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EXHIBIT 10.8
CONFIDENTIAL
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DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT
by and between
NEXTLEVEL SYSTEMS, INC.
and
BROADCOM CORPORATION
Dated
September 29, 1997
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CONFIDENTIAL TREATMENT REQUESTED
DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT
THIS DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT (this "AGREEMENT") is
made and entered into this 29th day of September, 1997 (the "EFFECTIVE DATE")
by and between NextLevel Systems, Inc. ("NLS"), a Delaware corporation with its
principal place of business at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇, and Broadcom Corporation ("BROADCOM"), a California corporation
with its principal place of business at ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
W I T N E S S E T H:
WHEREAS, NLS has invented and developed certain VLSI Technology (as
hereinafter defined); and
WHEREAS, Broadcom desires to develop, and NLS desires to have Broadcom
develop, in accordance with the terms and conditions set forth herein,
including the various responsibilities of Broadcom and NLS, respectively,
certain Development Program Products (as hereinafter defined), some of which
will use or include, in addition to Broadcom Intellectual Property, the VLSI
Technology; and
WHEREAS, NLS desires to grant to Broadcom, and Broadcom desires to
receive from NLS, a license under the VLSI Technology, in accordance with the
terms and conditions set forth herein, to use, develop, manufacture and sell
certain Broadcom Products (as hereinafter defined) in accordance with the terms
and conditions set forth herein; and
WHEREAS, Broadcom shall agree to supply to NLS, and NLS shall agree to
purchase from Broadcom, certain Broadcom Products pursuant to the terms and
conditions set forth herein, [*****] and minimum purchase commitments set forth
herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, the Parties agree as follows:
1. DEFINITIONS
Defined Terms. The following definitions apply to this Agreement:
(a) "Affiliate" means any person, partnership, joint
venture, corporation or other form of enterprise, domestic or foreign,
including but not limited to parents and subsidiaries, which directly or
indirectly Controls, is Controlled by, or is under common Control with, the
subject party.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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(b) "Broadcom Enhancements" means any improvement,
modification or enhancement to the VLSI Technology developed by or for
Broadcom, other than a Broadcom Modification. Without limiting the foregoing,
Broadcom Enhancements include any intellectual property or technology acquired
or licensed by Broadcom from a third party (including without limitation any
MPEG, VEC, video or graphics technology) or independently developed by Broadcom
without use of or reference to the VLSI Technology or NLS Enhancements,
notwithstanding the fact that such technology may replicate features or
functionality of any VLSI Technology or NLS Enhancements.
(c) "Broadcom Intellectual Property" means any and all
technology, technical information and rights therein to the extent owned by or
licensed from a third party to Broadcom, including without limitation technical
data, inventions, concepts, processes, formulae, know-how, systems,
apparatuses, software, designs, drawings, and any other technical subject
matter related thereto, including all patents, copyrights, trade secrets, masks
and mask works, industrial designs and other intellectual property rights
therein protected under the laws of any country of the world (whether or not
rights therein are currently perfected). Broadcom Intellectual Property shall
also include any Broadcom Enhancements and Broadcom Modifications.
(d) "Broadcom Modifications" means Modifications
developed by or for Broadcom.
(e) "Broadcom NRE Payments" means the non-refundable
payments for non-recurring engineering costs to be made by Broadcom to NLS at
the times, in the amounts and subject to the conditions set forth in Exhibit E
hereto.
(f) "Broadcom Development Products" shall mean the
Development Program Products defined in Exhibit A and described in Exhibit G
hereto.
(g) "Broadcom Products" means the Development Program
Products and Other Broadcom Products referred to collectively.
(h) "Change Proposal" shall have the meaning set forth in
Section 4.2 below.
(i) "Confidential Information" means any information
disclosed by a Party hereto (the "Disclosing Party") to the other Party
("Recipient"), either directly or indirectly, in writing, orally or by
inspection of tangible objects (including without limitation documents,
prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation within thirty (30)
days of its disclosure to the Recipient; provided, however, that any
information relating to product and business plans and strategies (including
proposed orders and pricing) shall be deemed to be Confidential Information
whether or not so designated. Information communicated orally shall be
considered Confidential Information if such information is designated, in
writing, as being confidential or proprietary within thirty (30) days after the
initial
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disclosure and, in any event, is reduced to or summarized in writing and
confirmed to Recipient as being Confidential Information within thirty (30)
days of the initial disclosure; provided, however, that any information
relating to product and business plans and strategies (including proposed
orders and pricing) shall be deemed to be Confidential Information whether or
not so reduced to or summarized in writing. Confidential Information shall
not, however, include any information which (i) was publicly known and
available in the public domain prior to the time of disclosure to the Recipient
by the Disclosing Party; (ii) becomes publicly known and available in the
public domain after disclosure to the Recipient by Disclosing Party through no
action or inaction of Recipient; (iii) is lawfully in the possession of
Recipient at the time of disclosure by Disclosing Party; (iv) is independently
developed by Recipient without use of or reference to Disclosing Party's
Confidential Information; (v) is received by Recipient from a third party which
Recipient has no reason to believe has a duty of confidentiality to the
Disclosing Party; (vi) is required by law to be disclosed by Recipient,
provided that Recipient gives Disclosing Party prompt written notice of such
requirement prior to such disclosure and cooperates with Disclosing Party in
the latter's attempt, if any, to prevent such disclosure or in obtaining a
protective or similar order with respect to the Confidential Information to be
disclosed; or (vii) has been approved for disclosure by Disclosing Party.
(j) "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
operating policies of an entity through direct or indirect ownership in the
aggregate of more than fifty percent (50%) of the voting and/or equity
securities of such entity.
(k) "Development Plan" shall have the meaning set forth
in Section 2.1(a) below.
(l) "Development Program" shall have the meaning set
forth in Section 2.1(a) below.
(m) "Development Program Products" shall mean each of the
products identified as such in Exhibit A hereto.
(n) "Evaluation" shall have the meaning set forth in
Section 3.2 below.
(o) "FCS" shall mean the time at which the first
commercial volume production shipment of a particular Broadcom Product is made
by Broadcom to NLS.
(p) "Gross Revenues" shall mean (i) the proceeds received
by Broadcom, Broadcom's Affiliates or any Sublicensees from the sale of any
products (including, without limitation, Broadcom Products) which materially
use or incorporate the VLSI Technology or portions thereof to persons other
than NLS, NLS' Affiliates, Broadcom or Broadcom's Affiliates, less (ii) those
adjustments made in accordance with Generally Accepted Accounting Principles
that impact net sales.
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CONFIDENTIAL TREATMENT REQUESTED
(q) "Mandatory Enhancements" shall have the meaning set
forth in Section 5.4 below.
(r) [*****].
(s) "Milestone(s)" refer to the particular milestones for
each individual stage of development of the Development Program Products as set
forth in Exhibit B hereto, as hereafter amended from time to time as mutually
agreed.
(t) "Modifications" shall mean any bug fixes, interface
changes, changes in register mapping, timing changes and comparable corrections
and modifications to the VLSI Technology developed by or for either party
during the term of the Agreement. "Modifications" do not include improvements
or enhancements that add new functionality or features to the VLSI Technology.
(u) "NLS Enhancements" means any improvement,
modification or enhancement to the VLSI Technology developed by or for NLS
during the term of the Agreement, including without limitation the Mandatory
Enhancements, other than an NLS Modification.
(v) "NLS Intellectual Property" means any and all
technology, technical information and rights therein to the extent owned by or
licensed from a third party to NLS, including without limitation technical
data, inventions, concepts, processes, formulae, know-how, systems,
apparatuses, software, designs, drawings, VLSI Technology, and any other
technical subject matter related thereto, including all patents, copyrights,
trade secrets, masks and mask works, industrial designs and other intellectual
property rights therein protected under the laws of any country of the world
(whether or not rights therein are currently perfected). NLS Intellectual
Property shall also include any NLS Enhancements and NLS Modifications.
(w) "NLS Modifications" means Modifications developed by
or for NLS.
(x) "NLS NRE Payments" means the non-refundable payments
for non-recurring engineering costs to be made by NLS to Broadcom at the times,
in the amounts and subject to the conditions set forth in Exhibit G hereto.
(y) "Other Broadcom Products" shall mean the following
current products, and future products, including any enhancements or
derivatives thereto and follow-on products, that provide comparable
functionality, which are made commercially available by Broadcom or its
Affiliates to any customers (including NLS and its Affiliates) during the term
of this Agreement: (i) digital cable set top components; (ii) digital satellite
MPEG components; (iii) cable modem components solely for use in NLS Telco
return cable modem products that are not MCNS compatible; and (iv) components
solely intended for use in digital cable set top boxes that also include
interactive MCNS
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
compatibility as a feature; provided, however, that notwithstanding the
foregoing, Other Broadcom Products shall specifically not include tuner or CMOS
tuner products.
(z) "Party" or "Parties" means NLS and its Affiliates, or
Broadcom and its Affiliates, or both, as the case may be.
(aa) [*****].
(bb) "Project Manager" shall have the meaning set forth in
Section 2.3(a) below.
(cc) "Release Event" shall have the meaning set forth in
Section 9 below.
(dd) "Specifications" means the technical specifications
set forth in Exhibit A hereto, as hereafter amended from time to time as
mutually agreed.
(ee) "Sublicensee" means any third party to whom Broadcom
has granted a sublicense, under the VLSI Technology, to manufacture and sell
Broadcom Products pursuant to Section 5.1 below.
(ff) "Supply Terms" means the quality, quantity, pricing,
delivery and other requirements for Broadcom Products set forth in Exhibit D
hereto.
(gg) "Tangible Embodiments" shall have the meaning set
forth in Section 5.3(c) below.
(hh) "VLSI Technology" means any and all technology,
technical information and rights therein relating to NLS's VLSI-related
technology, as defined on Exhibit C hereto (which technology, information and
rights may be utilized by Broadcom without the payment of any additional
royalties or fees by Broadcom to NLS, NLS' Affiliates or any third party),
including without limitation technical data, inventions, concepts, processes,
formulae, know-how, systems, apparatuses, software, designs, drawings, and any
other technical subject matter related thereto, including all patents,
copyrights, trade secrets, masks and mask works, industrial designs and other
intellectual property rights therein protected under the laws of any country of
the world (whether or not rights therein are currently perfected), which are
conceived, developed, reduced to practice, licensed, owned, acquired or
controlled by NLS prior to the Effective Date. By way of clarification and not
of limitation, VLSI Technology excludes any intellectual property or technology
acquired or licensed by Broadcom from a third party (including without
limitation any MPEG, VEC, video or graphics technology) or independently
developed by Broadcom without use of or reference to the VLSI Technology or NLS
Enhancements, notwithstanding the fact that such technology may replicate
features or functionality of any VLSI Technology.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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(ii) "VLSI Technology Products" shall have the meaning set
forth in Section 5.1 below.
2. DEVELOPMENT PROGRAM
Section 2.1. General.
(a) Establishment; Specifications and Milestones.
Pursuant to this Agreement, the Parties shall establish a development program
for the continued or new development of each Development Program Product set
forth in Exhibit A hereto (the "Development Program"). During the Development
Program, the Parties agree to work cooperatively with each other in good faith
and to use reasonable best efforts to ensure that the Development Program
Products conform to the material requirements set forth in Exhibit A
("Development Program Products and Specifications") and Exhibit B
("Milestones") hereto (collectively, the "Development Plan"). It is understood
that, at the commencement of the Development Program, the Development Plan will
be preliminary and certain of the Specifications will not have been fully
developed and thus the Specifications and Milestones set forth in Exhibits A
and B, respectively, will be subsequently amended (and, in the case of the
Milestones, extended) by the Parties upon mutual written agreement as described
further below. The Parties agree to act in good faith to develop and finalize
the Specifications and related Milestones at the earliest practicable date.
Except as otherwise agreed by the Parties in writing and as contemplated by the
previous sentence, the Development Program will be conducted in accordance with
the Development Plan.
