CONFIDENTIAL
SUNI-DMD MANUFACTURING, ASSEMBLY & TEST SERVICES AGREEMENT
This Manufacturing, Assembly & Test Supply Agreement ("Manufacturing
Agreement") is entered into as of March 17, 1999, by and between SUNI IMAGING
MICROSYSTEMS ("SUNI") and DENTAL/MEDICAL DIAGNOSTIC SYSTEMS, INC. ("DMD"),
regarding the subject matter described in this document.
The parties agree as follows:
1. OVERVIEW.
DMD and SUNI entered into an Agreement dated October 10, 1997 (the
"Development Agreement") under which SUNI developed for DMD a CCD Chip, as
defined in the Development Agreement. DMD and SUNI desire that SUNI will
assemble, test and package Sensor Assembly Components provided by DMD to SUNI
into Sensor Assemblies and Combined Products as a manufacturing service to DMD.
2. DEFINITIONS.
2.1. "Xxxx of Materials" means the lists of materials and components set
forth in Exhibit A to this Agreement.
2.2. "Board Assembly" or "Camera Board" or "Board" means the electronics
board that is referred to as the "image capture board" in the Development
Agreement. The Board Assembly will include a PCI and/or USB personal computer
interface and be designed to be plugged into a personal computer.
2.3. "Board Assembly Specifications" shall mean the technical
specifications for Board Assemblies that are attached to this Agreement as
Exhibit B.
2.4. "Combined Product" means a tested Board Assembly and Sensor Assembly
that complies with the Combined Product Specifications.
2.5. "Combined Product Specification" means the functional specifications
for the Combined Product that are to be attached to this Agreement as Exhibit C
in accordance with Section 9.4 below.
2.6. "Production Year" shall mean the 12 month period that commences on the
date when SUNI: (a) has shipped to DMD a Sensor Assembly or
Page 1
Combined Product that conforms to the Sensor Assembly Functional Specifications,
and (b) has provided written notice to DMD that SUNI is able to produce such
Sensor Assembly or Combined Product in commercial quantities, and each 12 month
period that commences on the anniversary of such first shipment and notice.
2.7. "Sensor Assembly" means the CCD Chip and packaging designed to be
inserted in a patient's mouth, together with the cable and plug used to connect
the Sensor Assembly to the Board Assembly.
2.8. "Sensor Assembly Component" means a part, such as a CCD Chip, cable or
plug, that is required in order to assemble a Sensor Assembly.
2.9. "Sensor Assembly Component Specification" means the technical and
functional specifications for each Sensor Assembly Component that are attached
to this Agreement as Exhibit A.
2.10. "Sensor Assembly Functional Specification" means the functional
specifications for the Sensor Assembly that are attached to this Agreement as
Exhibit C.
2.11. "Wafer Specifications" shall mean the following technical documents:
Attachment 1 to the Development Agreement and the memorandum from DMD to SUNI
dated January 14, 1999 that is attached to this Agreement as Exhibit E.
3. PARTS PROCUREMENT.
3.1. DMD and SUNI will jointly review and approve suppliers of Sensor
Assembly Components and of Board Assemblies, to be manufactured in accordance
with the Sensor Assembly Component and Board Assembly Specifications, and such
approval shall not be unreasonably withheld. The Xxxx of Materials for the PCI
personal computer interface attached as Exhibit A(i) to this Agreement includes
the materials and components determined by SUNI to be necessary to manufacture
each Sensor Assembly Component and Board Assembly that includes a PCI personal
computer interface. The Xxxx of Materials to manufacture each Sensor Assembly
Component and Board Assembly that includes a USB personal computer interface
shall be provided by SUNI to DMD, and attached as Exhibit A(ii) to this
Agreement, within 30 days of signing this Agreement. If SUNI is unable to
provide DMD with the Xxxx of Materials necessary, and acceptable to DMD, to
manufacture each Sensor Assembly Component and Board Assembly that includes a
USB personal computer interface within such time, either party may terminate
this Agreement in its entirety without liability to the other. Exhibit B sets
forth the technical specifications for each Sensor Assembly Component and Board
Assembly. DMD will manage all material procurement activities with the exception
of wafer
Page 2
procurement. DMD shall place purchase orders with Orbit or such other
wafer supplier of SUNI's choice as shall be reasonably acceptable to DMD and
able to provide wafers at or below the wafer prices set forth in the Xxxx of
Materials and SUNI will manage all aspects of the wafer supplier's performance.
