Exhibit
10.1


 


SETTLEMENT
AGREEMENT


 


This SETTLEMENT
AGREEMENT ( “Agreement”) is entered into as of  the Effective Date (as the term is defined
below) between SRS Labs, Inc., having its
principal office at 2909 Daimler
Street, Santa Ana CA 92705 (“SRS”) and
Sony Corporation, having its principal office at 1-7-1 Konan Minato-ku Tokyo 108-0075 Japan (“Sony”).  SRS
and Sony are referred to in this Agreement collectively as the “Parties” and
individually as a “Party.”


 


WHEREAS, Sony and/or its Subsidiaries sell, have sold, or have caused to
be sold one or more models of TVs incorporating certain audio technology which is
designed by Sony that according
to SRS infringes one or more claims of the Licensed Patents (as the term
is defined below);


 


WHEREAS, Sony denies infringement, and shall not by
entering into this Agreement be deemed to have admitted, that any of the claims
of the Licensed Patents are valid, enforceable, or infringed; and


 


WHEREAS, the Parties desire to settle all differences, disagreements and
disputes that exist or may exist between them based upon the Licensed
Patents.  Each Party hereto denies any
wrongdoing, illegal conduct or liability whatsoever on its part, but
nevertheless has concluded that it is in its best interests to settle this
dispute, without the time and expense of litigation or other legal action, on
the terms set forth herein.


 


NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, SRS and Sony
agree as follows:


 


1.             DEFINITIONS.  As used in this Agreement:


 


1.1          “Effective
Date” means the latter date upon which
all Parties have signed this Agreement or identical counterparts thereof.


 


1.2          “Person” means any individual or firm, association, organization, joint
venture, trust, partnership, corporation, or other collective organization or
entity.


 


1.3          “Licensed Products” means  any and all of Sony’s or its Subsidiaries’ products
incorporating any proprietary audio technology i) that is designed by Sony
and/or its Subsidiaries prior to the date of this Agreement
and/or ii) that will be designed by Sony and/or its Subsidiaries during the
period for three (3) years after the Effective Date (collectively “Sony Audio
Technologies”).  Licensed Products shall
also include any and all of Sony’s or its Subsidiaries’ products incorporating
modifications, derivations, enhancements and/or the like of the Sony Audio
Technologies.


 


1.4          “Licensed
Patents” means:


 


(a)           patents and/or patent applications related
to any audio technology, which SRS owns and/or controls and has a first filing
date or priority date prior to the Effective date in any county in the world
including, but not limited to,
U.S. Patents No. 4,866,774; No. 5,892,830;  No. 7,636,443 and U.S. patent application No. 12/643930 (“Present Patents”).  Present Patents shall also include any and
all pending or future re-issues, re-examinations, continuations,
continuations-in-part, divisional and foreign counterparts applications
relating to the above patents and/or patent applications, and


 


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(b)           patents and/or patent applications related
to any audio technology, which SRS owns and/or controls and has a first filing
date or priority date during the period from the Effective Date through three (3)
years thereafter in any country in the world (“Future Patents”).  Future Patents shall also include any and all
pending or future re-issues, re-examinations, continuations,
continuations-in-part, divisional and foreign counterparts applications relating
to the above patents and/or patent applications.


 


1.5          “Subsidiary(ies)” means a legal entity which now or hereinafter, directly or
indirectly, controls, is controlled by, or is under common control with a
Party.  The term “control” as used in
this Section  shall mean ownership of fifty
percent (50%) or more of the outstanding shares representing the right to vote
for directors or other managing officers of such legal entity; or for a legal
entity which does not have outstanding shares, fifty percent (50%) or more of
the ownership interest representing the right to appoint directors or other
managing officers of such legal entity. 
The term Subsidiary(ies) shall also include any entities in which a
Party has, directly or indirectly, a majority of the beneficial ownership of
such entity.


 


2.             LICENSE.  SRS hereby
grants Sony, as well as its Subsidiaries, a non-transferable, non-assignable,
irrevocable, non-exclusive,
fully paid-up worldwide license, under
the Licensed Patents to make, have made, use, offer for sell,
sell, distribute, import  or
otherwise dispose of
the Licensed Products throughout the
world.


