May 11, 1997
MEMORANDUM OF UNDERSTANDING
WHEREAS, TTR INC., a Delaware corporation, ('TTRINC') and TTR Technologies
Ltd., a corporation organized in the State of Israel, ('TTR Limited'), and
collectively ('TTR') has developed, and holds all proprietary rights to,
technology which may prevent the faithful reproduction of optical media
(hereafter 'DiscGuard').
WHEREAS, NIMBUS CD INTERNATIONAL INC., a Delaware corporation, ('Nimbus')
is a world-recognized CD-ROM replicator.
WHEREAS, DOUG CARSON AND ASSOCIATES, a Oklahoma corporation, ('DCA') is in
the business of supplying mastering interface systems ('MIS') for different
types of laser mastering machines for use in the optical media industry.
WHEREAS, DCA is in the process of developing a MIS which integrates the
DiscGuard technology for use on laser mastering machines (hereinafter the
'Enhanced MIS Unit');
WHEREAS, Nimbus desires and agrees to integrate a Enhanced MIS Unit into
one of its laser mastering machines in order to produce, on a trial basis, a
DiscGuard enhanced glass master and to undertake a test run of 1,000 DiscGuard
protected CD-ROMs (hereinafter the 'First Run'); and
WHEREAS, the parties wish to enter into this Memorandum of Understanding
('MOU') to set forth the principles of their relationship.
NOW, THEREFORE, for the mutual covenants and premises contained herein, the
parties hereto agree as follows:
1. Nimbus will work jointly with DCA to complete the First Run by May 15,
1997. TTR will provide all assistance to so complete the First Run.
Nimbus will supply twenty (20) discs, for approval by TTR prior to
replicating and packaging the First Run. The First Run discs will be
packaged in Jewel boxes with booklets and inlays. The product will be
overwrapped. Nimbus will bear the costs of replicating the discs,
ordering booklets (two page maximum) and inlays using TTR supplied
artwork and packaging the discs. All shipping costs will be borne by
TTR.
2. For the 6 month period beginning from the date of distribution of the
First Run anticipated to be June 3, 1997, the opening day of Replitech
(the 'Exclusivity Period'), TTR shall not grant to any third party the
right to replicate DiscGuard protected CD-ROMs; however, TTR shall be
entitled to grant to any third party the right to integrate a Enhanced
MIS Unit into its laser mastering machines.
3. Upon the completion of the First Run and for the Exclusivity Period,
TTR shall grant to Nimbus a non-exclusive (except as provided in
paragraph 4 below), non-transferable license to use the DiscGuard
technology for the purpose of replicating DiscGuard protected CD-ROMs
and DVDs (hereinafter, the 'Nimbus License').
4. During the Exclusivity Period of the Nimbus License, Nimbus shall
integrate the Enhanced MIS Units into its laser mastering machines and
may not use any technology or unit that is directly competitive with
DiscGuard. The Security Band and Edge to Edge hologram technology
offered by 3d-cd, L.L.C., a joint venture company of Nimbus is
specifically excluded from this provision. In addition, the use of the
Content Scramble System or the Analog Protection System technology of
Macrovision Corporation will also not be prohibited under the terms
hereof.
5. The prototype Enhanced MIS Unit will be provided at no cost to Nimbus
and remain available to Nimbus for the entire Exclusivity period.
Improvements or changes in this unit will be provided in a timely
fashion at no cost to Nimbus. Nimbus reserves the right to discontinue
the use of the Enhanced MIS Unit at any time. Following the Exclusivity
period, if Nimbus elects to purchase the Enhanced MIS Unit, Nimbus and
DCA and Nimbus and TTR agree to negotiate in good faith to establish a
purchase price.
6. During the Exclusivity period, TTR agrees to refer all potential
customers for the DiscGuard technology to Nimbus.
7. With respect to each DiscGuard protected Disc sold or distributed by or
on behalf of Nimbus, Nimbus shall pay TTR 50% of the per disc premium
revenue charged for each DiscGuard disc sold. It is understood that the
per disc premium revenue charge will be a minimum of $.15 but TTR and
Nimbus reserve the right to charge the amount charged based on
marketing considerations and mutual agreement.
8. TTR shall grant Nimbus preferred terms on all future payments of
royalties, such that retained per disc premiums are at least 20% more
favorable than those granted to other replicators.
9. With respect to each DiscGuard title sold or distributed by or on
behalf of Nimbus, TTR shall make it known to DiscGuard title owners
that a mandatory $1,500 mastering charge is to be applied by Nimbus.
Nimbus shall pay TTR $1,000 from the gross consideration received;
however, Nimbus shall only be obligated to pay TTR if the mastering
charge is collected. It is understood that this charge is to be applied
on a per title basis and not a per Glass Master basis.
10. All amounts owed by Nimbus to TTR will be paid on a quarterly basis.
Nimbus will accord to TTR the right to audit, with notice and during
normal business hours, Nimbus' records to verify Nimbus' compliance
with its payment obligations. The amounts paid for such sales or
distribution shall be adjusted annually.
11. Each purchaser (i.e., software and electronic content developers and
title publishers) of DiscGuard protected CD-ROMs or DVDs will be
informed by Nimbus through a notice, approved by TTR, that DiscGuard is
proprietary to TTR, disclaim any consequential liability and require
such purchaser to take affirmative action whereby the purchaser is
bound to a standard TTR license respecting the use of DiscGuard. Nimbus
will notify TTR and provide data regarding every mastering and/or
replication job including the number of Discs finished shipped.
12. TTR agrees to hold Nimbus and DCA harmless from and against any and all
liabilities, costs and damages (including reasonable attorney's fees
and litigation cost, regardless of outcome) arising out of or relating
to DiscGuard's infringement of third party IP rights. All parties
hereto shall agree to include limitation of liability provisions in the
'Agreement.'
13. The parties shall issue a media release to the public (in a form that
has been approved in writing by both parties) to announce the business
relationship being created by this MOU.
14. Within 30 days of execution of this MOU the parties shall enter into an
agreement incorporating, inter alia, the principal terms contained
herein (the 'Agreement').
IN WITNESS WHEREOF, each of the Parties has caused this MOU to be duly
executed on its behalf as of the date first written above.
TTR INC. DOUG CARSON AND ASSOCIATES
By: MARC TOKAYER By: DOUG CARSON
.............................. .................................
Mark Tokayer
Chairman and President
TTR TECHNOLOGIES LTD. NIMBUS CD INTERNATIONAL, INC.
By: ARIK SHAVIT By: JOHN TOWN
............................. .................................
Arik Shavit, CEO John Town, VP R&D