Software & Technology License

AGREEMENT BETWEEN MICROSOFT AND PROGRESSIVE NETWORKS ON MEDIA STREAMING TECHNOLOGY





This "Agreement" is entered into and effective as of June 17, 1997 (the "Effective Date") by and between MICROSOFT CORPORATION, a Washington corporation located at One Microsoft Way, Redmond, WA 98052 ("Microsoft") and PROGRESSIVE NETWORKS, INC., a Washin gton corporation located at 1111 Third Avenue, Suite 2900, Seattle, WA 98101 ("PN").



1. DEFINITIONS



1.1 "Standard Code" means all of the PN and third party code (subject to

Section 2.2) used in PN's current version 4.0 streaming audio and video

client and server products, including, but not limited to, PN Internal

Tools, tools currently provided to third parties at no charge by PN [*]

and including bug-fixes developed by PN during the one year following

delivery by PN, for all operating system platforms, including but not

limited to all versions of Microsoft Windows, all versions of UNIX, the

Macintosh operating system, and the WebTV operating system. Standard

Code shall not include code PN's "Splitter" products or its Player Plus

software, nor shall it include future-developed technology for

advertisement insertion, datatypes other than audio or video (which are

not included in PN Clients or RA/RV Server), distributed networking

(such as Splitter finding), tools which are value-add technology on top

of base level encoders, billing and other value added technology

(technology which is not required for Compatibility purposes). It is

expressly understood that base level encoding and compression

technology is part of the Standard Code; further, thinning and

bandwidth negotiation are part of the Standard Code to the extent such

technologies are used in PN's current version 4.0 streaming audio and

video client and server products. Standard Code does not include added

PN or third party hardware or software technology bundled with Standard

Code as part of short term sales promotions.



1.2 "Internal Tools" means associated documentation, specifications, and

tools developed by either party, necessary to build and create

derivative works of the code.



1.3 "Software Development Kits" means code licensed by PN to third parties

for purposes of development as part of or in conjunction with PN's

streaming audio and video client and server products, and code

licensed by Microsoft to third parties for purposes of development as

part of or in conjunction with Microsoft's streaming audio and video

client and server products.



1.4 "Term" means the three (3) year period commencing upon the Effective



1.5 "Confidential Information" means: (i) any trade secrets relating to

either party's product or service plans, designs, costs, prices and

names, finances, marketing plans, business opportunities, personnel,

research, development or know-how; and (ii) the specific terms and

conditions of this Agreement. "Confidential Information" shall not

include information that: (i) is or becomes generally known or

available, whether by publication, commercial use or otherwise,

without restriction on disclosure and through no fault of the

receiving party; (ii) is known and has been reduced to tangible form

by the receiving party at the time of disclosure and is not subject to

restriction; (iii) is independently developed or learned by the

receiving party without reference to any Confidential Information of

the disclosing party; and (iv) is lawfully obtained from a third party

that has the right to make such disclosure.



1.6 "PN Clients" means PN's RealAudio and RealVideo standard player,

versions 4.0.



1.7 "RA/RV Server" means PN's Easy Start RealAudio/RealVideo server

software version 4.0, with 60 user stream capability.











Page 1 of 14



Portions of this agreement have been omitted pursuant to Rule 406 and filed separately with the Commission.



[*] denotes confidential treatment requested 1.9 "Compatible" means audio/video client or server streaming software

which interoperates with the PN Clients or the RA/RV Server (including

current versions of the PN Clients and the RA/RV Server as of the date

of a subsequent delivery of Standard Code), respectively, or as the

parties may otherwise mutually agree. For purposes of this Agreement

"interoperates" means the clients and servers of both parties will

operate substantially as well with PN Clients and RA/RV Server

(including current versions of the PN Clients and the RA/RV Server as

of the date of a subsequent delivery of Standard Code) as with its own



2. LICENSE GRANTS



2.1 Non-Exclusive License to Standard Code. PN hereby grants to Microsoft a

non-exclusive, perpetual, [*], worldwide, fully paid-up right and

license to: (i) use, copy, modify, translate and create derivative

works of the source and binary versions of the Standard Code; (ii)

reproduce, license, rent, lease, broadcast publicly display, transmit

or otherwise distribute in any medium now known or hereafter devised

(collectively, "Distribute") and have Distributed, to and by third

parties, binary versions of the Standard Code [*], (iii) [*]

sublicense, to and by third parties, the source versions of the

Standard Code, provided that Microsoft will only [*], license and

sublicense Standard Code source under conditions of confidentiality and

the same degree of care that Microsoft applies to its Windows NT source

code; and (iv) grant any and all of the rights set forth in this

Section 2 in the Standard Code to third parties, [*].