3.2. DMD will identify and contract with one or more vendors which are to
be approved by SUNI to manufacture and supply Board Assemblies. SUNI will not
withhold or delay approval without reasonable cause
3.3. DMD shall use commercially reasonable efforts to supply sets of all
required materials defined in the applicable Xxxx of Materials to SUNI no less
than 15 days prior to the 1st of each month in which the finished Sensor
Assemblies, or Combined Products, as applicable, to be produced from those
materials are to be delivered to DMD. If DMD or the suppliers of the required
materials deliver such required materials to SUNI later than fifteen (15) days
prior to the first day of the calendar month, as set forth in the preceding
sentence, then SUNI's time to deliver the Sensor Assemblies or Combined Products
to be assembled from such materials shall be extended for a commercially
reasonable period of time not to exceed the number of days that DMD or the
suppliers delivered the required materials after fifteen days prior to the first
day of such calendar month.
3.4. At the earliest possible date after execution of this Agreement, DMD
shall issue a purchase order for a quantity of wafers to the wafer supplier
selected in accordance with Section 3.1 above, in the configuration set forth in
the Wafer Specifications , sufficient to produce 4,500 sensors based on a 50%
yield from each wafer. DMD shall take delivery of all wafers on this purchase
order within 6 months of the first delivery of wafers.
4. PAYMENT FOR PARTS.
DMD will pay for all Sensor Assembly Components and Board Assemblies and
be responsible for assuring materiel flow that is sufficient to manufacture
required Sensor Assemblies and Board Assemblies consistent with quantities of
Sensor Assemblies and Combined Products ordered by DMD. SUNI is not responsible
for any consequences of delays in materiel supply which do not result from the
actions or omissions of SUNI.
5. MANUFACTURING SERVICES.
5.1. Equipment. SUNI will purchase, lease, sublease and install, or obtain
through subcontract arrangements, all equipment necessary to assemble, test and
package Sensor Assemblies (the "Equipment").
5.2. Manufacturing Support. SUNI will establish requirements for all
manufacturing of Sensor Assembly Components and Board Assemblies. DMD is
responsible for establishing and monitoring each vendor's compliance with
Page 3
customary manufacturing processes to be established by SUNI. If the Sensor
Assembly Components or Board Assemblies delivered to SUNI fail to conform to the
applicable Sensor Assembly Component Specifications and Board Assembly Component
Specifications, SUNI's sole and exclusive remedy against DMD shall be to require
DMD to, as quickly as commercially reasonable, procure replacement parts that
meet such specifications, and DMD shall indemnify SUNI as set forth in Section
9.6 below.
5.3. Assembly. SUNI will use the Equipment to test, assemble and package
Sensor Assembly Components into Sensor Assemblies. SUNI will test all Assembly
Boards sold with SUNI manufactured and assembled Sensors as part of a Combined
Product.
5.4. Good Manufacturing Practices. SUNI will comply with the applicable
regulations of the United States Food and Drug Administration ("FDA") and of all
other applicable regulatory agencies applicable to the manufacture of the
medical devices manufactured by SUNI for DMD, including without limitation "Good
Manufacturing Practices" ("GMP") regulations. Prior to commencement of assembly
of the Combined Products, DMD may, on reasonable advance notice to SUNI, conduct
inspections of SUNI manufacturing facilities and records to determine SUNI's
compliance with applicable "Good Manufacturing Practices" ("GMP") regulations
and SUNI shall fully cooperate with such inspections.
6. ROYALTY ADVANCE.
6.1. DMD will advance to SUNI $CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION in cash as follows:
o $CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION paid to SUNI April 2, 1999
o $CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION paid to SUNI thirty days after execution of this
Agreement
o $CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION paid to SUNI sixty days after execution of this
Agreement
The $CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION advance will be credited against the first $CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION in royalties that DMD would otherwise be obligated to pay to SUNI
under the Development Agreement commencing with the first royalty payment that
becomes due under the Development Agreement, provided that DMD may not take such
credit with respect to royalties that become due during any calendar quarter if
the cumulative orders placed by DMD total fewer than CONFIDENTIAL INFORMATION
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor
Assemblies to be delivered by SUNI to DMD during such calendar quarter.
