Exhibit
10.72


 


POLICY NUMBER: 405-90-74


 


	
  

  A Member Company

  of American International

  Group, Inc.

  	
  AMERICAN INTERNATIONAL

  SPECIALTY LINES INSURANCE COMPANY

  

  A Capital Stock Insurance Company

  

  70 Pine Street

  New York, NY 10270

  



 


NEW YORK NOTICE:


 


THIS INSURANCE POLICY IS WRITTEN BY AN INSURER NOT LICENSED
BY THE STATE OF NEW YORK, NOT SUBJECT TO ITS SUPERVISION, AND NOT PROTECTED, IN
THE EVENT OF THE INSOLVENCY OF THE INSURER, BY THE NEW YORK STATE SECURITY
FUNDS.  THE POLICY MAY NOT BE SUBJECT TO
ALL OF THE REGULATIONS OF THE INSURANCE DEPARTMENT PERTAINING TO POLICY FORMS.


 


CALIFORNIA NOTICE:


 


1. 
THE INSURANCE POLICY THAT YOU HAVE PURCHASED IS BEING ISSUED BY AN
INSURER THAT IS NOT LICENSED IN THE STATE OF CALIFORNIA.  THESE INSURERS ARE CALLED “NON-ADMITTED” OR
“SURPLUS LINE” INSURERS.


 


2. 
THE INSURER IS NOT SUBJECT TO THE FINANCIAL SOLVENCY REGULATION AND
ENFORCEMENT WHICH APPLIES TO CALIFORNIA LICENSED INSURERS.


 


3. 
THE INSURER DOES NOT PARTICIPATE IN ANY OF THE INSURANCE GUARANTEE FUNDS
CREATED BY CALIFORNIA LAW.  THEREFORE,
THESE FUNDS WILL NOT PAY YOUR CLAIMS OR PROTECT YOUR ASSETS IF THE INSURER
BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS PROMISED.


 


4. 
CALIFORNIA MAINTAINS A LIST OF ELIGIBLE SURPLUS LINE INSURERS APPROVED
BY THE INSURANCE COMMISSIONER.  ASK YOUR
AGENT OR BROKER IF THE INSURER IS ON THAT LIST.


 


5. 
FOR ADDITIONAL INFORMATION ABOUT THE INSURER YOU SHOULD ASK QUESTIONS OF
YOUR INSURANCE AGENT, BROKER, OR “SURPLUS LINE” BROKER OR CONTACT THE
CALIFORNIA DEPARTMENT OF INSURANCE AT THE FOLLOWING TOLL-FREE NUMBER:
800-927-4357.


 


1

















 


SPECIFIC
LITIGATION PROTECTION AGREEMENT


 


DECLARATIONS


 


	
  ITEM 1.

  	
   

  	
  NAMED CORPORATION:

  	
   

  	
  Liberate Technologies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MAILING ADDRESS:

  	
   

  	
  2 Circle Star Way

  San Carlos, CA 94070

  Attn.: General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  STATE OF INCORPORATION
  OF

  THE NAMED CORPORATION:

  	
   

  	
  Delaware

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITEM 2.

  	
   

  	
  POLICY PERIOD:

  	
   

  	
  Effective Date: August 29, 2003, unless Premium
  remains unpaid on that date

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Expiration Date: Upon Settlement or Final
  Adjudication of all Actions

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITEM 3.

  	
   

  	
  RETENTION:

  	
   

  	
  See Clause 5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITEM 4.

  	
   

  	
  LIMIT OF LIABILITY:

  	
   

  	
  See Clause 5

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITEM 5.

  	
   

  	
  PREMIUM:

  	
   

  	
  See Clause 4

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ITEM 6.

  	
   

  	
  NAME AND ADDRESS OF INSURER (“Insurer”):

  
	
   

  	
   

  	
  (This Agreement is issued only by the insurance
  company indicated below.)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  American
  International Specialty Lines Insurance Company

  
	
   

  	
   

  	
  c/o Loss Mitigation Unit

  175 Water Street, 10th Floor

  New York, New York 10038

  



 


2

















 


IN
WITNESS WHEREOF, the Insurer has caused this Agreement to be
signed on the Declarations Page, by a duly authorized representative of the
Insurer.


 


 


	
   

  	
   

  	
   

  
	
   

  	
  John A. Rudolf

  	
   

  
	
   

  	
  AUTHORIZED REPRESENTATIVE

  	
   

  



 


3

















 


SPECIFIC
LITIGATION PROTECTION AGREEMENT


 


This Specific Litigation
Protection Agreement (“Agreement”) (all other capitalized terms are as defined
hereafter or in the Declarations) is made and entered into as of the date of
execution of this Agreement by the Insurer.


 


WHEREAS, the Insureds
desire to protect themselves against certain possible Loss that may result from
Defense Costs, Settlement, or Final Adjudication of the Actions.


 


NOW, THEREFORE, in
consideration of the insurance coverage set forth in Clause 1 and the other
terms and provisions of this Agreement, including but not limited to the
payment of Premium required by Clause 4, and in reliance on the Representations
and Warranty and Covenant made in Clause 9, the Insureds and the Insurer agree
as follows:


 


1.                                      INSURING
AGREEMENT


 


The Insurer shall pay on behalf of the Insureds all
Loss.


 


2.                                      DEFINITIONS


 


a)                                      “Actions”
shall mean the Existing Actions and any Additional Actions, provided that under
no circumstances shall any Uncovered Regulatory Matter be within the definition
of Actions.  Except as set forth above,
no other civil or governmental complaint, inquiry or proceeding or any other
allegations, claims, demands, causes of action or charges of wrongdoing brought
by any person against the Insureds shall be within the definition of Actions.


