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Exhibit 10.38
AGREEMENT
This is an Agreement entered into as of October 10, 1997 by and between
Dental/Medical Diagnostic Systems, Inc., a Delaware Corporation with its
principal office located at 000 Xxxxx Xxxxxxxx Xxxx., Xxxxx 000, Xxxxxxxx
Xxxxxxx, XX 00000, "DMD" and Suni Imaging Microsystems, a California
corporation, with an address at 000 X. Xxxx Xxxxxx, Xxxxxxxx Xxxx, XX 00000
("SUNI"). This Agreement will be effective as of the Effective Date set forth
below.
BACKGROUND AND OBJECTIVES
A. DMD develops, manufactures and markets technology and devices intended
to assist dentists and other professionals to diagnose and/or treat dental and
oral diseases, conditions and/or imperfections, and to assist dental and other
oral medical and dental treatment professionals to educate patients with respect
to their conditions and treatment options.
B. DMD wishes to develop and offer for sale a digital dental x-ray system
intended to successfully compete on the basis of superior functionality,
superior image quality and clarity, and competitive price to incorporate into a
turn-key digital x-ray imaging system to be assembled and marketed worldwide by
DMD.
C. SUNI is independently developing technology and an image capture and
processing device capable of creating high quality high definition x-ray images
for display on computer monitors or for printing using low-level x-ray radiation
emissions. SUNI has expertise in developing semiconductor chip processors for
x-ray imaging, computer software and associated systems and documentation for
components similar to those required by DMD.
D. DMD has selected SUNI to design, develop, document and provide
manufacturing set up know-how and integrate a semiconductor chip processor for
x-ray imaging, computer software and associated systems and documentation into
DMD's proposed X-Ray System, as defined below.
E. SUNI will own all Intellectual Property Rights in and to the CCD Chip
Design, CCD Chip Technology, Tooling, Licensed Technology, SUNI Software and
Developed Subsystem, each as defined below. Subject to SUNI's ownership as set
forth in the preceding sentence, DMD will own all Intellectual Property Rights
in and to the X-Ray System and DMD Software, as defined below.
Now, therefore, the parties agree as follows:
1. DEFINITIONS.
1.1. "Advance Payment" shall mean the advance payment of royalties
as set forth in Section 4.1.
1.2. "Affiliate" shall mean a Subsidiary and any entity in which a
party owns or controls fifty percent (50%) or more of the voting
interests, or any entity where
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more than fifty percent (50%) of its voting interests are owned or
controlled by the same entity that owns more than fifty percent
(50%) of a party.
1.3. "Agreement" shall mean this document, including any
Attachments.
1.4. "CCD Chip" means a charged coupled semiconductor imaging chip
which processes x-ray images and which meets the applicable parts of
the Design and Engineering Specification.
1.5. "CCD Chip Technology," means CCD Chip technology and know-how
owned or used by SUNI, including but not limited to (1) CCD Chip
circuit design; (2) CCD Chip physical design databases; (3) CCD Chip
manufacturing processes; (4) CCD Chip specifications; (5) any
improvements or derivative works of the above developed by SUNI
pursuant to Section 2 of this Agreement; and (6) Documentation that
is related to the foregoing.
1.6. "Commercial Commencement" shall mean whichever of the following
dates is the first to occur: (a) such date as is nine (9) months
following filing by DMD of a 510k application with the FDA for the
X-Ray System; or (b) the last day of the first month in which DMD
invoices a customer for an X-Ray System that is sold in the United
States of America.
1.7. "Confidential Information" shall mean all information of a
party marked confidential, restricted, or proprietary by such party;
and any oral disclosures, which, in order to be considered
Confidential Information, must be stated as such and reduced to
writing within twenty (20) days thereafter, which writing shall
indicate that the disclosed information is confidential.
1.8. "Days" or "days" shall mean calendar days unless otherwise
specified.
1.9. "Deliverables" are the items to be provided by SUNI to DMD as
specified in the Statement of Work.
1.10. "Deliverable Failure" means any error, unresolved problem, or
defect caused by or resulting from (1) an incorrect functioning of
code or firmware, or (2) an incorrect or incomplete statement or
diagram in the Documentation, if such error, problem, or defect
renders the Developed Subsystem or Tooling inoperable, causes the
Developed Subsystem to fail to meet Design and Engineering
Specifications thereof, causes Documentation to be inaccurate or
incomplete in any material respect, causes incorrect results, or
causes incorrect functions to occur when any such materials are used
for their intended purposes.
1.11. "Dental Field" means (i) dentistry, oral surgery,
orthodontistry, oral hygiene, cosmetic dentistry, periodontics and
all other medical and cosmetic professions providing dental care to
humans and animals or providing services to or educating the
foregoing professions, and (ii) research, development, design,
production, manufacture, distribution, marketing, leasing,
servicing, repairing and/or selling of goods and services to or for
use by persons engaged in the activities described in the preceding
clause (i).
1.12. "Design and Engineering Specification" means the functional
and performance specification of the Developed Subsystem and Tooling
including the
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electrical and mechanical specification details as defined by SUNI
and agreed by DMD as set forth in Section 2.1 below, and which,
when so agreed, will be incorporated as Attachment 1 and will be
subject to modification by mutual agreement of the parties from time
to time.
1.13. "Developed Subsystem" means the subsystem developed by SUNI
for DMD that comprises solely the CCD Chip, the image capture board,
SUNI Software, and cable and that meets the Design and Engineering
Specifications.
1.14. "Development Work," means the work performed under this
Agreement by SUNI in order to produce the Developed Subsystem and
Tooling for DMD.
1.15. "Discretionary Rejection" shall have the meaning set forth in
Section 2.9(b)(ii).
1.16. "DMD Approved Vendor" shall mean vendors selected by SUNI, and
subject to approval by DMD, which approval will not unreasonably be
withheld, for the purpose of manufacturing the Developed Subsystem
and Tooling.
1.17. "DMD Software" means software developed by or for DMD that is
used to retrieve an image from the system memory that is separate
from the Developed Subsystem. DMD Software does not include the test
image capture routine.
1.18. "Documentation" means the documentation provided by SUNI to
DMD in paper form and in digital format (Word for Windows for text,
and an application as determined by SUNI for designs and technical
specifications) that includes (1) a list of each component of the
Developed Subsystem and Tooling and estimated manufacturing costs,
(2) manufacturing flow, directions and instructions for each
sub-system to be built from the separate components in (1) above,
(3) updates to the above from time to time, all of which shall be
appropriate for reasonably qualified DMD personnel or personnel of
DMD's subcontractors to use for the intended purpose, and (4) any
other form of documentation that is set forth in the Statement of
Work.
1.19. "Effective Date" shall mean the date on which the parties have
initialed each of Attachments 1 through 4 to this Agreement, as set
forth in Section 32 below.
1.20. "Final Prototype Developed Subsystem" means the final
prototype of the Developed Subsystem with all required
functionality, performance and Documentation for final test
purposes, manufactured with production ready Tooling using the
actual production methods and equipment specified by SUNI in the
Documentation, and which has been determined by SUNI to satisfy the
Design and Engineering Specifications and the manufacturing cost
targets contained therein.
1.21. "Improvements" means modifications to the Developed Subsystem
and Tooling that improve functionality, performance or
manufactureability of the CCD Chip at the 2 micron lithography
level.
1.22. "Initial Prototype Developed Subsystem" means a prototype of
the Developed Subsystem which is functionally equivalent to
production versions of the Developed Subsystem but which is not
necessarily manufactured using manufacturing processes required for
commercial production of the Developed Subsystem or with actual
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production tooling, but which has been determined by SUNI to satisfy
the applicable sections of the Design and Engineering Specifications
and the manufacturing cost targets.
1.23. "Intellectual Property Rights" means any and all Patents,
copyrights, mask works, trade secrets and other intellectual
property rights in any country of the world.
1.24. "Licensed Products," means the Developed Subsystem or
components of the Developed Subsystem or products that incorporate
the Licensed Technology or CCD Chip, including, but not limited to,
an X-Ray System.
1.25. "Licensed Technology," means all currently existing
inventions, methods, designs, code and know-how, whether or not
copyrighted or copyrightable or patented or patentable that have
been developed by, for, or used by SUNI in the Developed Subsystem
design or Tooling, or both, and any future Improvements that DMD
elects to license pursuant to Section 5.2 below.
