PATENT LICENSE AGREEMENT
BETWEEN
LEXAR MEDIA AND SAMSUNG ELECTRONICS CO., LTD.
This Patent License Agreement ("Agreement") is made and entered into as of
March 23, 2002 (the "Effective Date") between Lexar Media, Inc., a Delaware
corporation (Lexar Media, Inc, its subsidiaries and affiliates are hereinafter
referred to as "Lexar") and Samsung Electronics Co., Ltd., a corporation of
South Korea ("Samsung").
RECITALS
A. Lexar Media, Inc. ("Lexar") is the owner and user of certain proprietary
technology related to flash memory controllers, flash memory and system
architecture.
B. Samsung designs, manufactures, and sells certain flash memory
technology.
C. In 2001, Lexar and Samsung executed a Purchase Agreement ("Purchase
Agreement") and Lexar and Samsung Semiconductor, Inc. executed a Consignment
Contract ("Consignment Contract") pursuant to which Lexar will purchase from
Samsung Semiconductor certain flash memory and Samsung will purchase from Lexar
certain flash controller products. Given these relationships, the parties agree
that their interests are aligned with one another.
D. Samsung desires to receive from Lexar a license to Lexar's proprietary
technology to manufacture, market and sell certain flash memory products and
components thereof on the terms and conditions of this Agreement.
NOW, THEREFORE, Lexar and Samsung hereby agree as follows:
1. DEFINITIONS
1.1 "Affiliate" means, with respect to any entity, any other entity
that controls, is controlled by or is under common control with such entity. For
purposes of this Agreement, an entity shall be in "control" of an entity if it
owns or controls at least fifty percent (50%) of the equity securities of the
subject entity entitled to vote for the election of directors (or, in the case
of an entity that is not a corporation, for the election of the corresponding
managing authority), or otherwise has the power to control the management and
policies of such other entity.
1.2 "Flash Controller" means a device within Flash Card Products
(whether implemented in firmware, hardware and/or software) that controls the
operation of a memory within such Flash Card Products.
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as *. A complete version of this exhibit has been filed
separately with the Securities and Exchange Commission.
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1.3 "Flash Card Products" means a Flash Memory System on a card having
a connector that attaches it to a host system.
1.4 "Flash Memory System" means an integrated circuit memory system
that contains: (a) one or more interconnected flash memory devices or flash
memory integrated circuits, and (b) in-system control, I/O and other support
circuit(s) that are: (i) interconnected with the flash memory devices or flash
memory integrated circuits and (ii) necessary to the operation of the memory
system.
1.5 "Global Market Share" means the percentage of Flash Card Products
units sold worldwide by form factors in accordance with data as published by
International Data Corporation ("IDC").
1.6 "Global Market Share Ceiling" means (i) * percent (*%) of the
Global Market Share; or (ii) * percent (*%) of the Global Market Share, if Lexar
fails to satisfy the minimum purchase requirements under Section 4.1 of the
Purchase Agreement during the first six (6) quarters following the effective
date of the Purchase Agreement. After the first twelve (12) quarters following
the effective date of the Purchase Agreement, the Global Market Share Ceiling is
* percent (*%) of the Global Market Share.
1.7 "Have Manufactured" means only that the licensee may contract with
a third party or parties to manufacture the licensed product for and on behalf
of the licensee.
1.8 "High-Speed Memory Stick" means a memory data storage device that
meets the High-Speed Memory Stick Specifications.
1.9 "High-Speed Memory Stick Specifications" means the specifications
for a certain flash memory data storage device developed by Sony (as such
specifications are from time to time modified or replaced by Sony in its sole
discretion).
1.10 "Improvements Technology" means any improvements or enhancements
to the Lexar Technology that are conceived or developed by Samsung and that
would, absent the licenses granted hereunder, infringe or constitute a
misappropriation of the Lexar Intellectual Property Rights.
1.11 "Intellectual Property Rights" means, with respect to a party,
all rights of such party in and to all patents, patent applications, and patents
issuing from such patent applications in any country or jurisdiction in the
world.
1.12 "Lexar Intellectual Property Rights" means the Intellectual
Property Rights owned by or licensed to Lexar (but, in either case, only
Intellectual Property Rights owned by or licensed to Lexar wherein Lexar has the
right to grant sublicenses without payment of compensation to any third party
other than Lexar employees), anytime within the fifth anniversary of the
Effective Date, in and to the Lexar Technology.
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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1.13 "Lexar Technology" means the technology described in Lexar's
patents and patent applications.
1.14 "Licensed Lexar Products" means, individually or collectively,
Flash Controllers, Flash Card Products, Memory Sticks, High-Speed Memory Sticks
and Smart Media.
1.15 "Memory Stick" means a flash memory data storage device that
meets the Memory Stick Specifications. Memory Stick includes without limitation
Sony's miniature Memory Stick known as the "Duo".
1.16 "Memory Stick Specifications" means the specifications for a
certain flash memory data storage device developed by Sony (as such
specifications are from time to time modified or replaced by Sony in its sole
discretion).
