EXHIBIT 10.13
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
MEMORANDUM OF UNDERSTANDING
This Agreement of Principal Terms is entered into this 29th of October
2001 between China Electronics Corporation ("CEC"), a state-owned enterprise
directly administered by the State Council of China whose registered address is
Xx. 00 Xxx Xxxx Xxxx, Xxxxxxx, Xxxxx P.C 100846 and SpatiaLight, Inc.
("SpatiaLight"), a New York Corporation having a principal place of business at
0 Xxxxxxxxxx Xxxx., Xxxxx 000, Xxxxxx, Xxxxxxxxxx 00000, Xxxxxx Xxxxxx of
America (CEC and SpatiaLight are sometimes referred individually as a "party"
and jointly as "parties").
WHEREAS
(a) SpatiaLight is the creator, developer and manufacturer of an active
matrix liquid crystal on silicon microdisplay device having an active matrix of
1280 pixels by 1024 pixels (or 5 by 4 format) or 1280 pixels by 720 pixels (or
16 by 9 format) ("LCOS chip"). When the LCOS chips are fitted onto a light
engine, it may be utilized in display application products such as high
definition televisions and home screen projection systems. As used elsewhere in
this Agreement, the term "Display Unit(s)" refers to three (3) SpatiaLight LCOS
chips fitted onto a light engine designed by SpatiaLight and Fuji Photo Optical
Company ("Fuji") and manufactured by Fuji.
(b) CEC is a leading Chinese electronics manufacturer who intends to enter
the market of LCOS television sets using SpatiaLight's proprietary LCOS chips
fitted in the Display Unit.
(c) CEC has entered into a full Non-disclosure Agreement with SpatiaLight
dated 29th October 2001 ("Non-disclosure Agreement") and is fully bound by the
terms and conditions set forth in that Agreement.
(d) SpatiaLight wishes to enter into this Agreement and assist CEC in
developing the Chinese market for LCOS televisions using SpatiaLight's
proprietary technology.
(e) The parties recently had friendly and constructive meetings between
their representatives in China and have recognized that each could benefit in
important ways by working together.
(f) To help further discussions and co-operation, the parties have agreed
to the following principals terms.
NOW, THEREFORE, the parties hereto agree, as follows:
1. Representations: Each of CEC and SpatiaLight, hereby warrants and
represents to the other, as follows:
(a) that it is a legal person validly existing in its jurisdiction of
establishment;
(b) that it has the full power and authority to enter into this
Agreement and perform its contractual obligations; that its representative who
is signing this Agreement has been authorized to do so pursuant to a valid power
of attorney or board of directors' resolution.
2. SpatiaLight will furnish CEC with two (2) prototypes LCOS TVs within
__ days of receiving agreement from the Chinese authorities specified in Section
3, below. SpatiaLight will also provide a further eight (8) prototypes to CEC in
two stages. The delivery of these prototypes will be agreed upon subsequently
between the two parties. CEC will pay for these eight (8) prototypes at
SpatiaLight's cost. CEC will have the
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use of the prototypes for a period of _________________ months ("Test Period")
from the acknowledged receipt of the prototypes. During the Test Period, CEC
will use its best efforts to develop prototype projection television sets using
the Display Units.
(a) During the Test Period, SpatiaLight will provide technical
assistance to CEC to make and test prototype LCOS televisions using the Display
Units to meet the technical criteria established by CEC and SpatiaLight,
jointly.
(b) If the prototype LCOS televisions meet the specified technical
criteria at the end of the Test Period, CEC shall enter into a definitive
Purchase Order Agreement with SpatiaLight on a mutually agreeable form, and CEC
will set up or transform its existing production capacity into a production line
with a target annual capacity of 200,000 to 300,000 LCOS rear projection TVs.
The Purchase Order Agreement shall conform to the following: (i) in the 1st year
of production, an initial minimum order of 2,000 Display Units, (ii) in the 2nd
year of production, a minimum order of 60,000 Display Units, and (iii) in the
3rd year of production, orders ranging from a minimum of 200,000 Display Units
up to a maximum of 300,000 Display Units. The purchase price for the Display
Units shall be based on quantity, as follows: (i) for an order of 2,000 Display
Units, the price per Display Unit will be US$______, (ii) for an order of 60,000
Display Units, the price per Display Unit which based on current market
conditions is estimated to be US$1600 (excluding import tariffs and VAT). The
actual price will be determined in the Purchase Order Agreement, (iii) for any
order over 120,000 Display Units, the price per Display Unit will be determined
mutually based upon market conditions prevailing at that time. The terms of
payment shall be internationally acceptable methods of payment acceptable to
SpatiaLight and CEC. The Purchase Order Agreement shall also provide that
Display Units will be delivered to CEC within 150 days of the receipt of CEC's
irrevocable order.
(c) If the prototype LCOS televisions do not meet the specified
technical criteria at the end of the Test Period, CEC shall return the ten (10)
prototype Display Units and all confidential technology, data and know-how shall
be either destroyed or kept confidential in accordance with the terms of the
Non-disclosure Agreement. SpatiaLight will return 50% of the payment made to it
by CEC in relation to the further 8 prototypes as referred to in paragraph 2
above.
3. Within ten days of the execution of this Agreement, CEC will notify
SpatiaLight that it has the necessary agreement to this Agreement from the
relevant Chinese authorities.
OTHER ISSUES
In relation to the desire of both CEC and SpatiaLight to develop their
commercial relationship beyond the foregoing the following is also agreed.
4. [Confidential material redacted and filed separately with the
Commission.]
5. [Confidential material redacted and filed separately with the
Commission.]
6. During the period that SpatiaLight is working with CEC and providing
it with trade secrets, technical and other assistance for the development of
LCOS TVs, CEC, its officers, directors and employees shall not, directly or
indirectly, work with any competitor of SpatiaLight.
7. The Governing law for this Agreement of Principal Terms shall be
that of the People's Republic of China.
Signed on behalf of CEC Signed on behalf of SpatiaLight
Name: \s\SU ZHENMING Name: \s\XXXXXX X. XXXXX
------------------------------ -----------------------------
Su Zhenming Xxxxxx X. Xxxxx
Title: Vice President Title: Chief Executive Officer
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