1.26. "Net Receipts" from Licensed Products shall mean the total
amount actually invoiced by DMD to DMD's customer for Licensed
Products (exclusive of training, installation, maintenance and
support charges separately invoiced), less (i) any prices separately
charged by DMD , as per DMD's published price list for hardware or
software used in connection with the Licensed Products, including
without limitation, work stations, personal computers, monitors,
video cassette recorders and optional accessories; (ii) DMD
authorized returns; (iii) free warranty replacements; (iv) sales,
use and excise taxes; (v) freight (specifically billed or prepaid);
and (vi) insurance for freight. If DMD's customer is an Affiliate of
DMD that is purchasing the Licensed Product for resale purposes,
then Net Receipts shall mean the total amount actually invoices by
such DMD Affiliate to its customer for Licensed Products, less the
deductions specified in this Subsection above (with the DMD
Affiliate substituted for DMD).
1.27. "Patents" means patents and patent applications and all
foreign counterparts, reissues, divisions, renewals, extensions,
provisionals, continuations and continuations-in-part of any such
patents or patent applications.
1.28. "Prototypes" means the Initial Prototype Developed Subsystem
and the Final Prototype Developed Subsystem.
1.29. "Regulatory Agency" shall mean any regulatory agency
governmental or private, including but not limited to agencies
regulating medical device safety, product safety, and/or
electromagnetic emissions, the approval of which is required by DMD
or the government of the United States prior to delivery or
marketing of the X-Ray Systems in the United States, Puerto Rico,
and the territories and possessions of the United States and which
are included in the Regulatory Specification or by an applicable
regulatory agency of Canada or the European Community.
1.30. "Regulatory Specification" shall mean the functional and
performance specification to be prepared by DMD that identifies
electrical and mechanical features that must be included in the
Developed System pursuant to the requirements
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of Regulatory Agencies, a copy of which is attached to this
Agreement as Attachment 5.
1.31. "Statement of Work", means the list of the Deliverables,
including source code, each with a target date for completion by
SUNI of the Deliverable and of the Developed Subsystem and Tooling,
as set forth in Attachment 2.
1.32. "Subsidiary" shall mean any entity in which a party owns or
controls more than fifty percent (50%) of the voting interests.
1.33. "SUNI Software" means software developed by or for SUNI to
create an image in the system memory that is separate from the
Developed Subsystem and to provide the test image display routine
function.
1.34. "Tooling", means CCD Chip mask set for the DMD Approved
Vendor, and other hardware and software (in object code and source
code) as set forth in Attachment 3 that will be required by DMD for
the production of the Developed Subsystem by DMD or its
subcontractors in quantities contemplated by DMD under this
Agreement.
1.35. "X-Ray System" shall mean a digital x-ray system and each of
its component parts proposed to be marketed and sold by DMD, that
incorporates the Developed Subsystem and that also may include, but
not be limited to, the following additional items: DMD Software,
personal computer, peripheral devices such as monitors, video
cassette recorder and/or other recording devices, networking servers
and cabling, hand-held mouthpiece, and/or an x-ray emitter.
2. DEVELOPMENT WORK.
2.1. Design and Engineering Specification. SUNI will provide a
proposed Design and Engineering Specification to DMD on or before
the date specified in the Statement of Work. DMD and SUNI will use
commercially reasonable best efforts to reach agreement on the
Design and Engineering Specification within thirty (30) days from
DMD's receipt of the proposed Design and Engineering Specification.
If the parties have failed to agree to the proposed Design and
Engineering Specification within such time period, then either party
may terminate this Agreement upon ten(10) days notice to the other,
and neither party shall have any liability to the other arising out
of such failure or termination. No Sections of this Agreement shall
survive termination under this Section 2.1
2.2. Performance of Development Work. SUNI shall use reasonable best
efforts: (a) to perform all Development Work, and (b) to achieve
each milestone and provide the Deliverables in accordance with the
Statement of Work in conformity with the Design and Engineering
Specifications; provided however, that SUNI shall deliver the
Initial Prototype Developed Subsystem and the Final Prototype
Developed Subsystem in accordance with Section 2.3 below.
2.3. Delivery Dates. Subject to Sections 2.4 and 2.5 below, SUNI
shall (a) complete and deliver the Initial Prototype Developed
Subsystem no later than six (6) months after the Effective Date, and
(b) deliver the Final Prototype Developed Subsystem to DMD no later
than twelve (12) months after the Effective Date (the "Delivery
Date"), in each case, subject to change by mutual agreement as
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contemplated by Section 2.8 below. Each party acknowledges that
SUNI's ability to perform in accordance with the Statement of Work
schedule will be subject to DMD's timely performance of its
obligations under this Agreement and to the ability of any DMD
Approved Vendor to deliver CCD Chip Prototypes within the required
timeframe. SUNI shall provide DMD with progress reports, in
accordance with the Statement of Work. Each such report shall
reflect/indicate:
(i) Status of progress to current SOW milestone;
(ii) Short description of problems in meeting such milestone;
(iii) Proposed recovery method to meet next milestone if needed;
(iv) Any other information related to the Development Work
reasonably requested by DMD;
(v) Any anticipated changes in the projected cost of the
Developed Subsystem or Tooling.
2.4. Design Assumptions. Delivery Dates are based upon a CCD Chip
that incorporates scintillator-based technology.
2.5. DMD Approved Vendors. SUNI shall be responsible for having made
by the DMD Approved Vendors the Initial Prototype Developed
Subsystem and the Final Prototype Developed Subsystem. If a defect
in a Prototype or delay in delivery of a Prototype is caused by a
DMD Approved Vendor and such defect or delay results in a delay in
SUNI's performance of its obligations under this Agreement, then the
Statement of Work schedule and Delivery Dates specified in Section
2.3 above shall automatically be extended by the delay caused by the
DMD Approved Vendor.
2.6. Costs of Development Work. SUNI shall bear all costs of the
Development Work, other than as agreed as set forth in Section 2.8
below and as set forth in Section 3.5 below.
2.7. Progress Reviews. The parties agree to conduct regular program
reviews as shown on the Statement of Work, to ensure their mutual
satisfaction with the performance of the Development Work under the
Agreement. The parties agree to meet at a mutually agreeable time
and location to discuss and inspect the status of the Development
Work.
2.8. Changes to Specifications and Statement of Work. Prior to
delivery of the Initial Prototype Developed Subsystem, DMD and SUNI
shall meet to discuss any changes to the Design and Engineering
Specifications suggested by the other party, including, but not
limited to changes required by Regulatory Agencies. If a change is
required by a Regulatory Agency, then SUNI will make such change,
and DMD will pay for all costs that SUNI incurs in implementing such
change. All other changes will be subject to the parties' mutual
agreement on changes to the Statement of Work and timing and payment
for the incremental cost of such changes. DMD may also specify
changes to the Developed Subsystem design, schedule, and/or related
deliverable items in writing at any time; provided, however, that if
SUNI reasonably concludes that such change will result in a change
to the cost or time required for performance by SUNI of the
Development Work, or if SUM expects the
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change to affect the form, fit, function or manufacturing cost of
the Developed Subsystem, then SUNI will so notify DMD within ten
days after receipt of DMD's request. SUNI shall not implement any
change prior to the parties' written agreement on such
adjustment(s). If changes are to be paid for at an hourly rate, then
such rate shall be SUNI's standard rates for comparable work at the
time such changes are made.
2.9. Acceptance and Testing Procedures.
(a) Acceptance and Testing. DMD, with the assistance of SUNI if
requested by DMD, will examine and test each Prototype upon delivery
to determine whether the Prototype conforms to the Design and
Engineering Specifications and in the exercise of its sole
discretion generates image quality and clarity acceptable to DMD.
DMD shall, within ten (10) working days from delivery of each
Prototype: (i) accept the Prototype and so inform SUNI in writing;
or (ii) reject the Prototype and provide SUNI with a written
statement of nonconformity to the Design and Engineering Statement,
specifying in detail the Prototype's nonconformity, or, in the case
of an Initial Prototype Developed Subsystem specifying the basis for
a Discretionary Rejection, as described in greater detail in
subsection 2.9(b)(ii) below. If DMD does not provide such a
statement of non-conformity to the Design and Engineering
Specifications or notice of Discretionary Rejection within the said
acceptance period, then DMD will be deemed to have accepted the
Prototype.
(b) Consequences of Rejection.
(i) Failure to Conform to Design and Engineering Specification.
