<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 13, 1999
REGISTRATION NO. 333-86361
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
IMMERSION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3577 94-3180138
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION NUMBER) IDENTIFICATION NO.)
</TABLE>
2158 PARAGON DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 467-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------
LOUIS B. ROSENBERG
CHIEF EXECUTIVE OFFICER
IMMERSION CORPORATION
2158 PARAGON DRIVE
SAN JOSE, CALIFORNIA 95131
(408) 467-1900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
BRUCE SCHAEFFER, ESQ. LAIRD H. SIMONS, III, ESQ.
TOM FURLONG, ESQ. KATHERINE TALLMAN SCHUDA, ESQ.
PAMELA B. BURKE, ESQ. CYNTHIA E. GARABEDIAN, ESQ.
GRAY CARY WARE & FREIDENRICH LLP FENWICK & WEST LLP
400 HAMILTON AVENUE TWO PALO ALTO SQUARE
PALO ALTO, CALIFORNIA 94301-1825 PALO ALTO, CALIFORNIA 94306
(650) 328-6561 (650) 494-0600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------
If any of the securities being registered on this Form are being offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [ ]
------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE(1)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock ($0.001 par value)............... $53,762,500 $14,946
- ----------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Previously paid in connection with the filing of Immersion's Registration
Statement on Form S-1 (File No. 333-86361) on September 1, 1999.
------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
EXPLANATORY NOTE
The purpose of this Amendment No. 1 is solely to file certain exhibits to
the Registration Statement as set forth below in Item 16(a) of Part II.
<PAGE> 3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth all costs and expenses, other than the
underwriting discounts and commissions payable by the Registrant in connection
with the sale and distribution of the Common Stock being registered. All amounts
shown are estimates except for the Securities and Exchange Commission
registration fee, the NASD filing fee and the Nasdaq National Market application
fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $14,946
NASD filing fee............................................. 5,877
Nasdaq National Market application fee......................
Blue sky qualification fees and expenses....................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Director and officer liability insurance....................
Transfer agent and registrar fees...........................
Miscellaneous expenses......................................
-------
Total............................................. $
=======
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's Certificate of
Incorporation and Bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant has entered into separate indemnification agreements (Exhibit 10.1)
with its directors and officers which require the Registrant, among other
things, to indemnify them against certain liabilities which may arise by reason
of their status or service (other than liabilities arising from willful
misconduct of a culpable nature). The Registrant also intends to maintain
director and officer liability insurance, if available on reasonable terms.
These indemnification provisions and the indemnification agreements may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred) arising
under the Securities Act.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant and its officers and directors for certain
liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
(a) Since August 31, 1996, we have sold and issued the following
unregistered securities:
(1) From inception to August 31, 1999, we have issued options to
purchase an aggregate of 3,038,387 shares of common stock under the 1994
stock option plan, of which 1,173,114 have been exercised, and 2,123,486
shares of common stock under the 1997 stock option plan, of which 274,949
have been exercised.
II-1
<PAGE> 4
(2) On November 3, 1996, November 4, 1996, November 20, 1996, November
26, 1996 and November 27, 1996, the Company sold an aggregate of 98,334
shares of its Series B preferred stock to accredited investors for an
aggregate purchase price of $590,004.
(3) In November, 1996, we issued an option to purchase 80,700 shares
of common stock to Steve Blank at an exercise price of $0.17 per share.
(4) In November 1996, we issued a warrant to purchase 8,000 shares of
Series B preferred stock to Bruce Paul at an exercise price of $6.00 per
share.
(5) From November 1996 through June 1999, we issued options to
purchase an aggregate of 154,648 shares of common stock to Steven Blank at
exercise prices ranging between $0.173 per share and $3.66 per share. These
options may be exercised at any time within ten years after their date of
issuance.
(6) In December 1996, we issued a warrant to purchase 10,000 shares of
Series B preferred stock to Bruce Paul at an exercise price of $6.00 per
share.
(7) On March 31, 1997, we issued 30,000 shares of Series A preferred
stock to Bruce Paul individually or as a trustee upon the exercise of a
warrant for an aggregate of $60,000.00 as consideration for consulting
services.
(8) In March 1997, we issued 30,000 shares of Series A Preferred Stock
to Bruce Paul pursuant to an exercise of a warrant dated April 1995 at an
exercise price of $2.00 per share.
(9) On June 3, 1997, the Company sold an aggregate of 1,071,428 shares
of its Series C preferred stock to accredited investors for an aggregate
purchase price of $1,500,005.40.
(10) On June 3, 1997, we issued a warrant to purchase 91,191 shares of
common stock to an accredited investor at an exercise price of $0.18 per
share.
(11) In December 1997, we issued an option to purchase 80,700 shares
of common stock to Washington Research Foundation at an exercise price of
$0.37 per share in consideration of consulting services. This option may be
exercised at any time within ten years after its issuance.
(12) In March 1998, we issued an option to purchase 242,100 shares of
common stock to Lex Computer Management at an exercise price of $0.62 per
share in consideration of consulting services.
(13) In March 1998, we issued an option to purchase 20,175 shares of
common stock to Asia Pacific Ventures Co. with a fair market value of $0.37
in consideration of consulting services. This option may be exercised at
any time within ten years after its issuance.
(14) On April 13, 1998, the Company sold an aggregate of 1,706,232
shares of its Series D preferred stock to accredited investors for an
aggregate purchase price of $5,750,002.
(15) On April 13, 1998, we issued a warrant to purchase 14,836 shares
of Series D preferred stock to BancAmerica Robertson Stephens at an
exercise price of $3.37 per share.
(16) In June 1998, we issued 80,700 shares of common stock to Digital
Equipment Corporation with a fair market value of $3.66 per share in
consideration of consulting services.
(17) In June 1998, we issued 85,945 shares of common stock to Bernie
G. Jackson pursuant to an exercise of a warrant dated June 1995 at an
exercise price of $0.04 per share.
II-2
<PAGE> 5
(18) In July 1998, we issued 28,245 shares of common stock to
Ming-Chang Tsai and Gemintek Corporation at a price of $3.66 per share in
consideration of an assignment of the patent.
(19) On August 1, 1998, we issued 3,750 shares of Series A preferred
stock to Bruce Paul upon exercise of a warrant for consideration of
$14,000.
(20) In August 1998, we issued 7,500 shares of Series A Preferred
Stock to Bruce Paul pursuant to an exercise of a warrant dated August 1996
at an exercise price of $4.00 per share.
(21) In November 1998, we issued 28,245 shares of common stock to
Craig Culver with a fair market value of $3.66 per share in consideration
for an assignment of a patent.
(22) In February 1999, we issued 8,070 shares of common stock to
Washington Research Foundation as consideration for a patent license.
(23) On March 4, 1999, we issued an aggregate of 1,291,200 shares of
common stock to Cybernet Systems Corporation pursuant to an Agreement and
Plan of Reorganization.
(24) On March 4, 1999, we issued a warrant to purchase 322,800 shares
of common stock to Cybernet Systems Corporation as consideration for
certain consulting services.
(25) In May 1999, we issued 7,061 shares of common stock to Richard
Brent Gillespie pursuant to an exercise of a warrant dated August 1995 at
an exercise price of $0.04 per share.
(26) In June 1999, we issued an option to purchase 20,175 shares of
common stock at an exercise price of $3.66 per share to Coactive Drive
Corporation. This option may be exercised at any time within ten years
after its issuance.
(27) In July 1999, we issued 68,595 shares of common stock to Michael
Reich and Associates in consideration of services.
(28) There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances described in Items 15(a)(1) through 15(a)(28) were deemed
exempt from registration under the Securities Act in reliance on Section 492 of
the Securities Act as transactions by an issuer not involving a public offering.
Certain issuances described in Item 15(a) were deemed exempt from registration
under the Securities Act in reliance on Section 4(2) or Rule 701 promulgated
thereunder as transactions pursuant to compensatory benefit plans and contracts
relating to compensation. The recipients of securities in each such transaction
represented their intention to acquire the securities for investment only and
not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates and other instruments
issued in such transactions. All recipients either received adequate information
about us or had access, through employment or other relationships, to such
information.
II-3
<PAGE> 6
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Reorganization with Cybernet Systems
Corporation ("Cybernet"), its wholly-owned subsidiary and
our wholly-owned subsidiary dated March 4, 1999.**
3.1 Amended and Restated Articles of Incorporation of Immersion,
as amended to date.**
3.2 Form of Certificate of Incorporation of Immersion.
3.3 Bylaws of Immersion.**
3.4 Form of Bylaws.
4.1 Information and Registration Rights Agreement dated April
13, 1998.**
4.2 Immersion Corporation Cybernet Registration Rights Agreement
dated March 5, 1999.**
4.3 Common Stock Grant and Purchase Agreement and Plan with
Michael Reich & Associates dated July 6, 1999.**
4.4 Common Stock Agreement with Digital Equipment Corporation
dated June 12, 1998.**
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.*
10.1 1994 Stock Option Plan and form of Incentive Stock Option
Agreement and form of Nonqualified Stock Option Agreement.**
10.2 1997 Stock Option Plan and form of Incentive Stock Option
Agreement and form of Nonqualified Stock Option Agreement.**
10.3 Form of Indemnity Agreement.
10.4 Immediately Exercisable Nonstatutory Stock Option Agreement
with Steven G. Blank dated November 1, 1996.**
10.5 Common Stock Purchase Warrant issued to Cybernet Systems
Corporation dated March 5, 1999.**
10.6 Consulting Services Agreement with Cybernet Systems
Corporation dated March 5, 1999.**
10.7 Amendment to Warrant to Purchase Shares of Series B
Preferred Stock to Bruce Paul amending warrant to purchase
8,000 shares of Series B Preferred Stock dated September 22,
1998.**
10.08 Amendment to Warrant to Purchase Shares of Series B
Preferred Stock to Bruce Paul amending warrant to purchase
10,000 shares of Series B Preferred Stock dated September
22, 1998.**
10.09 Operating Agreement for MicroScribe, LLC dated July 1,
1997.**
10.10 Exchange Agreement with MicroScribe, LLC dated July 1,
1997.**
10.11 Lease with Spieker Properties, L.P. dated October 26, 1998.
10.12 Agreement Draft for ASIC Design and Development with
Kawasaki LSI, U.S.A., Inc., dated October 16, 1997.+
10.13 Patent License Agreement with Microsoft Corporation dated
July 19, 1999.+
10.14 Semiconductor Device Component Purchase Agreement with
Kawasaki LSI, U.S.A., Inc., dated August 17, 1998.+
10.15 Amendment No. 1 to Semiconductor Device Component Purchase
Agreement with Kawasaki LSI, U.S.A., Inc., dated April 27,
1999.+
10.16 Intercompany Intellectual Property License Agreement with
MicroScribe, LLC dated July 1, 1997.+
10.17 Patent License Agreement with MicroScribe, LLC dated July 1,
1997.+
10.18 Intellectual Property License Agreement with Logitech, Inc.
dated [#].+
10.19 Intellectual Property License Agreement with Logitech, Inc.
dated [#].+
10.20 Technology Product Development Agreement with Logitech, Inc.
dated [#].+
21.1 Subsidiaries of Immersion.**
23.1 Consent of Deloitte & Touche LLP.**
23.4 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1).*
</TABLE>
II-4
<PAGE> 7
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
24.1 Power of Attorney (included on page II-5).**
27.1 Financial Data Schedule (EDGAR filed version only).**
</TABLE>
- ------------------------
* To be filed by amendment.
** Previously filed with Registrant's Registration Statement on Form S-1 (File
No. 333-86361) on September 1, 1999.
# Certain information has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
+ Confidential treatment is being requested as to a portion of this exhibit.
(B) FINANCIAL STATEMENT SCHEDULES.
The following are filed herewith:
Independent Auditors' Report on Schedule.
Schedule II Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities Act, and is therefore unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer,
or controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered hereunder, the Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of Prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in the
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at the time shall be
deemed to be the initial bona fide offering thereof.
II-5
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement Amendment No. 1 to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of San Jose, State of
California, on the thirteenth day of September, 1999
IMMERSION CORPORATION
By: /s/ LOUIS ROSENBERG
------------------------------------
Louis Rosenberg, Ph.D.
Chairman of the Board, Chief
Executive Officer and President
Pursuant to the requirements of the Securities Act, this Registration
Statement Amendment No. 1 has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ LOUIS ROSENBERG Chairman of the Board, President September 13, 1999
- --------------------------------------------- and Chief Executive Officer
Louis Rosenberg, Ph.D. (Principal Executive Officer)
/s/ VICTOR VIEGAS* Chief Financial Officer (Principal September 13, 1999
- --------------------------------------------- Financial and Accounting Officer)
Victor Viegas
/s/ BRUCE SCHENA* Vice President, Chief Technology September 13, 1999
- --------------------------------------------- Officer, Secretary and Director
Bruce Schena
/s/ TIMOTHY LACEY* Vice President, Finance and September 13, 1999
- --------------------------------------------- Director
Timothy Lacey
/s/ STEVEN BLANK* Director September 13, 1999
- ---------------------------------------------
Steven Blank
</TABLE>
*By: /s/ LOUIS ROSENBERG
---------------------------
Louis Rosenberg, Ph.D.
Attorney-in-Fact
II-6
<PAGE> 9
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors and Stockholders
of Immersion Corporation:
We have audited the consolidated financial statements of Immersion
Corporation (the Company) as of December 31, 1998 and 1997, and for each of the
three years in the period ended December 31, 1998, and have issued our report
thereon dated April 2, 1999 (included elsewhere in this Registration Statement).
Our audits also included the financial statement schedule listed in Item 16(b)
of this Registration Statement. The financial statement schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, such financial statement schedule,
when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
San Jose, California
April 2, 1999
S-1
<PAGE> 10
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COST AND DEDUCTIONS/ END OF
OF PERIOD EXPENSES WRITE-OFFS PERIOD
---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996
Allowance for doubtful accounts............ $ 5 $40 $37 $ 8
Year ended December 31, 1997
Allowance for doubtful accounts............ $ 8 $39 $ 9 $38
Year ended December 31, 1998
Allowance for doubtful accounts............ $38 $57 $ 3 $92
Six months ended June 30, 1999
Allowance for doubtful accounts*........... $92 $ 4 $20 $76
</TABLE>
- ---------------
* Unaudited
S-2
<PAGE> 11
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
2.1 Agreement and Plan of Reorganization with Cybernet Systems
Corporation ("Cybernet"), its wholly-owned subsidiary and
our wholly-owned subsidiary dated March 4, 1999.**
3.1 Amended and Restated Articles of Incorporation of Immersion,
as amended to date.**
3.2 Form of Certificate of Incorporation of Immersion.
3.3 Bylaws of Immersion.**
3.4 Form of Bylaws.
4.1 Information and Registration Rights Agreement dated April
13, 1998.**
4.2 Immersion Corporation Cybernet Registration Rights Agreement
dated March 5, 1999.**
4.3 Common Stock Grant and Purchase Agreement and Plan with
Michael Reich & Associates dated July 6, 1999.**
4.4 Common Stock Agreement with Digital Equipment Corporation
dated June 12, 1998.**
5.1 Opinion of Gray Cary Ware & Freidenrich LLP.*
10.1 1994 Stock Option Plan and form of Incentive Stock Option
Agreement and form of Nonqualified Stock Option Agreement.**
10.2 1997 Stock Option Plan and form of Incentive Stock Option
Agreement and form of Nonqualified Stock Option Agreement.**
10.3 Form of Indemnity Agreement.
10.4 Immediately Exercisable Nonstatutory Stock Option Agreement
with Steven G. Blank dated November 1, 1996.**
10.5 Common Stock Purchase Warrant issued to Cybernet Systems
Corporation dated March 5, 1999.**
10.6 Consulting Services Agreement with Cybernet Systems
Corporation dated March 5, 1999.**
10.7 Amendment to Warrant to Purchase Shares of Series B
Preferred Stock to Bruce Paul amending warrant to purchase
8,000 shares of Series B Preferred Stock dated September 22,
1998.**
10.8 Amendment to Warrant to Purchase Shares of Series B
Preferred Stock to Bruce Paul amending warrant to purchase
10,000 shares of Series B Preferred Stock dated September
22, 1998.**
10.9 Operating Agreement with MicroScribe, LLC dated July 1,
1997.**
10.10 Exchange Agreement with MicroScribe, LLC dated July 1,
1997.**
10.11 Lease with Spieker Properties, L.P. dated October 26, 1998.
10.12 Agreement Draft for ASIC Design and Development with
Kawasaki LSI, U.S.A., Inc., dated October 16, 1997.+
10.13 Patent License Agreement with Microsoft Corporation dated
July 19, 1999.+
10.14 Semiconductor Device Component Purchase Agreement with
Kawasaki LSI, U.S.A., Inc., dated August 17, 1998.+
10.15 Amendment No. 1 to Semiconductor Device Component Purchase
Agreement with Kawasaki LSI, U.S.A., Inc. dated April 27,
1999.+
10.16 Intercompany Intellectual Property License Agreement with
MicroScribe, LLC dated July 1, 1997.+
10.17 Patent License Agreement with MicroScribe, LLC dated July 1,
1997.+
10.18 Intellectual Property License Agreement with Logitech, Inc.
dated [#].+
10.19 Intellectual Property License Agreement with Logitech, Inc.
dated [#].+
10.20 Technology Product Development Agreement with Logitech, Inc.
dated [#].+
21.1 Subsidiaries of Immersion.**
23.1 Consent of Deloitte & Touche LLP.**
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
23.4 Consent of Gray Cary Ware & Freidenrich LLP (included in
Exhibit 5.1.)*
24.1 Power of Attorney (included on page II-5).**
27.1 Financial Data Schedule (EDGAR filed version only).**
</TABLE>
- ---------------
* To be filed by amendment.
** Previously filed with Registrant's Registration Statement on Form S-1 (File
No. 333-86361) on September 1, 1999.
# Certain information has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
+ Confidential treatment is being requested as to a portion of this exhibit.
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF INCORPORATION
OF
IMMERSION CORPORATION DELAWARE
FIRST: The name of this corporation is Immersion Corporation Delaware
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Incorporating Services, Ltd., 15 East North Street, in the
City of Dover, County of Kent. The name of the registered agent at that address
is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of Delaware.
FOURTH: The Corporation is authorized to issue a total of 25,000,000
shares of stock in two classes designated respectively "Preferred Stock" and
"Common Stock." The total number of shares of all series of Preferred Stock that
the Corporation shall have the authority to issue is 5,000,000 and the total
number of shares of Common Stock that the Corporation shall have the authority
to issue is 20,000,000. All of the authorized shares shall have a par value of
$0.001.
FIFTH: The name and mailing address of the incorporator is:
Andrea Charvet
c/o Gray Cary Ware & Freidenrich LLP
139 Townsend Street, Suite 400
San Francisco, CA 94107-1922
SIXTH: The business and affairs of the Corporation shall be managed by
or under the direction of the Board of Directors. In addition to the powers and
authority expressly conferred upon them by Statute or by this Certificate of
Incorporation or the Bylaws of the Corporation, the
1
<PAGE> 2
directors are hereby empowered to exercise all such powers and do all such
acts and things as may be exercised or done by the Corporation. Election of
directors need not be by written ballot unless the Bylaws so provide.
SEVENTH: The Board of Directors is authorized to make, adopt, amend,
alter or repeal the Bylaws of the Corporation. The stockholders shall also have
power to make, adopt, amend, alter or repeal the Bylaws of the Corporation.
EIGHTH: This Corporation reserves the right to amend or repeal any of
the provisions contained in this Certificate of Incorporation in any manner now
or hereafter permitted by law, and the rights of the stockholders of this
Corporation are granted subject to this reservation.
NINTH: To the fullest extent permitted by the Delaware General
Corporation Law, a director of this Corporation shall not be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or modification of the foregoing provisions of
this Article NINTH by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification.
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation under the laws of the State of Delaware, do make, file and record
this Certificate of Incorporation, do certify that the facts herein stated are
true, and accordingly, have hereto set my hand this 26th day of August, 1999.
/s/ ANDREA CHARVET
---------------------------------------
Andrea Charvet
2
<PAGE> 3
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
IMMERSION CORPORATION DELAWARE
(Pursuant to Sections 242 and 245 of the General Corporation Law
of the State of Delaware)
Immersion Corporation Delaware, a corporation organized and existing
under the General Corporation Law of the State of Delaware on August 26, 1999,
(the "Corporation") certifies as follows:
1. The Corporation's Amended and Restated Certificate of Incorporation
was duly adopted by the Board of Directors and sole stockholder by written
consent in accordance with Sections 242 and 245 of the General Corporation Law.
2. The Corporation's Certificate of Incorporation is restated to read
in full as follows:
FIRST: The name of the Corporation is Immersion Corporation Delaware.
SECOND: The address of the registered office of the Corporation in the
State of Delaware is Incorporating Services, Ltd., 15 East North
Street, in the City of Dover, County of Kent. The name of the
registered agent at that address is Incorporating Services, Ltd.
THIRD: The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the
General Corporation Law of Delaware.
FOURTH:
A. The Corporation is authorized to issue a total of 108,525,759
shares of stock in two classes designated respectively "Preferred
Stock" and "Common Stock". The total number of shares of all
series of Preferred Stock that the Corporation shall have the
authority to issue is 8,525,759 and the total number of shares of
Common Stock that the Corporation shall have the authority to
issue is 100,000,000. All of the authorized shares shall have a
par value of $0.001.
The shares of Preferred Stock may be divided into such number of
series as the Board of Directors may determine. The Board of
Directors is authorized to determine and alter the rights,
preferences, privileges and restrictions granted to and imposed
upon the Preferred Stock or any series thereof with respect to
any wholly unissued series of Preferred Stock, and to fix the
number of shares of any such series of Preferred Stock. The Board
of Directors, within the limits and restrictions stated in any
<PAGE> 4
resolution or resolutions of the Board of Directors
originally fixing the number of shares constituting any
series, may increase or decrease (but not below the number
of shares of such series then outstanding) the number of
shares of any series subsequent to the issue of shares of
that series.
FIFTH: The following provisions are inserted for the management
of the business and the conduct of the affairs of the
Corporation, and for further definition, limitation and
regulation of the powers of the Corporation and of its
directors and stockholders:
A. The business and affairs of the Corporation shall be
managed by or under the direction of the Board of
Directors. In addition to the powers and authority
expressly conferred upon them by statute or by this
Certificate of Incorporation or the Bylaws of the
Corporation, the directors are hereby empowered to
exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by
written ballot unless the Bylaws so provide.
C. On and after the closing date of the first sale of the
Corporation's Common Stock pursuant to a firmly
underwritten registered public offering (the "IPO"), any
action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly
called annual or special meeting of stockholders of the
Corporation and may not be effected by any consent in
writing by such stockholders. Prior to such sale, unless
otherwise provided by law, any action which may otherwise
be taken at any meeting of the stockholders may be taken
without a meeting and without prior notice, if a written
consent describing such actions is signed by the holders
of outstanding shares having not less than the minimum
number of votes which would be necessary to authorize or
take such action at a meeting at which all shares entitled
to vote thereon were present and voted.
D. Special meetings of stockholders of the Corporation may
be called only (1) by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for
adoption) or (2) by the holders of not less than ten
percent (10%) of all of the shares entitled to cast votes
at the meeting.
2
<PAGE> 5
SIXTH:
A. The number of directors shall initially be set at
five (5) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any
vacancies in previously authorized directorships at the
time any such resolution is presented to the Board for
adoption). Upon the closing of the IPO, the directors
shall be divided into three classes with the term of
office of the first class (Class I) to expire at the first
annual meeting of the stockholders following the IPO; the
term of office of the second class (Class II) to expire at
the second annual meeting of stockholders held following
the IPO; the term of office of the third class (Class III)
to expire at the third annual meeting of stockholders; and
thereafter for each such term to expire at each third
succeeding annual meeting of stockholders after such
election. Subject to the rights of the holders of any
series of Preferred Stock then outstanding, a vacancy
resulting from the removal of a director by the
stockholders as provided in Article SIXTH, Section C below
may be filled at a special meeting of the stockholders
held for that purpose. All directors shall hold office
until the expiration of the term for which elected, and
until their respective successors are elected, except in
the case of the death, resignation, or removal of any
director.
B. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, newly created
directorships resulting from any increase in the
authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation or
other cause (other than removal from office by a vote of
the stockholders) may be filled only by a majority vote of
the directors then in office, though less than a quorum,
and directors so chosen shall hold office for a term
expiring at the next annual meeting of stockholders at
which the term of office of the class to which they have
been elected expires, and until their respective
successors are elected, except in the case of the death,
resignation, or removal of any director. No decrease in
the number of directors constituting the Board of
Directors shall shorten the term of any incumbent
director.
C. Subject to the rights of the holders of any series of
Preferred Stock then outstanding, any directors, or the
entire Board of Directors, may be removed from office at
any time, with or without cause, but only by the
affirmative vote of the holders of at least a majority of
the voting power of all of the then outstanding shares of
capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as
a single class. Vacancies in the Board of Directors
resulting from such removal may be filled by a majority of
the directors then in office, though less than a quorum,
or by the stockholders as provided in Article SIXTH,
Section A above. Directors so chosen shall hold office for
a term expiring at the next annual meeting of stockholders
at which the term of office of the class to which they
have been elected expires, and until their
3
<PAGE> 6
respective successors are elected, except in the case of
the death, resignation, or removal of any director.
SEVENTH: The Board of Directors is expressly empowered to adopt,
amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the
Board of Directors shall require the approval of a
majority of the total number of authorized directors
(whether or not there exist any vacancies in previously
authorized directorships at the time any resolution
providing for adoption, amendment or repeal is presented
to the Board). The stockholders shall also have power to
adopt, amend or repeal the Bylaws of the Corporation. Any
adoption, amendment or repeal of Bylaws of the Corporation
by the stockholders shall require, in addition to any vote
of the holders of any class or series of stock of the
Corporation required by law or by this Certificate of
Incorporation, the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then outstanding shares of the
capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as
a single class.
EIGHTH: A director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involved
intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which
the director derived an improper personal benefit.
If the Delaware General Corporation Law is hereafter
amended to authorize the further elimination or limitation
of the liability of a director, then the liability of a
director of the Corporation shall be eliminated or limited
to the fullest extent permitted by the Delaware General
Corporation Law, as so amended.
Any repeal or modification of the foregoing provisions of
this Article EIGHTH by the stockholders of the Corporation
shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such
repeal or modification.
4
<PAGE> 7
NINTH: The Corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation
in the manner prescribed by the laws of the State of
Delaware and all rights conferred upon stockholders are
granted subject to this reservation; provided, however,
that, notwithstanding any other provision of this
Certificate of Incorporation or any provision of law which
might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series
of the stock of this Corporation required by law or by
this Certificate of Incorporation, the affirmative vote of
the holders of at least 66-2/3% of the voting power of all
of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be
required to amend or repeal this Article NINTH, Article
FIFTH, Article SIXTH, Article SEVENTH or Article EIGHTH.
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate to be signed by a duly authorized officer on this ______ day of
September, 1999.
IMMERSION CORPORATION DELAWARE
By:
-------------------------------
Louis Rosenberg, Ph.D.,
Chief Executive Officer
5
<PAGE> 8
IMMERSION CORPORATION DELAWARE
CERTIFICATE OF DESIGNATIONS, PREFERENCES AND RIGHTS
OF THE TERMS OF THE
SERIES A, SERIES B, SERIES C AND SERIES D PREFERRED STOCK
(Pursuant to Section 151 of the General Corporation
Law of the State of Delaware)
We, the President and the Secretary, respectively, of Immersion
Corporation Delaware, organized and existing under the General Corporation Law
of the State of Delaware, in accordance with the provisions of Section 103
thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on August 30, 1999, adopted the following resolution creating (i) a
series of 618,500 shares of Preferred Stock designated as Series A Preferred
Stock, (ii) a series of 115,834 shares of Preferred Stock designated as Series B
Preferred Stock (iii) a series of 1,070,357 shares of Preferred Stock designated
as Series C Preferred Stock, and (iv) a series of 1,721,068 shares of Preferred
Stock designated as Series D Preferred Stock.
RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, series of Preferred Stock of the Corporation be
and they hereby are created, and that the designation and amount thereof and the
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:
Designation and Amount. The first series of Preferred Stock shall be
designated Series A Preferred Stock and shall be comprised of 618,500 shares.
The second series of Preferred Stock shall be designated Series B Preferred
Stock and shall be comprised of 115,834 shares. The third series of Preferred
Stock shall be designated Series C Preferred Stock and shall be comprised of
1,070,357 shares. The fourth series of Preferred Stock shall be designated
Series D Preferred Stock and shall be comprised of 1,721,068 shares.
Relative rights, preferences, privileges and restrictions granted to or
imposed upon the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock and Series D Preferred Stock (collectively, the "Preferred
Stock") are as follows:
Section 1. Voting Rights.
Section 1.1 Except as otherwise required by law or as set forth herein,
the shares of Series A, Series B, Series C and Series D Preferred Stock shall be
voted equally and together with the shares of the Corporation's Common Stock at
any annual or special meeting of shareholders of the Corporation, or may act by
written consent in the same manner as the
1
<PAGE> 9
Corporation's Common Stock, upon the following basis: each holder of shares of
Series A, Series B, Series C and Series D Preferred Stock shall be entitled to
such number of votes for the Series A, Series B, Series C and Series D Preferred
Stock held by him on the record date fixed for such meeting, or on the effective
date of such written consent, as shall be equal to the whole number of shares of
the Corporation's Common Stock into which all of his shares of Series A, Series
B, Series C and Series D Preferred Stock are convertible immediately after the
close of business on the record date fixed for such meeting or the effective
date of such written consent.
Section 2. Protective Provisions.
Section 2.1 If any shares of Series C Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval by vote or
written consent, in the manner provided by law, of the holders of more than
fifty percent (50%) of the total number of shares of Series C Preferred Stock
then outstanding, voting together as a single class, undertake any of the
following actions: (a) amend or change the rights, preferences, privileges or
powers of, or the restrictions provided for the benefit of the Series C
Preferred Stock; or (b) authorize, create or issue shares of any class of stock
having rights, preferences, privileges or powers superior to that of the Series
C Preferred Stock; or (c) reclassify any outstanding shares of any class of
stock into shares having rights, preferences, privileges or powers as to
dividends or assets senior to the preferences, rights, privileges or powers of
the Series C Preferred Stock; or (d) amend the Corporation's Restated Articles
to adversely affect the rights, preferences, privileges or powers of the Series
C Preferred Stock; provided, however, that any amendment to the Corporation's
Restated Articles authorizing any class of stock having rights, preferences,
privileges or powers on parity with the Series C Preferred Stock shall not be
deemed to adversely affect the rights of the Series C Preferred Stock,
respectively.
Section 2.2 If any shares of Series D Preferred Stock are outstanding,
the Corporation shall not, without first obtaining the approval by vote or
written consent, in the manner provided by law, of the holders of more than
fifty percent (50%) of the total number of shares of Series D Preferred Stock
then outstanding, voting together as a single class, undertake any of the
following actions: (a) amend or change the rights, preferences, privileges or
powers of, or the restrictions provided for the benefit of the Series D
Preferred Stock; or (b) authorize, create or issue shares of any class of stock
having rights, preferences, privileges or powers superior to that of the Series
D Preferred Stock; or (c) reclassify any outstanding shares of any class of
stock into shares having rights, preferences, privileges or powers as to
dividends or assets senior to the preferences, rights, privileges or powers of
the Series D Preferred Stock; or (d) amend the Corporation's Restated Articles
to adversely affect the rights, preferences, privileges or powers of the Series
D Preferred Stock; provided, however, that any amendment to the Corporation's
Restated Articles authorizing any class of stock having rights, preferences,
privileges or powers on parity with the Series D Preferred Stock shall not be
deemed to adversely affect the rights of the Series D Preferred Stock,
respectively.
2
<PAGE> 10
Section 3. Dividends.
Section 3.1 The holders of the then outstanding Series A, Series B,
Series C and Series D Preferred Stock shall be entitled to receive in any fiscal
year, prior and in preference to any distribution of dividends to the holders of
the Common Stock, when, as and if, declared by the Board of Directors, out of
any assets at the time legally available therefor, dividends in cash at the rate
of $0.02, $0.06, $0.14, and $0.33 per annum per share, respectively on a pari
passu basis, as adjusted for any consolidations, combinations, stock
distributions, stock dividends, stock splits or similar events (each a
"Recapitalization Event"). The right to such dividends on the Series A, Series
B, Series C and Series D Preferred Stock shall not be cumulative and no right
shall accrue to holders of Series A, Series B, Series C or Series D Preferred
Stock by reason of the fact that dividends on said shares are not declared in
any prior year, nor shall any undeclared or unpaid dividends bear or accrue
interest. Dividends may be declared or paid upon shares of Common Stock in any
fiscal year of the Corporation only if dividends shall have been paid to or
declared and set apart upon, as the case may be, all shares of Series A, Series
B, Series C and Series D Preferred Stock at such annual rate for each quarter of
such fiscal year of the Corporation including the quarter in which such
dividends upon common shares are declared. No dividends shall be paid on any
Common Stock unless an equal dividend is paid with respect to all outstanding
shares of Series A, Series B, Series C and Series D Preferred Stock in an amount
for each such share of Series A, Series B, Series C and Series D Preferred Stock
equal to the aggregate amount of such dividends for all Common Stock into which
each such share of Series A, Series B, Series C and Series D Preferred Stock
could then be converted.
Section 3.2 Each holder of Series A, Series B, Series C or Series D
Preferred Stock shall be deemed to have consented, for purposes of Sections 502,
503 and 506 of the General Corporation Law of the State of California, to (i)
distributions made by the Corporation in connection with the repurchase of
Common Stock issued to or held by employees or consultants upon termination of
their employment or services pursuant to agreements providing for such
repurchase and (ii) the use of up to two million dollars ($2,000,000) from the
sale of Series D Preferred Stock to purchase outstanding shares of the Company's
Common Stock or Preferred Stock at the fair market value of the Common Stock as
determined by the Board of Directors of the Company.
Section 4. Redemption Rights
Section 4.1 At any time on or after June 4, 2002, this Corporation
shall, upon receipt of the written request (the "Redemption Request") of the
holders of at least a majority of the Series C Preferred Stock then outstanding,
redeem for cash out of any funds legally available therefor ratably from holders
thereof, on or before each of the relevant Redemption Dates (as defined below),
that number of shares of Series C Preferred Stock equal to one-fourth of the
number of such shares outstanding on the first Redemption Date. Redemptions of
each share of Series C Preferred Stock pursuant to this Section 4.1 shall be
made at the price originally paid by the holders of Series C Preferred Stock
(and without interest as adjusted for any Recapitalization Event) for such
Series C Preferred Stock, plus an amount equal to the amount of all declared but
unpaid dividends as of the relevant Redemption Date payable in accordance with
Section 3.1
3
<PAGE> 11
above on each such share to be redeemed. The total amount to be paid with
respect to each share of Series C Preferred Stock is hereinafter referred to as
the "Redemption Price."