 


b)                                     “Additional
Actions” shall mean (i) all related proceedings (including appeals and
collateral proceedings) to, any amendment to, and any refiling of the Existing
Actions and (ii) any newly-filed civil action, provided that such amendment,
refiling or newly-filed action arises from substantially the same facts and
circumstances as those alleged in the Existing Actions at the Effective
Date.  The Named Corporation shall give
prompt notice pursuant to Clause 12 of any Additional Action.


 


c)                                      “Appeal
Bond” shall mean any bond or similar security (including but not limited to
appeal bonds and attachment bonds) required to stay or delay the execution of
any judgment for Loss pending appeal. 
The Insurer shall make a good faith effort to obtain an Appeal Bond if
such a judgment is rendered and an appeal is intended, provided that the
Insurer shall be under no obligation to write a bond itself or to obtain a bond
from its parents, affiliates or subsidiaries, and provided, further, that for
any given appeal if the Named Corporation cannot using reasonable diligence
obtain an Appeal Bond and the Insurer elects not to write such a bond, the
Insureds shall not be required to pursue such an appeal.  If the Insurer or any of its affiliates
elects to write any Appeal Bond, the reasonable market cost of the Appeal Bond
shall be deemed not to be Loss in relation to the Retention, and as such shall
not diminish the Retention (unless


 


4

















 


the Named Corporation or an Underlying Insurer pays
the Appeal Bond premium), but such cost shall be deemed Loss in relation to
determining the available Limit of Liability, and as such shall diminish the
available Limit of Liability dollar for dollar.


 


d)                                     “Control
Events” shall mean any one or more of (i) a tender by the Underlying Insurers
of any and all remaining Underlying Insurance, (ii) exhaustion of the
Underlying Insurance by payment of loss, (iii) a written denial of all coverage
by all Underlying Insurers; or (iv) a judgment declaring that the Underlying
Insurers have no obligation to defend or indemnify the Insureds.


 


e)                                      “Defense
Costs” shall mean all reasonable legal and expert fees, other costs (including
premium and costs incurred by Insureds or Insurer in obtaining any Appeal Bond,
subject to Clause 2(b) herein), and court costs that (i) result solely from the
investigation, adjustment, defense, and appeal of the Actions, (ii) are payable
by the Insureds and (iii) are incurred after the Effective Date.  Defense Costs shall not include (x) amounts
otherwise meeting the requirements of this definition which are incurred
(whether or not billed) after the Expiration Date other than as reasonably
necessary to administer a Settlement or implement a Final Adjudication or (y)
salaries, other compensation and other expenses of Insureds.


 


f)                                        “Draft
SEC Filings” shall mean the drafts of SEC filings provided by the Named
Corporation to the Insurer on August 25, 2003 that correspond with certain
Forthcoming SEC Filings.


 


g)                                     “Exhaustion
Event” shall mean any one or more of (i) a tender by the Insurer of the Limit
of Liability, (ii) exhaustion of the Limit of Liability by payment of Loss,
(iii) a written denial of all coverage by the Insurer, (iv) a final judgment declaring
that the Insurer has no duty to the Insureds pursuant to this Agreement, (v) a
release of the Insurer pursuant to the terms of this Agreement, whether at the
Expiration Date or otherwise.


 


h)                                     “Existing
Actions” shall mean In re Liberate Technologies Securities Litigation,
Master File No.: C-02-5017 MJJ, USDC, Northern District of California, and the
Existing Derivative Action, each as they exist on the Effective Date.


 


i)                                         “Existing
Causes of Action” shall mean the causes of action alleged in the Existing
Actions as of the Effective Date.


 


j)                                         “Existing
Derivative Action” shall mean In re Liberate Technologies Derivative
Litigation, Case No. CIV 426770, California Superior Court, County of San
Mateo.


 


k)                                      “Final
Adjudication” shall mean a final judgment in one or more of the Actions against
an Insured, as a result of trial or other evidentiary adjudication (not the
result of a Settlement), which is not or no longer subject to appeal or review
or to further proceedings upon remand or to further appeal or review.


 


l)                                         “Forthcoming
SEC Filings” shall mean the SEC filings to be made by the Named


 


5

















 


Corporation amending certain earlier filings, namely
the Reports on Form 10-Q/A for the periods September 1 - November 30, 2001 and
December 1, 2001 through February 28, 2002, a Report on Form 10-K/A for the
fiscal year ending May 31, 2002, and a Report on Form 10-Q for the period June
1 - August 31, 2002.


 


m)                                   “Individual
Insureds” shall mean any of the past, present or future directors, officers or
employees of the Named Corporation or its affiliates who are or may be named as
defendants in the Actions.


 


n)                                     “Insureds”
shall mean the Named Corporation or its affiliates and the Individual
Insureds.  If any of the Actions
includes a claim against: (i) the lawful spouse or other legally recognized
domestic partner of any Individual Insured; (ii) a property interest of such
spouse or domestic partner or (iii) the estates, heirs, or legal
representatives of any deceased Individual Insureds, and the legal
representatives of any Individual Insured, in the event of incompetency,
insolvency or bankruptcy, is named in any one or more of the Actions, and the
claim pursuant to (i), (ii) or (iii) arises from substantially the same facts
and circumstances as those alleged in the Existing Actions at the Effective
Date, then that spouse, legally recognized domestic partner, or legal
representative shall be an Insured in connection with that Action.  Donald Fitzpatrick shall be deemed to not be
an Insured regardless of whether he would otherwise be defined as an Insured
pursuant Clause 2(m) or 2(n) hereof. For purposes of clarification, although
Donald Fitzpatrick shall be deemed not to be an Insured, such exclusion is
intended to exclude Loss that may be incurred by Donald Fitzpatrick in his
individual capacity, and is not intended to exclude Loss incurred by any
Insured as a result of acts or circumstances involving Donald Fitzpatrick (for
example Loss incurred by the Named Corporation attributable to the actions of
Donald Fitzpatrick while he was an employee of the Named Corporation).