(b) Additional Activities. NLS and Broadcom may from
time to time explore other opportunities for joint cooperation and product
development as may be mutually agreed ("Additional Activities"). In the event
that the Parties mutually agree to pursue Additional Activities, and wish to do
so pursuant to this Agreement, the Parties shall amend the Development Plan to
establish mutually agreed specifications, budgets, milestones and provisions
for proprietary and licensing rights for such Additional Activities.
Section 2.2. Development Obligations.
(a) Milestones. Each Party shall use its reasonable best
efforts, and shall dedicate and utilize adequate staffing and equipment, to
perform its development obligations in accordance with the Milestones set forth
in Exhibit B. Neither Party will be liable to the other Party based solely on
such Party's failure to meet one of its Milestones provided that such Party has
used, and continues to use, its reasonable best efforts during the Development
Program to accomplish the objectives of such Milestone. NLS agrees that any
delay in Broadcom meeting the delivery schedule that is caused by the failure
of NLS to timely provide design elements or information (including, without
limitation, final determination of the Specifications and related Milestones)
or to achieve timely resolution of issues emerging from design reviews shall
not constitute a breach or default of this
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Agreement on the part of Broadcom. The completion date for the tasks set forth
in Exhibit B and in Section 3.2 shall be extended accordingly to account for
the delay caused by NLS.
(b) Management and Support. Broadcom will have and
retain primary responsibility for managing and conducting the Development
Program and accomplishing the Development Program objectives, subject to the
Development Plan. Except as otherwise specified in Exhibit B, all development
activities will be conducted by Broadcom at its facilities. Certain activities
specified in Exhibit B will be conducted by NLS. NLS agrees to support
Broadcom's efforts with respect to the Development Program, to work under
Broadcom's direction with respect to NLS' activities thereunder, and to make
NLS resources available as reasonably required by Broadcom. During the term of
the Development Program, Broadcom will send certain technical staff to NLS who
will work with NLS to address technical issues and assist in evaluation and
other activities carried out by NLS under the Development Program. Except as
specifically provided in this Agreement, or as otherwise agreed, each Party
will bear all of its own direct and related costs associated with the
Development Program.
Section 2.3. Administrative Procedures. The Parties agree that the
following administrative procedures shall apply to each project under the
Development Program:
(a) Project Managers. Each Party shall designate in
writing a Project Manager to manage its participation in the Development
Program and coordinate its activities under the Development Program with the
other Party. The initial Project Manager for Broadcom shall be ▇▇▇▇▇ ▇▇▇▇▇▇▇,
and the initial Project Manager for NLS shall be ▇▇▇▇▇▇ ▇▇▇▇▇. The Project
Manager for each Party may be replaced from time to time by that Party upon
written notice thereof to the other Party.
(b) Periodic Review Meetings and Reports. Broadcom will
keep NLS reasonably informed of Broadcom's progress under the Development
Program, and the respective Project Managers from Broadcom and NLS will
schedule formal Development Program meetings, at mutually agreeable times at
least quarterly during the term of the Agreement, to be attended by authorized
program management personnel of both Parties, to discuss the status of the
development and supply activities contemplated under this Agreement. Such
discussions shall be for information purposes only and shall not be binding
upon either Party other than as expressly set forth in a Change Proposal signed
by both Parties, or any amendment thereto or to this Agreement.
(c) Records and Progress Reports. At mutually agreeable
times during the Development Program, the Project Managers of both Parties will
meet, at least by telephone, to compare the status of the development. Each
Party will maintain and distribute, approximately bi-monthly during the course
of the Development Program, a written progress report in a form reasonably
mutually acceptable, which shall include any matter anticipated to delay
completion of any Milestone and the reason for, and anticipated extent of, such
delay.
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CONFIDENTIAL TREATMENT REQUESTED
(d) Review and Modification of Development Plan. The
Parties shall review the Development Plan on a quarterly basis and agree to act
in good faith to modify the Development Plan as necessary to achieve the
objectives set forth in Exhibit A, provided that any such modifications shall
be mutually agreed in writing. It is understood that, at the commencement of
the Development Program, the Development Plan will be preliminary and certain
of the Specifications will not have been fully developed and thus the
Specifications and Milestones will be subsequently amended (and, in the case of
the Milestones, established or extended) by the Parties upon mutual written
agreement. If the Parties agree that a modification to the Specifications is
necessary, the Parties shall follow the procedures set forth in Section 4.2 for
implementing a Change Proposal.
Section 2.4. Broadcom Failure to Meet Milestone Dates. In the event
that Broadcom fails to meet a Milestone as scheduled, NLS and Broadcom shall
promptly enter into consultations with respect to a modification of the
Specifications and/or the applicable Milestone to allow Broadcom to meet the
requirements of such Milestone or extend the due date for the applicable
Milestone, which modification shall be subject to the approval of NLS, such
approval not to be unreasonably withheld.
Section 2.5. Broadcom Development Products. NLS hereby agrees to
make the NLS NRE Payments to Broadcom as provided in Exhibit G. [*****].
Broadcom shall at all times keep an accurate account of all Broadcom
Development Products sold, distributed or otherwise disposed of by Broadcom,
Broadcom's Affiliates and Sublicensees. Broadcom shall render to NLS a written
statement to such effect with respect to each such quarterly period and shall
submit such statement to NLS [*****]. In connection with their annual audit of
Broadcom's financial statements, upon the written request of NLS delivered to
Broadcom no later than December 1 of the year under audit, Broadcom's
independent certified public accountants shall be requested to audit the
records of Broadcom and its Affiliates with respect to sales of Broadcom
Development Products [*****] pursuant to this Section 2.5 during such period
and shall be requested to provide to NLS, within thirty (30) days after
completion of the annual audit, a written certification that Broadcom's reports
hereunder are true and accurate in all material respects. The cost of the
Broadcom Development Product audit shall be borne by NLS. Notwithstanding the
foregoing, NLS shall have the option to engage a mutually acceptable "Big 6"
accounting firm in lieu of Broadcom's accountants to conduct such audit at
NLS's expense (such audit to be conducted in substantially the same manner,
including without limitation with respect to confidentiality, as if it had been
conducted by Broadcom's accountants). In the event that any Broadcom
Development Product audit establishes that a positive or negative adjustment is
needed, Broadcom shall promptly make such adjustment in its records and
supplement or reissue its outstanding invoices to NLS as necessary to reflect
such adjustment.
Section 2.6. Broadcom NRE Payments. Broadcom hereby agrees to make
the Broadcom NRE Payments to NLS as provided in Exhibit E.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
Section 2.7. Samples. Subject to the terms and conditions of this
Agreement, Broadcom shall supply to NLS as soon as practicable seven (7)
samples of every Development Program Product and each other Broadcom Product
incorporating NLS Intellectual Property that will be publicly available.
Section 2.8. Completion of Development. The Development Program
shall commence upon the Effective Date and shall continue until the earlier of
(i) expiration or termination of this Agreement under Article 13 below or (ii)
acceptance by NLS of all of the Milestones and associated deliverables from
Broadcom as set forth in Exhibit B.
3. DELIVERY AND ACCEPTANCE OF DEVELOPMENT PROGRAM PRODUCTS
Section 3.1. Delivery. Broadcom will deliver to NLS each deliverable
at the time and in the form set forth in Exhibit B. Upon such delivery, NLS
shall test each deliverable pursuant to Section 3.2 below. NLS shall not be
deemed to have accepted any such deliverable except through the procedures set
forth in Section 3.2 below. Broadcom will be deemed to have completed a
Milestone or deliverable only upon NLS accepting the corresponding deliverable,
which acceptance will not be unreasonably withheld, delayed or conditioned.
Section 3.2. Acceptance.
(a) Evaluation; Latent Defects. Upon receiving a
deliverable from Broadcom, NLS will test and evaluate such deliverable to
determine, acting reasonably and in good faith, whether it meets in all
material respects the associated Specifications set forth in Exhibit A. NLS
will use its reasonable best efforts to report the results of such tests and
evaluations in writing to Broadcom (an "Evaluation") within forty-five (45)
calendar days following its receipt of the associated deliverable. If NLS fails
to submit an Evaluation to Broadcom within forty-five (45) calendar days
following its receipt of the associated deliverable, such deliverable will be
deemed accepted. Notwithstanding the foregoing, Broadcom will use its
reasonable best efforts during the Development Program to correct any material
latent defects discovered in a deliverable after the acceptance of such
deliverable. If NLS conducted tests during the evaluation period that should
have revealed the latent defect and such defect was not so revealed, [*****].
If NLS did not conduct tests during the evaluation period that should have
revealed the latent defect, [*****].
(b) Material Deviations. If NLS provides an Evaluation
indicating material deviations from the Specifications set forth in Exhibit A,
Broadcom will use its reasonable best efforts, with assistance from NLS as
required and consistent with the allocation of responsibilities in Exhibit B,
to correct any such deviations and redeliver the associated deliverable to NLS
as soon as reasonably practicable. All redelivered deliverables shall be
subject to the evaluation procedure set forth in Section 3.2(a) above.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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4. DEVELOPMENT PROGRAM PRODUCT SPECIFICATIONS
Section 4.1. Development Program Product Specifications. The
Specifications for the Development Program Products are attached hereto as
Exhibit A and incorporated herein. During the Development Program, NLS may, in
its sole discretion, modify the Specifications to relax the criteria required
for conformance as it deems necessary or desirable. Except as set forth above,
if the Parties agree that a modification to the Specifications is necessary,
the Parties will follow the procedures set forth in Section 4.2 for
implementing a Change Proposal. Such procedures shall also be used to
establish and finalize Specifications for those Development Program Products
for which final Specifications have not been finalized at the date of this
Agreement.
Section 4.2. Change Request Procedure. All requests for changes,
amendments, and supplements to the Specifications shall be handled in
accordance with the change order procedures set forth in this Section 4.2
unless otherwise specified in a writing signed by each Party. Either Party
may, from time to time during the term of this Agreement, provide written
notice to the other Party proposing changes to the Specifications (a "Change
Proposal"). Following a Change Proposal, the Parties shall promptly meet
(either in person, by teleconference or otherwise as mutually agreed) to
determine whether, and with what modifications, such Change Proposal may be
mutually agreeable. No Change Proposal shall have any effect until agreed to
in writing by both Parties. All Change Proposals that are agreed upon by the
Parties shall constitute amendments to the Specifications for all purposes of
this Agreement. All agreed upon Change Proposals shall include appropriate
adjustments to the development schedule and associated Milestones. The Parties
understand and acknowledge that certain Change Proposals will have to be agreed
to in order for the successful completion of the Development Program because at
the commencement of the Development Program, the Development Plan will be
preliminary and certain of the Specifications will not have been fully
developed.
5. TECHNOLOGY LICENSE FROM NLS TO BROADCOM
Section 5.1. License of VLSI Technology. Subject to the terms and
conditions of this Agreement, NLS hereby grants to Broadcom a perpetual,
irrevocable (other than for non-payment of royalties), world-wide,
non-exclusive, royalty-bearing right and license under the VLSI Technology to
use, develop, make or have made, distribute, market, sell, offer to sell,
import, export and otherwise exploit products and derivative products
(including without limitation Broadcom Products) which are based upon or
incorporate such VLSI Technology (collectively, "VLSI Technology Products").
Beginning on June 30, 1998, Broadcom shall have the limited right to sublicense
its rights under the VLSI Technology to any third party (including, without
limitation, other semiconductor manufacturers) in connection with a license by
Broadcom to such third party, for manufacture and sale by such third party, its
affiliates or subcontractors, of any specific Broadcom-designed integrated
circuit design. Without limitation, the rights granted by NLS to Broadcom
pursuant to this Section 5.1 would allow Broadcom to have the same third party
act as both (i) a manufacturer for Broadcom and (ii) a distributor for Broadcom
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CONFIDENTIAL TREATMENT REQUESTED
with respect to VLSI Technology Products. Broadcom agrees to promptly notify
NLS with respect to any sublicenses of the VLSI Technology by Broadcom.