 


3.             COVENANT NOT TO ASSERT.  SRS
covenants not to assert the Licensed Patents against Sony, its Subsidiaries, and each of their
customers, distributors, agents, resellers, value-added resellers and end-users
with respect to the Licensed Products after the Effective Date.  SRS, on behalf of itself and its Subsidiaries, covenants and agrees
that neither SRS nor any Person directly or
indirectly controlled by or claiming through it, will bring suit or otherwise
assert a claim that a Licensed Product manufactured, imported, exported, used,
offered for sale, or sold or otherwise distributed, by Sony or its
Subsidiaries infringes any of the Licensed Patents.  This covenant shall run with the Licensed
Patents.


 


4.             SETTLEMENT PAYMENT.


 


4.1          Amount of Payment.  In consideration of the license and covenant granted
herein, Sony shall pay to SRS
nine hundred thousand ($900,000.00)
United States dollars (the “Settlement Payment”).


 


4.2          Timing of Payment.  Sony shall pay SRS the
Settlement Payment within thirty (30) days after the latter
of (1)  the Effective Date of this
Agreement; or  (2)  the date
Sony receives correctly completed tax forms necessary for the avoidance of any
withholding taxes that may be required by the Japanese government to be
withheld from the Settlement Payment, including SRS’s
Certificate of Residency


 


4.3          Method of Payment.  The Settlement Payment shall
be made by wire transfer in United States dollars.  The wire transfer payment shall be sent to
the following bank:


 


Bank Name: US Bank


Bank Address: 4100 Newport Place Dr. Ste100, Newport
Beach, CA 92660


SWIFT code: USBKUS44


ABA: 122235821


Account name: SRS Labs, Inc.


Account
No.:  


 


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4.4          Taxes.  All taxes shall be the financial responsibility of the
Party obligated to pay such taxes as determined by the applicable law and
neither Party is or shall be liable at any time for any of the other Party’s
taxes incurred in connection with or related to amounts paid under this
Agreement.  Notwithstanding this Section 4.4, SRS shall correctly
complete and supply to Sony the tax forms necessary for the avoidance of
any withholding taxes that may be required by the Japanese government to be
withheld from the Settlement Payment, including a current Certificate of
Residency from the United States government. 
However, in the event Sony is required to deduct or withhold any foreign
tax, such as a tax imposed by the Japanese Taxing Authority, from or in
connection with the Settlement Payment, that amount may be deducted from the
Settlement Payment.


 


5.             RELEASES AND DISMISSAL.


 


5.1          SRS Releases to Sony.  Subject
to Sony’s payment to SRS of the Settlement Payment in
accordance with Section 4 above, SRS, its
Subsidiaries, and their respective legal successors, heirs and assigns, release
and absolutely discharge Sony and its Subsidiaries, and each of their
customers, distributors,
agents, resellers, value-added resellers and end-users, past and present, of and from any and all claims under the Licensed Patents for the
Licensed Products made, had made used, offered for sale, sold, imported, distributed or otherwise disposed of prior to the Effective
Date.


 


5.2          Unknown
Claims. 
The Parties expressly acknowledge and agree that this Agreement fully and
finally releases and forever resolves the dispute,
including those claims involving the Licensed Products that are unknown,
unanticipated or unsuspected or that may hereafter arise as a result of the new
and/or additional facts.


 


5.3          Denial of Liability.  The Parties are entering
into this Agreement to resolve disputed claims, that nothing herein shall be
construed to be an admission of liability, and that SRS on the
one hand, and Sony on the other, expressly deny any liability to the other
Party.  Each party shall bear its own
costs and attorney’s fees incurred in this action.


 


6.             BUSINESS
RELATIONSHIP.  As of the Effective Date of this Agreement, Sony
agrees that normal business discussions and negotiations with SRS may resume.


 


7.             TERM AND TERMINATION OF LICENSE.


 


7.1          Term.  The license, covenant and release granted under this Agreement are
effective as of the Effective Date and continue until the expiration of the
last surviving Licensed Patent.