 


o)                                     “Loss”
shall mean any and all amounts of Settlements or Final Adjudications (including
compensatory damages, multiplied, exemplary or punitive damages) plus Defense
Costs and plaintiff’s counsel fees, the latter as and to the extent approved by
or awarded by a court.  Notwithstanding
the foregoing, Loss in connection with any shareholder derivative actions,
including but not limited to the Existing Derivative Action, shall be comprised
solely of amounts of the same type as those covered as loss by the Underlying
Insurance including but not limited to Defense Costs and plaintiff’s counsel
fees, the latter as and to the extent approved by or awarded by a court.  For the avoidance of confusion, no amounts
of loss of any kind incurred by Insureds in connection with Uncovered
Regulatory Matters shall be within the definition of Loss.


 


The
amount of Loss for Settlements or Final Adjudications in Actions which allege
New Causes of Action shall not include any portion of such Settlement or Final
Adjudication attributable to any of the New Causes of Action supporting claimed
damages that create a materially greater exposure to Loss (such as RICO or
other theoretical New Causes of Action that would create exposure to multiple
damages, or New Causes of Action that would create materially greater exposure
to punitive damages, or New Causes of Action that would create materially
greater exposure to damages because they make available to the claimant types
of damages not available in the Existing Causes of Action or make relevant
facts to support such types of damages) than the damages claimed under the
Existing Causes of Action.  The Named
Corporation and the


 


6

















 


Insurer
agree to use their best efforts to determine a fair and proper allocation of
the amounts of a Settlement or Final Adjudication which are and are not Loss
pursuant to the immediately preceding sentence, taking into account all
relevant circumstances, including but not limited to the respective measures of
damages for Existing Causes of Action and New Causes of Action and the
circumstances of the Actions or of Settlement discussions that created the
amount to be allocated.  If an
allocation cannot be agreed upon, then, pursuant to the terms and conditions of
this Agreement, the Insurer shall advance the amount of the Settlement or Final
Adjudication that the Insurer deems fair and proper until a different amount shall
be agreed upon or determined pursuant to the provisions of this Agreement and
applicable law.


 


Amounts arising from the claim made against an Insured
spouse, domestic partner or legal representative of an Individual Insured or
the property of such Insured spouse, domestic partner, estate, heir or legal
representative if such Loss arises from a claim of any actual or alleged act,
error or omission of such Insured spouse, domestic partner or legal
representative, rather than from an act, error, or omission of the Individual
Insured, shall not be within the definition of Loss.


 


p)                                     “New
Causes of Action” shall mean any causes of action alleged in any of the Actions
that are not Existing Causes of Action.


 


q)                                     “Settlement”
shall mean any voluntary judgment or dismissal of one or more of the Actions
that is the product of stipulation or agreement to settle, enter judgment in,
voluntarily dismiss, or otherwise finally resolve such Actions, with prejudice
and release of all liabilities associated with such Actions (unless otherwise
agreed by the Named Corporation and the Insurer), which Settlement is not or no
longer subject to appeal or review or to further proceedings or to further
appeal or review.


 


r)                                        “Settlement
Proposal” shall mean a proposal to settle one or more of the Actions made by or
on behalf of plaintiff which is either in writing or, if not in writing, is a
proposal sufficiently definite to serve as a starting point for negotiation of
full terms of a Settlement.


 


s)                                      “Underlying
Insurance” shall mean the following: Lloyd’s, policy no. 823/FZ0201781
(effective 8/26/02 – 8/26/03), Federal Insurance Company, policy no. 8166-5731
(effective 8/26/02 – 8/26/03), and National Union Fire Insurance Company of
Pittsburgh, Pa., policy no. 569-63-94 (effective 8/26/02 – 8/26/03). None of
the terms of this Agreement, including but not limited to the definition of the
extent and components of Loss, shall in any way affect the terms and provisions
of or any positions taken or that may be taken in the future by either the
Insureds or the Insurer in connection with the Underlying Policy.


 


t)                                        “Underlying
Insurers” shall mean the issuers of the Underlying Insurance.


 


u)                                     “Uncovered
Regulatory Matters” shall mean any civil or governmental complaint, inquiry or
proceeding or any other allegations, claims, demands, causes of action or
charges of wrongdoing brought by the SEC, any state securities or financial
regulatory body, or any other governmental or quasi-governmental entity against
one or more Insureds.


 


7

















 


v)                                     “Underwriting
Fee” shall mean the thirty five thousand dollar ($35,000) fee paid by the Named
Corporation to the Insurer in connection with the Insurer’s due diligence
review of the Action.


 


3.                                      LOSS
SETTLEMENT TERMS AND CONDITIONS


 


a.)                                   At
all times before the occurrence of a Control Event, the Insurer shall have the
right to (i) associate in the defense and settlement of the Actions, including
but not limited to association in matters of strategy and tactics of litigation
and settlements, (ii) receive such information and cooperation as the Insurer
may reasonably require and (iii) consent or refuse to consent, in its sole
discretion, to any Settlement Proposal which, if implemented, would require a
payment of Loss by the Insurer. 
Although Donald Fitzpatrick is not an Insured hereunder and therefore no
Loss is payable on his behalf, the Insurer may not withhold consent to a
Settlement on the grounds that the release in such a Settlement may extend to
Donald Fitzpatrick, and will not argue that such a release supports allocating
a portion of otherwise covered Loss to Donald Fitzpatrick.