Section 4.2 The Redemption Request shall set forth the requested date of
the redemption, which date in no event shall be fewer than twenty (20) days nor
more than sixty (60) days after the date of the Redemption Request, or such
later date as the holders of at least a majority of the then outstanding Series
C Preferred Stock agree to in writing. Such date and the six (6) month, twelve
(12) month, and eighteen (18) month anniversaries thereof are referred to herein
collectively as the "Redemption Dates" and individually as a "Redemption Date."
Within ten (10) days of the Redemption Request, this Corporation shall give
written notice by mail, postage prepaid, to each holder of record (at the close
of business on the business day next preceding the day on which notice is
deposited in the mail) of the Series C Preferred Stock to be redeemed, at the
address last shown on the records of this corporation for such holder or given
by the holder to this Corporation for the purpose of notice, or if no such
address appears or is given, at the place where the principal executive office
of this Corporation is located, notifying such holder of the redemption to be
effected, specifying the number of shares to be redeemed from such holder, the
applicable Redemption Date, the applicable Redemption Price, the place at which
payment may be obtained and the date on which such holder's Conversion Rights as
to such shares terminate and calling upon such holder to surrender to this
Corporation, in the manner and at the place designated, his certificate or
certificates representing the shares to be redeemed (the "Redemption Notice").
On or after such Redemption Date, each holder of Series C Preferred Stock to be
redeemed shall surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the applicable Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
Section 4.3 From and after the applicable Redemption Date, unless there
shall have been a default in payment of the applicable Redemption Price, all
dividends on the Series C Preferred Stock designated for redemption in the
Redemption Notice shall cease to accrue, all rights of the holders of such
shares as holders of the Series C Preferred Stock (except the right to receive
the Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of Series C Preferred Stock on any Redemption Date are
insufficient to redeem the total number of Series C Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares ratably among the holders of
such shares to be redeemed. The shares of Series C Preferred Stock not redeemed
shall remain outstanding and entitled to all the rights and preferences provided
herein. At any time thereafter when additional funds of the corporation are
legally available for the redemption of the Series C Preferred Stock, such funds
will immediately be used to redeem the balance of the shares which the
corporation has become obligated to redeem on any Redemption Date but which it
has not redeemed.
4
<PAGE> 12
Section 5. Liquidation Preference.
Section 5.1 In the event of the liquidation, dissolution or winding up
of the Corporation, either voluntary or involuntary, distributions to the
shareholders of the Corporation shall be made in the following manner:
(a) The holders of Series C and Series D Preferred Stock
then outstanding shall be entitled to be paid out of the assets of the
Corporation, on a pari passu basis, for each share of Series C or Series D
Preferred Stock then held by them, first, prior and in preference to any
distribution to the holders of the Series A and Series B Preferred Stock, and
the Common Stock, an amount equal to $1.40 per share of Series C Preferred Stock
and $3.37 per share of Series D Preferred Stock (as adjusted for
Recapitalization Events) plus an amount equal to all declared and unpaid
dividends with respect thereto. If upon the occurrence of such event, the assets
and funds available for distribution are insufficient to permit the payment to
the holders of Series C and Series D Preferred Stock the full preferential
amount, then the entire assets and funds of the Corporation legally available
for distribution to shareholders will be distributed among the holders of the
Series C and Series D Preferred Stock ratably in proportion to the full
preferential amount which they would be entitled to receive pursuant to the
preceding sentence of this Section 5.1(a).
(b) After payment has been made to the holders of Series C
and Series D Preferred Stock of the full preferential amounts to which they
shall be entitled, if any, as aforesaid, the holders of the Series A and Series
B Preferred Stock then outstanding shall be entitled to be paid, pari passu, out
of the assets of the Corporation, for each share of Series A or Series B
Preferred Stock then held by them, first, prior and in preference to any
distribution to the holders of the Common Stock, and amount equal to (A) $0.40
per share for the Series A Preferred Stock and $6.00 per share for the Series B
Preferred Stock (as adjusted for Recapitalization Events) plus (B) an amount
equal to all declared and unpaid dividends with respect thereto.
(c) After payment has been made to the holders of the
Series A, Series B, Series C and Series D Preferred Stock of the full
preferential amounts to which they shall be entitled, if any, as aforesaid and
until the holders of the Series C and Series D Preferred Stock then outstanding
have received an additional $1.40 and $2.02 per share of Series C and Series D
Preferred Stock, respectively (as adjusted for Recapitalization Events), the
holders of the Common Stock and the Series C and Series D Preferred Stock shall
be entitled to receive, pro rata, the remaining assets of the Corporation
available for distribution to shareholders, based on the number of shares of
Common Stock then held, with each share of Series C and Series D Preferred Stock
treated as the number of shares of Common Stock into which such share of
Preferred Stock is then convertible.
(d) After payment has been made to the holders of the
Series C and Series D Preferred Stock and holders of Common Stock pursuant to
Section 5.1(c), the holders of Common Stock shall be entitled to receive, pro
rata, the remaining assets of the Corporation
5
<PAGE> 13
available for distribution to shareholders, based on the number of shares of
Common Stock then held.
Section 5.2 Events Deemed to be Liquidation.
(a) For the purposes of this Section 5 and with respect to
the Series A and Series B Preferred Stock, (i) a consolidation or merger of the
Corporation with or into any other corporation or corporations (other than a
wholly-owned subsidiary) in which the shareholders of the Corporation
immediately prior to such transaction hold fifty percent (50%) or less of the
total voting power for the election of directors of the acquiring or surviving
entity immediately following the transaction, or (ii) the sale, transfer or
other disposition of all or substantially all of the assets of the Corporation
or (iii) the consummation of any transaction or series of related transactions
which results in the Corporation's shareholders immediately prior to such
transaction holding fifty percent (50%) or less of the voting power of the
acquiring or surviving entity immediately following the transaction (each such
event is hereinafter defined as a "Corporate Sale") shall not be deemed to be a
liquidation, dissolution or winding up.
(b) For purposes of this Section 5 and with respect to the
Series C and Series D Preferred Stock, a Corporate Sale shall be deemed a
liquidation, dissolution or winding up.
Section 6. Conversion Rights.
Section 6.1 Conversion of Series A and Series B Preferred Stock.
(a) Optional Conversion. Each share of Series A and Series
B Preferred Stock will be convertible, at the option of the holder thereof, at
the office of the Corporation or any transfer agent for the Series A and Series
B Preferred Stock, into Common Stock. The number of shares of Common Stock into
which each share of Series A Preferred Stock will be converted will be equal to
$0.40 divided by the Series A Conversion Price (as hereafter defined) such
conversion ratio being referred to as the "Series A Conversion Rate." The
initial Series A Conversion Price will be $0.40 and the initial Series A
Conversion Rate shall be one-to-one. The number of shares of Common Stock into
which each share of Series B Preferred Stock will be converted will be equal to
$6.00 divided by the Series B Conversion Price (as hereafter defined) such
conversion ratio being referred to as the "Series B Conversion Rate." The
initial Series B Conversion Price will be $6.00 and the initial Series B
Conversion Rate shall be one-to-one. Any decrease or increase of the Series A
Conversion Price or Conversion Rate, or the Series B Conversion Price or
Conversion Rate as described in this Section F will cause an increase or
decrease in the conversion rate or conversion price accordingly.
(b) Automatic Conversion of the Series A and Series B
Preferred Stock. Each share of Series A and Series B Preferred Stock will be
converted into shares of Common Stock at the then effective Series A Conversion
Rate or Series B Conversion Rate:
6
<PAGE> 14
(i) immediately upon the closing of the sale of stock
pursuant to a registration statement under the Securities Act of 1933, as
amended, (the "Securities Act") for an underwritten public offering (other than
a registration on Form S-8, Form S-4 or comparable or successor forms) covering
the Corporation's Common Stock which results in aggregate cash proceeds (prior
to underwriters' commissions and expenses) to the Corporation of more than
$5,000,000, and which has a public offering price of not less than $3.60 per
share (as appropriately adjusted for stock splits, combinations,
reclassifications and the like);
(ii) immediately upon the affirmative vote or written
consent of the holders of a majority of the then outstanding shares of Series A
Preferred Stock and Series B Preferred Stock, voting together as a class; or
(iii) on the date that less than twenty percent (20%) of
the highest number of the total number of shares of Series A Preferred Stock and
Series B Preferred Stock that have been outstanding at any time remain
outstanding.
(c) Adjustment for Dividends, Distributions, Subdivisions
or Combinations of Common Stock. In the event the Corporation at any time or
from time to time after the date hereof (a) effects a subdivision or combination
of its outstanding Common Stock into a greater or lesser number of shares
without a proportionate and corresponding subdivision or combination of its
outstanding Series A Preferred Stock and its outstanding Series B Preferred
Stock or (b) issues a dividend or other distribution of additional shares of
Common Stock or other securities or rights (collectively hereinafter referred to
as "Common Stock Equivalents") convertible into or entitling the holder thereof
to receive additional shares of Common Stock without payment of any
consideration by such holder for such Common Stock Equivalents or the additional
shares of Common Stock, then the existing Series A Conversion Price and Series B
Conversion Price will be decreased or increased proportionately.
(d) Recapitalizations. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for in Section 5),
provision shall be made so that the holders of the Series A and Series B
Preferred Stock will thereafter be entitled to receive upon conversion of the
Series A and Series B Preferred Stock the number of shares of stock or other
securities or property of the Corporation or otherwise, to which a holder of
Common Stock deliverable upon conversion would have been entitled on such
recapitalization. In any such case, appropriate adjustment shall be made in the
application of the provisions of this Section 6.1 with respect to the rights of
the holders of the Series A and Series B Preferred Stock after the
recapitalization to the end that the provisions of this Section 6.1 (including
adjustment of the Series A and Series B Conversion Price then in effect and the
number of shares issuable upon conversion of the Series A or Series B Preferred
Stock) shall be applicable after that event in as nearly an equivalent manner as
may be practicable.
(e) Certificate as to Adjustments. Upon the occurrence of
each adjustment or readjustment of the Series A Conversion Rate or Series B
Conversion Rate pursuant to this Section 6, the Corporation at its expense
promptly will compute such adjustment
7
<PAGE> 15
or readjustment in accordance with the terms hereof and prepare and furnish to
each holder of Series A or Series B Preferred Stock, a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation, upon the written request
at any time of any holder of Series A or Series B Preferred Stock, will furnish
or cause to be furnished to such holder a like certificate setting forth (i)
such adjustments and readjustments, (ii) the Series A or Series B Conversion
Rate at the time in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of the Series A or Series B Preferred Stock held by such holder.
Section 6.2 Conversion of Series C and Series D Preferred Stock.
(a) Conversion. The holders of the Series C and
Series D Preferred Stock have conversion rights as follows (the "Conversion
Rights"):
(i) Right to Convert Series C Preferred. Each share of
Series C Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share into the number of
fully paid and nonassessable shares of Common Stock which results from dividing
the Series C Conversion Value (as defined below) by the Series C Conversion
Price (as defined below) per share in effect for such series at the time of
conversion. The initial Series C Conversion Price per share of the Series C
Preferred shall be $1.40, and the Series C Conversion Value per share of the
Series C Preferred shall be $1.40. The initial Series C Conversion Price per
share of the Series C Preferred Stock shall be subject to adjustment from time
to time as provided in Section 6.2(a)(iv) hereof. Upon conversion, all declared
and unpaid dividends on the Series C Preferred Stock shall be paid in cash, to
the extent legally permitted.
(ii) Right to Convert Series D Preferred. Each share of
Series D Preferred Stock shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share into the number of
fully paid and nonassessable shares of Common Stock which results from dividing
the Series D Conversion Value (as defined below) by the Series D Conversion
Price (as defined below) per share in effect for such series at the time of
conversion. The initial Series D Conversion Price per share of the Series D
Preferred shall be $3.37 and the Series D Conversion Value per share of the
Series D Preferred shall be $3.37. The initial Series D Conversion Price per
share of the Series D Preferred Stock shall be subject to adjustment from time
to time as provided in Section 6.2(a)(iv) hereof. Upon conversion, all declared
and unpaid dividends on the Series D Preferred Stock shall be paid in cash, to
the extent legally permitted.
(iii) Automatic Conversion of Series C and Series D
Preferred Stock. Each share of Series C and Series D Preferred Stock will be
converted into shares of Common Stock at the then effective Series C Conversion
Price and Series D Conversion Price, respectively, immediately upon the closing
of the sale of stock pursuant to a registration statement under the Securities
Act for an underwritten public offering (other than a registration on Forms S-8,
Form S-4 or comparable or successor forms) covering the Corporation's Common
8
<PAGE> 16
Stock (an "Offering") which results in aggregate cash proceeds to the
Corporation of more than $10,000,000 and which has a public offering price of
not less than $7.00 per share (as adjusted for Recapitalization Events).
(iv) Adjustments to Conversion Price of Series C
and Series D Preferred Stock.
(1) Special Definitions. For purposes
of this Section 6.2(a)(iii), the following definitions shall apply:
(A) "Options" shall mean rights,
options or warrants to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities.
(B) "Convertible Securities" shall
mean any evidences of indebtedness, shares or other securities convertible into
or exchangeable for Common Stock.
(C) "Additional Shares of Common"
shall mean all shares of Common Stock issued (or, pursuant to Section
6.2(a)(iv)(3) below, deemed to be issued) by the Corporation after the Original
Issue Date, other than shares of Common Stock issued or issuable:
(I) upon conversion of
shares of Series A, Series B, Series C and Series D Preferred Stock;
(II) upon exercise of
warrants to purchase an aggregate of (i) 228,250 shares of Common Stock, (ii)
7,500 shares of Series A Preferred Stock, and (iii) 18,000 shares of Series C
Preferred Stock outstanding as of the Original Issue Date (as adjusted for
Recapitalization Events);
(III) to officers, directors
or employees of, or consultants to, the Corporation pursuant to a stock grant,
option plan or purchase plan or other employee stock incentive program or
agreement approved by the Board, not to exceed 7,400,000 shares, inclusive of
the 3,549,596 shares subject to outstanding options and the 1,365,172 shares
issued upon exercise of outstanding options but net of repurchases,
cancellations, terminations and expirations, since the Original Issue Date (as
adjusted for Recapitalization Events);
(IV) in connection with the
acquisition by the Company of another business entity or majority ownership
thereof, provided that (A) such entity is not an affiliate (any person or entity
controlling, controlled by or under common control with the Company, an
"Affiliate") of any director, officer or other natural person who is an
Affiliate of the Company (a "Control Person") other than in such Control
Person's capacity as an officer, director or shareholder of the Company and such
Control Person does not have a material interest in such entity other than as an
officer, director or shareholder of the Company, or
9
<PAGE> 17
(B) such issuances of Common Stock issued or issuable are made in a bona fide
arm's length transaction as determined by the Board of Directors of the Company;
(V) in an amount up to
750,000 shares of Common Stock (as adjusted for Recapitalization Events), in
connection with any lease financing transaction approved by the Company's Board
of Directors;
(VI) as a dividend or
distribution on Series A, Series B, Series C or Series D Preferred Stock;
(VII) upon exercise of
nonqualified stock options outstanding as of the Original Issue Date to purchase
100,000 shares of Common Stock (as adjusted for Recapitalization Events);
(VIII) by way of dividend or
other distribution on shares of Common Stock excluded from the definition of
Additional Shares of Common by the foregoing clauses (I) through (VII) or this
clause (VIII); or
(IX) solely for purposes of
calculating adjustments to the Series D Conversion Price, Additional Shares of
Common shall also exclude all shares of Common Stock issued or issuable in an
amount up to 800,000 shares of Common Stock (as adjusted for Recapitalization
Events), issued in connection with strategic investment and/or the acquisition
of technology approved by the Company's Board of Directors.
(D) "Original Issue Date" shall
mean August 26, 1999.
(2) No Adjustment of Conversion Price. No adjustment
in the Series C or Series D Conversion Price shall be made in respect of the
issuance of Additional Shares of Common unless the consideration per share for
an Additional Share of Common issued or deemed to be issued by the Corporation
is less than the Series C or Series D Conversion Price, as applicable, in effect
on the date of, and immediately prior to, such issue.
(3) Deemed Issue of Additional Shares of Common.
(A) Options and Convertible Securities. In the
event the Corporation at any time or from time to time after the Original Issue
Date shall issue any Options or Convertible Securities or shall fix a record
date for the determination of holders of any class of securities entitled to
receive any such Options or Convertible Securities, then the maximum number of
shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the exercise of such Options and
conversion or exchange of such Convertible Securities shall be deemed to be
Additional Shares of Common issued as of the time of such issue or, in case such
a record date shall have been fixed, as of the close of business on such record
date, provided that Additional Shares of Common shall not be deemed to have been
issued unless the
10
<PAGE> 18
consideration per share (determined pursuant to Section 6.2(a)(iv)(5) hereof) of
such Additional Shares of Common would be less than the Series C or Series D
Conversion Price in effect on the date of and immediately prior to such issue,
or such record date, as the case may be, and provided further that in any such
case in which Additional Shares of Common are deemed to be issued:
(I) except as provided in Section
6.2(a)(iv)(3)(II) below, no further adjustment in the Series C or Series D
Conversion Price shall be made upon the subsequent issue of Convertible
Securities or shares of Common Stock upon the exercise of such Options or
conversion or exchange of such Convertible Securities;
(II) if such Options or Convertible
Securities by their terms provide, with the passage of time or otherwise, for
any change in the consideration payable to the Corporation, or change in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof (other than under or by reason of provisions designed to
protect against dilution), a Conversion Price computed upon the original issue
thereof (or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities; and
(III) no readjustment pursuant to
clause (II) above shall have the effect of increasing the Series C or Series D
Conversion Price to an amount which exceeds the lower of (1) the Series C or
Series D Conversion Price on the original adjustment date or (2) the Series C or
Series D Conversion Price that would have resulted from any issuance of
Additional Shares of Common between the original adjustment date and such
readjustment date.
(B) Stock Dividends and Subdivisions. In the event
the Corporation at any time or from time to time after the Original Issue Date
shall declare or pay any dividend on the Common Stock payable in Common Stock,
or effect a split or subdivision of the outstanding shares of Common Stock into
a greater number of shares of Common Stock (by reclassification or otherwise
than by payment of a dividend in Common Stock), then and in any such event,
Additional Shares of Common shall be deemed to have been issued:
(I) in the case of any
such dividend, immediately after the close of business on the record date for
the determination of holders of any class of securities entitled to receive such
dividend, or
(II) in the case of any such
subdivision, at the close of business on the date immediately prior to the date
upon which such corporate action becomes effective.
(4) Adjustment of Conversion Price Upon
Issuance of Additional Shares of Common. In the event this Corporation shall
issue Additional Shares of
11
<PAGE> 19
Common (including Additional Shares of Common deemed to be issued pursuant to
Section 6.2(a)(iv)(3)) without consideration or for a consideration per share
less than the Series C or Series D Conversion Price in effect on the date of and
immediately prior to such issue (such issuance price being referred to herein as
the "Dilution Price"), then and in each such event the Series C or Series D
Conversion Price, as applicable, shall be reduced to a price (calculated to the
nearest cent) determined by multiplying such Series C or Series D Conversion
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the
Corporation for the total number of Additional Shares of Common so issued would
purchase at such Series C or Series D Conversion Price; and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of such Additional Shares of Common so
issued; provided that, for the purposes of this Section 6.2(a)(iv)(4), all
shares of Common Stock issuable upon conversion of all outstanding Preferred
Stock, and other Convertible Securities and all outstanding Options (provided
such Options have an exercise price below the Series C or Series D Conversion
Price immediately prior to such issue) shall be deemed to be outstanding, and,
immediately after any Additional Shares of Common are deemed issued pursuant to
Section 6.2(a)(iv)(3), such Additional Shares of Common shall be deemed to be
outstanding.
(5) Determination of Consideration.
For purposes of this Section 6.2(a)(iv), the consideration received by the
Corporation for the issue of any Additional Shares of Common shall be computed
as follows:
(A) Cash and Property: Such
consideration shall:
(I) insofar as it
consists of cash, be computed at the aggregate amount of cash received by the
Corporation;
(II) insofar as it consists
of property other than cash, be computed at the fair value thereof at the time
of such issue, as determined by Board in the good faith exercise of its
reasonable business judgment; and
(III) in the event Additional
shares of Common are issued together with other shares or securities or other
assets of the Corporation for consideration which covers both, be the proportion
of such consideration so received, computed as provided in clauses (A) and (B)
above, as determined in good faith by the Board.
(B) Options and Convertible
(I) the total amount, if any,
received or receivable by the Corporation as consideration for the issue of
such Options or Convertible Securities, plus the minimum aggregate amount of
additional consideration (as set forth in the
12
<PAGE> 20
instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(II) the maximum number of
shares of Common Stock (as set forth in the instruments relating thereto,
without regard to any provision contained therein for a subsequent adjustment of
such number) issuable upon the exercise of such Options or the conversion or
exchange of such Convertible Securities.
(C) Stock Dividends and Stock
Subdivisions. Any Additional Shares of Common deemed to have been issued,
relating to stock dividends and stock splits or subdivisions, shall be deemed to
have been issued for no consideration.
(6) Other Adjustments to Series C and
Series D Conversion Price.
(A) Subdivisions, Combinations,
or Consolidations of Common Stock. In the event the outstanding shares of Common
Stock shall be subdivided, combined or consolidated, by stock split, stock
dividend, combination or like event, into a greater or lesser number of shares
of Common Stock after the Original Issue Date, the Series C and the Series D
Conversion Price in effect immediately prior to such subdivision, combination,
consolidation or stock dividend shall, concurrently with the effectiveness of
such subdivision, combination or consolidation, be proportionately adjusted.
(B) Distributions Other Than
Cash Dividends Out of Retained Earnings. In case the Corporation shall declare a
cash dividend upon its Common Stock payable otherwise than out of retained
earnings or shall distribute to holders of its Common Stock shares of its
capital stock (other than Common Stock), stock or other securities of other
persons, evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights (excluding options to
purchase and rights to subscribe for Common Stock or other securities of the
Corporation convertible into or exchangeable for Common Stock), then, in each
such case, the holders of shares of Series C and Series D Preferred Stock shall,
concurrently with the distribution to holders of Common Stock, receive a like
distribution based upon the numbers of shares of Common Stock into which the
Series C and Series D Preferred Stock is then convertible.
(C) Reclassifications. In the
case, at any time after the date hereof, of any capital reorganization or any
reclassification of the stock of the Corporation (other than as a result of a
stock dividend or subdivision, split-up or combination of shares), or Corporate
Sale (other than a consolidation or merger in which the Corporation is the
continuing entity and which does not result in any change in the Common Stock),
the shares of the Series C and Series D Preferred Stock shall, after such
reorganization, reclassification or Corporate Sale, be convertible into the kind
and number of shares of stock or other securities or property of the Corporation
or otherwise to which such holder would have been entitled if
13
<PAGE> 21
immediately prior to such reorganization, reclassification or Corporate Sale,
the holder had converted the holder's shares of the Series C and Series D
Preferred Stock into Common Stock. The provisions of this Section
6.2(a)(iv)(6)(C) shall similarly apply to successive reorganizations,
reclassifications, consolidations or Corporate Sales.
(b) Certificate as to Adjustments. Upon the
occurrence of each adjustment or readjustment of the Series C or Series D
Conversion Price pursuant to this Section 6.2, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance with the
terms hereof and furnish to each holder of Series C and/or Series D Preferred
Stock a certificate setting forth such adjustment or readjustment and showing in
detail the facts upon which such adjustment or readjustment is based. The
Corporation shall, upon the written request at any time of any holder of Series
C or Series D Preferred Stock, furnish or cause to be furnished to such holder a
like certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Price of the Series C or Series D Preferred Stock at the time in
effect, and (iii) the number of shares of Common Stock and the amount, if any,
of other property which at the time would be received upon the conversion of the
Series C or Series D Preferred Stock.
Section 6.3 No Fractional Shares. No fractional shares of Common Stock
will be issued upon conversion of Series A, Series B, Series C or Series D
Preferred Stock and any fractional share which otherwise would result from
conversion by a holder of all of his shares of Series A, Series B, Series C or
Series D Preferred Stock will be redeemed by payment in an amount equal to such
fraction of the then effective Series A, Series B, Series C or Series D
Conversion Price as promptly as funds legally are available therefor.
Section 6.4 Mechanics of Conversion. Before any holder of Series A,
Series B, Series C or Series D Preferred Stock will be entitled to convert the
same into shares of Common Stock, he will surrender the certificate or
certificates therefor, duly endorsed, at the office of the Corporation or of any
transfer agent for the Series A, Series B, Series C or Series D Preferred Stock,
and he will give written notice to the Corporation stating the name or names in
which he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation, as soon as practicable thereafter, will issue and
deliver at such office to such holder of Series A, Series B, Series C or Series
D Preferred Stock or to his nominee or nominees, a certificate or certificates
for the number of shares of Common Stock to which he will be entitled as
aforesaid. Such conversion will be deemed to have been made, in the event of
automatic conversion, immediately prior to the close of business on the date of
the event of conversion or, in the event of voluntary conversion, immediately
prior to the close of business on the date when the Corporation receives a
holder's certificate or certificates for Series A, Series B, Series C or Series
D Preferred Stock and any other documents or instruments required hereunder or
by applicable law, and the person or persons entitled to receive the shares of
Common Stock issuable upon conversion will be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
Section 6.5 No Impairment. The Corporation, whether by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
merger, dissolution, issue or
14
<PAGE> 22
sale of securities or any other voluntary action, will not avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but at all times in good faith will
assist in the carrying out of all of such action as may be necessary or
appropriate in order to protect the conversion rights pursuant to this Section 6
of the holders of Series A, Series B, Series C and Series D Preferred Stock
against impairment.
Section 6.6 Notices of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any Common Stock
Equivalents or any right to subscribe for, purchase or otherwise acquire any
shares of stock of any class or any other securities or property, or to receive
any other right, the Corporation will mail to each holder of Series A, Series B,
Series C or Series D Preferred Stock at least ten (10) days prior to the date
specified therein, a notice specifying the date on which any such record is to
be taken for the purpose of such dividend, distribution or rights, and the
amount and character of such dividend, distribution or right.
Section 6.7 Reservation of Stock Issuable Upon Conversion. The
Corporation at all times will reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series A, Series B, Series C or Series D Preferred
Stock such number of its shares of Common Stock as from time to time will be
sufficient to effect the conversion of all then outstanding shares of Series A,
Series B, Series C and Series D Preferred Stock; and if at any time the number
of authorized but unissued shares of Common Stock is not sufficient to effect
the conversion of all then outstanding shares of Series A, Series B, Series C
and Series D Preferred Stock, in addition to such other remedies as may be
available to the holders of Series A, Series B, Series C and Series D Preferred
Stock for such failure, the Corporation will take such corporate action as, in
the opinion of its counsel, may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as will be sufficient
for such purpose.
1. Section 6.8 Notices. Any notices required by the provisions of this Section 6
to be given to the holders of shares of Series A, Series B, Series C or Series D
Preferred Stock must be in writing and will be deemed given upon personal
delivery, one day after deposit with a reputable overnight courier service for
overnight delivery or after transmission by facsimile telecopier with
confirmation of successful transmission, or five days after deposit in the
United States mail, by registered or certified mail postage prepaid, or upon
actual receipt if given by any other method, addressed to each holder of such
record at his address appearing on the books of the Corporation.
15
<PAGE> 23
IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this _____ day of
________________, 1999.
-----------------------------------------------
Louis Rosenberg, Chief Executive Officer
-----------------------------------------------
Bruce Schena, Secretary
16
<PAGE> 24
CERTIFICATE OF ELIMINATION OF
SERIES A, SERIES B, SERIES C AND SERIES D PREFERRED STOCK OF
IMMERSION CORPORATION
(Pursuant to Section 151 of the General
Corporation Law of the State of Delaware)
Immersion Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware (the "Corporation"), certifies
as follows:
FIRST: Article FOURTH of the Certificate of Incorporation of the
Corporation authorizes the issuance of 8,525,759 shares of Preferred Stock, par
value $0.001 per share (the "Preferred Stock"), of which 618,500 shares have
been designated Series A Preferred Stock, 115,834 shares have been designated
Series B Preferred Stock, 1,070,357 shares have been designated Series C
Preferred Stock and 1,721,068 shares have been designated Series D Preferred
Stock pursuant to a Certificate of Designations filed pursuant to Section 151 of
the General Corporation Law of the State of Delaware.
SECOND: The following resolution was adopted on ____________, 1999 by
the Board of Directors of the Corporation as required by Section 151(g) of the
General Corporation Law of the State of Delaware:
RESOLVED, that none of the authorized shares of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock are outstanding and no shares of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock will be issued subject to the Certificate of
Designations previously filed with respect to such Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock.
THIRD: Pursuant to the provisions of Section 151(g) of the General
Corporation Law of the State of Delaware, all matters set forth in the
Certificate of Designations with respect to such Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
are hereby eliminated from the Certificate of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by its duly authorized officer this ____ day of September, 1999.
IMMERSION CORPORATION
By:
--------------------------------------------
Its:
--------------------------------------------
<PAGE> 25
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") is entered
into as of ____________________, 1999 by and between Immersion Corporation a
California corporation ("Immersion California"), and Immersion Corporation
Delaware, a Delaware corporation ("Immersion Delaware").
WITNESSETH:
WHEREAS, Immersion Delaware is a corporation duly organized and
existing under the laws of the State of Delaware;
WHEREAS, Immersion California is a corporation duly organized and
existing under the laws of the State of California;
WHEREAS, on the date of this Merger Agreement, Immersion Delaware has
authority to issue 100,000,000 shares of Common Stock, par value $0.001 per
share (the "Immersion Delaware Common Stock"), of which 100 shares are issued
and outstanding and owned by Immersion California and 8,525,759 shares of
Preferred Stock, par value $0.001 per share (the "Immersion Delaware Preferred
Stock), of which no shares are issued or outstanding;
WHEREAS, on the date of this Merger Agreement, Immersion California has
authority to issue 100,000,000 shares of Common Stock (the "Immersion California
Common Stock"), of which 7,400,819 shares are issued and outstanding, and
5,000,000 shares of Preferred Stock (the "Immersion California Preferred
Stock"), of which 3,492,923 shares are issued and outstanding;
WHEREAS, the respective Boards of Directors for Immersion Delaware and
Immersion California have determined that, for the purpose of effecting the
reincorporation of Immersion California in the State of Delaware, it is
advisable and to the advantage of said two corporations and their shareholders
that Immersion California merge with and into Immersion Delaware upon the terms
and conditions herein provided; and
WHEREAS, the respective Boards of Directors of Immersion Delaware and
Immersion California, the shareholders of Immersion California, and the sole
stockholder of Immersion Delaware have adopted and approved this Merger
Agreement;
NOW, THEREFORE, in consideration of the mutual agreements and covenants
set forth herein, Immersion California and Immersion Delaware hereby agree to
merge as follows:
1. Merger. Immersion California shall be merged with and into Immersion
Delaware, and Immersion Delaware shall survive the merger ("Merger"), effective
upon the date when this Merger Agreement is made effective in accordance with
applicable law (the "Effective Date").
2. Governing Documents. The Amended and Restated Certificate of
Incorporation of Immersion Delaware (the "Certificate of Incorporation") shall
continue to be the Certificate of Incorporation of Immersion Delaware as the
surviving Corporation. Article FIRST of the Restated Certificate of
Incorporation of Immersion Delaware shall be amended to read as follows:
1
<PAGE> 26
FIRST: The name of the Corporation is Immersion Corporation.
The Bylaws of Immersion Delaware, in effect on the Effective Date, shall
continue to be the Bylaws of Immersion Delaware as the surviving Corporation
without change or amendment until further amended in accordance with the
provisions thereof and applicable laws.
3. Directors and Officers. The directors and officers of Immersion
California shall become the directors and officers of Immersion Delaware upon
the Effective Date and any committee of the Board of Directors of Immersion
California shall become the members of such committees for Immersion Delaware.
4. Succession. On the Effective Date, Immersion Delaware shall succeed
to Immersion California in the manner of and as more fully set forth in Section
259 of the General Corporation Law of the State of Delaware.
5. Further Assurances. From time to time, as and when required by
Immersion Delaware or by its successors and assigns, there shall be executed and
delivered on behalf of Immersion California such deeds and other instruments,
and there shall be taken or caused to be taken by it such further and other
action, as shall be appropriate or necessary in order to vest, perfect or
confirm, of record or otherwise, in Immersion Delaware the title to and
possession of all the property, interests, assets, rights, privileges,
immunities, powers, franchises and authority of Immersion California, and
otherwise to carry out the purposes of this Merger Agreement and the officers
and directors of Immersion Delaware are fully authorized in the name and on
behalf of Immersion California or otherwise to take any and all such action and
to execute and deliver any and all such deeds and other instruments.
6. Stock of Immersion California.
a. Common Stock. Upon the Effective Date, by virtue of the Merger
and without any action on the part of the holder thereof, each one (1) share of
Immersion California Common Stock outstanding immediately prior thereto shall be
changed and converted into 0.807 fully paid and nonassessable share of Immersion
Delaware Common Stock.
b. Preferred Stock. Upon the Effective Date, by virtue of the
Merger and without any action on the part of the holder thereof, (i) each one
(1) share of Immersion California Series A Preferred and Series B Preferred
outstanding immediately prior thereto shall be changed and converted into 4.035
fully paid and nonassessable equivalent shares of Immersion Delaware Series A
Preferred or Series B Preferred Stock and (ii) each one share of Series C
Preferred Stock and Series D Preferred Stock outstanding immediately prior
thereto shall be changed and converted into 0.807 fully paid and nonassessable
equivalent share of Immersion Delaware Series C or Series D Preferred Stock.
c. Fractional Shares. No fractional shares which a Immersion
Delaware stockholder would otherwise be entitled to receive by reason of the
exchange of Immersion California stock for Immersion Delaware stock shall be
issued. In lieu of any fractional shares to which a holder would otherwise be
entitled, Immersion Delaware shall pay cash equal to such fraction multiplied by
the fair market value of the Common Stock on the Effective Date as determined by
the Board of Directors of Immersion Delaware and for the Preferred Stock, such
2
<PAGE> 27
fraction multiplied by the Conversion Prices as defined in Article FOURTH,
subparagraph 4(a) of this Certificate of Incorporation.
7. Stock Certificates. On and after the Effective Date, all of the
outstanding certificates which prior to that time represented shares of
Immersion California stock shall be deemed for all purposes to evidence
ownership of and to represent the shares of Immersion Delaware stock into which
the shares of Immersion California stock represented by such certificates have
been converted as herein provided. The registered owner on the books and records
of Immersion Delaware or its transfer agent of any such outstanding stock
certificate shall, until such certificate shall have been surrendered for
transfer or otherwise accounted for to Immersion Delaware or its transfer agent,
have and be entitled to exercise any voting and other rights with respect to and
to receive any dividend and other distributions upon the shares of Immersion
Delaware stock evidenced by such outstanding certificate as above provided.