If DMD provides a statement of non-conformity within the
acceptance period, pursuant to Subsection (a) above, then
SUNI will use reasonable best efforts to correct the
nonconformity within fifteen (15) days from SUNI's receipt
of the statement of non-conformity. DMD shall re-test the
Prototype within ten (10) days of delivery of the corrected
Prototype, and the test and acceptance procedures set forth
in this Section shall apply to such re-test. If after two
(2) re-test cycles, SUNI has been unable to correct a
non-conformity that was the subject of a written statement
of nonconformity by DMD, in accordance with this Section,
then, unless the parties have otherwise developed a mutually
agreeable plan to correct the non-conformity, DMD may: (A)
terminate this Agreement upon sixty (60) days prior notice
to SUNI, and/or (B) obtain SUNI technical information
pursuant to Section 11 below and correct the non-conformity
itself. DMD may deduct from future royalties payable to SUNI
the reasonable cost of such corrections pursuant to Section
4.5 below. If DMD elects to terminate this Agreement and to
obtain the technical information as set forth in this
Section, then the following Sections shall survive such
termination: Sections 4 (Royalty); 6 (Intellectual Property
Ownership); 7 (License) 8 (Exclusive Marketing; Sensor
Technology Development); 11 (Delivery of Technology); 13
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(Confidential Information); 14 (Indemnification) 15
(Liability); and 16 through 33.
(ii) Discretionary Rejection. If DMD rejects an Initial
Prototype Developed Subsystem during the acceptance period
due to a determination by DMD that the Initial Prototype
Developed Subsystem does not produce image quality and
clarity acceptable to DMD in its sole discretion (a
"Discretionary Rejection"), then all Advance Payments due to
SUNI on or prior to the date specified in the Statement of
Work for delivery to DMD of the Initial Prototype Developed
Subsystem under Section 4.1 of this Agreement (the "Initial
Prototype Milestone Payments") and pursuant to Section 2.8
shall be deemed earned and shall not be refundable to DMD.
In such case, the obligation of DMD to make any further
Advance Payments shall be immediately suspended unless and
until SUNI, at its option, has delivered to DMD an Initial
Prototype Developed Subsystem determined by DMD in the
exercise of its sole discretion to generate image quality
and clarity acceptable to DMD, at which time, all Advance
Payments that would otherwise have become due during the
period that payments were suspended, shall be come due and
payable. If DMD advises SUNI in writing that it has elected
not to make any further Advance Payments, then SUNI shall be
relieved of any further obligations under this Agreement
(including but not limited to obligations under this Section
2 or Section 3 below). If as a result of a Discretionary
Rejection, the Initial Prototype Milestone Payments are
deemed earned by SUNI, DMD may take a credit against
subsequent royalty obligations to SUNI (after the fourth
anniversary of Commercial Commencement) in an amount equal
to the Initial Prototype Milestone Payments that have been
paid to SUNI
2.10. Access to SUNI Facilities. SUNI shall promptly upon request by
DMD at any time after the date of this Agreement until the earlier
of the date that this Agreement is terminated or the delivery of the
Final Prototype Developed Subsystem, provide to DMD reasonable
access to SUNI's facilities and information to inspect the progress
of the Development Work, and, in connection with such inspection,
shall provide to DMD access to technical advisory staff for a
reasonable time.
2.11. Improvements as of Agreement Date. The Deliverables delivered
hereunder shall, to the extent not otherwise contemplated by the
Design and Engineering Specifications, incorporate the latest
improvements to the CCD Chip Technology as of the Effective Date of
this Agreement, to the extent applicable in or useful in the Dental
Field. SUNI shall offer to DMD Improvements made after the Effective
Date of this Agreement in accordance with Section 5.2 below.
2.12. Software. SUNI will be responsible for the development of all
SUNI Software. DMD will be responsible for the development of all
DMD Software and for all changes to the Developed Subsystem and
Tooling that may be required as a
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result of changes in the operating system specified in the Design
and Engineering Specifications.
3. MANUFACTURE.
3.1. DMD Right to Manufacture. DMD shall have the right to
manufacture, or have manufactured by a DMD Approved Vendor, the
Developed Subsystem and Tooling as set forth in Section 7 below.
3.2. SUNI Assistance. SUNI shall provide all reasonable assistance
to the DMD Approved Vendor(s) and Documentation as set forth in the
Statement of Work.
3.3. Technical Support. SUNI shall, at no additional cost for up to
180 days following Commercial Commencement, provide to DMD and the
DMD Approved Vendor(s) technical support to facilitate a smooth and
cost effective commencement of production of the Developed Subsystem
and Tooling. SUNI will provide manufacturing drawings and
specifications to DMD in accordance with good commercial practice.
3.4. Training. SUNI shall, at no additional cost for up to 180 days
following Commercial Commencement, provide to DMD's personnel at
DMD's facilities in California, adequate training, as reasonably
determined and scheduled by DMD, for the integration and manufacture
of the Developed Subsystem as part of the X-Ray System, and provide
consulting services to DMD's software engineers to facilitate smooth
and efficient integration and transfer of responsibility for the
software and firmware included with the Developed Subsystems with
the other software and hardware components of the X-Ray System.
Thereafter, such training shall be provided by SUNI at a mutually
agreed cost to the parties consistent with SUNI's standard charges
to customers for similar services.
3.5. Tooling. Subject to the following sentence, SUNI will be
responsible for the cost of obtaining and delivering to DMD Tooling
for Prototypes. If the mask set to be used by the DMD Approved
Vendor is a six (6) inch Orbit Semiconductor mask set, then DMD will
be responsible for the cost of Tooling for Prototypes. Production
mask set Tooling, which DMD shall own, shall be retained for
production of CCD Chips by the DMD Approved Vendor for the CCD
Chips. DMD will be responsible for the cost of obtaining production
masks and production Tooling. If a mask is broken after delivery to
DMD or to a DMD Approved Vendor, then DMD will pay for the
replacement mask. If a Prototype mask is defective and if SUNI is
responsible for such defect, then SUNI will pay for the replacement
mask.
3.6. DMD Personnel. DMD personnel receiving training and technical
support from SUNI will have reasonable technical background and
experience in the areas in which such training and support is to be
provided.
4. ROYALTY. Subject to all the terms and conditions expressed in this Agreement,
and in consideration for the rights and licenses granted in Section 7 and the
hardware, software Tooling, services and support required to be provided by SUNI
hereunder, DMD shall pay royalties to SUNI as follows:
4.1. Advance Payments. During the development phase DMD shall pay to
SUNI prepaid royalties (the "Advance Payments") as set forth below.
All Advance
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**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
Payments paid to SUNI shall be recoupable as full credit from
royalties otherwise payable to SUNI after the fourth anniversary of
Commercial Commencement pursuant to Section 4.5 of this Agreement.
(a) Subject to Section 4.1(b) below, the Advance Payment shall
be paid in installments as follows:
TIME AMOUNT
--------------------------------------------- ---------
Upon the Effective Date $ **
On the last day of the first calendar month
during which the Effective Date occurs $ **
On the last day of the second calendar month
after the Effective Date $ **
On the last day of the third calendar month
after the Effective Date $ **
On the last day of the fourth calendar month
after the Effective Date $ **
On the last day of the fifth calendar month
after the Effective Date $ **
Upon the last day of each calendar month
commencing upon the earlier of the date that
is: (i) the calendar month of delivery to
DMD of the first production Developed
Subsystem by DMD Approved Vendors; or (ii)
three (3) months after DMD's acceptance of
the Final Prototype Developed System until
total payments under this Section 4.1(a)
equal $1,250,000. These Advance Payments are
subject to Subsection (b)(ii) below. $ **
=========
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(b) Relief from Advance Payment Obligations. DMD may be relieved of
its obligations to make Advance Payments under any of the
circumstances described below:
(i) Failure of SUNI to Achieve a Reasonable Rate of Progress. If
SUNI fails to make reasonable progress towards meeting the
milestones set forth in the Statement of Work, then DMD may
give SUNI notice of the failure, and SUNI will then have
fifteen (15) days from receipt of such notice to achieve a
reasonable rate of progress with respect to the applicable
milestones. If SUNI fails to achieve reasonable progress
within such fifteen (15) day period, then DMD may either:
(A) terminate this Agreement and will be relieved of the
obligation to make any further Advance Payments; or (B)
suspend payment of Advance Payments. If DMD elects to
terminate this Agreement under this 4.1(b)(i), then the
following Sections shall survive such termination: Sections
4 (Royalty); 6 (Intellectual Property Rights); 7 (License);
8 (Exclusive Marketing; Sensor Technology Development); 11
(Delivery of Technology); 13 (Confidential Information); 14
(Indemnification); 15 (Liability); and 16 through 33. If DMD
elects to suspend Advance Payments then: (A) if SUNI
achieves a reasonable rate of progress during the next
thirty (30) days after the suspension, DMD will pay to SUNI
the withheld Advance Payments; and (B) if SUNI fails to
achieve a reasonable rate of progress during the next thirty
(30) days after the suspension, then the Agreement will
terminate and the Sections of this Agreement set forth in
the preceding sentence shall survive such termination. Upon
termination of this Agreement pursuant to this Subsection
4.1 (b)(i), DMD may obtain SUNI technology and may complete
the Developed Subsystem itself, pursuant to the terms and
conditions of Section 11 below. DMD shall be entitled to
deduct from any future royalty payments otherwise due under
this Agreement, the reasonable costs of completing the
Developed Subsystem so that it conforms to the Design and
Engineering Specifications, as set forth in Section 4.5
below.