 


b.)                                  Upon
occurrence of a Control Event and until occurrence of an Exhaustion Event, the
following terms and conditions shall apply:


 


(i)                                     The
Insurer shall have the right to exercise full control over the defense of the
Actions, including but not limited to strategy and tactics.  The Named Corporation will have the right to
associate in the defense of the Actions by the Insurer.  The Insureds shall give effect to the
Insurer’s rights to fully control the defense of the Actions, including by
provision of such information and cooperation as the Insurer may reasonably
require and by the Named Corporation using its best efforts to cause other Insureds
to afford the Insurer its rights hereunder.


 


(ii)                                  The
Insurer will have the right to fully, exclusively and directly (at the
Insurer’s sole discretion) control the discussion, negotiation and terms of all
Settlements, provided that the Insurer shall consider any Settlement as though
the Insurer alone bears the entire risk of loss.  The Named Corporation shall have the right to associate in
connection with Settlements.


 


(iii)                               The Insureds shall
consent to any and all Settlement Proposals that the Insurer, in its sole
discretion, chooses to recommend.  The
sole remedy if any Insured unreasonably withholds or delays its consent to such
a Settlement Proposal, and Loss payable ultimately exceeds the amount that
would have been payable as the result of the Insureds agreeing to the
Settlement Proposal, will be that the Insurer shall not be liable for payment
of any amounts of Loss in excess of the amount that would have been incurred as
the result of agreement to the terms of that Settlement Proposal.  The Insurer may recommend multiple
Settlement Proposals during the course of any one or a group of Actions.


 


8

















 


(iv)                              The
Insureds and the Insurer, as the case may be, shall each promptly notify the
other of any Settlement discussions. The Insured shall have no right to make
any representations to any person regarding possible terms or parameters of a
Settlement, without the prior consent, which may be sought and given orally, of
the Insurer, in its sole discretion. Any discussions regarding Settlement that
any Insured has with the plaintiffs, or any person representing the plaintiffs,
in the Actions may be undertaken only with the prior consent, which may be
sought and given orally, of the Insurer, in its sole discretion.


 


(v)                                 Notwithstanding
the foregoing, for all Settlements, the Named Corporation shall have the right
to consent or reasonably withhold consent to any terms that are non-monetary
and can be satisfied only by future performance or forbearance to perform by
the Insured.  Notice to the Insurer of
any decision to consent or not to consent to any non-monetary terms shall not
be unreasonably delayed.  If the Named
Corporation unreasonably withholds or delays consent to any non-monetary terms
of a Settlement, and Loss payable ultimately exceeds the amount that would have
been payable as the result of the Insureds agreeing to the Settlement Proposal,
then the Insurer shall not be liable for payment of any amounts of Loss in
excess of the amount that would have been incurred as the result of agreement
to that Settlement Proposal.


 


c.)                                   Upon
payment of Loss by the Insurer related to any Settlement or Final Adjudication
of one or more (but not all) Actions, the Named Corporation, on behalf of all
of the Insureds, shall provide the Insurer with a full release and indemnity
(the latter against only all claims made by any Insureds or by the non-Insured
Donald Fitzpatrick) (“Claim Release”), reasonably satisfactory in form and
substance to the Insurer, against any and all further obligation under the
Agreement in relation to the subject Actions. 
Upon payment of Loss by the Insurer in relation to Settlement or Final
Adjudication of all Actions, the Named Corporation, on behalf of all of the
Insureds, shall provide the Insurer with a full release and indemnity (the
latter against only all claims made by any Insureds or by the non-Insured
Donald Fitzpatrick, such claims the Named Corporation shall have the right to
control the defense of) (“Policy Release”), reasonably satisfactory in form and
substance to the Insurer, against any and all further obligation under the
Agreement.


 


d.)                                  All
amounts of Loss that become payable according to the terms and provisions of
this Agreement that are incurred before the Expiration Date shall be payable in
due course by the Insurer, including amounts of Defense Costs incurred before
but billed after the Expiration Date.


 


e.)                                   At
any time during the Policy Period, at the sole discretion of the Named
Corporation, or at the Expiration Date of this Agreement, upon Notice pursuant
to Clause 12 to the Insurer, the Named Corporation may elect to commute this
Agreement and receive a final Loss payment in commutation as follows:


 


A minimum of thirteen million five hundred thousand
dollars ($13,500,000) shall be retained by the Insurer irrespective of Loss
paid under the Agreement; and


 


9

















 


If the amount of Loss paid is less than four million
four hundred thousand dollars ($4,400,000), then the Insurer shall pay four
million four hundred thousand dollars ($4,400,000), less the amount of Loss
paid, to the Named Corporation in exchange for a Policy Release as described in
Clause 3(c).


 