1.17 "Net Selling Price" means the gross sales price of a product
invoiced by Samsung or its Affiliates to customers that are not Affiliates for
the sale or other distribution of Licensed Lexar Products, less (a) credits,
allowances, discounts, sales commission, and rebates to such customers; (b)
chargebacks from the account of such customers for damaged and returned
products; (c) freight and insurance costs incurred in transporting such product
to such customers; (d) cash, quantity and trade discounts, rebates and other
price reductions for such product given to such customers under price reduction
programs that are consistent with industry practices and price reductions given
for similar products by Samsung or its Affiliates; (e) sales, use, value-added
and other direct taxes incurred on the sale of such product to such customers;
and (f) customs duties, surcharges and other governmental charges incurred in
exporting or importing such product to such customers. In the case of Licensed
Lexar Products sold or distributed with other products during any quarter, the
Net Selling Price of such Licensed Lexar Products shall be the average Net
Selling Price of the same or comparable model of Licensed Lexar Products sold
separately to unaffiliated third parties in arm's length transactions during
such calendar quarter.
1.18 "Samsung Intellectual Property Rights" means the Intellectual
Property Rights owned by or licensed to Samsung or those rights in and to the
Improvements Technology.
1.19 "Secure Digital Card" means a type of Flash Card Products having
a flash memory storage device that meets the Secure Digital Specifications.
1.20 "Secure Digital Specifications" means the specifications for a
certain flash memory data storage device developed by The Secure Digital
Association (as such specifications are from time to time modified or replaced
by The Secure Digital Association or, in the event of a merger of The Secure
Digital Association with another entity, by the subsequent entity, in its sole
discretion).
1.21 "Secure Multi-Media Card" means a type of Flash Card Products
having a flash memory storage device that meets the Secure Multi-Media
specifications.
1.22 "Smart Media" means a flash memory storage device that meets the
Smart
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Media Specifications.
1.23 "Smart Media Specifications" means the specifications for a
certain flash memory storage device developed by the Smart Media Association (as
such specifications are from time to time modified or replaced by the Smart
Media Association in its sole discretion).
1.24 "Flash Card Controller" means a device (whether implemented in
firmware, hardware and/or software) that controls the operation of Flash Card
Products.
1.25 "Flash Products" means flash storage or controller product
including but not limited to flash memory, Flash Controller, Flash Card Product,
Flash Memory System, and Flash Card Controller.
1.26 "* Period" means the period of time from the Effective Date of
this Agreement until *, unless earlier terminated in accordance with Section
7.3(a) below.
1.27 "Secure Media Card" means a type of Flash Card Products having a
flash memory storage device that meets either the Secure Multi-Media
specification or the Secure Digital Specification as defined herein. For
purposes of this Agreement, the Secure Media Cards shall mean Secure Digital
Cards and Secure Multi-Media Cards, or any variation or combination thereof.
1.28 "CompactFlash Cards" means a flash memory storage device that
meets the CompactFlash Association Specifications.
1.29 "CompactFlash Association Specifications" means the
specifications for a certain flash memory storage device developed by the
CompactFlash Association (as such specifications are from time to time modified
or replaced by the CompactFlash Association in its sole discretion).
2. GRANT OF LICENSE RIGHTS
2.1 Lexar License Grants.
(a) Until the last to expire of the Lexar Intellectual Property
Rights, and subject to Samsung's compliance with the terms and conditions of
this Agreement, Lexar hereby grants to Samsung a * license under all Lexar
Intellectual Property Rights to manufacture, Have Manufactured, use, offer for
sale, import and sell Smart Media.
(b) Until the last to expire of the Lexar Intellectual Property
Rights, and subject to Samsung's compliance with the terms and conditions of
this Agreement, Lexar hereby grants to Samsung a * license under all Lexar
Intellectual Property Rights to manufacture, Have Manufactured, use, offer for
sale, import and sell Memory Sticks. The license granted under this Section
2.1(b) does not include, and specifically excludes, the right to *.
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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(c) Subject to Samsung's compliance with the terms and conditions
of this Agreement, including but not limited to Sections 2.2, 2.4(d) and 2.5(a)
below, Lexar hereby grants to Samsung a * license under all Lexar Intellectual
Property Rights to manufacture, Have Manufactured, use, offer for sale, import
and sell High-Speed Memory Sticks. The * on this license expressly excludes any
* including, but not limited to, *. Samsung shall have the right to terminate
the grant of the license in this Section 2.1(c) at anytime during the term of
this Agreement with a thirty-day (30) prior written notice. The license granted
in this Section 2.1(c) shall * at the end of the * Period.
(d) Subject to Samsung's compliance with the terms and conditions
of this Agreement, during the initial five (5) year term of the Purchase
Agreement (the "Initial Purchase Agreement Term"), Lexar covenants not to xxx:
(i) Samsung or its Affiliates for the manufacture (including Having
Manufactured), offer for sale, importation or sale of *; or (ii) any customer of
Samsung or its Affiliates for the offer for sale, importation or sale of *.
(e) If Samsung elects to extend the Purchase Agreement after the
Initial Purchase Agreement Term for a subsequent five (5) year term, on the same
terms as originally set forth therein, then Lexar will grant to Samsung a *
license under all Lexar Intellectual Property Rights to manufacture, Have
Manufactured, use, offer for sale, import and sell *. In the event that Samsung
makes such an election, then the definition of "Lexar Intellectual Property
Rights" shall be expanded to include the Intellectual Property Rights owned by
or licensed to Lexar (but, in either case, only Intellectual Property Rights
owned by or licensed to Lexar wherein Lexar has the right to grant sublicenses
without payment of compensation to any third party other than Lexar employees),
anytime within the tenth anniversary of the Effective Date, in and to the Lexar
Technology.