The foregoing license grants include a license under any current and

future patents owned or licensable by PN to the extent necessary: (i)

to exercise any license right granted herein; and (ii) to combine the

Standard Code and/or derivative works thereof with any hardware and



2.2 Third Party Rights.



(a) PN. If PN does not have sufficient rights in third party code

included in Standard Code to grant the rights set forth in

Section 2.1, then PN shall so notify Microsoft. The license

grants set forth in Section 2.1 shall be presumed to grant

Microsoft all the rights which PN can grant, and [*] to enable

the license grant set forth in Section 2.1 to Microsoft. PN's

cumulative liability under this Section 2.2(a) shall be [*].



(b) Microsoft. If Microsoft does not have sufficient rights in third

party code included in Microsoft Code (as defined below) to grant

the rights set forth in Section 2.4, then Microsoft shall so

notify PN. The license grants set forth in Sections 2.4(b) and

(c) shall be presumed to grant PN all the rights which Microsoft

can grant, and Microsoft shall, [*] to enable the license grant

set forth in Sections 2.4(b) and (c) to PN. Microsoft's

cumulative liability under this Section 2.2(b) shall be [*].



(c) Cooperation. The parties shall cooperate with respect to

licensing and obtaining necessary rights to third party code.

For Standard Code delivered in the initial delivery or any

Microsoft Code to be delivered at the same time, within fifteen

(15) days of the Effective Date each party will notify the other

of any third party license issues. For subsequent deliveries of

code under this Agreement, each party will, on or before such

delivery, notify the other of any third party license issues.



2.3 Non-Exclusive License to PN Trademarks. PN hereby grants to Microsoft

a non-exclusive, perpetual, irrevocable, worldwide, fully paid- up

right and license to use and sublicense the use of any "PN Marks" for

identification of, or in conjunction with, or as part of Microsoft

products which are

















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[*] denotes confidential treatment requested





Compatible. For purposes of this Section 2.3, "PN Marks" means PN

trademarks and related logos for "Real Audio" and "Real Video." If

Microsoft exercises its rights under Section 3.3, the PN Marks will

also include those marks and associated logos which are used in

connection with the applicable versions of the Compatible PN Clients

and RA/RV Server.



PN agrees that it will license use of the PN Marks to third parties

only for use with products that are Compatible. Microsoft may only

sublicense the PN Marks for use in connection with third party

products which are Compatible, and which comply with the PN quality

control guidelines imposed on Microsoft under this Agreement.

Microsoft will use good faith efforts to ensure that its sublicensees

abide by PN's quality control guidelines, and will cooperate with PN

to remedy any violation thereof by its sublicensees.



Microsoft agrees that it will comply with PN's trademark usage

guidelines regarding the style and design of the PN Marks, which PN

will deliver to Microsoft within two (2) weeks of the Effective Date.

Microsoft agrees to cooperate with PN in facilitating PN's reasonable

monitoring and review of the nature and quality of products and

services bearing the PN Marks, and to supply PN with specimens of

Microsoft's use of the PN Marks upon reasonable request Microsoft

understands and agrees that the use of any PN Mark in connection with

this Agreement shall not create any right, title or interest in or to

the use of the PN Marks and that all such use and goodwill associated

with the PN Marks will inure to the benefit of PN. [*]



2.4 License Back



(a) Scope and Frequency of Delivery. Pursuant to Section 2.4(b),

Microsoft shall license back to PN (i) any and all modifications

and derivative works of the Standard Code, and (ii) Microsoft

software which is essentially of the same functionality as the

Standard Code, and associated Microsoft Internal Tools, Software

Development Kits and bug fixes (collectively "Microsoft Code").

Delivery of Microsoft Code so licensed back to PN shall occur

once on a date determined by PN [*] under Section 3.



(b) License Back - Source. Microsoft hereby grants to PN, for the

License Back term, a non-exclusive, worldwide, fully paid-up

right and license to: (i) copy, review and evaluate the source

version of the Microsoft Code solely for purposes of building

value-added products; (ii) use, copy, modify and create

derivative works of the source versions of the Microsoft Code

solely for purposes of correcting bugs or fixing errors in the

Microsoft Code; and (iii) use, copy, modify and create derivative

works of the source versions of the Microsoft Code solely for

purposes of porting the Microsoft Code to non-Microsoft operating

system platforms.



"License Back Term" means, as applicable, (i) a period of [*]

following initial delivery of the Standard Code by PN to

Microsoft under Section 3.2, or (ii) a period of [*] following

any subsequent delivery of Standard Code by PN to Microsoft under

Section 3.3.



(c) License Back - Binary. Microsoft grants to PN a non-exclusive,

worldwide, perpetual (provided PN continues to meet any royalty

obligations) right and license to Distribute and have

Distributed, to and by third parties, binary-only versions of the

Microsoft Code delivered during the License Back Term and any

derivative works of thereof created by PN under Section 2.4(b).



