Document:

EXHIBIT No. 10 (d)

This
document constitutes part of a prospectus covering securities

that have been registered under the Securities Act of 1933.

Constellation Energy Group, Inc.

Amended and Restated Management Long-Term Incentive Plan

(Plan)

1.             Objective.  The objective of this Plan is to
increase shareholder value by providing a long-term incentive to reward
management level and other designated employees of Constellation Energy and its
Subsidiaries, whose responsibilities include the continued growth, development,
and financial success of Constellation Energy and its Subsidiaries, for the
continued profitable performance of Constellation Energy and its
Subsidiaries.  The Plan is also designed
to assist Constellation Energy and its Subsidiaries to retain talented and
motivated management level and other designated employees and to increase their
ownership of Constellation Energy common stock.

2.             Definitions.  All
singular terms defined in this Plan will include the plural and vice versa.  As used herein, the following terms will have
the meaning specified below:

“Award” means
individually or collectively, Restricted Stock, Restricted Stock Units,
Options, Performance Units, Stock Appreciation Rights, or Dividend Equivalents
granted under this Plan.

“Board” means the Board
of Directors of Constellation Energy.

“Book Value” means the
book value of a share of Stock determined in accordance with Constellation
Energy’s regular accounting practices as of the last business day of the month
immediately preceding the month in which a Stock Appreciation Right is
exercised as provided in Section 10.

“Constellation Energy”
means Constellation Energy Group, Inc., a Maryland corporation, or its
successor, including any “New Company” as provided in Section 14I.

“Code” means the Internal
Revenue Code of 1986, as amended. 
Reference in the Plan to any section of the Code will be deemed to
include any amendments or successor provisions to such section and any
regulations promulgated thereunder.

“Covered Award” means any
Award granted under the Plan on or after November 28, 2005.

“Date of Grant” means the
date on which the granting of an Award is authorized by the Plan Administrator
or such later date as may be specified by the Plan Administrator in such
authorization.

“Date of Retirement”
means the date of Retirement or Early Retirement.

“Disability” means the
determination that a Participant is “disabled” under the Constellation Energy
disability plan in effect at that time.

 

“Dividend Equivalent”
means an award granted under Section 11.

“Early Retirement” means
retirement prior to the Normal Retirement Date.

“Earned Performance Award”
means an actual award of a specified number of Performance Units (or shares of
Restricted Stock or Restricted Stock Unit, as the context requires) which the
Plan Administrator has determined have been earned and are payable (or, in the
case of Restricted Stock or Restricted Stock Units, earned and with respect to
which restrictions will lapse) for a particular Performance Period.

“Eligible Employee” means
any person employed by Constellation Energy or a Subsidiary on a regularly
scheduled basis who satisfies all of the requirements of Section 5.

“Excluded Transactions”
has the meaning set forth in Section 12.

“Exercise Period” means
the period or periods during which a Stock Appreciation Right is exercisable as
described in Section 10.

“Fair Market Value” means
the average of the highest and lowest price at which the Stock was sold regular
way on the New York Stock Exchange-Composite Transactions on a specified date; provided, however, that notwithstanding the
foregoing, solely for purposes of determining the Option price per share of
Stock under Section 8C for Option grants made after October 19, 2006, “Fair
Market Value” means the price at which the Stock was last sold on the New York
Stock Exchange-Composite Transactions on the Date of Grant.

“Incentive Stock Option”
means an incentive stock option within the meaning of Section 422 of the
Code.

“1934 Act” means the
Securities Exchange Act of 1934, as amended.

“Normal Retirement Date”
is the retirement date as described in the Pension Plan or a Subsidiary’s
retirement or pension plan.

“Option” or “Stock Option”
means either a nonqualified stock option or an incentive stock option granted
under Section 8.

“Option Period” or “Option
Periods” means the period or periods during which an Option is exercisable as
described in Section 8.

“Participant” means an
employee of Constellation Energy or a Subsidiary who has been granted an Award
under this Plan.

“Pension Plan” means the
Pension Plan of Constellation Energy Group, Inc. as may be amended from
time to time.

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“Performance-Based” means
that in determining the amount of a Restricted Stock or Restricted Stock Unit
Award payout, the Plan Administrator will take into account the performance of
the Participant, Constellation Energy, one or more Subsidiaries, or any
combination thereof.

“Performance Period”
means a period of time, established by the Plan Administrator at the time an
Award is granted, during which corporate and/or individual performance is
measured.

“Performance Unit” means
a unit of measurement equivalent to such amount or measure as defined by the
Plan Administrator which may include, but is not limited to, dollars, market
value shares, or book value shares.

“Plan Administrator”
means, as set forth in Section 4, the Chief Executive Officer of
Constellation Energy.

“Restricted Stock” means
an Award granted under Section 7.

“Restricted Stock Unit”
means a right granted under Section 7 that is denominated in shares of
stock, each of which represents a right to receive the value of a share of
stock (or a percentage of such value, which percentage may be higher than 100%)
upon the terms and conditions set forth by the Committee.

“Retirement” means
retirement on or after the “Normal Retirement Date” (as such term is defined in
the Pension Plan or a Subsidiary’s retirement or pension plan).

“Service-Based” means
that in determining the amount of a Restricted Stock or Restricted Stock Unit
Award payout, the Plan Administrator will take into account only the period of
time that the Participant performed services for Constellation Energy or its
Subsidiaries since the Date of Grant.

“Stock” means the common
stock, without par value, of Constellation Energy.

“Stock Appreciation Right”
means an Award granted under Section 10.

“Subsidiary(ies)” means
any corporation of which 20% or more of its outstanding voting stock or voting
power is beneficially owned, directly or indirectly, by Constellation Energy.

“Target Performance Award”
means a targeted award of a specified number of Performance Units (or shares of
Restricted Stock or Restricted Stock Unit, as the context requires) which may
be earned and payable (or, in the case of Restricted Stock or Restricted Stock
Unit, earned and with respect to which restrictions will lapse) based upon the
performance objectives for a particular Performance Period, all as determined
by the Plan Administrator.  The Target
Performance Award will be a factor in the Plan Administrator’s ultimate
determination of the Earned Performance Award.

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“Termination” means
resignation or discharge from employment with Constellation Energy or any of
its Subsidiaries except in the event of death, Disability, Retirement or Early
Retirement.

3.             Effective Date and
Duration.

A.            Effective Date.  The Plan
became effective as of February 1, 1998, and was most recently amended and
restated effective as of October 19, 2006.

B.            Period for Grants of Awards.  Awards
may be made as provided herein for a period of 10 years after
February 1, 1998.

C.            Grants Outstanding.  Grants
outstanding at the effective time of the share exchange between Constellation
Energy and the common stockholders of Baltimore Gas and Electric Company (BGE)
were converted from BGE common stock-based grants to Constellation Energy
common stock-based grants.

4.             Plan
Administration.  The Chief Executive Officer of Constellation
Energy is the Plan Administrator and has sole authority (except as specified
otherwise herein) to determine all questions of interpretation and application
of the Plan, or of the terms and conditions pursuant to which Awards are
granted, exercised or forfeited under the Plan provisions, and, in general, to
make all determinations advisable for the administration of the Plan to achieve
its stated objective.  Such
determinations shall be final and not subject to further appeal.  The Plan Administrator shall have the power
to delegate all or any part of his/her duties to one or more designees, and to
withdraw such authority, by written designation.

5.             Eligibility.  Each
employee of Constellation Energy who holds a management level position, and
other employees of Constellation Energy and its Subsidiaries, may be designated
by the Plan Administrator as a Participant, from time to time, with respect to
one or more Awards.  No employee of
Constellation Energy or its Subsidiaries shall have any right to be granted an
Award under this Plan.

6.             Grant of Awards
and Limitation of Number of Shares Awarded.  The Plan Administrator
may, from time to time, grant Awards to one or more Eligible Employees,
provided that (i) subject to any adjustment pursuant to Section 14H,
the aggregate number of shares of Stock subject to Awards under this Plan may
not exceed three million (3,000,000) shares; (ii) to the extent that an
Award lapses or the rights of the Participant to whom it was granted terminate,
any shares of Stock subject to such Award shall again be available for the
grant of an Award under the Plan; and (iii) shares delivered by
Constellation Energy under the Plan may be authorized and unissued Stock, Stock
held in the treasury of Constellation Energy, or Stock purchased on the open
market (including private purchases) in accordance with applicable securities
laws.

7.             Restricted Stock and
Restricted Stock Unit Awards.

A.            Grants of Restricted Shares or Units.  One
or more shares of Restricted Stock or Restricted Stock Units may be granted to
any Eligible Employee.  The 

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Restricted Stock will be
issued or Restricted Stock Unit granted to the Participant on the Date of Grant
without the payment of consideration by the Participant.  The Restricted Stock will be issued or
Restricted Stock Unit granted either in the name of the Participant or in an
agent account on behalf of one or more Participants, and will bear a
restrictive legend prohibiting sale, transfer, pledge or hypothecation of the
Restricted Stock or Restricted Stock Unit until the expiration of the
restriction period.

The Plan Administrator
may also impose such other restrictions and conditions on the Restricted Stock
or Restricted Stock Unit as it deems appropriate, and will designate the grant
as either a Service-Based or Performance-Based Award.

Upon issuance to the
Participant of the Restricted Stock, the Participant will have the right to
vote the Restricted Stock.  Upon issuance
to the Participant of the Restricted Stock or grant of the Restricted Stock
Unit and subject to the Plan Administrator’s discretion, the Participant will
have the right to receive the cash dividends (or Dividend Equivalents as
provided in Section 11) distributable with respect to such shares or
units, with such dividends or Dividend Equivalents treated as compensation to
the Participant.  The Plan Administrator,
in his/her sole discretion, may direct the accumulation and payment of
distributable dividends to the Participant at such times, and in such form and
manner, as determined by the Plan Administrator.

B.            Service-Based Award.

i.              Restriction Period.  At the time a Service-Based Restricted
Stock or Restricted Stock Unit Award is granted, the Plan Administrator will
establish a restriction period applicable to such Award which will be not less
than one year and not more than ten years. 
Each Restricted Stock or Restricted Stock Unit Award may have a
different restriction period, at the discretion of the Plan Administrator.

ii.             Forfeiture or Payout of Award.  In the event a Participant ceases
employment during a restriction period, a Restricted Stock or Restricted Stock
Unit Award is subject to forfeiture or payout (i.e., removal of restrictions)
as follows: (a) Termination—the Restricted Stock or Restricted Stock Unit
Award is completely forfeited; (b) Retirement, Disability or death—payout
of the Restricted Stock or Restricted Stock Unit Award is prorated for service
during the period; or (c) Early Retirement—if at the Participant’s
request, the payout or forfeiture of the Restricted Stock or Restricted Stock
Unit Award is determined at the discretion of the Plan Administrator, or if at
Constellation Energy’s request, payout of the Restricted Stock or Restricted
Stock Unit Award is prorated for service during the period; provided, however,
that the Plan Administrator may modify the above if it determines at his/her
sole discretion that special circumstances warrant such modification.

Any shares of
Restricted Stock which are forfeited will be transferred to Constellation
Energy.

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Upon completion of
the restriction period, all Award restrictions will expire and certificates
representing the Award will be issued (the payout) without the restrictive
legend described in Section 7A.

C.            Performance-Based
Award.

i.              Restriction Period.  At the time a Performance-Based
Restricted Stock or Restricted Stock Unit Award is granted, the Plan
Administrator will establish a restriction period applicable to such Award
which will be not less than one year and not more than ten years.  Each Restricted Stock or Restricted Stock
Unit Award may have a different restriction period, at the discretion of the
Plan Administrator.  The Plan
Administrator will also establish a Performance Period.

ii.             Performance Objectives.  The Plan Administrator will determine,
no later than 90 days after the beginning of each Performance Period, the
performance objectives for each Participant’s Target Performance Award and the
number of shares of Restricted Stock or Restricted Stock Units for each Target
Performance Award that will be issued on the Date of Grant.  Performance objectives may vary from Participant
to Participant and will be based upon such performance criteria or combination
of factors as the Plan Administrator deems appropriate, which may include, but
not be limited to, the performance of the Participant, Constellation Energy,
one or more Subsidiaries, or any combination thereof.  Performance Periods may overlap and
Participants may participate simultaneously with respect to Performance-Based
Restricted Stock or Restricted Stock Unit Awards for which different
Performance Periods are prescribed.

If, during the
course of a Performance Period significant events occur as determined in the
sole discretion of the Plan Administrator, which the Plan Administrator expects
to have a substantial effect on a performance objective during such period, the
Plan Administrator may revise such objective.

iii.            Forfeiture or Payout of Award.  As soon as practicable after the end
of each Performance Period, the Plan Administrator will determine whether the
performance objectives and other material terms of the Award were
satisfied.  The Plan Administrator’s
determination of all such matters will be final and conclusive.

As soon as
practicable after the later of (i) the date the Plan Administrator makes
the above determination, or (ii) the completion of the restriction period,
the Plan Administrator will determine the Earned Performance Award for each
Participant.  Such determination may
result in forfeiture of all or some shares of Restricted Stock or Restricted
Stock Units (if Target Performance Award performance objectives were not 

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attained),
or the issuance of additional shares of Stock or Restricted Stock Units (if
Target Performance Award performance objectives were exceeded), and will be
based upon such factors as the Plan Administrator determines at his/her sole
discretion, but including the Target Performance Award performance objectives.

In the event a
Participant ceases employment during a restriction period, the Restricted Stock
or Restricted Stock Unit Award is subject to forfeiture or payout (i.e.,
removal of restrictions) as follows: (a) Termination—the Restricted Stock
or Restricted Stock Unit Award is completely forfeited; (b) Retirement,
Disability or death—payout of the Restricted Stock or Restricted Stock Unit
Award is prorated taking into account factors including, but not limited to, service
during the period; and the performance of the Participant during the portion of
the Performance Period before employment ceased; or (c) Early
Retirement—if at the Participant’s request, the payout or forfeiture of the
Restricted Stock or Restricted Stock Unit Award is determined at the discretion
of the Plan Administrator, or if at Constellation Energy’s request, payout of
the Restricted Stock or Restricted Stock Unit Award is prorated taking into
account factors including, but not limited to, service during the period and
the performance of the Participant during the portion of the Performance Period
before employment ceased; provided, however, that the Plan Administrator may
modify the above if it determines at his/her sole discretion that special circumstances
warrant such modification.

Any shares of
Restricted Stock which are forfeited will be transferred to Constellation
Energy.

With respect to
shares of Restricted Stock or Restricted Stock Units for which restrictions
lapse, certificates will be issued (the payout) without the restrictive legend
described in Section 7A. 
Certificates will also be issued for additional Stock, if any, awarded
to the Participant because Target Performance Award performance objectives were
exceeded.

D.            Waiver of Section 83(b) Election.  Unless
otherwise directed by the Plan Administrator, as a condition of receiving an
Award of Restricted Stock, a Participant must waive in writing the right to
make an election under Section 83(b) of the Code to report the value of
the Restricted Stock as income on the Date of Grant.

8.             Stock Options

A.            Grants of Options.  One or more Options may be granted to
any Eligible Employee on the Date of Grant without the payment of consideration
by the Participant.