f.)                                     The
Insureds and the Insurer (in this paragraph, with the Insureds, collectively,
the “Parties”) agree to maintain the confidentiality of the negotiation,
issuance, existence, and terms and provisions of the coverage afforded by this
Agreement (“Confidential Information”), to the extent such information has not
become public through no breach of this Agreement and to the extent permitted
by law, including but not limited to disclosure regulations promulgated by the
SEC, and except to the extent disclosure hereof is necessary to enforce the
provisions hereof.  The Insurer hereby consents
to the proposed disclosures described in or attached as Exhibit A to this
Agreement.  The Parties shall not, and
shall use all reasonable efforts to cause any of their advisors, investment
bankers, actual or potential lenders or investors, representatives, brokers,
legal counsel, agents or potential parties to a material sale, merger or
acquisition with the Named Corporation (“Representatives”) not to, issue any
press release or make any statements or otherwise disclose any information
relating to any Confidential Information, including disclosures relating to the
settlement or compromise of the Actions, to any person, including but not
limited to plaintiffs in the Actions, without the prior written consent of the
Insurer, in the case of proposed disclosure by the Insureds, and the Named
Corporation, in the case of proposed disclosure by the Insurer.  The Parties may disclose Confidential
Information to Representatives, accountants and auditors if and only to the
extent necessary for those persons to provide their respective services to the
Parties, provided that all such disclosures (except those that in the opinion
of the respective Party’s legal counsel are subject to some privilege or
immunity from disclosure) be made under terms of confidentiality at least as
restrictive as those in this paragraph. 
The Parties will be responsible for any violation of this provision by
their respective Representatives, whether such violation occurs during or after
the conclusion of the Representatives’ relationship with their respective
principals.  In the event that any Party
receives notice of an actual or potential legal process or proceeding the
consequence of which may be the creation or enforcement of a legal requirement
that either of the Parties (or any of their Representatives) disclose any
Confidential Material, the Party on notice of such an attempt to compel
disclosure shall promptly notify the other Party hereto so that the other Party
may take all steps that they deem advisable to protect the confidentiality
agreed to herein.  These confidentiality
provisions shall continue in full force and effect after the Expiration Date of
this Agreement until the earlier of when altered or released in writing by the
Parties or one (1) year after the Expiration Date.


 


4.                                      PREMIUM


 


a.)                                   The
Premium shall be seventeen million nine hundred thousand dollars ($17,900,000)
and shall be considered fully-earned upon receipt and non-refundable, except as
provided in Clause 9.  The Insureds
shall be responsible for any and all surplus lines taxes and stamping fees that
may be applicable.


 


10

















 


b.)                                  Premium
shall be due and payable in full (less the amount of the Underwriting Fee
previously paid) on or before the Effective Date.  All payments by the Insureds under this Agreement shall be made
to:


 


	
  Bank Name:

  	
   

  	
  Chase Manhattan Bank

  
	
  Located at:

  	
   

  	
  460 Bergen Boulevard, Palisades Park, NJ  07650

  
	
  ABA #:

  	
   

  	
  021-000-021

  
	
  Phone #:

  	
   

  	
  (201) 947-2372

  
	
  Account name:

  	
   

  	
  American International Specialty Lines Ins. Co.

  
	
  Account #:

  	
   

  	
  6019-005062

  



 


c.)                                   In
no event shall coverage incept prior to payment of the full Premium.  The failure to pay any Premium as provided
by this Clause 4 shall cause the coverage to be deemed void ab initio.


 


d.)                                  This
Agreement and the insurance hereunder shall be deemed void ab initio (from the
beginning) if the Insurer does not receive the full Premium within the stated
timeframes described above.  Under the
same condition as in the previous sentence, the Insurer may rescind or cancel
this Agreement, and the Insurer shall be relieved of any obligation under this
Agreement, if applicable law would cause the Agreement not to be deemed void ab initio.


 


5.                                      LIMIT OF
LIABILITY AND RETENTION


 


The Limit of Liability is one hundred million dollars
($100,000,000) IN THE AGGREGATE.  In no
event shall the Named Corporation place insurance coverage (in connection with
the Action) excess of the Limit of Liability provided by this Agreement without
the written consent of the Insurer, which shall not be unreasonably withheld.


 


The Retention shall be twenty million dollars
($20,000,000), and shall be depleted by (i) payments by the Insureds or the
Underlying Insurers of amounts that would be Loss hereunder  (ii) payments by the Named Corporation (but
only those payments that (a) are legally required to be made or (b) are made
pursuant to the retention or coinsurance terms of the Underlying Insurance) or
Underlying Insurers of amounts of defense costs (as defined in the Underlying
Insurance) in connection with Uncovered Regulatory Matters, and (iii) payments
by the Named Corporation (but only those payments that (a) are legally required
to be made or (b) are made pursuant to the retention or coinsurance terms of
the Underlying Insurance) or the Underlying Insurers of amounts of loss
attributable to coverage for Donald Fitzpatrick.  No other amounts, including but not limited to fines, penalties
or payments to cover cost of prosecution (whether imposed by civil or criminal
authorities, on behalf of such authorities or for costs or fees of agents,
surrogates, or designates of those authorities) incurred by Insureds in
connection with Uncovered Regulatory Matters, shall deplete the Retention.  The Retention must be paid without
diminution by bankruptcy or otherwise before the Insurer has any obligation to
pay Loss.  The Retention shall include
the Underlying Insurance.  In no event
shall this Agreement drop down to


 


11

















 


provide coverage, in place of the Underlying Insurance
or otherwise, for any amount within the Retention.  The Named Corporation may not insure any portion of the Retention
other than that insured by the Underlying Insurance.


 


6.                                      SUBROGATION/TREATMENT
OF RECOVERED AMOUNTS


 


At the
request of the Insurer, the Insureds shall: (i) assign to the Insurer all of
their respective rights of recovery against any other person or entity (other
than one of the Insureds) for loss arising out of the Action and (ii) execute
all papers required and do everything that may be reasonably necessary to
secure such rights, including but not limited to the execution of such
documents necessary to enable the Insurer to effectively bring suit in the name
of Insureds.  If assignment of any
particular right of recovery is not permissible under applicable law, then
Insureds shall agree instead to allow the Insurer to control the assertion and
pursuit of any such claim, and the proceeds from any such claim shall be for
the benefit of the Insurer to defray Loss paid or incurred.  Any recovery made by the Insurer shall be
applied against Loss, and any remainder after such application shall be paid
over to the Named Corporation at the later of (x) the Expiration Date or (y)
the date any such recovery is made by the Insurer, provided that if the Loss is
greater than the Limit of Liability plus Retention, the recovery shall first be
paid over to the Named Corporation up to amount the Named Corporation has paid
in excess of the Limit of Liability plus Retention, and any remainder after such
payment to the Named Corporation shall be handled as set forth in this Clause.