8. Options and Warrants. Upon the Effective Date, (i) each outstanding
option, warrant to purchase common Stock, Series C Preferred Stock or Series D
Preferred Stock or other right to purchase Common Stock, Series C Preferred
Stock or Series D Preferred Stock of Immersion California, including those
options granted under the 1994 Stock Option Plan and 1997 Stock Option Plan
(collectively, the "Option Plan") of Immersion California, shall be converted
into and become an option, warrant, or right to purchase the number of shares of
Immersion Delaware stock determined by multiplying the number of shares of
Immersion California subject to the option, warrant or right to purchase by
0.807, rounded down to the nearest whole number, at a price per share equal to
the exercise price of the option, warrant or right to purchase Immersion
California stock divided by 0.807, rounded down to the nearest whole cent, and
upon the same terms and subject to the same conditions as set forth in the
Option Plan and other plan or agreement entered into by Immersion California
pertaining to such options, warrants, or rights and (ii) each outstanding
warrant to purchase Series A or Series B Preferred Stock of Immersion California
shall be converted into and become a warrant to purchase the equivalent number
of shares of Series A Preferred Stock or Series B Preferred Stock of Immersion
Delaware stock determined by multiplying the number of shares of Immersion
California subject to the warrant by 4.035 rounded down to the nearest whole
number, at a price per share equal to the exercise price of the warrant divided
by 4.035, rounded down to the nearest whole cent, and upon the same terms and
subject to the same conditions as set forth in the agreements entered into by
Immersion California pertaining to the warrant. A number of shares of Immersion
Delaware stock of the relevant class and series shall be reserved for purposes
of (i) the options, warrants, and rights described in clause (i) of the
preceding sentence equal to the number of shares of Immersion California stock
so reserved as of the Effective Date multiplied by 0.807 and (ii) of the
warrants described in clause (ii) of the preceding sentence equal to the number
of shares of Immersion California stock of the relevant class and series so
reserved as of the Effective Date multiplied by 4.035. As of the Effective Date,
Immersion Delaware shall assume all obligations of Immersion California under
agreements pertaining to such options, warrants and rights, including the Option
Plans, and the outstanding options, warrants or other rights, or portions
thereof, granted pursuant thereto.
9. Other Employee Benefit Plans. As of the Effective Date, Immersion
Delaware hereby assumes all obligations of Immersion California under any and
all employee benefit plans
3
<PAGE> 28
in effect as of said date or with respect to which employee rights or accrued
benefits are outstanding as of said date.
10. Outstanding Common Stock of Immersion Delaware. Forthwith upon the
Effective Date, the One Hundred (100) shares of Immersion Delaware Common Stock
presently issued and outstanding in the name of Immersion California shall be
canceled and retired and resume the status of authorized and unissued shares of
Immersion Delaware Common Stock, and no shares of Immersion Delaware Common
Stock or other securities of Immersion Delaware shall be issued in respect
thereof.
11. Covenants of Immersion Delaware. Immersion Delaware covenants and
agrees that it will, on or before the Effective Date:
a. Qualify to do business as a foreign corporation in the State
of California, and in all other states in which Immersion California is so
qualified and in which the failure so to qualify would have a material adverse
impact on the business or financial condition of Immersion Delaware. In
connection therewith, Immersion Delaware shall irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California Corporations Code and under applicable provisions of state law in
other states in which qualification is required hereunder.
b. File any and all documents with the California Franchise Tax
Board necessary to the assumption by Immersion Delaware of all of the franchise
tax liabilities of Immersion California.
12. Amendment. At any time before or after approval and adoption by the
stockholders of Immersion California, this Merger Agreement may be amended in
any manner as may be determined in the judgment of the respective Boards of
Directors of Immersion Delaware and Immersion California to be necessary,
desirable or expedient in order to clarify the intention of the parties hereto
or to effect or facilitate the purposes and intent of this Merger Agreement.
13. Abandonment. At any time before the Effective Date, this Merger
Agreement may be terminated and the Merger may be abandoned by the Board of
Directors of either Immersion California or Immersion Delaware or both,
notwithstanding approval of this Merger Agreement by the sole stockholder of
Immersion Delaware and the shareholders of Immersion California.
14. Counterparts. In order to facilitate the filing and recording of
this Merger Agreement, the same may be executed in any number of counterparts,
each of which shall be deemed to be an original.
4
<PAGE> 29
IN WITNESS WHEREOF, this Merger Agreement, having first been duly
approved by resolution of the Board of Directors of Immersion California and
Immersion Delaware, is hereby executed on behalf of each of said two
corporations by their respective officers thereunto duly authorized.
IMMERSION CORPORATION DELAWARE, a Delaware
corporation
By:
-----------------------------------------------
Louis Rosenberg, Chief Executive Officer
IMMERSION CORPORATION, a California
corporation
By:
-----------------------------------------------
Louis Rosenberg, Chief Executive Officer
5
<PAGE> 30
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
IMMERSION CORPORATION
Immersion Corporation, a Delaware corporation (the "Corporation"),
hereby certifies:
1. That the Corporation's Board of Directors has duly adopted the following
resolutions:
RESOLVED, that the first paragraph of Article FOURTH of the Restated
Certificate of Incorporation is hereby amended to read in full as
follows:
FOURTH:The Corporation is authorized to issue a total of
105,000,000 shares of stock in two classes designated
respectively "Preferred Stock" and "Common Stock." The total
number of shares of all series of Preferred Stock that the
Corporation shall have the authority to issue is 5,000,000 and
the total number of shares of Common Stock that the Corporation
shall have the authority to issue is 100,000,000. All of the
authorized shares shall have a par value of $0.001.
2. That the proposed amendment has been duly adopted by the
Corporation's Board of Directors and sole stockholder in
accordance with the provisions of Sections 242 and 228 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment of Restated Certificate of Incorporation to be signed by a duly
authorized officer on this _____ day of ___________, 1999.
IMMERSION CORPORATION
-----------------------------------------------
Louis Rosenberg, Ph.D., Chief Executive
Officer
<PAGE> 1
EXHIBIT 3.4
BYLAWS
OF
IMMERSION CORPORATION DELAWARE
<PAGE> 2
IMMERSION CORPORATION DELAWARE
A DELAWARE CORPORATION
BYLAWS
ARTICLE I
STOCKHOLDERS
Section 1.1 Annual Meeting. An annual meeting of the stockholders, for
the election of directors to succeed those whose terms expire and for the
transaction of such other business as may properly come before the meeting,
shall be held at such place, on such date, and at such time as the Board of
Directors shall each year fix, which date shall be within thirteen months
subsequent to the later of the date of incorporation or the last annual meeting
of stockholders.
Section 1.2 Special Meetings. Special meetings of the stockholders, for
any purpose or purposes prescribed in the notice of the meeting, may be called
only (i) by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there
exists any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board of Directors for adoption) or (ii) by the
holders of not less than 10% of all shares entitled to cast votes at the
meeting, voting together as a single class and shall be held at such place, on
such date, and at such time as they shall fix. Business transacted at special
meetings shall be confined to the purpose or purposes stated in the notice.
Section 1.3 Notice of Meetings. Written notice of the place, date, and
time of all meetings of the stockholders shall be given, not less than ten (10)
nor more than sixty (60) days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than thirty
(30) days after the date for which the meeting was originally noticed, or if a
new record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
Section 1.4 Quorum. At any meeting of the stockholders, the holders of a
majority of all of the shares of the stock entitled to vote at the meeting,
present in person or by proxy, shall constitute a quorum for all purposes,
unless or except to the extent that the presence of a larger number may be
required by law.
<PAGE> 3
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of a majority of the shares of stock entitled to vote who
are present, in person or by proxy, may adjourn the meeting to another place,
date, or time.
If a notice of any adjourned special meeting of stockholders is sent to
all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
Section 1.5 Conduct of the Stockholders' Meeting. At every meeting of
the stockholders, the Chairman, if there is such an officer, or if not, the
President of the Corporation, or in his absence the Vice President designated by
the President, or in the absence of such designation any Vice President, or in
the absence of the President or any Vice President, a chairman chosen by the
majority of the voting shares represented in person or by proxy, shall act as
Chairman. The Secretary of the Corporation or a person designated by the
Chairman shall act as Secretary of the meeting. Unless otherwise approved by the
Chairman, attendance at the stockholders' meeting is restricted to stockholders
of record, persons authorized in accordance with Section 8 of these Bylaws to
act by proxy, and officers of the Corporation.
Section 1.6 Conduct of Business. The Chairman shall call the meeting to
order, establish the agenda, and conduct the business of the meeting in
accordance therewith or, at the Chairman's discretion, it may be conducted
otherwise in accordance with the wishes of the stockholders in attendance. The
date and time of the opening and closing of the polls for each matter upon which
the stockholders will vote at the meeting shall be announced at the meeting.
The Chairman shall also conduct the meeting in an orderly manner, rule
on the precedence of and procedure on, motions and other procedural matters, and
exercise discretion with respect to such procedural matters with fairness and
good faith toward all those entitled to take part. The Chairman may impose
reasonable limits on the amount of time taken up at the meeting on discussion in
general or on remarks by any one stockholder. Should any person in attendance
become unruly or obstruct the meeting proceedings, the Chairman shall have the
power to have such person removed from participation. Notwithstanding anything
in the Bylaws to the contrary, no business shall be conducted at a meeting
except in accordance with the procedures set forth in this Section 1.6 and
Section 1.7, below. The Chairman of a meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting and in accordance with the provisions of this Section 1.6 and
Section 1.7, and if he should so determine, he shall so declare to the meeting
and any such business not properly brought before the meeting shall not be
transacted.
Section 1.7 Notice of Stockholder Business. At an annual or special
meeting of the stockholders, only such business shall be conducted as shall have
been properly brought before the meeting. To be properly brought before a
meeting, business must be (a) specified in the notice of meeting (or any
supplement thereto) given by or at the direction of the Board of Directors, (b)
properly brought before the meeting by or at the direction of the Board of
Directors, (c) properly brought before an annual meeting by a stockholder, or
(d) properly brought before a special meeting by a stockholder, but if, and only
if, the notice of a special
<PAGE> 4
meeting provides for business to be brought before the meeting by stockholders.
For business to be properly brought before a meeting by a stockholder, the
stockholder must have given timely notice thereof in writing to the Secretary of
the Corporation. To be timely, a stockholder proposal to be presented at an
annual meeting shall be received at the Corporation's principal executive
offices not less than 120 calendar days in advance of the date that the
Corporation's (or the Corporation's predecessor's) proxy statement was released
to stockholders in connection with the previous year's annual meeting of
stockholders, except that if no annual meeting was held in the previous year or
the date of the annual meeting has been changed by more than 30 calendar days
from the date contemplated at the time of the previous year's proxy statement,
or in the event of a special meeting, notice by the stockholder to be timely
must be received not later than the close of business on the tenth day following
the day on which such notice of the date of the meeting was mailed or such
public disclosure was made. A stockholder's notice to the Secretary shall set
forth as to each matter the stockholder proposes to bring before the annual or
special meeting (a) a brief description of the business desired to be brought
before the annual or special meeting and the reasons for conducting such
business at the special meeting, (b) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the Corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Section 1.8 Proxies and Voting. At any meeting of the stockholders,
every stockholder entitled to vote may vote in person or by proxy authorized by
an instrument in writing or by a transmission permitted by law filed in
accordance with the procedure established for the meeting. No stockholder may
authorize more than one proxy for his shares.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefor by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by law, all other matters shall be determined by a
majority of the votes cast.
Section 1.9 Stock List. A complete list of stockholders entitled to vote
at any meeting of stockholders, arranged in alphabetical order for each class of
stock and showing the address of each such stockholder and the number of shares
registered in his or her name, shall be open to the examination of any such
stockholder, for any purpose germane to the meeting, during ordinary business
hours for a period of at least ten (10) days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or if not so specified, at the place
where the meeting is to be held.
<PAGE> 5
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
ARTICLE II
BOARD OF DIRECTORS
Section 2.1 Number and Term of Office. The number of directors shall
initially be four (4) and, thereafter, shall be fixed from time to time
exclusively by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors (whether or not there exist
any vacancies in previously authorized directorships at the time any such
resolution is presented to the Board for adoption). Upon the closing of the
first sale of the Corporation's common stock pursuant to a firmly underwritten
registered public offering (the "IPO"), the directors shall be divided into
three classes, with the term of office of the first class to expire at the first
annual meeting of stockholders held after the IPO, the term of office of the
second class to expire at the second annual meeting of stockholders held after
the IPO, the term of office of the third class to expire at the third annual
meeting of stockholders held after the IPO and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election. A vacancy resulting from the removal of a director by the stockholders
as provided in Article II, Section 2.3 below may be filled at special meeting of
the stockholders held for that purpose. All directors shall hold office until
the expiration of the term for which elected and until their respective
successors are elected, except in the case of the death, resignation or removal
of any director.
Section 2.2 Vacancies and Newly Created Directorships. Subject to the
rights of the holders of any series of Preferred Stock then outstanding, newly
created directorships resulting from any increase in the authorized number of
directors or any vacancies in the Board of Directors resulting from death,
resignation, retirement, disqualification or other cause (other than removal
from office by a vote of the stockholders) may be filled only by a majority vote
of the directors then in office, though less than a quorum, and directors so
chosen shall hold office for a term expiring at the next annual meeting of
stockholders. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
Section 2.3 Removal. Subject to the rights of holders of any series of
Preferred Stock then outstanding, any directors, or the entire Board of
Directors, may be removed from office at any time, with or without cause, but
only by the affirmative vote of the holders of at least a majority of the voting
power of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class. Vacancies in the Board of Directors resulting from such removal
may be filled by a majority of the directors then in office, though less than a
quorum, or by the stockholders as provided in Article II, Section 2.1 above.
Directors so chosen shall hold office until the new annual meeting of
stockholders.
<PAGE> 6
Section 2.4 Regular Meetings. Regular meetings of the Board of Directors
shall be held at such place or places, on such date or dates, and at such time
or times as shall have been established by the Board of Directors and publicized
among all directors. A notice of each regular meeting shall not be required.
Section 2.5 Special Meetings. Special meetings of the Board of Directors
may be called by one-third of the directors then in office (rounded up to the
nearest whole number) or by the chief executive officer and shall be held at
such place, on such date, and at such time as they or he or she shall fix.
Notice of the place, date, and time of each such special meeting shall be given
each director by whom it is not waived by mailing written notice not fewer than
five (5) days before the meeting or by telegraphing or personally delivering the
same not fewer than twenty-four (24) hours before the meeting. Unless otherwise
indicated in the notice thereof, any and all business may be transacted at a
special meeting.
Section 2.6 Quorum. At any meeting of the Board of Directors, a majority
of the total number of authorized directors shall constitute a quorum for all
purposes. If a quorum shall fail to attend any meeting, a majority of those
present may adjourn the meeting to another place, date, or time, without further
notice or waiver thereof.
Section 2.7 Participation in Meetings by Conference Telephone. Members
of the Board of Directors, or of any committee thereof, may participate in a
meeting of such Board or committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other and such participation shall constitute presence in
person at such meeting.
Section 2.8 Conduct of Business. At any meeting of the Board of
Directors, business shall be transacted in such order and manner as the Board
may from time to time determine, and all matters shall be determined by the vote
of a majority of the directors present, except as otherwise provided herein or
requited by law. Action may be taken by the Board of Directors without a meeting
if all members thereof consent thereto in writing, and the writing or writings
are filed with the minutes of proceedings of the Board of Directors.
Section 2.9 Powers. The Board of Directors may, except as otherwise
required by law, exercise all such powers and do all such acts and things as may
be exercised or done by the Corporation, including, without limiting the
generality of the foregoing, the unqualified power:
(a) To declare dividends from time to time in accordance with
law;
(b) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(c) To authorize the creation, making and issuance, in such form
as it may determine, of written obligations of every kind, negotiable or
non-negotiable, secured or unsecured, and to do all things necessary in
connection therewith;
<PAGE> 7
(d) To remove any officer of the Corporation with or without
cause, and from time to time to devolve the powers and duties of any officer
upon any other person for the time being;
(e) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(f) To adopt from time to time such stock, option, stock
purchase, bonus or other compensation plans for directors, officers, employees
and agents of the Corporation and its subsidiaries as it may determine;
(g) To adopt from time to time such insurance, retirement, and
other benefit plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine; and
(h) To adopt from time to time regulations, not inconsistent with
these bylaws, for the management of the Corporation's business and affairs.
Section 2.10 Compensation of Directors. Directors, as such, may receive,
pursuant to resolution of the Board of Directors, fixed fees and other
compensation for their services as directors, including, without limitation,
their services as members of committees of the Board of Directors.
Section 2.11 Nomination of Director Candidates. Subject to the rights of
holders of any class or series of Preferred Stock then outstanding, nominations
for the election of Directors may be made by the Board of Directors or a proxy
committee appointed by the Board of Directors or by any stockholder entitled to
vote in the election of Directors generally. However, any stockholder entitled
to vote in the election of Directors generally may nominate one or more persons
for election as Directors at a meeting only if timely notice of such
stockholder's intent to make such nomination or nominations has been given in
writing to the Secretary of the Corporation. To be timely, a stockholder
nomination for a director to be elected at an annual meeting shall be received
at the Corporation's principal executive offices not less than 120 calendar days
in advance of the date that the Corporation's (or the Corporation's
Predecessor's) Proxy statement was released to stockholders in connection with
the previous year's annual meeting of stockholders, except that if no annual
meeting was held in the previous year or the date of the annual meeting has been
changed by more than 30 calendar days from the date contemplated at the time of
the previous year's proxy statement, or in the event of a nomination for
director to be elected at a special meeting, notice by the stockholders to be
timely must be received not later than the close of business on the tenth day
following the day on which such notice of the date of the special meeting was
mailed or such public disclosure was made. Each such notice shall set forth: (a)
the name and address of the stockholder who intends to make the nomination and
of the person or persons to be nominated; (b) a representation that the
stockholder is a holder of record of stock of the Corporation entitled to vote
for the election of Directors on the date of such notice and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or persons
<PAGE> 8
(naming such person or persons) pursuant to which the nomination or nominations
are to be made by the stockholder; (d) such other information regarding each
nominee proposed by such stockholder as would be required to be included in a
proxy statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated, or intended to be nominated, by the
Board of Directors; and (e) the consent of each nominee to serve as a director
of the Corporation if so elected.
In the event that a person is validly designated as a nominee in
accordance with this Section 2.11 and shall thereafter become unable or
unwilling to stand for election to the Board of Directors, the Board of
Directors or the stockholder who proposed such nominee, as the case may be, may
designate a substitute nominee upon delivery, not fewer than five days prior to
the date of the meeting for the election of such nominee, of a written notice to
the Secretary setting forth such information regarding such substitute nominee
as would have been required to be delivered to the Secretary pursuant to this
Section 2.11 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a director of the
Corporation, if elected, of each such substitute nominee.
If the chairman of the meeting for the election of Directors determines
that a nomination of any candidate for election as a Director at such meeting
was not made in accordance with the applicable provisions of this Section 2.11,
such nomination shall be void; provided, however, that nothing in this Section
2.11 shall be deemed to limit any voting rights upon the occurrence of dividend
arrearages provided to holders of Preferred Stock pursuant to the Preferred
Stock designation for any series of Preferred Stock.
ARTICLE III
COMMITTEES
Section 3.1 Committees of the Board of Directors. The Board of
Directors, by a vote of a majority of the whole Board, may from time to time
designate committees of the Board, with such lawfully delegable powers and
duties as it thereby confers, to serve at the pleasure of the Board and shall,
for those committees and any others provided for herein, elect a director or
directors to serve as the member or members, designating, if it desires, other
directors as alternate members who may replace any absent or disqualified member
at any meeting of the committee. Any committee so designated may exercise the
power and authority of the Board of Directors to declare a dividend, to
authorize the issuance of stock or to adopt a certificate of ownership and
merger pursuant to Section 253 of the Delaware General Corporation Law if the
resolution which designates the committee or a supplemental resolution of the
Board of Directors shall so provide. In the absence or disqualification of any
member of any committee and any alternate member in his place, the member or
members of the committee present at the meeting and not disqualified from
voting, whether or not he or she or they constitute a quorum, may by unanimous
vote appoint another member of the Board of Directors to act at the meeting in
the place of the absent or disqualified member.
Section 3.2 Conduct of Business. Each committee may determine the
procedural rules for meeting and conducting its business and shall act in
accordance therewith, except as
<PAGE> 9
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the authorized members shall
constitute a quorum unless the committee shall consist of one or two members, in
which event one member shall constitute a quorum; and all matters shall be
determined by a majority vote of the members present. Action may be taken by any
committee without a meeting if all members thereof consent thereto in writing,
and the writing or writings are filed with the minutes of the proceedings of
such committee.
ARTICLE IV
OFFICERS
Section 4.1 Generally. The officers of the Corporation shall consist of
a President, one or more Vice Presidents, a Secretary and a Treasurer. The
Corporation may also have, at the discretion of the Board of Directors, a
Chairman of the Board and such other officers as may from time to time be
appointed by the Board of Directors. Officers shall be elected by the Board of
Directors, which shall consider that subject at its first meeting after every
annual meeting of stockholders. Each officer shall hold office until his or her
successor is elected and qualified or until his or her earlier resignation or
removal. The Chairman of the Board, if there shall be such an officer, and the
President shall each be members of the Board of Directors. Any number of offices
may he held by the same person.
Section 4.2 Chairman of the Board. The Chairman of the Board, if there
shall be such an officer, shall, if present, preside at all meetings of the
Board of Directors, and exercise and perform such other powers and duties as may
be from time to time assigned to him by the Board of Directors or prescribed by
these bylaws.
Section 4.3 President. The President shall be the chief executive
officer of the Corporation. Subject to the provisions of these bylaws and to the
direction of the Board of Directors, he or she shall have the responsibility for
the general management and control of the business and affairs of the
Corporation and shall perform all duties and have all powers which are commonly
incident to the office of chief executive or which are delegated to him or her
by the Board of Directors. He or she shall have power to sign all stock
certificates, contracts and other instruments of the Corporation which are
authorized and shall have general supervision and direction of all of the other
officers, employees and agents of the Corporation.
Section 4.4 Vice President. Each Vice President shall have such powers
and duties as may be delegated to him or her by the Board of Directors. One Vice
President shall be designated by the Board to perform the duties and exercise
the powers of the President in the event of the President's absence or
disability.
Section 4.5 Treasurer. Unless otherwise designated by the Board of
Directors, the Chief Financial Officer of the Corporation shall be the
Treasurer. The Treasurer shall have the responsibility for maintaining the
financial records of the Corporation and shall have custody of all monies and
securities of the Corporation. He or she shall make such disbursements of the
funds of the Corporation as are authorized and shall render from time to time an
account of all
<PAGE> 10
such transactions and of the financial condition of the Corporation. The
Treasurer shall also perform such other duties as the Board of Directors may
from time to time prescribe.
Section 4.6 Secretary. The Secretary shall issue all authorized notices
for, and shall keep, or cause to be kept, minutes of all meetings of the
stockholders, the Board of Directors, and all committees of the Board of
Directors. He or she shall have charge of the corporate books and shall perform
such other duties as the Board of Directors may from time to time prescribe.
Section 4.7 Delegation of Authority. The Board of Directors may from
time to time delegate the powers or duties of any officer to any other officers
or agents, notwithstanding any provision hereof.
Section 4.8 Removal. Any officer of the Corporation may be removed at
any time, with or without cause, by the Board of Directors.
Section 4.9 Action With Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or any
officer of the Corporation authorized by the President shall have power to vote
and otherwise act on behalf of the Corporation, in person or by proxy, at any
meeting of stockholders of or with respect to any action of stockholders of any
other corporation in which this Corporation may hold securities and otherwise to
exercise any and all rights and powers which this Corporation may possess by
reason of its ownership of securities in such other corporation.
ARTICLE V
STOCK
Section 5.1 Certificates of Stock. Each stockholder shall be entitled to
a certificate signed by, or in the name of the Corporation by, the President or
a Vice President, and by the Secretary or an Assistant Secretary, or the
Treasurer or an Assistant Treasurer, certifying the number of shares owned by
him or her. Any of or all the signatures on the certificate may be facsimile.
Section 5.2 Transfers of Stock. Transfers of stock shall be made only
upon the transfer books of the Corporation kept at an office of the Corporation
or by transfer agents designated to transfer shares of the stock of the
Corporation. Except where a certificate is issued in accordance with Section 4
of Article V of these bylaws, an outstanding certificate for the number of
shares involved shall be surrendered for cancellation before a new certificate
is issued therefor.
Section 5.3 Record Date. The Board of Directors may fix a record date,
which shall not be more than sixty (60) nor fewer than ten (10) days before the
date of any meeting of stockholders, nor more than sixty (60) days prior to the
time for the other action hereinafter described, as of which there shall be
determined the stockholders who are entitled: to notice of or to vote at any
meeting of stockholders or any adjournment thereof; to receive payment of any
dividend or other distribution or allotment of any rights; or to exercise any
rights with respect to any change, conversion or exchange of stock or with
respect to any other lawful action.
<PAGE> 11
Section 5.4 Lost, Stolen or Destroyed Certificates. In the event of the
loss, theft or destruction of any certificate of stock, another may be issued in
its place pursuant to such regulations as the Board of Directors may establish
concerning proof of such loss, theft or destruction and concerning the giving of
a satisfactory bond or bonds of indemnity.
Section 5.5 Regulations. The issue, transfer, conversion and
registration of certificates of stock shall be governed by such other
regulations as the Board of Directors may establish.
ARTICLE VI
NOTICES
Section 6.1 Notices. Except as otherwise specifically provided herein or
required by law, all notices required to be given to any stockholder, director,
officer, employee or agent shall be in writing and may in every instance be
effectively given by hand delivery to the recipient thereof, by depositing such
notice in the mails, postage paid, or by sending such notice by prepaid
telegram, mailgram, telecopy or commercial courier service. Any such notice
shall be addressed to such stockholder, director, officer, employee or agent at
his or her last known address as the same appears on the books of the
Corporation. The time when such notice shall be deemed to be given shall be the
time such notice is received by such stockholder, director, officer, employee or
agent, or by any person accepting such notice on behalf of such person, if hand
delivered, or the time such notice is dispatched, if delivered through the mails
or be telegram or mailgram.
Section 6.2 Waivers. A written waiver of any notice, signed by a
stockholder, director, officer, employee or agent, whether before or after the
time of the event for which notice is to be given, shall be deemed equivalent to
the notice required to be given to such stockholder, director, officer, employee
or agent. Neither the business nor the purpose of any meeting need be specified
in such a waiver.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Facsimile Signatures. In addition to the provisions for use
of facsimile signatures elsewhere specifically authorized in these bylaws,
facsimile signatures of any officer or officers of the Corporation may be used
whenever and as authorized by the Board of Directors or a committee thereof.
Section 7.2 Corporate Seal. The Board of Directors may provide a
suitable seal, containing the name of the Corporation, which seal shall be in
the charge of the Secretary. If and when so directed by the Board of Directors
or a committee thereof, duplicates of the seal may be kept and used by the
Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 7.3 Reliance Upon Books, Reports and Records. Each director,
each member of any committee designated by the Board of Directors, and each
officer of the
<PAGE> 12
Corporation shall, in the performance of his duties, be fully protected in
relying in good faith upon the books of account or other records of the
Corporation, including reports made to the Corporation by any of its officers,
by an independent certified public accountant, or by an appraiser selected with
reasonable care.
Section 7.4 Fiscal Year. The fiscal year of the Corporation shall be as
fixed by the Board of Directors.
Section 7.5 Time Periods. In applying any provision of these bylaws
which require that an act be done or not done a specified number of days prior
to an event or that an act be done during a period of a specified number of days
prior to an event, calendar days shall be used, the day of the doing of the act
shall be excluded, and the day of the event shall be included.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 8.1 Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is involved in any action, suit
or proceeding, whether civil, criminal, administrative or investigative
("proceeding"), by reason of the fact that he or she or a person of whom he or
she is the legal representative, is or was a director, officer or employee of
the Corporation or is or was serving at the request of the Corporation as a
director, officer or employee of another corporation, or of a Partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director, officer or employee or in any other capacity
while serving as a director, officer or employee, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by Delaware Law, as
the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than said Law permitted the Corporation
to provide prior to such amendment) against all expenses, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
amounts paid or to be paid in settlement and amounts expended in seeking
indemnification granted to such person under applicable law, this bylaw or any
agreement with the Corporation) reasonably incurred or suffered by such person
in connection therewith and such indemnification shall continue as to a person
who has ceased to be a director, officer or employee and shall inure to the
benefit of his or her heirs, executors and administrators; provided, however,
that, except as provided in Section 8.2 of this Article VIII, the Corporation
shall indemnify any such person seeking indemnity in connection with an action,
suit or proceeding (or part thereof) initiated by such person only if (a) such
indemnification is expressly required to be made by law, (b) the action, suit or
proceeding (or part thereof) was authorized by the Board of Directors of the
Corporation, (c) such indemnification is provided by the Corporation, in its
sole discretion, pursuant to the powers vested in the Corporation under the
Delaware General Corporation Law, or (d) the action, suit or proceeding (or part
thereof) is brought to establish or enforce a right to indemnification under an
indemnity agreement or any other statute or law or otherwise as required under
Section 145 of the Delaware General Corporation Law. Such right shall be a
contract right and shall include the right to be paid by the Corporation
expenses incurred in
<PAGE> 13
defending any such proceeding in advance of its final disposition; provided,
however, that, unless the Delaware General Corporation Law then so prohibits,
the payment of such expenses incurred by a director or officer of the
Corporation in his or her capacity as a director or officer (and not in any
other capacity in which service was or is tendered by such person while a
director or officer, including, without limitation. service to an employee
benefit plan) in advance of the final disposition of such proceeding, shall be
made only upon delivery to the Corporation of an undertaking, by or on behalf of
such director or officer, to repay all amounts so advanced if it should be
determined ultimately that such director or officer is not entitled to be
indemnified under this Section or otherwise.
Section 8.2 Right of Claimant to Bring Suit. If a claim under Section 1
of this Article VIII is not paid in full by the Corporation within ninety (90)
days after a written claim has been received by the Corporation, the claimant
may at any time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if such suit is not frivolous or brought in bad
faith, the claimant shall be entitled to be paid also the expense of prosecuting
such claim. The burden of proving such claim shall be on the claimant. It shall
be a defense to any such action (other then an action brought to enforce a claim
for expenses incurred in defending any proceeding in advance of its final
disposition where the required undertaking, if any, has been tendered to this
Corporation) that the claimant has not met the standards of conduct which make
it permissible under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed. Neither the failure of the
Corporation (including its Board of Directors, independent legal counsel, or its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that claimant has not
met the applicable standard of conduct.
Section 8.3 Non-Exclusivity of Rights. The rights conferred on any
person in Sections 1 and 2 shall not be exclusive of any other right which such
persons may have or hereafter acquire under any statute, provision of the
Certificate of Incorporation, bylaw, agreement, vote of stockholders or
disinterested directors or otherwise.
Section 8.4 Indemnification Contracts. The Board of Directors is
authorized to enter into a contract with any director, officer, employee or
agent of the Corporation, or any person serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, including employee
benefit plans, providing for indemnification rights equivalent to or, if the
Board of Directors so determinates, greater than, those provided for in this
Article VIII.
Section 8.5 Insurance. The Corporation shall maintain insurance to the
extent reasonably available, at its expense, to protect itself and any such
director, officer, employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any such expense,
liability or loss, whether or not the Corporation would have
<PAGE> 14
the power to indemnify such person against such expense, liability or loss under
the Delaware General Corporation Law.
Section 8.6 Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VIII by the stockholders and the directors of
the Corporation shall not adversely affect any right or protection of a director
or officer of the Corporation existing at the time of such amendment, repeal or
modification.
ARTICLE IX
AMENDMENTS
Section 9.1 Amendment of Bylaws. The Board of Directors is expressly
empowered to adopt, amend or repeal Bylaws of the Corporation. Any adoption,
amendment or repeal of Bylaws of the Corporation by the Board of Directors shall
require the approval of a majority of the total number of authorized directors
(whether or not there exist any vacancies in previously authorized directorships
at the time any resolution providing for adoption, amendment or repeal is
presented to the Board). The stockholders shall also have power to adopt, amend
or repeal the Bylaws of the Corporation. Any adoption, amendment or repeal of
By-Laws of the Corporation by the stockholders shall require, in addition to any
vote of the holders of any class or series of stock of the Corporation required
by law or by this Certificate of Incorporation, the affirmative vote of the
holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting
power of all of the then outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.
<PAGE> 15
CERTIFICATE OF SECRETARY
I hereby certify that I am the duly elected and acting Secretary of
Immersion Corporation Delaware, a Delaware corporation (the "Corporation"), and
that the foregoing Bylaws, comprising thirteen (13) pages, constitute the
Bylaws of the Corporation as duly adopted on August __, 1999, by the unanimous
written consent of the Board of Directors of the Corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name on ________________,
1999.
________________________________________
Bruce Schena, Secretary
<PAGE> 16
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I STOCKHOLDERS...............................................................1
Section 1.1 Annual Meeting.......................................................1
Section 1.2 Special Meetings.....................................................1
Section 1.3 Notice of Meetings...................................................1
Section 1.4 Quorum...............................................................2
Section 1.5 Conduct of the Stockholders' Meeting.................................2
Section 1.6 Conduct of Business..................................................2
Section 1.7 Notice of Stockholder Business.......................................2
Section 1.8 Proxies and Voting...................................................3
Section 1.9 Stock List...........................................................3
ARTICLE II BOARD OF DIRECTORS.........................................................4
Section 2.1 Number and Term of Office............................................4
Section 2.2 Vacancies and Newly Created Directorships............................4
Section 2.3 Removal..............................................................4
Section 2.4 Regular Meetings.....................................................5
Section 2.5 Special Meetings.....................................................5
Section 2.6 Quorum...............................................................5
Section 2.7 Participation in Meetings by Conference Telephone....................5
Section 2.8 Conduct of Business..................................................5
Section 2.9 Powers...............................................................5
Section 2.10 Compensation of Directors............................................6
Section 2.11 Nomination of Director Candidates....................................6
ARTICLE III COMMITTEES.................................................................7
Section 3.1 Committees of the Board of Directors.................................7
Section 3.2 Conduct of Business..................................................8
ARTICLE IV OFFICERS...................................................................8
Section 4.1 Generally............................................................8
Section 4.2 Chairman of the Board................................................8
Section 4.3 President............................................................8
Section 4.4 Vice President.......................................................8
Section 4.5 Treasurer............................................................9
Section 4.6 Secretary............................................................9
Section 4.7 Delegation of Authority..............................................9
Section 4.8 Removal..............................................................9
Section 4.9 Action With Respect to Securities of Other Corporations..............9
ARTICLE V STOCK......................................................................9
Section 5.1 Certificates of Stock................................................9
Section 5.2 Transfers of Stock...................................................9
Section 5.3 Record Date..........................................................9
</TABLE>
<PAGE> 17
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 5.4 Lost, Stolen or Destroyed Certificates..............................10
Section 5.5 Regulations.........................................................10
ARTICLE VI NOTICES...................................................................10
Section 6.1 Notices.............................................................10
Section 6.2 Waivers.............................................................10
ARTICLE VII MISCELLANEOUS.............................................................10
Section 7.1 Facsimile Signatures................................................10
Section 7.2 Corporate Seal......................................................11
Section 7.3 Reliance Upon Books, Reports and Records............................11
Section 7.4 Fiscal Year.........................................................11
Section 7.5 Time Periods........................................................11
ARTICLE VIII INDEMNIFICATION OF DIRECTORS AND OFFICERS.................................11
Section 8.1 Right to Indemnification............................................11
Section 8.2 Right of Claimant to Bring Suit.....................................12
Section 8.3 Non-Exclusivity of Rights...........................................12
Section 8.4 Indemnification Contracts...........................................12
Section 8.5 Insurance...........................................................13
Section 8.6 Effect of Amendment.................................................13
ARTICLE IX AMENDMENTS................................................................13
Section 9.1 Amendment of Bylaws.................................................13
</TABLE>
<PAGE> 1
EXHIBIT 10.3
INDEMNITY AGREEMENT
This Indemnity Agreement, dated as of __________, 1999, is made by and
between Immersion Corporation Delaware, a Delaware corporation (the "Company"),
and (the "Indemnitee").