Any Distribution to a third party of Microsoft Code in binary

form is subject to a royalty as follows. If PN Distributes

Microsoft Code for Microsoft operating system platforms, and if

Microsoft Distributes the same or substantially similar software

for no fee, or as a feature of the operating system for no

additional cost, then during the same period for which Microsoft

so Distributes for free, PN shall owe no royalty. If PN

Distributes Microsoft Code for Microsoft operating system

platforms, and if Microsoft distributes the same or substantially

similar software for a fee or as a revenue product (including if

it converts from a [*], provided such conversion shall not affect

any existing agreements of PN) then PN shall pay for such

Microsoft Code on terms and conditions no less favorable than

those granted to any other resellers or licensees of the

Microsoft Code. If PN Distributes Microsoft Code for

non-Microsoft operating system platforms, then PN shall pay a

royalty to Microsoft equal to [*] PN receives for such

Distribution. Should PN wish to Distribute Microsoft Code for

non-Microsoft operating system platforms, the parties will enter

into an agreement outlining payment terms, including but not

limited to provisions for payment, audit and the like.



The foregoing license grants include a license under any current and

future patents owned or licensable by Microsoft to the extent

necessary: (i) to exercise any license right granted herein; and (ii)

to combine the Microsoft Code and/or derivative works thereof with any

hardware and software.









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[*] denotes confidential treatment requested

2.5 Distribution of RA/RV Server. Until Microsoft distributes a

Compatible server product, Microsoft shall distribute the RA/RV Server

[*] Microsoft's website shall provide cross-links to PN's website for

additional information and support of the RA/RV Server. PN shall be

solely responsible for RA/RV Server end user support and shall have

the discretion to create appropriate support policies for end user



2.6 Distribution of PN Clients. [*] between the parties effective [*] is

hereby [*] by this Section 2.6. For a period of [*] from the [*]

Microsoft will include the PN Clients (including Promo Player Plus)

with Microsoft Internet Explorer version 4.0 distributed on CD-ROM,

through OEMs, via "On-Line Systems" (as defined [*]) and in the same

manner, place or distribution mechanism as Microsoft distributes

NetShow (or any other equivalent streaming media client) as part of a

standard Microsoft product, except for any configurations of Internet

Explorer version 4.0 designed for minimal download size which do not

include NetShow (or any other equivalent streaming media client).

Provided that the parties [*] and further provided that PN supports

DirectShow and the mutually defined ASF file format (to the extent such

formats have been determined) within [*] Microsoft will continue to

include the PN Clients (and Promo Player Plus), as set forth in [*].

2.7 Support. During the Term, each party shall use commercially practical

efforts to:



(a) [*]



(b) Provide consistent points of contact at the program manager

and executive level; and



(c) Provide each other reasonable level of technical support.



PN will receive such information at such quarterly meetings and to the

same extent provided to Microsoft's own internal streaming media











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[*] denotes confidential treatment requested 3. LICENSE FEE; DELIVERY; CONSULTING



3.1 Initial Delivery. On a date within thirty (30) days of signing this

agreement, such date to be set by Microsoft at its sole discretion, PN

shall make delivery to Microsoft of the Standard Code. At that time,

PN shall deliver to Microsoft PN's latest version of the Standard

Code, including any and all works in progress whether or not such

works have been released by PN. PN shall also provide Microsoft with

six (6) man-months of free consulting help by knowledgeable PN

employee's to train Microsoft with respect to the Standard Code,

including but not limited to how to build and create derivative works

of the Standard Code.



3.2 License Fee. In consideration for the rights and licenses granted

under this Agreement, Microsoft shall pay PN the sum of thirty millon

dollars ($30,000,000). Of this amount, twenty million dollars

($20,000,000) shall be paid [*] and ten million dollars ($10,000,000)

shall be paid within thirty (30) days of the earlier of (i) PN's

completion of the associated six (6) man months of consulting services

and (ii) six (6) months after the initial delivery of the Standard

Code from PN.



3.3 Subsequent Deliveries. During the first and second years following

initial delivery of the Standard Code, Microsoft shall have the option,

at its sole discretion, of receiving further deliveries, [*]. If

Microsoft takes the first optional delivery [*] following initial

delivery of the Standard Code, it shall pay PN a flat fee of

twenty-five million dollars ($25,000,000). If Microsoft takes the

second optional delivery, it shall pay PN a further flat fee of

thirty-five million dollars ($35,000,000). Within the time periods

specified, Microsoft shall decide the dates for such deliveries at its

sole discretion. If such deliveries are made, then the code delivered

shall be considered Standard Code for purposes of this agreement and

shall be subject to all the terms of this agreement. For amounts due

under this Section 3.3 [*].



3.4 Bug Fixes. PN shall deliver any bug fixes to the Standard Code on a

quarterly basis in the twelve (12) months following the initial [*].



3.5 UNIX Port. Regardless of whether Microsoft exercises its rights to

subsequent deliveries of Standard Code, ...