(ii) Discretionary Rejection. Upon a Discretionary Rejection by
DMD, DMD may be relieved of its obligation to make Advance
Payments that would otherwise be due after delivery of the
Initial Prototype Developed Subsystem, as set forth in
Section 2.9(b)(ii) above.
4.2. Production Phase Royalty Payment. DMD shall pay SUNI royalties as
follows for each and every Licensed Product shipped. Royalties accrue on
Licensed Products sold, leased or otherwise transferred by DMD or, as
applicable, by DMD Affiliates, to their customers. No royalties shall be
paid by DMD for Licensed Products which are used internally by DMD for
purposes that include testing, evaluation, support, marketing,
demonstration or training provided that the duration
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**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
of such testing, evaluation, support, marketing, demonstration or training
does not exceed thirty (30) days. Royalties shall accrue on Licensed
Products used for more than thirty (30) days for testing, evaluation,
support, marketing, demonstration or training. Royalties shall accrue as
follows:
(a) For the period ending on the fourth anniversary of Commercial
Commencement:
(i) ** % of all Net Receipts until Net Receipts equal $ **
and
(ii) ** % of all Net Receipts after Net Receipts exceed $ **
(b) For the period following the fourth anniversary of Commercial
Commencement: ** % of all Net Receipts.
(c) Notwithstanding the foregoing, the minimum royalty payable for
each Licensed Product under this Section 4.2 shall be U.S. $ **.
4.3. Payment of Production Royalties. Within sixty (60) days after the end
of each calendar quarter during the term hereof, DMD shall provide SUNI
with a written report setting forth the amount of royalties earned by SUNI
during that calendar quarter pursuant to this Agreement and the amount of
any Advance Payment or Correction Amount applied against such royalty in
accordance with Section 4.5 below. DMD shall provide with each report a
check in the amount of any payment to be made, as indicated in the report.
4.4. Audit. DMD shall, for a period of two (2) years following the date of
each royalty report issued, keep records adequate to verify the substance
of the report and any accompanying payment. SUNI shall have the right, no
more than once each calendar year, to select a mutually acceptable
independent Certified Public Accountant to inspect the records of DMD
relating to the Licensed Products at a single location on reasonable
notice and during regular business hours to verify the reports and
payments made hereunder. The entire cost of such inspection shall be borne
by SUNI, and such Certified Public Accountant shall not disclose to SUNI
any information other than information relating to the computation and
accuracy of such reports and payments. Any information as to DMD's
customers will be treated as DMD confidential information and shall not be
disclosed to anyone other than the auditors. If the audit reveals that DMD
has under-reported royalties by more than ten percent (10%) in any
calendar year, DMD shall reimburse SUNI for the audit fees following
delivery to DMD of the auditors report detailing such under reporting of
royalties. In any event, DMD shall promptly repay, or apply against any
outstanding prepaid royalties, the underpayment.
4.5. Recovery of Advance Payments and Correction Amounts. All Advance
Payments and reasonable amounts paid by DMD to correct defects in or to
complete the Developed Subsystem in accordance with Sections 2.9(b)(ii),
or 4.1(b)(i) (the "Correction Amounts") are recoupable by credit against
future royalty payments due to SUNI under Section 4.2 after the fourth
anniversary of Commercial Commencement, as set forth in this Section. DMD
may deduct up to fifty percent (50%) of the royalty payments due for the
first two (2) calendar quarters of each calendar year after the fourth
anniversary of Commercial Commencement until such
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time as such deductions are equal to one hundred percent (100%) of the
Advance Payments paid to SUNI and 100% of DMD's reasonable Correction
Amounts. If, after the first two (2) calendar quarters of each calendar
year DMD has not recouped one hundred percent (100%) of the Advance
Payments and Correction Amounts, then DMD may recoup the balance of the
Advance Payments and Correction Amounts from up to one hundred percent
(100%) of future quarterly royalty payments otherwise payable during the
balance of that calendar year.
4.6. Late Payments. All late payments of amounts due under this Agreement
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.
5. MAINTENANCE AND SUPPORT.
0.0.Xxxxxxx. SUNI shall provide the following support services to DMD and
to each DMD Approved Vendor as follows, at no charge until the 90th day
following Commercial Commencement, and, if thereafter requested by DMD,
shall be provided at rates consistent with SUNI's standard rates or upon
such other terms as may be mutually agreed:
(a) Telephone Support. SUNI will provide reasonable telephone
hot-line support for DMD and DMD Approved Vendors during SUNI's
normal hours of business for manufacture and product de-bugging of
CCD Chip wafers; and
(b) Technical Support and Training. SUNI will provide technical
support and training to DMD pursuant to Sections 3.3 and 3.4 above.
5.2.Improvements. During the term of this Agreement, SUNI will disclose to
DMD all Improvements that may be applicable to the Dental Field, and, if
DMD elects to have SUNI implement such Improvements as part of the
Developed Subsystem or Tooling, then SUNI shall deliver such Improvements
to DMD, and DMD shall pay for the cost of any modifications required to
enable DMD to use such Improvements in the Dental Field or to integrate
such Improvements into the Developed Subsystem, consistent with the scope
of DMD's license under this Agreement, at rates consistent with SUNI's
then standard rates during the term of this Agreement.
6. INTELLECTUAL PROPERTY OWNERSHIP.
6.1.SUNI Rights. SUNI shall own all Intellectual Property Rights in and to
the Licensed Technology, CCD Chip Technology, SUNI Software, Tooling,
masks and Developed Subsystem.
6.2. DMD Rights. Subject to SUNI's ownership of Intellectual Property
Rights as set forth in Section 6.1 above, DMD shall own all Intellectual
Property Rights in and to the X-Ray System and DMD Software and shall own
all right, title and interest in and to the physical embodiment of the
Tooling for the production version of the Developed Subsystem.
6.3. Patent Prosecution. Attachment 4 to this Agreement includes a list of
those countries in which, as of the date of this Agreement, SUNI intends
to seek patent protection with respect to CCD Chip Technology and Licensed
Technology. DMD may, from time to time, provide SUNI with a list of those
countries in which DMD
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** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
wishes to obtain patent protection for any of the CCD Chip Technology or
Licensed Technology. If any such country is not included on the Attachment
4 list, then SUNI will seek and maintain patent protection in such
countries, provided that SUNI will first provide DMD with an estimate of
the cost of such protection, and DMD reimburses SUNI's reasonable costs
(including reasonable attorneys fees) in so doing.
6.4. Compensation. Each party shall be responsible for any compensation
which may be due its employees who make inventions.
6.5. Notice of Infringement. In performing SUNI's obligations under this
Agreement, SUNI agrees to avoid knowingly delivering, designing, and/or
developing an item that infringes one or more unlicensed patents, utility
models, design registrations, copyrights or trade secrets of any third
party. If during the course of performing SUNI's obligations under this
Agreement SUNI knows or becomes aware of any such patent, utility model,
design registration or copyright that SUNI believes might be infringed,
SUNI agrees to notify DMD promptly in writing of such possible
infringement.
7. LICENSE.
7.1. Grant of License. SUNI hereby grants to DMD and DMD hereby accepts an
irrevocable exclusive (subject to Section 7.3 below) worldwide right and
license ("License") in the Dental Field:
(a) Tooling. To use, disclose (subject to Section 13 below) make and
have made Tooling by a DMD Approved Vendor; and
(b) Developed Subsystems. To use, disclose (subject to Section 13
below), modify, maintain, make, have made by a DMD Approved Vendor,
sell, promote, distribute and lease Developed Subsystems and to
prepare derivative works of software that is included within the
Developed Subsystem for use in the Dental Field.
7.2. Sublicense Rights. DMD may grant sublicenses of the rights set forth
in Section 7.1 above to its Subsidiaries; provided that DMD shall remain
responsible for such sublicensee's performance of all obligations that
apply to DMD under this Agreement. All royalty payments under this
Agreement for both DMD and DMD Subsidiaries shall be made by DMD directly
to SUNI.