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors, officers or agents of corporations
unless they are protected by comprehensive liability insurance or
indemnification, due to increased exposure to litigation costs and risks
resulting from their service to such corporations, and due to the fact that the
exposure frequently bears no reasonable relationship to the compensation of such
directors, officers and other agents.
B. The statutes and judicial decisions regarding the duties of
directors and officers are often difficult to apply, ambiguous, or conflicting,
and therefore fail to provide such directors, officers and agents with adequate,
reliable knowledge of legal risks to which they are exposed or information
regarding the proper course of action to take.
C. Plaintiffs often seek damages in such large amounts and the costs of
litigation may be so enormous (whether or not the case is meritorious), that the
defense and/or settlement of such litigation is often beyond the personal
resources of directors, officers and other agents.
D. The Company believes that it is unfair for its directors, officers
and agents and the directors, officers and agents of its subsidiaries to assume
the risk of huge judgments and other expenses which may occur in cases in which
the director, officer or agent received no personal profit and in cases where
the director, officer or agent was not culpable.
E. The Company recognizes that the issues in controversy in litigation
against a director, officer or agent of a corporation such as the Company or its
subsidiaries are often related to the knowledge, motives and intent of such
director, officer or agent, that he is usually the only witness with knowledge
of the essential facts and exculpating circumstances regarding such matters, and
that the long period of time which usually elapses before the trial or other
disposition of such litigation often extends beyond the time that the director,
officer or agent can reasonably recall such matters; and may extend beyond the
normal time for retirement for such director, officer or agent with the result
that he, after retirement or in the event of his death, his spouse, heirs,
executors or administrators, may be faced with limited ability and undue
hardship in maintaining an adequate defense, which may discourage such a
director, officer or agent from serving in that position.
F. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
talented and experienced
1
<PAGE> 2
individuals to serve as directors, officers and agents of the Company and its
subsidiaries and to encourage such individuals to take the business risks
necessary for the success of the Company and its subsidiaries, it is necessary
for the Company to contractually indemnify its directors, officers and agents
and the directors, officers and agents of its subsidiaries, and to assume for
itself maximum liability for expenses and damages in connection with claims
against such directors, officers and agents in connection with their service to
the Company and its subsidiaries, and has further concluded that the failure to
provide such contractual indemnification could result in great harm to the
Company and its subsidiaries and the Company's stockholders.
G. Section 145 of the General Corporation Law of Delaware, under which
the Company is organized ("Section 145"), empowers the Company to indemnify its
directors, officers, employees and agents by agreement and to indemnify persons
who serve, at the request of the Company, as the directors, officers, employees
or agents of other corporations or enterprises, and expressly provides that the
indemnification provided by Section 145 is not exclusive.
H. The Company desires and has requested the Indemnitee to serve or
continue to serve as a director, officer or agent of the Company and/or one or
more subsidiaries of the Company free from undue concern for claims for damages
arising out of or related to such services to the Company and/or one or more
subsidiaries of the Company.
I. Indemnitee is willing to serve, or to continue to serve, the Company
and/or one or more subsidiaries of the Company, provided that he is furnished
the indemnity provided for herein.
AGREEMENT
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions.
(a) Agent. For the purposes of this Agreement, "agent" of the
Company means any person who is or was a director, officer, employee or other
agent of the Company or a subsidiary of the Company; or is or was serving at the
request of, for the convenience of, or to represent the interests of the Company
or a subsidiary of the Company as a director, officer, employee or agent of
another foreign or domestic corporation, partnership, joint venture, trust or
other enterprise; or was a director, officer, employee or agent of a foreign or
domestic corporation which was a predecessor corporation of the Company or a
subsidiary of the Company, or was a director, officer, employee or agent of
another enterprise at the request of, for the convenience of, or to represent
the interests of such predecessor corporation.
(b) Expenses. For purposes of this Agreement, "expenses" include all
out of pocket expenses costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees and related disbursements), actually and
reasonably incurred by the Indemnitee in
2
<PAGE> 3
connection with either the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification under this Agreement or
Section 145 or otherwise; provided, however, that "expenses" shall not include
any judgments, fines, ERISA excise taxes or penalties, or amounts paid in
settlement of a proceeding.
(c) Proceeding. For the purposes of this Agreement, "proceeding"
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, or investigative.
(d) Subsidiary. For purposes of this Agreement, "subsidiary" means
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries, or by one or more other subsidiaries.
2. Agreement to Serve. The Indemnitee agrees to serve and/or continue
to serve as agent of the Company, at its will (or under separate agreement, if
such agreement exists), in the capacity Indemnitee currently serves as an agent
of the Company, so long as he is duly appointed or elected and qualified in
accordance with the applicable provisions of the Bylaws of the Company or any
subsidiary of the Company or until such time as he tenders his resignation in
writing; provided, however, that nothing contained in this Agreement is intended
to create any right to continued employment by Indemnitee.
3. Liability Insurance.
(a) Maintenance of D&O Insurance. The Company hereby covenants and
agrees that, so long as the Indemnitee shall continue to serve as an agent of
the Company and thereafter so long as the Indemnitee shall be subject to any
possible proceeding by reason of the fact that the Indemnitee was an agent of
the Company, the Company, subject to Section 3(c), shall promptly obtain and
maintain in full force and effect directors' and officers' liability insurance
("D&O Insurance") in reasonable amounts from established and reputable insurers.
(b) Rights and Benefits. In all policies of D&O Insurance, the
Indemnitee shall be named as an insured in such a manner as to provide the
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if the Indemnitee is a director; or of the
Company's officers, if the Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if the Indemnitee is not a director
or officer but is a key employee.
(c) Limitation on Required Maintenance of D&O Insurance.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain D&O Insurance if the Company determines in good faith that such
insurance is not reasonably available, the premium costs for such insurance are
disproportionate to the amount of coverage provided, the coverage provided by
such insurance is limited by exclusions so as to provide an insufficient
benefit, or the Indemnitee is covered by similar insurance maintained by a
subsidiary of the Company.
3
<PAGE> 4
4. Mandatory Indemnification. Subject to Section 9 below, the Company
shall indemnify the Indemnitee as follows:
(a) Successful Defense. To the extent the Indemnitee has been
successful on the merits or otherwise in defense of any proceeding (including,
without limitation, an action by or in the right of the Company) to which the
Indemnitee was a party by reason of the fact that he is or was an Agent of the
Company at any time, against all expenses of any type whatsoever actually and
reasonably incurred by him in connection with the investigation, defense or
appeal of such proceeding.
(b) Third Party Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, the Company shall indemnify the Indemnitee against any and
all expenses and liabilities of any type whatsoever (including, but not limited
to, judgments, fines, ERISA excise taxes and penalties, and amounts paid in
settlement) actually and reasonably incurred by him in connection with the
investigation, defense, settlement or appeal of such proceeding, provided the
Indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Company and its stockholders, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful.
(c) Derivative Actions. If the Indemnitee is a person who was or is
a party or is threatened to be made a party to any proceeding by or in the right
of the Company by reason of the fact that he is or was an agent of the Company,
or by reason of anything done or not done by him in any such capacity, the
Company shall indemnify the Indemnitee against all expenses actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding, provided the Indemnitee acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Company and its stockholders; except that no indemnification
under this subsection 4(c) shall be made in respect to any claim, issue or
matter as to which such person shall have been finally adjudged to be liable to
the Company by a court of competent jurisdiction unless and only to the extent
that the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the court shall deem proper.
(d) Actions where Indemnitee is Deceased. If the Indemnitee is a
person who was or is a party or is threatened to be made a party to any
proceeding by reason of the fact that he is or was an agent of the Company, or
by reason of anything done or not done by him in any such capacity, and if prior
to, during the pendency of after completion of such proceeding Indemnitee
becomes deceased, the Company shall indemnify the Indemnitee's heirs, executors
and administrators against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) actually and reasonably incurred
to the extent Indemnitee would have been entitled to indemnification pursuant to
Sections 4(a), 4(b), or 4(c) above were Indemnitee still alive.
4
<PAGE> 5
(e) Notwithstanding the foregoing, the Company shall not be
obligated to indemnify the Indemnitee for expenses or liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
and penalties, and amounts paid in settlement) for which payment is actually
made to Indemnitee under a valid and collectible insurance policy of D&O
Insurance, or under a valid and enforceable indemnity clause, by-law or
agreement.
5. Partial Indemnification. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes and penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement or
appeal of a proceeding, but not entitled, however, to indemnification for all of
the total amount hereof, the Company shall nevertheless indemnify the Indemnitee
for such total amount except as to the portion hereof to which the Indemnitee is
not entitled.
6. Mandatory Advancement of Expenses. Subject to Section 8(a) below,
the Company shall advance all expenses incurred by the Indemnitee in connection
with the investigation, defense, settlement or appeal of any proceeding to which
the Indemnitee is a party or is threatened to be made a party by reason of the
fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall be determined ultimately that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by the Indemnitee to the
Company.
7. Notice and Other Indemnification Procedures.
(a) Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
(b) If, at the time of the receipt of a notice of the commencement
of a proceeding pursuant to Section 7(a) hereof, the Company has D&O Insurance
in effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
(c) In the event the Company shall be obligated to pay the expenses
of any proceeding against the Indemnitee, the Company, if appropriate, shall be
entitled to assume the defense of such proceeding, with counsel approved by the
Indemnitee, upon the delivery to the Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
the Indemnitee and the retention of such counsel by the Company, the Company
will not be liable to the Indemnitee under this Agreement for any fees of
counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (i) the Indemnitee
5
<PAGE> 6
shall have the right to employ his counsel in any such proceeding at the
Indemnitee's expense; and (ii) if (A) the employment of counsel by the
Indemnitee has been previously authorized by the Company, (B) the Indemnitee
shall have reasonably concluded that there may be a conflict of interest between
the Company and the Indemnitee in the conduct of any such defense; or (C) the
Company shall not, in fact, have employed counsel to assume the defense of such
proceeding, the fees and expenses of Indemnitee's counsel shall be at the
expense of the Company.
8. Exceptions. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board, (iii) such indemnification is provided by the Company,
in its sole discretion, pursuant to the powers vested in the Company under the
General Corporation Law of Delaware or (iv) the proceeding is brought to
establish or enforce a right to indemnification under this Agreement or any
other statute or law or otherwise as required under Section 145.
(b) Lack of Good Faith. To indemnify the Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by the
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
(c) Unauthorized Settlements. To indemnify the Indemnitee under this
Agreement for any amounts paid in settlement of a proceeding unless the Company
consents to such settlement, which consent shall not be unreasonably withheld.
9. Non-exclusivity. The provisions for indemnification and advancement
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements, or otherwise, both as
to action in his official capacity and to action in another capacity while
occupying his position as an agent of the Company, and the Indemnitee's rights
hereunder shall continue after the Indemnitee has ceased acting as an agent of
the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
10. Enforcement. Any right to indemnification or advances granted by
this Agreement to Indemnitee shall be enforceable by or on behalf of Indemnitee
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor. Indemnitee, in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim. It shall be a defense to any
action for which a claim for indemnification is made under this Agreement (other
than an action brought to enforce a claim for expenses pursuant to Section 6
hereof, provided that the required undertaking has
6
<PAGE> 7
been tendered to the Company) that Indemnitee is not entitled to indemnification
because of the limitations set forth in Sections 4 and 8 hereof. Neither the
failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Indemnitee is proper in the
circumstances, nor an actual determination by the Company (including its Board
of Directors or its stockholders) that such indemnification is improper, shall
be a defense to the action or create a presumption that Indemnitee is not
entitled to indemnification under this Agreement or otherwise.
11. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary to secure such rights and to enable the Company
effectively to bring suit to enforce such rights.
12. Survival of Rights.
(a) All agreements and obligations of the Company contained herein
shall continue during the period Indemnitee is an agent of the Company and shall
continue thereafter so long as Indemnitee shall be subject to any possible claim
or threatened, pending or completed action, suit or proceeding, whether civil,
criminal, arbitrational, administrative or investigative, by reason of the fact
that Indemnitee was serving in the capacity referred to herein.
(b) The Company shall require any successor to the Company (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place.
13. Interpretation of Agreement. It is understood that the parties
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification to the Indemnitee to the fullest extent permitted by law
including those circumstances in which indemnification would otherwise be
discretionary.
14. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(i) the validity, legality and enforceability of the remaining provisions of the
Agreement (including without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (ii) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraph of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 13 hereof.
15. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver
7
<PAGE> 8
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar) nor shall such
waiver constitute a continuing waiver.
16. Notice. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee or (ii) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on the
signature page of this Agreement, or as subsequently modified by written notice.
17. Governing Law. This Agreement shall be governed exclusively by and
construed according to the laws of the State of Delaware as applied to contracts
between Delaware residents entered into and to be performed entirely within
Delaware.
18. Consent to Jurisdiction. The Company and the Indemnitee each hereby
consent to the jurisdiction of the courts of the State of Delaware with respect
to any action or proceeding which arises out of or relates to this Agreement.
8
<PAGE> 9
The parties hereto have entered into this Indemnity Agreement effective
as of the date first above written.
THE COMPANY:
IMMERSION CORPORATION DELAWARE
By
--------------------------------
Its
-------------------------------
Address: 2158 Paragon Drive
San Jose, California 94402
INDEMNITEE:
-----------------------------------
[NAME]
Address:
-----------------------------------
-----------------------------------
9
<PAGE> 1
EXHIBIT 10.11
BASIC LEASE INFORMATION
INDUSTRIAL NET
<TABLE>
<S> <C>
LEASE DATE: October 26, 1998
TENANT: Immersion Corporation, a California corporation
TENANT'S NOTICE ADDRESS: 2158 Paragon Drive, San Jose, CA 95131
TENANT'S BILLING ADDRESS: 2158 Paragon Drive, San Jose, CA 95131
TENANT CONTACT: Timothy Lacey PHONE NUMBER: (408) 467-1900
FAX NUMBER: (408) 467-1901
LANDLORD: Spieker Properties, L.P., a California limited partnership
LANDLORD'S NOTICE ADDRESS: 2180 Sand Hill Rd., Suite 200, Menlo Park, CA 94025
LANDLORD'S REMITTANCE ADDRESS: P. O. Box 45587, Department 11231, San Jose, CA 94145-0587
PROJECT DESCRIPTION: That four building R&D/light industrial project totaling 163,370
square feet situated on 9.237 acres of land commonly known as
the Charcot Business Park, San Jose, California. The Project is
outlined in green on Exhibit A.
BUILDING DESCRIPTION: That approximately 29,480 square foot, one-story building known as
building C. The building is outlined in blue on exhibit A.
PREMISES: Approximately 16,280 rentable square feet, 2150, 2154, and 2158
Paragon Drive, San Jose, California, outlined in red on Exhibit A.
PERMITTED USE: Office, marketing, prototyping, assembly, storage, and
distribution of computer hardware
PARKING DENSITY: Lessee will be allocated 39 non-exclusive parking spaces on an
unassigned basis.
SCHEDULED TERM COMMENCEMENT DATE: February 1, 1999
SCHEDULED LENGTH OF TERM: Three (3) years and nine (9) months
SCHEDULED TERM EXPIRATION DATE: October 31, 2002
RENT:
BASE RENT: $19,536.00 per month
(subject to adjustment as provided in Paragraph 38.A. hereof)
ESTIMATED FIRST YEAR OPERATING EXPENSES: $2,767.60 per month
SECURITY DEPOSIT: $23,000.00 including $15,770.00 currently on deposit.
TENANT'S PROPORTIONATE SHARE:
OF BUILDING: 55.22%
OF PROJECT: 9.97%
</TABLE>
The foregoing Basic Lease Information is incorporated into and made a part of
this Lease. Each reference in this Lease to any of the Basic Lease Information
shall mean the respective information above and shall be construed to
<PAGE> 2
incorporate all of the terms provided under the particular Lease paragraph
pertaining to such information. In the event of any conflict between the Basic
Lease Information and the Lease, the latter shall control.
LANDLORD TENANT
Spieker Properties, L.P., Immersion Corporation
a California limited partnership a California corporation
By: Spieker Properties, Inc.,
a Maryland corporation, By: /s/ Timothy Lacey
its general partner -----------------------------------
Timothy Lacey
Its: Chief Financial Officer
By: /s/ Joseph D. Russell, Jr.
------------------------------------
Joseph D. Russell, Jr.
Its: Regional Senior Vice President
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Basic Lease Information............................................... 1
Table of Contents..................................................... 2
1. Premises.............................................................. 4
2. Possession and Lease Commencement..................................... 4
3. Term.................................................................. 4
4. Use................................................................... 4
5. Rules and Regulations................................................. 5
6. Rent.................................................................. 5
7. Operating Expenses.................................................... 5
8. Insurance and Indemnification......................................... 7
9. Waiver of Subrogation................................................. 8
10. Landlord's Repairs and Maintenance.................................... 8
11. Tenant's Repairs and Maintenance...................................... 9
12. Alterations........................................................... 9
13. Signs................................................................. 10
14. Inspection/Posting Notices............................................ 10
15. Services and Utilities................................................ 10
16. Subordination......................................................... 11
17. Financial Statements.................................................. 11
18. Estoppel Certificate.................................................. 11
19. Security Deposit...................................................... 11
20. Limitation of Tenant's Remedies....................................... 11
21. Assignment and Subletting............................................. 11
22. Authority of Tenant................................................... 13
23. Condemnation.......................................................... 13
24. Casualty Damage....................................................... 13
25. Holding Over.......................................................... 14
26. Default............................................................... 14
27. Liens................................................................. 15
28. Substitution.......................................................... 15
29. Transfers by Landlord................................................. 15
30. Right of Landlord to Perform Tenant's Covenants....................... 15
31. Waiver................................................................ 16
32. Notices............................................................... 16
33. Attorney's Fees....................................................... 16
34. Successors and Assigns................................................ 16
35. Force Majeure......................................................... 16
36. Surrender of Premises................................................. 16
37. Miscellaneous......................................................... 17
38. Additional Provisions................................................. 17
39. Jury Trial Waiver..................................................... 19
Signatures............................................................ 19
</TABLE>
<TABLE>
<S> <C>
Exhibits:
Exhibit A............................. Rules and Regulations
Exhibit B............................. Site Plan, Property Description
Exhibit C............................. Tenant Improvements and Specifications
Additional Exhibits as Required
</TABLE>
3
<PAGE> 4
LEASE
THIS LEASE is made as of the 26th day of October, 1998, by and between Spieker
Properties, L.P., a California limited partnership (hereinafter called
"LANDLORD"), and Immersion Corporation (hereinafter called "TENANT").
1. PREMISES
Landlord leases to Tenant and Tenant leases from Landlord, upon the terms
and conditions hereinafter set forth, those premises (the "PREMISES") outlined
in red on EXHIBIT B and described in the Basic Lease Information. The Premises
shall be all or part of a building (the "BUILDING") and of a project (the
"PROJECT"), which may consist of more than one building and additional
facilities, as described in the Basic Lease Information. The Building and
Project are outlined in blue and green respectively on EXHIBIT B. Landlord and
Tenant acknowledge that physical changes may occur from time to time in the
Premises, Building or Project, and that the number of buildings and additional
facilities which constitute the Project may change from time to time, which may
result in an adjustment in Tenant's Proportionate Share, as defined in the Basic
Lease Information, as provided in Paragraph 7.A.
2. POSSESSION AND LEASE COMMENCEMENT
A. EXISTING IMPROVEMENTS. If this Lease pertains to a Premises in which the
interior improvements have already been constructed ("EXISTING IMPROVEMENTS"),
the provisions of this Paragraph 2.A. shall apply and the term commencement date
("TERM COMMENCEMENT DATE") shall be the earlier of the date on which: (1) Tenant
takes possession of some or all of suite two-thousand one-hundred fifty (2150);
or (2) Landlord notifies Tenant that Tenant may occupy the Premises. If for any
reason Landlord cannot deliver possession of the Premises to Tenant on the
scheduled Term Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall Landlord be in default hereunder nor shall such failure
affect the validity of this Lease, and Tenant agrees to accept possession of the
Premises at such time as Landlord is able to deliver the same, which date shall
then be deemed the Term Commencement Date. Tenant shall not be liable for any
Rent (defined below) for any period prior to (a) the Scheduled Term Commencement
Date or (b) the Term Commencement Date. Tenant acknowledges that Tenant has
inspected and accepts the Premises in their present condition, broom clean, "as
is," and as suitable for, the Permitted Use (as defined below), and for Tenant's
intended operations in the Premises. Tenant agrees that the Premises and other
improvements are in good and satisfactory condition as of when possession was
taken. Tenant further acknowledges that no representations as to the condition
or repair of the Premises nor promises to alter, remodel or improve the Premises
have been made by Landlord or any agents of Landlord unless such are expressly
set forth in this Lease. Upon Landlord's request, Tenant shall promptly execute
and return to Landlord a "Start-Up Letter" in which Tenant shall agree, among
other things, to acceptance of the Premises and to the determination of the Term
Commencement Date, in accordance with the terms of this Lease, but Tenant's
failure or refusal to do so shall not negate Tenant's acceptance of the Premises
or affect determination of the Term Commencement Date.
B. CONSTRUCTION OF IMPROVEMENTS. If this Lease pertains to a Building to be
constructed or improvements to be constructed within a Building, the provisions
of this Paragraph 2.B. shall apply in lieu of the provisions of Paragraph 2.A.
above and the term commencement date ("TERM COMMENCEMENT DATE") shall be the
earlier of the date on which: (1) Tenant takes possession of some or all of the
Premises; or (2) the improvements to be constructed or performed in the Premises
by Landlord (if any) shall have been substantially completed in accordance with
the plans and specifications, if any, described on EXHIBIT C and Tenant's taking
of possession of the Premises or any part thereof shall constitute Tenant's
confirmation of substantial completion for all purposes hereof, whether or not
substantial completion of the Building or Project shall have occurred. If for
any reason Landlord cannot deliver possession of the Premises to Tenant on the
scheduled Term Commencement Date, Landlord shall not be subject to any liability
therefor, nor shall Landlord be in default hereunder nor shall such failure
affect the validity of this Lease, and Tenant agrees to accept possession of the
Premises at such time as such improvements have been substantially completed,
which date shall then be deemed the Term Commencement Date. Tenant shall not be
liable for any Rent for any period prior to the Term Commencement Date (but
without affecting any obligations of Tenant under any improvement agreement
appended to this Lease). In the event of any dispute as to substantial
completion of work performed or required to be performed by Landlord, the
certificate of Landlord's architect or general contractor shall be conclusive.
Substantial completion shall have occurred notwithstanding Tenant's submission
of a punchlist to Landlord, which Tenant shall submit, if at all, within three
(3) business days after the Term Commencement Date or otherwise in accordance
with any improvement agreement appended to this Lease. Upon Landlord's request,
Tenant shall promptly execute and return to Landlord a "Start-Up Letter" in
which Tenant shall agree, among other things, to acceptance of the Premises and
to the determination of the Term Commencement Date, in accordance with the terms
of this Lease, but Tenant's failure or refusal to do so shall not negate
Tenant's acceptance of the Premises or affect determination of the Term
Commencement Date.
3. TERM
The term of this Lease (the "TERM") shall commence on the Term Commencement
Date and continue in full force and effect for the number of months specified as
the Length of Term in the Basic Lease Information or until this Lease is
terminated as otherwise provided herein. If the Term Commencement Date is a date
other than the first day of the calendar month, the Term shall be the number of
months of the Length of Term in addition to the remainder of the calendar month
following the Term Commencement Date.
4. USE
A. GENERAL. Tenant shall use the Premises for the permitted use specified in the
Basic Lease Information ("PERMITTED USE") and for no other use or purpose.
Tenant shall control Tenant's employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (collectively, "TENANT'S
PARTIES") in such a manner that Tenant and Tenant's Parties cumulatively do not
exceed the parking density specified in the Basic Lease Information (the
"PARKING DENSITY") at any time. So long as Tenant is occupying the Premises,
Tenant and Tenant's Parties shall have the nonexclusive right to use, in common
with other parties occupying the Building or Project, the parking areas,
driveways and other common areas of the Building and Project, subject to the
terms of this Lease and such rules and regulations as Landlord may from time to
time prescribe. Landlord reserves the right, without notice or liability to
Tenant, and without the same constituting an actual or constructive eviction, to
alter or modify the common areas from time to time, including the location and
configuration thereof, and the amenities and facilities which Landlord may
determine to provide from time to time.
B. LIMITATIONS. Tenant shall not permit any odors, smoke, dust, gas, substances,
noise or vibrations to emanate from the Premises or from any portion of the
common areas as a result of Tenant's or any Tenant's Party's use thereof, nor
take any action which would constitute a nuisance or would disturb, obstruct or
endanger any other tenants or occupants of the Building or Project or elsewhere,
or interfere with their use of their respective premises or common areas.
Storage outside the Premises of materials, vehicles or any other items is
prohibited. Tenant shall not use or allow the Premises to be used for any
immoral, improper or unlawful purpose, nor shall Tenant cause or maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer the commission of any waste in,
4
<PAGE> 5
on or about the Premises. Tenant shall not allow any sale by auction upon the
Premises, or place any loads upon the floors, walls or ceilings which could
endanger the structure, or place any harmful substances in the drainage system
of the Building or Project. No waste, materials or refuse shall be dumped upon
or permitted to remain outside the Premises except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord. Landlord
shall not be responsible to Tenant for the non-compliance by any other tenant or
occupant of the Building or Project with any of the above-referenced rules or
any other terms or provisions of such tenant's or occupant's lease or other
contract.
C. COMPLIANCE WITH REGULATIONS. By entering the Premises, Tenant accepts the
Premises in the condition existing as of the date of such entry. Tenant shall at
its sole cost and expense strictly comply with all existing or future applicable
municipal, state and federal and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances and
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, to Tenant's use of
the common areas, or to the use, storage, generation or disposal of Hazardous
Materials (hereinafter defined) (collectively "REGULATIONS"). Tenant shall at
its sole cost and expense obtain any and all licenses or permits necessary for
Tenant's use of the Premises. Tenant shall at its sole cost and expense promptly
comply with the requirements of any board of fire underwriters or other similar
body now or hereafter constituted. Tenant shall not do or permit anything to be
done in, on, under or about the Project or bring or keep anything which will in
any way increase the rate of any insurance upon the Premises, Building or
Project or upon any contents therein or cause a cancellation of said insurance
or otherwise affect said insurance in any manner. Tenant shall indemnify, defend
(by counsel reasonably acceptable to Landlord), protect and hold Landlord
harmless from and against any loss, cost, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any Regulation.
Tenant's obligations pursuant to the foregoing indemnity shall survive the
expiration or earlier termination of this Lease. Solely with respect to suite
two-thousand one-hundred fifty (2150), tenant's obligations to comply with
Regulations do not extend to (i) instances of non compliance with respect to the
condition of the Premises existing prior to Commencement Date.
D. HAZARDOUS MATERIALS. As used in this Lease, "HAZARDOUS MATERIALS" shall
include, but not be limited to, hazardous, toxic and radioactive materials and
those substances defined as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or other similar designations in any
Regulation. Tenant shall not cause, or allow any of Tenant's Parties to cause,
any Hazardous Materials to be handled, used, generated, stored, released or
disposed of in, on, under or about the Premises, the Building or the Project or
surrounding land or environment in violation of any Regulations. Tenant must
obtain Landlord's written consent prior to the introduction of any Hazardous
Materials onto the Project. Notwithstanding the foregoing, Tenant may handle,
store, use and dispose of products containing small quantities of Hazardous
Materials for "general office purposes" (such as toner for copiers) to the
extent customary and necessary for the Permitted Use of the Premises; provided
that Tenant shall always handle, store, use, and dispose of any such Hazardous
Materials in a safe and lawful manner and never allow such Hazardous Materials
to contaminate the Premises, Building, or Project or surrounding land or
environment. Tenant shall immediately notify Landlord in writing of any
Hazardous Materials' contamination of any portion of the Project of which Tenant
becomes aware, whether or not caused by Tenant. Landlord shall have the right at
all reasonable times to inspect the Premises and to conduct tests and
investigations to determine whether Tenant is in compliance with the foregoing
provisions, the costs of all such inspections, tests and investigations to be
borne by Tenant. Tenant shall indemnify, defend (by counsel reasonably
acceptable to Landlord), protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses (including attorneys' and consultants' fees and court
costs), demands, causes of action, or judgments directly or indirectly arising
out of or related to the use, generation, storage, release, or disposal of
Hazardous Materials by Tenant or any of Tenant's Parties in, on, under or about
the Premises, the Building or the Project or surrounding land or environment,
which indemnity shall include, without limitation, damages for personal or
bodily injury, property damage, damage to the environment or natural resources
occurring on or off the Premises, losses attributable to diminution in value or
adverse effects on marketability, the cost of any investigation, monitoring,
government oversight, repair, removal, remediation, restoration, abatement, and
disposal, and the preparation of any closure or other required plans, whether
such action is required or necessary prior to or following the expiration or
earlier termination of this Lease. Neither the consent by Landlord to the use,
generation, storage, release or disposal of Hazardous Materials nor the strict
compliance by Tenant with all laws pertaining to Hazardous Materials shall
excuse Tenant from Tenant's obligation of indemnification pursuant to this
Paragraph 4.D. Tenant's obligations pursuant to the foregoing indemnity shall
survive the expiration or earlier termination of this Lease.
5. RULES AND REGULATIONS
Tenant shall faithfully observe and comply with the building rules and
regulations attached hereto as EXHIBIT A and any other rules and regulations and
any modifications or additions thereto which Landlord may from time to time
prescribe in writing for the purpose of maintaining the proper care,
cleanliness, safety, traffic flow and general order of the Premises or the
Building or Project. Tenant shall cause Tenant's Parties to comply with such
rules and regulations. Landlord shall not be responsible to Tenant for the
non-compliance by any other tenant or occupant of the Building or Project with
any of such rules and regulations, any other tenant's or occupant's lease or any
Regulations.
6. RENT
A. BASE RENT. Tenant shall pay to Landlord and Landlord shall receive, without
notice or demand throughout the Term, Base Rent as specified in the Basic Lease
Information, payable in monthly installments in advance on or before the first
day of each calendar month, in lawful money of the United States, without
deduction or offset whatsoever, at the Remittance Address specified in the Basic
Lease Information or to such other place as Landlord may from time to time
designate in writing. Base Rent for the first full month of the Term shall be
paid by Tenant upon Tenant's execution of this Lease. If the obligation for
payment of Base Rent commences on a day other than the first day of a month,
then Base Rent shall be prorated and the prorated installment shall be paid on
the first day of the calendar month next succeeding the Term Commencement Date.
The Base Rent payable by Tenant hereunder is subject to adjustment as provided
elsewhere in this Lease, as applicable. As used herein, the term "Base Rent"
shall mean the Base Rent specified in the Basic Lease Information as it may be
so adjusted from time to time.
B. ADDITIONAL RENT. All monies other than Base Rent required to be paid by
Tenant hereunder, including, but not limited to, Tenant's Proportionate Share of
Operating Expenses, as specified in Paragraph 7 of this Lease, charges to be
paid by Tenant under Paragraph 15, the interest and late charge described in
Paragraphs 26.C. and D., and any monies spent by Landlord pursuant to Paragraph
30, shall be considered additional rent ("ADDITIONAL RENT"). "RENT" shall mean
Base Rent and Additional Rent.
7. OPERATING EXPENSES
A. OPERATING EXPENSES. In addition to the Base Rent required to be paid
hereunder, Tenant shall pay as Additional Rent, Tenant's Proportionate Share of
the Building and/or Project (as applicable), as defined in the Basic Lease
Information, of Operating Expenses (defined below) in the manner set forth
below. Tenant shall pay the applicable Tenant's Proportionate Share of each such
Operating Expenses. Landlord and Tenant acknowledge that if the number of
buildings which constitute the Project increases or decreases, or if physical
changes are made to the Premises, Building or Project or the configuration of
any thereof, Landlord may at its discretion reasonably adjust Tenant's
Proportionate Share of the Building or Project to reflect the change. Landlord's
determination of Tenant's Proportionate Share of the Building and of the Project
shall be conclusive so long as it is reasonably and consistently applied.
"OPERATING
5
<PAGE> 6
EXPENSES" shall mean all expenses and costs of every kind and nature which
Landlord shall pay or become obligated to pay, because of or in connection with
the ownership, management, maintenance, repair, preservation, replacement and
operation of the Building or Project and its supporting facilities and such
additional facilities now and in subsequent years as may be determined by
Landlord to be necessary or desirable to the Building and/or Project (as
determined in a reasonable manner) other than those expenses and costs which are
specifically attributable to Tenant or which are expressly made the financial
responsibility of Landlord or specific tenants of the Building or Project
pursuant to this Lease. Operating Expenses shall include, but are not limited
to, the following:
(1) TAXES. All real property taxes and assessments, possessory interest
taxes, sales taxes, personal property taxes, business or license taxes
or fees, gross receipts taxes, service payments in lieu of such taxes
or fees, annual or periodic license or use fees, excises, transit
charges, and other impositions, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind (including
fees "in-lieu" of any such tax or assessment) which are now or
hereafter assessed, levied, charged, confirmed, or imposed by any
public authority upon the Building or Project, its operations or the
Rent (or any portion or component thereof), or any tax, assessment or
fee imposed in substitution, partially or totally, of any of the above.
Operating Expenses shall also include any taxes, assessments,
reassessments, or other fees or impositions with respect to the
development, leasing, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises, Building or Project or any
portion thereof, including, without limitation, by or for Tenant, and
all increases therein or reassessments thereof whether the increases or
reassessments result from increased rate and/or valuation (whether upon
a transfer of the Building or Project or any portion thereof or any
interest therein or for any other reason). Operating Expenses shall not
include inheritance or estate taxes imposed upon or assessed against
the interest of any person in the Project, or taxes computed upon the
basis of the net income of any owners of any interest in the Project.