6.2. DMD will lease equipment ("DMD Leased Equipment") for SUNI's use in
connection with the manufacture, assembly and testing of DMD products, and SUNI
agrees that if it will not use the DMD Leased Equipment for other purposes,
unless SUNI is able to meet DMD's requirements for Sensor
Page 4
Assemblies. DMD will lease the DMD Leased Equipment under a purchase/lease
agreement per the List of Equipment attached as Exhibit D and updated in
accordance with the following sentence, not to exceed a total value of
$CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION. The parties agree that the List of Equipment attached as
Exhibit D, as of the date of this Agreement is preliminary, and SUNI will submit
a final and complete List of Equipment to DMD within thirty (30) days after the
date of this Agreement. DMD shall obtain SUNI's approval of any such agreement
with respect to the purchase or lease of DMD Leased Equipment and DMD will work
with SUNI to determine the structure that best fits SUNI's requirements. The
costs of these leases shall be recovered by DMD over the first 36 months of
deliveries as credits applied to royalty payments required under the Development
Agreement and/or payments otherwise due SUNI under this Agreement but if SUNI
terminates this Agreement under Section 7.6 or 7.7 or DMD terminates this
Agreement under Section 7.8 all unrecovered cost shall be immediately paid to
DMD by SUNI, and SUNI shall have the right, in its discretion, to become the
owner of the DMD Leased Equipment. If DMD terminates this Agreement under
Section 7.7, or if SUNI terminates this Agreement under Section 7.8, then SUNI
may elect either (a) to pay all of DMD's unrecovered cost with respect to the
DMD Leased Equipment, and upon such payment SUNI shall have the right, in its
discretion, to become the owner of the DMD Leased Equipment or (b) to return the
DMD Leased Equipment. SUNI shall own, or if a residual payment amount remains
due and owing at the end of the lease term shall have the option, by paying the
residual amount, of owning, the DMD Leased Equipment after DMD has recovered all
lease costs. If DMD elects not to buy additional Sensor Assemblies or Combined
Products beyond the first year from the date of this Agreement, then DMD shall
be responsible for all remaining lease costs and SUNI will own the DMD Leased
Equipment.
7. PURCHASE AGREEMENT.
7.1. DMD will fulfill all of its requirements for Sensor Assemblies and
Combined Products from SUNI during the Manufacturing Agreement term (which term
commences upon the date hereof and extends through the last day of the third
Production Year unless earlier terminated pursuant to Section 7.7 or Section 7.8
below) unless either (a) DMD's exclusive rights are terminated as set forth in
Section 7.3 and 7.6 below or (b) SUNI declines to accept any order that DMD
places prior to the 90 day lead time specified herein, for delivery of Sensor
Assemblies and Combined Products, in which case Section 7.6 below shall apply.
Upon the last day of the term, the term of this Agreement is extended
automatically one year at a time unless cancelled by either party within 90 days
of the last day of the term of this Agreement.
7.2. DMD shall, promptly following receipt of FDA notification for the
Sensor Assembly and/or Combined Product permitting marketing and sale of the
Sensor Assembly and/or Combined Product in the United States, issue a purchase
order, in the form attached as Exhibit F to this Agreement to SUNI for
Page 5
assembly of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies (the "Initial Order") for
delivery over the first Production Year. With respect to the Initial Order, SUNI
agrees to produce a minimum of CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies per
calendar month and a minimum of CONFIDENTIAL INFORMATION OMITTED AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies per
Production Year quarter for Q2, Q3 and Q4 of the first Production Year; and the
Q1 ramp-up under the Initial Order during the first Production Year shall be a
minimum of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies per month and minimum of
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION Sensor Assemblies for Q1 of the first Production Year. The
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION-Product shortfall for Q1 of the first Production Year shall
be delivered during Q2 of the first Production Year.
7.3. With respect to all orders after the first Production Year, DMD agrees
to order and take delivery of, and SUNI agrees to deliver, Sensor Assemblies at
a rate of at least CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies per calendar month of
each Production Year; provided, however, that if DMD refuses to order a minimum
of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION Sensor Assemblies for delivery in each calendar month of the
second or third Production Years and such failure continues for 30 calendar days
after delivery by SUNI to Xxxxxx Xxxxxxxxx and Dr. Xxxx Xxxxxxx of DMD of a
written demand describing such failure and referencing this paragraph 7.3, SUNI
may as its sole and exclusive remedy for failure by DMD to order the quantities
of Sensor Assemblies specified to be ordered in the second and third Production
Years by the terms of this Paragraph terminate DMD's exclusive rights to market
the Sensor Assembly and terminate all exclusivity relating to SUNI's designs, as
set forth in Section 8.1 of the Development Agreement; whereupon SUNI shall
continue to supply DMD pursuant to this Agreement on a non-exclusive basis,
provided that if DMD orders fewer than CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies
during any Production Year, then SUNI may elect to transfer production of Sensor
Assemblies to a third party that DMD identifies rather than continue to support
production at that level.
7.4. DMD shall guarantee payment in full for at least CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION Sensor Assemblies during the first Production Year during the term of
this Agreement. If DMD fails to purchase and pay for at least CONFIDENTIAL
INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION Sensor Assemblies during Q1 of the first Production Year or
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION Sensor Assemblies during any of Q2, Q3 and Q4 of the first
Production Year (the "Required Minimum Quantities"), then SUNI shall provide
written notice to DMD of such purchase shortfall, and DMD shall have 30 days
from the date of such written notice to pay to SUNI the difference between price
calculated under Section 8.1 below for the Required Minimum Quantities and the
actual quantity of Sensor Assemblies that DMD ordered and paid SUNI for during
the applicable calendar quarter. If DMD fails to pay such amount, then, in
addition to its other remedies, SUNI may terminate DMD's exclusive rights to
market the Sensor Assembly and terminate all exclusivity relating to SUNI's
designs as set forth in Section 8.1 of the Development Agreement. If DMD has
purchased more than CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies in a given Production
Year, then SUNI will credit DMD based on volume pricing, as described in Section
8.1 of this Agreement below, for an amount equal to the difference between the
price paid by DMD for each Sensor Assembly that DMD purchased
Page 6
and paid for during the Production Year and the volume discount price for the
Sensor Assemblies. The credit amount will be credited against future royalties
and/or payments under this Agreement that would otherwise be payable by DMD in
the following Production Year.