(f) Subject to Samsung's compliance with the terms and conditions
of this Agreement, including but not limited to Sections 2.2, 2.4(d) and 2.5(a)
below, Lexar hereby grants to Samsung a * license under the Lexar Intellectual
Property Rights to manufacture, Have Manufactured, use, offer for sale, import
and sell Secure Media Cards. The license granted in this Section 2.1(f) shall
* at the end of the * Period.
(g) Subject to Samsung's compliance with the terms and conditions
of this Agreement, including but not limited to Sections 2.2, 2.4(d) and 2.5(a)
below, Lexar hereby grants to Samsung * license under the Lexar Intellectual
Property Rights to manufacture, Have Manufactured, use, offer for sale, import
and sell CompactFlash Cards *. The * of this license specifically excludes * and
also shall specifically exclude the *. For the avoidance of doubt, Lexar shall *
and any licenses granted prior to the date of this Agreement *. The license
granted in this Section 2.1(g) shall terminate at the end of the * Period.
(h) If Lexar fails to purchase * dollars ($*) in Samsung Products
(as defined in the Purchase Agreement) during the first six quarters of the
Purchase Agreement, or if Lexar fails to purchase * million ($*) in Samsung
Products during the first twelve quarters of the Purchase Agreement, then with
the exception of the * licenses set forth in Sections 2.1(b), 2.1(c), 2.1(f) and
2.1(g), which shall continue without modification, Lexar will grant to Samsung a
*
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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license through the term of this Agreement under all Lexar Intellectual Property
Rights to manufacture, Have Manufactured, use, offer for sale, import and sell *
as of the first day of the quarter in which Lexar fails to make such purchases.
(i) If Samsung licenses any or all of the Samsung Intellectual
Property Rights to any company, excluding Lexar and its Affiliates, that has
more than *, or a comparable entity, the licenses granted under Sections 2.1(c),
2.1(f) and 2.1(g) shall immediately *.
2.2 Sublicense. Samsung shall be permitted to sublicense the rights
granted in Sections 2.1(a) and (e) to any Samsung Affiliates; provided that
Samsung shall promptly notify Lexar in writing of sublicenses granted to such
Affiliates and Samsung will be responsible for each such Affiliate's compliance
with the terms and conditions of this Agreement. Each such sublicense must
expressly and automatically terminate if the entity no longer is an Affiliate of
Samsung. The * licenses granted in Sections 2.1(c), 2.1(f) and 2.1(g) above do
not include, and specifically exclude, the right to *.
2.3 Samsung Cross License and Covenant Not to Xxx. Samsung hereby
grants to Lexar a * license under all Samsung Intellectual Property Rights to
manufacture, Have Manufactured, use, offer for sale, import and sell Licensed
Lexar Products. Samsung covenants not to xxx: (i) Lexar and its Affiliates for
the manufacture (including Having Manufactured), offer for sale, importation or
sale of Flash Card Products; or (ii) any customer of Lexar or its Affiliates for
the offer for sale, importation or sale of Flash Card Products made or have made
by Lexar. The rights and covenants granted hereunder shall not be assignable or
transferable in any way, and Section 12.3 of this Agreement shall not be
applicable hereto.
2.4 Restrictions.
(a) Except as expressly provided in Sections 2.1 and 2.2 above,
Samsung will have no right or license to use, sublicense, transfer or otherwise
convey to any third party the Lexar Intellectual Property Rights, or any
enhancement, improvement or derivative thereof.
(b) Samsung shall have no right to use the Lexar trade name or
Lexar trademarks.
(c) Samsung's exercise of its "Have Manufactured" rights under
Section 2.1 is contingent upon Samsung entering into a non-disclosure agreement
with each manufacturer that protects the Confidential Information of Lexar to
the same extent as provided for in this Agreement.
(d) Until *, the license granted to Samsung under Section 2.1(f)
above does not include, and specifically excludes, the right to manufacture,
Have Manufactured, use, sell, offer for sale and import *.
2.5 Reservations.
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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(a) The * licenses granted in Sections 2.1(c), 2.1(f) and 2.1(g)
above are subject to * to manufacture, Have Manufactured, use, sell, offer for
sale and import *, including but not limited to * and to practice any process,
within the full scope and for the full term of the Lexar Intellectual Property
Rights.
(b) No license or right is granted, by implication or otherwise,
to either party hereunder under any patent rights, Confidential Information or
other intellectual property rights now or hereafter owned or controlled by the
other, except for the licenses and rights expressly granted in this Agreement.
3. JOINT DEVELOPMENT OF FLASH CONTROLLERS
Samsung and Lexar shall discuss in good faith a joint development
program for Flash Controllers; provided, however, that the foregoing will not be
deemed to obligate or in any way require either party to undertake such a
program. Lexar will describe for Samsung the way in which *.
4. PAYMENTS AND PAYMENT TERMS
Lexar and Samsung expressly acknowledge and confirm that the royalty
rates and other applicable royalty payments terms set forth in this Section 4
have been negotiated and structured for the mutual convenience of the parties.