B.            Stock Option Agreement.  Each Option granted under the Plan
will be evidenced by a “Stock Option Agreement” between Constellation Energy
and the

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Participant containing
provisions determined by the Plan Administrator, including, without limitation,
provisions to qualify Incentive Stock Options as such under Section 422 of
the Code if directed by the Plan Administrator at the Date of Grant; provided,
however, that each Incentive Stock Option Agreement must include the following
terms and conditions: (i) that the Options are exercisable, either in
total or in part, with a partial exercise not affecting the exercisability of
the balance of the Option; (ii) every share of Stock purchased through the
exercise of an Option will be paid for in full at the time of the exercise;
(iii) each Option will cease to be exercisable, as to any share of Stock,
at the earliest of (a) the Participant’s purchase of the Stock to which
the Option relates, (b) the Participant’s exercise of a related Stock
Appreciation Right, or (c) the lapse of the Option; (iv) Options will
not be transferable by the Participant except by Will or the laws of descent
and distribution and will be exercisable during the Participant’s lifetime only
by the Participant or by the Participant’s guardian or legal representative;
and (v) notwithstanding any other provision, in the event of a public
tender for all or any portion of the Stock or in the event that any proposal to
merge or consolidate Constellation Energy with another company is submitted to
the stockholders of Constellation Energy for a vote, the Plan Administrator, in
his\her sole discretion, may declare any previously granted Option to be
immediately exercisable.

C.            Option Price.  The Option price per share of Stock
will be set by the grant, but will be not less than 100% of the Fair Market
Value at the Date of Grant.

D.            Form of Payment.  At the time of the exercise of the
Option, the Option price will be payable in cash or in other shares of Stock or
in a combination of cash and other shares of Stock, in a form and manner as
required by the Plan Administrator in his/her sole discretion.  When Stock is used in full or partial payment
of the Option price, it will be valued at the Fair Market Value on the date the
Option is exercised.

E.             Other Terms and Conditions.  The Option will become exercisable in
such manner and within such Option Period or Periods, not to exceed
10 years from its Date of Grant, as set forth in the Stock Option
Agreement upon payment in full.  Except
as otherwise provided in this Plan or in the Stock Option Agreement, any Option
may be exercised in whole or in part at any time.

F.             Lapse of Option.  An Option will lapse upon the earlier
of: (i) 10 years from the Date of Grant, or (ii) at the
expiration of the Option Period set by the grant.  If the Participant ceases employment within
the Option Period and prior to the lapse of the Option, the Option will lapse
as follows: (a) Termination—the Option will lapse on the effective date of
the Termination; or (b) Retirement, Early Retirement, or Disability—the
Option will lapse at the expiration of the Option Period set by the grant;
provided, however, that the Plan Administrator may modify the above if he/she
determines in his/her sole discretion that special circumstances warrant such
modification.  If the Participant dies
within the Option Period and prior to the lapse of the Option, the Option will
lapse at the expiration of the Option Period set by the grant unless it is
exercised before such time by the Participant’s legal representative(s) or by
the person(s) entitled to do so under the Participant’s Will or, if the
Participant fails to make testamentary 

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disposition of the Option
or dies intestate, by the person(s) entitled to receive the Option under the
applicable laws of descent and distribution.

G.            Individual Limitation.  In the case of an Incentive Stock
Option, the aggregate Fair Market Value of the Stock for which Incentive Stock
Options (whether under this Plan or another arrangement) in any calendar year
are first exercisable will not exceed $100,000 with respect to such calendar
year (or such other individual limit as may be in effect under the Code on the
Date of Grant) plus any unused portion of such limit as the Code may permit to
be carried over.

9.             Performance Units.

A.            Performance Units.  One or more Performance Units may be
earned by an Eligible Employee based on the achievement of preestablished
performance objectives during a Performance Period.

B.            Performance Period and Performance
Objectives.  The Plan
Administrator will determine a Performance Period and will determine, no later
than 90 days after the beginning of each Performance Period, the
performance objectives for each Participant’s Target Performance Award and the
number of Performance Units subject to each Target Performance Award.  Performance objectives may vary from
Participant to Participant and will be based upon such performance criteria or
combination of factors as the Plan Administrator deems appropriate, which may
include, but not be limited to, the performance of the Participant,
Constellation Energy, one or more Subsidiaries, or any combination
thereof.  Performance Periods may overlap
and Participants may participate simultaneously with respect to Performance
Units for which different Performance Periods are prescribed.

If during the course of a
Performance Period significant events occur as determined in the sole
discretion of the Plan Administrator which the Plan Administrator expects to
have a substantial effect on a performance objective during such period, the
Plan Administrator may revise such objective.

C.            Forfeiture or Payout of Award.  As soon as practicable after the end
of each Performance Period, the Plan Administrator will determine whether the
performance objectives and other material terms of the Award were
satisfied.  The Plan Administrator’s
determination of all such matters will be final and conclusive.

As soon as practicable
after the date the Plan Administrator makes the above determination, the Plan
Administrator will determine the Earned Performance Award for each
Participant.  Such determination may
result in an increase or decrease in the number of Performance Units payable
based upon such Participant’s Target Performance Award, and will be based upon
such factors as the Plan Administrator determines in his/her sole discretion,
but including the Target Performance Award performance objectives.

In the event a
Participant ceases employment during a Performance Period, the Performance Unit
Award is subject to forfeiture or payout as follows: (a) Termination—the
Performance Unit Award is completely forfeited; (b) Retirement, Disability
or 

 9
 

 

death—payout of
the Performance Unit Award is prorated taking into account factors including,
but not limited to, service and the performance of the Participant during the
portion of the Performance Period before employment ceased; or (c) Early
Retirement—if at the Participant’s request, the payout or forfeiture of the
Performance Unit Award is determined at the discretion of the Plan
Administrator, or if at Constellation Energy’s request, payout of the
Performance Unit Award is prorated taking into account factors including, but
not limited to, service and the performance of the Participant during the
portion of the Performance Period before employment ceased; provided, however,
that the Plan Administrator may modify the above if it determines in his/her
sole discretion that special circumstances warrant such modification.

D.            Form and Timing of Payment.  Each Performance Unit is payable in
cash or shares of Stock or in a combination of cash and Stock, as determined by
the Plan Administrator in his/her sole discretion.  Such payment will be made as soon as
practicable after the Earned Performance Award is determined.

10.           Stock Appreciation
Rights.

A.            Grants of Stock Appreciation Rights.  Stock
Appreciation Rights may be granted under the Plan in conjunction with an Option
either at the Date of Grant or by amendment or may be separately granted.  Stock Appreciation Rights will be subject to
such terms and conditions not inconsistent with the Plan as the Plan
Administrator may impose.

B.            Right to Exercise; Exercise Period.  A
Stock Appreciation Right issued pursuant to an Option will be exercisable to
the extent the Option is exercisable; both such Stock Appreciation Right and the
Option to which it relates will not be exercisable during the six months
following their respective Dates of Grant except in the event of the
Participant’s Disability or death.  A
Stock Appreciation Right issued independent of an Option will be exercisable
pursuant to such terms and conditions established in the grant.  Notwithstanding such terms and conditions, in
the event of a public tender for all or any portion of the Stock or in the
event that any proposal to merge or consolidate Constellation Energy with
another company is submitted to the stockholders of Constellation Energy for a
vote, the Plan Administrator, in his/her sole discretion, may declare any
previously granted Stock Appreciation Right immediately exercisable.

C.            Failure to Exercise.  If on
the last day of the Option Period, in the case of a Stock Appreciation Right
granted pursuant to an Option, or the specified Exercise Period, in the case of
a Stock Appreciation Right issued independent of an Option, the Participant has
not exercised a Stock Appreciation Right, then such Stock Appreciation Right
will be deemed to have been exercised by the Participant on the last day of the
Option Period or Exercise Period.

D.            Payment.  An exercisable
Stock Appreciation Right granted pursuant to an Option will entitle the
Participant to surrender unexercised the Option or any portion thereof to which
the Stock Appreciation Right is attached, and to receive in exchange for the
Stock Appreciation Right payment (in cash or Stock or a combination thereof as 

 10
 

 

described below) equal to
either of the following amounts, determined in the sole discretion of the Plan
Administrator at the Date of Grant: (1) the excess of the Fair Market
Value of one share of Stock at the date of exercise over the Option price, times
the number of shares called for by the Stock Appreciation Right (or portion
thereof) which is so surrendered, or (2) the excess of the Book Value of
one share of Stock at the date of exercise over the Book Value of one share of
Stock at the Date of Grant of the related Option, times the number of shares
called for by the Stock Appreciation Right. 
Upon exercise of a Stock Appreciation Right not granted pursuant to an
Option, the Participant will receive for each Stock Appreciation Right payment
(in cash or Stock or a combination thereof as described below) equal to either
of the following amounts, determined in the sole discretion of the Plan
Administrator at the Date of Grant: (1) the excess of the Fair Market
Value of one share of Stock at the date of exercise over the Fair Market Value
of one share of Stock at the Date of Grant of the Stock Appreciation Right,
times the number of shares called for by the Stock Appreciation Right, or
(2) the excess of the Book Value of one share of Stock at the date of exercise
of the Stock Appreciation Right over the Book Value of one share of Stock at
the Date of Grant of the Stock Appreciation Right, times the number of shares
called for by the Stock Appreciation Right.

The Plan Administrator
may direct the payment in settlement of the Stock Appreciation Right to be in
cash or Stock or a combination thereof. 
Alternatively, the Plan Administrator may permit the Participant to
elect to receive cash in full or partial settlement of the Stock Appreciation
Right, provided that (i) the Plan Administrator must consent to or
disapprove such election and (ii) unless the Plan Administrator directs
otherwise, the election and the exercise must be made during the period
beginning on the 3rd business day following the date of public release of
quarterly or year-end earnings and ending on the 12th business day following
the date of public release of quarterly or year-end earnings.  The value of the Stock to be received upon
exercise of a Stock Appreciation Right shall be the Fair Market Value of the
Stock on the trading day preceding the date on which the Stock Appreciation
Right is exercised.  To the extent that a
Stock Appreciation Right issued pursuant to an Option is exercised, such Option
shall be deemed to have been exercised, and shall not be deemed to have lapsed.

E.             Nontransferable.  A Stock
Appreciation Right will not be transferable by the Participant except by Will
or the laws of descent and distribution and will be exercisable during the
Participant’s lifetime only by the Participant or by the Participant’s guardian
or legal representative.

F.             Lapse of a Stock Appreciation Right.  A
Stock Appreciation Right will lapse upon the earlier of: (i) 10 years
from the Date of Grant; or (ii) at the expiration of the Exercise Period as
set by the grant.  If the Participant
ceases employment within the Exercise Period and prior to the lapse of the
Stock Appreciation Right, the Stock Appreciation Right will lapse as follows:
(a) Termination—the Stock Appreciation Right will lapse on the effective
date of the Termination; or (b) Retirement, Early Retirement, or
Disability—the Stock Appreciation Right will lapse at the expiration of the
Exercise Period set by the grant; provided, however, that the Plan
Administrator may modify the above if he/she determines in his/her sole
discretion that special circumstances warrant 

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such modification.  If the Participant dies within the Exercise
Period and prior to the lapse of the Stock Appreciation Right, the Stock
Appreciation Right will lapse at the expiration of the Exercise Period set by
the grant unless it is exercised before such time by the Participant’s legal
representative(s) or by the person(s) entitled to do so under the Participant’s
Will or, if the Participant fails to make testamentary disposition of the Stock
Appreciation Right or dies intestate, by the person(s) entitled to receive the
Stock Appreciation Right under the applicable laws of descent and distribution.

11.           Dividend Equivalents.

A.            Grants of Dividend Equivalents.  Dividend
Equivalents may be granted under the Plan in conjunction with an Option or a
separately awarded Stock Appreciation Right, at the Date of Grant or by
amendment, without consideration by the Participant.  Dividend Equivalents may also be granted
under the Plan in conjunction with Performance Units, at any time during the
Performance Period, without consideration by the Participant.  Dividend Equivalents will be granted under a
Performance-Based Restricted Stock or Restricted Stock Unit Award in
conjunction with additional shares of Stock issued if Target Performance Award
performance objectives are exceeded.

B.            Payment.  Each Dividend
Equivalent will entitle the Participant to receive an amount equal to the
dividend actually paid with respect to a share of Stock on each dividend
payment date from the Date of Grant to the date the Dividend Equivalent lapses
as set forth in Section 11D.  The
Plan Administrator, in his/her sole discretion, may direct the payment of such
amount at such times and in such form and manner as determined by the Plan
Administrator.

C.            Nontransferable.  A
Dividend Equivalent will not be transferable by the Participant.

D.            Lapse of a Dividend Equivalent.  Each
Dividend Equivalent will lapse on the earlier of (i) the date of the lapse
of the related Option or Stock Appreciation Right; (ii) the date of the
exercise of the related Option or Stock Appreciation Right; (iii) the end
of the Performance Period (or if earlier, the date the Participant ceases
employment) of the related Performance Units or Performance-Based Restricted
Stock or Restricted Stock Unit Award; or (iv) the lapse date established
by the Plan Administrator on the Date of Grant of the Dividend Equivalent.

12.           Accelerated Award
Payout/Exercise.

A.            Change in Control.  Notwithstanding
anything in this Plan document to the contrary, a Participant is entitled to an
accelerated payout or accelerated Option or Exercise Period (as set forth in
Section 12B) with respect to any previously granted Award upon the
happening of a change in control; provided, that, except as otherwise expressly
provided to the contrary in the applicable grant agreement, a Participant will
not be entitled to an accelerated payout or accelerated Option or Exercise
Period of any Covered Awards in connection with the consummation of the
transactions contemplated by the Agreement and Plan of Merger dated as of
December 18, 2005 by and among FPL 

 12
 

 

Group, Inc., CF Merger
Corporation and the Company (the “Excluded Transactions”), and such Covered
Awards shall remain outstanding in accordance with their terms following the
consummation of the Excluded Transactions, subject to any adjustments made by
the Plan Administrator in accordance with the provisions of Section 14.