7.5. Any increases over minimum orders specified in Section 7.3 above
requires 90-day advance notice to SUNI.
7.6. If DMD does not place orders for a minimum of CONFIDENTIAL INFORMATION
OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor
Assemblies within the required purchase order lead time, to be delivered during
each quarter of the second Production Year of this Agreement (other than
following notice from SUNI that it cannot accept all orders for the Second
Production year) then SUNI will be entitled, in its sole discretion, to maintain
in effect all lease or other agreements with respect to DMD Leased Equipment. If
SUNI decides not to accept all of DMD's Production Year orders in year two or
three or part of such orders in excess of CONFIDENTIAL INFORMATION OMITTED AND
FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies
per Production Year quarter (the "Rejected Orders") then SUNI shall provide DMD
with written notice of such decision. Provided that the Rejected Orders are bona
fide and were made within the applicable minimum purchase order lead times set
forth in this Section 7, then SUNI shall supervise transition of production to a
second source of DMD's choice for (a) in the case of a rejection by SUNI only of
orders in excess of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies in any given Production
Year quarter, all future quantities of Sensor Assemblies and Combined Products
above CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION Sensor Assemblies per Production Year quarter, and (b)
in the case of a rejection which results in SUNI accepting orders totaling fewer
then CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION Sensor Assemblies in a given Production Year quarter,
all future quantities of Sensor Assemblies that DMD desires to purchase from
such second source. SUNI shall continue to assemble and deliver Sensor
Assemblies and Combined Products during the period that SUNI is assisting to
establish the second source, and thereafter SUNI shall promptly deliver the DMD
Leased Equipment to DMD or fully pay all lease obligations of DMD with respect
to such equipment, unless SUNI has elected to continue to supply to DMD the
minimum quantities of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH
THE SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies during each Production
Year quarter. However, SUNI is not required to support DMD for more than six
months after such notice of Rejected Orders. Both DMD and SUNI are required to
give a 90-day notice of intent not to extend manufacture of a minimum of
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION Sensor Assemblies per Production Year quarter prior to
commencement of Production Years two and three.
7.7. Either party may terminate this Agreement effective on the last day of
a Production Year by written notice given in writing at least 90 days prior to
the end of the then current Production Year.
7.8. This agreement may be terminated prior to the expiration of the term
by either party if the other materially breaches this Agreement and such
Page 7
breach remains uncured for 30 days from delivery by the non-breaching party of
written notice of breach.
7.9. Sections 6.2 (as to rights post-termination) 7.3, 7.4, 7.9, 7.11, 8.1,
9.4, 9.5, 9.6 and 9.10 through 9.16 shall survive termination of this Agreement.
7.10. If there are yield problems with components that DMD supplies to SUNI
including wafers, SUNI will identify the problem and report it to DMD along with
recommendations of corrective action. DMD will be responsible for any
manufacturing defects in such components, except to the extent that such defect
is caused by SUNI's negligence, and SUNI may, but will have no obligation to,
conduct acceptance testing of components received from DMD suppliers. If a
manufacturing defect exists in any such component, SUNI's sole and exclusive
remedy against DMD shall be to require DMD to, as quickly as commercially
reasonable, procure replacement parts that meet such specifications, and DMD
shall indemnify SUNI against any third party claims as set forth in Section 9.7
below.
7.11. SUNI terms of sale of Sensor Assembly services to DMD shall be:
payable NET 5 days from date of invoice, FOB, Mountain View, CA. The "date of
invoice" shall mean when a Sensor Assembly and Product Quality Report for such
Sensor Assembly, as described in Section 8.2 below is delivered to DMD. A
payments due under this Section and delayed more than thirty (30) days from the
date of invoice, shall bear interest at a rate equal to the Bank of America
Prime Rate plus one percent (1%) from the date due until paid in full.