If it shall not be lawful for Tenant to reimburse Landlord for all or
any part of such taxes, the monthly rental payable to Landlord under
this Lease shall be revised to net Landlord the same net rental after
imposition of any such taxes by Landlord as would have been payable to
Landlord prior to the payment of any such taxes.
(2) INSURANCE. All insurance premiums and costs, including, but not
limited to, any deductible amounts, premiums and other costs of
insurance incurred by Landlord, including for the insurance coverage
set forth in Paragraph 8.A. herein.
(3) COMMON AREA MAINTENANCE.
(a) Repairs, replacements, and general maintenance of and for
the Building and Project and public and common areas and
facilities of and comprising the Building and Project,
including, but not limited to, the roof and roof membrane,
elevators, mechanical rooms, alarm systems, pest
extermination, landscaped areas, parking and service areas,
driveways, sidewalks, truck staging areas, rail spur areas,
fire sprinkler systems, sanitary and storm sewer lines,
utility services, heating/ventilation/air conditioning
systems, electrical, mechanical or other systems, telephone
equipment and wiring servicing, plumbing, lighting, and any
other items or areas which affect the operation or appearance
of the Building or Project, which determination shall be at
Landlord's discretion, except for: those items expressly made
the financial responsibility of Landlord pursuant to Paragraph
10 hereof; those items to the extent paid for by the proceeds
of insurance; and those items attributable solely or jointly
to specific tenants of the Building or Project. Replacement
costs of Generally Accepted Accounting Principals (GAAP)
capital items (roof membrane, HVAC, paving and exterior
painting) in excess of twenty thousand dollars ($20,000) shall
be amortized over their useful lives based on industry norms
and Tenant shall be responsible for its pro rata share for the
remaining Term of the Lease.
(b) Repairs, replacements, and general maintenance shall
include the cost of any capital improvements made to or
capital assets acquired for the Project or Building that in
Landlord's discretion may reduce any other Operating Expenses,
including present or future repair work, are reasonably
necessary for the health and safety of the occupants of the
Building or Project, or are required to comply with any
Regulation, such costs or allocable portions thereof to be
amortized over such reasonable period as Landlord shall
determine, together with interest on the unamortized balance
at the publicly announced "prime rate" charged by Wells Fargo
Bank, N.A. (San Francisco) or its successor at the time such
improvements or capital assets are constructed or acquired,
plus two (2) percentage points, or in the absence of such
prime rate, then at the U.S. Treasury six-month market note
(or bond, if so designated) rate as published by any national
financial publication selected by Landlord, plus four (4)
percentage points, but in no event more than the maximum rate
permitted by law, plus reasonable financing charges.
(c) Payment under or for any easement, license, permit,
operating agreement, declaration, restrictive covenant or
instrument relating to the Building or Project.
(d) All expenses and rental related to services and costs of
supplies, materials and equipment used in operating, managing
and maintaining the Premises, Building and Project, the
equipment therein and the adjacent sidewalks, driveways,
parking and service areas, including, without limitation,
expenses related to service agreements regarding security,
fire and other alarm systems, janitorial services to the
extent not addressed in Paragraph 11 hereof, window cleaning,
elevator maintenance, Building exterior maintenance,
landscaping and expenses related to the administration,
management and operation of the Project, including without
limitation salaries, wages and benefits and management office
rent.
(e) The cost of supplying any services and utilities which
benefit all or a portion of the Premises, Building or Project
to the extent not addressed in Paragraph 15 hereof.
(f) Legal expenses and the cost of audits by certified public
accountants; provided, however, that legal expenses chargeable
as Operating Expenses shall not include the cost of
negotiating leases, collecting rents, evicting tenants nor
shall it include costs incurred in legal proceedings with or
against any tenant or to enforce the provisions of any lease.
(g) A management and accounting cost recovery fee equal to
five percent (5%) of the sum of the Project's base rents and
Operating Expenses (other than such management and accounting
fee).
If the rentable area of the Building and/or Project is not fully occupied during
any fiscal year of the Term as determined by Landlord, an adjustment may be made
in Landlord's discretion in computing the Operating Expenses for such year so
that Tenant pays an equitable portion of all variable items (e.g., utilities,
janitorial services and other component expenses that are affected by variations
in occupancy levels) of Operating Expenses, as reasonably determined by
Landlord; provided, however, that in no event shall Landlord be entitled to
collect in excess of one hundred percent (100%) of the total Operating Expenses
from all of the tenants in the Building or Project, as the case may be.
Operating Expenses shall not include the cost of providing tenant improvements
or other specific costs incurred for the account of, separately billed to and
paid by specific tenants of the Building or Project, the initial construction
cost of the Building, or debt service on any mortgage or deed of trust recorded
with respect to the Project other than pursuant to Paragraph 7.A.(3)(b) above.
Notwithstanding
6
<PAGE> 7
anything herein to the contrary, in any instance wherein Landlord, in Landlord's
sole discretion, deems Tenant to be responsible for any amounts greater than
Tenant's Proportionate Share, Landlord shall have the right to allocate costs in
any manner Landlord deems appropriate.
The above enumeration of services and facilities shall not be deemed to impose
an obligation on Landlord to make available or provide such services or
facilities except to the extent if any that Landlord has specifically agreed
elsewhere in this Lease to make the same available or provide the same. Without
limiting the generality of the foregoing, Tenant acknowledges and agrees that it
shall be responsible for providing adequate security for its use of the
Premises, the Building and the Project and that Landlord shall have no
obligation or liability with respect thereto, except to the extent if any that
Landlord has specifically agreed elsewhere in this Lease to provide the same.
B. PAYMENT OF ESTIMATED OPERATING EXPENSES. "ESTIMATED OPERATING EXPENSES" for
any particular year shall mean Landlord's estimate of the Operating Expenses for
such fiscal year made with respect to such fiscal year as hereinafter provided.
Landlord shall have the right from time to time to revise its fiscal year and
interim accounting periods so long as the periods as so revised are reconciled
with prior periods in a reasonable manner. During the last month of each fiscal
year during the Term, or as soon thereafter as practicable, Landlord shall give
Tenant written notice of the Estimated Operating Expenses for the ensuing fiscal
year. Tenant shall pay Tenant's Proportionate Share of the Estimated Operating
Expenses with installments of Base Rent for the fiscal year to which the
Estimated Operating Expenses applies in monthly installments on the first day of
each calendar month during such year, in advance. Such payment shall be
construed to be Additional Rent for all purposes hereunder. If at any time
during the course of the fiscal year, Landlord determines that Operating
Expenses are projected to vary from the then Estimated Operating Expenses by
more than five percent (5%), Landlord may, by written notice to Tenant, revise
the Estimated Operating Expenses for the balance of such fiscal year, and
Tenant's monthly installments for the remainder of such year shall be adjusted
so that by the end of such fiscal year Tenant has paid to Landlord Tenant's
Proportionate Share of the revised Estimated Operating Expenses for such year,
such revised installment amounts to be Additional Rent for all purposes
hereunder.
C. COMPUTATION OF OPERATING EXPENSE ADJUSTMENT. "OPERATING EXPENSE ADJUSTMENT"
shall mean the difference between Estimated Operating Expenses and actual
Operating Expenses for any fiscal year determined as hereinafter provided.
Within one hundred twenty (120) days after the end of each fiscal year, or as
soon thereafter as practicable, Landlord shall deliver to Tenant a statement of
actual Operating Expenses for the fiscal year just ended, accompanied by a
computation of Operating Expense Adjustment. If such statement shows that
Tenant's payment based upon Estimated Operating Expenses is less than Tenant's
Proportionate Share of Operating Expenses, then Tenant shall pay to Landlord the
difference within twenty (20) days after receipt of such statement, such payment
to constitute Additional Rent for all purposes hereunder. If such statement
shows that Tenant's payments of Estimated Operating Expenses exceed Tenant's
Proportionate Share of Operating Expenses, then (provided that Tenant is not in
default under this Lease) Landlord shall pay to Tenant the difference within
twenty (20) days after delivery of such statement to Tenant. If this Lease has
been terminated or the Term hereof has expired prior to the date of such
statement, then the Operating Expense Adjustment shall be paid by the
appropriate party within twenty (20) days after the date of delivery of the
statement. Should this Lease commence or terminate at any time other than the
first day of the fiscal year, Tenant's Proportionate Share of the Operating
Expense Adjustment shall be prorated based on a month of 30 days and the number
of calendar months during such fiscal year that this Lease is in effect.
Notwithstanding anything to the contrary contained in Paragraph 7.A or 7.B,
Landlord's failure to provide any notices or statements within the time periods
specified in those paragraphs shall in no way excuse Tenant from its obligation
to pay Tenant's Proportionate Share of Operating Expenses.
D. NET LEASE. This shall be a triple net Lease and Base Rent shall be paid to
Landlord absolutely net of all costs and expenses, except as specifically
provided to the contrary in this Lease. The provisions for payment of Operating
Expenses and the Operating Expense Adjustment are intended to pass on to Tenant
and reimburse Landlord for all costs and expenses of the nature described in
Paragraph 7.A. incurred in connection with the ownership, management,
maintenance, repair, preservation, replacement and operation of the Building
and/or Project and its supporting facilities and such additional facilities now
and in subsequent years as may be determined by Landlord to be necessary or
desirable to the Building and/or Project.
E. TENANT AUDIT. If Tenant shall dispute the amount set forth in any statement
provided by Landlord under Paragraph 7.B. or 7.C. above, Tenant shall have the
right, not later than twenty (20) days following receipt of such statement and
upon the condition that Tenant shall first deposit with Landlord the full amount
in dispute, to cause Landlord's books and records with respect to Operating
Expenses for such fiscal year to be audited by certified public accountants
selected by Tenant and subject to Landlord's reasonable right of approval. The
Operating Expense Adjustment shall be appropriately adjusted on the basis of
such audit. If such audit discloses a liability for a refund in excess of ten
percent (10%) of Tenant's Proportionate Share of the Operating Expenses
previously reported, the cost of such audit shall be borne by Landlord;
otherwise the cost of such audit shall be paid by Tenant. If Tenant shall not
request an audit in accordance with the provisions of this Paragraph 7.E. within
twenty (20) days after receipt of Landlord's statement provided pursuant to
Paragraph 7.B. or 7.C., such statement shall be final and binding for all
purposes hereof.
8. INSURANCE AND INDEMNIFICATION
A. LANDLORD'S INSURANCE. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord's sole control.
(1) PROPERTY INSURANCE. Landlord agrees to maintain property insurance
insuring the Building against damage or destruction due to risk
including fire, vandalism, and malicious mischief in an amount not less
than the replacement cost thereof, in the form and with deductibles and
endorsements as selected by Landlord. At its election, Landlord may
instead (but shall have no obligation to) obtain "All Risk" coverage,
and may also obtain earthquake, pollution, and/or flood insurance in
amounts selected by Landlord.
(2) OPTIONAL INSURANCE. Landlord, at Landlord's option, may also (but
shall have no obligation to) carry insurance against loss of rent, in
an amount equal to the amount of Base Rent and Additional Rent that
Landlord could be required to abate to all Building tenants in the
event of condemnation or casualty damage for a period of twelve (12)
months. Landlord may also (but shall have no obligation to) carry such
other insurance as Landlord may deem prudent or advisable, including,
without limitation, liability insurance in such amounts and on such
terms as Landlord shall determine. Landlord shall not be obligated to
insure, and shall have no responsibility whatsoever for any damage to,
any furniture, machinery, goods, inventory or supplies, or other
personal property or fixtures which Tenant may keep or maintain in the
Premises, or any leasehold improvements, additions or alterations
within the Premises.
B. TENANT'S INSURANCE.
(1) PROPERTY INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term, insurance on all personal property and
fixtures of Tenant and all improvements, additions or alterations made
by or for Tenant to the Premises on an "All Risk" basis, insuring such
property for the full replacement value of such property.
7
<PAGE> 8
(2) LIABILITY INSURANCE. Tenant shall procure at Tenant's sole cost and
expense and keep in effect from the date of this Lease and at all times
until the end of the Term Commercial General Liability insurance
covering bodily injury and property damage liability occurring in or
about the Premises or arising out of the use and occupancy of the
Premises and the Project, and any part of either, and any areas
adjacent thereto, and the business operated by Tenant or by any other
occupant of the Premises. Such insurance shall include contractual
liability coverage insuring all of Tenant's indemnity obligations under
this Lease. Such coverage shall have a minimum combined single limit of
liability of at least Two Million Dollars ($2,000,000.00), and a
minimum general aggregate limit of Three Million Dollars
($3,000,000.00), with an "Additional Insured - Managers or Lessors of
Premises Endorsement" and the "Amendment of the Pollution Exclusion
Endorsement." All such policies shall be written to apply to all bodily
injury (including death), property damage or loss, personal and
advertising injury and other covered loss, however occasioned,
occurring during the policy term, shall be endorsed to add Landlord and
any party holding an interest to which this Lease may be subordinated
as an additional insured, and shall provide that such coverage shall be
"PRIMARY" and non-contributing with any insurance maintained by
Landlord, which shall be excess insurance only. Such coverage shall
also contain endorsements including employees as additional insureds if
not covered by Tenant's Commercial General Liability Insurance. All
such insurance shall provide for the severability of interests of
insureds; and shall be written on an "OCCURRENCE" basis, which shall
afford coverage for all claims based on acts, omissions, injury and
damage, which occurred or arose (or the onset of which occurred or
arose) in whole or in part during the policy period.
(3) WORKERS' COMPENSATION AND EMPLOYERS' LIABILITY INSURANCE. Tenant
shall carry Workers' Compensation Insurance as required by any
Regulation, throughout the Term at Tenant's sole cost and expense.
Tenant shall also carry Employers' Liability Insurance in amounts not
less than One Million Dollars ($1,000,000) each accident for bodily
injury by accident; One Million Dollars ($1,000,000) policy limit for
bodily injury by disease; and One Million Dollars ($1,000,000) each
employee for bodily injury by disease, throughout the Term at Tenant's
sole cost and expense.
(4) COMMERCIAL AUTO LIABILITY INSURANCE. Tenant shall procure at
Tenant's sole cost and expense and keep in effect from the date of this
Lease and at all times until the end of the Term commercial auto
liability insurance with a combined limit of not less than One Million
Dollars ($1,000,000) for bodily injury and property damage for each
accident. Such insurance shall cover liability relating to any auto
(including owned, hired and non-owned autos).
(5) GENERAL INSURANCE REQUIREMENTS. All coverages described in this
Paragraph 8.B. shall be endorsed to (i) provide Landlord with thirty
(30) days' notice of cancellation or change in terms; and (ii) waive
all rights of subrogation by the insurance carrier against Landlord. If
at any time during the Term the amount or coverage of insurance which
Tenant is required to carry under this Paragraph 8.B. is, in Landlord's
reasonable judgment, materially less than the amount or type of
insurance coverage typically carried by owners or tenants of properties
located in the general area in which the Premises are located which are
similar to and operated for similar purposes as the Premises or if
Tenant's use of the Premises should change with or without Landlord's
consent, Landlord shall have the right to require Tenant to increase
the amount or change the types of insurance coverage required under
this Paragraph 8.B. All insurance policies required to be carried by
Tenant under this Lease shall be written by companies rated A X or
better in "Best's Insurance Guide" and authorized to do business in the
State of California. In any event deductible amounts under all
insurance policies required to be carried by Tenant under this Lease
shall not exceed Five Thousand Dollars ($5,000.00) per occurrence.
Tenant shall deliver to Landlord on or before the Term Commencement
Date, and thereafter at least thirty (30) days before the expiration
dates of the expired policies, certified copies of Tenant's insurance
policies, or a certificate evidencing the same issued by the insurer
thereunder; and, if Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at Landlord's
option and in addition to Landlord's other remedies in the event of a
default by Tenant hereunder, procure the same for the account of
Tenant, and the cost thereof shall be paid to Landlord as Additional
Rent.
C. INDEMNIFICATION. Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses, including reasonable attorneys' and consultants' fees and
court costs, demands, causes of action, or judgments, directly or indirectly
arising out of or related to: (1) claims of injury to or death of persons or
damage to property occurring or resulting directly or indirectly from the use or
occupancy of the Premises, Building or Project by Tenant or Tenant's Parties, or
from activities or failures to act of Tenant or Tenant's Parties; (2) claims
arising from work or labor performed, or for materials or supplies furnished to
or at the request of Tenant in connection with performance of any work done for
the account of Tenant within the Premises or Project; (3) claims arising from
any breach or default on the part of Tenant in the performance of any covenant
contained in this Lease; and (4) claims arising from the negligence or
intentional acts or omissions of Tenant or Tenant's Parties. The foregoing
indemnity by Tenant shall not be applicable to claims to the extent arising from
the gross negligence or willful misconduct of Landlord. Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord for any
injury or damage to any person or property in or about the Premises, Building or
Project by or from any cause whatsoever (other than Landlord's gross negligence
or willful misconduct) and, without limiting the generality of the foregoing,
whether caused by water leakage of any character from the roof, walls, basement
or other portion of the Premises, Building or Project, or caused by gas, fire,
oil or electricity in, on or about the Premises, Building or Project. The
provisions of this Paragraph shall survive the expiration or earlier termination
of this Lease.
9. WAIVER OF SUBROGATION
To the extent permitted by law and without affecting the coverage provided
by insurance to be maintained hereunder or any other rights or remedies,
Landlord and Tenant each waive any right to recover against the other for: (a)
damages for injury to or death of persons; (b) damages to property, including
personal property; (c) damages to the Premises or any part thereof; and (d)
claims arising by reason of the foregoing due to hazards covered by insurance
maintained or required to be maintained pursuant to this Lease to the extent of
proceeds recovered therefrom, or proceeds which would have been recoverable
therefrom in the case of the failure of any party to maintain any insurance
coverage required to be maintained by such party pursuant to this Lease. This
provision is intended to waive fully, any rights and/or claims arising by reason
of the foregoing, but only to the extent that any of the foregoing damages
and/or claims referred to above are covered or would be covered, and only to the
extent of such coverage, by insurance actually carried or required to be
maintained pursuant to this Lease by either Landlord or Tenant. This provision
is also intended to waive fully, and for the benefit of each party, any rights
and/or claims which might give rise to a right of subrogation on any insurance
carrier. Subject to all qualifications of this Paragraph 9, Landlord waives its
rights as specified in this Paragraph 9 with respect to any subtenant that it
has approved pursuant to Paragraph 21 but only in exchange for the written
waiver of such rights to be given by such subtenant to Landlord upon such
subtenant taking possession of the Premises or a portion thereof. Each party
shall cause each insurance policy obtained by it to provide that the insurance
company waives all right of recovery by way of subrogation against either party
in connection with any damage covered by any policy.
10. LANDLORD'S REPAIRS AND MAINTENANCE
Landlord shall at Landlord's expense maintain in good repair, reasonable
wear and tear excepted, the structural soundness of the roof, foundations, and
exterior and load-bearing walls of the Building. The term "exterior walls" as
used herein shall not include windows, glass or plate glass, doors, dock bumpers
or dock plates, special store fronts or office entries. Any damage caused by or
repairs
8
<PAGE> 9
necessitated by any negligence or act of Tenant or Tenant's Parties may be
repaired by Landlord at Landlord's option and Tenant's expense. Tenant shall
immediately give Landlord written notice of any defect or need of repairs in
such components of the Building for which Landlord is responsible, after which
Landlord shall have a reasonable opportunity and the right to enter the Premises
at all reasonable times to repair same. Landlord's liability with respect to any
defects, repairs, or maintenance for which Landlord is responsible under any of
the provisions of this Lease shall be limited to the cost of such repairs or
maintenance, and there shall be no abatement of rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of repairs, alterations or improvements in or to any
portion of the Premises, the Building or the Project or to fixtures,
appurtenances or equipment in the Building, except as provided in Paragraph 24.
By taking possession of the Premises, Tenant accepts them "as is," as being in
good order, condition and repair and the condition in which Landlord is
obligated to deliver them and suitable for the Permitted Use and Tenant's
intended operations in the Premises, whether or not any notice of acceptance is
given. Landlord represents that upon delivery of the Premises, the HVAC,
electrical, plumbing, roof and warehouse docking systems are in good working
order. Landlord will perform repairs to the HVAC, electrical, plumbing, roof and
warehouse docking systems of subject premises for the first 30 days of tenant
occupancy. In no event will Landlord be responsible to repair the HVAC,
electrical, plumbing, roof (excluding structural soundness) and warehouse
docking systems of which Landlord was notified more than 30 days after lease
commencement.
11. TENANT'S REPAIRS AND MAINTENANCE
Tenant shall at all times during the Term at Tenant's expense maintain all
parts of the Premises and such portions of the Building as are within the
exclusive control of Tenant in a first-class, good, clean and secure condition
and promptly make all necessary repairs and replacements, as determined by
Landlord, including but not limited to, all windows, glass, doors, walls,
including demising walls, and wall finishes, floors and floor covering, heating,
ventilating and air conditioning systems, ceiling insulation, truck doors,
hardware, dock bumpers, dock plates and levelers, plumbing work and fixtures,
downspouts, entries, skylights, smoke hatches, roof vents, electrical and
lighting systems, and fire sprinklers, with materials and workmanship of the
same character, kind and quality as the original. Tenant shall at Tenant's
expense also perform regular removal of trash and debris. If Tenant uses rail
and if required by the railroad company, Tenant agrees to sign a joint
maintenance agreement governing the use of the rail spur, if any. Tenant shall,
at Tenant's own expense, enter into a regularly scheduled preventative
maintenance/service contract with a maintenance contractor for servicing all hot
water, heating and air conditioning systems and equipment within or serving the
Premises. The maintenance contractor and the contract must be approved by
Landlord. The service contract must include all services suggested by the
equipment manufacturer within the operation/maintenance manual and must become
effective and a copy thereof delivered to Landlord within thirty (30) days after
the Term Commencement Date. Landlord may, upon notice to Tenant, enter into such
a service contract on behalf of Tenant or perform the work and in either case
charge Tenant the cost thereof along with a reasonable amount for Landlord's
overhead. Notwithstanding anything to the contrary contained herein, Tenant
shall, at its expense, promptly repair any damage to the Premises or the
Building or Project resulting from or caused by any negligence or act of Tenant
or Tenant's Parties. Nothing herein shall expressly or by implication render
Tenant Landlord's agent or contractor to effect any repairs or maintenance
required of Tenant under this Paragraph 11, as to all of which Tenant shall be
solely responsible.
12. ALTERATIONS
A. Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
("ALTERATIONS") without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; (b) are, in Landlord's
opinion, compatible with the Building or the Project and its mechanical,
plumbing, electrical, heating/ventilation/air conditioning systems, and will not
cause the Building or Project or such systems to be required to be modified to
comply with any Regulations (including, without limitation, the Americans With
Disabilities Act); and (c) will not interfere with the use and occupancy of any
other portion of the Building or Project by any other tenant or its invitees.
Specifically, but without limiting the generality of the foregoing, Landlord
shall have the right of written consent for all plans and specifications for the
proposed Alterations, construction means and methods, all appropriate permits
and licenses, any contractor or subcontractor to be employed on the work of
Alterations, and the time for performance of such work, and may impose rules and
regulations for contractors and subcontractors performing such work. Tenant
shall also supply to Landlord any documents and information reasonably requested
by Landlord in connection with Landlord's consideration of a request for
approval hereunder. Tenant shall cause all Alterations to be accomplished in a
first-class, good and workmanlike manner, and to comply with all applicable
Regulations and Paragraph 27 hereof. Tenant shall at Tenant's sole expense,
perform any additional work required under applicable Regulations due to the
Alterations hereunder. No review or consent by Landlord of or to any proposed
Alteration or additional work shall constitute a waiver of Tenant's obligations
under this Paragraph 12. Tenant shall reimburse Landlord for all costs which
Landlord may incur in connection with granting approval to Tenant for any such
Alterations, including any costs or expenses which Landlord may incur in
electing to have outside architects and engineers review said plans and
specifications, and shall pay Landlord an administration fee of ten percent
(10%) of the cost of the Alterations as Additional Rent hereunder. Landlord
shall not impose the allowable ten percent (10%) administrative fee for
alterations with a project budget below ten thousand dollars ($10,000). All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord's option, require
that Tenant, at Tenant's expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
All such removals and restoration shall be accomplished in a first-class and
good and workmanlike manner so as not to cause any damage to the Premises or
Project whatsoever. If Tenant fails to remove such Alterations or Tenant's trade
fixtures or furniture or other personal property, Landlord may keep and use them
or remove any of them and cause them to be stored or sold in accordance with
applicable law, at Tenant's sole expense. In addition to and wholly apart from
Tenant's obligation to pay Tenant's Proportionate Share of Operating Expenses,
Tenant shall be responsible for and shall pay prior to delinquency any taxes or
governmental service fees, possessory interest taxes, fees or charges in lieu of
any such taxes, capital levies, or other charges imposed upon, levied with
respect to or assessed against its fixtures or personal property, on the value
of Alterations within the Premises, and on Tenant's interest pursuant to this
Lease, or any increase in any of the foregoing based on such Alterations. To the
extent that any such taxes are not separately assessed or billed to Tenant,
Tenant shall pay the amount thereof as invoiced to Tenant by Landlord.
Notwithstanding the foregoing, at Landlord's option (but without obligation),
all or any portion of the Alterations shall be performed by Landlord for
Tenant's account and Tenant shall pay Landlord's estimate of the cost thereof
(including a reasonable charge for Landlord's overhead and profit) prior to
commencement of the work; provided however that Landlord's right to perform
alterations work itself shall be subject to a commercially reasonable pricing
standard. In addition, at Landlord's election and notwithstanding the foregoing,
however, Tenant shall pay to Landlord the cost of removing any such Alterations
and restoring the Premises to their original condition such cost to include a
reasonable charge for Landlord's overhead and profit as provided above, and such
amount may be deducted from the Security Deposit or any other sums or amounts
held by Landlord under this Lease.
B. In compliance with Paragraph 27 hereof, at least ten (10) business days
before beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Building is located.
9
<PAGE> 10
13. SIGNS
Tenant shall not place, install, affix, paint or maintain any signs, notices,
graphics or banners whatsoever or any window decor which is visible in or from
public view or corridors, the common areas or the exterior of the Premises or
the Building, in or on any exterior window or window fronting upon any common
areas or service area or upon any truck doors or man doors without Landlord's
prior written approval which Landlord shall have the right to withhold in its
absolute and sole discretion; provided that Tenant's name shall be included in
any Building-standard door and directory signage, if any, in accordance with
Landlord's Building signage program, including without limitation, payment by
Tenant of any fee charged by Landlord for maintaining such signage, which fee
shall constitute Additional Rent hereunder. Any installation of signs, notices,
graphics or banners on or about the Premises or Project approved by Landlord
shall be subject to any Regulations and to any other requirements imposed by
Landlord. Tenant shall remove all such signs or graphics by the expiration or
any earlier termination of this Lease. Such installations and removals shall be
made in such manner as to avoid injury to or defacement of the Premises,
Building or Project and any other improvements contained therein, and Tenant
shall repair any injury or defacement including without limitation discoloration
caused by such installation or removal.
14. INSPECTION/POSTING NOTICES
After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord's agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required hereunder, to make repairs, improvements or
alterations to the Premises, Building or Project or to other tenant spaces
therein, to deal with emergencies, to post such notices as may be permitted or
required by law to prevent the perfection of liens against Landlord's interest
in the Project or to exhibit the Premises to prospective tenants, purchasers,
encumbrancers or to others, or for any other purpose as Landlord may deem
necessary or desirable; provided, however, that Landlord shall use reasonable
efforts not to unreasonably interfere with Tenant's business operations. Tenant
shall not be entitled to any abatement of Rent by reason of the exercise of any
such right of entry. Tenant waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby.
Landlord shall at all times have and retain a key with which to unlock all of
the doors in, upon and about the Premises, excluding Tenant's vaults and safes
or special security areas (designated in advance), and Landlord shall have the
right to use any and all means which Landlord may deem necessary or proper to
open said doors in an emergency, in order to obtain entry to any portion of the
Premises, and any entry to the Premises or portions thereof obtained by Landlord
by any of said means, or otherwise, shall not be construed to be a forcible or
unlawful entry into, or a detainer of, the Premises, or an eviction, actual or
constructive, of Tenant from the Premises or any portions thereof. At any time
within six (6) months prior to the expiration of the Term or following any
earlier termination of this Lease or agreement to terminate this Lease, Landlord
shall have the right to erect on the Premises, Building and/or Project a
suitable sign indicating that the Premises are available for lease.
15. SERVICES AND UTILITIES
A. Tenant shall pay directly for all water, gas, heat, air conditioning, light,
power, telephone, sewer, sprinkler charges and other utilities and services used
on or from the Premises, together with any taxes, penalties, surcharges or the
like pertaining thereto, and maintenance charges for utilities and shall furnish
all electric light bulbs, ballasts and tubes. If any such services are not
separately billed or metered to Tenant, Tenant shall pay a proportion, as
determined by Landlord, of all charges jointly serving other premises. All sums
payable under this Paragraph 15 shall constitute Additional Rent hereunder.
B. Tenant acknowledges that Tenant has inspected and accepts the water,
electricity, heat and air conditioning and other utilities and services being
supplied or furnished to the Premises as of the date Tenant takes possession of
the Premises, if any, as being sufficient in their present condition, "as is,"
for the Permitted Use, and for Tenant's intended operations in the Premises.
Landlord shall have no obligation to provide additional or after-hours
electricity, heating or air conditioning, but if Landlord elects to provide such
services at Tenant's request, Tenant shall pay to Landlord a reasonable charge
for such services as determined by Landlord. Tenant agrees to keep and cause to
be kept closed all window covering when necessary because of the sun's position,
and Tenant also agrees at all times to cooperate fully with Landlord and to
abide by all of the regulations and requirements which Landlord may prescribe
for the proper functioning and protection of electrical, heating, ventilating
and air conditioning systems. Wherever heat-generating machines, excess lighting
or equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation and the cost of operation and
maintenance thereof, shall be paid by Tenant to Landlord upon demand by
Landlord.
C. Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises, including without limitation, computers,
electronic data processing machines, copying machines, and other machines, using
excess lighting or using electric current, water, or any other resource in
excess of or which will in any way increase the amount of electricity, water, or
any other resource being furnished or supplied for the use of the Premises for
reasonable and normal office use, in each case as of the date Tenant takes
possession of the Premises as determined by Landlord, or which will require
additions or alterations to or interfere with the Building power distribution
systems; nor connect with electric current, except through existing electrical
outlets in the Premises or water pipes, any apparatus, equipment or device for
the purpose of using electrical current, water, or any other resource. If Tenant
shall require water or electric current or any other resource in excess of that
being furnished or supplied for the use of the Premises as of the date Tenant
takes possession of the Premises, if any, as determined by Landlord, Tenant
shall first procure the written consent of Landlord which Landlord may refuse,
to the use thereof, and Landlord may cause a special meter to be installed in
the Premises so as to measure the amount of water, electric current or other
resource consumed for any such other use. Tenant shall pay directly to Landlord
as an addition to and separate from payment of Operating Expenses the cost of
all such additional resources, energy, utility service and meters (and of
installation, maintenance and repair thereof and of any additional circuits or
other equipment necessary to furnish such additional resources, energy, utility
or service). Landlord may add to the separate or metered charge a recovery of
additional expense incurred in keeping account of the excess water, electric
current or other resource so consumed. Landlord shall not be liable for any
damages directly or indirectly resulting from nor shall the Rent or any monies
owed Landlord under this Lease herein reserved be abated by reason of: (a) the
installation, use or interruption of use of any equipment used in connection
with the furnishing of any such utilities or services, or any change in the
character or means of supplying or providing any such utilities or services or
any supplier thereof; (b) the failure to furnish or delay in furnishing any such
utilities or services when such failure or delay is caused by acts of God or the
elements, labor disturbances of any character, or any other accidents or other
conditions beyond the reasonable control of Landlord or because of any
interruption of service due to Tenant's use of water, electric current or other
resource in excess of that being supplied or furnished for the use of the
Premises as of the date Tenant takes possession of the Premises; or (c) the
inadequacy, limitation, curtailment, rationing or restriction on use of water,
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or Project otherwise; or (d) the partial or
total unavailability of any such utilities or services to the Premises or the
Building, whether by Regulation or otherwise; nor shall any such occurrence
constitute an actual or constructive eviction of Tenant. Landlord shall further
have no obligation to protect or preserve any apparatus, equipment or device
installed by Tenant in the Premises, including without limitation by providing
additional or after-hours heating or air conditioning. Landlord shall be
entitled to cooperate voluntarily and in a reasonable manner with the efforts of
national, state or local governmental agencies or utility suppliers in reducing
energy or other resource consumption. The obligation to make services available
hereunder shall be subject to the limitations of any such voluntary, reasonable
program. In addition, Landlord reserves the right to change the supplier or
provider of any such utility or service from time to time.
10
<PAGE> 11
Landlord may, but shall not be obligated to, upon notice to Tenant, contract
with or otherwise obtain any electrical or other such service for or with
respect to the Premises or Tenant's operations therein from any supplier or
provider of any such service. Tenant shall cooperate with Landlord and any
supplier or provider of such services designated by Landlord from time to time
to facilitate the delivery of such services to Tenant at the Premises and to the
Building and Project, including without limitation allowing Landlord and
Landlord's suppliers or providers, and their respective agents and contractors,
reasonable access to the Premises for the purpose of installing, maintaining,
repairing, replacing or upgrading such service or any equipment or machinery
associated therewith.
16. SUBORDINATION
Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises and Project are situated, or
both; and (b) any mortgage or deed of trust which may now exist or be placed
upon the Building, the Project and/or the land upon which the Premises or the
Project are situated, or said ground leases or underlying leases, or Landlord's
interest or estate in any of said items which is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. If any ground lease or underlying lease terminates for any
reason or any mortgage or deed of trust is foreclosed or a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination, attorn to and become the Tenant of the successor in interest to
Landlord provided that Tenant shall not be disturbed in its possession under
this Lease by such successor in interest so long as Tenant is not in default
under this Lease. Within ten (10) days after request by Landlord, Tenant shall
execute and deliver any additional documents evidencing Tenant's attornment or
the subordination of this Lease with respect to any such ground leases or
underlying leases or any such mortgage or deed of trust, in the form requested
by Landlord or by any ground landlord, mortgagee, or beneficiary under a deed of
trust, subject to such nondisturbance requirement. If requested in writing by
Tenant, Landlord shall use commercially reasonable efforts to obtain a
subordination, nondisturbance and attornment agreement for the benefit of Tenant
reflecting the foregoing from any ground landlord, mortgagee or beneficiary, at
Tenant's expense, subject to such other terms and conditions as the ground
landlord, mortgagee or beneficiary may require.
17. FINANCIAL STATEMENTS
At the request of Landlord from time to time, Tenant shall provide to Landlord
Tenant's and any guarantor's current financial statements or other information
discussing financial worth of Tenant and any guarantor, which Landlord shall use
solely for purposes of this Lease and in connection with the ownership,
management, financing and disposition of the Project.
18. ESTOPPEL CERTIFICATE
Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord's designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Building or Project or any interest therein.