A change in control for
purposes of this Section 12 means the occurrence of any one of the
following events:

i.              individuals
who, on January 24, 2003, constitute the Board (the “Incumbent Directors”) cease for any
reason to constitute at least a majority of the Board, provided that any person
becoming a director subsequent to January 24, 2003, whose election or
nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or by approval
of the proxy statement of Constellation Energy Group (the “Company”) in which such person is
named as a nominee for director, without written objection to such nomination)
shall be an Incumbent Director; provided,
however, that no individual
initially elected or nominated as a director of the Company as a result of an
actual or threatened election contest with respect to directors or as a result
of any other actual or threatened solicitation of proxies by or on behalf of
any person other than the Board shall be deemed to be an Incumbent Director;

ii.             any
“person” (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange
Act”) and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act)
is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company’s then
outstanding securities eligible to vote for the election of the Board (the “Company Voting Securities”); provided, however, that the event described in this paragraph (ii) shall
not be deemed to be a change in control by virtue of any of the following
acquisitions: (A) by the Company or any corporation with respect to which
the Company owns a majority of the outstanding shares of common stock or has
the power to vote or direct the voting of sufficient securities to elect a
majority of the directors (a “Subsidiary
Company”), (B) by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any Subsidiary Company, (C) by
any underwriter temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (iii)), or (E) pursuant to any acquisition by Participant
or any group of persons including Participant (or any entity controlled by
Participant or any group of persons including Participant);

iii.            consummation
of a merger, consolidation, statutory share exchange or similar form of
corporate transaction involving the Company 

 13
 

 

or
any of its Subsidiary Companies, (a “Business
Combination”), unless immediately following such Business Combination:
(A) more than 60% of the total voting power of (x) the corporation
resulting from such Business Combination (the “Surviving Corporation”), or (y) if applicable, the ultimate
parent corporation that directly or indirectly has beneficial ownership of at
least 95% of the voting securities eligible to elect directors of the Surviving
Corporation (the “Parent Corporation”),
is represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, is represented by shares
into which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation), is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) and (C) at least a
majority of the members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving Corporation) following
the consummation of the Business Combination were Incumbent Directors at the
time of the Board’s approval of the execution of the initial agreement
providing for such Business Combination (any Business Combination which
satisfies all of the criteria specified in (A), (B), and (C) above shall
be deemed to be a “Non-Qualifying
Transaction”); or

iv.            the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company, or the consummation of a sale of all or
substantially all of the Company’s assets.

Notwithstanding the
foregoing, a change in control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 20% of the
Company Voting Securities as a result of the acquisition of Company Voting
Securities by the Company which reduces the number of Company Voting Securities
outstanding; provided, that if after such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a change in control of the
Company shall then occur.

B.            Amount of Award Subject to Accelerated
Payout/Option Period/Exercise Period.  The
amount of a Participant’s previously granted Award that will be paid or
exercisable upon the happening of a change in control will be determined as
follows, provided, that, except as otherwise expressly provided
to the contrary in the applicable grant agreement, a Participant will not be
entitled to an accelerated vesting, exercisability 

 14
 

 

or payout of any Covered
Awards under this Section 12B in connection with the consummation of the
Excluded Transactions:

Restricted
Stock or Restricted Stock Unit Awards.  The
Participant will be entitled to an accelerated Award payout, and the amount of
the payout will be based on the number of shares of Restricted Stock or
Restricted Stock Units that were issued on the Date of Grant, prorated based on
the number of months of the restriction period that have elapsed as of the
payout date.  Also, with respect to
Performance-Based Restricted Stock or Restricted Stock Unit Awards, in
determining the amount of the payout, maximum performance achievement will be
assumed.

Stock
Option Awards and Stock Appreciation Rights. 
Any previously granted Stock Option Awards or Stock Appreciation
Rights will be immediately exercisable.

Performance
Units.  The Participant will be
entitled to an accelerated Award payout, and the amount of the payout will be
based on the number of Performance Units subject to the Target Performance
Award as established on the Date of Grant, prorated based on the number of
months of the Performance Period that have elapsed as of the payout date, and
assuming that maximum performance was achieved.

Covered Awards.  Except as may be expressly provided to the
contrary in the applicable grant agreement, Covered Awards shall not be
immediately vested or exercisable or subject to immediate or accelerated
payout, Option Period or Exercise Period as a result of the consummation of the
Excluded Transactions, but will remain outstanding in accordance with their
terms following the consummation of the Excluded Transactions, subject to any
adjustments made by the Plan Administrator in accordance with the provisions of
Section 14.

C.            Timing of Accelerated Payout/Option
Period/Exercise Period.  The
accelerated payout set forth in Section 12B will be made in cash within
30 days after the date of the change in control.  The accelerated Option Period/Exercise Period
set forth in Section 12B will begin on the date of the change in control,
and applicable payments will be in cash. 
When Stock is related to the Award, the amount of cash will be
determined based on the Fair Market Value of Stock on the payout or exercise
date, whichever is applicable.

13.           Amendment of Plan.

The Plan Administrator
may at any time and from time to time alter, amend, suspend or terminate the
Plan in whole or in part, except no such action may be taken without the
consent of the Participant to whom any Award was previously granted, which
adversely affects the rights of such Participant concerning such Award, except
as such termination or amendment of the Plan is required by statute, or rules
and regulations 

 15
 

 

promulgated
thereunder.

14.           Miscellaneous
Provisions.

A.            Nontransferability.  No
benefit provided under this Plan shall be subject to alienation or assignment
by a Participant (or by any person entitled to such benefit pursuant to the
terms of this Plan), nor shall it be subject to attachment or other legal
process except (i) to the extent specifically mandated and directed by
applicable state or federal statute, (ii) as requested by the Participant
(or by any person entitled to such benefit pursuant to the terms of this Plan),
and approved by the Plan Administrator, to satisfy income tax withholding, and
(iii) as requested by the Participant and approved by the Plan
Administrator, to members of the Participant’s family, or a trust established
by the Participant for the benefit of family members.

B.            No Employment Right.  Participation
in this Plan shall not constitute a contract of employment between
Constellation Energy or any Subsidiary and any person and shall not be deemed
to be consideration for, or a condition of, continued employment of any person.

C.            Tax Withholding.  Constellation
Energy or a Subsidiary may withhold any applicable federal, state or local
taxes at such time and upon such terms and conditions as required by law or
determined by Constellation Energy or a Subsidiary.  Subject to compliance with any requirements
of applicable law, the Plan Administrator may permit or require a Participant
to have any portion of any withholding or other taxes payable in respect to a
distribution of Stock satisfied through the payment of cash by the Participant
to Constellation Energy or a Subsidiary, the retention by Constellation Energy
or a Subsidiary of shares of Stock, or delivery of previously owned shares of
the Participant’s Stock, having a Fair Market Value equal to the withholding
amount.

D.            Fractional Shares.  Any
fractional shares concerning Awards shall be eliminated at the time of payment
or payout by rounding down for fractions of less than one-half and rounding up
for fractions of equal to or more than one-half.  No cash settlements shall be made with
respect to fractional shares eliminated by rounding.

E.             Government and Other Regulations.  The
obligation of Constellation Energy to make payment of Awards in Stock or
otherwise shall be subject to all applicable laws, rules, and regulations, and
to such approvals by any government agencies as may be required.  Constellation Energy shall be under no
obligation to register under the Securities Act of 1933, as amended (“Act”),
any of the shares of Stock issued, delivered or paid in settlement under the
Plan.  If Stock awarded under the Plan
may in certain circumstances be exempt from registration under the Act,
Constellation Energy may restrict its transfer in such manner as it deems
advisable to ensure such exempt status. 
The Plan is not subject to any provisions of the Employee Retirement
Income Security Act of 1974.

 16
 

 

F.             Indemnification.  The Plan
Administrator (and his/her designees), and Constellation Energy’s Chairman of
the Board, and President and all other employees of Constellation Energy or its
Subsidiaries whose assigned duties include matters under the Plan, shall be
indemnified by Constellation Energy or its Subsidiaries or from proceeds under
insurance policies purchased by Constellation Energy or its Subsidiaries
against any and all liabilities arising by reason of any act or failure to act
made in good faith pursuant to the provisions of the Plan, including expenses
reasonably incurred in the defense of any related claim.

G.            Changes in Capital Structure.  In
the event of any change in the outstanding shares of Stock by reason of any
stock dividend or split, recapitalization, combination or exchange of shares or
other similar changes in the Stock, then appropriate adjustments shall be made
in the shares of Stock theretofore awarded to the Participants and in the
aggregate number of shares of Stock which may be awarded pursuant to the
Plan.  Such adjustments shall be
conclusive and binding for all purposes. 
Additional shares of Stock issued as the result of any such change shall
bear the same restrictions as the shares of Stock to which they relate.

H.            Constellation Energy Successors.  In
the event Constellation Energy becomes a party to a merger, consolidation, sale
of substantially all of its assets or any other corporate reorganization in
which Constellation Energy will not be the surviving corporation or in which
the holders of the Stock will receive securities of another corporation (in any
such case, the “New Company”), then the New Company shall assume the rights and
obligations of Constellation Energy under this Plan.

I.              Governing Law.  All matters
relating to the Plan or to Awards granted hereunder shall be governed by the
laws of the State of Maryland, without regard to the principles of conflict of
laws.

J.             Relationship to Other Benefits.  Any
Awards under this Plan are not considered compensation for purposes of
determining benefits under any pension, profit sharing, or other retirement or
welfare plan, or for any other general employee benefit program.

K.            Expenses.  The expenses of
administering the Plan shall be borne by Constellation Energy and its
Subsidiaries.

L.             Titles and Headings.  The
titles and headings of the sections in the Plan are for convenience of
reference only, and in the event of any conflict, the text of the Plan, rather
than such titles or headings, shall control.

 17
 

 

This document constitutes
part of a prospectus covering securities that have been registered under the
Securities Act of 1933.

You may obtain without
charge, upon written or oral request, a copy of documents incorporated by
reference in the Registration Statement on file with the Securities and
Exchange Commission pertaining to the securities offered under the Management
Long-Term Incentive Plan.  In addition
you may obtain, without charge, upon written or oral request, a copy of
documents that are required to be delivered under Rule 428(b) of the
Securities Act including our annual report to shareholders or annual report on
Form 10-K and a copy of the documents that comprise the prospectus.

To make a request for any
of these documents, you may telephone or write:

Corporate
Secretary

750 East Pratt Street

18th Floor

Baltimore, Maryland 21202

(410) 783-3600

 18
 

 

1998 Management Long-Term Incentive Plan

Appendix

Additional Information

The Plan is not subject
to any provisions of the Employee Retirement Income Security Act of 1974, and
the Plan is not qualified under Section 401(a) of the Internal Revenue Code.

Participants may obtain
additional information about the Plan by contacting:

Manager — Executive Compensation

Constellation Energy Group, Inc.

750 East Pratt Street

5th Floor

Baltimore, MD 21202

410-783-3244

After each grant is made,
participants will be furnished with information about the amount of the
grant.  Participants have access to information
about their outstanding grants.

In general, grants
subject to restrictions are taxable to participants when the restrictions
lapse, and deductible by Constellation Energy at such time, based on the fair
market value of the awards when the restrictions lapse.  Grants not subject to restrictions are
taxable/deductible at fair market value on the grant date.  Additionally, options are subject to other
special tax provisions.

 19

 

FORM OF SERVICE-BASED RESTRICTED STOCK AWARD
AGREEMENT

[DATE]

Recipient
Name

Recipient Title

Company

Company Address

City, State Zip Code

RE: 
Service-Based Restricted Stock Award

Dear Recipient:

Effective
date, The Board of Directors
Compensation Committee, (The Committee), granted you [#]
service-based restricted shares of CEG Common Stock (the “Award”) pursuant to
Section 7 of the Constellation Energy Group, Inc. Management Long—Term
Incentive Plan (the “Plan”).  In addition
to other provisions of the Plan (a copy of which is provided to you with this
letter), your Award is subject to the following conditions:

1.                    The
Plan restriction period for these shares expires as show on the restriction
lapse dates in the table below:

	
  # Shares

  Granted

  	
   

  	
  Share

  Grant

  Date

  	
   

  	
  Restriction

  Period

  	
   

  	
  Restriction

  Lapse

  Date

  	
   

  	
  Aggregate

  Shares

  Lapsed

  
	
  [#]

  	
   

  	
  mm/dd/yy

  	
   

  	
  [one
  to five

  years]

  	
   

  	
  [one
  to five

  years after

  Share Grant

  Date]

  	
   

  	
  [#]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

2.                    The
Plan requires that as a condition to receiving your Award, you waive in writing
the right to make an election under Section 83(b) of the Internal Revenue Code
of 1986 with respect to your Award (see Section 7D of the Plan).  Your execution of this letter will constitute
your waiver to make such election under Section 83(b).  This waiver means that you will not have the
option of electing to be taxed on the restricted shares at the time of the
grant.  Instead, you will be taxed on the
restricted shares at the time the Plan restrictions are removed (see Attachment
A).  This waiver allows the Company to
treat dividends paid to you during the period of the Plan restrictions as
compensation, thereby giving the Company a tax deduction for such amounts.

3.                    As provided in
the Plan, until the Plan restriction period expires, you may not sell,
transfer, pledge or hypothecate the Award shares.  CEG will hold the shares for safekeeping
until the restriction lapse, unless you let us know that you want a stock
certificate for the Award.  If you prefer
a certificate, it will be issued in your name with a legend to the effect that
you may not sell, transfer, pledge, or hypothecate the Award shares and that
the shares are subject to certain conditions under the Plan.

4.                    If
you contemplate the sale or transfer (for example to a family member) of any
shares after the restriction period expires, you should contact the SEC-related
persons specified below for advice on the 

 20
 

 

timing of any sale
or transfer and any reporting obligations you may have.

5.                    In the event of Retirement, Disability (each
as defined in the Plan) or death before the Award shares vest, a prorated
portion of the shares will vest based on service after the Grant Date (see
Table).  In the event of employment
Termination (as defined in the Plan) for any other reason, any unvested Award
shares will be forfeited.

6.                    Awards are not eligible compensation for
benefit purposes.

7.                    Neither this Agreement nor the Award
constitutes a contract of employment between Constellation Energy or any
Subsidiary and you, and neither will be deemed to be consideration for, or a
condition of, your continued employment.

8.                    The Award is granted pursuant to the terms of
the Plan, the terms of which are incorporated in this Agreement by
reference.  The Award will in all
respects be interpreted in accordance with the Plan.  All capitalized terms, which are not
otherwise defined in this Agreement, will have the meaning specified in the
Plan.  The Plan Administrator will
interpret and construe the Plan and this agreement, and its interpretations and
determinations will be conclusive and binding on the parties and any other
person claiming an interest with respect to any issue arising under this
Agreement.

9.                    The provisions of this Agreement are
severable.  If any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions will nevertheless be binding and enforceable.

Please
read the Plan carefully as it contains many other provisions relating to your
Award.  If you have any questions, please
do not hesitate to call:

	
  General

  	
   

  	
  SEC-related

  	
   

  	
  Tax-related

  
	
  [NAME]

  	
   

  	
  [NAME]

  	
   

  	
  [NAME]

  
	
  [PHONE NUMBER]

  	
   

  	
  [PHONE NUMBER]

  	
   

  	
  [PHONE NUMBER]

  

 

Please
sign the enclosed copy of this letter and return it in the envelope provided.

Sincerely,

 

[NAME]

[TITLE, DEPARTMENT]

 

I have read the
Plan and this letter and agree to the terms and conditions contained in each
regarding my Award.

 

	
  

  	
   

  	
   

  	
   

  
	
  Signature of Recipient

  	
  Date

  

 

 21
 

 

ATTACHMENT A

CONSTELLATION ENERGY GROUP, INC.

INCOME TAX CONSEQUENCES TO PARTICIPANTS

FOR SERVICE-BASED RESTRICTED STOCK AWARDS

Set
forth is a brief overview of certain income tax consequences associated with
your Service-Based Restricted Stock Award (“the Award”).

