EXHIBIT 10.31
CONFIDENTIAL TREATMENT REQUESTED
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR THE PORTIONS OF THIS AGREEMENT
MARKED [*]. THE OMITTED PORTIONS OF THIS AGREEMENT HAVE BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
INTELLECTUAL PROPERTY RIGHTS
LICENSE AGREEMENT
BETWEEN
SURGX CORPORATION OF USA
(LICENSOR)
AND
IRISO ELECTRONIC COMPANY, LTD. OF JAPAN
(LICENSEE)
Dated OCTOBER , 1997
INTELLECTUAL PROPERTY RIGHTS LICENSE AGREEMENT
On October 1997, SurgX Corporation, a Delaware corporation
having its principal office at 0000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000
(hereinafter "Licensor") and IRISO Electronics Company, a Japanese
corporation having a principal office at 0-00-0 Xxxxxxxxxx Xxxxxxx-Xx,
Xxxxxxxx Xxxxxxxx, Xxxxx 213 (hereinafter "Licensee") agree to replace their
original Agreement (Attachment 1) dated September 1, 1994 with this License
Agreement. The capital equipment ( Attachment 2) purchased by Oryx (by the
SurgX Division) under the September 1994 Agreement, that is presently in use
at SurgX Corporation but which is owned by IRISO will continue to be owned by
IRISO.
1. DEFINED TERMS.
1.1 "Improvements" shall mean those supplements, changes,
revisions, updates, advancements, corrections, and modifications to the
Technical Information or Licensed Intellectual Property Rights.
"Improvements" also includes manufacturing process improvements made during
the term of this Agreement which are necessary or useful for the manufacture,
use, or sale of Licensed Products.
1.2 "Licensed Intellectual Property Rights" means SurgX's
interest in any patents, patent applications, inventions (including the
inventions and patent applications listed on Attachment 1.2), the "SurgX"
trademark and trade name, Technical Information and copyrights owned,
controlled, applied for or obtained by SurgX at any time before or during the
term of this Agreement to the extent such rights are necessary or essential
for the manufacture, use and sale of the Licensed Products. Wherever used in
this Agreement, Licensed Intellectual Property Rights includes any such
rights relating to Improvements of SurgX.
1.3 "Licensed Products" means discrete components and connector
products described on Attachment 1.3 which utilize the Licensed Intellectual
Property Rights and incorporate the Liquid SurgX Polymer Material.
Specifically excluded are other SurgX products, such as, without limitation,
the family of products identified by SurgX as SurgTape, except for SurgTape
for use in Connector Arrays, SurgX Epoxy Packages, or custom SurgX
applications such as a layer in a printed circuit board and novel packaging,
including hybrid designs and multichip modules.
1.4 "Liquid Polymer Material" means the SurgX polymeric material
provided in a solvated liquid form that can be used to provide electrical
over-stress (EOS) or electrostatic discharge (ESD) protection for integrated
circuits (IC's). Specifically, the Liquid Polymer Material is covered by
the patent applications listed on Attachment 1.2.
1.5 SurgTape means a Tape which integrates the SurgX Material,
and which provides ESD and EOS protection for Integrated Circuits.
1.6 Training means providing technical staff selected by IRISO
with approximately 2 weeks of technical instruction on the manufacturing
process used to make connector and discrete components from Liquid SurgX. It
is anticipated that training will consist
of approximately 2 sessions of 1 week each for IRISO in California, and a 1
week session with SurgX staff in Japan. IRISO travel expenses will be paid
for by IRISO, and SurgX travel expenses by SurgX.
1.7 "Technical Assistance" means providing a the appropriate
SurgX personnel to assist personnel of IRISO in becoming trained in the use
of Technical Information needed for the manufacture of SurgX discrete or
connector components.
1.8 "Technical Information" means trade secrets, know-how,
drawings, designs, specifications and industrial, commercial and scientific
information controlled by SurgX and disclosed to IRISO under this Agreement.
Whenever used in this Agreement, Technical Information includes any
information relating to Improvements of SurgX.
1.9 "Royalty Year" means a period of 12 months used to measure
the royalties payable to SurgX. The "First Royalty Year" is the 12 month
period which commences on the date of signing of the agreement.