Failure by Tenant to execute and deliver such certificate shall constitute an
acceptance of the Premises and acknowledgment by Tenant that the statements
included are true and correct without exception. Tenant agrees that if Tenant
fails to execute and deliver such certificate within such ten (10) day period,
Landlord may execute and deliver such certificate on Tenant's behalf and that
such certificate shall be binding on Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
Project or any interest therein. The parties agree that Tenant's obligation to
furnish such estoppel certificates in a timely fashion is a material inducement
for Landlord's execution of this Lease, and shall be an event of default
(without any cure period that might be provided under Paragraph 26.A(3) of this
Lease) if Tenant fails to fully comply or makes any material misstatement in any
such certificate.
19. SECURITY DEPOSIT
Tenant agrees to deposit with Landlord upon execution of this Lease, a security
deposit as stated in the Basic Lease Information (the "SECURITY DEPOSIT"), which
sum shall be held and owned by Landlord, without obligation to pay interest, as
security for the performance of Tenant's covenants and obligations under this
Lease. The Security Deposit is not an advance rental deposit or a measure of
damages incurred by Landlord in case of Tenant's default. Upon the occurrence of
any event of default by Tenant, Landlord may from time to time, without
prejudice to any other remedy provided herein or by law, use such fund as a
credit to the extent necessary to credit against any arrears of Rent or other
payments due to Landlord hereunder, and any other damage, injury, expense or
liability caused by such event of default, and Tenant shall pay to Landlord, on
demand, the amount so applied in order to restore the Security Deposit to its
original amount. Although the Security Deposit shall be deemed the property of
Landlord, any remaining balance of such deposit shall be returned by Landlord to
Tenant at such time after termination of this Lease that all of Tenant's
obligations under this Lease have been fulfilled, reduced by such amounts as may
be required by Landlord to remedy defaults on the part of Tenant in the payment
of Rent or other obligations of Tenant under this Lease, to repair damage to the
Premises, Building or Project caused by Tenant or any Tenant's Parties and to
clean the Premises. Landlord may use and commingle the Security Deposit with
other funds of Landlord.
20. LIMITATION OF TENANT'S REMEDIES
The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord's
interest in the Project for the recovery of any amount from Landlord, and shall
not look to other assets of Landlord nor seek recourse against the assets of the
individual or other partners of Landlord or its or their partners, directors,
officers or shareholders. Any lien obtained to enforce any such judgment and any
levy of execution thereon shall be subject and subordinate to any lien, mortgage
or deed of trust on the Project. Under no circumstances shall Tenant have the
right to offset against or recoup Rent or other payments due and to become due
to Landlord hereunder except as expressly provided in Paragraph 23.B. below,
which Rent and other payments shall be absolutely due and payable hereunder in
accordance with the terms hereof.
21. ASSIGNMENT AND SUBLETTING
A. (1) GENERAL. This Lease has been negotiated to be and is granted as an
accommodation to Tenant. Accordingly, this Lease is personal to Tenant,
and Tenant's rights granted hereunder do not include the right to
assign this Lease or sublease the Premises, or to receive any excess,
either in installments or lump sum, over the Rent which is expressly
reserved by Landlord as hereinafter provided, except as otherwise
expressly hereinafter provided. Tenant shall not assign or pledge this
Lease or sublet the Premises or any part thereof, whether voluntarily
or by operation of law, or permit the use or occupancy of the Premises
or any part thereof by anyone other than Tenant, or suffer or permit
any such assignment, pledge, subleasing or occupancy, without
Landlord's prior written consent except as provided herein. If Tenant
desires to assign this Lease or sublet any or all of the
11
<PAGE> 12
Premises, Tenant shall give Landlord written notice (the "TRANSFER
NOTICE") at least thirty-five (35) days prior to the anticipated
effective date of the proposed assignment or sublease, which shall
contain all of the information reasonably requested by Landlord to
address Landlord's decision criteria specified hereinafter. Landlord
shall then have a period of thirty (30) days following receipt of the
Transfer Notice to notify Tenant in writing that Landlord elects
either: (i) to terminate this Lease as to the space so affected as of
the date so requested by Tenant by delivery of written notice (the
"Recapture Notice"), provided that if Landlord delivers the Recapture
Notice, Tenant may, within five (5) business days after the receipt
thereof, withdraw the Transfer Notice, thereby retaining all of its
interests and rights in and under this Lease with respect to the
Premises and nullifying the Recapture Notice; or (ii) to consent to the
proposed assignment or sublease, subject, however, to Landlord's prior
written consent of the proposed assignee or subtenant and of any
related documents or agreements associated with the assignment or
sublease. If Landlord should fail to notify Tenant in writing of such
election within said period, Landlord shall be deemed to have waived
option (i) above, but written consent by Landlord of the proposed
assignee or subtenant shall still be required. If Landlord does not
exercise option (i) above, Landlord's consent to a proposed assignment
or sublease shall not be unreasonably withheld. Consent to any
assignment or subletting shall not constitute consent to any subsequent
transaction to which this Paragraph 21 applies.
(2) CONDITIONS OF LANDLORD'S CONSENT. Without limiting the other instances
in which it may be reasonable for Landlord to withhold Landlord's
consent to an assignment or subletting, Landlord and Tenant acknowledge
that it shall be reasonable for Landlord to withhold Landlord's consent
in the following instances: if the proposed assignee does not agree to
be bound by and assume the obligations of Tenant under this Lease in
form and substance satisfactory to Landlord; the use of the Premises by
such proposed assignee or subtenant would not be a Permitted Use or
would violate any exclusivity or other arrangement which Landlord has
with any other tenant or occupant or any Regulation or would increase
the Occupancy Density or Parking Density of the Building or Project, or
would otherwise result in an undesirable tenant mix for the Project as
determined by Landlord; the proposed assignee or subtenant is not of
sound financial condition as determined by Landlord in Landlord's sole
discretion; the proposed assignee or subtenant is a governmental
agency; the proposed assignee or subtenant does not have a good
reputation as a tenant of property or a good business reputation; the
proposed assignee or subtenant is a person with whom Landlord is
negotiating to lease space in the Project or is a present tenant of the
Project; the assignment or subletting would entail any Alterations
which would lessen the value of the leasehold improvements in the
Premises or use of any Hazardous Materials or other noxious use or use
which may disturb other tenants of the Project; or Tenant is in default
of any obligation of Tenant under this Lease, or Tenant has defaulted
under this Lease on three (3) or more occasions during any twelve (12)
months preceding the date that Tenant shall request consent. Failure by
or refusal of Landlord to consent to a proposed assignee or subtenant
shall not cause a termination of this Lease. Upon a termination under
Paragraph 21.A.(1)(i), Landlord may lease the Premises to any party,
including parties with whom Tenant has negotiated an assignment or
sublease, without incurring any liability to Tenant. At the option of
Landlord, a surrender and termination of this Lease shall operate as an
assignment to Landlord of some or all subleases or subtenancies.
Landlord shall exercise this option by giving notice of that assignment
to such subtenants on or before the effective date of the surrender and
termination. In connection with each request for assignment or
subletting, Tenant shall pay to Landlord Landlord's standard fee for
approving such requests, as well as all costs incurred by Landlord or
any mortgagee or ground lessor in approving each such request and
effecting any such transfer, including, without limitation, reasonable
attorneys' fees.
(3) TRANSFER TO AFFILIATES. An "Affiliate" means any entity that (i)
controls, is controlled by, or is under common control with Tenant,
(ii) results from the transfer of all or substantially all of Tenant's
assets or stock, or (iii) results from the merger or consolidation of
Tenant with another entity. "Control" means the direct or indirect
ownership of more than fifty percent (50%) of the voting securities of
an entity or possession of the right to vote more than fifty percent
(50%) of the voting interest in the ordinary direction of the entity's
affairs. Landlord's consent is not required for any assignment of this
Lease or sublease of all or a portion of the Premises to an Affiliate
as long as the following conditions are met: (a) At least ten (10)
business days before any such assignment or sublease, Landlord receives
written notice of such assignment or sublease (as well as any documents
or information reasonably requested by Landlord regarding the intended
sublessee or assignee); (b) Tenant is not then in default under this
Lease (c) if the transfer is an assignment, the intended assignee
assumes in writing all of Tenant's obligations under this Lease
relating to the Premises in form satisfactory to Landlord or, if the
transfer is a sublease, the intended sublessee accepts the sublease in
form satisfactory to Landlord; (d) the intended transferee has a
tangible net worth, as evidenced by financial statements delivered to
Landlord and certified by an independent certified public accountant in
accordance with generally accepted accounting principles that are
consistently applied, at least equal to three million dollars
($3,000,000.00); and (e) Tenant shall pay all costs reasonably incurred
by Landlord in connection with such assignment or subletting, including
without limitation attorneys' fees. No transfer to an Affiliate in
accordance with this paragraph shall relieve Tenant of any obligation
under this Lease or alter the primary liability of the Tenant named
herein for the payment of Rent or for the performance of any other
obligation to be performed by Tenant, including obligations contained
in Paragraph 25 with respect to any Affiliate.
B. BONUS RENT. Any Rent or other consideration realized by Tenant under any such
sublease or assignment in excess of the Rent payable hereunder, after
amortization of a reasonable brokerage commission and cost of subtenant
improvements incurred by Tenant, shall be divided and paid, twenty-five percent
(25%) to Tenant, seventy-five percent (75%) to Landlord. In any subletting or
assignment undertaken by Tenant, Tenant shall diligently seek to obtain a market
reasonable rental amount available in the marketplace for comparable space
available for primary leasing.
C. CORPORATION. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings) resulting in a change in the
present control of such corporation or any of its parent corporations by the
person or persons owning a majority of said corporate shares, shall constitute
an assignment for purposes of this Lease.
D. UNINCORPORATED ENTITY. If Tenant is a partnership, joint venture,
unincorporated limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.
E. LIABILITY. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or alter the primary
liability of the Tenant named herein for the payment of Rent or for the
performance of any other obligations to be performed by Tenant, including
obligations contained in Paragraph 25 with respect to any assignee or subtenant.
Landlord may collect rent or other amounts or any portion thereof from any
assignee, subtenant, or other occupant of the Premises, permitted or otherwise,
and apply the net rent collected to the Rent payable hereunder, but no such
collection shall be deemed to be a waiver of this Paragraph 21, or the
acceptance of the assignee, subtenant or occupant as tenant, or a release of
Tenant from the further performance by Tenant of the obligations of Tenant under
this Lease. Any assignment or subletting which conflicts with the provisions
hereof shall be void.
12
<PAGE> 13
22. AUTHORITY
Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord's obligations hereunder and that
all persons signing this Lease on its behalf are authorized to do. Tenant and
the person or persons, if any, signing on behalf of Tenant, jointly and
severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant's obligations hereunder, and
that all persons signing this Lease on its behalf are authorized to do so.
23. CONDEMNATION
A. CONDEMNATION RESULTING IN TERMINATION. If the whole or any substantial part
of the Premises should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. If any material portion of the Building or Project is taken or
condemned for any public use under any Regulation, or by right of eminent
domain, or by private purchase in lieu thereof, Landlord may terminate this
Lease at its option. In either of such events, the Rent shall be abated during
the unexpired portion of this Lease, effective when the physical taking of said
Premises shall have occurred.
B. CONDEMNATION NOT RESULTING IN TERMINATION. If a portion of the Project of
which the Premises are a part should be taken or condemned for any public use
under any Regulation, or by right of eminent domain, or by private purchase in
lieu thereof, and the taking prevents or materially interferes with the
Permitted Use of the Premises, and this Lease is not terminated as provided in
Paragraph 23.A. above, the Rent payable hereunder during the unexpired portion
of this Lease shall be reduced, beginning on the date when the physical taking
shall have occurred, to such amount as may be fair and reasonable under all of
the circumstances, but only after giving Landlord credit for all sums received
or to be received by Tenant by the condemning authority. Notwithstanding
anything to the contrary contained in this Paragraph, if the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable hereunder by Tenant during the Term; in the event of any such temporary
appropriation or taking, Tenant shall be entitled to receive that portion of any
award which represents compensation for the use of or occupancy of the Premises
during the Term, and Landlord shall be entitled to receive that portion of any
award which represents the cost of restoration of the Premises and the use and
occupancy of the Premises.
C. AWARD. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant's personal property and moving costs, shall be and
remain the property of Tenant.
D. WAIVER OF CCP SECTION 1265.130. Each party waives the provisions of
California Civil Code Procedure Section 1265.130 allowing either party to
petition the superior court to terminate this Lease as a result of a partial
taking.
24. CASUALTY DAMAGE
A. GENERAL. If the Premises or Building should be damaged or destroyed by fire,
tornado, or other casualty (collectively, "CASUALTY"), Tenant shall give
immediate written notice thereof to Landlord. Within thirty (30) days after
Landlord's receipt of such notice, Landlord shall notify Tenant whether in
Landlord's estimation material restoration of the Premises can reasonably be
made within one hundred eighty (180) days from the date of such notice and
receipt of required permits for such restoration. Landlord's determination shall
be binding on Tenant.
B. WITHIN 180 DAYS. If the Premises or Building should be damaged by Casualty to
such extent that material restoration can in Landlord's estimation be reasonably
completed within one hundred eighty (180) days after the date of such notice and
receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises in
the manner determined by Landlord, except that Landlord shall not be required to
rebuild, repair or replace any part of the Alterations which may have been
placed on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
C. GREATER THAN 180 DAYS. If the Premises or Building should be damaged by
Casualty to such extent that rebuilding or repairs cannot in Landlord's
estimation be reasonably completed within one hundred eighty (180) days after
the date of such notice and receipt of required permits for such rebuilding or
repair, then Landlord shall have the option of either: (1) terminating this
Lease effective upon the date of the occurrence of such damage, in which event
the Rent shall be abated during the unexpired portion of this Lease; or (2)
electing to rebuild or repair the Premises diligently and in the manner
determined by Landlord. Landlord shall notify Tenant of its election within
thirty (30) days after Landlord's receipt of notice of the damage or
destruction. Notwithstanding the above, Landlord shall not be required to
rebuild, repair or replace any part of any Alterations which may have been
placed, on or about the Premises by Tenant. If the Premises are untenantable in
whole or in part following such damage, the Rent payable hereunder during the
period in which they are untenantable shall be abated proportionately, but only
to the extent of rental abatement insurance proceeds received by Landlord during
the time and to the extent the Premises are unfit for occupancy.
D. TENANT'S FAULT. Notwithstanding anything herein to the contrary, if the
Premises or any other portion of the Building are damaged by Casualty resulting
from the fault, negligence, or breach of this Lease by Tenant or any of Tenant's
Parties, Base Rent and Additional Rent shall not be diminished during the repair
of such damage and Tenant shall be liable to Landlord for the cost and expense
of the repair and restoration of the Building caused thereby to the extent such
cost and expense is not covered by insurance proceeds.
E. INSURANCE PROCEEDS. Notwithstanding anything herein to the contrary, if the
Premises or Building are damaged or destroyed and are not fully covered by the
insurance proceeds received by Landlord or if the holder of any indebtedness
secured by a mortgage or deed of trust covering the Premises requires that the
insurance proceeds be applied to such indebtedness, then in either case Landlord
shall have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.
F. WAIVER. This Paragraph 24 shall be Tenant's sole and exclusive remedy in the
event of damage or destruction to the Premises or the Building. As a material
inducement to Landlord entering into this Lease, Tenant hereby waives any rights
it may have under Sections 1932, 1933(4), 1941 or 1942 of the Civil Code of
California with respect to any destruction of the Premises, Landlord's
obligation for tenantability of the Premises and Tenant's right to make repairs
and deduct the expenses of such repairs, or under any similar law, statute or
ordinance now or hereafter in effect.
13
<PAGE> 14
G. TENANT'S PERSONAL PROPERTY. In the event of any damage or destruction of the
Premises or the Building, under no circumstances shall Landlord be required to
repair any injury or damage to, or make any repairs to or replacements of,
Tenant's personal property.
25. HOLDING OVER
Unless Landlord expressly consents in writing to Tenant's holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord's written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord's consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
triple the amount of daily rental as of the last month prior to the date of
expiration or earlier termination. Tenant shall also indemnify, defend, protect
and hold Landlord harmless from any loss, liability or cost, including
consequential and incidental damages and reasonable attorneys' fees, incurred by
Landlord resulting from delay by Tenant in surrendering the Premises, including,
without limitation, any claims made by the succeeding tenant founded on such
delay. Acceptance of Rent by Landlord following expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, shall not constitute a renewal of this Lease, and nothing contained in
this Paragraph 25 shall waive Landlord's right of reentry or any other right.
Additionally, if upon expiration or earlier termination of this Lease, or
following demand by Landlord for possession of the Premises, Tenant has not
fulfilled its obligation with respect to repairs and cleanup of the Premises or
any other Tenant obligations as set forth in this Lease, then Landlord shall
have the right to perform any such obligations as it deems necessary at Tenant's
sole cost and expense, and any time required by Landlord to complete such
obligations shall be considered a period of holding over and the terms of this
Paragraph 25 shall apply. The provisions of this Paragraph 25 shall survive any
expiration or earlier termination of this Lease.
26. DEFAULT
A. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an
event of default on the part of Tenant:
(1) ABANDONMENT. Abandonment or vacation of the Premises for a
continuous period in excess of five (5) days. Tenant waives any right
to notice Tenant may have under Section 1951.3 of the Civil Code of the
State of California, the terms of this Paragraph 26.A. being deemed
such notice to Tenant as required by said Section 1951.3.
(2) NONPAYMENT OF RENT. Failure to pay any installment of Rent or any
other amount due and payable hereunder upon the date when said payment
is due, as to which time is of the essence.
(3) OTHER OBLIGATIONS. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in
subparagraphs (1) and (2) of this Paragraph 26.A., such failure
continuing for fifteen (15) days after written notice of such failure,
as to which time is of the essence.
(4) GENERAL ASSIGNMENT. A general assignment by Tenant for the benefit
of creditors.
(5) BANKRUPTCY. The filing of any voluntary petition in bankruptcy by
Tenant, or the filing of an involuntary petition by Tenant's creditors,
which involuntary petition remains undischarged for a period of thirty
(30) days. If under applicable law, the trustee in bankruptcy or Tenant
has the right to affirm this Lease and continue to perform the
obligations of Tenant hereunder, such trustee or Tenant shall, in such
time period as may be permitted by the bankruptcy court having
jurisdiction, cure all defaults of Tenant hereunder outstanding as of
the date of the affirmance of this Lease and provide to Landlord such
adequate assurances as may be necessary to ensure Landlord of the
continued performance of Tenant's obligations under this Lease.
(6) RECEIVERSHIP. The employment of a receiver to take possession of
substantially all of Tenant's assets or the Premises, if such
appointment remains undismissed or undischarged for a period of fifteen
(15) days after the order therefor.
(7) ATTACHMENT. The attachment, execution or other judicial seizure of
all or substantially all of Tenant's assets or Tenant's leasehold of
the Premises, if such attachment or other seizure remains undismissed
or undischarged for a period of fifteen (15) days after the levy
thereof.
(8) INSOLVENCY. The admission by Tenant in writing of its inability to
pay its debts as they become due.
B. REMEDIES UPON DEFAULT.
(1) TERMINATION. In the event of the occurrence of any event of
default, Landlord shall have the right to give a written termination
notice to Tenant, and on the date specified in such notice, Tenant's
right to possession shall terminate, and this Lease shall terminate
unless on or before such date all Rent in arrears and all costs and
expenses incurred by or on behalf of Landlord hereunder shall have been
paid by Tenant and all other events of default of this Lease by Tenant
at the time existing shall have been fully remedied to the satisfaction
of Landlord. At any time after such termination, Landlord may recover
possession of the Premises or any part thereof and expel and remove
therefrom Tenant and any other person occupying the same, including any
subtenant or subtenants notwithstanding Landlord's consent to any
sublease, by any lawful means, and again repossess and enjoy the
Premises without prejudice to any of the remedies that Landlord may
have under this Lease, or at law or equity by any reason of Tenant's
default or of such termination. Landlord hereby reserves the right, but
shall not have the obligation, to recognize the continued possession of
any subtenant. The delivery or surrender to Landlord by or on behalf of
Tenant of keys, entry codes, or other means to bypass security at the
Premises shall not terminate this Lease.
(2) CONTINUATION AFTER DEFAULT. Even though an event of default may
have occurred, this Lease shall continue in effect for so long as
Landlord does not terminate Tenant's right to possession under
Paragraph 26.B.(1) hereof, and Landlord may enforce all of Landlord's
rights and remedies under this Lease and at law or in equity, including
without limitation, the right to recover Rent as it becomes due, and
Landlord, without terminating this Lease, may exercise all of the
rights and remedies of a landlord under Section 1951.4 of the Civil
Code of the State of California or any successor code section. Acts of
maintenance, preservation or efforts to lease the Premises or the
appointment of a receiver under application of Landlord to protect
Landlord's interest under this Lease or other entry by Landlord upon
the Premises shall not constitute an election to terminate Tenant's
right to possession.
(3) INCREASED SECURITY DEPOSIT. If Tenant is in default under Paragraph
26.A.(2) hereof and such default remains uncured for ten (10) days
after such occurrence or such default occurs more than three times in
any twelve (12) month period, Landlord may require that Tenant increase
the Security Deposit to the amount of three times the current month's
Rent at the time of the most recent default.
14
<PAGE> 15
C. DAMAGES AFTER DEFAULT. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.B.(1) hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination, (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid Rent and
other amounts for the balance of the Term after the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; and
(4) any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The "worth at the time of award" as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The "worth at
the time of award" as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.
D. LATE CHARGE. In addition to its other remedies, Landlord shall have the right
without notice or demand to add to the amount of any payment required to be made
by Tenant hereunder, and which is not paid and received by Landlord on or before
the first day of each calendar month, an amount equal to five percent (5%) of
the delinquency for each month or portion thereof that the delinquency remains
outstanding to compensate Landlord for the loss of the use of the amount not
paid and the administrative costs caused by the delinquency, the parties
agreeing that Landlord's damage by virtue of such delinquencies would be
extremely difficult and impracticable to compute and the amount stated herein
represents a reasonable estimate thereof. Any waiver by Landlord of any late
charges or failure to claim the same shall not constitute a waiver of other late
charges or any other remedies available to Landlord.
E. INTEREST. Interest shall accrue on all sums not paid when due hereunder at
the lesser of twelve percent (12%) per annum or the maximum interest rate
allowed by law ("APPLICABLE INTEREST RATE") from the due date until paid.
F. REMEDIES CUMULATIVE. All rights, privileges and elections or remedies of the
parties are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.
27. LIENS
Tenant shall at all times keep the Premises and the Project free from liens
arising out of or related to work or services performed, materials or supplies
furnished or obligations incurred by or on behalf of Tenant or in connection
with work made, suffered or done by or on behalf of Tenant in or on the Premises
or Project. If Tenant shall not, within ten (10) days following the imposition
of any such lien, cause the same to be released of record by payment or posting
of a proper bond, Landlord shall have, in addition to all other remedies
provided herein and by law, the right, but not the obligation, to cause the same
to be released by such means as Landlord shall deem proper, including payment of
the claim giving rise to such lien. All sums paid by Landlord on behalf of
Tenant and all expenses incurred by Landlord in connection therefor shall be
payable to Landlord by Tenant on demand with interest at the Applicable Interest
Rate as Additional Rent. Landlord shall have the right at all times to post and
keep posted on the Premises any notices permitted or required by law, or which
Landlord shall deem proper, for the protection of Landlord, the Premises, the
Project and any other party having an interest therein, from mechanics' and
materialmen's liens, and Tenant shall give Landlord not less than ten (10)
business days prior written notice of the commencement of any work in the
Premises or Project which could lawfully give rise to a claim for mechanics' or
materialmen's liens to permit Landlord to post and record a timely notice of
non-responsibility, as Landlord may elect to proceed or as the law may from time
to time provide, for which purpose, if Landlord shall so determine, Landlord may
enter the Premises. Tenant shall not remove any such notice posted by Landlord
without Landlord's consent, and in any event not before completion of the work
which could lawfully give rise to a claim for mechanics' or materialmen's liens.
28. SUBSTITUTION
A. At any time after execution of this Lease, Landlord may substitute for the
Premises other premises in the Project (the "NEW PREMISES") upon not less than
sixty (60) days prior written notice, in which event the New Premises shall be
deemed to be the Premises for all purposes hereunder and this Lease shall be
deemed modified accordingly to reflect the new location and shall remain in full
force and effect as so modified, provided that:
(1) The New Premises shall be similar in area and in function for
Tenant's purposes; and
(2) If Tenant is occupying the Premises at the time of such
substitution, Landlord shall pay the expense of physically moving
Tenant, Tenant's property and equipment to the New Premises and shall,
at Landlord's sole cost, improve the New Premises with improvements
substantially similar to those the Landlord has committed to provide or
has provided in the Premises. Moving costs shall include incidental
items related to moving, including but not limited to stationary,
telephone relocation, alarm systems, etc. In no event shall these
incidental costs exceed fifteen thousand dollars ($15,000.00).
29. TRANSFERS BY LANDLORD
In the event of a sale or conveyance by Landlord of the Building or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord's successor-in-interest. In
such event, Tenant agrees to look solely to the responsibility of the
successor-in-interest of Landlord under this Lease with respect to the
performance of the covenants and duties of "Landlord" to be performed after the
passing of title to Landlord's successor-in-interest. This Lease shall not be
affected by any such sale and Tenant agrees to attorn to the purchaser or
assignee. Landlord's successor(s)-in-interest shall not have liability to Tenant
with respect to the failure to perform any of the obligations of "Landlord," to
the extent required to be performed prior to the date such
successor(s)-in-interest became the owner of the Building.
30. RIGHT OF LANDLORD TO PERFORM TENANT'S COVENANTS
All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant's sole cost and expense and
without any abatement of Rent. If Tenant shall fail to pay any sum of money,
other than Base Rent, required to be paid by Tenant hereunder or shall fail to
perform any other act on Tenant's part to be performed hereunder, including
Tenant's obligations under Paragraph 11 hereof, and such failure shall continue
for fifteen (15) days after notice thereof by Landlord, in addition to the other
rights and remedies of Landlord, Landlord may make any such payment and perform
any such act on Tenant's part. In the case of an emergency, no prior
notification by Landlord shall be required. Landlord may take such actions
without any obligation and without
15
<PAGE> 16
releasing Tenant from any of Tenant's obligations. All sums so paid by Landlord
and all incidental costs incurred by Landlord and interest thereon at the
Applicable Interest Rate, from the date of payment by Landlord, shall be paid to
Landlord on demand as Additional Rent.
31. WAIVER
If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord's knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.
32. NOTICES
Each provision of this Lease or of any applicable governmental laws, ordinances,
regulations and other requirements with reference to sending, mailing, or
delivery of any notice or the making of any payment by Landlord or Tenant to the
other shall be deemed to be complied with when and if the following steps are
taken:
A. RENT. All Rent and other payments required to be made by Tenant to Landlord
hereunder shall be payable to Landlord at Landlord's Remittance Address set
forth in the Basic Lease Information, or at such other address as Landlord may
specify from time to time by written notice delivered in accordance herewith.
Tenant's obligation to pay Rent and any other amounts to Landlord under the
terms of this Lease shall not be deemed satisfied until such Rent and other
amounts have been actually received by Landlord.
B. OTHER. All notices, demands, consents and approvals which may or are required
to be given by either party to the other hereunder shall be in writing and
either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the Notice Address for such party
as specified in the Basic Lease Information or to such other place as the party
to be notified may from time to time designate by at least fifteen (15) days
notice to the notifying party. Notices shall be deemed served upon receipt or
refusal to accept delivery. Tenant appoints as its agent to receive the service
of all default notices and notice of commencement of unlawful detainer
proceedings the person in charge of or apparently in charge of occupying the
Premises at the time, and, if there is no such person, then such service may be
made by attaching the same on the main entrance of the Premises.
C. REQUIRED NOTICES. Tenant shall immediately notify Landlord in writing of any
notice of a violation or a potential or alleged violation of any Regulation that
relates to the Premises or the Project, or of any inquiry, investigation,
enforcement or other action that is instituted or threatened by any governmental
or regulatory agency against Tenant or any other occupant of the Premises, or
any claim that is instituted or threatened by any third party that relates to
the Premises or the Project.
33. ATTORNEYS' FEES
In an event of Default beyond the applicable cure period, if Landlord places the
enforcement of this Lease, or any part thereof, or the collection of any Rent
due, or to become due hereunder, or recovery of possession of the Premises in
the hands of an attorney, Tenant shall pay to Landlord, upon demand, Landlord's
reasonable attorneys' fees and court costs, whether incurred at trial, appeal or
review. In any action which Landlord or Tenant brings to enforce its respective
rights hereunder, the unsuccessful party shall pay all costs incurred by the
prevailing party including reasonable attorneys' fees, to be fixed by the court,
and said costs and attorneys' fees shall be a part of the judgment in said
action.
34. SUCCESSORS AND ASSIGNS
This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided hereunder, Tenant's assigns.
35. FORCE MAJEURE
If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant's obligation to pay Rent,
however, is not excused by this Paragraph 35.
36. SURRENDER OF PREMISES
Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, reasonable wear and tear excepted,
including, but not limited to, all interior walls cleaned, all interior painted
surfaces repainted in the original color, all holes in walls repaired, all
carpets shampooed and cleaned, all HVAC equipment in operating order and in good
repair, and all floors cleaned, waxed, and free of any Tenant-introduced marking
or painting, all to the reasonable satisfaction of Landlord. Tenant shall remove
all of its debris from the Project. At or before the time of surrender, Tenant
shall comply with the terms of Paragraph 12.A. hereof with respect to
Alterations to the Premises and all other matters addressed in such Paragraph.
If the Premises are not so surrendered at the expiration or sooner termination
of this Lease, the provisions of Paragraph 25 hereof shall apply. All keys to
the Premises or any part thereof shall be surrendered to Landlord upon
expiration or sooner termination of the Term. Tenant shall give written notice
to Landlord at least thirty (30) days prior to vacating the Premises and shall
meet with Landlord for a joint inspection of the Premises at the time of
vacating, but nothing contained herein shall be construed as an extension of the
Term or as a consent by Landlord to any holding over by Tenant. In the event of
Tenant's failure to give such notice or participate in such joint inspection,
Landlord's inspection at or after Tenant's vacating the Premises shall
conclusively be deemed correct for purposes of determining Tenant's
responsibility for repairs and restoration. Any delay caused by Tenant's failure
to carry out its obligations under this Paragraph 36 beyond the term hereof,
shall constitute unlawful and illegal possession of Premises under Paragraph 25
hereof. Tenant improvements performed under Paragraph 38.B of the Lease to suite
two-thousand one-hundred fifty (2,150) and approved by Landlord at the time of
Lease execution are not subject to this paragraph thirty-six (36). Any wall
penetrations between suite two-thousand one-hundred fifty (2,150) and adjacent
suites are subject to restoration at Landlord's discretion.
16
<PAGE> 17
37. MISCELLANEOUS
A. GENERAL. The term "Tenant" or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.
B. TIME. Time is of the essence regarding this Lease and all of its provisions.
C. CHOICE OF LAW. This Lease shall in all respects be governed by the laws of
the State of California.
D. ENTIRE AGREEMENT. This Lease, together with its Exhibits, addenda and
attachments and the Basic Lease Information, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or understandings made between the parties
other than those set forth in this Lease and its Exhibits, addenda and
attachments and the Basic Lease Information.
E. MODIFICATION. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in the Basic Lease Information as the approximate area of the Premises
for all purposes under this Lease, and acknowledges and agrees that no other
definition of the area (rentable, usable or otherwise) of the Premises shall
apply. Tenant shall in no event be entitled to a recalculation of the square
footage of the Premises, rentable, usable or otherwise, and no recalculation, if
made, irrespective of its purpose, shall reduce Tenant's obligations under this
Lease in any manner, including without limitation the amount of Base Rent
payable by Tenant or Tenant's Proportionate Share of the Building and of the
Project.
F. SEVERABILITY. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.
G. RECORDATION. Tenant shall not record this Lease or a short form memorandum
hereof.
H. EXAMINATION OF LEASE. Submission of this Lease to Tenant does not constitute
an option or offer to lease and this Lease is not effective otherwise until
execution and delivery by both Landlord and Tenant.
I. ACCORD AND SATISFACTION. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord's right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.
J. EASEMENTS. Landlord may grant easements on the Project and dedicate for
public use portions of the Project without Tenant's consent; provided that no
such grant or dedication shall materially interfere with Tenant's Permitted Use
of the Premises. Upon Landlord's request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant's covenants hereunder.
K. DRAFTING AND DETERMINATION PRESUMPTION. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord's consent, determination or estimation
shall be given or made solely by Landlord in Landlord's good faith opinion,
whether or not objectively reasonable. If Landlord fails to respond to any
request for its consent within the time period, if any, specified in this Lease,
Landlord shall be deemed to have disapproved such request.
L. EXHIBITS. The Basic Lease Information, and the Exhibits, addenda and
attachments attached hereto are hereby incorporated herein by this reference and
made a part of this Lease as though fully set forth herein.
M. NO LIGHT, AIR OR VIEW EASEMENT. Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Building shall in no way affect this Lease or impose any
liability on Landlord.
N. NO THIRD PARTY BENEFIT. This Lease is a contract between Landlord and Tenant
and nothing herein is intended to create any third party benefit.
O. QUIET ENJOYMENT. Upon payment by Tenant of the Rent, and upon the observance
and performance of all of the other covenants, terms and conditions on Tenant's
part to be observed and performed, Tenant shall peaceably and quietly hold and
enjoy the Premises for the term hereby demised without hindrance or interruption
by Landlord or any other person or persons lawfully or equitably claiming by,
through or under Landlord, subject, nevertheless, to all of the other terms and
conditions of this Lease. Landlord shall not be liable for any hindrance,
interruption, interference or disturbance by other tenants or third persons, nor
shall Tenant be released from any obligations under this Lease because of such
hindrance, interruption, interference or disturbance.
P. COUNTERPARTS. This Lease may be executed in any number of counterparts, each
of which shall be deemed an original.
Q. MULTIPLE PARTIES. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.
R. PRORATIONS. Any Rent or other amounts payable to Landlord by Tenant hereunder
for any fractional month shall be prorated based on a month of 30 days. As used
herein, the term "fiscal year" shall mean the calendar year or such other fiscal
year as Landlord may deem appropriate.
38. ADDITIONAL PROVISIONS
A. ADDENDUM 1, PARAGRAPH 6, RENT
BASE RENT. Base Rent, net of Basic Operating Costs per Paragraph 7 of this
Lease, for the Premises shall be as follows:
<TABLE>
<S> <C>
Months 1 - 12: Base Rent shall be $19,536.00 per month. Base Rent will increase 4% annually. In
addition to Base Rent, Tenant shall also pay Tenant's Proportionate Share of Basic
Operating Costs as set forth in paragraph 7 of the Lease Agreement. Basic Operating
Costs, including management fee, are initially estimated to be $2,767.60 per month.