Stock

Because
the Plan places certain restrictions on the Award which could lead to
forfeiture of the shares prior to lifting the Plan restrictions and because you
have agreed to waive the Section 83(b) election(1), the value of the restricted
stock is not taxed to you when the initial grant is made.  Rather, the stock is taxable to you at the
time the restrictions are removed.  The
amount subject to income tax is the fair market value of the stock on the day
that the Plan restrictions are removed. 
This amount is treated as compensation subject to withholding of income
taxes, Medicare taxes and, if applicable, Social Security taxes.  You are not taxed on the value of any stock
forfeited.

For
purposes of determining the gain or loss on any sale of the stock received
pursuant to this Award, your basis in the stock is the amount that you included
in taxable income when the Plan restrictions were removed.  Your tax holding period, for purposes of
determining whether a gain or loss on a sale is long-term or short-term, begins
on the day after the day that the Plan restrictions were removed.

Dividends

The
dividends during the restriction period will be automatically reinvested in
additional shares of company common stock. 
These shares will be subject to the same restrictions as the originally
awarded shares and will vest accordingly. 
For tax purposes, the dividends on the restricted stock will not be
taxable as dividend income.  Rather, the
accumulated shares of stock will be taxable to you in the same manner as stated
above.

After
the Plan restrictions on the stock are removed, the dividends are treated as
regular dividend income (generally not subject to tax withholding).

Tax Planning

You
may wish to consult your tax advisor in the year the restrictions are lifted
from the Award if you have questions regarding the impact of the Award on your
tax withholding or if you have questions about the applicable capital gains
holding period and rates for this Award.

(1) The Plan requires
that as a condition to receiving a Restricted Stock Award, you must waive in
writing the right to make an election under Section 83(b) of the Internal
Revenue Code of 1986 with respect to your Award (see Section 7 D of the
Plan).  This waiver means that you will
not have the option of electing to be taxed on the restricted shares at the
time of grant.  Instead, you will be
taxed on the restricted shares at the time the Plan restrictions are
removed.  This allows the Company to
treat dividends paid during the period of Plan restrictions as compensation,
thereby giving the Company a tax deduction for such amounts.

 22
 

 

FORM OF PERFORMANCE UNIT AGREEMENT

[date]

TO: «First» «MI»
«Last»

Effective [Date], as part of the [3 CALENDAR YEAR PERFORMANCE PERIOD]
Long-Term Incentive Program, you were granted [#]
performance units (the “Units”) under the Constellation Energy Group, Inc.
Management Long—Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan,
your award is subject to the conditions set forth in this document.

	
  Target

  Grant

  (# Units)

  	
   

  	
  Grant

  Date

  	
   

  	
  Performance

  Period

  	
   

  	
  Vesting Date

  
	
  [#]

  	
   

  	
  [MM/DD/YY]

  	
   

  	
  [3-Year
  Period]

  	
   

  	
  [End
  of 3-

  Year Period]

  

 

Under current tax
law, you are not subject to tax on your Units until the Vesting Date.

1.               Each Unit is worth
$1. The final award payout on the Vesting Date will be based on Constellation
Energy Group’s relative Total Shareholder Return (“TSR”) performance over the
Performance Period as set forth below. TSR is defined as the stock price change
from [BEGINNING TO END OF 3 CALENDAR YEAR PERFORMANCE
PERIOD] and dividends during that period that are reinvested on
the ex-dividend date (date stock trades without its dividend) at the closing
price on that date.

The Plan Administrator will determine the award payout
soon after the conclusion of the Performance Period. The performance measures
used to determine the award payout are as follows:

·                  Primary
Measure: Constellation Energy TSR for the Performance Period is compared to
the TSR performance results of large and mid-size investment grade companies
within the Dow Jones Electric Utilities Index (DJEUI) on [END OF
PERFORMANCE PERIOD].  In the
DJEUI, companies that are rated ‘non-investment grade’ by both Moody’s and
S&P rating agencies on [END OF PERFORMANCE
PERIOD] are excluded.

·                  Secondary
Measure: If Constellation Energy’s percentile rank for the Primary Measure
is below the [   ]
percentile, then a comparison will be made to the TSR performance results of
investment grade companies in the S&P 500 Index on [END OF
PERFORMANCE PERIOD].

	
  

  	
   

  	
   

  	
   

  	
  Primary

  Measure

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  TSR v. DJEUI

  Large & Mid-

  Cap

  Investment

  Grade

  Companies

  	
   

  	
  Secondary

  Measure

  TSR v. S&P

  500 Index

  Comparison

  Group

  	
   

  
	
  Performance

  Level

  	
   

  	
  Total Shareholder

  Return

  	
   

  	
  Payout vs.

  Target

  	
   

  	
  Payout vs.

  Target

  	
   

  
	
  <Threshold

  	
   

  	
  <[  ] Percentile

  	
   

  	
  [  ]

  	
  %

  	
  [  ]

  	
  %

  
	
  Threshold

  	
   

  	
  [  ] Percentile

  	
   

  	
  [  ]

  	
  %

  	
  [  ]

  	
  %

  
	
  Target

  	
   

  	
  [  ] Percentile

  	
   

  	
  [  ]

  	
  %

  	
  [  ]

  	
  %

  
	
  Stretch

  	
   

  	
  [  ] Percentile

  	
   

  	
  [  ]

  	
  %

  	
  [  ]

  	
  %

  

 

Payout levels interpolated between points.

Secondary measure applies
only if performance vs. primary measure is below threshold.

 23
 

 

2.                                       The
award payout amount is determined by multiplying the “Payout vs. Target”
percentage by the number of Units (worth $1 each) that you
were granted.  This award payout amount
may be settled, in the sole discretion of the Plan Administrator, in either
restricted or unrestricted stock or stock units, or cash (or any combination
thereof).

3.                                       Under
current tax law, you will be subject to tax on the Vesting Date on the award
payout amount.  The Company will be required
to withhold applicable taxes at such time. 
If the award payout is settled in stock or stock units, the Company will
withhold the required number of shares or units to pay these taxes.

4.                                       As
provided in the Plan, until the Vesting Date, you may not sell, transfer, or
pledge the Units.

5.                                       Awards
are not eligible compensation for benefit purposes.

6.                                       Neither
this Agreement nor the Award constitutes a contract of employment between
Constellation Energy or any Subsidiary and you, and neither will be deemed to
be consideration for, or a condition of, your continued employment.

7.                                       The
Award is granted pursuant to the terms of the Plan, the terms of which are
incorporated in this Agreement by reference. 
The Award will in all respects be interpreted in accordance with the
Plan.  All capitalized terms, which are
not otherwise defined in this Agreement, will have the meaning specified in the
Plan.  The Plan Administrator will
interpret and construe the Plan and this agreement, and its interpretations and
determinations will be conclusive and binding on the parties and any other
person claiming an interest with respect to any issue arising under this
Agreement.

8.                                       The
provisions of this Agreement are severable. 
If any one or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions will nevertheless
be binding and enforceable.

Please read the
Plan carefully as it contains many other provisions relating to your
award.  If you have any questions, please
do not hesitate to call:

 

	
  General

  	
   

  	
  SEC-related

  	
   

  	
  Tax-related

  
	
  [NAME]

  	
   

  	
  [NAME]

  	
   

  	
  [NAME]

  
	
  [PHONE NUMBER]

  	
   

  	
  [PHONE NUMBER]

  	
   

  	
  [PHONE NUMBER]

  

 

Please
sign this letter and return it in the envelope provided, and keep a copy for
your records.

Sincerely,

 

[NAME]

[TITLE, DEPARTMENT]

 

I have read the
Plan and this letter and agree to the terms and conditions contained in each
regarding my Award.

 

	
  

  	
   

  	
   

  	
   

  
	
  Signature of «First» «MI» «Last»

  	
  DATE

  	
   

  

 

 24
 

 

FORM OF STOCK UNIT AWARD WITH SALE RESTRICTION

AGREEMENT

[DATE]

Recipient Name

Recipient Title

Company

Company Address

City, State Zip Code

RE:  Stock Unit Award with Sale Restriction

Dear Recipient:

Effective date, as
part of your [PERFORMANCE YEAR] annual
incentive and in recognition of your performance during [PERFORMANCE
YEAR], you were granted [#]
restricted Constellation Energy Group, Inc. (the “Company”) common stock units
with sale restrictions (“Deferred Shares”) under the Constellation Energy
Group, Inc. Management Long-Term Incentive Plan (the “Plan”).  In addition to other provisions of the Plan,
your award is subject to the following conditions:

1.                    Each Deferred Share entitles you to receive
on the Restriction Lapse Date (set forth below) one share of Constellation
Energy Group common stock (“Common Stock”). 
Under current tax law, you are not subject to tax on your Deferred
Shares until the Restriction Lapse Date (see paragraph 4 below).

2.                    During the Restriction Period (set forth
below), on any date that Constellation Energy Group pays dividends with respect
to the Common Stock, the Company shall credit you with a number of Deferred
Shares equal to (i) the number of your Deferred Shares on the dividend record
date times (ii) the dividend rate per share, divided by (iii) the per share
reinvestment price.  These dividend-based
additional Deferred Shares shall be subject to the same rules and restrictions
as Deferred Shares originally granted to you.

3.                    The Restriction Period for your Deferred
Shares expires on the Restriction Lapse Date as shown in the table below:

	
  # Deferred

  Shares Granted

  	
   

  	
  Deferred Share

  Grant

  Date

  	
   

  	
  

  Restriction

  Period

  	
   

  	
  Restriction

  LapseDate

  
	
  [#]

  	
   

  	
  [MM/DD/YY]

  	
   

  	
  [5
  years]

  	
   

  	
  [5
  years after

  Grant Date]

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Your
Deferred Shares are fully and immediately vested, however, during the
Restriction Period, you may not sell, transfer, or pledge the Deferred
Shares.  During the Restriction Period,
you will have no voting rights with respect to the Deferred Shares.  The Restriction Period remains in effect irrespective
of your employment status.

 25
 

 

4.                    Following the Restriction Lapse Date, the
Company shall cause to be issued to you a certificate for shares of Common
Stock equal to the number of your Deferred Shares (including dividend-based
additional Deferred Shares).  Under
current tax law, you will be subject to tax on the Restriction Lapse Date based
on an amount equal to the number of shares of Common Stock issued to you times
the Fair Market Value per share (i.e., the average of the high and low price of
the Common Stock on the Restriction Lapse Date).  The Company will be required to withhold
applicable taxes at such time, and will withhold the required number of shares
to pay these taxes.  The total shares you
receive will be rounded to the nearest whole share.  You should consult your tax advisor regarding
any tax issues.

5.                    Awards are not eligible compensation for
benefit purposes.

6.                    Neither this Agreement nor the Award
constitutes a contract of employment between Constellation Energy or any
Subsidiary and you, and neither will be deemed to be consideration for, or a
condition of, your continued employment.

7.                    The Award is granted pursuant to the terms of
the Plan, the terms of which are incorporated in this Agreement by
reference.  The Award will in all respects
be interpreted in accordance with the Plan. 
All capitalized terms, which are not otherwise defined in this
Agreement, will have the meaning specified in the Plan.  The Plan Administrator will interpret and
construe the Plan and this agreement, and its interpretations and
determinations will be conclusive and binding on the parties and any other
person claiming an interest with respect to any issue arising under this
Agreement.

8.                    The provisions of this Agreement are
severable.  If any one or more provisions
are determined to be illegal or otherwise unenforceable, in whole or in part,
the remaining provisions will nevertheless be binding and enforceable.

Please read the Plan carefully as it contains many
other provisions relating to your award. 
If you have any questions, please do not hesitate to call:

	
  General

  	
   

  	
  SEC-related

  	
   

  	
  Tax-related

  
	
  [NAME]

  	
   

  	
  [NAME]

  	
   

  	
  [NAME]

  
	
  [PHONE
  NUMBER]

  	
   

  	
  [PHONE NUMBER]

  	
   

  	
  [PHONE NUMBER]

  

 

Please sign the enclosed copy of this letter and return it in the envelope
provided.

Sincerely,

 

[NAME]

[TITLE, DEPARTMENT]

I have read the Plan and this letter and agree to the terms and
conditions contained in each regarding my Award.

 

	
  

  	
   

  	
   

  	
   

  
	
  Signature of Recipient

  	
  Date

  	
   

  

 

 26

 

FORM OF

STOCK OPTION AGREEMENT

This
Stock Option Agreement (“Agreement”) is subject to the terms and conditions of
the Constellation Energy Group, Inc. Management Long-Term Incentive Plan (the “Plan”).  The «Administrator» Constellation Energy
Group, Inc. (the “Plan Administrator”) has authorized the option grant under
this Agreement by and between Participant (designated below) and Constellation
Energy Group, Inc. (“Constellation Energy”).

1. Grant
of Option.

(a)
The “Participant” is «First» «Middle» «Last».

(b)
The date of the grant is «GrantDate» (“Grant
Date”).

(c)
The number of shares subject to the option (“Option Shares”) are «Grant» shares of Constellation Energy common stock (“Stock”).

(d)
The exercise price is [OptionPrice = fair market
value of stock on grant date] per share of Stock (“Exercise Price”).

This
Agreement specifies the terms of the option (“Option”) granted to Participant
to purchase the Option Shares at the Exercise Price set forth above. The Option
is not intended to constitute an “incentive
stock option” as that term is used in Internal Revenue Code section 422.  The “Option Period” is the period during
which the Option is exercisable as provided in this Agreement.

2.
Installment Exercise.

Subject
to the terms of this Agreement, the Option will be exercisable in installments
according to the following schedule (each a “Vesting Date”):

	
  INSTALLMENT

  	
   

  	
  VESTING DATE

  APPLICABLE TO

  INSTALLMENT

  
	
  [1/3 of
  Option Shares] Options

  	
   

  	
  [One
  year after Grant Date]

  
	
  [1/3 of
  Option Shares] Options

  	
   

  	
  [Two years
  after Grant Date]

  
	
  [1/3 of
  Option Shares] Options

  	
   

  	
  [Three
  years after Grant Date]

  

 

3.
Termination of Option.

(a)           Except as provided in paragraph 3(b)
below, the Option will terminate upon the earlier to occur of: (1) when all
Option Shares have been exercised; or (2) ten (10) years from the Grant Date (“Expiration
Date”).

(b)           If Participant ceases employment, the
Option will terminate as to any unvested Option Shares on the effective date of
Participant’s employment Termination (as defined in the Plan) and as to vested
Option Shares 90 days after such effective date; provided that if Participant
ceases employment 

 27
 

 

because of
Participant’s Retirement, Disability (each as defined in the Plan), or death,
the Option will terminate as to any unvested Option Shares on the effective
date of the Retirement, Disability or death, and as to vested Option Shares,
the Option will remain exercisable until the earlier of 60 months after such
effective date or the Expiration Date.

(c)           In the event of Participant’s death
during the Option Period, vested Option Shares may be exercised by Participant’s
legal representative(s), or by other person(s) authorized under Participant’s
will.  Alternatively, if Participant
fails to make testamentary disposition of the Option or dies intestate, such
vested Option Shares may be exercised by persons(s) entitled to receive the
Option Shares under the applicable laws of descent and distribution.

(d)           A transfer of Participant’s
employment between Constellation Energy and any Subsidiary of Constellation
Energy, or between Subsidiaries of Constellation Energy, will not be considered
an employment Termination.