 


7.2          Survival.  Sections 1, 2, 3,
5, and 8 will survive the termination of this Agreement.


 


8.             GENERAL PROVISIONS.


 


8.1          Irreparable
Harm Arising from Breach.  The Parties agree that violation of the
provisions contained in this Section 8 shall
cause a Party to suffer immediate and irreparable harm for which there is no
adequate remedy at law.  Therefore, the
Parties further agree that in the event of a breach of this Section 8,
the non-breaching Party shall be entitled to preliminary and permanent injunctive
relief, in addition to all other remedies available to it at law or equity.


 


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8.2          Confidentiality.


 


(a)           Each Party will hold all terms and conditions of
this Agreement including its existence in confidence
and shall not publicize or disclose it in any manner without prior written consent of the other
Party. 
Provided,
however, that the Parties may
disclose this Agreement as required by applicable law, in confidence to a Court
(or otherwise as directed by law) under a protective order,
and to the Parties’ respective attorneys, accountants, auditors, tax preparers,
financial advisors and other agents who have a need to know the content of this
Agreement under
necessary confidential obligation.


 


(b)           Notwithstanding the forgoing, Sony shall not unreasonably withhold approval of an SRS press release that
refers only to the existence of this Agreement. 
SRS agrees that no further detail shall be disclosed without the prior
written consent of Sony.


 


8.3          Governing
Law, Jurisdiction and Venue.  This Agreement shall be governed by,
interpreted and construed in accordance with the laws of New York,
without reference to conflicts of laws principles.  Any legal action or other legal proceeding
relating to this Agreement or the enforcement of any provision of this
Agreement must be brought or otherwise commenced in Federal District Court for
the Southern District of New York.  Each
Party expressly and irrevocably consents and submits to the jurisdiction of
such court in connection with any such legal proceeding.  In the event any party commences an action or
proceeding that relates to or arises out of this Agreement, the party
prevailing in such action or proceeding shall be entitled to reimbursement of
its reasonable expenses incurred in such action or proceeding, including
payment of its attorney’s fees, from the unsuccessful party.


 


8.4          Warranties;
Disclaimers; Limitations.  SRS,
on behalf of itself and its Subsidiaries, represents and warrants that SRS
is the assignee of the Licensed Patents with all right, title and interest in
the enforcement of the Licensed Patents, and that SRS has all
rights necessary to grant any and all rights granted to Sony under this
Agreement including without limitation the licenses granted in Section 2, the
covenant not to assert claims under the Licensed Patents in Section 3, and the
releases granted in Section 5.1.


 


8.5          Duly
Existing.  Each of the Parties represents and warrants
that it is duly existing, and each Party hereto represents and warrants that it
has the full power and authority to enter into this Agreement, and that there
are no other Persons whose consent to this Agreement or whose joinder herein is
necessary to make fully effective the provisions of this Agreement.


 


8.6          Representation.  Each Party acknowledges to
the other Party that it has been represented by legal counsel of its own choice
throughout all of the negotiations which preceded the execution of this
Agreement and that it has executed this Agreement with the consent and on the
advice of such legal counsel.  Each Party
further acknowledges that it and its counsel have had adequate opportunity to
make whatever investigation or inquiry they may deem necessary or desirable in
connection with the subject matter of this Agreement prior to the execution
hereof.  Each Party has authorized and
directed their respective attorneys to execute and deliver such other and
further documents as may be required to carry out the terms and conditions of
this Agreement.


 


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8.7          Interpretation.  The language of this
Agreement has been approved by counsel for the Parties.  The language of this Agreement shall be
construed as a whole according to its fair meaning and none of the Parties (or
the Parties’ respective attorneys) shall be deemed to be the draftsman of this
Agreement in any action which may hereafter arise between the Parties.


 


8.8          Entire
Agreement; Amendments.  This is an enforceable Agreement.  This Agreement  constitutes
the entire agreement between the Parties and supersedes all previous
communications, representations, agreements or understandings, either oral or
written, between the Parties with respect to the subject matter hereof.  This Agreement may be amended, supplemented
or modified only by a written instrument duly executed by or on behalf of each
Party hereto which specifically refers to this Agreement.