Basic Operating Costs are estimated a year in advance and collected on a monthly
basis. Any adjustments (up or down) will be made at the end of the calendar year.
</TABLE>
17
<PAGE> 18
<TABLE>
<S> <C>
Months 13 - 24: Base Rent shall be $20,317.00 per month. In addition to Base Rent, Tenant shall also
pay Tenant's Proportionate Share of Basic Operating Costs as set in Paragraph 7.
Months 25 - 36: Base Rent shall be $21,130.00 per month. In addition to Base Rent, Tenant shall also
pay Tenant's Proportionate Share of Basic Operating Costs as set forth in Paragraph 7.
Months 37 - 45: Base Rent shall be $21,975.00 per month. In addition to Base Rent, Tenant shall also
pay Tenant's Proportionate Share of Basic Operating Costs as set forth in Paragraph 7.
</TABLE>
B TENANT IMPROVEMENT ALLOWANCE Landlord agrees to reimburse Tenant up to a
maximum of Eight Thousand Dollars ($8,000.00), "Tenant Improvement
Allowance" for the 16,280 square foot Premises located at Charcot Business
Park, 2150-2158 Paragon Drive, San Jose, California. The "Tenant
Improvement Allowance" shall be used only toward improvements to the
building, to include the following; drop ceiling, sprinklers as required,
carpeting, lighting, light fixtures, a new HVAC unit, interior walls, wall
penetrations, distribution and electrical distribution, but not for
Tenant's specific electrical connections to Tenant's specific equipment and
fixtures. All Tenant Improvements are subject to restoration at Landlord
discretion per Paragraph 12 of this Lease. Tenant shall submit written
notice of substantial completion of Tenant Improvements and application for
reimbursement to Landlord. Landlord shall reimburse Tenant for actual costs
in an amount up to the Tenant Improvement Allowance (not to exceed
$8,000.00) within thirty (30) days after Tenant's written notice to
Landlord of Substantial Completion of Tenant Improvements. All work must be
completed and all claims for reimbursement must be submitted to Landlord on
or before May 1, 1999. Tenant shall cause all Alterations to be
accomplished in a first-class, good and workmanlike manner, and to comply
with all applicable Regulations and Paragraph 27 hereof.
C. CANCELLATION OF PREVIOUS LEASE
It is hereby agreed and understood that, after full execution and upon the
Scheduled Term Commencement Date, this Lease shall cancel and supersede the
following two leases:
That certain lease between Spieker Properties, L.P., a California limited
partnership, as successor-in-interest to Orchard Investment Company Number
205, a California general partnership, as Landlord, and Immersion
Corporation, a California corporation, as successor in interest to
Immersion Human Interface Corporation, a California corporation, as Tenant,
for premises located at Charcot Business Park, Suite 2158, California,
dated April 17, 1995 (the "2158 Prior Lease"), and that certain lease
between Spieker Properties, L.P., a California limited partnership, as
Landlord, and Immersion Corporation, a California corporation, as successor
in interest to Immersion Human Interface Corporation, a California
corporation, as Tenant, for premises located at Charcot Business Park,
Suite 2154, California, dated November 21, 1997 (the "2154 Prior Lease",
and together with the 2158 Prior Lease, collectively, the "Prior Leases");
provided that (i) Tenant is not in default of the material terms, including
monetary defaults, of either of the Prior Leases; (ii) Tenant delivers the
premises possessed by Tenant in connection with each of the Prior Leases to
Landlord in the condition required by each of the Prior Leases at the
termination of the Lease; (iii) all financial obligations of Tenant under
each of the Prior Leases are paid through January 31, 1999.
Notwithstanding the foregoing, Tenant shall still be obligated for
reconciliation of Operating Expenses under each of the Prior Leases for the
time period January 1, 1998 through January 31, 1999, and Tenant shall
continue to be liable for (i) any obligations, liabilities or losses
accruing during the term of either if the Prior Leases which are based on
any indemnity or hold harmless agreement set forth in each of the Prior
Leases, (ii) any liability or damages arising out of the release or
discharge of Hazardous Materials occurring during the term of each of the
Prior Leases to the extent Tenant is responsible for such release or
discharge of Hazardous Materials under the terms of each of the Prior
Leases, and (iii) any obligations or liabilities which survive expiration
or termination of each of the Prior Leases. Landlord shall be entitled to
retain the sums held by Landlord under each of the Prior Leases as the
Security Deposit under this Lease.
18
<PAGE> 19
1. JURY TRIAL WAIVER
EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE BUILDING IS LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF THE
COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 39. THE
PROVISIONS OF THIS PARAGRAPH 39 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the day
and the year first above written.
LANDLORD
Spieker Properties, L.P.,
a California limited partnership
By: Spieker Properties, Inc.,
a Maryland corporation,
its general partner
By: /s/ Joseph D. Russell, Jr.
------------------------------------
Joseph D. Russell, Jr.
Its: Regional Senior Vice President
Date:
TENANT
Immersion Corporation
a California corporation
By: /s/ Timothy Lacey
------------------------------------
Timothy Lacey
Its: Chief Financial Officer
Date:
19
<PAGE> 20
EXHIBIT A
INDUSTRIAL LEASE
RULES AND REGULATIONS
1. Driveways, sidewalks, halls, passages, exits, entrances, elevators,
escalators and stairways shall not be obstructed by tenants or used by
tenants for any purpose other than for ingress to and egress from their
respective premises. The driveways, sidewalks, halls, passages, exits,
entrances, elevators and stairways are not for the use of the general
public and Landlord shall in all cases retain the right to control and
prevent access thereto by all persons whose presence, in the judgment of
Landlord, shall be prejudicial to the safety, character, reputation and
interests of the Building, the Project and its tenants, provided that
nothing herein contained shall be construed to prevent such access to
persons with whom any tenant normally deals in the ordinary course of such
tenant's business unless such persons are engaged in illegal activities. No
tenant, and no employees or invitees of any tenant, shall go upon the roof
of any Building, except as authorized by Landlord.
2. No sign, placard, banner, picture, name, advertisement or notice, visible
from the exterior of the Premises or the Building or the common areas of
the Building shall be inscribed, painted, affixed, installed or otherwise
displayed by Tenant either on its Premises or any part of the Building or
Project without the prior written consent of Landlord in Landlord's sole
and absolute discretion. Landlord shall have the right to remove any such
sign, placard, banner, picture, name, advertisement, or notice without
notice to and at the expense of Tenant, which were installed or displayed
in violation of this rule. If Landlord shall have given such consent to
Tenant at any time, whether before or after the execution of Tenant's
Lease, such consent shall in no way operate as a waiver or release of any
of the provisions hereof or of the Lease, and shall be deemed to relate
only to the particular sign, placard, banner, picture, name, advertisement
or notice so consented to by Landlord and shall not be construed as
dispensing with the necessity of obtaining the specific written consent of
Landlord with respect to any other such sign, placard, banner, picture,
name, advertisement or notice.
All approved signs or lettering on doors and walls shall be printed,
painted, affixed or inscribed at the expense of Tenant by a person or
vendor approved by Landlord and shall be removed by Tenant at the time of
vacancy at Tenant's expense.
3. The directory of the Building or Project will be provided exclusively for
the display of the name and location of tenants only and Landlord reserves
the right to charge for the use thereof and to exclude any other names
therefrom.
4. No curtains, draperies, blinds, shutters, shades, screens or other
coverings, awnings, hangings or decorations shall be attached to, hung or
placed in, or used in connection with, any window or door on the Premises
without the prior written consent of Landlord. In any event with the prior
written consent of Landlord, all such items shall be installed inboard of
Landlord's standard window covering and shall in no way be visible from the
exterior of the Building. All electrical ceiling fixtures hung in offices
or spaces along the perimeter of the Building must be fluorescent or of a
quality, type, design, and bulb color approved by Landlord. No articles
shall be placed or kept on the window sills so as to be visible from the
exterior of the Building. No articles shall be placed against glass
partitions or doors which Landlord considers unsightly from outside
Tenant's Premises.
5. Each tenant shall be responsible for all persons for whom it allows to
enter the Building or the Project and shall be liable to Landlord for all
acts of such persons.
Landlord and its agents shall not be liable for damages for any error
concerning the admission to, or exclusion from, the Building or the Project
of any person.
During the continuance of any invasion, mob, riot, public excitement or
other circumstance rendering such action advisable in Landlord's opinion,
Landlord reserves the right (but shall not be obligated) to prevent access
to the Building and the Project during the continuance of that event by any
means it considers appropriate for the safety of tenants and protection of
the Building, property in the Building and the Project.
6. Tenant shall not alter any lock or access device or install a new or
additional lock or access device or bolt on any door of its Premises,
without the prior written consent of Landlord. If Landlord shall give its
consent, Tenant shall in each case furnish Landlord with a key for any such
lock. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys for all doors which have been furnished to Tenant, and in
the event of loss of any keys so furnished, shall pay Landlord therefor.
7. The restrooms, toilets, urinals, wash bowls and other apparatus shall not
be used for any purpose other than that for which they were constructed and
no foreign substance of any kind whatsoever shall be thrown into them. The
expense of any breakage, stoppage, or damage resulting from violation of
this rule shall be borne by the tenant who, or whose employees or invitees,
shall have caused the breakage, stoppage, or damage.
8. Tenant shall not use or keep in or on the Premises, the Building or the
Project any kerosene, gasoline, or inflammable or combustible fluid or
material except in strict accordance with the terms of the Lease.
9. Tenant shall not use, keep or permit to be used or kept in its Premises any
foul or noxious gas or substance. Tenant shall not allow the Premises to be
occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Building by reason of noise, odors and/or vibrations
or interfere in any way with other tenants or those having business
therein, nor shall any animals or birds be brought or kept in or about the
Premises, the Building, or the Project.
10. Except with the prior written consent of Landlord, Tenant shall not sell,
or permit the sale, at retail, of newspapers, magazines, periodicals,
theater tickets or any other goods or merchandise in or on the Premises,
nor shall Tenant carry on, or permit or allow any employee or other person
to carry on, the business of stenography, typewriting or any similar
business in or from the Premises for the service or accommodation of
occupants of any other portion of the Building, or the business of a public
barber shop, beauty parlor, nor shall the Premises be used for any illegal,
improper, immoral or objectionable purpose, or any business or activity
other than that specifically provided for in such Tenant's Lease. Tenant
shall not accept hairstyling, barbering, shoeshine, nail, massage or
similar services in the Premises or common areas except as authorized by
Landlord.
11. If Tenant requires telegraphic, telephonic, telecommunications, data
processing, burglar alarm or similar services, it shall first obtain, and
comply with, Landlord's instructions in their installation. The cost of
purchasing, installation and maintenance of such services shall be borne
solely by Tenant.
12. Landlord will direct electricians as to where and how telephone, telegraph
and electrical wires are to be introduced or installed. No boring or
cutting for wires will be allowed without the prior written consent of
Landlord. The location of burglar alarms, telephones, call boxes and other
office equipment affixed to the Premises shall be subject to the prior
written approval of Landlord.
20
<PAGE> 21
13. Tenant shall not install any radio or television antenna, satellite dish,
loudspeaker or any other device on the exterior walls or the roof of the
Building, without Landlord's consent. Tenant shall not interfere with radio
or television broadcasting or reception from or in the Building, the
Project or elsewhere.
14. Tenant shall not mark, or drive nails, screws or drill into the partitions,
woodwork or drywall or in any way deface the Premises or any part thereof.
Tenant shall not lay linoleum, tile, carpet or any other floor covering so
that the same shall be affixed to the floor of its Premises in any manner
except as approved in writing by Landlord. The expense of repairing any
damage resulting from a violation of this rule or the removal of any floor
covering shall be borne by the tenant by whom, or by whose contractors,
employees or invitees, the damage shall have been caused.
15. Tenant shall not place a load upon any floor of its Premises which exceeds
the load per square foot which such floor was designed to carry or which is
allowed by law.
Business machines and mechanical equipment belonging to Tenant which cause
noise or vibration that may be transmitted to the structure of the Building
or to any space therein to such a degree as to be objectionable to Landlord
or to any tenants in the Building shall be placed and maintained by Tenant,
at Tenant's expense, on vibration eliminators or other devices sufficient
to eliminate noise or vibration. The persons employed to move such
equipment in or out of the Building must be acceptable to Landlord.
16. Each tenant shall store all its trash and garbage within the interior of
the Premises or as otherwise directed by Landlord from time to time. Tenant
shall not place in the trash boxes or receptacles any personal trash or any
material that may not or cannot be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in the
city, without violation of any law or ordinance governing such disposal.
17. Canvassing, soliciting, distribution of handbills or any other written
material and peddling in the Building and the Project are prohibited and
each tenant shall cooperate to prevent the same. No tenant shall make
room-to-room solicitation of business from other tenants in the Building or
the Project, without the written consent of Landlord.
18. Landlord shall have the right, exercisable without notice and without
liability to any tenant, to change the name and address of the Building and
the Project.
19. Landlord reserves the right to exclude or expel from the Project any person
who, in Landlord's judgment, is under the influence of alcohol or drugs or
who commits any act in violation of any of these Rules and Regulations.
20. Without the prior written consent of Landlord, Tenant shall not use the
name of the Building or the Project or any photograph or other likeness of
the Building or the Project in connection with, or in promoting or
advertising, Tenant's business except that Tenant may include the
Building's or Project's name in Tenant's address.
21. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental
agency.
22. Tenant assumes any and all responsibility for protecting its Premises from
theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
23. Landlord reserves the right to designate the use of the parking spaces on
the Project. Tenant or Tenant's guests shall park between designated
parking lines only, and shall not occupy two parking spaces with one car.
No trucks, truck tractors, trailers or fifth wheel are allowed to be parked
anywhere at any time within the Project other than in Tenant's own truck
dock well. Vehicles in violation of the above shall be subject to tow-away,
at vehicle owner's expense. Vehicles parked on the Project overnight
without prior written consent of the Landlord shall be deemed abandoned and
shall be subject to tow-away at vehicle owner's expense. No tenant of the
Building shall park in visitor or reserved parking areas or loading areas.
Any tenant found parking in such designated visitor or reserved parking
areas or loading areas or unauthorized areas shall be subject to tow-away
at vehicle owner's expense. The parking areas shall not be used to provide
car wash, oil changes, detailing, automotive repair or other services
unless otherwise approved or furnished by Landlord. Tenant will from time
to time, upon the request of Landlord, supply Landlord with a list of
license plate numbers of vehicles owned or operated by its employees or
agents.
24. No Tenant is allowed to unload, unpack, pack or in any way manipulate any
products, materials or goods in the common areas of the Project including
the parking and driveway areas of the Project. All products, goods and
materials must be manipulated, handled, kept, and stored within the
Tenant's Premises and not in any exterior areas, including, but not limited
to, exterior dock platforms, against the exterior of the Building, parking
areas and driveway areas of the Project. Tenant also agrees to keep the
exterior of the Premises clean and free of nails, wood, pallets, packing
materials, barrels and any other debris produced from their operation. All
products, materials and goods are to enter and exit the Premises by being
loaded or unloaded through dock high doors into trucks and or trailers,
over dock high loading platforms into trucks and or trailers or loaded or
unloaded into trucks and or trailers within the Premises through grade
level door access.
25. Tenant shall be responsible for the observance of all of the foregoing
Rules and Regulations by Tenant's employees, agents, clients, customers,
invitees and guests.
26. These Rules and Regulations are in addition to, and shall not be construed
to in any way modify, alter or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of any premises in the
Project.
27. Landlord may waive any one or more of these Rules and Regulations for the
benefit of any particular tenant or tenants, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of
any other tenant or tenants, nor prevent Landlord from thereafter enforcing
any such Rules and Regulations against any or all tenants of the Building.
28. Landlord reserves the right to make such other and reasonable rules and
regulations as in its judgment may from time to time be needed for safety
and security, for care and cleanliness of the Building and the Project and
for the preservation of good order therein. Tenant agrees to abide by all
such Rules and Regulations herein stated and any additional rules and
regulations which are adopted.
21
<PAGE> 22
EXHIBIT B
Site Plan
[DIAGRAM]
22
<PAGE> 23
EXHIBIT B.1
Property Description
All that certain real property situated in the City of San Jose, County of Santa
Clara, State of California, described as follows:
Parcel 4, as shown on that Parcel Map filed for record in the office of the
Recorder of the County of Santa Clara, State of California on January 11, 1978,
in Book 411 of Maps, page(s) 10 and 11.
ARB #237-02-051.06
23
<PAGE> 1
EXHIBIT 10.12
AGREEMENT DRAFT
FOR
ASIC DESIGN AND DEVELOPMENT
BY AND BETWEEN
IMMERSION CORPORATION
AND
KAWASAKI LSI U.S.A., INC.
<PAGE> 2
AGREEMENT FOR ASIC DESIGN AND DEVELOPMENT
This Agreement for ASIC Design and Development ("Agreement") is entered into and
is effective as of this 16th day of October 1997 (the "Effective Date") by and
between Immersion Corporation, a California corporation having its principal
place of business at 2158 Paragon Drive, San Jose, CA 95131 (hereinafter
referred to as "Immersion") and Kawasaki LSI U.S.A., Inc., a California
corporation having its principal place of business at 2570 North First Street,
Suite 301, San Jose, CA 95131 (hereinafter referred to as "KLSI").
RECITALS
Immersion wishes to have KLSI design and develop for Immersion and KLSI desires
to design and develop for Immersion an integrated circuit device as specified
more fully herein.
AGREEMENT
1. DEFINITIONS
1.1 "A/D Converter" shall mean the A/D converter described in Exhibit A
("Specifications").
1.2 "[****] Modifications" shall mean modifications made by [****] in the
course of performance under the AXIS Chip Agreement to the [****] and
the [****] and the related Intellectual Property Rights.
1.3 "[****] Preexisting Technology" shall mean [****] technology and the
related Intellectual Property Rights in existence prior to the Effective
Date and used in the AXIS Chip, consisting of the [****], the [****],
the [****], the [****], the [****], the [****], the [****], and the
[****].
1.4 "AXIS Chip" shall mean an integrated circuit device which is designed to
provide an optimized version of the force-feedback functions delivered
by the Immersion force feedback firmware.
1.5 "AXIS-derived Chip" shall mean an integrated circuit device which
consists of the [****] and which (i) does not contain the same [****],
(ii) does not contain any portion of the [****], (iii) does not
incorporate firmware that provides [****], to the best of KLSI's
knowledge, as determined by KLSI by making a reasonable inquiry, and
(iv) does have the [****] through a means disclosed and described to
Immersion in writing and approved by Immersion in writing.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
2
<PAGE> 3
1.6 "AXIS Chip Agreement" shall mean the written agreement between KLSI and
[****] regarding the development of the AXIS Chip and the ownership and
licensing of certain technology and the related Intellectual Property
Rights used in the AXIS Chip.
1.7 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.8 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.9 "Confidential Information" shall mean: (i) the Specifications, the
Product, the PLSSOP, the Prototype Units, the [****], the [****], the
Immersion Requested Revisions ("IRR") and any trade secrets related to
any of the foregoing, including but not limited to any information
relating to either party's product plans, costs, prices and names,
finances, marketing plans, business opportunities, personnel, research,
development or know-how; (ii) any information designated by the
disclosing party as confidential in writing or, if disclosed orally,
reduced to writing within thirty (30) days, provided, however, that
"Confidential Information" shall not include information that (i) is or
becomes generally known or available by publication, commercial use or
otherwise through no fault of the receiving party; (ii) is known and has
been reduced to tangible form by the receiving party at the time of
disclosure and is not subject to restriction; (iii) is independently
developed by the receiving party by individuals who do not have access
to the same information from the disclosing party; (iv) is lawfully
obtained from a third party who has the right to make such disclosure;
or (v) is released for publication by the disclosing party in writing.
1.10 "Deliverables" shall mean the PLSSOP, the testable Prototype Units, the
First Articles and Documentation.
1.11 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.12 "Development and Payment Schedule" shall mean the time for the parties'
performance under this Agreement, as set forth in Exhibit B
("Development and Payment Schedule").
1.13 "Documentation" shall mean the Specification, the VHDL File for the AXIS
Chip, and other documentation that would reasonably accompany the
Deliverables.
1.14 "Errors" shall mean: (i) in the case of acceptance under the terms of
Section 4.2 ("Acceptance"), defects in the Prototype Units which cause
such Prototype Units not to operate in conformance with the requirements
of this Agreement, and, in the case of warranty under the terms of
Section 7.1 ("Warranties"), defects in the Deliverables which cause such
Deliverables not to operate in conformance with Exhibit A
("Specifications"); (ii) defects in the Products which cause such
Products not to operate in conformance with Exhibit A
("Specifications"); and (iii) defects in the Documentation which render
it inaccurate, erroneous or otherwise unreliable.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
3
<PAGE> 4
1.15 "Final Mask ROM" shall mean the final mask ROM described in Exhibit A
("Specifications").
1.16 "First Articles" shall mean a limited number of units of the Product, as
mutually agreed upon by the parties, which are manufactured as a test
run for review and acceptance by Immersion prior to full production of
the Product.
1.17 "Force Feedback Functionality" shall mean the basic functions required
by a local processor for use in a force feedback product. These
functions include [****]
1.18 [****] shall mean the Immersion [****] designed to implement the Force
Feedback Functionality.
1.19 "Immersion Preexisting Technology" shall mean the Immersion technology
and related Intellectual Property Rights in existence prior to the
Effective Date and used in the AXIS Chip, consisting of the [****] and
the [****].
1.20 "Immersion Requested Revisions" shall mean the technology modifications
and related Intellectual Property Rights created by KLSI in the course
of the performance under this Agreement and/or the technology
modifications and related Intellectual Property Rights created by [****]
in the course of performance under the AXIS Chip Agreement, consisting
of (i) modifications to the [****] and the [****] and (ii)
modifications, which are specifically implemented to facilitate and
support the implementation of the Force Feedback Functionality which are
made to the [****], the [****], the [****], the [****], the [****], the
[****], the [****], the [****], the [****], the [****] and the [****].
1.21 "Intellectual Property Rights" shall mean all worldwide patents and
other patent rights (such as continuations, continuations in part and
reissues), utility models, copyrights and mask work rights, including
without limitation, all applications and registrations with respect
thereto and rights in trade secrets and know-how.
1.22 "Invention" shall mean any Invention or discovery which is or may be
patentable or otherwise protectable under Title 35 of the United States
Code.
1.23 "Inventions" shall mean all ideas, creations, works, processes, designs
and methods (whether or not patentable, copyrightable or registrable as
a mask work) incorporated in the design or function of the Prototype
Unit, and all documentation associated therewith, which are created or
discovered as part of the Services; provided, however, that
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
4
<PAGE> 5
Inventions shall not include any discoveries, improvements or ideas made
solely by KLSI regarding methods of designing, structuring or producing
products generally.
1.24 "KLSI Modifications" shall mean modifications made by KLSI in the course
of performance under this Agreement to the [****] and the [****] and the
related Intellectual Property Rights.
1.25 "KLSI Preexisting Technology" shall mean KLSI technology and the related
Intellectual Property Rights in existence prior to the Effective Date
and used in the AXIS Chip, consisting of the [****], the [****] and the
[****].
1.26 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.27 "Non-Immersion Technology" shall mean the [****] Preexisting Technology,
the [****] Modifications, the [****] Preexisting Technology and the
[****] Modifications.
1.28 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.29 "Product" shall mean the Axis Chip as more fully described in the
Specifications.
1.30 "Post Layout Simulation Sign Off Package" or "PLSSOP" shall mean the
computer generated simulation of the Prototype Unit that is a model of
the Prototype Unit and that is used to review the features and
functionality which will be present in the Prototype Unit.
1.31 "Prototype Units" shall mean initial working testable units of the
Products that conform to the PLSSOP and the Specifications.
1.32 "Purchase Agreement" shall mean the agreement to be entered into by
Immersion and KLSI under which KLSI will produce AXIS Chips and
Immersion will purchase the AXIS Chips.
1.33 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.34 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.35 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.36 "Second Source" shall mean an alternative foundry for the AXIS Chip
licensed by Immersion to produce the AXIS Chip for Immersion.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
5
<PAGE> 6
1.37 "Services" shall mean the design and development of the Prototype Units
and the fabrication and assembly of the Prototype Units.
1.38 [****] shall mean the Immersion [****].
1.39 "Specifications" shall mean the initial technical and design
specifications for the Product set forth in Exhibit A
("Specifications").
1.40 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.41 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.42 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.43 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.44 [****] shall mean the [****] described in Exhibit A ("Specifications").
1.45 [****] shall mean the [****] described in Exhibit A ("Specifications").
2. SCOPE OF WORK
2.1 Services. Based on the terms and conditions set forth in this Agreement,
KLSI agrees to perform the Services in accordance with the Development
and Payment Schedule. Except for the design and development functions of
system definition, logic design and breadboard definition and
construction (which will be provided by Immersion), KLSI will be
responsible for obtaining all the technology, labor, material, tooling
and facilities necessary for such design and development of the
Prototype Unit.
2.2 Progress Reports. KLSI will provide Immersion with written progress
reports, as requested by Immersion, starting one week after the
Effective Date and ending on the date of Immersion's final acceptance of
the Prototype Unit and receipt of all Deliverables. Each report shall
indicate progress as follows:
(a) Status of progress toward the next scheduled milestone;
(b) Short description of problems in meeting such milestone, if any;
(c) Proposed recover method to meet the next milestone, if necessary;
(d) Probability of meeting the next milestone;
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
6
<PAGE> 7
(e) Any changes in KLSI's estimate of recurring manufacturing costs for
the Prototype Unit or First Articles.
3. DESIGN REVIEW AND SPECIFICATION CHANGES
3.1 Design Review. Immersion is entitled to conduct periodic design reviews
to ensure its satisfaction with the Services. Upon reasonable notice,
KLSI shall allow Immersion during normal business hours, to visit its
places of business for development and manufacturing to discuss and
inspect the status of the development of the Product.
3.2 Changes to the Specification. Immersion is entitled to request
modifications in the form of changes or additions to the Specifications
at anytime time during the term of this Agreement. Such requests shall
be submitted by Immersion to KLSI in writing. If any such modification
of the Specifications materially increases or decreases the cost or time
of performance of the Services, the parties will negotiate an equitable
adjustment to this Agreement. Upon receipt of Immersion's written
approval, KLSI will proceed with the implementation of the prescribed
changes and the Specifications and other exhibits to the Agreement shall
be modified in writing accordingly to reflect such agreed upon changes
and signed by both parties.
4. DELIVERABLES: DELIVERY; ACCEPTANCE; AND REJECTION
4.1 Deliverables KLSI agrees to deliver the Deliverables in accordance with
the Development and Payment Schedule. Deliverables shall be delivered to
the Immersion Project Manager accompanied by a written statement listing
the items delivered and stating that they are ready for Immersion's
acceptance testing. All Deliverables shall be sent to Immersion F.O.B.
Immersion's facility at the address stated above. KLSI's liability for
loss shall cease upon delivery to the F.O.B. point and title to the
Deliverables shall shift to Immersion without any effect on the
intellectual property rights in such Deliverables.
4.2 Acceptance
(a) Immersion, with the assistance of KLSI if requested by Immersion,
shall examine and test the PLSSOP and the Prototype Unit and examine
each other Deliverable upon delivery to determine whether the PLSSOP
and the Prototype Unit and each other Deliverable conforms to the
Specification and that the Prototype Unit conforms to the PLSSOP.
(b) Within the acceptance period for each Deliverable specified in
Exhibit B ("Development and Payment Schedule"), Immersion shall
provide KLSI with written acceptance of such Deliverable or a
written statement of Errors (the "Statement of Errors") to be
corrected prior to Immersion's payment of the amount due upon
Immersion's acceptance of such Deliverables, if any. Immersion will
examine the Deliverables received against the list in Exhibit C
("Deliverables") to confirm that all such Deliverables have, in
fact, been delivered
7
<PAGE> 8
and will notify KLSI if any items are missing. KLSI will promptly
deliver any Deliverables that are missing upon notification by
Immersion.
(c) KLSI will correct the Errors in any Deliverable set forth in the
Statement of Errors and redeliver the Deliverable to Immersion. The
parties will negotiate a reasonable time period for each Error
correction depending on the nature of the Errors. The following will
serve as reasonable guidelines for Error correction:
(i) seven (7) calendar days unless reprocessing of prototypes,
remasking or redesign is required,
(ii) twenty-one (21) calendar days if reprocessing of prototypes is
required,
(iii) twenty-five (25) calendar days if remasking is required, and
(iv) thirty-five (35) calendar days if redesign (new tape) is
required.
(d) Immersion will, within thirty (30) calendar days after any such
redelivery, provide KLSI with written acceptance or another
Statement of Errors. The procedure set forth in this Section 4.2
will be repeated until Immersion accepts the Deliverables or
terminates this Agreement pursuant to Section 4.3 ("Rejection").
4.3 Rejection. Should any Prototype Unit fail to conform to the PLSSOP
and/or the Specification either (i) after the second redelivery of such
Prototype Unit pursuant to Section 4.2(b) or (ii) after any delivery or
redelivery which is late, then KLSI will be deemed to be in material
breach of this Agreement and Immersion may terminate the Agreement
pursuant to Section 10.1 ("Termination for Cause by Either Party").
5. INTELLECTUAL PROPERTY RIGHT
5.1 Disclosure. KLSI will promptly and fully disclose and describe to
Immersion in writing any Inventions which are conceived or reduced to
practice during the term of this Agreement and within the scope of the
development of the Immersion Requested Revisions.
5.2 Ownership.
(a) Ownership by Immersion. The parties agree that Immersion owns and
will solely own all Immersion Preexisting Technology and Immersion
Requested Revisions. Nothing in this Agreement is intended to affect
or restrict Immersion's rights in the Immersion Preexisting
Technology or Immersion Requested Revisions. KLSI hereby assigns to
Immersion all right, title and interest in the Immersion Requested
Revisions. KLSI represents and warrants and agrees to insure that
under the terms of the AXIS Chip Agreement, all Immersion Requested
Revisions created by [****] will be assigned to Immersion, through
KLSI. KLSI agrees that in no case will Immersion be required to
assign any Immersion Preexisting
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
8
<PAGE> 9
Technology to KLSI or [****] and KLSI agrees that KLSI's and
[****]'s use of the Immersion Requested Revisions shall be limited
to the licenses granted herein.
(b) Ownership by KLSI. KLSI owns and will own all KLSI Preexisting
Technology. Nothing in this Agreement is intended to affect or
restrict KLSI's rights in the KLSI Preexisting Technology. Immersion
agrees that in no case will KLSI be required to assign any KLSI
Preexisting Technology to Immersion and that assignment of the
Immersion Requested Revisions will not in any way grant Immersion
rights in the KLSI Preexisting Technology except as licensed to
Immersion under the terms of this Agreement.
(c) Cooperation. KLSI agrees to assist Immersion, and will make
appropriate contractual arrangements with [****] for [****] to
assist Immersion, in any reasonable manner to maintain and enforce
Immersion's Intellectual Property Rights in the Immersion Requested
Revisions for Immersion's benefit in any and all countries, and KLSI
agrees to execute, and to make appropriate contractual arrangements
with [****] for [****] to execute, when requested by Immersion,
applications for and assignments to Immersion and any other
documents necessary to effectuate the ownership provisions
applicable to the Intellectual Property Rights in the Immersion
Requested Revisions. KLSI represents and agrees and will make
appropriate contractual arrangements with [****] for [****] to
represent and agree, that all persons who perform work on the
Immersion Requested Revisions will have signed written agreements
which vest all Intellectual Property Rights in KLSI, or [****], as
applicable, for assignment to Immersion.
5.3 Licenses.
(a) License by KLSI to Immersion. KLSI hereby grants Immersion a
worldwide nonexclusive license, under KLSI's and [****] Intellectual
Property Rights in the Non-Immersion Technology (i) to have KLSI
manufacture the AXIS Chip and to have a Second Source manufacture
the AXIS Chip if KLSI cannot accommodate Immersion and Immersion's
designated parties' requests in terms of volume production of the
AXIS Chip due to lack of wafer capacity or allotment of wafer
fabrication capacity, and (ii) to distribute and sell the AXIS Chip
through Immersion's channels of distribution.
(b) License by Immersion to KLSI. Immersion hereby grants KLSI a
worldwide nonexclusive license, without a right to sublicense, under
Immersion's Intellectual Property Rights in the [****], the
Immersion Requested Revisions and the [****] (i) to use and modify
the [****], the Immersion Requested Revisions and the [****] in
developing, prototyping and manufacturing the AXIS Chip and (ii) to
distribute and sell the AXIS Chip to Immersion and Immersion
designated parties, as provided in the Purchase Agreement. In
addition, Immersion hereby
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
9
<PAGE> 10
grants KLSI a license under Immersion's Intellectual Property Rights
in the [****] and the Immersion Requested Revisions (i) to use and
modify the Immersion Requested Revisions and to include the [****]
(but to disable such [****]) in developing, prototyping and
manufacturing the AXIS-derived Chip and (ii) to distribute and sell
the AXIS-derived Chip.
(c) Prohibitions. KLSI expressly agrees that it will not, during the
term of this Agreement or thereafter, without Immersion's prior
written consent:
(i) knowingly design, simulate, sell or otherwise distribute a
prototype device identical to the Prototype Unit, either
for KLSI's account or for any third party, or assist any
third party in so doing; or
(ii) unless for Immersion, knowingly develop, utilizing any
Confidential Information regarding the Prototype Unit
obtained by KLSI from Immersion, a prototype for a
semiconductor device that is pin-compatible with the
Prototype Unit, or assist any third party in so doing.
6. PAYMENTS
Immersion shall make payments to KLSI in accordance with the Development and
Payment Schedule, subject to completion of the applicable milestones and
acceptance of the applicable Deliverables by Immersion. Such payments shall be
due net [****] from Immersion's receipt of KLSI invoices.
7. WARRANTIES AND INDEMNIFICATION
7.1 Warranties. KLSI warranties that: (i) all Deliverables delivered to
Immersion hereunder will conform to the Specifications for a period of
[****] days after acceptance by Immersion; (ii) in connection with KLSI
performance of the Services, KLSI will not knowingly infringe any
patent, copyright, trade secret, mask work right, or any other
proprietary right of any third party; (iii) KLSI has not previously
granted and will not grant any rights in the Product or any Inventions
to any third party which grant is inconsistent with the rights granted
to Immersion herein; and (iv) all Products delivered to Immersion
hereunder will conform to the Specifications for a period of [****]
after acceptance by Immersion. In the event that the Products delivered
to Immersion do not conform to the Specifications, KLSI will repair or
replace the nonconforming Products.