Broadcom further agrees that all such sublicenses shall be made pursuant to
written agreements containing terms and restrictions (including without
limitation confidentiality restrictions) consistent with the terms and
restrictions of this Agreement.
Section 5.2. Delivery of VLSI Technology; Tangible Embodiments;
Support. As soon as practicable following the Effective Date of this
Agreement, NLS shall deliver to Broadcom copies of Tangible Embodiments of the
VLSI Technology and all other technological information and know-how which are
in NLS' possession and which are necessary for the full and complete exercise
by Broadcom of the licenses granted pursuant to Sections 5.1 and 5.3(a). As
soon as reasonably practicable, Broadcom will evaluate such Tangible
Embodiments and technical information received from NLS and will notify NLS if
Broadcom believes that additional Tangible Embodiments or technical information
are necessary for Broadcom to fully exploit the VLSI Technology. If Broadcom
so notifies NLS, NLS will promptly cooperate with Broadcom to provide such
additional Tangible Embodiments or technical information. In addition, and in
furtherance of NLS' obligations hereunder, NLS shall provide Broadcom from time
to time [*****] such training, technical assistance and support to Broadcom
personnel reasonably skilled in the art and as reasonably requested by Broadcom
in order for Broadcom to fully exploit its rights to the VLSI Technology, NLS
Modifications and NLS Enhancements. Such support shall include on-site support
at Broadcom's facility by qualified NLS personnel from the Effective Date until
the AVI 4.0 (BCM7100) chip has been transferred from development to production
by Broadcom. Broadcom shall also have access, at reasonable times and upon
reasonable notice, to NLS's video diagnostic test facilities and to NLS' design
team, design notes and records.
Section 5.3. Modifications and Enhancements to VLSI Technology.
(a) NLS Modifications and Enhancements. NLS hereby
grants to Broadcom and its Affiliates a perpetual, irrevocable, world-wide,
non-exclusive, royalty-free right and license, with the right to sublicense,
under the NLS Modifications and NLS Enhancements, to make, have made,
distribute, market, use, sell, offer for sale, import, export and otherwise
exploit products and derivative products which are based upon or incorporate
such NLS Modifications and NLS Enhancements.
(b) Broadcom Modifications. Broadcom hereby grants to
NLS and its Affiliates a perpetual, irrevocable, world-wide, non-exclusive,
royalty-free right and license, with the right to sublicense, under the
Broadcom Modifications, to make, have made, distribute, market, use, sell,
offer for sale, import, export and otherwise exploit products and derivative
products which are based upon or incorporate such Broadcom Modifications. This
license shall not extend to Broadcom Enhancements, all rights to which shall be
retained by Broadcom.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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(c) Sharing of Modifications. During the term of the
Agreement, all Tangible Embodiments and technical information relating to the
NLS Modifications and NLS Enhancements described in Sections 5.3(a) and 5.4
shall be shared by NLS with Broadcom on a prompt and regular basis, such basis
to be mutually determined by the Parties in good faith from time to time. As
soon as reasonably practicable, Broadcom will evaluate such Tangible
Embodiments and technical information received from NLS and will notify NLS if
Broadcom believes that additional Tangible Embodiments or technical information
are necessary for Broadcom to fully exploit the technology. If Broadcom so
notifies NLS, NLS will promptly cooperate with Broadcom to provide such
additional Tangible Embodiments or technical information. Broadcom shall have
no obligation to provide any Broadcom Enhancements or Tangible Embodiments of
any Broadcom Modifications or Broadcom Enhancements to NLS but shall provide to
NLS, with respect to Broadcom Modifications only, block descriptions and
documentation sufficient for NLS to understand the nature and functionality of
the Broadcom Modification. For purposes of this Agreement, "Tangible
Embodiments" means transistor-level schematics, layouts, transistor-level net
lists and masks, together with all documentation related to same.
Section 5.4. Mandatory Enhancements by NLS. NLS agrees to develop,
at its sole expense, the enhancements to the VLSI Technology described in
Exhibit H ("Mandatory Enhancements"), which Mandatory Enhancements are required
in order for Broadcom to develop certain of the Development Program Products.
NLS shall promptly deliver alpha, beta and final versions of the Mandatory
Enhancements, any subsequent modifications or enhancements thereto, and all
Tangible Embodiments of the foregoing, to Broadcom as each becomes available.
Section 5.5. Royalties.
(a) Royalty Rates. In consideration of the license
granted by NLS to Broadcom pursuant to Section 5.1 above, Broadcom shall have a
continuing obligation to pay the following royalties to NLS, during the period
of time beginning upon the Effective Date and ending ten (10) years thereafter,
based upon the Gross Revenues received by Broadcom, Broadcom's Affiliates or
any Sublicensees during this time period. The expiration of the obligation to
make royalty payments to NLS shall not affect Broadcom's right to use or
sublicense, in accordance with the terms of this Agreement, any of the NLS
Intellectual Property licensed to it pursuant to this Agreement. The
applicable royalty rates shall depend upon the specific one year period (in
each case to be measured based on the period of elapsed time since the
Effective Date) during which such Gross Revenues are received by Broadcom,
Broadcom's Affiliates or any Sublicensees, and shall be calculated as follows:
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CONFIDENTIAL TREATMENT REQUESTED
One Year Period Following
Effective Date Percentage of Gross Revenues
First, Second and Third [*****]
Fourth and Fifth [*****]
Six and Seventh [*****]
Eighth, Ninth and Tenth [*****]
Notwithstanding the foregoing, to the extent that Broadcom, Broadcom's
Affiliates or any Sublicensees receive any Gross Revenues with respect to any
integrated circuit products (including, without limitation, Broadcom Products)
which include both VLSI Technology and non-NLS Intellectual Property, NLS's
royalty shall be based solely on the portion of such Gross Revenues [*****].
In the event that Broadcom, Broadcom's Affiliates or any
Sublicensee provide both royalty-bearing and non-royalty-bearing products to a
customer in a "bundled" transaction or series of related transactions, any
price discounts and the allocation of revenue among the affected products may
be applied by Broadcom in any manner in its discretion; provided, however, that
the royalties payable to NLS pursuant to this Section 5.5 with respect to such
products shall be computed in a manner no less favorable to NLS than in
relative proportion to the generally prevailing independent prices of the
affected products.
(b) Maximum Limitation on Royalties. Notwithstanding
anything to the contrary contained in Section 5.5(a) above, Broadcom's
obligation to pay royalties to NLS shall cease after such time as Broadcom has
paid cumulative royalties to NLS in the amount of [*****]. Broadcom may at any
time elect to prepay the maximum amount of royalties due to NLS, at which time
NLS' rights to accounting and payment pursuant to this Section 5.5 shall cease.
(c) No Royalties for Sales to Related Parties.
Notwithstanding anything to the contrary contained in this Agreement, no
royalty shall be due to NLS pursuant to this Section 5 with respect to sales of
any products by Broadcom, its Affiliates or any Sublicensees to NLS, its
Affiliates, Broadcom or Broadcom's Affiliates.
(d) Accounting and Payment. The continuing royalty
payments due from Broadcom to NLS pursuant to Section 5.5(a) above shall be
computed on a calendar quarterly basis in arrears, beginning with the calendar
quarter in which the Effective Date occurs, and shall be payable to NLS within
thirty (30) days following each such quarterly period. Any payment of
royalties to NLS by a Broadcom Affiliate or Sublicensee shall be considered a
royalty payment by Broadcom. Broadcom shall at all times keep an accurate
account of all products, equipment and services sold, distributed or otherwise
disposed of
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-13-
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CONFIDENTIAL TREATMENT REQUESTED
by Broadcom and its Affiliates pursuant to the license set forth in Section 5.1
above. Broadcom shall render to NLS a written statement to such effect with
respect to each quarterly period and shall submit such statement to NLS along
with any continuing royalty payments due to NLS. In connection with their
annual audit of Broadcom's financial statements, upon the written request of
NLS delivered to Broadcom no later than December 1 of the year under audit,
Broadcom's independent certified public accountants shall be requested to audit
the records of Broadcom and its Affiliates with respect to sales of products
subject to royalty hereunder and Broadcom's royalty reports pursuant to this
Section 5.5 during such period and shall be requested to provide to NLS, within
thirty (30) days after completion of the annual audit, a written certification
that Broadcom's reports hereunder are true and accurate in all material
respects. The cost of the royalty audit shall be borne by NLS.
Notwithstanding the foregoing, NLS shall have the option to engage a mutually
acceptable "Big 6" accounting firm in lieu of Broadcom's accountants to conduct
such audit at NLS's expense (such audit to be conducted in substantially the
same manner, including without limitation with respect to confidentiality, as
if it had been conducted by Broadcom's accountants). In the event that any
royalty audit establishes that NLS was underpaid or overpaid in any manner, an
adjustment shall be made in the books of Broadcom and the appropriate party
shall promptly make an offsetting payment to the other party reflecting the
adjustment.
6. SUPPLY OF BROADCOM PRODUCTS TO NLS
Section 6.1. Obligation. Subject to the terms and conditions of this
Agreement, Broadcom shall manufacture Development Program Products, and shall
sell such Development Program Products to NLS and its Affiliates. All
purchases shall be made in accordance with the terms and conditions contained
in the Supply Terms attached hereto as Exhibit D, except as specifically
supplemented by this Agreement. In the event of any conflict between the terms
and conditions of Exhibit D and those of this Agreement, this Agreement shall
govern.
Section 6.2. Pricing.
(a) Initial Pricing. The pricing for all Broadcom
Products sold by Broadcom to NLS and its Affiliates shall be computed in
accordance with the provisions of this Section 6.2. Such pricing shall take
effect immediately upon the Effective Date except that, in the case of the
BCM3115 and the BCM3900 only, such pricing shall be effective for products
shipped after January 1, 1997. Pricing will be computed [*****], determined in
accordance with Section 6.2(c) below, [*****]. Except as otherwise provided in
this Agreement, [*****] shall apply to all Broadcom Products. Such [*****]
shall be based as follows on the unit purchase volumes for each three month
measurement period (computed as of the anniversary of FCS) for each specific
Broadcom Product purchased by NLS and its Affiliates:
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(i) Broadcom Products Which [*****]
Three Month NLS
Purchase Volume [*****]
<12.5k [*****]
<25k [*****]
<62.5k [*****]
<125k [*****]
>125k [*****]
(ii) Broadcom Products Which [*****]
Three Month NLS
Purchase Volume [*****]
<12.5k [*****]
<25k [*****]
<62.5k [*****]
<125k [*****]
>125k [*****]
(iii) Broadcom Products Which [*****].
(iv) Determination of [*****]. Broadcom's pricing
to NLS for each Broadcom Product shall be determined in accordance with three
month purchase volumes [*****] as shown in the tables set forth in Sections
6.2(a)(i) and 6.2(a)(ii). Upon FCS of each product and on each three month
anniversary of such FCS, NLS shall estimate in good faith its anticipated
purchases of the product for the ensuing three month
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-15-
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CONFIDENTIAL TREATMENT REQUESTED
period. Actual quantities of each product purchased by NLS will be calculated
as of each three month anniversary of FCS of that product. If the actual
quantities purchased are not as originally estimated, appropriate pricing
adjustments will be made retroactively for the full three month period. In the
event that a higher purchase price shall apply to a particular product,
Broadcom shall reinvoice such purchases at the higher price, with credit for
prior payments by NLS, and NLS shall promptly pay the difference to Broadcom.
In the event that a lower purchase price shall apply to a particular product,
Broadcom shall promptly issue to NLS a credit voucher for the difference which
may be applied to any future purchases of Broadcom Products by NLS from
Broadcom.
(v) [*****]. [*****].