1.10 "Territory" means Japan. SurgX has granted XXXXXX-XXXXXX
COMPANY 's subsidiary BUSSMANN a world wide exclusive license of SurgX Liquid
for discretes and connectors, except for Japan, where the license is
co-exclusive with IRISO.
1.11 "Gross Profit" means under United States generally accepted
accounting principles: (i) the aggregate sum of revenue recognized by IRISO
from sales or other dispositions of Licensed Products to unaffiliated third
parties net of freight out, returns and credits allowed and taken ("Net
Sales"); (ii) minus IRISO's cost of sales at standard costs including direct
and indirect labor and associated fringe benefits, scrap, perishable tooling,
supplies and maintenance on machinery and equipment (only costs associated
with the manufacture of Licensed Products will be included in standard
costs); (iii) plus or minus, as applicable, operating variances from standard
costs of sales; (iv) minus semi-variable costs equal to 5% of Net Sales for
selling commissions and distribution costs; (v) minus amortization associated
with incremental machinery and equipment used in the manufacture of the
Licensed Products (using a 10 year useful life); and (vi) minus amortization
associated with development costs incurred by SurgX and reimbursed by IRISO
as described in Section 3.3 hereof using a 5-year amortization period.
2. GRANT OF LICENSE (BUSINESS RIGHTS).
2.1 SurgX grants to IRISO, a license, to use Intellectual
Property Rights; and Technical Information for the manufacture, use and sale
of Licensed Products in Japan. SurgX also grants IRISO the right to sell any
such products to an original equipment manufacturer or to a value added
reseller in Japan that may incorporate any such products into goods that are
sold outside of Japan. SurgX further grants IRISO the right to sell any such
product to a Japanese company with an overseas manufacturing facility,
provided the sale of the SurgX takes place in Japan.
2.2 The license is a co-exclusive license with Bussmann.
2.3 The license granted to IRISO under the terms of this
Agreement is for the manufacture, use and sale of Licensed Products for a
period of 15 years commencing on the date of signing of this agreement.
Thereafter the license granted to Licensee hereunder shall continue on a
nonexclusive basis, provided the royalties of paragraph 5.1 continue to be
paid.
2.4 SurgX also grants IRISO the right to SurgX's SurgTape
products for use in the manufacture of connector arrays.
3. DEVELOPMENT AND COMMERCIALIZATION OF THE LICENSED
PRODUCTS
3.1 In consideration for granting the license to IRISO, and in
lieu of a normal license fee, IRISO agrees to take an equity position in
SurgX Corporation of $500,000 at a market valuation of $15 million or $1.50
per share prior to the investment. The stock shares purchased Class A Common
Stock. This investment is for 3.23% of the total value of the company. The
$500,000 is to be paid by wire transfer on the signing of this Agreement by
both parties.
3.2 Upon execution of the Agreement both Parties will use good
faith reasonable efforts to develop the Licensed Products and bring them to
commercialization as soon as feasible. To do this SurgX will provide IRISO
with the following:
3.2.1 The Training, Technical Information and Technical
Assistance required to allow IRISO to manufacture the Licensed Products in
its facilities;
3.2.2 As soon as reasonably possible, a final report
documenting all processing requirements and procedures necessary for IRISO to
manufacture the Licensed Products; and
3.2.3 As soon as reasonably possible, the technology
necessary to improve the Licensed Products performance for broader product
application as follows:
(a) Trigger voltage < 100 V (Transmission Line Pulser
at 500V).
(b) Clamping voltage < 50 V (IEC 1004-2 ESD
Specification).
(c) Vmax < 200 (IEC 1004-2 ESD Specification at 12 kV).
3.3 To the extent that SurgX specifically undertakes any Licensed
Product modifications or enhancements at IRISO's written request (other than the
product modifications and enhancements described in Section 3.2.3 above which
will be undertaken by SurgX at its sole expense), IRISO shall reimburse SurgX
for its development costs as described below in conducting such modifications or
enhancements, including any additional capital equipment that SurgX requires to
perform such modifications and enhancements. The development costs incurred by
SurgX to be reimbursed by IRISO shall consist of direct and indirect labor and
associated fringe benefits of SurgX's employees and independent contractors as
allocated to the project, scrap, perishable tooling, supplies, maintenance on
machinery and equipment, capital
equipment costs, material costs and travel costs. The development costs
incurred by SurgX will be amortized over a period of 5 years. The costs are
detailed in Attachment 3.3. The development costs and the capital equipment
costs incurred by IRISO will be amortized over a period of 10 years and the
annual amortization will be included in the cost structure of the Licensed
Products for the purpose of determining annual royalties based on Gross
Profits (or if annual royalties are based on net sales, the royalties based
on net sales will be reduced by an equivalent amount to account for the
annual amortization).