4.
Exercise of Option.

(a)           Subject to this
Agreement and the Plan, the Option may be exercised in whole or in part by the
method specified by the Plan Administrator from time to time or by contacting [NAME] at [PHONE NUMBER(S)].

(b)           On or before the exercise date
specified pursuant to paragraph 4(a), Participant must fully pay the Exercise
Price and the tax withholding obligation for the Option Shares exercised in
U.S. dollars by cash or by check payable to Constellation Energy Group,
Inc.  All or a portion of the Exercise
Price and tax withholding obligation may also be paid by Participant: (i) subject
to the terms of paragraph 4(c) below, by delivery of shares of Stock owned by
Participant and acceptable to the Plan Administrator having an aggregate Fair
Market Value (as defined in paragraph 6 below) on the date of exercise that is
equal to the amount of cash that would otherwise be required; or (ii) by
authorizing a third party to sell the Option Shares (or a sufficient portion of
the Option Shares), and immediately remit to Constellation Energy the Exercise
Price and any tax withholding resulting from such exercise.  Further, tax withholding up to the minimum
required withholding rate (but not in excess of that rate) may also be
satisfied through a holdback by Constellation Energy of some of the Option
Shares that would otherwise be deliverable to Participant by reason of the
Option exercise.  The Option will cease
to be exercisable, as to the portion exercised, when Participant purchases the
Stock to which the exercised portion of the Option relates.

(c)           Other shares of Stock owned by
Participant may be delivered to satisfy the Exercise Price, or to satisfy
Participant’s tax withholding obligation above the minimum withholding rate,
only if the shares have been held by Participant for at least six months before
delivery, except that there shall be no holding period imposed for shares purchased
by Participant for cash on the open market. 
Use of previously-owned shares shall be effected by actual delivery of
the Stock certificates to Constellation Energy, and by completing an affidavit
available from Constellation Energy affirming that Participant owns the
necessary shares and that any applicable holding period has been satisfied.

(d)           Participant is required to comply
with Constellation Energy’s Insider Trading Policy at all times, including in
connection with exercise of the Option. The Option may not be exercised by
Participant during any blackout or prohibited trading period established by
Constellation Energy or applicable to Participant, nor shall the Option be
exercisable if and to the extent Constellation Energy determines that such exercise
would violate applicable state or Federal securities laws or the rules and
regulations of any securities exchange on which the Stock is traded.  If Constellation Energy makes such a
determination, it will use all reasonable efforts to comply with such laws,
rules or regulations.  In 

 28
 

 

making any such
determinations, Constellation Energy may rely on the opinion of counsel for
Constellation Energy.

(e)           As soon as practicable after the
exercise date, Constellation Energy will deliver to Participant a Stock
certificate or certificates (or other evidence of ownership) for the purchased
Option Shares.

5.  Tax Withholding.

Constellation
Energy will have the right to withhold any applicable federal, state or local
taxes, deductions or withholdings due with respect to the Option or its
exercise in such form and manner as provided in the Plan.

6. Fair
Market Value.

The “Fair
Market Value” of a share of Stock is the average of the highest and lowest sale
price per share of Stock on the New York Stock Exchange-Composite Transactions
on the applicable date of reference, or if there are no sales on such date,
then the average of such highest and lowest sale price on the last previous day
on which sales are reported.

7. No
Rights of Stockholders.

Participant
does not have any of the rights and privileges of a stockholder of
Constellation Energy with respect to any shares of Stock purchasable or
issuable upon the exercise of the Option, in whole or in part, before the date
of exercise and purchase of the Option Shares.

8.
Non-Transferability of Option.

The
Option is not transferable, except for a transfer to Participant’s family
member or to a trust established for the benefit of Participant’s family
members which has been approved by the Plan Administrator as provided in the
Plan, or in case of Participant’s death, by will or the laws of descent and
distribution, nor shall the Option be subject to attachment, execution or other
similar process.  During Participant’s
lifetime, the Option is exercisable only by Participant, any guardian or legal
representative of Participant, or a family member or trustee of a trust
established for the benefit of Participant’s family members to whom the Option
has been transferred in accordance with the Plan.  In the event of (a) any attempt by
Participant to alienate, assign, pledge, hypothecate or otherwise dispose of
the Option, except as provided in this Agreement, or (b) the levy of any
attachment, execution or similar process upon the rights or interest conferred
under this Agreement, Constellation Energy may terminate the Option by notice
to Participant and it will become null and void.

9.
Employment Not Affected.

Neither
this Agreement nor the grant of the Option constitutes a contract of employment
between Constellation Energy or any Subsidiary and Participant, and neither
will be deemed to be consideration for, or a condition of, continued employment
of Participant. Awards are not eligible compensation for benefit purposes.

 29
 

 

10.
Incorporation of Plan by Reference.

The
Option is granted pursuant to the terms of the Plan, the terms of which are
incorporated in this Agreement by reference. 
The Option will in all respects be interpreted in accordance with the
Plan.  All capitalized terms, which are
not otherwise defined in this Agreement, will have the meaning specified in the
Plan.  The Plan Administrator will
interpret and construe the Plan and this Agreement, and its interpretations and
determinations will be conclusive and binding on the parties and any other
person claiming an interest with respect to any issue arising under this
Agreement.

11.  Severability.

The
provisions of this Agreement are severable. 
If any one or more provisions are determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions will nevertheless
be binding and enforceable.

IN WITNESS
WHEREOF, Constellation Energy Group, Inc. and Participant have executed this
Stock Option Agreement effective as of the Grant Date.

	
  Constellation Energy Group,
  Inc

  	
  ACCEPTED AND AGREED TO:

  
	
   

  	
   

  
	
   

  	
   

  
	
  [NAME]

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  «First» «Middle» «Last»       

  	
   

  
	
  [TITLE,
  DEPARTMENT]

  	
   

  

 

 30Exhibit 10.69

EXECUTION VERSION

EXCLUSIVE LICENSE AGREEMENT

This EXCLUSIVE LICENSE AGREEMENT (this “Agreement”) is made and entered into as of August 8, 2006
(the “Agreement Date”), by and
between DTS, Inc., a Delaware corporation (“DTS”),
and Avica Technology Corporation, a California corporation (“Avica”).

1              DEFINITIONS

All defined or abbreviated terms in this Agreement
have the meaning assigned to them in this Agreement and will apply both to
their singular and plural forms, as applicable. 
“H/herein,” “hereof” and “hereunder” or
similar expressions refer to this Agreement. 
All references to “Section”
refer to sections in this Agreement, and all references to “Exhibit” are to Exhibits A, B, and C
attached and incorporated hereto.  Except
where expressly identified, all references to “days”
are to calendar days.  DTS and Avica are
individually sometimes referred to in this Agreement as a “party” and collectively as the “parties.”

1.1          “Affiliate” means, with respect
to any person, any person that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
such person.

1.2          “Avica Products” means all of
Avica’s product lines in existence, and any other products or technologies
under development by or on behalf of Avica, as of the Closing Date, including ***.

1.3          “business day” (whether such term
is capitalized or not) means any day other than Saturday, Sunday or a legal
holiday that banks located in Los Angeles, California are closed for business.

1.4          “Confidential Information” means with respect to a party hereto (the “Disclosing Party”), collectively:  (i) all technical, financial and/or business
information of any kind whatsoever, including all data, compilations,
blueprints, plans, audio and/or video recordings and/or devices, information on
computer disks, software, source code, object code, tapes, printouts and other
printed, typewritten or handwritten documents, specifications, systems,
schemas, methods (including delivery, storage, receipt, transmission,
presentation and manufacture of audio, video, informational or other data or
content), strategies, business or marketing development plans, customer lists,
research projections, processes, techniques, designs, sequences, components,
programs, technology, ideas, know-how, improvements, inventions (whether or not
patentable or copyrightable), information about operations and maintenance,
trade secrets, formulae, models, patent disclosures, information regarding the
skills and compensation of the Disclosing Party’s employees, information
concerning the actual or anticipated business, research or development of the
Disclosing Party or its actual or potential customers or partners, information
which is or has been generated or received in confidence by or for the
Disclosing Party by or from any person; (ii) any and all tangible and
intangible embodiments thereof of any kind whatsoever including all
compositions, machinery, apparatus, records, reports, drawings, copyright
applications, patent applications, documents, samples, prototypes, models,
products and the like; and (iii) any extensions or derivatives thereof of any
kind whatsoever.  Notwithstanding the foregoing,
Confidential Information does not include information that the Recipient
proves:  (a) is or becomes generally
known to the public through no fault or breach of this Agreement by the
Recipient; (b) is known to the Recipient at the time of disclosure without an
obligation of confidentiality; (c) is entirely independently developed by the

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 

Recipient without any access or reference to or use of the Disclosing
Party’s Confidential Information; (d) the Recipient rightfully obtains from a
third party without restriction on use or disclosure; or (e) is
disclosed publicly with the prior written approval of the Disclosing
Party.  Information shall not be deemed
to be in the public domain solely as a result of the individual elements being
separately found in the public domain.

1.5          ***

1.6          “Derivative Work” means a work that is based on or derived from
the Licensed Products or Documentation, including any improvements,
developments, alterations, derivatives, updates, revisions, enhancements,
modifications, translations, abridgments, condensations, expansions or any
other form in which a Licensed Product or the Documentation may be recast,
transformed or adapted.  For purposes of
this Agreement, a “Derivative Work”
also includes any compilation that incorporates a Licensed Product or the
Documentation.

1.7          “Documentation” means all documentation relating to the
Licensed Products provided by Avica to DTS.

1.8          “Encumbrance” means any mortgage,
pledge, security interest, lien, option, charge, claim, covenant, condition,
restriction, encumbrance or any third-party claim of any kind or nature
whatsoever.

1.9          “Engineering Tools” means all product
and sub-system architectural designs, electrical schematics, printed circuit
board designs, mechanical design drawings, fabrication drawings, binary images
and source files for all programmable parts, software tools, including those
for compiling programmable part source files, test jigs (including electrical,
mechanical and software design files used to create the test jigs), test
procedures, test software (including source files, build scripts, tools for
building the test software), product software in the form of disk image files,
Source Code, build scripts, all software tools invoked by the build scripts,
Source Code and build scripts for any software or hardware tools that were
developed by or on behalf of Avica that directly or indirectly relate to the
Avica Products.

1.10        “Errors” means any reproducible error, omission or
defect in a Licensed Product that creates a material adverse affect to the
Licensed Product and/or the ability to use the Licensed Product as intended.

1.11        “Field” means any fields of use other than military
applications.

1.12        “GAAP” means United States
generally accepted accounting principles consistently applied.

1.13        “Intellectual Property
Rights” or “IP” means
any and all patents (and reissues, divisionals, continuations, continuations-in
part, and extensions thereof), patent rights (including patent applications,
renewals and disclosures), business processes, manufacturing or development
plans, trademarks, trade names, service marks, service names, goodwill, trade
secrets, know-how, designs, mask works, copyrights, moral rights, database
rights, and any other form of proprietary protection, or any applications for
the foregoing, which arise or are enforceable under the laws of the U.S. or any
other jurisdiction or any bi-lateral or multi-lateral treaty regime.

1.14        “Licensed IP” means the Owned IP
and Third Party IP.

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 2
 

 

1.15        “Licensed Products” means one or more
products, the development, improvement, manufacture, license, sale or any other
use of which by DTS or its sublicensees, or the intended use of which
incorporate or use Licensed IP or which are covered in whole or in part by a
valid claim under the patents and patent applications included in the Licensed
IP.  For purposes of this Agreement, “Licensed Products” includes the Avica
Products and the Engineering Tools, including any or all portions or components
thereof.

1.16        “Licensed Services” means the
development or performance of one or more services by DTS or a sublicensee for
or on behalf of DTS or a third party, which development or performance
incorporates or uses Licensed IP or which is covered in whole or in part by a
valid claim under the patents and patent applications included in the Licensed
IP.

1.17        “Object Code” means software assembled or compiled in
magnetic or electronic binary form on software media, which are readable and
usable by machines, but not generally readable by humans without reverse
assembly, reverse compiling or reverse engineering.

1.18        “Operative” means substantially conforming to the
Specifications and otherwise performing substantially in accordance with the
applicable performance standards and functioning without Errors.

1.19        “Option Agreement” means that certain
Option Agreement, entered into by the parties as of the date hereof.

1.20        “Owned IP” means all
Intellectual Property Rights owned by Avica, as set forth on Exhibit A.

1.21        “Publicly Available
Software” means each of (a)
any software that contains, or is derived in any manner (in whole or in part)
from, any software that is distributed as open source software (e.g., Linux) or
through similar licensing or distribution models; and (b) any software that
requires as a condition of use, modification and/or distribution of such
software that such software or other software incorporated into, derived from
or distributed with such software (i) be disclosed or distributed in source
code form; (ii) be licensed for the purpose of making derivative works; or (iii) be
redistributable at no charge.  Publicly
Available Software includes software licensed or distributed under any of the
following licenses or distribution models, or licenses or distribution models
similar to any of the following, including: (A) GNU’s General Public License
(GPL) or Lesser/Library GPL (LGPL), (B) The Artistic License (e.g., PERL), (C)
the Mozilla Public License, (D) the Netscape Public License, (E) the Sun
Community Source License (SCSL), (F) the Sun Industry Source License (SISL),
and (G) the Apache Server license.

1.22        “Related Agreements”
means the Option Agreement, the Voting Agreement, the Escrow Agreement and all
other agreements entered into in connection therewith.

1.23        “Source Code” means software written in programming
languages, including all comments and procedural code, such as job control
language statements, in a form intelligible to trained programmers and capable
of being translated into Object Code for operation on computer equipment
through assembly or compiling, and, to the extent available, accompanied by
documentation, including flow charts, schematics, statements of principles of
operations, and architecture standards, describing the data flows, data
structures, and control logic of the software in sufficient detail to enable a
trained programmer through study of such documentation to maintain and/or
modify the software without undue experimentation.

 3
 

 

1.24        “Specifications” means the descriptions, functionality
requirements, features, performance criteria, attributes, technical
characteristics and components of the Licensed Products.

1.25        “Avica Stockholders” means the holders
of the shares of Avica’s Common Stock.

1.26        “Thirty Party IP” means all
Intellectual Property Rights licensed to Avica or any of its subsidiaries by a
third party pursuant to a Third Party License or Third Party Licenses that are
currently used in the conduct of Avica’s business (as conducted or as such
business is presently contemplated to be conducted) or are relevant to the
Field, as set forth on Exhibit A. 
For purposes of this Agreement, “Third
Party IP” includes the Publicly Available Software identified on Exhibit
A.

1.27        “Third Party License(s)” means all written
or verbal contracts, licenses and agreements to which Avica or any of its
subsidiaries is a party and pursuant to which a third party has licensed or
transferred any Third Party IP to Avica or any of its subsidiaries as of the
Agreement Date (excluding commercial off-the-shelf or shrink wrap licenses of
computer software), as set forth on Exhibit A.

1.28        “Transition Period”
means the period beginning on the Agreement Date and ending on the License
Closing Date.

1.29        “Territory” means worldwide.

1.30        “Voting Agreement” shall
have the meaning set forth in the Option Agreement.