Page 8
8. PURCHASE PRICE.
8.1. SENSOR ASSEMBLY. DMD will pay the following amount to SUNI for each
Sensor Assembly that SUNI assembled and delivered to DMD. DMD may, but is not
required to inspect Sensor Assemblies on delivery, and the remedy for defective
Sensor Assemblies shall be as set forth in Section 9.5 below:
NUMBER OF SENSOR ASSEMBLIES SUNI SHIPPED DURING THE PRODUCTION YEAR PRICE PER SENSOR ASSEMBLY
----------------------------------------------------------------------------- ----------------------------------
CONFIDENTIAL INFORMATION OMITTED CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION to SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION COMMISSION
CONFIDENTIAL INFORMATION OMITTED CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION to SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION COMMISSION
CONFIDENTIAL INFORMATION OMITTED CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION to SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION COMMISSION
CONFIDENTIAL INFORMATION OMITTED CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION to SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION COMMISSION
CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION and more SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION
8.2 EXTENDED WARRANTY. DMD will pay the following amount (subject to
adjustment in accordance with this Section below) to SUNI for each Sensor
Assembly and each Board Assembly that is covered under an Extended Warranty, as
defined in Section 9.5 below.
Sensor Assembly Board Assembly
$CONFIDENTIAL INFORMATION OMITTED $CONFIDENTIAL INFORMATION OMITTED
AND FILED SEPARATELY WITH THE AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION
WITH THE SECURITIES AND EXCHANGE WITH THE SECURITIES AND EXCHANGE
COMMISSION COMMISSION
The Extended Warranty price is based on DMD's purchase of a minimum of
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION Sensor Assemblies during the first Production Year of this
Agreement and of CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION Sensor Assemblies during each month of each
Production Year after the first Production Year of this Agreement. If DMD has
failed to purchase such minimum quantities, as of the time that DMD purchases
the Extended Warranty from SUNI, then SUNI shall have no obligation to provide
Extended Warranty services under Section 9.5 below, unless and until, DMD and
SUNI agree on a mutually acceptable Extended Warranty fee to be paid to SUNI.
8.3 PRODUCT QUALITY REPORT. Every Sensor Assembly shipped by SUNI to DMD
shall be accompanied by a product quality report confirming that such Sensor
Assembly meets the Sensor Assembly Functional Specification.
Page 9
9. MISCELLANEOUS
9.1. PROJECT MANAGERS. DMD and SUNI each will appoint Project Managers. The
Project Managers will meet monthly to review the status of the Manufacturing
Agreement.
9.2. MANUFACTURING PROCESS AND RESPONSIBILITY FOR SENSOR ASSEMBLY
COMPONENTS. SUNI will guarantee conformity to the manufacturing process used to
manufacture the Sensor Assembly Components but DMD will look to the individual
vendors for any claims with respect to defects in material or workmanship in
relation to Sensor Assembly Components and Board Assemblies and third party
Board Assembly manufacturing services. Issues pertaining to the design of the
Sensor Assembly and Assembly Board are covered under the Development Agreement.
9.3. WORKER'S COMPENSATION AND INSURANCE. SUNI shall carry (i) adequate
workers compensation, and (ii) insurance, naming DMD as an insured, adequate to
cover the costs of possible loss of or damage to DMD-owned materiel including
the Sensor Assembly Components and Board Assemblies while in its possession and
the DMD Leased Equipment, unless and to the extent that such DMD Leased
Equipment is covered by insurance maintained under the terms of the lease
agreement. SUNI will provide copies of such policies and endorsements within 30
days following execution of this Agreement. SUNI shall guard the DMD Leased
Equipment, Products and components from damage during the period that such
property is in the possession or control of SUNI. SUNI agrees to keep the Sensor
Assembly Components separated from other products of SUNI and take such other
action as DMD may reasonably request (including execution of such
acknowledgments of DMD's ownership and UCC financing statements as DMD may
reasonably require) in order to protect and confirm DMD's ownership rights in
the Sensor Assemblies, Combined Products and their components, and DMD's
interest in the DMD Leased Equipment, subject to SUNI's rights in the DMD Leased
Equipment as set forth in this Agreement.