7.3. Circumstances Under Which the License Converts to a Non-exclusive
License. The License granted under Subsection 7.1 above shall
automatically become nonexclusive if any of the following circumstances
occurs:
(a) DMD Fails to Pay Minimum Royalty Payments. The License granted
under Subsection 7.1 above shall become non-exclusive if DMD fails,
with respect to any of the periods specified below to pay to SUNI
the minimum royalty amount specified for such period in the table
below:
12 Months ending on: Amount:
------------------------------------------- -----------
90 days following the first anniversary of $ **
Commercial Commencement
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** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
90 days following the second anniversary of $ **
Commercial Commencement
90 days following the third anniversary of $ **
Commercial Commencement
90 days following the fourth anniversary of $ **
Commercial Commencement
90 days following each subsequent $ **
Anniversary of Commercial Commencement
All minimum royalty payments are due on the last day of the
applicable period. Late payments will bear interest in accordance
with Section 4.6. Notwithstanding anything to the contrary in the
foregoing, if DMD fails to pay a late payment in full within sixty
(60) days from the due date, then the license will convert to a
non-exclusive license.
(b) DMD Offers For Sale a Competing Product. The License granted
under Section 7.1 above shall become non-exclusive if DMD or a DMD
Affiliate offers for sale or lease any product in the Dental Field
that contains a semiconductor imaging chip unit that processes x-ray
images other than a Licensed Product that contains CCD Chip
Technology.
(c) DMD Exercises its Rights to Receive Technology in Order to
Complete or Correct the Developed Subsystem. If DMD exercises its
rights under either of Sections 2.9(b)(i) or 4.1(b)(i) to obtain
SUNI technical information pursuant to Section 11 of this
Agreement, and if DMD has not obtained a production version of the
Developed Subsystem within six (6) months after the date that is the
later of the date on which such technical information is delivered
to DMD and the date that was SUNI's Delivery Date for the Final
Prototype Developed Subsystem, then the License granted under
Section 7.1 above shall become non-exclusive.
(d) Notice by DMD. The License granted under Section 7.1 above shall
become non-exclusive if DMD provides SUNI with written notice
electing to convert the License into a non-exclusive license.
7.4. SUNI Rights if License Becomes Non-exclusive. If the License granted
under Section 7.1 above becomes non-exclusive, then SUNI shall have the
right to license the Licensed Technology to others for use in the Dental
Field; provided, however, that except where the License becomes
non-exclusive upon DMD's election as set forth in Section 7.3(d) above, no
other licensee may have greater or more favorable rights in the Dental
Field in any respect than are afforded to DMD hereby.
7.5. No Trademark License. Nothing in this Agreement shall be construed as
authorizing a party to use any trademark or trade name of the other.
8. EXCLUSIVE MARKETING; SENSOR TECHNOLOGY DEVELOPMENT.
8.1. Exclusive Marketing by SUNI. So long as the license granted under
Section 7.1
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remains exclusive, SUNI shall not sell or license to any person other than
DMD, or develop other than for DMD, any device competitive with the X-Ray
System or the Developed Subsystem for use or sale in the Dental Field.
SUNI shall not, however, be restricted by this Section 8.1 from
developing, selling or licensing any products or services for use outside
the Dental Field.
8.2. Sensor Technology Development.
(a) If DMD desires to add features to the Developed System or to
market a device competitive with the X-Ray System then before it may
do so, DMD will first give SUNI written notice of DMD's proposal for
additional features or a competing product. Within thirty (30) days'
of SUNI's receipt of such notice SUNI shall inform DMD, in writing,
as to whether SUNI desires to engage in discussions with DMD
concerning SUNI's performance of the work required to add features
or develop a competing product. If SUNI notifies DMD that it is not
interested in engaging in such discussions or fails to respond
within the thirty (30) day period to DMD's request, then on the date
that is six (6) months after the expiration of SUNI's thirty (30)
day response period, DMD may commence promotion and sale of a
product that is competitive with the X-Ray System. IF SUNI notifies
DMD within the thirty (30) day response period that SUNI wants to
engage in such discussions, then SUNI and DMD will have another
sixty (60) days from the date of SUNI's response to complete an
agreement concerning SUNI's work on the additional features or
development of a competing product. If SUNI and DMD fail to reach
agreement within such time period, then on the date that is six (6)
months after the expiration of the sixty (60) day negotiation
period, DMD may commence promotion and sale of a product that is
competitive with the X-Ray System.
(b) If, in compliance with Section 8.2(a) above, DMD shall offer for
sale any product in the Dental Field other than a Licensed Product
that contains a semiconductor imaging chip unit that processes x-ray
images, then the License granted under Section 7.1 shall immediately
cease to be exclusive.
9. REPRESENTATIONS AND WARRANTIES.
9.1. Representations and Warranties of DMD and SUNI. SUNI and DMD each
represent and warrant to the other that:
(a) It has all requisite power and authority to enter into this
Agreement and to carry out the transactions contemplated by this
Agreement;
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement
have been duly authorized by all requisite action on the part of
such party; and
(c) This Agreement has been duly executed and delivered by such
party and (assuming the due authorization, execution and delivery
hereof by the other party) is a valid and binding obligation of such
party, enforceable against it in accordance with its terms except as
enforcement of such terms may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the
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enforcement of creditors' rights generally and by the availability
of equitable remedies and defenses.
9.2. Representations and Warranties of SUNI. SUNI represents and warrants
to DMD that:
(a) To SUNI's knowledge, all Deliverables have been or will be
designed for DMD, and SUNI either owns or has acquired rights in and
to, or will acquire right in and to, all Deliverables and no portion
of such items or their use or distribution violates any patent,
copyright, trade secret right, or similar right of any third party.
(b) SUNI has the rights it needs to satisfy its obligations
hereunder. Further, for so long as DMD's rights under this Agreement
remain in effect, SUNI agrees that it will not take any action which
would prevent DMD and its Subsidiaries from marketing the Developed
Subsystem anywhere in the world.
(c) SUNI shall use reasonable best efforts to perform all
Development Work and to provide the Deliverables in accordance with
the Statement of Work and Design and Engineering Specifications.
(d) To SUNI's knowledge, the CCD Chip does not and will not infringe
upon, or violate or misappropriate, in whole or in part, the rights
of any third party or entity, including but not limited to any
patent, copyright, trade secret, trade xxxx, service xxxx rights.
(e) To SUNI's knowledge, the CCD Chip is not the subject of any
litigation or claim that has given or might give rise to litigation
or any investigation or proceeding.
(f) SUNI will perform its obligations arising pursuant to this
Agreement in a diligent and professional manner using experienced
personnel.
(g) SUNI is free to enter into this Agreement and will not do or
permit any act which will materially interfere with or derogate from
the full performance of the Development Work or the exercise of
DMD's rights granted herein.
(h) The entering into and carrying out of the terms of this
Agreement will not violate or constitute a breach of any law,
judgment or agreement binding on SUNI.
(i) Immediately upon each element of the X-Ray System (other than
the Developed Subsystem and Tooling) coming into existence, title to
such element and all Intellectual Property Rights associated
therewith shall be owned by DMD free and clear of all liens,
interests or adverse claims imposed by or with the consent of SUNI.
SUNI shall promptly execute all documents necessary to assign such
rights to DMD.
9.3. LIMITATION ON WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
SECTION 9 ABOVE, NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY, FITNESS FOR
A PARTICULAR PURPOSE AND NONINFRINGEMENT.
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10. TERM AND TERMINATION. This Agreement will continue in effect unless and
until terminated as follows:
10.1. Automatic Termination. This Agreement will terminate automatically
if the Effective Date has not occurred on or before the date that is
thirty (30) days after the date first set forth above in this Agreement,
unless both parties agree, in writing, to an extension of such thirty (30)
day period. Neither party shall have any liability to the other as a
result of a termination under this Section 10.1.
10.2. Termination by SUNI. SUNI may terminate this Agreement upon written
notice to DMD for the material breach by DMD of any of its material
obligations under this Agreement if DMD has not cured such breach within
the applicable notice period specified below.
(a) The notice period shall be ninety (90) days for a failure to pay
an amount due under this Agreement, provided that the reason for the
late payment is a bona fide cash flow problem that DMD is
experiencing, and DMD has not been late in delivering any other
payments due under the Agreement during the twelve (12) month period
preceding the payment due date.
(b) The notice period shall be thirty (30) days for a failure to pay
an amount due under this Agreement if the ninety (90) day notice
period described in Subsection 10.1(a) above does not apply.
(c) The notice period shall be sixty (60) days for any breach not
specified in subsections (a) and (b) above.
10.3. Termination by DMD. DMD may terminate this Agreement upon sixty (60)
days written notice to SUNI for the material breach by SUNI of any
material representation, warranty or obligation of SUNI contained or
referred to herein, provided that SUNI has failed to cure such breach
within such sixty (60) days; or (ii) pursuant to Sections 2.9(b)(i) or
4.1(b)(i) above.