2                                         DELIVERABLES

2.1          Delivery.  
Within five (5) days after the Agreement Date, Avica shall deliver to
DTS, at a minimum, the following to the extent within Avica’s possession or
reasonable control (individually and collectively, the “Deliverables”):

2.1.1        one (1) copy of the Source Code for each Avica Product in softcopy
form; 

2.1.2       one (1) copy of the Object Code for each Avica Product in softcopy
form;

2.1.3       one (1) copy of the Documentation in softcopy form; 

2.1.4       a complete disk image of each build system
needed to build each Avica Product, including the complete Source Code control
database, all current commercial build tools, all custom-built software tools
and complete build scripts (provided that DTS will be responsible for obtaining
necessary licenses for all commercial off-the-shelf or shrink wrap computer
software, which shall be identified in writing by Avica within five (5) days
after the Agreement Date);

2.1.5       complete design and manufacturing
documentation for all printed circuit boards used in each Avica Product,
including a complete disk image of the circuit board design system, including
all current versions of schematic and printed circuit board source files and
current software tools for making Gerber files and drill drawings for each
Avica Product;

2.1.6       complete design and manufacturing
documentation for all mechanical components for each Avica Product, including a
complete disk image of the mechanical design system, including all current
versions mechanical drawings and current software tools, including all assembly
and fabrication drawings and packaging designs;

 4
 

 

2.1.7       a complete disk image of the Avica Product
documentation system, including complete sources for all manuals of any kind;
and

2.1.8       full manufacturing records, including
detailed purchasing information for every build cycle for each Avica Product,
including full details for any sub-contracted manufacturing, including
mechanical parts and printed circuit boards, as well as sub-system suppliers,
printers and packaging suppliers.

2.2          Acceptance.  DTS shall have a period of thirty (30) days
from the date of delivery of the Deliverables as provided in Section 2.1
for inspection and testing (the “Acceptance
Testing”) of such Deliverables to ascertain that
such Deliverables (i) are Operative; and (ii) substantially conform to the
Documentation (the “Acceptance Criteria”).  At the conclusion of Acceptance Testing, DTS
will inform Avica in writing whether the Source Code is accepted or rejected
for failure to satisfy the Acceptance Criteria. 
If the Source Code is properly rejected, Avica, at its own expense and
at no cost to DTS, will use the remaining time during the Transition Period to
satisfy the Acceptance Criteria and re-deliver the Source Code to DTS.  

2.3          Engineering Tool Updates.  During the Transition Period, Avica shall
provide DTS, at its own expense and at no cost to DTS, with any updates of the
Engineering Tools to the extent such updates are within Avica’s possession or
reasonable control.  

3              LICENSES

3.1          Licensed Products.  Subject to the terms and conditions of this Agreement, and effective as
of the License Closing, Avica hereby grants to DTS an exclusive (even as to
Avica, but subject to the Permitted Encumbrances), irrevocable, fully paid-up,
royalty-free, license and right during the License Term to (the “Exclusive License”):

3.1.1       develop, produce or have produced Derivative
Works, make, have made, use, sell, offer for sale, have sold, import, export,
reproduce, perform, display, distribute, have distributed and otherwise exploit
Licensed Products and Licensed Services within the Field in the Territory; and

3.1.2       allow others to exercise any such rights on
behalf of DTS, including the right to sublicense any and all of the rights in Sections
3.1.1 to a third party; provided, however, that DTS shall not, without
Avica’s prior written consent, have the right to enter into any sublicense(s)
(whether in a single transaction or pursuant to a series of transactions) that
would have the effect of transferring all or substantially all of DTS’ rights
and obligations under the Exclusive License with respect to commercialization
of the Licensed IP to one or more unaffiliated third parties.

3.2          Documentation.  Subject to the terms and conditions of this Agreement, Avica hereby
grants to DTS an exclusive (even as to Avica, but subject to the Permitted
Encumbrances), irrevocable, fully paid-up, royalty-free, license and right
during the License Term to:

3.2.1        use and reproduce the Documentation to support the license rights
granted in Section 3.1;

3.2.2       modify the Documentation to produce or have produced Derivative Works
thereof; and

3.2.3       distribute the Documentation and any Derivative Works thereof directly
or through DTS’ channels of distribution to end users in conjunction with the
marketing, sale, support and maintenance of the Licensed Products, Licensed
Services and/or DTS’ products and services.

 5
 

 

3.3          Exclusivity.  For
the avoidance of doubt, except as otherwise specifically stated herein, Avica
acknowledges and agrees that during the License Term, notwithstanding anything
to the contrary expressed or implied herein, Avica shall not, without DTS’
prior written consent, directly or indirectly create, develop, grant further
licenses, distribute, market, make, use, sell, import, export or otherwise
commercialize or make available any products in, for, or provide any services
to any third party in the Field.

3.4          End User License Agreements.  The end users’ use of the Licensed Products will be governed by and
subject to an end user license agreement, which will be reasonably similar to
the end user license agreements DTS generally uses for its own products or
services.

4                                         OWNERSHIP

4.1          Reservation of Rights.

4.1.1       Subject only to the licenses and rights specifically granted herein to
DTS, as between the parties, Avica and its licensors shall retain ownership of
all rights, title and interest in and to the Licensed IP, the Avica Products
and the Documentation, and all copies thereof.

4.1.2       Each party reserves all rights not expressly granted in this Agreement,
and no licenses are granted by either party to the other under this Agreement,
whether by implication, estoppel or otherwise, except as expressly set forth
herein.

4.2          Ownership of Derivative
Works.

4.2.1       Subject to the provisions in Section 4.1 and 16.7, DTS
shall have sole and exclusive ownership of all right, title and interest in and
to the Derivative Works of the Licensed Products or Documentation created or
developed by or on behalf of DTS, all copies thereof, and all modifications and
enhancements thereto (including ownership of all Intellectual Property Rights
pertaining thereto, but excluding ownership of any underlying Intellectual
Property Rights owned by Avica prior to the Agreement Date).  Upon DTS’ request, Avica shall assist DTS in
every reasonable way, including by executing appropriate documents, at DTS’
expense and request, to secure for DTS’ benefit all Intellectual Property
Rights in and to the Derivative Works (other than any underlying Intellectual
Property Rights owned by Avica prior to the Agreement Date).  If Avica is unable to fulfill its obligations
under this Section 4.2.1, Avica hereby constitutes and appoints DTS the
true and lawful attorney of Avica, with full power of substitution, in the name
of Avica, for the benefit of DTS to execute and deliver all such assignments,
assurances or other documents, and to take and do all such other actions and
things as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in or to the Derivative Works.

4.2.2       Notwithstanding anything herein to the contrary, DTS may choose to
develop or not to develop such Derivative Works at its sole option, and DTS is
not obligated to develop such Derivative Works.

4.3          Joint Intellectual Property
Rights.

4.3.1       DTS and Avica do not anticipate that any
jointly created or developed Intellectual Property Rights will arise as a
result of the relationship between the parties. 
Nevertheless, as the possibility of jointly created or developed
Intellectual Property Rights cannot be entirely ruled out, and in order to
avoid the formidable legal and business complications associated with joint
intellectual property ownership, the parties hereby allocate ownership of all
jointly created

 6
 

 

or developed Intellectual Property Rights
(the “Joint IPRs”) solely to
DTS.  Upon DTS’ request, Avica shall assist DTS in
every reasonable way, including by executing appropriate documents, at DTS’
expense and request, to secure for DTS’ benefit all Intellectual Property
Rights in and to the Joint IPRs.  If
Avica is unable to fulfill its obligations under this Section 4.3.1,
Avica hereby constitutes and appoints DTS the true and lawful attorney of
Avica, with full power of substitution, in the name of Avica, for the benefit
of DTS to execute and deliver all such assignments, assurances or other
documents, and to take and do all such other actions and things as may be
necessary or desirable to vest, perfect or confirm any and all right, title and
interest in or to the Joint IPRs.

4.3.2       For the avoidance of doubt, DTS does not license to Avica, and Avica
has, and shall have, no rights with respect to, any of DTS’ Intellectual
Property Rights, including Joint IPRs, under this Agreement.

4.4          Trademarks.

4.4.1       During the License Term, Avica hereby grants to DTS an exclusive (even
as to Avica, but subject to the Permitted Encumbrances), worldwide,
royalty-free and limited license and right to use the name, logos, trademarks
and service marks of Avica set forth on Exhibit B (“Marks”) solely in the Field in connection
with DTS’ rights and obligations under this Agreement.  DTS’ use of the Marks shall comply with
Avica’s trademark guidelines, as provided by Avica to DTS in writing from time
to time.  Subject only to the licenses
and rights specifically granted herein to DTS, DTS acknowledges that Avica owns
all Intellectual Property Rights in the Marks.

4.4.2       DTS agrees to use its commercially reasonable efforts to maintain
trademark registrations for the Marks in the jurisdictions identified on Exhibit
B (the “Key Marks”) for a period beginning
on the Agreement Date and ending on the third anniversary of the Agreement
Date; provided, however, that such obligation shall apply solely to the extent
that, in DTS’ reasonable judgment, such Key Marks do not infringe upon the
rights of any third party.  In the event
that DTS, in its sole discretion, determines not to maintain the trademark
registrations for the Key Marks in any of the jurisdictions identified on Exhibit
B following expiration of such three-year period, during the remainder of
the License Term following expiration of such three-year period, (i) DTS shall
provide written notification to Avica of such decision, and (ii) Avica shall
have the right to take any reasonable actions to maintain such registrations
that DTS does not maintain.

4.4.3       Avica, at DTS’ request and expense, shall during the License Term: (i)
execute all applications for trademark registrations, assignments or other
applicable documents and (ii) perform any other act reasonably necessary for
DTS to secure or maintain any and all of the Mark rights in any country in
which DTS is marketing a product or service in association with a Mark.

4.4.4       Subject to the other provisions of this Section 4.4, the parties
acknowledge and agree that DTS, in its sole discretion, is entitled to
reproduce, market, distribute, sell and sublicense the Licensed Products and
Licensed Services under DTS’ own name, trademarks or other designations of
origin.

5                                         DTS OBLIGATIONS

DTS agrees to provide training and support to its sales and marketing
personnel and representatives to enable them to market and distribute the
Licensed Products and Licensed Services in the Field during the License Term.

 7
 

 

6              AVICA OBLIGATIONS

6.1          Knowledge Transfer.  During the Transition Period, Avica shall begin the knowledge transfer
process relating to the Licensed IP, Avica Products and Documentation and shall
otherwise work cooperatively with DTS to prepare DTS to exploit the licenses
and rights granted herein.

6.2          Referrals.  During
the License Term, Avica shall refer to DTS all inquiries and prospects that
would be reasonably likely to be relevant to a transaction involving a Licensed
Product or Licensed Service in the Field.

6.3          Insurance. 
During the License Term, Avica shall obtain and maintain the following
insurance policies (to the extent applicable): 
(i) workers’ compensation; and (ii) fire, liability and other forms of
insurance as required under Third Party Licenses or other agreements relating
to the Licensed IP.  Avica shall be given
30 days to cure any breach of this Section 6.3, as long as such breach
is not a violation of Avica’s obligations to comply with applicable laws.

7                                         CONSIDERATION

7.1          Fees.  Subject to the terms and conditions of this Agreement, as consideration
for the Exclusive License, at the License Closing, DTS shall:

7.1.1       pay $500,000 in cash to Avica; and

7.1.2       deposit $4,500,000 into an escrow account (the “Liability
Escrow”) to be established with a third party escrow agent selected
by DTS (the “Escrow Agent”), subject to the
terms and conditions set forth in an escrow agreement to be entered into by
DTS, Avica and the Escrow Agent (the “Escrow Agreement”).

7.2          Liability Escrow.

7.2.1       Avica shall identify all of its liabilities on a schedule (the “Schedule of Liabilities”) in the Escrow Agreement, and
Avica shall represent and warrant to DTS that the liabilities listed on the
Schedule of Liabilities represent all liabilities of Avica as of the License
Closing.  The Schedule of Liabilities may
be amended from time to time by mutual written consent of the parties.  Upon execution of this Agreement, Avica shall
deliver to DTS a schedule of all of Avica’s liabilities as of the date hereof,
including the identity of each creditor and the total amount owed, together
with a certificate of the Chief Executive Officer of Avica certifying that such
Schedule of Liabilities is true, accurate and complete in all respects as of
Agreement Date.

7.2.2       Until all of the liabilities listed on the Schedule of Liabilities are satisfied
in full by Avica as described in the Escrow Agreement, the Liability Escrow
shall be used solely to satisfy such liabilities.  Only after the Escrow Agent has received an
executed release from each creditor listed on the Schedule of Liabilities pursuant
to the terms and conditions set forth in the Escrow Agreement and the
liabilities listed on the Schedule of Liabilities have been satisfied in full
as described in the Escrow Agreement, the Escrow Agent shall distribute to
Avica all funds that remain in the Liability Escrow.

7.3          Additional Consideration.  Within thirty (30) days of revenue
recognition (in accordance with GAAP) with respect to the sale by DTS of *** (provided
such revenue recognition has occurred within three years of the Agreement
Date), DTS will pay to Avica as follows:

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed separately
with the Commission.

 8
 

 

7.3.1       a one-time cash payment of $1,500,000 upon ***

7.3.2       an additional one-time cash payment of $1,000,000 upon ***; and

7.3.3       an additional one-time cash payment of $350,000 upon ***.

For the avoidance of doubt, in order for the amount specified in any of
Sections 7.3.1, 7.3.2 or 7.3.3 to become payable, it is
not necessary to first satisfy the conditions precedent in the other of such
subsections; provided, however, that ***.

7.4          Audit Rights.  During the License Term, DTS shall keep accurate records in sufficient
and customary detail such that the amounts payable under Section 7.3 may
be verified.  No more frequently than
once every twelve months, DTS will permit an independent audit of its relevant
financial records directly relating to the Exclusive License for the sole
purpose of verifying the accuracy of any and all payments required by DTS under
Section 7.3.  Such audit shall be
requested with at least twenty (20) business days’ prior written notice,
conducted during normal business hours, and situated on DTS’ premises or such
other location as DTS in its sole reasonable opinion shall determine.  The audit must be conducted in strict
confidence and by an independent auditor reasonably acceptable to DTS, who is
bound by a written confidentiality agreement with provisions that are at least
as protective of DTS’ Confidential Information as those set forth in this
Agreement.  The audit must further be conducted
at Avica’s expense, unless the audit determines that DTS underpaid Avica, in
which case (i) the amount of such underpayment shall immediately become due and
payable by DTS to Avica and (ii) DTS shall reimburse Avica for the reasonable,
documented costs of such audit.

7.5          Payment.  DTS
shall pay all amounts due under this Agreement in U.S. dollars by wire transfer
in same day funds to Avica’s account at *** as follows:

***

***

or at such other account as Avica may provide to DTS in a written
notice pursuant to Section 14.