Lexar and Samsung further acknowledge and confirm that the royalty obligations
set forth in this Section 4 will remain in effect until the last to expire of
the Lexar Intellectual Property Rights, except as otherwise set forth throughout
the subsections below.
4.1 * License Fee and Royalties. In consideration of the license
granted under Section *, Samsung shall pay Lexar the amounts set forth below:
(a) During the first through eighth quarters following the
Effective Date, Samsung shall pay Lexar a non-refundable, non-creditable against
royalties license fee of * dollars ($*), net of taxes pursuant to Section 4.6
("Taxes"). Such * dollars, discounted at a net present value of five percent
(5%), shall be due and payable on or before March 29, 2002. The discounted net
present value of * dollars ($*) is * dollars ($*). The first eight quarters of
this Agreement shall be referred to as the "*."
(b) After the *, Samsung shall pay Lexar the non-refundable
royalties specified in Section 1 of Exhibit A for each * sold or distributed by
Samsung or its Affiliates. Such royalties will be due and payable within sixty
(60) calendar days after the end of June and December for the preceding
six-month period. Notwithstanding the foregoing, no royalty will accrue on sales
of * or Lexar for further resale by * on an OEM basis. The parties expressly
acknowledge that the amount of such royalties is reasonable, taking into account
the anticipated discontinuance by *.
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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4.2 *Royalties. Lexar and Samsung shall negotiate in good faith to
decide the * royalty conditions after the Effective Date. Lexar hereby
guarantees that such royalty conditions shall be the *. Notwithstanding the
foregoing, no royalty will accrue on sales of * for further resale by * on an
OEM basis.
4.3 *Royalties.
(a) During the Initial Purchase Agreement Term, Samsung will have
no obligation to pay royalties to Lexar for the sale or distribution by Samsung
or its Affiliates of *, provided that the aggregate quantity of such products
sold or distributed by Samsung and its Affiliates does not exceed the greater
of: (i) the Global Market Share Ceiling; or (ii) the aggregate quantity of *
sold by Lexar (including sales of * (the "Lexar Sales Ceiling"). The foregoing
determination will be made by the parties within thirty (30) calendar days
following every annual publication of a compilation by the IDC. For purposes of
such determination, Lexar shall provide its sales record to Samsung annually at
the same time as it files its 10-K with the United States Securities and
Exchange Commission. (The greater of the Global Market Share Ceiling or the
Lexar Sales Ceiling, as determined herein, is referred to as the "Royalty
Trigger Threshold".)
(b) If, during the Initial Purchase Agreement Term, the number of
units of *, sold or distributed by Samsung or its Affiliates exceeds the Royalty
Trigger Threshold, then Samsung shall pay Lexar the non-refundable royalties
specified in Section 2 of Exhibit A for each * sold or distributed by Samsung or
its Affiliates that exceeds the Royalty Trigger Threshold. For purposes of this
Agreement, all Samsung sales of * as defined in Section 2 of Exhibit A.
Notwithstanding the foregoing, no royalty will accrue on sales of * by Samsung
or its Affiliates to Lexar. Such royalties will be due and payable within sixty
(60) calendar days after each IDC annual publication.
4.4 *Payment. For the * rights in Section 2.1(f) and 2.1(g) of this
Agreement, Samsung shall pay Lexar a non-refundable, non-creditable against
royalties, license fee of * dollars ($*). Such license fee will be due and
payable in full on or before March 29, 2002. If the parties mutually agree to
extend the * Period, and Samsung tenders an additional non-refundable,
non-creditable against royalties, license fee of * dollars ($*) prior to the
expiration of the initial * Period (*), then the * Period may be extended until
*.
4.5 Other Payment Terms. On any overdue payments, Samsung shall pay a
finance charge upon the unpaid balance of the lesser of the prime rate plus two
percent (2%) annually and the maximum amount permitted by law. All amounts
specified in this Agreement shall be paid in U.S. dollars and shall not be
subject to setoff against any other amounts due and payable under this Agreement
or any other agreement.
4.6 Taxes. Samsung shall pay any and all national, state, or local
excise, sales, use, withholding, value-added, or other taxes or duties imposed
by any applicable laws and regulations in respect of the payments made under
this Agreement or otherwise arising out of this Agreement, other than taxes
based upon Lexar's net income. If Samsung pays, on Lexar's behalf, any
withholdingtaxes that are required to be paid under applicable law, Samsung will
furnish
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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Lexar with written documentation of such payments, including but not limited to
receipts, of any and all such taxes paid by Samsung.
5. RECORDS AND AUDIT REQUIREMENTS
5.1 Records. For a period of three (3) years after the later date that
each royalty or other payment is due or is made under this Agreement, Samsung
will make and maintain such books, records and accounts as are reasonably
necessary to verify such royalty and other payments.
5.2 Reports. Within sixty (60) calendar days after the end of each
calendar half, or in the case of Section 4.3, within sixty (60) calendar days
after the end of each annual IDC publication, until all royalties and other
payments payable hereunder shall have been reported and paid, Samsung shall
furnish to Lexar a statement specifying the royalties owed for such six month
period. If no royalties are due, that fact shall be shown on such statement.