(b) [*****]. Notwithstanding anything to the contrary in
Section 6.2(a) above:
(i) With respect to Broadcom Products other than
those described in Section 7.1 (which other products shall be subject to the
minimum purchase commitments therein contained), NLS shall not be entitled to
continue to receive the benefits of [*****] with respect to a Broadcom Product
unless NLS and all of its Affiliates have purchased at least [*****] of their
total aggregate requirements for that general class of products from Broadcom
(except to the extent due to the fault of Broadcom or failure of Broadcom to
supply the quantities ordered by NLS, in accordance with the Supply Terms), as
measured at the end of each three month period, and in such event Broadcom's
invoices for all shipments of the Broadcom Products in such class after the
last three month period in which NLS and its Affiliates met the [*****]
requirement shall be issued, supplemented or reissued as necessary to reflect
pricing at Broadcom's standard rates.
(ii) [*****].
(iii) In the event that Broadcom notifies NLS of
the forthcoming availability of a product that is a successor to a product
subject to the provisions of Section 6.2(a) and NLS places orders to purchase
the successor product in volume in accordance with the Supply Terms, then for a
period not to exceed three (3) months after the date of NLS' first purchase
order for the successor product NLS shall be entitled to purchase additional
quantities of the old product with the same [*****] that applied to NLS'
purchases of the old product in the most recent three month measurement period.
(c) [*****]. The Parties mutually agree and acknowledge
that [*****] in connection with the application of [*****] (i) shall be made in
accordance with the procedure set forth in Exhibit F and (ii) shall be made in
accordance with [*****]. In connection with their annual audit of Broadcom's
financial statements, upon the written request of NLS delivered to Broadcom no
later than December 1 of the year under audit, Broadcom's independent certified
public accountants shall be requested to audit Broadcom's records with respect
to [*****] during such period and shall be requested to provide to NLS, within
thirty (30) days after completion of the annual audit, a written
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
certification that Broadcom's calculations are true and accurate in all
material respects. The cost of this audit shall be borne by NLS.
Notwithstanding the foregoing, NLS shall have the option to engage a mutually
acceptable "Big 6" accounting firm in lieu of Broadcom's accountants to conduct
such audit at NLS's expense (such audit to be conducted in substantially the
same manner, including without limitation with respect to confidentiality, as
if it had been conducted by Broadcom's accountants). In the event that [*****]
establishes that any positive or negative adjustment is needed, Broadcom shall
promptly make such adjustment in its records and issue an appropriate
supplemental invoice or credit voucher to NLS reflecting the adjustment.
(d) [*****]. [*****]. Without limitation, such efforts
shall include, when necessary and appropriate in Broadcom's good faith
judgment, the engagement of [*****]. In order to [*****], the parties shall
[*****] with respect to Broadcom Products. Such [*****] shall be implemented in
accordance with [*****].
(e) [*****]. [*****]. Notwithstanding anything contained
in [*****], NLS will [*****]. In this regard, NLS will receive such [*****] with
respect to [*****], and NLS may [*****]. In connection with their annual audit
of Broadcom's financial statements, upon the written request of NLS delivered to
Broadcom no later than December 1 of the year under audit, Broadcom's
independent certified public accountants shall be requested to audit the records
of Broadcom and its Affiliates with respect to Broadcom's compliance with the
[*****] provisions of this Section 6.2(e) during such period and shall be
requested to provide to NLS, within thirty (30) days after completion of the
annual audit, a written certification that Broadcom has complied with this
Section 6.2(e) in all material respects. The cost of the [*****] audit shall be
borne by NLS. Notwithstanding the foregoing, NLS shall have the option to
engage a mutually acceptable "Big 6" accounting firm in lieu of Broadcom's
accountants to conduct such audit at NLS's expense (such audit to be conducted
in substantially the same manner, including without limitation with respect to
confidentiality, as if it had been conducted by Broadcom's accountants). In the
event that any [*****] audit establishes that any positive or negative
adjustment is needed, Broadcom shall promptly make such adjustment in its
records and issue an appropriate supplemental invoice or credit voucher to NLS
reflecting the adjustment.
Section 6.3 [*****]. Broadcom shall offer to NLS [*****].
(Thereafter Broadcom shall be entitled to [*****].) With respect to each
Development Program Product, Broadcom shall provide advance written notice to
NLS of [*****], provided such advance notice shall not be provided more than
[*****]. If NLS wishes to [*****], it shall provide to Broadcom an [*****]
within [*****] after receiving the notice from Broadcom. [*****].
7. NLS MINIMUM PURCHASE COMMITMENTS
Section 7.1. Minimum Purchase Commitment.
(a) First 48 Months. NLS agrees that NLS and its Affiliates shall
purchase from Broadcom, at a minimum, the following percentages of their total
aggregate annual requirements for each component which contains transmission or
communication functions for digital cable subscriber products, including
without limitation QAM modulators or demodulators and any components used in
digital cable products which contain video decompression algorithms such as
MPEG:
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
Percentage of Aggregate NLS/Affiliate
Period from Effective Date Requirements
-------------------------- -------------------------------------
First Twelve Months [*****]
Second Twelve Months [*****]
Third Twelve Months [*****]
Fourth Twelve Months [*****]
(b) Subsequent Periods. In order for NLS to receive the benefit
of the pricing described in Section 6.2 for a fifth or sixth twelve month
period from the Effective Date, NLS shall be required, at least two years prior
to the commencement of each such twelve month period, to deliver to Broadcom a
written undertaking and commitment to purchase at least [*****] of the total
aggregate requirements of NLS and all of its Affiliates for each component of
the classes described in Section 7.1 during such twelve month period.
Section 7.2. Conditions. NLS' minimum purchase commitment for
each class of products under this Section 7 during a given applicable period
during the Term shall be subject to Broadcom's material compliance during such
period with its obligations under the Supply Terms and Broadcom's good faith
effort during such period to maintain its competitive position with respect to
that class of products.
Section 7.3. MPEG Products. Notwithstanding the provisions of
Section 7.1, the minimum purchase commitment of NLS and its Affiliates with
respect to any digital cable subscriber video decompression products shall not
commence until FCS of the BCM7010 product. Upon FCS of the BCM7010 product,
the minimum purchase commitment of NLS and its Affiliates with respect to
digital cable subscriber video decompression products shall be [*****] of the
total aggregate requirements of NLS and its Affiliates for the first and second
twelve month periods from the Effective Date, [*****] for the third twelve
month period from the Effective Date, [*****] for the fourth twelve month
period from the Effective Date, and thereafter as provided in Section 7.1(b).
Section 7.4. Periodic Purchases.
(a) Even Run Rate. NLS and its Affiliates shall be required to
use their reasonable best efforts to purchase products subject to this Section
7 at an even percentage run rate as compared to NLS's product purchases from
any of its other sources for the same or similar products, during each twelve
month commitment period (rather than "front end" or "back end" loading of such
purchases) in order to allow Broadcom to properly coordinate order flow,
forecast manufacturing requirements and undertake volume production in a cost
efficient manner.
(b) Shortfall Fee. If, in any quarter of a twelve month
measurement period NLS and its Affiliates purchase from Broadcom less than the
stated minimum purchase commitment percentage less five percentage points for
any Broadcom Product (determined for this purpose as if the annual purchase
commitments were also applicable to such
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-18-
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CONFIDENTIAL TREATMENT REQUESTED
quarter), then NLS shall promptly pay to Broadcom an amount equal to [*****] of
Broadcom's unit profit margin (as set forth in Section 6) for such Broadcom
Product multiplied by the additional number of units of such Broadcom Product
that NLS and its Affiliates would be required to purchase so that their
aggregate purchases of such Broadcom Product for the quarter would have equaled
the stated minimum purchase commitment; provided, however, that in no event
will NLS's payment obligations to Broadcom pursuant to this Section 7.4(b)
exceed [*****] for any quarter. NLS shall provide Broadcom with reasonably
detailed calculations of its purchase commitment compliance within thirty (30)
days after the end of each quarter of a twelve month measurement period.
Nothing contained in this Section 7.4(b) shall be deemed to create a
minimum purchase obligation for NLS and its Affiliates in addition to the
annual minimum purchase commitments set forth in this Section 7, and no failure
on the part of NLS and its Affiliates to purchase particular quantities of
Broadcom Products in any quarter (other than as set forth in Section 7.4(a))
shall in itself be deemed to constitute a material breach of this Agreement,
but the failure of NLS and its Affiliates to purchase the stated minimum
quantity of each Broadcom Product described in Sections 7.1, 7.3 and 7.5 during
a twelve month measurement period shall constitute a material breach of this
Agreement.
Section 7.5. Special Purchase Commitment. With respect to each of
the BCM3900QUOD and BCM3902 only, NLS agrees that it shall purchase and take
delivery of, during each calendar quarter commencing with the quarter ending
December 31, 1997, at least the minimum quantities set forth in Exhibit L at
the prices set forth in Section 6.2(a).
Section 7.6 Audit. In connection with their annual audit of NLS'
financial statements, upon the written request of Broadcom delivered to NLS no
later than December 1 of the year under audit, NLS' independent certified
public accountants shall be requested to audit the records of NLS and its
Affiliates with respect to purchases of all products subject to the provisions
of this Section 7 during such period and shall be requested to provide to
Broadcom, within thirty (30) days after completion of the annual audit, a
written certification that NLS and its Affiliates have complied with the
requirements of this Section 7 in all material respects. The cost of the
minimum purchase commitment audit shall be borne by Broadcom. Notwithstanding
the foregoing, Broadcom shall have the option to engage a mutually acceptable
"Big 6" accounting firm in lieu of NLS' accountants to conduct such audit at
Broadcom's expense (such audit to be conducted in substantially the same
manner, including without limitation with respect to confidentiality, as if it
had been conducted by NLS's accountants).
Section 7.7. "Purchase". For purposes of Sections 6 and 7 of this
Agreement, the term "purchase by NLS" and equivalents thereof shall mean
products shipped for revenue by Broadcom to NLS or its Affiliates and accepted
by NLS or its Affiliates during the applicable period in fulfillment of
purchase orders by NLS or its Affiliates.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-19-
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Section 7.8. Material Breach. The Parties acknowledge and agree
that a breach of this Section 7 (other than as expressly set forth in Section
7.4(b)) by NLS or its Affiliates shall be deemed a material breach of this
Agreement.
8. CONFIDENTIALITY
Section 8.1. Duty to Hold in Confidence. Each Party ("Recipient")
agrees that it will preserve in strict confidence and secure against accidental
loss any Confidential Information disclosed by the other Party ("Disclosing
Party") to Recipient. In preserving Disclosing Party's Confidential
Information, Recipient will use the same standard of care it would use to
secure and safeguard its own confidential information of similar importance,
but in no event less than reasonable care. Any permitted reproduction of
Disclosing Party's Confidential Information shall contain all confidential or
proprietary legends which appear on the original. Recipient shall immediately
notify Disclosing Party in writing in the event of any loss or unauthorized
disclosure or use of Confidential Information.
Section 8.2. Permitted Disclosures. Recipient shall permit access to
Disclosing Party's Confidential Information solely to its employees, agents and
contractors who (i) have a need to know such information; and (ii) have signed
confidentiality agreements containing terms at least as restrictive as those
contained herein. Except as permitted in the exercise of the licenses and
rights granted under this Agreement, Recipient shall not disclose or transfer
any Confidential Information to any third party, without the specific prior
written approval of Disclosing Party, except to the extent required by law or
governmental or court order to be disclosed by Recipient, provided that
Recipient gives Disclosing Party prompt written notice of such requirement
prior to such disclosure and cooperates with Disclosing Party in the latter's
attempt, if any, to prevent such disclosure or in obtaining a protective or
similar order with respect to the Confidential Information to be disclosed.
Recipient shall use Disclosing Party's Confidential Information disclosed
hereunder solely for the purpose of fulfilling such Party's obligations and
exercising such Party's rights under this Agreement.
Section 8.3. Obligation to Return Confidential Information.
Recipient acknowledges that Disclosing Party retains ownership of all
Confidential Information disclosed or made available to Recipient.