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 9
 

 

8                                         CONFIDENTIALITY

A party receiving or having access to Disclosing Party’s Confidential
Information (each, a “Recipient”) will not use
Disclosing Party’s Confidential Information except as permitted herein, and
will not disclose, except as expressly permitted herein, such Confidential
Information to any third party except to Recipient’s employees and consultants
as is reasonably required in connection with the exercise of Recipient’s rights
and obligations under this Agreement (“Authorized
Representatives”).  Each
Recipient will ensure that each of its Authorized Representatives, before
obtaining access to the Disclosing Party’s Confidential Information, is bound
by a written confidentiality agreement, with provisions to protect such
Confidential Information at least as restrictive as those contained
herein.  Each Recipient shall be
responsible for any breach of this Section 8 by its Authorized
Representatives.  Each Recipient agrees
that it shall take all reasonable measures to protect the secrecy of and avoid
disclosure or use of Confidential Information of the Disclosing Party in order
to prevent it from falling into the public domain or the possession of persons
other than those persons authorized under this Agreement to have any such
information.  Such measures shall include
the highest degree of care that Recipient utilizes to protect its own
Confidential Information of a similar nature, which shall be no less than
reasonable care.  However, each Recipient
may disclose Confidential Information of Disclosing Party:  (i) pursuant to the order or requirement of a
court, administrative agency or other governmental body, provided that
Disclosing Party gives reasonable notice to the other party to contest such
order or requirement; and (ii) on a confidential basis to legal or financial
advisors who shall be deemed to be Authorized Representatives hereunder.  Whether or not a protective order or other
such remedy is obtained, or whether the Disclosing Party waives compliance with
the provisions hereof, Recipient agrees to (a) furnish only that portion of the
Confidential Information that Recipient is legally required to furnish or
disclose and (b) exercise Recipient’s reasonable efforts to obtain assurance
that confidential treatment is accorded such Confidential Information.  Upon expiration or termination of the
Agreement for any reason, Recipient shall promptly destroy or return to the
Disclosing Party (as the Disclosing Party shall instruct) all documents and
other tangible materials representing the Disclosing Party’s Confidential
Information and all copies thereof, and purge all electronic copies or other
representations thereof that are under Recipient’s direct or indirect
control.  Notwithstanding the foregoing,
either party’s legal counsel shall be permitted to retain one (1) copy of all
such Confidential Information in its records for archival purposes, provided
such Confidential Information remains subject to the terms and conditions set
forth in this Section 8.

9                                         REPRESENTATIONS AND
WARRANTIES 

9.1          Avica hereby represents, warrants and
covenants to DTS that, except as set forth on Schedule 9.1 attached
hereto:

9.1.1       Avica has the full right and power and legal capacity and authority to
enter into and perform according to the terms of this Agreement.

9.1.2       As of the License Closing Date, Avica has secured valid written
assignments from all current employees and current and former consultants who
contributed to the creation or development of the Owned IP of such person’s
ownership interest therein.  To the best
of Avica’s knowledge, none of the employees or consultants of Avica is in
violation thereof and no such rights vest with anyone other than Avica.

9.1.3       All employees of, consultants to or vendors of Avica with access to
confidential information of Avica are parties to written agreements under which
each such employee, consultant or vendor is obligated to maintain the
confidentiality of confidential information of Avica.

 10
 

 

To the best of Avica’s knowledge, none of the employees, consultants or
vendors of Avica or any of its subsidiaries is in violation of such agreements.

9.1.4       Avica is the sole owner of the entire right, title and interest in and
to each item of the Owned IP, free and clear of any Encumbrances, other than
the Permitted Encumbrances.

9.1.5       The Licensed IP includes all of the Intellectual Property Rights used
in the conduct of the business of Avica as it has been conducted to date.

9.1.6       To the best of Avica’s knowledge, no right, license, lease, consent or
other agreement is required with respect to any Intellectual Property Right for
the conduct of the business of Avica as it has been conducted to date other
than the Third Party Licenses.  Avica is
entitled to use the Third Party IP in the ordinary course of business.

9.1.7       To the best of Avica’s knowledge, the patents included in the Owned IP
and, to Avica’s actual knowledge, the patents included in the Licensed IP (i)
are in good standing, all without challenge of any kind; (ii) are valid and
enforceable; and (iii) have not been adjudged invalid or unenforceable in whole
or part.

9.1.8       All Owned IP, including any registrations and applications therefor,
have been duly maintained and all filing fee(s), maintenance fee(s), annuity
fee(s) or renewal fee payment(s) for each jurisdiction in which each patent,
patent application, trademark, trademark application, trade name, trade name
registration, brand name, brand name registration, service mark, service mark
registration, copyright, copyright application, domain name or domain name
application included within the Owned IP has issued or is pending have been
timely paid.  None of the patents or
patent applications in the Owned IP is involved in or the subject of any
opposition, interference, reexamination, cancellation or other legal or
governmental proceeding in any jurisdiction, and, to the best of Avica’s
knowledge, there has been no threat or other indication that any such
proceeding will hereafter be commenced.

9.1.9       (i) The development, manufacture, marketing, use, sale, distribution,
import, export or other commercial exploitation of any of the Avica Products or
Licensed Products by Avica, in each case in connection with the operation of
the business of Avica as it has been conducted to date, does not infringe upon,
misappropriate, violate, dilute (with respect to any Marks) or otherwise
constitute the unauthorized use of, the Intellectual Property Rights of any
third party; and (ii) no claim is pending or, to the best of Avica’s knowledge,
threatened against Avica alleging any of the foregoing.

9.1.10     To the best of Avica’s knowledge, no third party is engaging in any
activity that infringes or misappropriates the Licensed IP.

9.1.11     Avica is not a party to any verbal contract, agreement or arrangement,
except as set forth on Exhibit C (“Existing Verbal
Agreements”).  A summary of
the material terms and conditions of such Existing Verbal Agreements is set
forth on Exhibit C.

9.1.12     (i) Avica has all necessary rights in the Licensed Products to grant
DTS the licenses and rights set forth herein; (ii) the licenses, including the
Exclusive License, and rights granted in this Agreement do not conflict with,
or result in any violation of, or default (with or without notice or passage of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under the terms of any
agreement between Avica and any third party; (iii) DTS shall not be required to
seek permissions from or make payments to any third parties in order to
exercise the license rights to the Licensed Products set forth herein;

 11
 

 

(iv) the Avica Products are not libelous and do not violate any rights
of privacy and/or publicity of any third party; and (v) no instruction, advice
or information contained in the Avica Products is injurious to the end user.

9.1.13     Each hardware component of the Avica Products (other than commercially
available third-party components) is free from Errors and material defects in
materials and workmanship.

9.1.14     The Avica Products substantially conform to the functionality described
in the Documentation.

9.1.15     Personnel of Avica shall be available to consult with respect to the
Licensed Products with DTS and its personnel, at such times and for such
periods as DTS may reasonably request during the Transition Period.

9.1.16     In the development of the Licensed Products and their content, all
laws, statutes, ordinances, rules and regulations of each country, state, city
or other political entity having jurisdiction over development of the Licensed
Products were fully complied with.

9.1.17     The credit, attribution and/or
acknowledgement lists and other materials delivered by Avica to DTS under this
Agreement are true, accurate and complete in all material respects, and DTS
shall incur no liabilities to any third parties arising out of the use of such
lists and materials pursuant to DTS’ license rights in the Licensed Products.

9.1.18     Avica has not and will not take any actions that: (i) assign, delegate
or transfer, or purport to assign, delegate or transfer, any of the Licensed IP
to any third party; (ii) create, or purport to create, any obligation on behalf
of DTS; or (iii) grant, or purport to grant, any rights or immunities to any
third party under DTS’ Intellectual Property Rights or other proprietary
rights.

9.1.19     Avica has disclosed
and delivered to DTS all books, records, files, documents and agreements of
Avica related to the Licensed IP, Licensed Products and Licensed Services,
including, all documentation related to Intellectual Property Rights
registrations or applications, or any and all Permitted Encumbrances thereon.

9.1.20     Avica shall comply with all applicable laws
and regulations with respect to its performance under this Agreement.

9.2                               DTS hereby represents, warrants and covenants
to Avica that:

9.2.1       DTS has the full right, power, legal capacity and authority to enter
into this Agreement and to carry out the terms and conditions hereof.

9.2.2       DTS shall comply with all applicable laws and regulations with respect
to its performance under this Agreement.

9.3          These representations and warranties shall be
deemed to have been given by the parties at execution of this Agreement and,
with respect to each Deliverable provided hereunder, upon delivery of such
Deliverable pursuant to this Agreement. 
These representations and warranties shall survive expiration or
termination of this Agreement.

 12

 

9.4          THE FOREGOING WARRANTIES ARE IN LIEU OF ALL
OTHER WARRANTIES OR CONDITIONS, AND EXCEPT FOR THE EXPRESS WARRANTIES OR
CONDITIONS STATED IN THIS AGREEMENT, THE PARTIES MAKE NO ADDITIONAL WARRANTIES
OR CONDITIONS, EXPRESS OR IMPLIED.  IN
PARTICULAR, EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH IN THIS SECTION 9,
ANY AND ALL WARRANTIES AND CONDITIONS OF MERCHANTABILITY, AND FITNESS FOR A
PARTICULAR PURPOSE OR NON-INFRINGEMENT ARE EXPRESSLY EXCLUDED.

10                                  INDEMNIFICATION 

10.1                        Indemnity.  

10.1.1     Avica will, at its sole expense and upon DTS’ written request, defend
DTS, including its successors and assigns, and their respective directors,
officers, employees, agents, customers, affiliates, and distributors
(collectively, “DTS Indemnitees”),
from and against any and all suits, claims, actions, demands or proceedings
asserted against any DTS Indemnitee, and Avica will pay, indemnify and hold
harmless each DTS Indemnitee from any and all liabilities, damages, losses,
judgments, settlements, costs or expenses, including attorney’s fees, incurred
by or assessed against, any DTS Indemnitee, to the extent the same arise out of
any (i) actual or alleged, direct, contributory or other infringement or
misappropriation by Avica or any Avica Product upon any Intellectual Property
Right, contractual or other rights of any third party; (ii) breach of any of
Avica’s representations or warranties in this Agreement; (iii) bodily harm
(including death) or any property damage caused by the Avica Products
(excluding hardware components in such Avica Products that are either purchased
from third parties or licensed pursuant to Third Party Licenses) manufactured
on or prior to the License Closing, (iv) violation by Avica of any applicable
law, rule or regulation; or (v) the negligence, misrepresentation, or
error or omission on the part of Avica or any employee, agent or representative
of Avica.  

10.1.2     DTS will, at its sole expense and upon Avica’s written request, defend
Avica, including its successors and assigns, and their respective directors,
officers, employees, agents, customers, affiliates, and distributors
(collectively, “Avica Indemnitees”),
from and against any and all suits, claims, actions, demands or proceedings
asserted against any Avica Indemnitee, and DTS will pay, indemnify and hold
harmless each Avica Indemnitee from any and all liabilities, damages, losses,
judgments, settlements, costs or expenses, including attorney’s fees, incurred
by or assessed against, any Avica Indemnitee, to the extent the same arise out
of any (i) third party claim that a Licensed Product infringes such third
party’s Intellectual Property Rights, where such claim would have been avoided
by the exclusive use of the Avica Products; or (iii) breach of any of DTS’
representations or warranties in this Agreement.

10.1.3     If a party becomes aware of any such claim subject to indemnification
hereunder, the party will provide the other party with reasonably prompt notice
of the claim and reasonable cooperation in the defense thereof.  Neither party will settle any such claim
without the other party’s written consent, which will not be unreasonably
withheld.  The indemnified party will
have the right to approve the counsel selected by the indemnifying party to
defend any such claim (such approval not to be unreasonably withheld) and will
also have the right to have its own counsel participate in the defense of any
such claim at its own expense.

10.2        Duty to Correct.  In addition to Avica’s indemnification obligations, if DTS reasonably
believes or it is determined that any of the Avica Products may have violated a
third party’s Intellectual Property Rights, Avica will, at its option and sole
risk and expense:  (i) procure for DTS
the rights to continue exploiting the licenses and rights granted herein; or (ii)
modify the

 13
 

 

subject Avica Products so that they become
non-infringing.  Any such replacement or
modification must substantially conform to the Specifications and the
Documentation.

10.3        Covenant Not to Sue. 
During the License Term, Avica covenants that it will not, without the
prior written consent of DTS, assert against DTS, any DTS affiliate or any DTS
licensee, end user, distributor, representative, licensee or customer, a claim
of direct or indirect patent or other Intellectual Property Right infringement
arising from the exercise of the licenses and rights granted herein or sale,
use, distribution or other disposal of the Licensed Products, Licensed
Services, Derivative Works, Documentation or any DTS product or service.

11                                  PROSECUTION AND MAINTENANCE
OF LICENSED IP

During the License Term, subject to the other
provisions set forth in this Section 11, DTS shall have sole control of,
and be responsible for, filing, prosecution and maintenance of the Licensed IP,
and DTS shall pay the expenses thereof. 
Avica agrees to cooperate with DTS in such preparation, filing,
prosecution and maintenance of the Licensed IP, and DTS shall consult with
Avica and/or its inventors regarding material issues during prosecution.  During the License Term, Avica hereby grants
DTS an irrevocable power of attorney to undertake such activities and to
execute and file all instruments necessary or appropriate in connection
therewith.  Upon reasonable request by
Avica, DTS shall make available to Avica copies of any significant documents
that DTS receives from or sends to any relevant intellectual property offices
including, without limitation, any official actions, responses, notices of
interferences, re-examinations, oppositions or requests for patent term
extensions.  Upon receipt of a notice of
allowance of a pending patent application in the Licensed IP in existence of as
of the Agreement Date, and in the event that DTS intends to elect not to file a
continuation or divisional in connection with such patent application prior to
the issuance of the related patent, (i) DTS shall provide written notice of
such election to Avica; and (ii) DTS shall pay the issue fee relating to such
patent application no earlier than thirty (30) days following the date of such
written notice to Avica; and (iii) Avica shall have the right at its sole cost
and expense to file and prosecute one or more continuation or divisional patent
applications (each an “Additional Patent
Application”) claiming priority to such patent application.  In the event that Avica exercises its rights
under this Section 11 to file and prosecute any Additional Patent
Applications, such Additional Patent Applications, and any patents that issue
thereon, shall be deemed to be Licensed IP for purposes of this Agreement.

12                                  ENFORCEMENT ACTIONS

12.1        During the License Term, if a third party infringes or
allegedly infringes any Intellectual Property Rights in the Licensed IP within
Field, DTS shall have the right, but not the obligation, to prosecute the
infringer by appropriate legal proceedings; provided that DTS shall inform
Avica of all developments in such proceedings. 
DTS shall be responsible for all costs and expenses of any enforcement
activities, including legal proceedings, against infringers that DTS
initiates.  Avica agrees to cooperate in
all reasonable respects with any enforcement proceedings at the request of DTS,
and at DTS’ expense.  Avica may be
represented by Avica’s counsel in any such legal proceedings, at Avica’s own
expense (subject to reimbursement under this Section 12), acting in an
advisory but not controlling capacity. The prosecution, settlement or
abandonment of any proceeding under this Section 12 shall be at DTS’
reasonable discretion, provided that DTS shall not grant any rights in or to
any of the Licensed IP in excess of the rights licensed to DTS hereunder.
Recoveries collected by DTS shall be paid (i) first, to DTS in the amount of
all documented and reasonable out-of-pocket costs and expenses (including
attorneys fees) incurred by DTS in such action, (ii) then to Avica to reimburse
Avica for its documented and reasonable out-of-pocket costs and expenses
(including attorneys fees) incurred in cooperating with DTS in such action as
requested by DTS, and (iii) for the remainder, if any, the recovery shall be
paid to DTS.