5.3 Audit. Upon at least thirty (30) calendar days prior written
notice, no more than once a year, either party shall have the right, at its own
cost and expense, to authorize a certified public accounting firm of
internationally recognized standing selected by that party and approved by the
other, which approval will not be unreasonably withheld, to audit the other's
books, records, and accounts, and other relevant information for the purpose of
(i) verifying royalties and other payments reported under Section 5.2, and
(ii) verifying Lexar Sales Ceiling under Section 4.3. If such accounting firm
concludes that additional amounts were owed to Lexar during the audited period,
Samsung shall pay such additional amounts within thirty (30) calendar days of
the date Lexar delivers to Samsung such accounting firm's written report so
concluding. The fees charged by such accounting firm shall be paid by the party
authorizing the audit; provided, however, if the audit discloses that the
royalties payable by Samsung for such period are more than one hundred fifteen
percent (115%) of the amounts actually paid for such period, then Samsung shall
pay the reasonable fees and expenses charged by such accounting firm.
6. CONFIDENTIAL INFORMATION
6.1 Definition of Confidential Information. Lexar and Samsung
acknowledge that, in the course of performing their respective obligations
hereunder, each may obtain information relating to the other and the other's
products that is of a confidential and proprietary nature to such other party.
"Confidential Information" means confidential or proprietary information of
either party which is (i) designated with the legend "Confidential" or
comparable legend in case of disclosure thereof in written, graphic, machine
readable or other tangible form or (ii) designated "Confidential" at the
disclosure thereof in other form and within thirty (30) calendar days after such
disclosure set forth in writing designated "Confidential" and forwarded to the
receiving party. Confidential Information further includes without limitation
the existence and terms of this Agreement.
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6.2 Exclusions. Confidential Information does not include information
which (i) is or becomes public knowledge or is received by the other party
without the fault or action of the other party or any breach of any
confidentiality obligation; (ii) the other party can document was independently
developed by it without use or access to the Confidential Information; or (iii)
the other party can document was previously known to it prior to receipt of the
Confidential Information.
6.3 Obligation. Each of Samsung and Lexar agrees that, during the term
of this Agreement and for a period of five (5) years thereafter, it will: (i)
use the other party's Confidential Information only in connection with
fulfilling its rights and obligations under this Agreement; (ii) hold the other
party's Confidential Information in strict confidence and exercise due care with
respect to its handling and protection, consistent with its own policies
concerning protection of its own Confidential Information of like importance but
in no instance less than reasonable care, such due care including without
limitation requiring its employees to execute non-disclosure agreements which
provide protection of the other party's Confidential Information which is at
least as protective as the terms and conditions of this Agreement; (iii) not
disclose, divulge or publish the other party's Confidential Information except
to such of its responsible directors, employees and consultants and legal and
financial advisors who have a bona fide need to know to the extent necessary to
fulfill such party's obligations under this Agreement or except to the extent
such Confidential Information is required to be disclosed pursuant to applicable
law, regulation or court order provided the other party uses reasonable efforts
to give the party owning the Confidential Information sufficient notice of such
required disclosure to allow the party owning the Confidential Information
reasonable opportunity to object to and to take legal action to prevent such
disclosure (or to request confidential treatment thereof); and (iv) instruct all
such employees not to disclose the other party's Confidential Information to
third parties, without the prior written permission of the other party. Samsung
acknowledges and agrees that the "bona fide need to know" standard set forth in
the foregoing subsection (iii) above as applied to dissemination of Lexar
Technology requires that authorized Samsung employees must have actual need to
use the Lexar Technology to design or develop a specific Licensed Lexar Product.
Samsung further acknowledges and agrees that theoretical analysis and
investigation of (a) the features and functionality of the Lexar Technology or
(b) potential application of the Lexar Technology for an unidentified project
will not satisfy the "bona fide need to know" standard. Each party may disclose
Confidential Information of the other party: (i) to its legal and financial
advisors, as necessary to obtain tax, legal and accounting advice; (ii) in
connection with SEC filings; and (iii) to bona fide potential investors or
acquirers in connection with a financing, merger, acquisition or similar
transaction, provided that investors or acquirers are subject to,
confidentiality obligations at least as restrictive as those contained herein.
7. INTELLECTUAL PROPERTY RIGHTS
7.1 Lexar Technology. All right, title, and interest in and to the
Lexar Technology, and all Intellectual Property Rights therein are the sole and
exclusive property of Lexar.
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7.2 Samsung Technology. All right, title, and interest in and to any
the Improvements Technology or Samsung Intellectual Property Rights (exclusive
of the underlying Lexar Technology and Lexar Intellectual Property Rights) are
the sole and exclusive property of Samsung.
7.3 *.
(a) Lexar shall have the sole and exclusive right to * Lexar's
Intellectual Property Rights * and to * involving Lexar's Intellectual Property
Rights, including the right to *. However, in the event that Samsung discovers
that Lexar's Intellectual Property Rights *, Samsung shall have the right to
request that Lexar *. If Lexar fail to * within thirty (30) days following
notice by Samsung, then Samsung shall have the right to * within thirty (30)
days of such failure. In such *, Samsung shall have the right *. Other than
these express rights, Samsung shall not, and has no right to, * the Lexar
Intellectual Property Rights or *. Except as expressly provided in this Section
7.3(a), Samsung shall not * the Lexar Intellectual Property Rights *. In the
event that Samsung * in violation of this Section 7.3(a), Lexar may, in addition
to any other rights, damages and remedies it may have against Samsung,
immediately *.