Accordingly, upon any termination, cancellation or expiration of this
Agreement, or upon Disclosing Party's request for any reason (other than in
violation of this Agreement), Recipient shall return promptly to Disclosing
Party the originals and all copies (without retention of any copy) of any
written documents, tools, materials or other tangible items containing or
embodying Confidential Information; provided, however, that Recipient shall be
entitled to retain such originals and copies of Confidential Information of
Disclosing Party as Recipient shall reasonably conclude are necessary to
Recipient's use and exploitation, as permitted by this Agreement, of any rights
or licenses retained by Recipient following such termination, cancellation,
expiration or request.
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Section 8.4. No Representations or Warranties. EXCEPT AS EXPRESSLY
SET FORTH IN SECTION 10, OR ELSEWHERE IN THIS AGREEMENT, DISCLOSING PARTY MAKES
NO REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, STATUTORY OR IMPLIED,
RELATING TO THE SUFFICIENCY OR ACCURACY OF THE CONFIDENTIAL INFORMATION
DISCLOSED FOR ANY PURPOSE, NOR REGARDING INFRINGEMENT OF OTHERS' INTELLECTUAL
PROPERTY RIGHTS WHICH MAY ARISE FROM THE USE OF SUCH CONFIDENTIAL INFORMATION.
Section 8.5. No Grant of Property Rights. Recipient recognizes and
agrees that, except as expressly set forth in this Agreement, nothing herein
shall be construed as granting any property rights, by license or otherwise, to
any of Disclosing Party's Confidential Information, or to any invention or any
patent right that has issued or that may issue based on such Confidential
Information or to decompile or reverse engineer any of the Disclosing Party's
Confidential Information.
9. TECHNOLOGY ESCROW.
As soon as reasonably practicable after the transfer from development
to production of each Development Program Product for which Broadcom receives a
production purchase order from NLS, NLS and Broadcom shall enter into a
Technology Escrow Agreement with a mutually agreeable escrow agent which shall
contain, as a minimum and without limitation, the terms and conditions set
forth in this Section 9. The Technology Escrow Agreement shall provide, among
other things, for the deposit with the escrow agent, for storage at such escrow
agent's premises, of all materials reasonably required to manufacture the
Development Program Product. NLS shall have a non-exclusive, irrevocable,
perpetual (but only during the period that Broadcom is unable to perform as
described in clause (b) below) license allowing NLS's manufacturing
subcontractor to make and to deliver the Development Program Product directly
to NLS, for incorporation and use in its module and system products (and for no
other purpose or use), in the event that both of the following have occurred (a
"Release Event"):
(a) The institution by Broadcom of insolvency,
receivership or bankruptcy proceedings or any other material proceedings for
the settlement of its debts, including without limitation, a reorganization
under the federal bankruptcy laws, a compromise or arrangement or assignment
for the benefit of its creditors; the institution of such proceedings against
Broadcom, which such proceedings are not dismissed within ninety (90) days;
Broadcom making an assignment for the benefit of creditors; or Broadcom's
dissolution or ceasing to do business in the normal course; and
(b) Such event actually prevents Broadcom from continuing
to deliver the Development Program Product to NLS in substantial compliance
with the Supply Terms of this Agreement.
-21-
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10. REPRESENTATIONS AND WARRANTIES
Section 10.1. Broadcom Representations and Warranties.
Broadcom represents and warrants to NLS and its Affiliates:
(a) Corporate Authority. Broadcom has the right to enter
this Agreement, is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation, has the corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and has by all necessary corporate action duly and
validly authorized the execution and delivery of this Agreement and the
performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and
legally binding obligation of Broadcom in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and
performance by Broadcom of this Agreement and each other agreement, document,
or instrument now or hereafter executed and delivered by Broadcom pursuant
thereto or in connection herewith will not: (i) conflict with or violate the
articles or certificate of incorporation or by-laws of Broadcom or any
provision of any law, rule, regulation, authorization or judgment of any
governmental authority having applicability to Broadcom or its actions; or (ii)
to Broadcom's knowledge, conflict with or result in any breach of, or
constitute a default under, any note, security agreement, commitment, contract
or other agreement, instrument or undertaking to which Broadcom is a party or
by which any of its property is bound.
(d) Ownership. With respect to all Broadcom Intellectual
Property used or to be used in the Broadcom Products or Development Program,
Broadcom has the right and power to assign, license, and otherwise make
agreements pertaining to such property, as may be entered into hereunder;
provided, however, that this Section 10.1(d) shall not constitute a
representation or warranty as to non-infringement of any intellectual property
rights of any third party.
(e) Independent Work. All Broadcom Intellectual Property
used or to be used in the Broadcom Products or Development Program has been (or
will be) created by Broadcom's employees, agents, or consultants, and, to the
best of Broadcom's knowledge, use of such property by Broadcom as contemplated
herein and development of the Broadcom Products will not depend upon the
acquisition of rights from any third party.
(f) No Litigation or Claims. As of the Effective Date
and except as disclosed in Exhibit J, there is no pending litigation or claim
nor, to the best of
-22-
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Broadcom's knowledge, the reasonable basis for any claim, that Broadcom does
not own Broadcom Intellectual Property used or to be used in the Broadcom
Products, or that the exercise by NLS of any of the rights granted hereunder,
infringes any Intellectual Property Right of any third party.
(g) Agreements with Employees. Broadcom has and will
maintain with all Broadcom employees, agents, and consultants, written
agreements sufficient to enable Broadcom to perform its obligations hereunder
with confidentiality terms at least as restrictive as those provided for the
Parties under this Agreement.
Section 10.2. NLS Representations and Warranties.
NLS represents and warrants to Broadcom and its Affiliates:
(a) Corporate Authority. NLS has the right to enter this
Agreement, is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and has by all necessary corporate action
duly and validly authorized the execution and delivery of this Agreement and
the performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and
legally binding obligation of NLS in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and
performance by NLS of this Agreement and each other agreement, document, or
instrument now or hereafter executed and delivered by NLS pursuant thereto or
in connection herewith will not: (i) conflict with or violate the articles or
certificate of incorporation or by-laws of NLS or any provision of any law,
rule, regulation, authorization or judgment of any governmental authority
having applicability to NLS or its actions; or (ii) to NLS' knowledge, conflict
with or result in any breach of, or constitute a default under, any note,
security agreement, commitment, contract or other agreement, instrument or
undertaking to which NLS is a party or by which any of its property is bound.
(d) Ownership. With respect to all NLS Intellectual
Property used or to be used in the Broadcom Products or Development Program,
NLS has the right and power to assign, license, and otherwise make agreements
pertaining to such property, as may be entered into hereunder; provided,
however, that this Section 10.2(d) shall not constitute a representation or
warranty as to non-infringement of any intellectual property rights of any
third party.
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(e) Independent Work. All NLS Intellectual Property used
or to be used in the Broadcom Products or Development Program has been (or will
be) created by NLS' employees, agents, or consultants, and, to the best of NLS'
knowledge, use of such property by Broadcom as contemplated herein and
development of the Broadcom Products will not depend upon the acquisition of
rights from any third party.
(f) No Litigation or Claims. As of the Effective Date
and except as disclosed in Exhibit J, there is no pending litigation or claim
nor, to the best of NLS' knowledge, the reasonable basis for any claim, that
NLS does not own NLS Intellectual Property used or to be used in the Broadcom
Products, or that the exercise by Broadcom of any of the rights granted
hereunder, infringes any Intellectual Property Right of any third party.
(j) Agreements with Employees. NLS has and will maintain
with all NLS employees, agents, and consultants, written agreements sufficient
to enable NLS to perform its obligations hereunder with confidentiality terms
at least as restrictive as those provided for the Parties under this Agreement.
Section 10.3. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE IN
THIS SECTION 10 OR ELSEWHERE IN THIS AGREEMENT OR IN ANY EXHIBITS HERETO,
NEITHER PARTY MAKES ANY WARRANTY OR REPRESENTATION OF ANY KIND TO THE OTHER
PARTY WHETHER EXPRESS, IMPLIED, STATUTORY OR IN ANY OTHER PROVISION OF THIS
AGREEMENT, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
11. INDEMNIFICATION
Section 11.1. General Indemnification by NLS. Subject to Section
14.1, NLS hereby agrees to indemnify, hold harmless and defend Broadcom and its
Affiliates against and in respect of any and all claims, damages, demands,
liabilities, losses, costs and expenses (including reasonable attorneys' fees,
litigation expenses and expert witness fees) (collectively, "Losses"), in each
case arising out of or based upon or relating or pertaining to:
(a) the inaccuracy in any material respect of any
representation or warranty made by NLS in Section 10.2 of this Agreement; or
(b) the breach by NLS or any of its Affiliates of any
material agreement or covenant contained in this Agreement.
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Section 11.2. General Indemnification by Broadcom. Subject to
Section 14.1, Broadcom hereby agrees to indemnify, hold harmless and defend NLS
and its Affiliates against and in respect of any and all Losses, in each case
arising out of or based upon or relating or pertaining to:
(a) the inaccuracy in any material respect of any
representation or warranty made by Broadcom in Section 10.1 of this Agreement;
or
(b) the breach by Broadcom or any of its Affiliates of
any material agreement or covenant contained in this Agreement.
Section 11.3. Product Indemnification by Broadcom. Subject to
Section 14.1(a), Broadcom agrees to defend, indemnify and hold NLS and its
Affiliates harmless against and in respect of any and all Losses (including
without limitation Losses resulting from any indemnification by NLS of its
customers and distributors) arising out of or based upon or relating or
pertaining to any claim that the manufacture, sale, importation or use of the
Broadcom Products supplied by Broadcom (either directly or by or through its
Affiliates) to NLS hereunder infringes the patent, copyright, trademark, trade
secret or other proprietary rights of any third party, except that Broadcom
shall have no such indemnification obligation with respect to (a) any
infringement arising from the use by NLS or its Affiliate of the Broadcom
Product in combination with other components supplied by NLS or its Affiliate
or any third party or (b) any infringement resulting from or relating to any
NLS Intellectual Property used by Broadcom in such products pursuant to the
terms of this Agreement.
Section 11.4. Product Indemnification by NLS. Subject to Section
14.1(a), NLS agrees to defend, indemnify and hold Broadcom and its Affiliates
harmless against and in respect of any and all Losses (including without
limitation Losses resulting from any indemnification by Broadcom of its
customers and distributors) arising out of or based upon or relating or
pertaining to any claim that the manufacture, sale, importation or use of the
Broadcom Products supplied by Broadcom (either directly or by or through its
Affiliates) to NLS or any of its other customers infringes the patent,
copyright, trademark, trade secret or other proprietary rights of any third
party to the extent that such claim results from or relates to: (a) any
infringement arising from the use by NLS or its Affiliate of the Broadcom
Product in combination with other components supplied by NLS or its Affiliate
or any third party or (b) any infringement resulting from or relating to any
NLS Intellectual Property used by Broadcom in such products pursuant to the
terms of this Agreement.
Section 11.5. Indemnification Procedures. A Party seeking
indemnification pursuant to this Agreement ( the "Indemnified Party") shall
give reasonably prompt written notice to the Party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity may be sought hereunder, and shall give the
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Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request, but no failure to give such notice shall relieve
the Indemnifying Party of any liability hereunder, except to the extent that
the Indemnifying Party has suffered actual prejudice thereby. The Indemnifying
Party shall have the right to undertake the defense of any such claim asserted
by a third person, and the Indemnified Party shall cooperate in such defense
and make available all personnel, records and materials requested by the
Indemnifying Party in connection therewith at the Indemnifying Party's expense.
The Indemnified Party shall be entitled to participate in such defense, but
shall not be entitled to indemnification with respect to the costs and expenses
of such defense if the Indemnifying Party shall have assumed the defense of the
claim with counsel reasonably satisfactory to the Indemnified Party. The
Indemnifying Party shall not be liable for any claim settled without its
consent, which consent may not be unreasonably withheld. The Indemnifying
Party may settle any claim without the consent of the Indemnified Party, but
only if the sole relief awarded is monetary damages.