9.4. SPECIFICATIONS. SUNI and DMD shall agree upon the Sensor Assembly
Functional Specification and Combined Product Specification for both units that
include a PCI personal computer interface and units that include a USB personal
computer interface within 30 days of the signing of this Agreement. The Sensor
Assembly Functional Specification for units that include a PCI personal computer
interface will be attached as Exhibit C(i) to this Agreement and the Sensor
Assembly Functional Specification for units that include a USB personal computer
interface will be attached as Exhibit C(ii) to this Agreement. If the parties
are unable to agree upon the Sensor Assembly Functional Specification and
Combined Product Specification for units that include a PCI, and units that
include a USB, personal computer interface by such time, either party may
terminate this Agreement in its entirety without liability to the other. These
Page 10
specifications can be modified subject to mutual written agreement from time to
time. SUNI owns all right, title and interest in and to the Wafer Specification,
Sensor Assembly Component Specification, Sensor Assembly Functional
Specification, Combined Product Specification and any other technical
specifications that are attached to this Agreement as Exhibit B. If DMD is
entitled to obtain an alternate or replacement source for production of Sensor
Assemblies, in accordance with the terms and conditions of this Agreement under
either of Sections 7.3 or 7.6, then SUNI shall be deemed to grant to DMD a
limited license to use the Specifications for the purpose of such production,
which license shall be identical to the license SUNI granted to DMD with respect
to the Developed Subsystem under Section 7.1 of the Development Agreement
9.5. WARRANTY.
(a) SUNI warrants that all Sensor Assemblies will comply with the Sensor
Assembly Functional Specifications and be free of defects resulting from
workmanship performed by SUNI or its subcontractors for the longer of (i) 90
days from the date of shipment by DMD and (ii) 180 days from the date of
shipment from SUNI to DMD. Visible signs of negligent use or abuse voids this
warranty. This warranty does not extend to the Sensor Assembly Components or
Board Assemblies, and DMD agrees that it will look to the individual vendors for
any claims with respect to defects in material or workmanship in relation to
Sensor Assembly Components and Board Assemblies and third party Board Assembly
manufacturing services. If a Sensor Assembly fails to conform to the foregoing
warranty, then DMD's sole and exclusive remedy against SUNI will be to require
SUNI to correct SUNI's workmanship with respect to any defective test, assembly
and packaging services. In addition, both parties shall participate in the
Warranty Pool that is described in Section 9.5(b) below. EXCEPT AS EXPRESSLY SET
FORTH IN THIS SECTION 9.5, SUNI MAKES NO WARRANTIES , EXPRESS OR IMPLIED, WITH
RESPECT TO THE SERVICES PROVIDED UNDER THIS AGREEMENT, INCLUDING BUT NOT LIMITED
TO THE IMPLIED WARRANTIES OF MERCHANTABILITY AND OF FITNESS FOR A PARTICULAR
PURPOSE.
(b) Both SUNI and DMD agree that it is in their mutual interest to
promptly remedy any failure of a Sensor Assembly to conform to the Sensor
Assembly Functional Specifications for reasons other than misuse or abuse of the
Sensor Assembly (a "Sensor Assembly Defect") and agree to do so in accordance
with this Section 9.5(b) below:
(i) 12 MONTH NO FAULT REPAIRS. DMD and SUNI each agree that if during
the 12 month period from the date that DMD ships a Sensor
Assembly or Board Assembly to a customer, the customer claims a
Sensor Assembly Defect that is covered under DMD's standard
twelve (12) month warranty, then, and provided that at the time
that the customer or DMD returns the defective Sensor Assembly to
Page 11
SUNI, SUNI is still in the business of selling Sensor Assemblies
to DMD under this Agreement, then DMD shall provide all necessary
replacement Sensor Assembly Components and Board Assemblies to
SUNI, and SUNI will provide test, assembly and packaging services
as necessary to re-assemble the defective Sensor Assembly and
re-test the Board Assembly, in accordance with the RMA procedures
set forth in subsection (b)(iii) below. DMD agrees that failures
or defects due to visible misuse or abuse of the Sensor Assembly
or Board Assembly will not be covered under DMD's standard twelve
(12) month warranty.
(ii) EXTENDED WARRANTY. DMD may offer to its customers, the
opportunity to purchase a twelve month extension of DMD's
standard twelve (12) month warranty for Sensor Assemblies, Board
Assemblies and Combined Products (an "Extended Warranty"). If DMD
elects to offer an Extended Warranty, then it must notify SUNI
within thirty (30) days after SUNI's shipment to DMD of a Sensor
Assembly, Board Assembly or Combined Product that the Extended
Warranty will apply to the shipped product. DMD will provide, as
part of such notice, the product identification number for each
Sensor Assembly, Board Assembly and Combined Product to be
covered under the Extended Warranty and will remit to SUNI
payment of the Extended Warranty Fee calculated in accordance
with Section 8.2 above. Provided that DMD has complied with the
requirement of this subsection (b)(ii), then SUNI's obligations
to repair and replace Sensor Assembly Defects will be the same
during the Extended Warranty period as they are during the
initial 12 month warranty period described in Subsection (b)(i)
above, otherwise SUNI's only obligations with respect to Sensor
Assembly Defects after the initial twelve month period shall be
as set forth in Subsection (b)(iii) below.
(iii) CORRECTION OF SENSOR ASSEMBLIES DEFECTS NOT COVERED BY A
WARRANTY.