 


The
amount of any recovery made by the Insureds arising out of the facts alleged in
the Action shall reduce the Insurer’s obligation to pay Loss under this
Agreement.  All pursuit of subrogation
by the Insurer shall be at the Insurer’s sole cost and expense.  In no event shall the Insurer exercise any
subrogation rights against an Insured.


 


7.                                      ASSIGNMENT/NO
THIRD PARTY BENEFICIARIES/CHANGE OF CONTROL


 


Neither
this Agreement nor any of the rights or obligations hereunder are assignable by
either party hereto without the prior written consent of the other party
hereto, except as may be required to implement any transaction described in the
next paragraph of this Clause.  The rights
hereunder shall inure only to the benefit of the Insureds (and their successors
by operation of law) and the Insurer, and no other person or entity shall be
deemed a beneficiary thereof, except as may be required to implement any
transaction described in the next paragraph of this Clause.


 


The
Insurer must be given Notice (pursuant to Clause 13 of this Agreement) as early
as reasonably practicable of the Named Corporation’s intent to enter into
transaction in which the Named Corporation would consolidate with, merge into,
or sell all or substantially all of its assets to any other person or entity or
group of persons or entities acting in concert (“Acquiror”) or in which any
person or entity or group of persons or entities acting in concert (“Control Person”)
acquires owning interests representing more than 25% of the voting, appointment
or designation power for the selection of a majority of the Board of Directors
of the Named Corporation or gains the right, pursuant to written contract or
the by-laws, charter, operating


 


12

















 


agreement
or similar documents, to elect, appoint or designate a majority of the Board of
Directors of the Named Corporation. The Named Corporation shall promptly
provide the Insurer with such information as it may reasonably request
regarding the transaction.  The Insurer
will then give Notice to the Named Corporation that it either has no concerns
regarding the transaction or of any concerns that it may have in connection
with the proposed transaction, and the Named Corporation agrees to reasonably
consider the Insurer’s stated concerns and consult with the Insurer on possible
means to ameliorate such concerns prior to agreeing to the transaction.  If the Insurer either has no concerns or the
Named Corporation has given due consideration and consulted with the Insurer
under the immediately-preceding sentence, then any and all rights of the Named
Corporation under this Agreement may be transferred to the Acquiror or Control
Person, who shall then also be deemed to have accepted all obligations of the
Named Corporation under this Agreement.


 


8.                                      NON-CANCELLATION


 


The
Agreement shall be non-cancelable, except by the Insurer as provided in the
limited circumstances in Clause 4 and Clause 9.


 


9.                                      REPRESENTATION
AND WARRANTY/COVENANT


 


As of the Effective Date, the Named Corporation
represents and warrants, to the best of the knowledge and belief of its
officers, as to the accuracy of the Forthcoming SEC Filings and all factual
information set forth in the provisions of the reports prepared by Latham &
Watkins for the Audit Committee of the Board of Directors of the Named
Corporation (including “Overview of Transactions Being Restated,” “Selected
Additional Transactions Reviewed But Not Restated,” “Corrective Measures and
Internal Controls,” and “Supplemental Report of the Audit Committee of the
Board of Directors of Liberate Technologies”), and covenants that the
Forthcoming SEC Filings will not be materially different from the Draft SEC
Filings.


 


If the representations and warranty or covenant are
breached in any respect that is material to the defense and settlement of the
Actions, the Insurer may deem the Agreement void ab initio, provided
that if the first clause of this sentence is ineffective for any reason the
Insurer may rescind or cancel the Agreement. 
In the event the Agreement is void, rescinded or canceled, the Insurer
shall be relieved of any obligation hereunder and the Named Corporation shall
be entitled to payment by the Insurer of the full amount of the Premium less
any Loss paid less the amount of the Underwriting Fee and less one hundred
thousand dollars ($100,000) for each month or part of a month elapsed for the
first year after the Effective Date and fifty thousand dollars ($50,000) for
each month or part of a month elapsed thereafter from the Effective Date until
discovery of the breach, up to a maximum of two million five hundred thousand
dollars ($2,500,000).


 


10.                               DISPUTE
RESOLUTION


 


All disputes or differences which may arise under or
in connection with the Agreement, including any determination of the amount of
Loss or the performance, non-performance or sufficiency of performance of any
obligation hereunder, may be submitted to a court of general


 


13

















 


jurisdiction as provided in this Clause, provided that
the parties will first submit any dispute to non-binding mediation administered
by the American Arbitration Association, in which the Insurer and any such
Insured shall make a reasonable effort to settle the dispute by mediation under
or in accordance with its then-prevailing Commercial Mediation Rules.  In mediation, the mediator shall have
knowledge of the legal, corporate management, or insurance issues relevant to
the matters in dispute.  Either party
shall have the right to commence a judicial proceeding after mediation provided
that no such judicial proceeding shall be commenced until the mediation shall
have been terminated and at least sixty (60) days shall have elapsed from the
date of the termination of the mediation. 
In all events, each party shall share equally the expenses of the
mediation.  The mediation may be
commenced in Chicago, Illinois; Denver, Colorado; or Wilmington, DE.


