EXHIBIT 10.16
CONFIDENTIAL TREATMENT REQUESTED. CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION.
AGREEMENT OF PRINCIPAL TERMS
This Agreement of Principal Terms is entered into this 31st day of
October 2001, between Shanghai Information Industry Co. Ltd. ("S.V.A."), a
Chinese corporation whose registered address is 000 Xxxxxxx Xxxx, Xxxxxxxx,
Xxxxx 000000 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 (S.V.A. and SpatiaLight are sometimes
referred to individually as a "party" and jointly as the "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) S.V.A. 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) S.V.A. has entered into a full Non-disclosure Agreement with SpatiaLight
dated May 23, 2000, ("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 S.V.A. 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 principal terms.
NOW, THEREFORE, the parties hereto agree, as follows:
1. Representations: Each of S.V.A. 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
contractual obligations; that is 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 S.V.A. with two (2) 52" LCOS TV prototypes
within 40 days of the signing of this Agreement and then at an agreed
upon later date, two (2) Display Units. S.V.A. will have the use of the
prototype TVs for a period of 15 days ("Test Period") from the
acknowledged receipt of the prototypes. SVA will also be entitled to
have use of the two Display Units (to be supplied at a later date) for a
period of 15 days (or such longer period of time which may be agreed
upon by the parties) from their acknowledged receipt. During the Test
Periods, S.V.A. 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 S.V.A. to test the prototype LCOS televisions using
the Display Units to meet the technical criteria established by
S.V.A. and SpatiaLight, jointly.
(b) If the prototype LCOS televisions meet the specified technical
criteria at the end of the Test Period, S.V.A. shall, following
satisfactory further testing which will incorporate trial
development and trial manufacturing ("Trial Period"), such Trial
Period estimated to be six months and which will consist of an
initial 20 prototype LCOS TVs using SpatiaLight's Display Units,
followed by 200 pre-production LCOS TVs using SpatiaLight's Display
Units and lastly 2,000 production LCOS TVs using SpatiaLight's
Display Units, enter into a definitive Purchase Order Agreement with
SpatiaLight on a mutually agreeable form for the following number of
Display Units or LCOS chips (such determination must be made by SVA
at the time of entering into the Purchase Order Agreement).
SpatiaLight agrees to sell its LCOS chips to SVA at a special
concessionary price of US$210 per chip solely for the purpose of
enabling SVA to undertake the Trial Period referred to in this
paragraph 2 (b).
(i) in the 1st full year of production, orders for a minimum of
100,000 Display Units or 300,000 LCOS chips.
(ii) in the 2nd full year of production, orders for a minimum of
200,000 Display Units or 600,000 LCOS chips. The terms of
payment shall be internationally acceptable methods of
payment acceptable to SpatiaLight.
(c) SpatiaLight undertakes that SVA will be the first company in China
to receive its prototype LCOS TVs. There will be a minimum of 15
days delay before a second company in China receives SpatiaLight's
prototype LCOS TVs and a minimum of 30 days delay before a third
company in China receives SpatiaLight's prototype LCOS TVs.
(d) Provided that SVA and SpatiaLight enter into a binding Purchase
Order Agreement for a minimum of 100,000 Display Units or 300,000
LCOS chips covering a period of 12 months within 30 days of the end
of the Trial Period, [*] in China for a [*] from the date of first
delivery of either Display Units or LCOS chips. Provided that SVA
and SpatiaLight enter into a binding Purchase Order Agreement for
the second year of production for a minimum of 200,000 Display Units
or 600,000 LCOS chips, [*] of either Display Units or LCOS chips for
China for that 12 month period.
(e) If any of the prototypes referred to in this Paragraph 2 do not meet
the specified technical criteria at the end of the Test Period,
S.V.A. shall return all prototypes 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.
3. Within 10 days of the execution of this Agreement, S.V.A. will notify
SpatiaLight that it has secured the necessary and proper approvals to
this Agreement from the relevant Chinese authorities.
OTHER ISSUES
In addition to the desire of both S.V.A. and SpatiaLight to develop
their commercial relationship beyond the foregoing the following is also
agreed.
4. Within the period that SpatiaLight is working with S.V.A. and providing
it with trade secrets, technical and other assistance for the
development of LCOS TVs, S.V.A., its officers, directors, principals,
owners, employees and agents shall not, directly or indirectly, work
with any competitor of SpatiaLight.
5. The Governing law for this Agreement of Principal Terms shall be that of
the People's Republic of China.
Signed on behalf of S.V.A. Signed on behalf of SpatiaLight
Name: /s/SUN YUHUAN Name: /s/XXXXXX X. XXXXX
----------------------- ----------------------
Sun Yuhuan Xxxxxx X. Xxxxx
Title: Deputy General Manager Title: Chief Executive Officer
[*]Confidential material redacted and filed separately with the Commission.