(b) If requested by one of the parties, the other party shall * and
neither party shall *. Other than Samsung actions taken as a result of failure
by Lexar to *, as set forth in Section 7.3(a) above, Samsung's *.
(c) Lexar shall have the sole and exclusive right, but not the
obligation, to pay maintenance fees to keep the Lexar Intellectual Property
Rights in force.
8. USE OF CONTRACTORS
Each party may retain third parties ("Contractors") to furnish
services to it in connection with the performance of this Agreement and permit
such Contractors to have access to the other party's Confidential Information,
but only to the extent and insofar as reasonably required in connection with
such party's performance under this Agreement; provided that all such
Contractors shall be required to execute a written agreement sufficient to
secure compliance by the Contractors with the contracting party's obligations of
confidentiality concerning Confidential Information set forth in this Agreement.
9. WARRANTY
9.1 Royalty Rates. Lexar warrants to Samsung that the royalty rates
for the *, which the parties shall decide upon later, will be the lowest royalty
rates made available by Lexar for such products to any of its other licensees *.
If Lexar offers lower royalty rates for the High Speed Memory Sticks to any of
its other licensees *, the royalty rates paid by Samsung for the * will
automatically be deemed adjusted to such lower rates. Otherwise, Lexar shall
lower the
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
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royalty rates for the * if Samsung or Lexar reaches an agreement with * to lower
such rates without affecting the * to Lexar.
9.2 Disclaimer of Warranty. THE LEXAR TECHNOLOGY AND LEXAR
INTELLECTUAL PROPERTY RIGHTS ARE PROVIDED "AS-IS". EXCEPT AS EXPRESSLY SET FORTH
IN THIS AGREEMENT, LEXAR MAKES NO REPRESENTATION OR WARRANTY OF ANY KIND,
EXPRESS, IMPLIED OR STATUTORY, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND NONINFRINGEMENT. WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, LEXAR DOES NOT WARRANT THAT THE LEXAR
TECHNOLOGY WILL OPERATE WITHIN LICENSED LEXAR PRODUCTS OR WILL BE COMPATIBLE
WITH LICENSED LEXAR PRODUCTS.
10. TERMINATION
10.1 Termination due to Material Breach.
(a) If Samsung materially breaches any term or condition of this
Agreement or the Purchase Agreement and fails to cure that breach within thirty
(30) calendar days after receiving written notice of the breach (or as to the
Purchase Agreement within such other cure period as specified therein), Lexar
shall have the right to terminate the licenses and other rights granted to
Samsung under Sections 2.1 and 2.2 at any time after the end of applicable cure
period.
(b) If Lexar materially breaches any term or condition of this
Agreement or the Purchase Agreement and fails to cure that breach within thirty
(30) calendar days after receiving written notice of the breach (or as to the
Purchase Agreement within such other cure period as specified therein), Samsung
shall be released of any and all obligations of license fee and royalty payments
under Section 4 herein, and Lexar grant of rights under Section 2.1(e) shall
become effective immediately thereafter.
10.2 Termination upon Voluntary Bankruptcy.
(a) If Samsung (i) seeks the liquidation, reorganization, dissolution
or winding up of itself (other than dissolution or winding up for the purposes
of reconstruction or amalgamation) or the composition or readjustment of all or
substantially all of its debts, (ii) applies for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or substantially all of its assets, (iii) makes a general
assignment for the benefit of its creditors, (iv) commences a voluntary case
under the bankruptcy code, or (v) files a petition for relief or otherwise seeks
relief from or readjustment of its debts under any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (including, without limitation, consenting to the entry of
an order for relief in an involuntary bankruptcy case against it), then Lexar
shall have the right to terminate the licenses and other rights granted to
Samsung under Sections 2.1 and 2.2 upon written notice to Samsung, provided,
however, that if any event described in the immediately preceding clause (e)
occurs, no notice shall
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
12
be required to Samsung and such licenses and other rights shall terminate
automatically upon the occurrence of such event without any further action.
(b) If Lexar (i) seeks the liquidation, reorganization, dissolution or
winding up of itself (other than dissolution or winding up for the purposes of
reconstruction or amalgamation) or the composition or readjustment of all or
substantially all of its debts, (ii) applies for or consent to the appointment
of, or the taking of possession by, a receiver, custodian, trustee or liquidator
of itself or of all or substantially all of its assets, (iii) makes a general
assignment for the benefit of its creditors, (iv) commences a voluntary case
under the bankruptcy code, or (v) files a petition for relief or otherwise seeks
relief from or readjustment of its debts under any other law relating to
bankruptcy, insolvency, reorganization, winding-up or composition or
readjustment of debts (including, without limitation, consenting to the entry of
an order for relief in an involuntary bankruptcy case against it), then Samsung
shall be released of any and all obligations of license fee and royalty payments
under Section 4 herein, and Lexar's grant of rights under Section 2.1 (e) shall
become effective immediately thereafter.