 


In any judicial proceeding to resolve a dispute
between the Insurer and the Insured, the parties agree that the proceeding will
be exclusively venued in Wilmington, DE, that the parties hereby consent to in
personam jurisdiction only in Wilmington, DE, and that the substantive internal
laws of the state of Delaware shall govern the construction and interpretation
of the provisions of the Agreement without giving effect to the principles of
conflict of laws thereof.  The Named
Corporation and the Insurer acknowledge that this Agreement is a
fully-negotiated manuscript contract entered into at the election of the
Insureds to specifically address the risk from the Action.  As such, the Named Corporation acknowledges
that, had it chosen to do so, it could have negotiated to further limit the Insurer’s
right to settle (or not), for additional limits of liability, or for other
terms to limit or tailor the Insurer’s rights to the needs of the Insured, or
that it could have chosen not to purchase insurance at all for the risk from
the Action, and the Insurer acknowledges that the Insurer has elected to enter
into this Agreement to obtain the payment of premium in exchange for addressing
certain risks from the Action as set forth in this Agreement, and that had the
Insurer chosen to do so it could have negotiated to further limit the coverage
or Limit of Liability provided by this Agreement, or for other terms to limit
or tailor the Insurer’s rights to its requirements, and that it could have
chosen not to provide insurance to the Named Corporation.  Accordingly, the Named Corporation and the
Insurer agree that the terms, conditions, provisions and exclusions of the
Agreement are to be construed in an evenhanded fashion as between the parties,
including without limitation, where the language of the Agreement is alleged to
be ambiguous or otherwise unclear, the issue shall be resolved in the matter
most consistent with the relevant terms, conditions, provisions or exclusions
of the Agreement (without regard to the authorship of the language or the doctrine
of reasonable expectation of the parties and without any presumption or
arbitrary interpretation or construction in favor of either party or parties)
and in accordance with the intent of the parties.


 


14

















 


11.                               COVENANTS
OF INSURER RELATED TO THE CONDUCT, CAUSES OF ACTION AND DAMAGES ALLEGED IN THE
ACTION


 


It is expressly understood that the purpose of this
Agreement is to provide coverage, subject to all other applicable terms and
conditions of the Agreement, for all Loss arising out of all the claims alleged
in the Actions, including but not limited to claims for willful acts,
intentional acts, punitive damages, exemplary damages, and/or multiplied
damages.  In this regard, the Insurer
expressly covenants the following:


 


a.)                                   The
Insurer will not disclaim or deny coverage under this Agreement upon a
contention that claims for willful acts, intentional acts, punitive damages,
exemplary damages, and/or multiplied damages are not insurable under the laws
of any state or as a matter of public policy or otherwise are prohibited by
law;


 


b.)                                  The
Insurer will not file or maintain any action or proceeding seeking to
determine, disclaim, or deny coverage under the Agreement on the grounds that
claims for willful acts, intentional acts, punitive damages, exemplary damages,
and/or multiplied damages are not insurable under the law or as a matter of
public policy or otherwise are prohibited by law; and


 


c.)                                   The
Insurer will take no action inconsistent with affording coverage under the
Agreement, subject to all other applicable terms and conditions of the
Agreement, for all the claims alleged in the Action for willful acts,
intentional acts, punitive damages, exemplary damages, and/or multiplied
damages.


 


d.)                                  As
provided in Clause 10, in relation to any dispute regarding the insurability of
willful acts, intentional acts, punitive damages, exemplary damages, and/or
multiplied damages, the internal laws of the State of Delaware, without
reference to any choice of law rules, shall apply; provided that, in the event
that such laws are changed or construed so as to prohibit or materially limit
the insurability of such willful acts, intentional acts, punitive damages,
exemplary damages, fines, penalties, and/or multiplied damages, any
jurisdiction of the Named Corporation’s choice which allows such shall apply to
determine the issues of insurability, provided that such jurisdiction has a
reasonable relationship to the Insureds, the Insurer, the claim in which such
damages are awarded, or this Agreement, including, without limitation, the
jurisdiction where:


 


i.)                                      any
Insured resides, is incorporated, has its principal place of business, or
transacts business, or


ii.)                                   the
Insurer is incorporated, has its principal place of business or transacts
business, or


iii.)                                such
damages are awarded, or


iv.)                               the
wrongful acts, willful acts, or other facts and circumstances underlying the
claim occurred, or


v.)                                  this
Agreement was negotiated, agreed upon, issued, made, delivered or performed.


 


12.                               WAIVERS


 


In connection with any claim made under the Agreement
(and except as set forth in the following paragraph), the Insureds expressly
waive any and all claims (or as applicable, portions thereof)


 


15

















 


against the Insurer that might expose the Insurer to
liability in addition to or instead of the obligations specifically set forth
in the Agreement, including but not limited to the Loss Settlement Terms and
Conditions and Limit of Liability, whether such claim sounds in tort or
contract or is based on statute or regulation, for violation of any covenant or
duty of good faith and fair dealing or any unfair trade or claims practices or
any other type of claim, based on common law, statute or regulation. Nothing in
this paragraph shall be deemed to limit or otherwise modify the power of the
Insureds or the Insurer to enforce the express contractual obligations, as
defined in the Agreement, of the other party hereunder.


 


In connection with any dispute over whether a
Settlement Proposal requiring payment of Loss equal to or greater than
$75,000,000 should be, or should have been, consented to by the Insurer
pursuant to Clause 3(b), and not under any other circumstances, the Insurer
agrees that in any action or proceeding commenced to enforce its obligations
hereunder (including those set forth in Clause 3(b)), the Insurer may be held
liable for any damages in a maximum amount of $25,000,000 (in the aggregate for
the Agreement, not per Settlement Proposal question) greater than the amount of
Loss it would have been obligated to pay. 
Thus, solely by way of example, if the Insurer refuses to consent to a
Settlement Proposal requiring payment of Loss in the amount of $85,000,000, and
following Final Adjudication or Settlement the Loss exceeds the Limit of
Liability by $40,000,000, the Insurer may be held liable (in addition to the
Limit of Liability) for $10,000,000 of such $40,000,000.