3.4 IRISO may utilize the SurgX trade name or trademark in
connection with the sale and promotion of the Licensed Products. IRISO may
also utilize its trade names or trademarks in conjunction with the SurgX
trade name or trademark in connection with the sale and promotion of the
Licensed Products. SurgX makes no representations or warranties regarding the
use or validity of such trademark name or trademarks within the Territory,
until registration of the xxxx in Japan is complete.
3.5 All Electrical Over-stress and or ESD materials,
formulations, processes for making formulations, electrodes, methods of
attaching electrodes to the polymer material, methods of attaching electrodes
to connectors and devices, and electrode designs inventions or other
intellectual property conceived or reduced to practice jointly by the
employees or independent contractors of the Parties, as a result of this
collaboration and during the term of this Agreement, shall be owned by SurgX
and shall be included in the license without charge to IRISO.
3.6 All connector inventions developed solely by IRISO belong to
IRISO.
3.7 All connector inventions developed jointly during the term
of this agreement will be shared in accordance with paragraphs 4.2 and 4.3.
3.8 All discrete components inventions developed during the term
of this agreement will be shared in accordance with paragraphs 4.2 and 4.3.
4. DISCLOSURE OF TECHNICAL INFORMATION.
4.1 SurgX shall disclose and furnish to IRISO all Technical
Information necessary or essential for the incorporation and use of Liquid
Polymer Material in the manufacture, use and sale of the Licensed Products.
Technical information shall be delivered as per the schedule of Attachment
4.1.
4.2 SurgX agrees to disclose to IRISO any Improvements made by
SurgX relating to the Licensed Intellectual Property Rights developed,
conceived or reduced to practice during the term of this Agreement and to
grant IRISO the right to use the Improvements in the manufacture, use and
sale of the Licensed Products at no additional cost under the same terms and
conditions of this Agreement for the term of this Agreement.
4.3 IRISO agrees to disclose to SurgX any Improvements made by
IRISO relating to the Licensed Intellectual Property Rights developed,
conceived or reduced to practice
by IRISO during the term of this Agreement and to grant SurgX a worldwide,
royalty-free license to any such Improvements for the term of this Agreement.
5. ROYALTIES.
5.1 Commencing with the First Royalty Year, IRISO will be
responsible for setting pricing, and IRISO and SurgX agree to share the Gross
Margin Profit on all product revenue for SurgX protected parts. Sharing is
on an equal 50-50 basis for discrete components sales, and on 65-35 basis on
sales of connectors using SurgX liquid or SurgTape. For connectors with
SurgX Liquid or SurgTape IRISO will receive 65% of the Gross Profit and SurgX
will receive 35% of the Gross Profit. Gross Margin is defined as all direct
and indirect costs associated with the manufacture, distribution and sale to
the customer. SurgX will provide the SurgX liquid to IRISO at cost.
5.2 In order to maintain the exclusive nature of the license for
the 15 year exclusivity period described in Section 2.3, IRISO shall insure
that the annual royalties payable to SurgX are no less than the following
amounts ("Minimum Annual Royalties"):
Royalty Year Minimum Annual Royalties
[*] [*]
If in any Royalty Year, the royalties based on Gross Profit (or net sales, if
applicable) are less than the Minimum Annual Royalties, IRISO, at its option,
has the right to pay up the difference to a total equaling the respective
year's Minimum Annual Royalty. If IRISO elects not to pay up the difference
to a total equaling the respective year's Minimum Annual Royalty, then the
license granted hereunder shall become non-exclusive license for the
remaining term of this Agreement, provided the royalties of 5.1 continue to
be paid.
In order to avoid double taxation, when IRISO submits royalty payments IRISO
will include documentation regarding any Japanese taxed paid on such
royalties. If any additional documentation is required by SUrgX for taxes
IRISO will cooperate to provide SurgX with documentation.