10.3 Termination upon Involuntary Bankruptcy.
(a) If a proceeding or case is commenced without the application or
consent of Samsung and such proceeding or case continues undismissed for a
period of ninety (90) calendar days from and after the commencement of such
proceeding seeking any of the matters set forth in the immediately following
clauses (i) through (iii) or if an order, judgment or decree approving or
ordering any such matters is entered and continues unstayed in effect for a
period of ninety (90) calendar days from and after the date its entry then,
subject to the last sentence of this Section 10.3, Lexar shall have the right to
terminate the licenses and other rights granted to Samsung under Sections 2.1
and 2.2 at any time after the end of such ninety (90) day period upon written
notice to Samsung: (i) liquidation, reorganization, dissolution or winding up,
or the composition or readjustment of all or substantially all of Samsung's
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of Samsung or of all or substantially all of Samsung's assets, or (iii)
similar relief for Samsung from its debts or readjustment of its debts under any
law relating to bankruptcy, insolvency, reorganization, winding up or
composition or readjustment of debts. Notwithstanding any other provision of
this Section 10.3, if any event described in the immediately preceding clause
(iii) occurs, no notice shall be required to Samsung and such licenses and other
rights shall terminate automatically upon the occurrence of such event without
any further action.
(b) If a proceeding or case is commenced without the application or
consent of Lexar and such proceeding or case continues undismissed for a period
of ninety (90) calendar days from and after the commencement of such proceeding
seeking any of the matters set forth in the immediately following clauses (i)
through (iii) or if an order, judgment or decree approving or ordering any such
matters is entered and continues unstayed in effect for a period of ninety (90)
calendar days from and after the date its entry then, subject to the last
sentence of this Section 10.3, then Samsung shall be released of any and all
obligations of license fee and royalty payments under Section 4 herein, and the
Lexar's grant of rights under Section 2.1 (e) shall become effective
13
immediately thereafter: (i) liquidation, reorganization, dissolution or winding
up, or the composition or readjustment of all or substantially all of Lexar's
debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the
like of Lexar or of all or substantially all of Lexar's assets, or (iii) similar
relief for Lexar from its debts or readjustment of its debts under any law
relating to bankruptcy, insolvency, reorganization, winding up or composition or
readjustment of debts.
10.5 Obligations Upon Termination. Upon any termination of rights
pursuant to Sections 10.1, 10.2 or 10.3: (a) each party shall promptly pay the
other any unpaid amounts due as of the termination based on sales of products
occurring prior to the date of termination; and (b) each party shall promptly
return or destroy all copies of Confidential Information in its possession or
control, and, at the request of the other, have an officer certify in writing
that each party has complied with the foregoing obligation.
10.6 Survival of Obligations. The following provisions shall survive
any Samsung License Termination: Sections 2.3, 2.4, 4.5, 4.6, 5, 6, 7.1, 7.2,
7.3, 9.4, 10.5, 10.6, 11 and 12.
11. LIMITATION OF LIABILITY
11.1 General Limitation of Damages. IN NO EVENT SHALL EITHER PARTY BE
LIABLE FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES, LOSS OF USE,
DATA OR PROFITS, INTERRUPTION OF BUSINESS OR ANY SPECIAL, INCIDENTAL, INDIRECT,
EXEMPLARY, OR CONSEQUENTIAL DAMAGES, ARISING OUT OF OR IN CONNECTION WITH THIS
AGREEMENT, HOWEVER CAUSED, ON ANY THEORY OF LIABILITY, WHETHER IN AN ACTION FOR
CONTRACT, STRICT LIABILITY, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, AND
WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
11.2 Severability. EACH AND EVERY PROVISION OF THIS AGREEMENT WHICH
PROVIDES FOR A LIMITATION OF LIABILITY, DISCLAIMER OF WARRANTY OR EXCLUSION OF
DAMAGES IS INTENDED BY THE PARTIES TO BE SEVERABLE AND INDEPENDENT OF ANY OTHER
SUCH PROVISION. FURTHER, IN THE EVENT THAT ANY REMEDY HEREUNDER IS DETERMINED TO
HAVE FAILED OF ITS ESSENTIAL PURPOSE, ALL LIMITATIONS OF LIABILITY AND
EXCLUSIONS OF DAMAGES SHALL REMAIN IN EFFECT.
12. GENERAL
12.1 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without regard to
conflicts of laws rules or principles, and excluding the United Nations
Convention on Contracts for the International Sale of Goods. All actions brought
by either party arising under or related to this Agreement shall be brought
exclusively in the state and federal courts located in Santa Xxxxx County,
California, and the parties hereby irrevocably consent to personal jurisdiction
and venue therein.
14
12.2 Injunctive Relief. Each of the parties acknowledges that
unauthorized disclosure or use of the other party's Confidential Information or
infringement or misappropriation of the other party's intellectual property
rights could cause irreparable harm and significant injury that would be
difficult to ascertain and may not be compensable by damages alone. Accordingly,
the parties agree that, in addition to any and all legal remedies, each party
shall be entitled to seek specific performance, injunction or other appropriate
equitable relief for claims regarding intellectual property rights or
Confidential Information.