10.4. Termination by Either Party. Either party may terminate this
Agreement if the other party becomes the subject of bankruptcy proceedings
not terminated within sixty days (60) of any filing. SUNI acknowledges
that if SUNI, as a debtor under the U.S. Bankruptcy Code, rejects this
Agreement, then DMD may elect to retain its rights under this Agreement as
provided in Section 365 (n) of the Bankruptcy Code. Upon written request
of DMD to SUNI or the Bankruptcy Trustee, SUNI or such Bankruptcy Trustee
shall not interfere with the rights of DMD as provided in this Agreement.
10.5. Discretionary Rejection is Not a Breach. Notwithstanding the
provisions of Sections 10.2 and 10.3 above a Discretionary Rejection shall
not be deemed to constitute a breach by SUNI of its obligations under this
Agreement.
11. DELIVERY OF SUNI TECHNOLOGY
11.1. Circumstances for Delivery. If, and only if, one or more of the
circumstances described under this Section 11.1 below exists, then DMD may
require SUNI to deliver to DMD the CCD Chip Technology and Licensed
Technology, pursuant to the terms and conditions described in Subsection
11.2 below:
(a) SUNI or its successor ceases doing business, or
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19
(b) After failure to cure within the notice period specified in
subsection 10.2 above SUNI is in material breach of its obligations
to support the CCD Chips or is otherwise in material breach of this
Agreement and such breach makes it reasonably necessary for DMD to
have access to the CCD Chip Technology for the purposes set forth in
Section 11.2 below, DMD elects, in lieu of terminating this
Agreement, to receive the Technology from DMD under this Section
11; or
(c) DMD is entitled to receive the Technology under either of
Sections 2.9(b)(i) or 4.1(b)(i)
11.2. Delivery of SUNI Technology and License. If one or more of the
circumstances described in Subsection 11.1 above exists, then DMD may
require SUNI to deliver or cause to be delivered to DMD a copy of the then
most recent version of the CCD Chip Technology, Developed Subsystem,
Tooling and Licensed Technology, and all engineering schematics, design
information, plans, flow charts, data structures, any work in progress to
develop the Developed Subsystem and Tooling, and any available compilers,
assemblers, or other computer programs necessary to create an executable
version of the system, together with source code for SUNI Software and all
related documentation. DMD shall have a nontransferable, non-sublicensable
license to use such CCD Chip Technology and Licensed Technology internally
for the sole and limited purpose of manufacturing, maintaining, developing,
selling and distributing the Developed Subsystem. In addition, to the
extent Tooling or third party licensed technology held by SUNI would be
necessary or useful for DMD to have for the purpose of manufacturing,
maintaining and Developing the Developed Subsystem, SUNI will grant a
license or sublicense, as applicable, to DMD solely for the limited purpose
of using such Tooling or third party technology or modifying or maintaining
such Tooling for purposes consistent with the license set forth in Section
7.1(a) above. If such third party proprietary technology is not
transferable to DMD, then SUNI will identify for DMD the existence and
source of such technology in the Statement of Work. DMD ASSUMES ALL RISK,
RESPONSIBILITY AND LIABILITY ARISING OUT OF ITS USE AND MODIFICATION OF THE
CCD CHIP TECHNOLOGY, LICENSED TECHNOLOGY AND TOOLING PURSUANT TO THIS
SECTION AND WILL INDEMNIFY AND HOLD HARMLESS SUNI FROM AND AGAINST ANY
LOSSES, COSTS, LIABILITY OR DAMAGES THAT SUNI MAY SUFFER AS A RESULT OF
DMD'S ACTIVITIES UNDER THIS SECTION 11.
12. COMPLIANCE WITH GOVERNMENTAL REQUIREMENTS.
12.1. Each party agrees to comply, and do all things necessary to comply
with all applicable laws, regulations and ordinances that it is required to
comply with in the ordinary course of the conduct of its business, and
hereby certifies that as of the date of this Agreement it is in such
compliance.
12.2. DMD shall advise SUNI of all requirements of all laws, regulations
and ordinances of Regulatory Agencies applicable to the Dental Field
insofar as they relate to the activities to be performed by SUNI under this
Agreement in the form of a change to the Design and Engineering
Specification. SUNI shall make all required changes in accordance with
Section 2.8 of this Agreement.
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20
12.3. DMD shall supply to SUNI, on a timely basis, as part of the
Regulatory Specifications, any features that are required for the Developed
Subsystem pursuant to regulations of Regulatory Agencies , and in any
event, shall provide such feature no later than the date specified in the
schedule incorporated in the Statement of Work as the "Regulatory
Specifications Cut-Off Date." Any regulations applicable to the Design and
Engineering Specifications adopted by a Regulatory Agency and not delivered
to SUNI by the "Regulatory Specifications Cut-Off Date" may be included in
the Design and Engineering Specifications only in accordance with Section
2.8 of this Agreement.
13. CONFIDENTIAL INFORMATION.
13.1. Confidential Information. DMD and SUNI each acknowledge that the
other possesses and will continue to possess information that has been
created, discovered, developed by or received by it, which information has
commercial value in its business or that of its customers and is not in
the public domain.
13.2. Obligations. DMD and SUNI will each use at least the same degree of
care to prevent disclosing to third parties the Confidential Information
of the other as it employs to avoid unauthorized disclosure, publication
or dissemination of its own information of a similar nature (including but
not limited to the use of written confidentiality agreements with
employees); provided, however, that the parties may disclose such
information to entities performing services required hereunder where (a)
use of such entity is authorized under this Agreement, (b) such disclosure
is necessary or otherwise naturally occurs in that entity's scope of
responsibility, (c) the entity agrees in writing to assume the obligations
described in this Section, and (d) the disclosing party assumes full
responsibility for the acts or omissions of such entity no less than if
the acts or omissions were those of the disclosing party. Any disclosure
to such entity shall be under the terms and conditions as provided herein.
Without limiting the generality of the foregoing, neither party will
publicly disclose the other's Confidential Information except to the
extent permitted by Section 13.5 without the prior written consent of the
other. Furthermore, neither DMD nor SUNI will (i) make any use of the
Confidential Information of the other except as contemplated by this
Agreement, or (ii) acquire any right in or assert any lien against the
Confidential Information of the other except as contemplated by this
Agreement.
13.3. Exclusions. Notwithstanding Section 13.2, this Section 13 will not
apply to any particular information which a party can demonstrate was (a)
at the time of disclosure to it, in the public domain; (b) after
disclosure to it, published or otherwise becomes part of the public domain
through no fault of the receiving party; (c) in the possession of the
receiving party at the time of disclosure to it; (d) received after
disclosure to it from a third party who had a lawful right to disclose
such information to it; or (e) independently developed by the receiving
party without reference to or use of Confidential Information of the
furnishing party. In addition, a party shall not be considered to have
breached its obligations under this Section 13 for disclosing Confidential
Information of the other party to the extent required to satisfy any legal
requirement of a competent government body provided that, (1) immediately
upon receiving any such request and to the extent that it may legally do
so, such party advises the other party promptly; (2) makes a reasonable
effort to obtain a protective order prior to making such disclosure in
order that
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the other party may interpose an objection to such disclosure; and (3)
takes action to assure confidential handling of the Confidential
Information.
13.4. Loss of Confidential Information. In the event of any disclosure or
loss of, or inability to account for, any Confidential Information of the
furnishing party, the receiving party will notify the furnishing party
immediately in writing of such occurrence.
13.5. Publicity. SUNI agrees not to disclose the fact that SUNI has
furnished or contracted to furnish to DMD the Developed Subsystem or
Tooling and/or services hereunder, or the terms and conditions of this
Agreement, without the express written consent of DMD. Neither party will
make any public announcement of this Agreement or its terms, or use the
name of the other party, without the other party's prior written request,
which consent shall not unreasonably be withheld.
14. INDEMNIFICATION.
14.1. Indemnification by SUNI.
(a) Obligation to Provide "Work Around". If a third party asserts a
claim that the Developed Subsystem or Tooling infringes the third
party's Intellectual Property Right (a "Claim"), then SUNI will use
commercially reasonable efforts, either: (A) to develop and
implement a non-infringing substitute for the infringing component
of the Developed Subsystem or Tooling, so long as the Developed
Subsystem and Tooling continue to conform to the Design and
Engineering Specification; or (B) at SUNI's expense, to obtain a
license from such third party that enables DMD to continue to
exercise its rights to the Developed Subsystem and Tooling as set
forth in this Agreement, provided that such license is available at
a reasonable rate not to exceed the amount of future royalties
payable to SUNI under this Agreement. If SUNI elects to implement a
work-around as set forth in Subsection (A) above, then SUNI will
provide to DMD an estimate of designing and implementing the
work-around plus reasonable overhead. DMD will pay SUNI upon receipt
of invoices from SUNI for all such costs. DMD may recover all
amounts that it pays to SUNI in accordance with the preceding
sentence by deducting from royalties otherwise payable to SUNI up to
one-twelfth (1/12) of such amounts during each month of the twelve
(12) month period that commences in the first month after DMD's
payment of such amounts.
