Ibm License Agreement

CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


EXHIBIT 10.6


103095 AGREEMENT with an effective date of
October 31, 1995 between
INTERNATIONAL BUSINESS MACHINES
CORPORATION, a New York corporation
(hereinafter called IBM), and
APPLIED SCIENCE FICTION, a Delaware
corporation (hereinafter called
LICENSEE).


IBM has the right to license others under certain patents.
LICENSEE desires to acquire a nonexclusive license under those
patents. In consideration of the premises and mutual covenants
herein contained, IBM and LICENSEE agree as follows:


Section 1. Definitions


1.1 "Information Handling System" shall mean any instrumentality or aggregate of instrumentalities primarily designed to compute, classify, process, transmit, receive, retrieve, originate, switch, store, display, manifest, measure, detect, record, reproduce, handle or utilize any form of information, intelligence or data for business, scientific, control or other purposes.


1.2 "IHS Product" shall mean:


1.2.1 an Information Handling System; or


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


1.2.2 any instrumentality or aggregate of instrumentalities (including, without
limitation, any component, subassembly or program) designed for
incorporation into an Information Handling System. An apparatus primarily
designed for use in the fabrication (including testing) of an IHS Product
shall not be considered an IHS Product even if it otherwise meets the
above definition.


1.3 "Type Number" shall mean the combination of numbers, letters or words utilized by LICENSEE to identify each type or model of Licensed Product.


1.4 "Licensed Patents" shall mean the patents listed in Exhibit 1 to this Agreement, any patents issuing on the applications listed in Exhibit 1, any patents of other countries corresponding to the listed patents and applications, and any reissues, divisions, continuations, or extensions of the foregoing patents and applications.


1.5 "Licensed Products" shall mean IHS Products which capture, create, process, handle, transmit, store, or output images.


1.6 "Patented Portion" shall mean that portion of a Licensed Product which embodies or uses all of the elements or steps recited in one claim of one Licensed Patent or which is


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


manufactured by the use of all of the steps recited in one claim of one Licensed Patent or which is capable of being used to practice the method recited in one claim of one Licensed Patent. A Licensed Product which embodies or uses all of the elements or steps recited in more than one claim of one Licensed Patent or in the claims of more than one Licensed Patent shall have more than one Patented Portion.


1.7 "Subsidiary" shall mean a corporation, company or other entity:


1.7.1 more than fifty percent (50%) of whose outstanding shares or securities
(representing the right to vote for the election of directors or other
managing authority) are, now or hereafter, owned or controlled, directly
or indirectly, by a party hereto, but such corporation, company or other
entity shall be deemed to be a Subsidiary only so long as such ownership
or control exists; or


1.7.2 which does not have outstanding shares or securities, as may be the case
in a partnership, joint venture or unincorporated association, but more
than fifty percent (50%) of whose ownership interest representing the
right to make the decisions for such corporation, company or other entity
is now or hereafter, owned or controlled, directly or indirectly, by a
party hereto, but such corporation, company or other entity shall be


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


deemed to be a Subsidiary only so long as such ownership or control
exists.


1.8 "LICENSEE's Selling Price" for each Licensed Product sold by LICENSEE to other than its affiliate shall mean the bona fide selling price, after prompt payment discounts and quantity discounts actually allowed, at which LICENSEE sold said Licensed Product. If said selling price includes the following items, they may be deducted only if separately invoiced to LICENSEE's customer: packing, transportation and insurance charges; import, export, excise, sales and value added taxes; and customs duties. "LICENSEE's Selling Price" for each Licensed Product sold by LICENSEE to one of its affiliates shall be equal to the average of the LICENSEE's Selling Prices for all Licensed Products identical to said Licensed Product which were sold to other than LICENSEE's affiliates in the relevant semiannual accounting period.


Section 2. License


2.1 IBM grants to LICENSEE a nonexclusive license under the Licensed Patents:


2.1.1 to make, use, import, and lease, sell and otherwise transfer Licensed
Products; and


2.1.2 to use any apparatus in the manufacture of Licensed Products and practice
any method or process in the manufacture or use of Licensed Products.


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


The license granted in this Section 2.1 for any particular Licensed Product shall be only under claims of Licensed Patents which claims define a Patented Portion for said particular Licensed Product and which are claims of Licensed Patents of the countries of manufacture, use, importation, or lease, sale or other transfer by LICENSEE.


A particular Licensed Product is licensed under a Licensed Patent when and only when:


2.1.3 such Licensed Patent defines a Patented Portion of such Licensed Product;


2.1.4 such Licensed Patent was identified in a report, as specified in Section
5.5, as covering such Licensed Product; and


2.1.5 the royalty attributable to such Licensed Product was either timely paid
as required by Section 5.4 or a late payment was made and accepted by IBM
pursuant to Section 5.2.