 14
 

 

12.2        In the event that (i) DTS’ general counsel in his reasonable
opinion believes that a third party infringes one of the Key Marks and (ii) DTS
does not intend to exercise its rights to prosecute such third party by
appropriate legal proceedings, then (a) DTS shall provide written notification
to Avica, and (b) Avica shall have the right at its sole cost and expense to
communicate with and prosecute such third party by appropriate legal
proceedings with respect to such potential infringement, and all recoveries
obtained by Avica in connection therewith shall belong exclusively to Avica.

12.3        In the event that (i) DTS’ general counsel knows that a third
party is infringing a patent in the Licensed IP and (ii) DTS does not intend to
exercise its rights to prosecute such third party by appropriate legal
proceedings or otherwise enter into an agreement with such third party, then
(a) DTS shall provide written notification to Avica; provided, however, that
DTS shall be obligated to provide written notification to Avica under this Section
12 only upon the first single occurrence of such infringement for each
patent in the Licensed IP; and (b) Avica shall have the right at its sole cost
and expense to communicate with and prosecute such third party by appropriate
legal proceedings with respect to such potential infringement, and all
recoveries obtained by Avica in connection therewith shall belong exclusively
to Avica.

13                                  RELATIONSHIP OF PARTIES

The parties to this Agreement are independent contractors.  Nothing in this Agreement shall be construed
as establishing any relationship of representatives, partnership, joint
venture, employment, franchise or agency between the parties.  Neither party will have the power to bind the
other or incur obligations on the other party’s behalf without the other
party’s written consent.

14                                  NOTICES AND REQUESTS

 All notices, claims and demands
hereunder, and all other communications which are required to be given in
writing pursuant to this Agreement, shall be in writing and shall be given (and
shall be deemed to have been duly given upon receipt) by delivery in person or
facsimile (received at the facsimile machine to which it is transmitted prior
to 5 p.m., local time, on a business day for the party to which it is sent, or
if received after 5 p.m., local time, as of the next business day) or by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified in a notice given in accordance with this Section
14):

	
  AVICA:

  	
  Avica Technology Corporation

  
	
   

  	
  1201 Olympic
  Blvd.

  
	
   

  	
  Santa Monica, CA
  90404

  
	
   

  	
  Attention:
  Nicholas J. Clay

  
	
  Telephone:

  	
  (310) 985-9840

  
	
   

  	
   

  
	
  with a
  copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Mitchell
  Silberberg & Knupp LLP

  
	
   

  	
  11377 West
  Olympic Blvd.,

  
	
   

  	
  Los Angeles, CA
  90064

  
	
   

  	
  Attention: Jan
  Powers, Esq.

  
	
  Telephone:

  	
  (310) 312-3257

  
	
  Facsimile:

  	
  (310) 231-8357

  

 

 15
 

 

 

	
  DTS:

  	
  DTS, Inc.

  
	
   

  	
  5171 Clareton
  Drive

  
	
   

  	
  Agoura Hills, CA
  91301

  
	
   

  	
  Attention:
  General Counsel

  
	
  Telephone:

  	
  (818) 706-3525

  
	
  Fax:

  	
  (818) 827-2470

  
	
   

  	
   

  
	
  with a
  copy to:

  	
   

  
	
   

  	
   

  
	
   

  	
  Heller Ehrman
  LLP

  
	
   

  	
  4350 La Jolla
  Village Drive

  
	
   

  	
  San Diego, CA
  92122

  
	
   

  	
  Attention: Kirt
  Shuldberg, Esq.

  
	
  Telephone:

  	
  (858) 450-8400

  
	
  Facsimile:

  	
  (858) 450-8499

  

 

15                                  CLOSING

15.1        Closing.   The
closing under this Agreement (the “License Closing”)
will take place at 10:00 a.m., Pacific Standard Time, on a date to be specified
by the parties, which shall be no later than the second (2nd) business day
after satisfaction or waiver of the conditions (excluding conditions that, by
their terms, cannot be satisfied until the License Closing) set forth in Section
15.2, unless another time or date is agreed to by the parties (the “License Closing Date”). 
The License Closing will be held at the offices of Heller Ehrman, 4350
La Jolla Village Drive, 7th Floor,
San Diego, CA  92122, or such other
location as the parties hereto shall agree to in writing.  If the conditions precedent set forth in Section
15.2 are satisfied as of execution of this Agreement, the License Closing
will be deemed to occur on the date of execution.

15.2        Conditions Precedent.  DTS’
obligation to effect the License Closing is subject to the satisfaction or
waiver on or prior to the License Closing Date of the following conditions:

15.2.1     ***

15.2.2     ***

15.2.3     ***

15.2.4     ***

15.2.5     ***

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 16
 

 

15.2.6     ***

15.2.7     ***

15.2.8     ***

15.2.9     ***

15.2.10  ***

15.2.11  ***

16                                  TERM; TERMINATION

16.1                        License Term.

16.1.1     The term of the Exclusive License shall commence upon the License
Closing and shall last until three years following completion by Avica of the
Clean-up Conditions set forth in Section 16.2 to the reasonable
satisfaction of DTS (the “License Term”).

16.1.2     Notwithstanding the foregoing or anything else to the contrary in this
Agreement, once a Licensed Product is sold or a Licensed Service is rendered to
a third party, the Exclusive License shall be deemed to be perpetual with
respect to that particular unit or instance of the Licensed Product or Licensed
Service without regard to the License Term.

16.2        Clean-up Conditions.  For purposes of this Agreement, the term “Clean-up Conditions” means the completion by Avica of all
of the following conditions, as acknowledged in writing by DTS, which acknowledgement
shall not be unreasonably withheld:

16.2.1              ***

16.2.2              ***

16.2.3              ***

16.2.4              ***

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 17
 

 

16.2.5              ***

16.2.6              ***

16.2.7              ***

16.3        Survival.  In
the event of expiration or termination of this Agreement, Sections 1, 3.1
but only to the extent set forth in Section 16.1.2, 4, 7 (only
with respect to any unpaid payments thereunder), 8, 9, 10, 16.1.2, 16.3,
16.4, 16.7, 17, 18 and 19 shall survive this Agreement for a
period of two (2) years.

16.4        Effect of Termination Due to Bankruptcy.  This Agreement constitutes a license of
intellectual property as defined in Section 101(35a) of the Bankruptcy Code
that is executory in nature until terminated. 
If this Agreement is rejected in any bankruptcy proceeding, then in
addition to all other rights hereunder, the parties agree that DTS will be
entitled to all rights under Section 365(n) of the Bankruptcy Code, including
the embodiment of Intellectual Property Rights and any updates and enhancements
created after the date of this Agreement.

16.5        Termination of Option Agreement.  This Agreement shall automatically terminate
if DTS unilaterally terminates the Option Agreement or if the Option Agreement
expires unexercised.

16.6        Termination by Mutual Written Consent.  This Agreement may be terminated upon the
mutual written consent of the parties.

16.7        Effect of Termination or Expiration.  Upon expiration or termination of this
Agreement or the License Term, subject only to the provisions of Section
16.1.2 of this Agreement, (i) except as set forth below, all licenses
hereunder shall immediately terminate; (ii) DTS shall immediately cease all use
of the Licensed IP; and (iii) DTS shall immediately cease all production,
distribution, use, sales, offers for sale, importing, exporting or other
activities with respect to any product or service that includes, embodies or
infringes upon any of the Licensed IP. 
Notwithstanding the foregoing, termination or expiration of this
Agreement shall not affect:  (a) the
rights and obligations of either party with respect to Licensed Products sold
prior to expiration or termination; (b) any obligations imposed by this
Agreement that expressly survive expiration or termination; (c) any liability
for damages resulting from an actionable breach; (d) any licenses or
sublicenses granted to customers or end users under this Agreement, which shall
survive any expiration or termination of this Agreement in accordance with
their terms; and (e) DTS’ ability to exercise the licenses and rights granted
hereunder as necessary to provide technical support and maintenance for its
customers or end users with respect to the licenses or sublicenses granted prior
to such expiration or termination.

17                                  ***

17.1        ***

17.2        ***

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 18
 

 

***

17.3        ***

18                                  LIMITATION OF LIABILITY

WITH THE EXCEPTION OF EITHER PARTIES’ CONFIDENTIALITY (SECTION 8)
OR INDEMNITY (SECTION 10) OBLIGATIONS, NEITHER PARTY SHALL BE LIABLE TO
THE OTHER FOR ANY SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES OF ANY
KIND OR NATURE WHATSOEVER, RELATING TO THE PRODUCT, THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY, INCLUDING LOST PROFITS OR LOST GOODWILL AND
WHETHER BASED ON BREACH OF ANY EXPRESS OR IMPLIED WARRANTY, BREACH OF CONTRACT,
TORT (INCLUDING NEGLIGENCE) OR STRICT LIABILITY, REGARDLESS OF WHETHER SUCH
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE OR IF SUCH DAMAGE
COULD HAVE BEEN REASONABLY FORESEEN.

19                                  GENERAL

19.1        Severability.  If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
applicable law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the matters referred to herein are not affected
in any manner materially adverse to any party. 
Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in a mutually acceptable manner in order that
the matters referred to herein be consummated as originally contemplated to the
fullest extent possible.

19.2        Entire Agreement; Assignment.  This Agreement, together with the Related
Agreements, constitutes the entire agreement among the parties with respect to
the subject matter hereof and thereof and supersedes all prior agreements and
undertakings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and thereof.  DTS shall have the right to assign all of its
rights and obligations under this Agreement to any entity which is, at the time
of assignment, an Affiliate of DTS, notwithstanding that the assignee may not
continue to be an Affiliate of DTS thereafter; provided, that no such
assignment to an Affiliate shall relieve the assigning party of its obligations
hereunder.  In the event of such an
assignment, all rights and obligations of DTS hereunder shall be deemed to be
rights and obligations of such assignee. 
DTS or its assignee shall also have the right to assign all of its
rights and obligations under this Agreement to any person that acquires a
majority by voting power of all of the capital stock, or substantially all of
the assets, of DTS or its assignee or the division or business unit of DTS or
its assignee responsible for the business of Avica; provided, that such person
assumes this Agreement, in writing, and agrees to be bound by and to comply
with all of the terms and conditions hereof. 
Avica shall not assign, delegate or transfer its rights and obligations
under this Agreement to any third party without the prior written consent of
DTS.  For purposes of this Agreement, an “assignment” by Avica under this Section
19.2 shall be deemed to include each of the following: (a) a change in
beneficial ownership of Avica of greater than twenty percent (20%) (whether in
a single transaction or series of transactions); (b) a merger of Avica with
another party, whether or not Avica is the surviving entity;

***  Portions of this page have
been omitted pursuant to a request for Confidential Treatment and filed
separately with the Commission.

 19
 

 

(c) the acquisition of more than twenty percent
(20%) of any class of Avica’s voting stock (or any class of non-voting security
convertible into voting stock) by a person who is not currently a shareholder
of Avica (whether in a single transaction or series of transactions); and (d)
the sale of more than twenty percent (20%) of Avica’s assets (whether in a
single transaction or series of transactions); provided, however, that an
assignment shall not be deemed to include (i) any change in beneficial
ownership resulting from the conversion of convertible securities, outstanding
as of the Agreement Date, by existing Avica Stockholders, or (ii) any change in
beneficial ownership resulting from a transfer of Avica shares made in
compliance with Avica’s Bylaws, as in effect on the Agreement Date, to any
third party who is not in DTS’ judgment a competitor or potential competitor of
DTS and so long as each permitted transferee agrees in writing to be bound by
and comply with the terms and conditions of the Voting Agreement as if such
transferee were a Shareholder (as defined in such Voting Agreement) and a
signatory to such Voting Agreement. 
Subject to the foregoing, this Agreement shall inure to the benefit of
and be binding upon the respective permitted successors and assigns of the parties.

19.3        Specific Performance.  The
parties hereto agree that irreparable damage would occur in the event that any
provision of this Agreement was not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of the
terms hereof, in addition to any other remedy at law or equity.

19.4        Governing Law.  This
Agreement shall be governed by, and construed in accordance with the laws of
the State of California applicable to contracts executed in and to be performed
in that state.

19.5        Consent to Jurisdiction.  Avica and DTS consent to jurisdiction and
venue in the state and federal courts in Los Angeles, California.

19.6        Headings; Interpretation.  The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.  Whenever the word “include,”
“includes,” or “including”
appears in this Agreement, it shall be deemed in each instance to be followed
by the words “without limitation.”

19.7        Counterparts.
 This Agreement may be executed and delivered
(including by facsimile transmission) in any number of counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
and delivered shall be deemed to be an original but all of which taken together
shall constitute one and the same agreement.

19.8        Fees and Expenses.
 All costs and expenses incurred in connection
with this Agreement and the Asset Purchase by Avica shall be paid by
Avica.  All costs and expenses incurred
in connection with this Agreement and the Asset Purchase by DTS shall be paid
by DTS.

19.9        Amendment.  Any
waiver, modification or amendment of any provision of this Agreement will be
effective only if in writing and signed by duly authorized representatives of
the parties.

19.10      Waiver.  At
any time prior to the License Closing, DTS and Avica may agree to (i) extend
the time for the performance of any obligation or other act of the other party
hereto, (ii) waive any inaccuracy in the representations and warranties of the
other contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance by the other, as the case may be, with any agreement or
condition contained herein.  Any such
extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.  The failure by

 20
 

 

either party to enforce any provision of this
Agreement will not constitute a waiver of future enforcement of that or any
other provision.

19.11      Remedies.  No remedy referred to in this Agreement is intended to be exclusive,
but each shall be cumulative and in addition to any other remedy referred to
herein or otherwise available at law, in equity or otherwise.

19.12      Force Majeure.  Except with respect to the payment of money, neither party will be
responsible for any failure or delay in its performance under this Agreement
due to causes beyond its reasonable control, including labor disputes, strikes,
lockouts, shortages of or inability to obtain labor, energy, raw materials or
supplies, war, riot, act of God or governmental action.

 21
 

 

IN WITNESS WHEREOF, the parties have caused this
Agreement to be executed as of the Agreement Date by their duly authorized
representatives.

	
  DTS, INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  Jon E. Kirchner

  	
   

  
	
  Name:

  	
  Jon Kirchner

  	
   

  
	
  Title:

  	
  President and Chief Executive Officer

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AVICA
  TECHNOLOGY CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
    /s/
  Nicholas J. Clay

  	
   

  
	
  Name:

  	
  Nicholas J. Clay

  	
   

  
	
  Title:

  	
  Chairman and Chief Executive Officer

  	
   

  

 

 22

 

EXHIBIT A

Intentionally
Omitted.

 

EXHIBIT B

AVICA MARKS

Intentionally
Omitted.

 

EXHIBIT C

EXISTING VERBAL AGREEMENTS

Intentionally
Omitted.

 

SCHEDULE 9.1

Intentionally
Omitted.

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