(b) Obligation to Defend DMD. SUNI, at its own expense, will defend
DMD against all Claims.
(c) Obligation to Indemnify DMD. In addition to the obligations set
forth in Subsections 14.1 (a) and 14.1 (b) above:
(i) Damages Finally Awarded. SUNI will indemnify DMD against
damages finally awarded against DMD in favor of a third
party in a Claim or paid to the third party as a result of a
settlement of the Claim; and
(ii) Indemnified Losses. SUNI will indemnify and hold harmless
DMD against Indemnified Losses that DMD suffers as a result
of a Claim. For purposes of this Subsection, "Indemnified
Losses" are
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costs, expenses, losses, damages, and liabilities incurred
or suffered by DMD as a result of the Claim; provided that
SUNI has approved such Indemnified Losses, in writing,
before DMD incurred or suffered such losses (which approval
will not unreasonably be withheld or delayed).
(iii) Limitation On SUNI's Liability Under this Subsection. Any
liability that SUNI incurs pursuant to this Subsection 14.1
(c) will be limited to an amount that is equal to thirty
three and a third percent of the amount of all Advance
Payments made under this Agreement plus all royalties (other
than Advance Payments) paid under this Agreement, provided
that the total amount of such liability shall only be
recoverable from: (A) up to fifty percent (50%) of royalties
paid by DMD to SUNI under this Agreement prior to the date
that the Claim is made; plus (B) a 50% decrease in the
applicable royalty rate under this Agreement until such time
as all amounts due under this Section have been paid in full
Notwithstanding anything to the contrary in the foregoing,
such limitation on SUNI's liability will not apply to
Indemnified Losses that DMD incurs or suffers as a result of
SUNI's knowing and willful infringement of a third party's
Intellectual Property Rights.
(d) Exceptions to SUNI's Obligations Under Section 14.1. SUNI's
obligations under this Section 14.1 shall not extend to any infringement:
(i) caused solely by DMD's failure to pay for or implement a
non-infringing substitute offered or provided by SUNI in
accordance with Section 14.1 (a) above;
(ii) caused by a mandatory design change requested by DMD,
(iii) arising out of the use or combination of the Developed
Subsystem or Tooling with any other components,
(iv) caused by any change made by DMD to the Developed Subsystem
or Tooling if SUNI's unchanged Developed Subsystem or
Tooling, as applicable, does not infringe or allegedly
infringe the Intellectual Property Right in question; or
(v) resulting from corrections to or completion of the Developed
Subsystem or Tooling made by or for DMD pursuant to Section
11 above.
If an infringement or misappropriation action or claim against SUNI is
based on any of the circumstances described in this Section 14(d), then
DMD shall at its own expense defend and indemnify SUNI as set forth in
Section 14.2 below.
14.2. Indemnification by DMD.
(a) Obligation to Defend SUNI. DMD, at its own expense will defend SUNI
against any claim by third parties that (i) technology owned by DMD as set
forth in Sections 6.2 or 9.2(i) above, infringes third party Intellectual
Property Rights;
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(ii) against claims based on one or more of the circumstances set
forth in Subsection 14.1(d) above, except that with respect to
Section 14.1(d)(iii) above, such this Section shall apply only if
the claim arises out of the use or combination of the Developed
Subsystem of Tooling with any other components where DMD supplies
such components or creates the combination; and (iii) as set forth
in Section 11.2 above (a "DMD Claim").
(b) Obligation to Indemnify SUNI. In addition to the foregoing
obligation:
(i) Damages Finally Awarded. DMD will indemnify SUNI against
damages finally awarded against SUNI in favor of a third
party in a DMD Claim or paid to the third party as a result
of a settlement of the DMD Claim; and
(ii) Indemnified Losses. DMD will indemnify and hold harmless
SUNI against SUNI Indemnified Losses that SUNI suffers as a
result of a DMD Claim. For purposes of this Subsection
14.2(b)(ii), "SUNI Indemnified Losses" are costs, expenses,
losses, damages, and liabilities incurred or suffered by
SUNI as a result of the DMD Claim; provided that DMD has
approved such SUNI Indemnified Losses, in writing, before
SUNI incurred or suffered such losses (which approval will
not unreasonably be withheld or delayed).
(iii) Limitations on DMD Liability Under this Subsection. Any
liability that DMD incurs pursuant to Subsections 14.2(b)(i)
and (b)(ii) will be limited to an amount that is equal to
thirty three and a third percent of the amount of all
Advance Payments made under this Agreement plus all
royalties paid under this Agreement, provided that the total
amount of such liability shall only be recoverable from: (A)
an amount equal to up to fifty percent(50%) of royalties
paid by DMD to SUNI under this Agreement prior to the date
that the Claim is made; plus (B) a fifty percent (50%)
increase in the applicable royalty rate under this Agreement
until such time as all amounts due under this Section have
been paid in full. Notwithstanding anything to the contrary
in the foregoing, such limitation on DMD's liability will
not apply to SUNI Indemnified Losses that SUNI incurs or
suffers as a result of DMD's knowing and willful
infringement of a third party's intellectual Property Rights
or with respect to DMD's indemnity obligations with respect
to the circumstances described in Section 11.2 above.
14.3. Conditions of Indemnification. If either party receives a claim or
is subject to any claim as to which it is entitled to be defended or to
indemnification under Sections 14.1 or 14.2 above, then such indemnified
party shall promptly notify the indemnifying party in writing of the
claim. The indemnifying party's obligations under this Section 14 shall be
contingent upon: (i) the indemnifying party having sole control of the
defense or settlement of the claim (provided that if a settlement will
adversely affect DMD's license rights or either party's costs under this
Agreement, or otherwise affect the rights of the
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24
indemnified party, the indemnifying party shall not settle the case
without the prior consent of the indemnified party), and (ii) the
indemnified party providing all reasonable assistance requested by the
indemnifying party, at the indemnifying party's expense. THE REMEDIES FOR
INFRINGEMENT SET FORTH IN THIS SUBSECTION ARE EACH PARTY'S SOLE AND
EXCLUSIVE REMEDY FOR INFRINGEMENT.
15. LIABILITY.
15.1. General. Each party is responsible for its own acts and for the acts
of its employees.
15.2. 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.
15.3. Limitation on Liability. EXCEPT FOR EACH PARTY'S INDEMNITY
OBLIGATIONS, WHICH ARE SUBJECT TO THE LIMITATIONS ON LIABILITY SET FORTH
IN SECTION 14 ABOVE, NEITHER PARTY'S AGGREGATE LIABILITY FOR ALL CLAIMS
ARISING OUT OF THIS AGREEMENT SHALL EXCEED THE FOLLOWING AMOUNTS:
(a) DMD's Maximum Liability. DMD's aggregate liability shall not
exceed an amount equal to:
(i) the amount of royalties DMD has paid to SUNI, plus
(ii) all royalties paid under this Agreement and the amount of
royalties both due and owing and payable to SUNI under
this Agreement; less
(iii) any amounts paid by DMD pursuant to Section 14;
Provided that the total amount of liability under this Section
shall only be recoverable from: (A) an amount equal to up to
fifty percent (50%) of royalties paid by DMD to SUNI under this
Agreement prior to the date that the Claim is made; plus (B) a
fifty percent (50%) increase in the applicable royalty rate
under this Agreement until such time as all amounts due under
this Section have been paid in full.
The foregoing limitation on DMD's liability shall not apply as to
any direct damages that SUNI suffers as a result of DMD's willful
and intentional breach of a material provision of this Agreement and
failure to cure such breach within the applicable notice and cure
period.
(b) SUNI's Maximum Liability. SUNI's aggregate liability shall not
exceed an amount equal to:
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25
(i) Prior to Payment of All Advance Payments. Up to
such time as DMD has paid all Advance Payments to
SUNI, SUNI's liability shall not exceed
thirty-three and one-third percent (33-1/3%) of the
amount of Advance Payments paid to SUNI.
(ii) After Payment of All Advance Payments. After such
time as DMD has paid all Advance Payments to SUNI,
then SUNI's liability shall not exceed an amount
equal to:
A. Thirty Three and One Third Percent of the
Advance Payments paid to SUNI; plus
B. all royalties (other than Advance Payments)
paid under this Agreement, less
C. any amounts paid by SUNI pursuant to Section
14;
Provided that the total amount of liability under
this Section shall only be recoverable from: (A) up
to fifty percent (50%) of royalties paid by DMD to
SUNI under this Agreement prior to the date that
the Claim is made; plus (B) a 50% decrease in the
applicable royalty rate under this Agreement until
such time as all amounts due under this Section
have been paid in full.