Section 11.6. Benefit of Intellectual Property Rights. In the
event that Broadcom or its Affiliate becomes a defendant in a litigation where
it is defending against a claim for patent infringement and such claim relates
to the Specifications, NLS agrees to make available for use by Broadcom and its
Affiliates, without additional consideration, any additional intellectual
property rights held by NLS or its Affiliates that relate to the Specifications
(including patents, copyrights and any patent or copyright licenses which any
of them has received from third parties, if allowed by such licenses) which may
assist Broadcom and its Affiliates in defending against such claims(s).
Section 11.7. Covenant Not to ▇▇▇. It is mutually agreed by the
Parties that they will not prosecute or assist in the prosecution of any claim,
action or cause of action against each other or their respective Affiliates,
and each of their successors, assigns, customers or any of their respective
directors, officers or employees for, on account of, or arising out of any
infringement of any patents, copyrights or other intellectual property, or the
use of any technical information belonging to either of the Parties, in
connection with the design, manufacture, sale or use by Broadcom or its
Affiliates of any product incorporating the VLSI Technology, NLS Enhancements
or NLS Modifications, whether used alone or in combination with other
components supplied by any third party, or the manufacture, sale, importation
or use by NLS or its Affiliates of any product that uses or incorporates a
Broadcom Product purchased from Broadcom, whether used alone or in combination
with other components supplied by NLS or any third party.
12. EQUITY INVESTMENT
As additional consideration for the covenants and obligations of the
Parties under this Agreement, NLS shall purchase 1,500,000 shares of a new
Series E Preferred Stock of Broadcom for the purchase price of $15.15 per share
pursuant to the terms of a Series E Preferred Stock Purchase Agreement to be
entered into by the Parties. The closing of the
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stock purchase by NLS shall occur contemporaneously with the Parties' execution
of this Agreement.
13. TERM AND TERMINATION
Section 13.1. Term. Unless earlier terminated as permitted under this
Article 13, this Agreement shall expire four (4) years after the Effective
Date; provided, however, that if NLS delivers to Broadcom a written undertaking
to extend its minimum purchase commitment for a fifth or sixth twelve month
period as provided in Section 7.1(b), the term of this Agreement shall be
extended concomitantly.
Section 13.2. Termination.
(a) Failure to Meet Milestones. In the event that
Broadcom fails to meet a Milestone within sixty (60) days after the scheduled
date for such Milestone as set forth in Exhibit B hereto, as such date may be
extended (i) as specifically contemplated by Sections 2.1 and 4.2 above and/or
(ii) as set forth in Section 2.4 above, but only after NLS' compliance with
Section 3.2 if applicable, NLS' shall be entitled to terminate the Development
Program as to the applicable Development Program Product (and any planned
successor products thereto providing additional integration or functionality)
only by providing Broadcom with sixty (60) days advance written notice thereof;
provided, however, that NLS may not so terminate (x) if Broadcom meets the
Milestone within the sixty (60) day advance notice period or (y) for Broadcom's
failure to meet a Milestone that relates, directly or indirectly, to a
Specification that was not fully developed as of the date of this Agreement,
unless such failure occurs after such Specification has been finally determined
by the Parties and the associated Milestones have been established or
appropriately revised by the Parties pursuant to the terms of this Agreement.
The termination by NLS of the Development Program as to a Development Program
Product (and any permitted successor product) shall not affect NLS' obligations
with respect to the balance of the Development Program or NLS' minimum purchase
commitments under this Agreement except that (x) NLS shall not be obligated to
purchase the Development Program Product (and any permitted successor product)
that would have resulted from the terminated project and (y) the minimum
purchase commitment of NLS under Section 7.1 with respect to the class of
products including the terminated product shall end twelve (12) months after
the effective date of the termination. In all other respects this Agreement
shall remain in full force and effect.
(b) Termination of Agreement for Material Breach. This
Agreement may be terminated at any time immediately for a material breach of
this Agreement (other than a failure to meet the Milestones, which shall be
covered exclusively by Section 13.2(a)), by one Party after the other Party's
failure to cure such breach within thirty (30) days after receiving written
notice thereof (or a plan to cure has not been reasonably agreed upon by the
Parties within such thirty (30) days, which agreement shall not be unreasonably
withheld, delayed or conditioned). Without implication as to what
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other actions or inactions on the part of either of the Parties constitutes or
does not constitute a material breach of this Agreement, NLS agrees that any
individual default in the performance by Broadcom of any of its obligations to
supply products pursuant to a particular purchase order shall not, without
more, constitute a material default in Broadcom's obligations under this
Agreement. To the extent that Broadcom's repeated defaults in the performance
of its obligations under purchase orders acknowledged by Broadcom shall
constitute a material default, such material default shall be deemed to be only
with respect to the particular Broadcom Product(s) that are the subject of such
defaults, and NLS's remedy in such event shall be to terminate its minimum
purchase commitment under this Agreement only as and to the extent it relates
to such Broadcom Product(s). This Agreement shall remain in full force and
effect in all other respects, including with respect to NLS' purchase
obligations for other Broadcom Products and with respect to the Development
Program.
Section 13.3. Termination in First Year. Notwithstanding any other
provision of this Agreement, NLS agrees that it shall have no right to
terminate this Agreement for any reason prior to October 1, 1998.
Section 13.4. Survival. The rights and obligations contained in the
following Sections shall survive termination or expiration of this Agreement
for any reason: Sections 5.1, 5.3(a), 5.3(b), 5.4, 5.5, 8, 10, 11, 13 and 14
of this Agreement. In addition, Section 9 shall survive the termination of
this Agreement by NLS pursuant to Section 13.2.
14. GENERAL PROVISIONS
Section 14.1. Limitation of Liability. (a) IN NO EVENT SHALL EITHER
PARTY HAVE ANY LIABILITY TO THE OTHER PARTY, ITS AFFILIATES, ITS CUSTOMERS OR
ANY THIRD PARTY ON ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR SPECULATIVE DAMAGES,
INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS OR USE, BUSINESS
INTERRUPTION, OR LOSS OF GOODWILL, IRRESPECTIVE OF WHETHER SUCH DAMAGES ARISE
UNDER CONTRACT, TORT, STATUTE, OR OTHERWISE AND WHETHER OR NOT THE PARTY HAS
ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
The Parties acknowledge that this limitation on potential liabilities was an
essential element in setting consideration under this Agreement.
(b) EXCEPT FOR PERSONAL INJURY CAUSED BY BROADCOM'S
NEGLIGENCE, OR WITH RESPECT TO SECTION 11.3 ABOVE, IN NO EVENT SHALL BROADCOM'S
CUMULATIVE LIABILITY TO NLS OR ITS AFFILIATES UNDER ANY PURCHASE ORDER PLACED
PURSUANT TO THIS AGREEMENT
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EXCEED THE AGGREGATE AMOUNT PAID TO BROADCOM UNDER THAT PURCHASE ORDER, EVEN IF
A TERM OF THE PURCHASE ORDER FAILS OF ITS ESSENTIAL PURPOSE.
Section 14.2. Freely Entered Contract. Each Party acknowledges that
it has read this Agreement, understands it and agrees to be bound by it. Each
Party acknowledges that such Party has not been induced to enter into such
Agreement by any representations or statements, oral or written, not expressly
contained herein or expressly incorporated by reference.
Section 14.3. Assignment. This Agreement shall be binding upon the
Parties and their respective successors and permitted assigns. Neither Party
may assign or delegate any of its rights or obligations under this Agreement
without the prior written consent of the other Party, except that either Party
may assign and delegate all of its rights and obligations hereunder in
conjunction with a disposition of all or substantially all of its assets to
which this Agreement relates (whether by merger, sale or other form of
transaction). Any assignment or delegation in violation of this Section 14.3
shall be null and void. Subject to the foregoing restrictions, this Agreement
will inure to the benefit of the successors and permitted assigns of the
Parties hereto.
Section 14.4. Headings. The section headings appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such section or in any way
affect the Agreement.
Section 14.5. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be considered an
original, but all of which together will constitute one and the same
instrument.
Section 14.6. Notices. All notices and consents required to be given
or made by the Parties shall be in writing and shall be deemed validly given if
delivered by hand or sent by registered mail, return receipt requested, or
confirmed facsimile to the following addresses:
To Broadcom: To NLS:
Broadcom Corporation NextLevel Systems, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
President & Chief Executive V.P., Business Development
Officer Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
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With copy to: With copies to:
Irell & ▇▇▇▇▇▇▇ LLP NextLevel Systems, Inc.
1800 Avenue of the Stars, Ste. 900 Broadband Networks Group
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq. ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇ Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, V.P &
General Counsel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, V.P., Digital
Network Sys.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Notice delivered by hand shall be deemed to have been received by the addressee
on the date delivered. Notice given by registered mail shall be deemed to have
been received by the addressee on the fifth (5th) business day following the
day upon which it is mailed. Notice given by confirmed facsimile shall be
deemed to have been received by the addressee on the business day following the
day on which it was sent.
Section 14.7. Entire Agreement. This Agreement and the Exhibits
hereto are the complete agreement of the Parties relating to the subject matter
hereof. This Agreement supersedes and governs any other prior or collateral
agreements with respect to the subject matter hereof. Any amendment to this
Agreement or any modification of any term of this Agreement must be in writing
and be executed by an authorized officer of each Party.
Section 14.8. Governing Law and Dispute Resolution.
(a) Mandatory Mediation. Unless the parties otherwise
agree in writing, any dispute, controversy, or claim, regardless of the legal
or equitable theory involved, arising out of or with reference to this
Agreement, or the interpretation, making, performance, breach or termination
thereof (a "Disputed Matter") shall be subject to confidential mandatory
non-binding mediation proceedings, in accordance with Section 14.8(b), prior to
the initiation of any litigation or other proceeding in any court of law or
equity. Notwithstanding the foregoing, before or during the mediation any
Party may apply to any of the courts described in Section 14.8(d) for a
temporary restraining order, preliminary injunction, permanent injunction or
other equitable relief where such relief is reasonably required to protect its
interests pending completion or termination of the mediation proceedings.
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(b) Mediation Procedures. Each Party agrees that, prior
to the initiation of any litigation against the other Party or its Affiliates
with respect to any Disputed Matter or the relationship between the Parties
(including its commencement and termination), whether based on breach of
covenant, breach of an implied covenant or other theories, the Parties shall
attempt to amicably resolve the claim or dispute through confidential mandatory
non-binding mediation. To this end, each Party will make available one or more
members of such Party's senior management who shall have expertise in the
subject matter of the claim or dispute (e.g., a Party's senior technical
officer in the event of a claim or dispute related to technology or a Party's
senior finance executive in the event of a claim or dispute related to
financial matters) and who shall be authorized to enter into negotiations with
respect to the claim or dispute. If the Parties are not able to resolve the
claim or dispute in this manner within thirty days of the initiation of
negotiations, they shall submit such claim or dispute to confidential
non-binding mediation before a single mediator in accordance with the
Commercial Mediation Rules of the American Arbitration Association ("AAA") then
in effect. The Parties shall agree on a mediator within fifteen (15) days of
notice that a Party intends to seek mediation. If the Parties cannot agree on
a mediator, the mediator shall be selected using the methods provided in the
Commercial Mediation Rules of the AAA. Unless the Parties shall otherwise
agree, the mediator shall be a partner or principal of a nationally recognized
firm of independent certified public accountants from the management advisory
services department (or comparable department or group) of such firm with at
least five (5) years of recent experience in the subject matter of the claim or
dispute; and provided further that such firm cannot be any firm of certified
public accountants that has audited the financial statements or books and
records of either Party or provided management or advisory services for either
Party within the last three years or that is engaged or reasonably expected to
do so for either Party for the current year. The Parties agree that the
mediation proceeding will be attended by one or more members of such Party's
senior management who meet the qualifications set forth above and who shall be
authorized to enter into negotiations with respect to the claim or dispute.