A. SYSTEMIC DEFECTS. For purposes of this Agreement a "Systemic
Defect" means a Sensor Assembly Defect that occurs in
identical or substantially similar form or from a
substantially similar cause in at least fifteen percent
(15%) of the field population of Sensor Assemblies within
two (2) years after receipt of delivery of the Sensor
Assemblies by DMD. DMD agrees that it will, at all times
during the term of this Agreement, and for so long as it
continues to sell or otherwise support Sensor Assemblies and
Board Assemblies, carry insurance that names SUNI as an
additional insured and that is sufficient to cover the costs
of possible loss or damage arising out of
Page 12
Systemic Defects, including, but not limited to, the cost of
replacement Components and of manufacturing, test and
assembly services. DMD will provide a copy of such insurance
policy to SUNI upon SUNI's request. SUNI and DMD agree that
they will complete negotiation of the allocation of the cost
of such Systemic Defect insurance within thirty (30) days
from the date of this Agreement.
B. OTHER DEFECTS. With respect to Sensor Assembly Defects that
are not covered under DMD's standard 12 month warranty or
under and Extended Warranty and that are not Systemic
Defects, both DMD and SUNI agree that it is in their mutual
best interest to preserve customer good will and to
cooperate on a case by case basis to remedy such defects in
a manner that is in the customer's interest and is equitable
for DMD and SUNI.
(iv) RMA PROCEDURES. If DMD authorizes a customer to return a Sensor
Assembly, Board Assembly or Combined Product that the customer
claims is defective, DMD shall assign a RMA number to the
returned item and then forward the returned item to SUNI together
with a written description of the claimed defect. SUNI will test
the returned item and if SUNI agrees that: (i) the item is
defective, (ii) the defect is covered under the terms of DMD's
standard twelve (12) month warranty, and (iii) the defect did not
result from abuse or misuse of the returned item, then SUNI will
notify DMD whether the returned item should be repaired or
replaced. If SUNI recommends repair, then it will notify DMD of
the replacement Components that SUNI requires in order to repair
the returned item. If SUNI recommends replacement, then SUNI will
provide a replacement Sensor Assembly or Combined Product to DMD,
provided that SUNI has the Sensor Assembly Components and/or
Board Assembly available to assemble the replacement Sensor
Assembly or Combined Product, as applicable. All repaired and
replacement Sensor Assemblies, Board Assemblies and Combined
Products will remain under warranty for the balance of the
warranty term that applied to the original Sensor Assembly, Board
Assembly or Combined Product, as applicable. If, as a result of a
defect that is covered under an original 12 month warranty, an
Extended Warranty, or Systemic Defect, DMD is required to
purchase a replacement Sensor Assembly Component that is a
Licensed Product under the Development Agreement, DMD shall be
relieved of any obligations it may have under the Development
Agreement to pay SUNI a royalty on such replacement Licensed
Product.
9.6. DMD INDEMNITY. DMD assumes all risk, responsibility and liability
arising out of defects in the Sensor Assembly Components and Board Assemblies,
except to the extent that such liability arises from defects in the design for
which SUNI is liable in accordance with the terms and conditions of
Page 13
the Development Agreement or its omissions or negligence or defects in the
services provided by SUNI under this Agreement and for which SUNI is liable in
accordance with Section 9.5 above (collectively, the "DMD Assumed Risks"). DMD
will, and hereby agrees to, indemnify and hold harmless SUNI from and against
any losses, costs, liability or damages that SUNI may suffer as a result of such
DMD Assumed Risks.
9.7. COMPLIANCE WITH LAWS. SUNI shall comply with all applicable federal,
state and local laws and regulations including labor and environmental laws and
regulations.
9.8. FORCE MAJEURE. Neither SUNI nor DMD shall be deemed to be in default
or liable to each other on account of delays in delivery or in the performance
of any other act to be performed by SUNI or DMD under this Agreement due to any
cause to the extent it is beyond SUNI's or DMD's control or not occasioned by
SUNI's or DMD's fault or negligence. Notwithstanding the foregoing:: (a) if SUNI
estimates that the delay in delivery of Sensor Assemblies will exceed six (6)
months where the delay is attributable to delays or shortfalls in the wafer
supply, or three (3) months where the delay is attributable to reasons other
than delays or shortfalls in the wafer supply; or (b) if the delay in fact
exceeds six months in the case of delays or shortfalls of wafer supply; or three
(3) months in the case of all other delays that are subject to this Section,
then DMD may elect to purchase Sensor Assemblies from an alternative supplier
unless the delay results from delays in the supply of Sensor Assembly Components
or Board Assemblies and but for such delay SUNI would be able to assemble Sensor
Assemblies and Combined Products in accordance with the terms of this Agreement
(the "DMD Alternate Supply Election"). If DMD makes a DMD Alternate Supply
Election, then; (a) SUNI shall render all necessary assistance to DMD and the
alternative supplier, at no additional expense to DMD during the first sixty
(60) days from the date that SUNI commences to provide such assistance and at
SUNI's then current commercial consulting rates after such initial sixty (60)
day period, to facilitate the manufacturing, assembling and packaging of Sensor
Assemblies; (b) all purchases made by DMD from the alternative supplier shall be
credited to DMD for the purposes of the purchase requirements under this
Agreement; and (c) within four (4) months of such delay in delivery being
resolved, DMD shall cease purchasing Product from such alternate supplier and
shall again purchase Sensor Assemblies and Combined Products from SUNI under the
terms of this Agreement.