 


Notwithstanding the foregoing, the Insureds waive any
rights they may have to obtain punitive damages, exemplary damages, and/or
multiplied damages in Excess of the Limit of Liability against the insurer in
any action or proceeding in connection with this Agreement


 


13.                               NOTICES


 


All notices under this Agreement shall be in writing
and delivered by hand, sent by overnight courier or sent by telecopier to the
following persons:


 


For the Insurer:


 


President


Loss Mitigation Unit


175 Water Street, 10th Floor


New York, New York 10038


 


Tel:                            212.458.1484


Fax:                         212.458.2300


 


With a copy to:


 


Kenneth D. Sagat


D’Amato & Lynch


70 Pine Street


 


16

















 


New York, New York 10270


 


Tel:                            212.269.0927


Fax:                         212.269-3559


 


For the Insureds:


 


General Counsel


Liberate Technologies


(as set forth in Item 1 of the Declarations)


 


Tel:                            650.701.4000


Fax:                           650.701.5495


 


With a copy to:


 


Ken King


Skadden, Arps, Slate, Meagher & Flom


 


Tel:                            650.470.4500


Fax:                           650.
470.4570


 


14.                               MISCELLANEOUS


 


The descriptions in the headings of this Agreement are
solely for convenience, and form no part of the terms and conditions of
coverage.  This Agreement is the entire
agreement between the parties hereto with respect to its subject matter, and
supersedes any prior oral or written communications between those parties,
including without limitation any term sheet or binder agreement.  This Agreement may only be amended or the
rights of the Insurer and Insureds modified in a written amendment signed by
the Insurer and the Named Corporation.


 


15.                               AUTHORIZATION


 


The
Insurer acknowledges that the Named Corporation is authorized to act on behalf
of the other Insureds in relation to any performance required of or consent
right given to the Insureds under this Agreement.


 


16.                               COUNTERPARTS
AND FACSIMILE SIGNATURES


 


This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
document.  Signatures by facsimile shall
be acceptable proof of execution of this Agreement.


 


17

















 


IN WITNESS WHEREOF, the Named Corporation, on behalf
of the Insureds, and the Insurer have caused this Agreement to be signed by, in
the case of the Named Corporation, its Chairman and Chief Executive Officer,
and, in the case of the Insurer, its Authorized Representative.


 


 


	
   

  	
  Liberate
  Technologies

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  David Lockwood

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Chairman and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  September
      , 2003

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  American
  International Specialty Lines Insurance Company

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
  John A. Rudolf

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Authorized Representative

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  September 2,
  2003

  	
   

  



 


18

















 


EXHIBIT
A


DISCLOSURES CONSENTED TO BY INSURER


 


Pursuant to the terms of
the confidentiality provisions (clause 3(f)) of the attached Specific
Litigation Protection Agreement (“Agreement”) and that July 9, 2003
Confidentiality Agreement executed by National Union Fire Insurance Company of
Pittsburgh, Pa. and Liberate Technologies, in connection with Liberate
Technologies’ Forthcoming SEC Filings, the Insured and the Insurer agree to the
inclusion of the Agreement as an exhibit to one or more of such filings, and in
connection with Liberate Technologies’ financial restatement announcement
planned for the week of September 1, 2003, the Insureds and the Insurer agree
to the public release or disclosure of the following specific language, and
only such language, to describe the Agreement:


 


“On August 29,
2003, Liberate purchased a $100 million supplemental loss mitigation insurance
policy from a AAA/A++ rated insurance carrier to cover damages that may arise
from pending securities and derivative litigation related to Liberate’s
restatement. This policy is in addition to Liberate’s existing policies that
provide for up to $15 million of coverage. Liberate paid a $17.9 million
premium for this policy, with a rebate of up to $4.4 million if an eventual
settlement or judgment is less than specified amounts.”


 


19

















 


Addenda to Liberate
Technologies, Inc. policy No. 405-90-74 (Effective August 29,

2003)

POLICYHOLDER DISCLOSURE STATEMENT

UNDER

TERRORISM RISK INSURANCE ACT OF 2002


 


You are hereby
notified that under the federal Terrorism Risk Insurance Act of 2002 (the
“Act”) effective November 26, 2002, you now have a right to purchase insurance
coverage for losses arising out of an Act of Terrorism, which is defined in the
Act as an act certified by the Secretary of the Treasury (i) to be an act of
terrorism, (ii) to be a violent act or an act that is dangerous to (A) human
life; (B) property or (C) infrastructure, (iii) to have resulted in damage
within the United States, or outside of the United States in case of an air
carrier or vessel or the premises of a U.S. mission and (iv) to have been
committed by an individual or individuals acting on behalf of any foreign
person or foreign interest, as part of an effort to coerce the civilian
population of the United States or to influence the policy or affect the
conduct of the United States Government by coercion. You should read the
Act  for a complete description of its
coverage.  The Secretary’s decision to
certify or not to certify an event as an Act of Terrorism and thus covered by
this law is final and not subject to review. 
There is a $100 billion dollar annual cap on all losses resulting from
Acts of Terrorism above which no coverage will be provided under this policy
and under the Act unless Congress makes some other determination.


 


For your information, coverage provided by this policy
for losses caused by an Act of Terrorism may be partially reimbursed by the
United States under a formula established by the Act.  Under this formula the United States pays 90% of terrorism losses
covered by this law exceeding a statutorily established deductible that must be
met by the insurer, and which deductible is based on a percentage of the
insurer’s direct earned premiums for the year preceeding the Act of Terrorism.


 


Unless you sign this form and return it to us
rejecting Terrorism Coverage under the Federal Act, you will be covered for
Terrorism as defined in the Act and your premium for that coverage is $1.00.


 


 


	
   

  	
  o                                    I
  hereby reject coverage in accordance with the Act.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Signature of Insured

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Print Name/Title

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Date

  



 


20