6. PAYMENTS.
6.1 Royalties (including Minimum Annual Royalties) are due and
payable for each quarter of each Royalty Year within 45 days after each
quarter of each such Royalty Year. All payment shall be in US dollars.
Royalties are based on the sales orders for which IRISO has received
payment.
7. MANUFACTURE AND SUPPLY OF LIQUID POLYMER MATERIAL.
7.1 At least 60 days prior to each delivery date, IRISO shall
deliver a forecast to SurgX of quantity requirements for the Liquid Polymer
Material.
7.2 Cost to manufacture SurgX are expected to declines with
volume, and, are expected to either increase or decrease with formulation
improvements. Attachment 7.2 provides preliminary estimates, and assumes
SurgX staffing and overhead costs will be shared by other SurgX products,
since initial Liquid SurgX volumes required by IRISO are not anticipated to
need the use of a continuously operating Liquid SurgX production line.
7.3 In order to assure IRISO can continue to manufacture, in the
event that SurgX is unable to meet the supply requirements of IRISO, SurgX
will be required to select an alternative contract manufacturer, and to
provide the selected manufacturer with the information necessary to allow the
manufacture of the Liquid SurgX material. Upon execution of this Agreement,
as a precautionary measure to insure all information relating to the
manufacture of the Liquid Polymer Material is available for contract
manufacturing, SurgX shall deliver all of the documents relating to the
manufacture of the Liquid Polymer Material to an escrow at Burns, Doane,
Xxxxxxx & Xxxxxx.
8. TERMINATION.
8.1 In addition to all other remedies SurgX may have under the
law and elsewhere in this Agreement, SurgX may terminate this Agreement if
IRISO shall breach any of IRISO's obligations to SurgX hereunder, including
but not limited to the timely payment of any sum due to SurgX under the terms
of this Agreement, provided that SurgX shall first notify IRISO in writing of
any such breach and IRISO shall have thirty (30) days from the date of such
notice to cure such breach. Other examples of breach include but are not
limited to; selling outside the territory, disclosure of proprietary SurgX
information, and providing SurgX Liquid to other companies for manufacture of
components.
9. NOTICE. Any notice pursuant to this Agreement shall be in writing and
shall be delivered to:
If to Licensor: SurgX Corporation
Attention: Xxxxx Xxxxxx - Vice President
Operations
0000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Licensee: IRISO Electronic Company
Attention: Xxxxx Xxxx - President
2-35-8 Kitamikata Takatsu-Ku
Kawasaki Kanagawa, Japan 213
Facsimile: 00-000-0000
If to Licensee: IRISO Electronic Company
Attention: Yujiro Sugaya - General Manager
0-00-0 Xxxxxxxxxx Xxxxxxx-Xx
Xxxxxxxx Xxxxxxxx, Xxxxx 213
Facsimile: 00-000-0000
10. DISPUTE RESOLUTION
10.1 In the event of any dispute the parties agree to have their
top executive management meet and discuss resolution of any dispute. No
legal action will be taken by either party until after such meetings. Any
dispute or claim arising out of, or in connection with this Agreement that is
not settled to the mutual satisfaction of the Parties within thirty (30) days
(or such longer period as may be mutually agreed upon) from the date that
either party informs the other in writing that such dispute or disagreement
exists, shall be submitted for Arbitration in accordance with the Rules of
Arbitration of the International Chamber of Commerce. The location of
dispute resolution by mediation, arbitration or legal action will be the
country of the party originally requesting resolution of the dispute.
11. MISCELLANEOUS.
11.1 Entire Agreement. This Agreement constitutes the entire
agreement between the Parties and supersedes all prior agreements,
negotiations or discussions between them regarding the subject matter.
SURGX CORPORATION IRISO ELECTRONIC COMPANY
Name: Name:
-------------------------- -----------------------
Title: Title:
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SCHEDULE OF ATTACHMENTS
ATTACHMENT 2: Capital Equipment
ATTACHMENT 1.2 Invention: Licensed Polymer Material
ATTACHMENT 1.3 Licensed Products
ATTACHMENT 3.3 Cost Calculation for Liquid Polymer Material
ATTACHMENT 4.1 Delivery Schedule for Technical Information
ATTACHMENT 7.2 Preliminary Liquid SurgX Cost Estimates