 


8.9          Full
Satisfaction.  The consideration for this Agreement, the
mutual release of liability and license, and the obligations required under
this Agreement, are acknowledged by the Parties to be in full and complete
settlement and satisfaction of claims that are released hereunder.


 


8.10        Waiver.  No waiver of any breach of
any provision of this Agreement shall constitute a waiver of any prior,
concurrent or subsequent breach of the same or any provisions hereof, and no
waiver shall be effective unless made in writing and signed by an authorized
representative of the waiving party.


 


8.11        Notices.  Any
notice required or permitted by this Agreement shall be in writing and shall be
sent by a reliable overnight courier service, return receipt requested; by
prepaid registered or certified mail, return receipt requested; or by facsimile
to the other Party at the address below or to
such other address for which such Party
shall give notice hereunder.  Such notice
shall be deemed to have been given one (1) business day after the date of
sending if by overnight courier service, or five (5) business days after the
date of sending by registered or certified mail, or upon confirmed receipt if
delivered by facsimile, excepted that notice of change of address shall be
effective only upon receipt.


 


To SRS:


2909 Daimler
St.


Santa Ana, CA
92705


Attn.: Legal
Department


 


To Sony:


1-7-1 Konan
Minato-ku


Tokyo,
108-0075 Japan


Attn.:
General Manager, IP Alliance & Licensing Department


Fax Number:
+81 3 6748 3544


 


8.12        Severability.  If any provision of this
Agreement shall be determined to be invalid, illegal or unenforceable under any
controlling body of law, that provision shall be reformed, construed and
enforced to the maximum extent permissible; and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.


 


8.13        Section Headings.  The section headings used
in this Agreement shall be intended for convenience only and shall not be
deemed to supersede or modify any provisions.


 


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8.14        Counterparts.  This Agreement may be
signed in counterparts, by facsimile, or may be sent by electronic mail, each
of which shall be deemed an original hereof, but all of which together shall
constitute one and the same instrument.


 


8.15        Bankruptcy.  All rights granted under
the licenses, covenants not to assert, releases, discharges and other rights
granted under or pursuant to this Agreement are, and shall otherwise be deemed
to be, for purposes of Section 365(n) of Title 11, U.S. Code (the “Bankruptcy
Code”), licenses and rights to “intellectual property” as defined under Section
101 of the Bankruptcy Code.  The Parties
agree that each Party shall retain and may fully exercise and enjoy all rights
and elections available to them under the Bankruptcy Code and other applicable
laws and regulations.


 


8.16        Force
Majeure. 
Neither Party shall be liable for failure to
perform under this Agreement if such failure to perform arises out of causes
beyond the control and without the fault or negligence of the non-performing Party.  Such causes may include, but are not limited
to, acts of God or public enemy, fires, floods, epidemics, quarantine
restrictions, freight embargoes, and unusually severe weather.  This provision shall become effective only if
the Party failing to perform notifies the other party within a reasonable time
of the extent and nature of the problem, limits delay in performance to that
required by the event, and takes all reasonable steps to minimize delays.  This provision shall not be effective unless
failure to perform is beyond the control and without the fault or negligence of
the non-performing Party.


 


8.17        Successors
and Assigns. This Agreement
shall be binding upon and inure to the benefit of the Parties hereto and their
respective representatives, successors and assigns.


 


IN WITNESS WHEREOF, the Parties do hereby execute this Settlement and Patent License
Agreement by duly authorized officials as of the Effective Date:


 


 


	
  SRS Labs Inc.

  	
  SONY CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /S/ ULRICH GOTTSCHLING

  	
   

  	
  By:

  	
  /S/ FUMIHIKO MORIYA

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Ulrich Gottschling

  	
   

  	
  Name:

  	
  Fumihiko Moriya

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Chief Financial Officer

  	
   

  	
  Title:

  	
  VP, Senior
  General Manager,

  Intellectual Property Division

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  September 7, 2010

  	
   

  	
  Date:

  	
  September 9, 2010

  



 


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