Page 14
9.9. AMENDMENTS. This Agreement may only be amended by express written
agreement signed by an authorized representative of each party. Failure by a
party to insist upon strict conformance to any provision herein, or in purchase
orders issued hereunder, or failure by a party to act in the event of a breach
of default, shall not construed as a consent or waiver by the non-breaching
party of that breach or default or any subsequent breach of default of the same
or of any other provision contained herein.
9.10. ASSIGNMENT. SUNI's rights and obligations under this Agreement are
personal and not assignable (either voluntarily or by operation of law) without
the prior written consent of DMD except to a successor to all or substantially
all of SUNI's assets or to a majority of SUNI's voting stock; provided, however,
that if such successor is a direct competitor of DMD, then DMD's prior consent
shall be required, which consent may be withheld in DMD's sole discretion. DMD
shall not assign its rights and obligations hereunder without the prior written
consent of SUNI, which shall not be unreasonably withheld. This Agreement shall
be binding upon and inure to the benefit of each party's permitted successors
and assigns.
9.11. SUBCONTRACT. SUNI may, from time to time, subcontract or permit
entities other than SUNI to perform the work, services or other performance
required under this Agreement without he prior written consent of DMD; provided
that SUNI shall remain responsible for each such subcontractor's performance.
SUNI is and will remain at all times during this Agreement an independent
contractor of DMD. SUNI is responsible for the acts of its employees.
9.12. ATTORNEYS FEES. If SUNI or DMD, for any cause whatsoever, brings suit
against the other party and the other party is finally adjudicated not to have
liability, then the party bringing suit will pay the other party's reasonable
attorneys' fees and costs which were incurred in defending said suit.
9.13. NO CONSEQUENTIAL Damages. EXCEPT IN THE CASE OF A WILLFUL AND
INTENTIONAL BREACH OF A MATERIAL PROVISION OF THIS AGREEMENT, NEITHER PARTY WILL
BE LIABLE TO THE OTHER WITH RESPECT TO ANY SUBJECT MATTER OF THIS AGREEMENT
UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE
THEORY FOR ANY SPECIAL, INCIDENTAL, CONSEQUENTIAL OR INDIRECT DAMAGES OR LOST
PROFITS. THIS LIMITATION SHALL APPLY EVEN IF A PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES.
9.14. ENTIRE AGREEMENT. Except as expressly set forth in Sections 7.3 and
7.4 above, nothing in this Agreement shall be deemed to modify the terms and
conditions of the Development Agreement. This Agreement and its exhibits
contains the entire understanding of the parties with respect to the matters
contained herein. There are no promises, covenants or undertakings, either oral
Page 15
or in writing, other than those expressly set forth in this Agreement.
9.15. NOTICE. All notices which any party may be required or desire to give
to another Party shall be in writing and shall be given by personal service,
facsimile, or registered or certified mail to the party at its respective
address or facsimile telephone number set forth below. Mailed notices shall be
deemed to be given upon actual receipt by the party to be notified. Notices
delivered by facsimile shall be confirmed in writing by overnight courier and
shall be deemed to be given upon actual receipt by the party to be notified.
If to DMD:
Dental/Medical Diagnostic Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
Attn: Dr. Xxxx Xxxxxxx
Xxxxxx Xxxxxxxxx
With a copy to:
Xxxxxx Xxxxxxxx
If to SUNI: President
SUNI Imaging Microsystems, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
Page 16
9.16. CHOICE OF LAW. This Agreement, its validity, construction and effect
shall be governed by the internal laws of the State of California, without
giving effect to its rules relating to conflicts of laws.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed by their duly authorized officers as of the date set first set forth
above.
DENTAL/MEDICAL DIAGNOSTICS, INC.
By: /S/ Xxxx Xxxxxxx
Its:
SUNI IMAGING MICROSYSTEMS, INC.
By: /S/ Paul Suni
Its:
EXHIBIT A-1
PCI XXXX OF MATERIALS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT A-2
USB XXXX OF MATERIALS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT B-1
PCI BOARD ASSEMBLY SPECIFICATIONS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT B-2
USB BOARD ASSEMBLY SPECIFICATIONS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT C-1
PCI SENSOR ASSEMBLY FUNCTIONAL SPECIFICATION
AND COMBINED PRODUCT SPECIFICATIONS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT C-2
USB SENSOR ASSEMBLY FUNCTIONAL SPECIFICATION
AND COMBINED PRODUCT SPECIFICATIONS
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT D
EQUIPMENT LIST
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT E
MEMORANDUM FROM DMD TO SUNI DATED JANUARY 14, 1999
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
EXHIBIT F
INITIAL ORDER
CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