12.3 Assignment. Neither party may assign this Agreement without the
prior written consent of the other, except that Lexar may assign or transfer its
rights and obligations under this Agreement in the course of a merger,
reorganization or acquisition of Lexar or substantially all of Lexar's assets
related to the Lexar Technology without consent by Samsung. Any assignment
permitted hereunder will be subject to the written assent of the assignee to all
of the terms and provisions of this Agreement. Any attempted assignment in
derogation of this section will be null and void.
12.4 Modification and Waiver. No modification to this Agreement, nor
any waiver of any rights, will be effective unless assented to in writing by the
party to be charged, and the waiver of any breach or default shall not
constitute a waiver of any other right hereunder or any subsequent breach or
default.
12.5 Notices. Any required or permitted notices hereunder must be
given in writing at the address of each party set forth below, or to such other
address as either party may substitute by written notice to the other in the
manner contemplated herein. Notices will be effective upon receipt.
To Lexar: To Samsung:
Lexar Media, Inc. Samsung Electronics Company, Ltd.
00000 Xxxxxxx Xxxxxxx Xxx #00, Xxxxxxx-Xxx, Xxxxxx-Xxxx
Xxxxxxx, XX Kyunggi-Do 449-711 Korea
Attention: Xxxx X. Xxxxxxxx Attention: General Manager, IP Team
Phone: (000) 000-0000 Phone: 00-00-000-0000
Fax: 00-00 000-0000
Copy to:
Fenwick & West LLP
Xxx Xxxx Xxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attn.: Xxxxx Xxxxxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
15
12.6 Compliance with Law, including U.S. Export Laws. Each party
agrees to comply with all applicable international, national, state, regional
and local laws and regulations in performing its duties hereunder and in any of
its dealings with respect to the technical information disclosed hereunder or
direct products thereof. Neither party shall export or re-export, directly or
indirectly, any technical information disclosed hereunder or direct products
thereof to any destination prohibited or restricted by the export control laws
and regulations of the United States, including the U.S. Export Administration
Regulations, without the prior authorization from the appropriate governmental
authorities.
12.7 Force Majeure. Neither party shall be responsible for delay or
failure in performance to the extent caused by any government act, law,
regulation, order or decree, by communication line or power failures beyond its
control, or by fire, flood or other natural disasters or by other causes beyond
its reasonable control, nor shall any such delay or failure be considered to be
a breach of this Agreement, provided that such party shall use commercially
reasonable efforts to resume performance as soon as reasonably practicable
thereafter.
12.8 Headings. The headings of the Sections of this Agreement are for
convenience only and will not be of any effect in construing the meanings of the
Sections.
12.9 Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
12.10 Independent Contractors. In performing their respective duties
under this Agreement, each of the parties will be operating as an independent
contractor. Nothing contained herein will in any way constitute any association,
partnership, or joint venture between the parties hereto, or be construed to
evidence the intention of the parties to establish any such relationship.
Neither party will have the power to bind the other party or incur obligations
on the other party's behalf without the other party's prior written consent.
12.11 Severability. In the event that it is determined by a court of
competent jurisdiction that any provision of this Agreement is invalid, illegal,
or otherwise unenforceable, such provision will be enforced as nearly as
possible in accordance with the stated intention of the parties, while the
remainder of this Agreement will remain in full force and effect and bind the
parties according to its terms. To the extent any provision cannot be enforced
in accordance with the stated intentions of the parties, such provisions will be
deemed not to be a part of this Agreement.
12.12 Entire Agreement. The Consignment Contract, Purchase Agreement
and this Agreement, and the exhibits attached, hereto constitute the entire and
exclusive agreement between the parties hereto with respect to the subject
matter hereof and supersede any prior representations, understandings and
agreements between the parties with respect to such subject matter.
16
12.13 Execution. This Agreement may be executed initially by a
transmittance of a signed facsimile copy followed by the originals in duplicate.
13. MANAGEMENT APPROVAL.
13.1 The Agreement is subject to approval by both parties' Executive
Management by March 29, 2002.
IN WITNESS WHEREOF, Lexar and Samsung have caused this Agreement to be
executed by their duly authorized representatives as of the Effective Date.
Lexar Media, Inc. Samsung Electronics Co., Ltd.
By: /s/ Xxxx X. Xxxxxxxx /s/ Yun Xxxxx Xxxx
------------------------- -----------------------------
Xxxx X. Xxxxxxxx Yun Xxxxx Xxxx
Title: Vice President of Technology Licensing Title: Senior Vice President
Date: March 23, 2002 March 23, 2002
17
EXHIBIT A
LICENSE FEES AND ROYALTIES
1. * Royalty Rate.
The lesser of:
$* or
*% of the Net Selling Price*
2. * Royalty Rates.
(a) For sales of * as part of a "*," *% of the average Net Selling Price of
such *. For purposes of this royalty calculation, a * is deemed to mean a sale
of any combination having *. In a *, the price of the * is deemed to be the
average Net Selling Price for all Samsung *, excluding *, and the price of the *
the average Net Selling Price of such a *;
(b) For sales of *, *% of the average Net Selling Price of such *.
(c) In the event the combined number of units of * sold by Samsung exceeds
the Royalty Trigger Threshold, then the calculation in 2(a) shall apply to that
portion of the excessive units corresponding to the percentage of * in the total
units sold, and 2(b) to that portion corresponding to the percentage of *.
* Certain information on this page has been omitted and filed separately with
the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.