The fees of the mediator shall be borne equally by each Party.
(c) Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California, without reference to
conflict of laws principles.
(d) Exclusive Jurisdiction and Venue. Any action or
other proceeding brought with respect to a Disputed Matter shall be brought and
heard only in an appropriate state or federal court located in the Counties of
Los Angeles or Orange, California, or in the County of New York, New York. The
parties hereto acknowledge that such courts have the exclusive jurisdiction to
interpret and enforce the provisions of this Agreement, and the parties waive
any and all objections that they may have as to personal jurisdiction or venue
in any of the above courts.
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Section 14.9. Affiliates. Each Party agrees that it will ensure that
all of its Affiliates are subject to the restrictions to which such Party is
subject under this Agreement with respect to the treatment and use of the other
Party's technology and Confidential Information, regardless of how such
Affiliate acquires such technology or Confidential Information.
Section 14.10. Severability. The illegality or unenforceability of
the whole or any part of the provisions of this Agreement will not affect the
continued operation of the remaining provisions of this Agreement.
Section 14.11. Waiver. The failure of either Party at any time to
insist upon strict performance of any of the terms and conditions contained in
this Agreement will not be deemed a waiver of its right at any time thereafter
to insist upon strict performance.
Section 14.12. Independent Contractors. The relationship of the
Parties established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other, (ii)
constitute the Parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow either Party to
create or assume any obligation on behalf of the other Party for any purpose
whatsoever.
Section 14.13. Confidentiality of Agreement. Each Party agrees that
the terms and conditions of this Agreement shall be treated as confidential
information and that no reference to the terms and conditions of this Agreement
can be made without the prior written consent of the other Party (such consent
not to be unreasonably withheld, conditioned or delayed); provided, however,
that each Party may disclose the mere existence of this Agreement without
restriction and may disclose the terms and conditions of this Agreement: (i) as
required by any court, administrative agency or other governmental body,
including without limitation any filing or public disclosure that may be
required under any federal or state securities law or regulation; (ii) as
otherwise required by law; (iii) in confidence, to legal counsel of the Parties
and other professional advisors; (iv) in confidence, to accountants, banks,
potential investors, financing sources and their respective advisors who would
not reasonably be deemed to be potential customers or competitors of either
Party; (v) in confidence, in connection with the enforcement of this Agreement
or rights under this Agreement; or (vi) in confidence, in connection with a
merger or acquisition or proposed merger or acquisition, or the like.
Notwithstanding the foregoing, the Parties agree that no initial announcement
or other public disclosure of the existence or terms of this Agreement shall be
made until the Parties have agreed upon the text of and issued an appropriate
joint press release announcing the Agreement and its principal terms and the
associated equity investment by NLS in Broadcom.
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Section 14.14. Force Majeure.
(a) Neither Party to this Agreement shall be held
responsible for any failure or delay in performance under this Agreement where
such performance is rendered impracticable by any act of war, compliance with
laws, governmental acts or regulations, fire, flood, other natural disaster,
epidemic, strikes and other causes similar to those listed, in each case where
failure to perform is beyond the control, and not caused by the negligence, of
the nonperforming Party ("Force Majeure").
(b) Upon the occurrence of an event of Force Majeure, the
Party whose performance is so affected shall promptly give notice to the other
Party of the occurrence or circumstance upon which it intends to rely to excuse
its performance. Duties and obligations of both Parties shall be suspended for
the duration of the Force Majeure.
(c) During the Force Majeure, the Party so affected shall
use its reasonable best efforts to avoid or remove such Force Majeure and shall
use its reasonable best efforts to resume its performance under this Agreement
with the least possible delay. If one Party is prevented to fulfill its
obligations under this Agreement by one of the Force Majeure causes for a
period exceeding ninety (90) days after such obligation is due, the other Party
may at its option terminate this Agreement upon fifteen (15) days' advance
written notice.
(d) The provisions of this Section 14.14 shall govern in
the event of any Force Majeure, and the Parties each hereby waive any other
defense or excuse for non-performance on grounds of implausibility or
impossibility.
Section 14.15. Joint Work Product. This Agreement is the joint work
product of the Parties hereto; accordingly, in its interpretation, no
inferences will be drawn against either Party based upon its drafting of the
provision(s) at issue.
Section 14.16. No Third Party Beneficiaries. Unless otherwise
expressly provided, no provisions of this Agreement are intended or shall be
construed to confer upon or give to any person or entity other than NLS and
Broadcom and, to the extent specifically so provided, their respective
Affiliates, any rights, remedies or other benefits under or by reason of this
Agreement.
Section 14.17. Further Assurances. Each of the Parties hereto
covenants, without the need for additional consideration, that it and its
Affiliates will take such further actions and execute upon request any further
documents as may be reasonably required to fully effectuate the terms,
conditions and intent of this Agreement and to more fully vest in the other
Party and its Affiliates the rights, licenses and other benefits provided to
such other Party and its Affiliates hereunder.
[The remainder of this page intentionally left blank.]
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their representatives thereunto duly authorized as of the date
first written above.
NEXTLEVEL SYSTEMS, INC. BROADCOM CORPORATION
By:_____________________________ By:____________________________
Name:___________________________ Name:__________________________
Title:____________________________ Title:_________________________
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
DEVELOPMENT PROGRAM PRODUCTS AND SPECIFICATIONS
1. DEVELOPMENT PROGRAM PRODUCTS
A. AVI 2.5 (BCM7010)
B. QUOD 2 (BCM3120)
C. AVI 4.0 (BCM7100) [*****]
2. SPECIFICATIONS
AVI 2.5 (BCM7010) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
QUOD 2 (BCM3120) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
AVI 4.0 (BCM7100) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
MILESTONES
AVI 2.5 (BCM7010)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
QUOD 2 (BCM3120)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
QUOD 2/AVI 4.0 (BCM7100)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
VLSI TECHNOLOGY
VIDEO GRAPHIC CONTROLLER (VGC) TECHNOLOGY
=========================================
License Rights under Pending Patents
====================================
[*****]
=======
Additional Technical Information to be transferred:
===================================================
[*****]
=======
FEC AND QAM TECHNOLOGY
======================
License Rights under Patents
============================
[*****]
=======
AVI TECHNOLOGY
==============
License Rights under Patents
============================
[*****]
=======
License Rights under Pending Patents
====================================
[*****]
=======
[*****] (BCM 3902)
==================
[*****]
=======
[*****] (BCM 7010)
==================
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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43
EXHIBIT D
SUPPLY TERMS
(a) Terms and Conditions. All purchases of Broadcom Products by
NLS from Broadcom during the term of the Agreement shall be subject to the
terms and conditions of the Agreement, including these Supply Terms. NLS's
purchase orders submitted to Broadcom from time to time with respect to
Broadcom Products to be purchased hereunder, and Broadcom's acknowledgments
provided to NLS from time to time, shall be governed by the terms of the
Agreement, including these Supply Terms, and nothing to the contrary contained
in any such purchase order or acknowledgment shall in any way modify, or add
any additional terms and conditions to, the Agreement and/or the Supply Terms.
Broadcom and NLS understand and acknowledge that the nature of their respective
businesses may necessitate occasional requests for waivers of, or variances
from, one or more of the terms set forth in these Supply Terms. Broadcom and
NLS accordingly each agree to cooperate and negotiate in good faith with
respect to any such occasional requests for waivers or variances (other than
with respect to price terms); provided, however, that this agreement shall not
obligate either Broadcom or NLS to grant a waiver in any particular instance.
(b) Prices. The purchase price to NLS for each of the Broadcom
Products ("Purchase Price") shall be determined in accordance with Section 6.2
of the Agreement. All prices are F.O.B. Broadcom's facility currently located
at the address listed for Broadcom at the beginning of the Agreement.
(c) Taxes. NLS's Purchase Price does not include any federal,
state or local taxes and/or duties that may be applicable to the Broadcom
Products. When Broadcom has the legal obligation to collect such taxes, the
appropriate amount shall be added to NLS's invoice and paid by NLS, unless NLS
provides Broadcom with a valid tax exemption certificate authorized by the
appropriate taxing authority.
(d) Forecasts. NLS shall supply Broadcom, within the first seven
(7) business days following the beginning of each month during the term of the
Agreement, with a rolling twelve (12) month forecast of NLS's anticipated
requirements for Broadcom Products. The forecasts for any given month (a
"Shipment Month") shall become binding upon Broadcom and NLS, following the
final permitted adjustment (i.e. the adjustment permitted in the fourth month
prior to the Shipment Month so specified below), three (3) months prior to the
start of that Shipment Month (such three (3) month period to be referred to as
the "Committed Period"), at which time NLS shall be required to submit binding
purchase orders pursuant to Section (f) below for the number of units forecast
for such Shipment Month. Prior to that time, monthly forecasts may be adjusted
by NLS without penalty as follows:
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CONFIDENTIAL TREATMENT REQUESTED
Fourth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between three and four months prior to start of Shipment Month
Shipment Month)
Fifth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between four and five months prior to start of Shipment Month
Shipment Month)
Sixth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between five and six months prior to start of Shipment Month
Shipment Month)
Seventh, eighth, ninth, tenth, eleventh and twelfth No restrictions
months prior to start of Shipment Month
Notwithstanding the foregoing, if a mutually agreed third party published
standard (the "Published Standard") indicates, at any time during the term of
this Agreement, that standard industry lead times for binding purchase orders
for the manufacture of custom ASICs are greater than three (3) months, the
monthly forecasting adjustments and Committed Period set forth above shall be
appropriately adjusted (upon each such material change, in either direction, in
standard industry lead times) to reflect such lengthened industry lead times;
provided, however, that if and when the Published Standard indicates that such
standard industry lead times revert to being less than or equal to three (3)
months, the monthly forecasting adjustments and Committed Period set forth
above shall be reset to the original provisions set forth above (i.e., a
minimum Committed Period of three (3) months).
(e) Reschedule and Cancellation.
(i) Rescheduling. NLS may not reschedule a shipping date
within thirty (30) days of the date of delivery specified in NLS's purchase
order. All other delivery dates specified in NLS's purchase orders may be
delayed by up to a maximum of sixty (60) days from the original delivery date
specified in such purchase orders. Only one (1) reschedule per purchase order
is allowed. Notwithstanding the foregoing, the rescheduling of purchase orders
specifying delivery days within the Committed Period (as it may be adjusted
pursuant to section (d) above) shall be subject to the following restrictions:
Months Prior Maximum
to Shipment Reschedule Percentage
----------- ---------------------
2 [*****]
3 [*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
(ii) Cancellation. NLS may cancel any purchase order
specifying a delivery date inside the Committed Period upon written notice to
Broadcom, subject to a cancellation charge calculated from the following table:
Cancellation Charge
Stage of Production (% of Contract Price)
------------------- ---------------------
Assembly/Finished Goods [*****]
Probed Die [*****]
Wafer Fabrication [*****]
(f) Order and Acceptance. All orders for Broadcom Products
submitted by NLS shall be initiated by written purchase orders sent to Broadcom
and requesting a delivery date during the term of the Agreement; provided,
however, that an order may initially be placed orally or by telex if a
confirmational written purchase order is received by Broadcom within ten (10)
days following said oral or telex order. NLS shall submit purchase orders to
Broadcom at least ninety (90) days prior to the requested day of delivery. No
NLS order shall be binding upon Broadcom unless Broadcom acknowledges it in
writing. Broadcom shall send NLS a formal written acknowledgment or rejection
of an order within ten (10) business days of receipt thereof. If Broadcom
shall fail to send such an acknowledgment or rejection, the offer shall be
deemed rejected. With respect to any order accepted by Broadcom, unless
Broadcom objects to the date of delivery in the purchase order in its
acknowledgment of acceptance, Broadcom shall use its reasonable best efforts to
deliver Broadcom Products to NLS on, or no more than three (3) days prior to,
the date specified in the purchase order. If Broadcom notifies NLS of its
objection to the date of delivery specified in an NLS purchase order, the
parties shall mutually agree on an alternative delivery date. No partial
shipment of an order shall constitute the acceptance of the entire order,
absent the written acceptance of such entire order.