(iii) Exception to Limitation on Liability. The foregoing
limitation on SUNI's liability shall not apply as
to any direct damages that DMD suffers as a result
of SUNI's willful and intentional breach of a
material provision of this Agreement and failure to
cure such breach within the applicable notice and
cure period.
15.4. Definition of "Willful and Intentional Breach". For purposes of this
Section 15, a "willful and intentional breach" shall mean a breach that results
from a party's willful act or omission where the party engaged in such act or
omission with knowledge and intent that such act or omission would result in a
breach of a material provision of this Agreement.
16. TAXES. The royalties specified in Section 4 above are exclusive of any
federal, state or local excise, sales, use and similar tax and other
governmental assessments, and, to the extent such taxes may apply, DMD shall
promptly pay all such amounts that are assessed or imposed (including, without
limitation, interest and penalties) with respect to the licenses granted and
Development Work performed under this Agreement, other than with respect to
SUNI's net income. Except as set forth above, SUNI will pay all taxes imposed in
connection with its performance under this Agreement. DMD will pay all taxes
imposed on DMD-owned assets and sales or retailers use taxes imposed on the
Developed Subsystem(s) or services provided hereunder.
17. SUNI'S EMPLOYEES. SUNI will have an appropriate agreement with each of
SUNI's employees, or others whose services SUNI may require sufficient to enable
SUNI to comply with all of the provisions of this Agreement.
18. SUNI NOT AGENT OF DMD. SUNI is and will remain at all times during this
Agreement an independent contractor. SUNI shall not be the agent or local
representative of DMD for any purpose whatsoever. SUNI is not granted any right
or authority to create any obligations, expressed or implied on behalf of DMD,
or to bind DMD in any manner whatsoever.
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19. SURVIVAL. Subject to Section 2.1 above, and except as otherwise expressly
set forth in this Agreement, the rights and obligations of Sections 4 (Royalty),
6 (Intellectual Property Rights); 13 (Confidential Information); 14
(Indemnification); 15 (Liability) and 16 through 33, shall survive and continue
after any expiration or termination of this Agreement and shall bind the parties
and their legal representatives, successors, heirs and assigns.
20. 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.
21. NOTIFICATION. 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: President
Dental/Medical Diagnostic Systems, Inc.
000 Xxxxx Xxxxxxxx Xxxx., Xxxxx 000
Xxxxxxxx Xxxxxxx, XX 00000
If to SUNI: President
SUNI Imaging Microsystems, Inc.
000 X. Xxxx Xxxxxx
Xxxxxxxx Xxxx, XX 00000
22. NON-WAIVER. The failure of any party at any time to require performance by
any other party of any provision of this Agreement shall not affect in any way
the full right to require such performance at any subsequent time; nor shall the
waiver by any party of a breach of any provision of this Agreement be taken or
held to be a waiver of the provision itself.
23. FORCE MAJEURE. No party shall be liable for, nor shall it be considered in
breach of this Agreement due to any failure to perform its obligations under
this Agreement as a result of natural calamity, act of God or a public enemy,
act of any military, civil or, to the extent not resulting from the intentional
or negligent acts or omissions of that party, and (i) act of regulatory
authority or (ii) change in any law or regulation. In such event, the party
whose performance is so prevented shall give prompt written notice to the other
and shall take all reasonable steps to avoid or remove such causes of
nonperformance. If it reasonably appears that the time for delivery or
performance under this Agreement will be extended for more than
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three (3) months due to Force Majeure, the party due performance shall have the
right to terminate this agreement without obligation to the other.
24. INJUNCTIVE RELIEF. Each party agrees that in the event of any breach by the
other party of any of the covenants and agreements set forth in Sections 7
(License), 11 (Delivery of Technology) or 13 (Confidentiality) of this Agreement
the non-breaching party may encounter extreme difficulty in attempting to prove
the actual amount of damages suffered by it as a result of such breach and may
not have adequate remedy at law in such event. Each party therefore agrees that,
in addition to any other remedy available at law or in equity, in the event of
such breach, either party shall be entitled to seek and receive specific
performance and temporary, preliminary and permanent injunctive relief from
violation of any of said covenants and agreements from any court of competent
jurisdiction without necessity of proving irreparable harm or the amount of any
actual damage to either party resulting from such breach.
25. REMEDIES. The remedies for breach set forth in this Agreement are, unless
specifically stated to the contrary in any instance, cumulative and are in
addition to any other remedies in law or equity. Unless specifically stated to
the contrary in any instance, the election of one or more remedies shall not bar
the use of other remedies.
26. SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable for any reason, such invalidity shall not affect the validity of
the remaining provisions of this Agreement, and the Parties shall attempt to
substitute for the invalid provision a valid provision which closely
approximates the intent and economic effect of the invalid provisions.
27. SECTION HEADINGS. The section headings in this Agreement are solely for
convenience and shall not be considered in its interpretation.
28. INTERPRETATION. This Agreement and all of the provisions of this Agreement
shall be deemed drafted by all of the parties hereto. This Agreement shall not
be interpreted strictly for or against any Party, but solely in accordance with
the fair meaning of the provisions hereof to effectuate the purpose and intent
of this Agreement.
29. COUNTERPARTS. This Agreement may be executed by the parties in one or more
counterparts, and each of which when so executed shall be an original, but all
such counterparts shall constitute one and the same instrument.
30. GOVERNING 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.
31. TIME IS OF THE ESSENCE. The parties agree that time is of the essence in the
performance of their respective material obligations hereunder.
32. EXHIBITS. The following Exhibits and Attachments are attached to this
Agreement and incorporated by reference:
Attachment 1 Design and Engineering Specification
Attachment 2 Statement of Work
Attachment 3 Tooling (hardware and software required by
DMD)
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Attachment 4 Countries in which SUNI intends to seek
patent protection.
Attachment 5 Regulatory Specification
33. PREVAILING PARTY. The prevailing party in any litigation between the parties
that arises out of this Agreement shall be entitled to recover reasonable
attorneys fees, costs and expense that the party incurred as a result of such
litigation.
34. ENTIRE 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 or in writing, other
than those expressly set forth in this Agreement. This Agreement may not be
modified except by a writing signed by authorized representatives of all
parties.
35. RESCISSION RIGHT. If either party sends to the other party before 3:00 PM
PST on October 13, 1997, a written notice that such party is rescinding this
Agreement, then this Agreement shall terminate and be of no further force and
effect. Neither party shall have any liability arising out of a termination or
rescission under this Section 35.
IN WITNESS WHEREOF, the parties to this Agreement have caused it to be
executed by their duly authorized officers as of the date set forth on the cover
hereof.
DENTAL/MEDICAL DIAGNOSTICS, INC.
By: /s/ R. E. XXXXXXX
---------------------------------
Its: Vice President
and CFO
SUNI IMAGING MICROSYSTEMS, INC.
By: /s/ PAUL SUNI 10-21-97
---------------------------------
Its: President and CEO
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ATTACHMENT 1
DESIGN AND ENGINEERING SPECIFICATION
30
ATTACHMENT 1 -
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
1
31
ATTACHMENT 1 -
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
2
32
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
___________________
Suni Imaging Microsystems, Inc.
PROPRIETARY
33
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
___________________
Suni Imaging Microsystems, Inc.
PROPRIETARY
34
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
___________________
Suni Imaging Microsystems, Inc.
PROPRIETARY
35
**
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION
___________________
Suni Imaging Microsystems, Inc.
PROPRIETARY
36
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
**
Suni Imaging Microsystems, Inc.
PROPRIETARY
37
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
38
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
39
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
-------------------------------
Suni Imaging Microsystems, Inc.
PROPRIETARY
40
SUNI IMAGING MICROSYSTEMS, INC.
**
SUNI PROPRIETARY
**CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
41
ATTACHMENT 2
STATEMENT OF WORK
42
ATTACHMENT 2 -- SUNI/DMD Statement of Work
SUNI/DMD STATEMENT OF WORK
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
3
43
ATTACHMENT 2 -- SUNI/DMD Statement of Work
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION
4
44
ATTACHMENT 3
TOOLING (HARDWARE AND SOFTWARE REQUIRED BY DMD)
45
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
ATTACHMENT 3--Required Tooling
**
5
46
ATTACHMENT 4
COUNTRIES IN WHICH SUNI INTENDS TO SEEK PATENT PROTECTION
47
ATTACHMENT 4--Countries where SUNI intends to file for patent protection
Countries where SUNI Intends to seek patent protection.
**
** CONFIDENTIAL INFORMATION OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION
6
48
ATTACHMENT 5
REGULATORY SPECIFICATION
[To be provided at a later date]