2.2 No license, immunity or other right is granted by IBM either directly or by implication, estoppel, or otherwise:


2.2.1 other than under the Licensed Patents;


2.2.2 to have Licensed Products made by a third party for
LICENSEE;


2.2.3 with respect to any Licensed Product which does not fully include a
Patented Portion;


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


2.2.4 with respect to any item other than a Licensed Product notwithstanding
that such other item may incorporate one or more Licensed Products; or


2.2.5 to parties acquiring any item from LICENSEE for the combination of such
acquired item with any other item, including other items provided by
LICENSEE, or for the use of any such combination even if such acquired
item has no substantial use other than as part of such combination.


Section 3. Extension of License to Subsidiaries


3.1 The license granted herein by IBM is also granted to LICENSEE's Subsidiaries, provided that:


3.1.1 each Subsidiary so licensed shall be bound by the terms and conditions of
this Agreement as if it were named herein in the place of LICENSEE; and


3.1.2 LICENSEE shall pay and account to IBM for royalties hereunder in respect
of the exercise by any Subsidiary of any license granted to it hereunder.


Any license granted to a Subsidiary shall terminate on the date such Subsidiary ceases to be a Subsidiary.


Section 4. Royalty and Other Payment


4.1 LICENSEE shall pay, as hereinafter provided, royalties to IBM in respect of each Licensed Product having one or more Patented Portions by virtue of one or more Licensed Patents of


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


the countries of manufacture, use, or lease, sale, or other transfer.


4.2 Subject to Sections 4.3, 4.5 and 4.6, for each Licensed Product which includes one or more Patented Portions and which is manufactured, used, or leased, sold or otherwise transferred in any country by or for LICENSEE, LICENSEE shall pay a royalty at a rate computed at the following percentages of LICENSEE's Selling Price of such Licensed Product:


Number of Licensed Patents Percentage of Licensee's
Defining Patented Portions Selling Price
-------------------------- ------------------------
1 [*]
2 [*]
3 [*]
4 [*]
5 or more [*]


For the purposes of this Section 4.2, a Licensed Patent and its corresponding patents shall be deemed to be one Licensed Patent.


4.3 In computing royalties on a Licensed Product, LICENSEE may exclude from the number of Licensed Patents used to compute royalties under Section 4.2, any Licensed Patent that defines one or more Patented Portions which are fully included in an item that is part of the Licensed Product and which was purchased by Licensee directly or indirectly from a third party who was authorized by IBM to sell such item. If, however, a Licensed


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- ----------- [*] Indicates that material has been omitted and confidential treatment requested therefor. All such material has been filed separately with the Commission pursuant to Rule 406.


CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


Patent also defines another Patented Portion not fully included in such purchased item, that particular Licensed Patent must be counted in the number of Licensed Patents used to compute the percentage of LICENSEE's Selling Price of the Licensed Product in accordance with Section 4.2.


4.4 If LICENSEE purchases from a third party portions of a Licensed Product and combines such portions with each other and/or with other portions such that the combination is itself a Licensed Product which includes a Patented Portion not fully included in any individual purchased portion, then royalty shall be due for the combination in accordance with this Section 4, notwithstanding the fact that said third party is authorized by IBM to sell said purchased portions.


4.5 No royalties shall be paid by LICENSEE for Licensed Products which LICENSEE manufactures for a third party where:


4.5.1 the third party is licensed by IBM to have such Licensed Product
manufactured for it; and


4.5.2 LICENSEE received prior authorization from such third party under such
party's license from IBM for such manufacture.


4.6 For royalties accruing through December 31, 1995, if a Licensed Product is covered by more than four (4) Licensed Patents, LICENSEE may, at his election, pay a royalty of four


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


percent (4%) of the LICENSEE's Selling Price of said Licensed Product. On January 1, 1996, this Section 4.6 and the reference to it contained in Section 4.2 shall be deemed to have been automatically deleted from this Agreement.


4.7 LICENSEE shall bear and pay all taxes (including, without limitation, sales and value added taxes) imposed by the national government (including any political subdivision thereof) of any country in which LICENSEE is doing business, as the result of the existence of this Agreement or the exercise of rights hereunder.


Section 5. Accruals, Records, Reports and Other Information


5.1 Royalties shall accrue when a Licensed Product, with respect to which royalty payments are required by this Agreement, is first sold or otherwise transferred (including, except as otherwise agreed in writing by IBM, sold or otherwise transferred to IBM or any of its Subsidiaries), or first used or leased in each country of use or lease, by or for LICENSEE, or when a newly issued or acquired Licensed Patent covers any portion of a Licensed Product in use or on lease by or for LICENSEE on which portion the royalties provided for in Section 4.1 have not previously accrued.


5.2 IBM may accept a late payment provided such payment includes all overdue royalties or other payment plus an interest penalty. The interest penalty on any overdue royalty or other payment


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CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. Sections 200.80(b) (4),
200.83 AND 230.496


shall be calculated commencing on the date such royalty or other payment became due, using an annual rate which is the greater of ten percent (10%) or one percentage point higher than the prime interest rate as quoted by the head office of Citibank N.A., New York, at the close of banking on such date, or on the first business day thereafter if such date falls on a non-business day. If such interest rate exceeds the maximum legal rate in the jurisdiction where a claim therefor is being asserted, the interest rate shall be reduced to such maximum legal rate.


5.3 LICENSEE shall pay all royalties and other payments due hereund ...