(g) Payment. Broadcom shall submit an invoice to NLS upon
shipment of each Broadcom Product. The invoice shall cover NLS's Purchase
Price for the Broadcom Products in a given shipment plus any freight, taxes or
other applicable costs initially paid by Broadcom but to be borne by NLS.
[*****]
(h) Shipping. All Broadcom Products delivered pursuant to the
terms of this Agreement shall be suitably packed for air freight shipment in
Broadcom's standard shipping cartons, marked for shipment at NLS's address set
forth above, and delivered to NLS or its carrier agent F.O.B. Broadcom's
facility currently located at the address listed for Broadcom at the beginning
of this Agreement, at which time title to such Broadcom Products and risk of
loss shall pass to NLS. Unless otherwise instructed in writing by NLS,
Broadcom shall select the carrier. All freight, insurance, and other shipping
expenses, as well as any special packing expense, shall be paid by NLS. NLS
shall also bear all applicable taxes, duties, and similar charges that may be
assessed against the Broadcom Products after delivery to the carrier at
Broadcom's facility.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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46
(i) Quality Level. Broadcom shall use its reasonable best efforts
to achieve an acceptable outgoing quality level of at least 100 ppm (as
measured through Broadcom's Acceptance Quality Level testing) for all Broadcom
Products during the term of the Agreement.
(j) Warranties and Warranty Disclaimers.
(i) Broadcom Warranty. Broadcom warrants that each
Broadcom Product will be free from defects in workmanship and materials for one
year from the date of shipment ("Warranty Period"). This warranty does not
apply to any Broadcom Product which has been misused (including static
discharge, improper installation, repair or accident) or neglected or which
Broadcom is not capable of testing (and such incapability of testing has
occurred through no fault of Broadcom). Broadcom's sole obligation to NLS for
a Broadcom Product failing to meet this warranty is, at Broadcom's option, to
replace or repair the Broadcom Product or to issue NLS a credit for the
purchase price of the Broadcom Product, but only if (i) Broadcom has received
written notice of the warranty claim within the Warranty Period, (ii) NLS has
returned the Broadcom Product to Broadcom in accordance with the rejection
procedures set forth in Section k(ii) below, and (iii) Broadcom has verified
that the Broadcom Product is defective. Broadcom warrants a replacement or
repaired Broadcom Product only for the unexpired term of the warranty for the
defective Product.
(ii) NOTWITHSTANDING CLAUSE (i) ABOVE, BROADCOM PROVIDES
PROTOTYPES "AS-IS", WITHOUT WARRANTY OF ANY KIND.
(iii) Broadcom's warranties shall not be enlarged by, nor
shall any obligation or liability of Broadcom arise due to, Broadcom providing
technical advice, facilities, or service in connection with any Broadcom
Product.
(iv) THE WARRANTY AND REMEDIES STATED IN THIS SECTION (j)
ARE EXCLUSIVE. BROADCOM DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. BROADCOM NEITHER ASSUMES NOR
AUTHORIZES ANY OTHER PERSON TO ASSUME FOR IT ANY OTHER LIABILITY IN CONNECTION
WITH THE SALE, INSTALLATION OR USE OF ITS PRODUCTS.
(k) Rejection of Broadcom Products.
(i) Acceptance Period. NLS shall have the right to
inspect all Broadcom Products promptly upon receipt thereof and may reject any
Broadcom Product that fails in any material way to meet the current published
specifications for that Broadcom Product. Any Broadcom Product not properly
rejected within forty-five (45)
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CONFIDENTIAL TREATMENT REQUESTED
days after receipt of that Broadcom Product by NLS ("Rejection Period") shall
be deemed accepted. If any Broadcom Product is shipped by NLS to its customer
prior to expiration of the Rejection Period, then that unit shall be deemed
accepted upon shipment by NLS.
(ii) Rejection Procedures. To reject a Broadcom Product,
NLS shall, within the Rejection Period, notify Broadcom in writing of its
rejection and request a Material Return Authorization ("MRA") number. Broadcom
shall use its reasonable best efforts to provide the MRA number in writing to
NLS within ten (10) days following the receipt of such request; provided,
however, that if the quantity rejected by NLS is greater than ten (10) pieces,
Broadcom shall have the right, prior to issuing an MRA number for the full
quantity, to request that a sample of the defective Broadcom Product be
returned with the initial MRA. In such case, subject to Broadcom's
verification of the initial MRA samples, but no later than ten (10) days
following the return of such samples, Broadcom shall notify NLS in writing of
the disposition of the full quantity; provided, however, that in the event such
samples are returned by NLS as part of actual NLS product units, Broadcom shall
have up to thirty (30) days to notify NLS in writing of the disposition of the
full quantity. If such full quantity is deemed defective, Broadcom shall then
issue a subsequent MRA which shall cover such full quantity. Within ten (10)
days after receipt of the written MRA number, NLS shall return to Broadcom the
rejected Broadcom Product, freight prepaid, with the MRA number displayed on
the outside of the carton. NLS shall have the right to debit the purchase
price of rejected Broadcom Products from its accounts payable to Broadcom
immediately upon receipt of the MRA number with respect to such rejected
Broadcom Products. In this regard, the MRA number issued by Broadcom with
respect to samples of rejected Broadcom Products which are part of larger
quantity of rejected Broadcom Products shall be considered distinct from the
MRA number for such full quantity of rejected Broadcom Products. In addition,
with respect to rejected quantities greater than ten (10) pieces for which
Broadcom has issued NLS an MRA number and for which NLS has taken a debit,
Broadcom shall reserve the right, at its sole option, to repair or replace such
rejected quantities and, thereafter, to sell such quantities back to NLS.
Provided that Broadcom has complied with its obligations in this Section (k),
Broadcom reserves the right to refuse to accept any rejected Broadcom Products
that do not bear an MRA number on the outside of the carton.
(l) Production Capacity and Supply. Broadcom shall use its
reasonable best efforts to establish and maintain a minimum production capacity
sufficient to supply NLS's requirements (such requirements to be determined
consistent with these Supply Terms) for all Broadcom Products during the term
of the Agreement. [*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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48
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT E
BROADCOM NRE PAYMENTS
Upon execution of the Agreement, Broadcom shall pay to NLS the non-refundable
sum of [*****] for non-recurring engineering (NRE) in support of Broadcom's
MPEG development program. NLS deliverables under this program include:
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT F
[*****]
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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50
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT G
NLS NRE PAYMENTS
Upon completion of the milestones identified below, NLS shall make
non-refundable NRE payments to Broadcom in the amounts shown below:
[*****] [*****] [*****]
Milestone (BCM 3120) (BCM 7010) (BCM7100) TOTAL
========= =========== ========== ========= =====
[*****]
=======
--------------------------------------------------
==================================================
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT H
MANDATORY ENHANCEMENTS
[*****] (BCM3120)
=================
[*****]
=======
[*****] (BCM7010)
=================
[*****]
=======
[*****] (BCM7100)
=================
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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52
EXHIBIT I
[INTENTIONALLY OMITTED]
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53
EXHIBIT J
PENDING LITIGATION AND CLAIMS
1. DISCLOSURES BY BROADCOM
One or more employees or independent contractors of the Company were
working at the University of California at Los Angeles ("UCLA") while
concurrently working at the Company. Each employee or independent contractor
of the Company who worked at UCLA executed a State Oath of Allegiance and
Patent Agreement, pursuant to which each such person agreed that every possible
patentable device, process, plant or product (collectively referred to as
"Inventions"), conceived or developed by such person while employed by UCLA, or
during the course of his or her utilization of any research facilities or in
connection with his or her use of any gift, grant or contract research funds
received through UCLA, would be assigned to UCLA. UCLA has refused to execute
any document releasing its interest in any such Inventions or assigning its
right to any such inventions to the Company. UCLA may assert a claim to the
Inventions of such persons, although no such claim has been received by the
Company to date.
On or about December 20, 1996, Stanford Telecommunications, Inc.
("STel") filed an action for patent infringement and injunctive relief (the
"Action") against the Company in the United States District Court for the
Northern District of California. STel alleges in its complaint in the Action
that the Company infringes United States Patent No. 5,412,352 (the "'352
Patent"), entitled "Modulator Having Direct Digital Synthesis for Broadband RF
Transmission." On or about February 18, 1997, the Company filed its answer and
affirmative defenses to STel's complaint, denying the allegations in STel's
complaint, and asserted a counterclaim requesting the Court to issue a
declaration that the Company does not infringe the '352 Patent and that the
'352 Patent is invalid and unenforceable.
On or about April 25, 1997, ▇▇▇▇▇▇▇ Corporation ("▇▇▇▇▇▇▇") filed a
complaint in New Jersey Superior Court against the Company and five former
Sarnoff employees now employed by the Company (the "Former Employees")
asserting claims against the Former Employees for breach of contract, (common
law) misappropriation of trade secrets and breach of the covenant of good faith
and fair dealing, and against the Company for inducing such actions. These
claims stem from the alleged disclosure of ▇▇▇▇▇▇▇'▇ supposedly proprietary
Quadrature Amplitude Modulation ("QAM") technology. The complaint also asserts
claims against the Company and the Former Employees for unfair competition,
misappropriation of trade secrets and tortious interference with present and
prospective economic advantage, as well as a claim against the Company for
"piracy" of ▇▇▇▇▇▇▇'▇ employees. ▇▇▇▇▇▇▇ seeks to preliminarily and
permanently restrain the Company and the Former Employees from utilizing any
alleged ▇▇▇▇▇▇▇ trade secrets, and to restrain the Former Employees from
violating their statutory and contractual duties of confidentiality to ▇▇▇▇▇▇▇
by precluding them from working for six months in any capacity relating to the
Company's QAM-related programs. On or about May 20, the New Jersey court
denied ▇▇▇▇▇▇▇'▇ request for a temporary restraining order; in the four months
since, ▇▇▇▇▇▇▇ has not sought any other injunctive relief.
From time to time, companies have asserted exclusive patent, copyright
and other intellectual property rights to technologies that are important to
the integrated chip industry. The Company
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54
evaluates each claim and, if appropriate, seeks a license to use the protected
technology. There can be no assurances that the Company would be able to
obtain licenses to use such technology or obtain such licenses on terms that
would not have a material adverse effect on the Company. If the Company or its
suppliers are unable to license protected technology used in the Company's
products, the Company could be prohibited from marketing such products. The
Company could also incur substantial costs to redesign its products or to
defend any legal action taken against it. If the Company's products should be
found to infringe protected technology, the Company could be required to pay
damages to the infringed party and to stop using such protected technology.
2. DISCLOSURES BY NLS
None.
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55
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT K
[*****]
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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56
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT L
MINIMUM PURCHASE COMMITMENTS FOR
BCM3900QUOD AND BCM3902
Calendar Minimum
Quarter Unit
Ended Quantity
--------- -----------------------------------
BCM3900QUOD BCM3902
----------- -------
12/31/97 [*****] [*****]
3/31/98 [*****] [*****]
6/30/98 [*****] [*****]
(A) Subject to Broadcom's ability to ship.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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57
CONFIDENTIAL TREATMENT REQUESTED
EXHIBITS
Exhibit A - Development Program Products and Specifications
Exhibit B - Milestones
Exhibit C - VLSI Technology
Exhibit D - Supply Terms
Exhibit E - Broadcom NRE Payments
Exhibit F - [*****]
Exhibit G - NLS NRE Payments
Exhibit H - Mandatory Enhancements
Exhibit I - [Intentionally Omitted]
Exhibit J - Pending Litigation and Claims
Exhibit K - [*****]
Exhibit L - Minimum Purchase Commitments for BCM3900QUOD and BCM3902
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
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