7.2 Infringement Indemnity.
(a) KLSI shall, at its expense and at Immersion's request, defend any
claim or action brought against Immersion, and Immersion's
subsidiaries, affiliates, directors, officers, employees, agents and
independent contractors, to the extent it is based on a claim that
the Product provided under this Agreement infringes or violates
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
10
<PAGE> 11
any patent, copyright, trademark, trade secret or other proprietary
right of a third party, and shall indemnify and hold harmless from
and against any costs, damages and fees reasonably incurred by
Immersion including but not limited to fees of attorneys and other
professionals that are attributable to such claim; provided,
however, that: (i) Immersion gives KLSI reasonably prompt notice in
writing of any such suit and permits KLSI through counsel of its
choice, to answer the charge of infringement and defend such claim
or suit; (ii) Immersion provides KLSI with information, assistance
and authority, at KLSI's expense, to enable KLSI to defend such
suit; and (iii) KLSI shall not be responsible for any settlement
made by Immersion without KLSI's written permission. In the event
Immersion agrees to settle the suit, Immersion agrees not to
publicize the settlement nor to permit the party claiming
infringement to publicize the settlement without first obtaining
KLSI's written permission.
(b) KLSI shall have no liability under this Section 7.2 ("Infringement
Indemnity") to the extent that such claim or suit could have been
avoided but for (i) the combination, operation, or use of the
Product with equipment, logic, software or products not supplied by
KLSI, (ii) any alteration or modification made to the Products after
delivery by KLSI to Immersion or (iii) the use by KLSI of
specifications or requirements provided by Immersion.
7.3 Duty to Correct. Notwithstanding Section 7.2(a), should the Product
become the subject of a claim of infringement of a third party's
proprietary right, KLSI shall, at KLSI's expense: (i) procure for
Immersion the past right to make, use and sell and the future right to
continue to make, use and sell the Product; (ii) replace or modify the
Product to make such non-infringing, provided that the same function is
performed by the replacement or modified Product to Immersion
satisfaction; or (iii) if the past and future rights to continue to
make, use and sell cannot be procured or the Product cannot be replaced
or modified at reasonable expense, reimburse Immersion for the total
amount paid under this Agreement.
7.4 General Indemnity. KLSI shall, at KLSI's expense, indemnify, hold
Immersion harmless and, at Immersion's request, defend Immersion and
Immersion's subsidiaries, affiliates, directors, officers, employees,
agents and independent contractors, from and against any and all loss,
cost, liability or expense (including costs and reasonable fees of
attorneys and other professionals) arising out of or in connection with
KLSI performance under this Agreement to the extent caused by, in whole
or in part, any negligent act or omission or willful misconduct of KLSI
or KLSI employees, agent or independent contractors, including but not
limited to any act or omission that contributes to: (i) any personal
injury, sickness, disease or death; (ii) any damage to or destruction of
property of Immersion or any loss of use resulting therefrom; (iii) any
violation of any statute, ordinance or regulation.
11
<PAGE> 12
8. CONFIDENTIALITY AND PROPRIETARY NOTICE
8.1 Each party acknowledges that by reason of its relationship to the other
hereunder, it will access to other party's Confidential Information.
Each party agrees that it shall not use in any way for its account or
the account of any third party, nor disclose to any third party any
Confidential Information revealed to it by the other party. Neither
party shall use the Confidential Information of the other party for
purposes other than those necessary to directly further the purposes of
this Agreement. Each party shall take every necessary precaution to
protect the confidentiality of all Confidential Information.
8.2 Any breach of the restrictions contained in this Section 8 is a breach
of this Agreement which will cause irreparable harm to the other party
entitling the other party to injunctive relief in addition to all legal
remedies.
8.3 KLSI will cause the outside package and top level metal mask work layer
of the Product to bear a mask work and copyright notice for Immersion's
benefit.
9. TERM
This Agreement will commence on the Effective Date and will continue until
terminated as provided in this Agreement.
10. TERMINATION
10.1 Termination for Cause By Either Party. Either party shall have the right
to terminate this Agreement immediately upon written notice at any time
if:
(a) the other party is in material breach of any warranty, term,
condition or covenant of this Agreement other than those contained
in Section 8 and fails to cure that breach within sixty (60) days
after written notice of that breach;
(b) the other party is in material breach of any warranty, term,
condition or covenant of Section 8; or
(c) the other party: (i) becomes insolvent; (ii) falls to pay its debts
or perform its obligations in the ordinary course of business as
they mature; (iii) admits in writing its insolvency or inability to
pay its debts or perform its obligations as they mature or (iv)
makes any assignment for the benefit of creditors.
10.2 Effect of Termination. Upon termination of this Agreement, each party
shall be released from all obligations and liabilities to the other
occurring or arising after the date of such termination, except that any
termination of this Agreement will not relieve obligations under
Sections 5, 7, 8 and 12 hereof, nor will any such termination relieve
Immersion or KLSI from any liability arising from any breach of this
Agreement. Neither party will be liable to the other for damages of any
sort solely as a result of terminating this Agreement in accordance with
its terms. Termination of this Agreement will be without prejudice to
12
<PAGE> 13
any other right or remedy of either party. Upon any termination of this
Agreement, KLSI will immediately deliver to Immersion all work in
process on the Deliverables, in whole or in part and will confirm in
writing the assignment of all related Intellectual Property Rights.
10.3 Payment by Immersion. Upon any termination of this Agreement pursuant to
the provisions of Section 10.1 above, Immersion's monetary obligation to
KLSI will be to pay for all milestones completed and accepted by
Immersion as set forth in the Development and Payment Schedule, and to
pay KLSI pro rata (based on the ratio (equal to 1:1)) of the number of
calendar days elapsed since completion of the last payment milestone and
the number of days between such milestone and the next subsequent
milestone in the Development and Payment Schedule) for work done by KLSI
towards the next subsequent milestone, including any costs, previously
approved by Immersion in writing, that are reasonably incurred for
materials related to any subsequent milestones. In no event, however,
shall Immersion's liability exceed the amounts set forth in the
Development and Payment Schedule.
11. DISCLAIMER OF CONSEQUENTIAL DAMAGES
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES FOR BREACH OF OR FAILURE TO PERFORM UNDER
THIS AGREEMENT, EVEN IF THAT PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES.
12. GENERAL
12.1 Force Majeure. Neither party shall be liable for any failure or delay in
its performance under this Agreement due to causes, including, but not
limited to, acts of God, acts of civil or military authority, fires,
epidemics, floods, earthquakes, riots, wars, sabotage, labor shortages
or disputes, and governmental actions, which are beyond its reasonable
control; provided that the delayed party: (i) gives the other party
written notice of such cause promptly, and in any event within fifteen
(15) days of discovery thereof, and (ii) uses its reasonable efforts to
correct such failure or delay in its performance. The delayed party time
for performance or cure under this Section 12.1 shall be extended for a
period equal to the duration of the cause or sixty (60) days, whichever
is less. Notwithstanding the above provisions in this Section 12.1, the
obligations to make payments under this Agreement which are due and
owing shall not be deferred, excused or otherwise affected by Force
Majeure or any other reasons whether or not foreseen or foreseeable so
long as the services, Deliverables or Products for which the payment is
due are received.
12.2 Relationship of Parties. KLSI is an independent contractor. Neither each
party nor its employees, consultants, contractors or agents are agents,
employees or joint ventures of other party nor do they have any
authority to bind the other party by contract or otherwise to any
obligation. They will not represent to the contrary, either expressly,
implicitly, by appearance or otherwise.
13
<PAGE> 14
12.3 Personnel. KLSI employees, consultants, contractors and agents who work
on Immersion premises will be required to observe Immersion regulations
applying to non-Immersion personnel working on Immersion premises.
12.4 Employment Taxes and Benefits It will be KLSI's obligation to report as
income all compensation received by KLSI pursuant to this Agreement and
pay all taxes due on such compensation.
12.5 Other Tax Implications. The purpose of development of the Deliverables
under this Agreement is to demonstrate that the Product developed
hereunder will conform to the Specifications. The Deliverables have no
intrinsic value as an item. As such, no value added, sales, or use taxes
have been assessed or are anticipated to be required as a result of the
Services performed under this Agreement. To the extent any such taxes
are ultimately assessed to Immersion as a retailer, Immersion shall have
responsibility to discharge the claim.
12.6 Assignment. The rights and liabilities of the parties hereto will bind
and inure to the benefit of their respective successors, executors and
administrators, as the case may be. Each party may not assign or
delegate its rights or obligations under this Agreement either in whole
or in part, without the prior written consent of the other party except
that Immersion may assign this Agreement in the case of a merger,
acquisition or sale of assets. Any attempted assignment in violation of
the provisions of this Section 12.6 will be void. Immersion agrees that
KLSI may use [****] as a subcontractor to perform the Services.
12.7 Applicable Law. This Agreement will be governed by and construed in
accordance with the laws of' the United States and the State of
California as applied to agreements entered into and to be performed
entirely within California between California residents.
12.8 Jurisdiction and Venue. The parties hereby submit to the jurisdiction
of, and waive any venue objections against, the United States District
Court for the Northern District of California, the Superior Court of the
State of California for the County of Santa Clara, the Santa Clara
Municipal Court, and any mutually agreed to alternative dispute
resolution proceeding taking place in Santa Clara County, California, in
any litigation arising out of this Agreement.
12.9 Severability. If for any reason a court of competent jurisdiction rinds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of this Agreement shall be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement shall continue in full force and
effect.
12.10 Notices. All notices required or permitted under this Agreement shall be
in writing, and be deemed given when: (i) delivered personally; (ii)
when sent by confirmed telex or facsimile; (iii) five (5) days after
having been sent by registered or certified mail, return receipt
requested, postage prepaid; or (iv) one (1) day after deposit with a
commercial overnight carrier, with written verification of receipt. All
communications will be sent to
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
14
<PAGE> 15
the addresses first above written. Either party may change its address
by giving notice pursuant to this Section 12.10.
12.11 No Waiver. Failure by either party to enforce any provision of this
Agreement shall not be deemed a waiver of future enforcement of that or
any other provision.
12.12 No Rights in Third Parties Rights. This Agreement is made for the
benefit of Immersion and KLSI and their respective subsidiaries and
affiliates, if any, and not for the benefit of any third parties.
12.13 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
12.14 Headings and References. The headings and captions used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
12.15 Construction. This Agreement has been negotiated by the parties and
their respective counsel. This Agreement will be fairly interpreted in
accordance with its terms and without any strict construction in favor
of or against either party.
12.16 Complete Agreement. This Agreement, including all Exhibits, constitutes
the entire agreement between the parties with respect to the subject
matter hereof, and supersedes and replaces all prior or contemporaneous
understandings or agreements, written or oral, regarding such subject
matter hereof. In the case of any conflict between the terms of this
Agreement and any of the Exhibits, the terms of the Agreement shall
govern and control. No amendment to or modification of this Agreement
shall be binding unless in writing and signed by a duly authorized
representative of both parties. To the extent any terms and conditions
of this Agreement conflict with the terms and conditions of any invoice,
purchase order or purchase order acknowledgment placed hereunder, the
terms and conditions of this Agreement shall govern and control.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives.
KAWASAKI LSI U.S.A. INC. IMMERSION CORPORATION
By: /s/ Masanori Kodama By: /s/ Louis Rosenberg
------------------------------ ------------------------------
(Signature) (Signature)
Masanori Kodama Louis Rosenberg
------------------------------ ------------------------------
(Print Name) (Print Name)
15
<PAGE> 16
President President
------------------------------ ------------------------------
(Title) (Title)
10/15/97 10/16/97
------------------------------ ------------------------------
(Date) (Date)
16
<PAGE> 1
EXHIBIT 10.13
SUBJECT TO RULE 408 AGREEMENT
PATENT LICENSE AGREEMENT
This Patent License Agreement (the "Agreement") is between Microsoft Corporation
("Microsoft"), a Washington corporation, having a place of business at One
Microsoft Way, Redmond, Washington 98052, and Immersion Corporation
("Immersion"), a California corporation, having a place of business at 2158
Paragon Drive, San Jose, California 95131, each a "party" and collectively the
"parties". The effective date of this Agreement is the date last signed below
(the "Effective Date").
WHEREAS, Immersion is a technology development business with expertise
and patent rights in the field of force feedback (FF) technologies; and
WHEREAS, Microsoft is also an innovator in and has expertise and patent
rights in the field of FF technologies, and has contributed to the
creation of a substantial market for FF gaming devices; and
WHEREAS, to resolve present patent issues, the parties wish to enter
into a license agreement as set forth herein;
NOW, THEREFORE, in consideration of the payments and promises made hereunder,
the sufficiency of which the parties acknowledge, the parties agree as follows:
1. DEFINITIONS
1.05 DIRECTINPUT refers to the dinput.dll, dinput.vxd, pid.dll,
dinput.h and dinputd.h files contained in either Version 6 or
in Version 7 of DirectX, as they exist as of the Effective
Date, and future versions of such files to the extent (but
only to the extent) they do not contain additional or modified
FF-related functionality. For purposes of this Agreement, the
version of DirectInput contained in DX7 which exists as of the
Effective Date is build 4.07.00.0201.
1.06 END-USER means a consumer who purchases and uses DirectInput,
or software or hardware into which DirectInput is integrated
or with which DirectInput is bundled, solely for his or her
own enjoyment or personal use. END-USERS do not include
developers who use DirectInput to create commercial products
such as hardware devices, software products or webpages.
1.1 FF is an abbreviation for Force Feedback. FORCE FEEDBACK means
the simulation of feel or tactile sensations.
1.2 IMMERSION FF PATENT PORTFOLIO means (i) all FF-related claims
in any utility patents and utility patent applications owned
or acquired by, or licensed to, Immersion or its Subsidiaries
(which, in the case of patents licensed to Immersion or its
Subsidiaries, are permitted to be sublicensed) and that are
filed as of the Effective Date of this Agreement or during the
term of this Agreement, and (ii) all subsequent FF-related
claims in any utility patents (i.e. divisional, continuation,
continuation-in-part, reissue, reexaminations and foreign
patents/applications) that claim priority based on such
patents or patent applications described in (i) above. A
listing of the currently-issued patents comprising the
Immersion FF Patent Portfolio as of the Effective Date is
attached as Exhibit A ("Immersion FF Patent Portfolio").
1.3 IMMERSION FF PATENT PORTFOLIO LICENSEE means any person that
has been or subsequently is licensed by Immersion or its
Subsidiaries to practice at least some of the inventions
claimed in the Immersion FF Patent Portfolio.
-1-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 2
1.4 IMMERSION LICENSEE PRODUCT(S) means FF hardware devices of any
kind shipped in commercial quantities by or on behalf of
Immersion Patent Portfolio Licensees on or before [****] (the
"Immersion Licensee Current Version"), as well as all
substantially similar future versions of such devices. A
device is "substantially similar" within the meaning of the
foregoing sentence if it has substantially the same
appearance, performance, feature set and architecture as the
Immersion Licensee Current Version, notwithstanding (i)
firmware and driver changes made to ensure compatibility with
future versions of Microsoft operating system software; (ii)
changes related to adding USB support; and (iii) cost
reductions to the electronics or existing mechanical design.
1.5 IMMERSION PRODUCT(S) means FF hardware devices of any kind
shipped in commercial quantities by Immersion or its
Subsidiaries on or before [****] (the "Immersion FF Current
Version"), and any future replacement FF hardware devices
marketed and sold by Immersion or its Subsidiaries which are
substantially similar to the Immersion FF Current Version. A
device is "substantially similar" within the meaning of the
foregoing sentence if it has substantially the same
appearance, performance, feature set and architecture as the
Immersion FF Current Version, notwithstanding (i) firmware and
driver changes made to ensure compatibility with future
versions of Microsoft operating system software; (ii) changes
related to adding USB support; (iii) cost reductions to the
electronics or existing mechanical design.
1.6 MICROSOFT FF PATENT PORTFOLIO means (i) all FF-related claims
in any utility patents and utility patent applications owned
or acquired by, or licensed to, Microsoft or its Subsidiaries
(which, in the case of patents licensed to Microsoft or its
Subsidiaries, are permitted to be sublicensed) and that are
filed as of the Effective Date of this Agreement, and (ii) all
subsequent FF-related patent claims in any utility patents
(i.e. divisional, continuation, continuation-in-part, reissue,
reexaminations and foreign patents/applications) that claim
priority based on such patents or patent applications
described in (i) above. A listing of the currently-issued
patents comprising the Microsoft FF Patent Portfolio as of the
Effective Date is attached as Exhibit B ("Microsoft FF Patent
Portfolio")
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-2-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 3
1.7 MICROSOFT PRODUCTS refers collectively to the Sidewinder Force
Feedback Joystick, Sidewinder Force Feedback Wheel and R-4
Force Feedback Wheel products.
1.8 R-4 FORCE FEEDBACK WHEEL means the FF user interface device
manufactured by or for Saitek Ltd. which bears the "R-4 Force
Feedback Wheel" product name as the primary trademark, as such
product exists as of [****] (the "R-4 Current Version") and
any future versions of such product which are substantially
similar to the R-4 Current Version, are introduced into the
commercial marketplace in commercial quantities by [****], and
are branded with "R-4 Force Feedback Wheel" as the primary
trademark.
1.9 SAITEK LICENSE means the Force Feedback technology license
agreement between Saitek Ltd. and Microsoft as such license
agreement exists as of the Effective Date or as it is amended
as set forth in this Agreement.
1.10 SIDEWINDER FORCE FEEDBACK JOYSTICK means (a) the FF joystick
product sold as of May 1, 1999 by Microsoft under the
"Sidewinder Force Feedback Joystick" product name; (b) a
replacement FF joystick product (however named or labeled)
with Substantially Similar Functional Characteristics which is
shipped by Microsoft or its Subsidiaries in commercial volumes
on or before [****] (devices qualifying under (a) or (b) shall
hereinafter be referred to as the "Sidewinder Joystick Current
Version"); and (c) any future replacement FF joystick products
marketed and sold by Microsoft or its Subsidiaries which are
substantially similar to the Sidewinder Joystick Current
Version. A product is "substantially similar" within the
meaning of (c) above if it has substantially the same
appearance, performance, feature set and architecture as the
Sidewinder Joystick Current Version, notwithstanding (i)
firmware and driver changes made to ensure compatibility with
future versions of Microsoft operating system software; (ii)
changes related to adding USB support; (iii) cost reductions
to the electronics or existing mechanical design.
1.11 SIDEWINDER FORCE FEEDBACK WHEEL means (a) the FF steering
wheel product sold as of May 1, 1999 by Microsoft under the
"Sidewinder Force Feedback Steering Wheel" product name; (b) a
replacement FF steering wheel product (however named or
labeled) with Substantially Similar Functional Characteristics
which is shipped by Microsoft or its Subsidiaries in
commercial volumes on or before [****] (devices qualifying
under (a) or (b) shall hereinafter be referred to as the
"Sidewinder Wheel Current Version"); and (c) any future
replacement FF steering wheel products marketed and sold by
Microsoft or its Subsidiaries which are substantially similar
to the Sidewinder Wheel Current Version. A product is
"substantially similar" within the meaning of (c) above if it
has substantially the same appearance, performance, feature
set and architecture as the Sidewinder Wheel Current Version,
notwithstanding (i) firmware and driver changes made to ensure
compatibility with future
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-3-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 4
versions of Microsoft operating system software; (ii) changes
related to adding USB support; (iii) cost reductions to the
electronics or existing mechanical design.
1.12 SIDEWINDER PRODUCTS means the collective term for the
Sidewinder Force Feedback Joystick and Sidewinder Force
Feedback Wheel products.
1.13 SUBSIDIARY means a corporation, company or other entity:
a) more than fifty percent (50%) of whose outstanding
shares or securities (representing the right to vote
for the election of directors or other managing
authority) are, as of the Effective Date, owned or
controlled, directly or indirectly, by a party, but
such corporation, company, or other entity shall be
deemed to be a Subsidiary only so long as such
ownership or control exists; or
b) which does not have outstanding shares or securities,
as may be the case in a partnership, joint venture or
unincorporated association, but more than fifty
percent (50%) of whose ownership interest
representing the right to make the decisions for such
corporation, company or other entity is, as of the
Effective Date, owned or controlled, directly or
indirectly, by a party, but such corporation, company
or other entity shall be deemed to be a Subsidiary
only so long as such ownership or control exists.
1.14 SUBSTANTIALLY SIMILAR FUNCTIONAL CHARACTERISTICS means that a
current version of a given product and its replacement version
(e.g., a currently shipping FF joystick product and its
replacement FF joystick product) bear the following
relationship to each other: the replacement product has
substantially the same functionality and feature set as the
current version, [****]
2. IMMERSION LICENSE TO MICROSOFT
2.1 SIDEWINDER PRODUCT PATENT LICENSE: In consideration for the
one-time payment made in Section 5.1 ("Microsoft One-Time
Payment to Immersion") and the license and covenant-not-to-sue
set forth in Section 3.2 ("License and Covenant-Not-To-Sue
Under Microsoft FF Patent Portfolio"), Immersion and its
Subsidiaries grant Microsoft and its Subsidiaries a worldwide,
nonexclusive license under the Immersion FF Patent Portfolio
(which license shall become irrevocable, perpetual, non-
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-4-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 5
terminable and fully paid-up upon Immersion's receipt of
Microsoft's one-time payment required under Section 5.1) to
make, have made, use, have used, import and have imported,
sell, have sold, and offer for sale Sidewinder Products,
subject to the limitation that, except for reasonable product
transition overlap (including possible manufacturing overlap
as well as marketing efforts to clear the distribution
channels of one product while its replacement product is being
introduced), the foregoing license shall extend to only one
Sidewinder Force Feedback Joystick product and one Sidewinder
Force Feedback Wheel product being manufactured or marketed by
or for Microsoft or its Subsidiaries at any one time. Such
license shall apply to Sidewinder Products without regard to
whether such Sidewinder Products are marketed in a bundle with
other separate products.
2.2 MICROSOFT SUBLICENSING RIGHTS: Immersion and its Subsidiaries
grant to Microsoft and its Subsidiaries a worldwide,
nonexclusive license under the Immersion FF Patent Portfolio
(which license shall become irrevocable, perpetual,
non-terminable and fully paid-up upon Immersion's receipt of
Microsoft's one-time payment required under Section 5.1) (i)
to sublicense third parties to manufacture Sidewinder Products
on behalf of Microsoft or its Subsidiaries for sale by
Microsoft or its Subsidiaries under the licenses granted
herein, and (ii) to sublicense Saitek to make, have made, use,
have used, import and have imported, sell and have sold and
offer for sale R-4 Force Feedback Wheels, solely to the extent
the Saitek License, by its terms, permits such activities as
of the Effective Date. No further sublicensing rights are
granted to Microsoft or its Subsidiaries by this Section 2.2
("Microsoft Sublicensing Rights") except as expressly granted
herein and to the extent the Saitek License grants to Saitek
more extensive rights than those granted by Immersion to
Microsoft or its Subsidiaries for sublicense to Saitek
hereunder, no license by Immersion is implied. Microsoft
hereby agrees that any amendments or modifications it agrees
to make to the Saitek License after the Effective Date shall
not in any way affect the scope of products licensed pursuant
to that Agreement.
2.3 MICROSOFT REFERENTIAL USE OF IMMERSION BRANDING: During the
term of this Agreement, Microsoft agrees to make referential
use of the I-FORCE trademarks by including in each Microsoft
Product (excluding the R-4 Force Feedback Wheel) the following
reference: "Microsoft is a licensee of Immersion Corporation,
the exclusive licensor, under the [INSERT I-FORCE LOGO] logo,
of I-FORCE force-feedback patents and technology."
Specifically, Microsoft agrees to incorporate the foregoing
reference along with a reference (and, to the extent
technically feasible, a hyper-text link) to Immersion's
then-current corporate web site (www.force-feedback.com) in
the About Box for the associated driver software control panel
or comparable location. Microsoft also agrees to place or have
placed on the underside (exterior) of the Sidewinder Products
the following notice: "Microsoft is a licensee of Immersion
Corporation, the exclusive licensor of I-FORCE force-feedback
patents
-5-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 6
and technology." Microsoft agrees to exercise its commercially
reasonable best efforts to implement the foregoing references
into Microsoft Products (excluding the R-4 Force Feedback
Wheel) manufactured by or for Microsoft as promptly as
possible, and commits to doing so by no later than ninety (90)
days from the Effective Date. Notwithstanding the referential
use described in this Section 2.3 ("Microsoft Referential Use
of Immersion Branding"), no trademark license is granted to
Microsoft hereunder to use the Immersion trademarks or to
sublicense such Immersion trademarks to third parties.
Immersion hereby agrees to defend, indemnify and hold
Microsoft, its Subsidiaries, distributors and licensees
harmless from and against any and all claims that Microsoft's
including such reference violates a third party's trademarks
or other proprietary rights. In the event Microsoft receives
such a third party claim ("Indemnification Claim"), Microsoft
agrees to promptly notify Immersion in writing of the
Indemnification Claim and to cooperate with Immersion at
Immersion's expense in defending the Indemnification Claim.
Immersion's obligations under the foregoing indemnity
provision, shall, however, be subject to a total dollar limit
of [****] of all payments by Microsoft to Immersion hereunder
(the "Indemnification Cap"); provided that in the event
Immersion does not within sixty (60) days of receiving notice
from Microsoft of an Indemnification Claim (or within three
(3) days of such notice if the third-party claim is
accompanied by a motion for preliminary injunction or
temporary restraining order that would if granted prevent
Microsoft from shipping product which contains such reference)
agree in writing to fully and completely indemnify and hold
Microsoft harmless with respect to the Indemnification Claim
without regard to the Indemnification Cap, then Microsoft in
its sole discretion may elect to discontinue all future
referential use of the I-FORCE trademarks as set forth in this
Section 2.3 in conjunction with the product sku associated
with the region in which the claim is raised. At such time as
the third-party claim is settled or otherwise resolved in a
manner which permits Microsoft to referentially use the
I-FORCE trademarks, Immersion may request, in writing, that
Microsoft resume referential use of the I-Force trademark as
set forth in this Section 2.3 and Microsoft agrees to do so,
provided that Immersion pays Microsoft's reasonable costs and
allows Microsoft a commercially reasonable amount of time to
make the change. Subject to Microsoft's right to protect its
own trademarks, tradenames and servicemarks, Immersion may
request, in writing, that Microsoft substitute alternative
tradenames, trademarks or servicemarks which may be
substituted for those referred to above or that Microsoft
substitute a different Immersion corporate web site (i.e.,
different from www.force-feedback.com) and Microsoft agrees to
do so, provided that Immersion pays Microsoft's reasonable
costs and allows Microsoft a commercially reasonable amount of
time to make the substitution. Immersion agrees that
Microsoft's obligations to include a hyper-text link under
Sections 2.3 and 6.2 shall not apply to any link to a site
which on a consistent basis (as opposed to the normal
featuring of new products, product reviews, etc.) features a
product
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-6-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 7
sold by a Microsoft competitor more prominently than a product
sold by Microsoft.
2.4 SAITEK BRANDING REQUIREMENT: Microsoft agrees to use its
commercially reasonable best efforts to require Saitek to use
the I-FORCE trademarks and to incorporate them on the bottom
of the R-4 Force Feedback Wheel. In addition, Microsoft agrees
to use its commercially reasonable best efforts to require
Saitek to include the I-FORCE logo in the About Box or
comparable location on the driver software control panel
associated with the R-4 Force Feedback Wheel, or if there is
no About Box, in the associated product manual. Microsoft
agrees to use commercially reasonable best efforts to require
Saitek to implement the foregoing trademark requirements by
September 15, 1999. Microsoft agrees to use commercially
reasonable best efforts to impose on Saitek the obligation to
include the I-FORCE logo on the product packaging for R-4
Force Feedback Wheels and in connection with advertising or
promotional materials associated with the R-4 Force Feedback
Wheels. Microsoft agrees to use commercially reasonable best
efforts to require Saitek to permit Immersion to cite Saitek
as an Immersion FF Patent Portfolio Licensee and to list
Saitek in all materials that list other Immersion FF Patent
Portfolio Licensees.
2.5 LIMITED SOFTWARE LICENSE: Immersion hereby grants Microsoft
and its Subsidiaries a worldwide, non-exclusive license under
the Immersion FF Patent Portfolio (which license shall become
irrevocable, perpetual, non-terminable and fully paid-up upon
Immersion's receipt of Microsoft's one-time payment required
under Section 5.1):
(a) to manufacture, sell, offer for sale, import and use
DirectInput; and
(b) to manufacture, sell, offer for sale, import and use
Microsoft's FF-capable gaming software products
listed in Exhibit C (all of which Microsoft
represents have been distributed by Microsoft to
third parties in commercial quantities on or before
[****] and to manufacture, sell, import and use
successor versions of such gaming software products.
Microsoft and its Subsidiaries and End-Users shall not be
liable to Immersion or its Subsidiaries as a contributory
infringer under 35 U.S.C. Section 271(c) (or the foreign law
equivalent thereof), or for inducing infringement under 35
U.S.C. Section 271(b) (or the foreign law equivalent thereof),
based solely on their manufacture, importation, offer for
sale, use or sale of DirectInput in combination with
third-party software and/or hardware products, nor shall they
be liable for direct infringement under 35 U.S.C. Section
271(a) (or the foreign equivalent thereof) based solely on
their combination of DirectInput with unlicensed Microsoft or
third-party hardware or software if no force feedback element
of the claim or claims asserted against them is contributed by
the Microsoft or third-party hardware or software which they
combine with DirectInput. Except as specifically provided
above, this Section 2.5 shall not be construed to
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-7-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 8
immunize Microsoft or its Subsidiaries from liability under 35
U.S.C. Section 271(a)-(c), or under any other provision of
Title 35 of the United States Code, either expressly, by
implication, by estoppel, or otherwise. However, injunctive
relief in patent infringement actions brought by Immersion or
its Subsidiaries based on Microsoft's or Microsoft's
Subsidiaries' unlicensed hardware or software products, or the
combination thereof with each other or with DirectInput,
shall, unless product integration and/or bundling make it
impractical, be directed to such unlicensed products, and not
to DirectInput itself.
3. LICENSE AND COVENANT-NOT-TO-SUE UNDER MICROSOFT FF PATENT PORTFOLIO.
3.1 In consideration for the licenses granted herein by Immersion
and its Subsidiaries, the favorable one-time royalty payment
for the licenses granted them herein with respect to the
Immersion FF Patent Portfolio, and the force feedback
evangelism services provided for in Section 6.6, Microsoft and
its Subsidiaries hereby grant Immersion and its Subsidiaries a
royalty-free, worldwide, non-exclusive license (which license
shall be irrevocable and non-terminable during the term set
forth in Section 3.3 upon Immersion's receipt of Microsoft's
one-time payment required under Section 5.1), under the
Microsoft FF Patent Portfolio, to make, have made, use, have
used, import and have imported, sell, have sold and offer for
sale Immersion Product(s), subject to the limitation that,
except for reasonable product transition overlap (including
possible manufacturing overlap as well as marketing efforts to
clear the distribution channels of one product while its
replacement product is being introduced), the foregoing
license shall extend to only one version of a given FF
hardware device being manufactured or marketed by or for
Immersion or its Subsidiaries at any one time (i.e., Immersion
will not have a given Immersion FF Current Version and its
replacement version being manufactured or marketed at the same
time, but may have two or more different Immersion FF hardware
devices on the market at a given time).
3.2 In further consideration for the licenses granted herein by
Immersion and its Subsidiaries, the favorable one-time royalty
payment for the licenses granted them herein with respect to
the Immersion FF Patent Portfolio, and the force feedback
evangelism services provided for in Section 6.6, Microsoft and
its Subsidiaries hereby grant all present and future Immersion
FF Patent Portfolio Licensees a covenant-not-to-sue such
Immersion FF Patent Portfolio Licensees under the Microsoft FF
Patent Portfolio with respect to Immersion Licensee
Product(s), subject to the limitation that, except for
reasonable product transition overlap (including possible
manufacturing overlap as well as marketing efforts to clear
the distribution channels of one product while its replacement
product is being introduced), the foregoing covenant shall
extend to only one version of a given FF hardware device being
manufactured or marketed by or for Immersion FF Patent
Portfolio Licensees at any one time (i.e., a given
-8-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 9
Immersion FF Patent Portfolio Licensee will not have a given
Immersion FF Patent Portfolio Licensee Current Version and its
replacement version being manufactured or marketed at the same
time, but may have two or more different Immersion FF Patent
Portfolio Licensee hardware devices on the market at a given
time). Microsoft warrants that no third party has or will be
granted the right, as an exclusive licensee or patent assignee
of Microsoft or otherwise, to assert any claim as to which
Microsoft has granted the covenant-not-to-sue described above.
No third party against whom Microsoft has a pending
infringement claim subsequent to the Effective Date with
respect to the Microsoft FF Patent Portfolio will be granted
the above-described covenant-not-to-sue in the event such
third party becomes an Immersion FF Patent Portfolio Licensee
after Microsoft has made a claim against such third party.
3.3 The term of the license provided to Immersion under Section
3.1, and of the covenant-not-to-sue provided to Immersion's
licensees under Section 3.2, shall commence on the Effective
Date and end:
3.3.1 With respect to FF joysticks and steering wheels, the
later of (A) [****]; or (b) [****];
3.3.2 With respect to all other FF hardware products, on
[****].
3.4 The covenant-not-to-sue granted in Section 3.2 above shall be
terminable upon written notice by Microsoft, with respect to
any particular Immersion licensee, in the event such licensee
(a) files suit against Microsoft or its Subsidiaries alleging
infringement of any FF-related patent or other intellectual
property right; (b) files suit against a Microsoft
distributor, reseller or end user alleging infringement of any
FF-related patent or other intellectual property right with
respect to a Microsoft FF product; or (c) engages in a course
of conduct which, under applicable Federal Circuit Court of
Appeals case law, gives rise to a reasonable apprehension by
Microsoft of such suit.
3.5 As set forth in Sections 3.1 and 3.2 above, Microsoft's
license to Immersion and its Subsidiaries and its covenant not
to sue Immersion's Patent Portfolio Licensees are granted by
Microsoft on a royalty or fee free basis. If Microsoft or its
Subsidiaries have entered or do enter into a license agreement
with a third party with respect to that third party's FF
related claims in patents and patent applications and such
license rights are sublicensable by Microsoft or its
Subsidiaries such that they become part of the Microsoft FF
Patent Portfolio (hereinafter, "Third Party Patents"), then:
(i) if the Third Party Patents are sublicensable by Microsoft
or its Subsidiaries on a royalty free or one-time lump sum fee
basis, then Immersion, its Subsidiaries and the Immersion
Patent Portfolio Licensees shall immediately receive rights to
such Third Party Patents
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-9-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 10
pursuant to Sections 3.1 and 3.2 as the case may be and
Immersion, its Subsidiaries and the Immersion Patent Portfolio
Licensees shall not owe Microsoft or its Subsidiaries any
compensation for receiving such rights; (ii) if the Third
Party Patents are sublicensable by Microsoft or its
Subsidiaries solely on a royalty bearing basis, then Microsoft
shall notify Immersion of the Third Party Patent license and
Immersion may elect on behalf of itself, its Subsidiaries and
the Immersion Patent Portfolio Licensees to take a royalty
bearing sublicense (or covenant not to sue as the case may be)
to such Third Party Patents subject to the terms of Sections
3.1 and 3.2 hereof (provided the parties acknowledge that such
a license for Third Party Patents may not necessarily be
irrevocable and non-terminable nor may they run for the term
set forth in Section 3.3), in which event, Immersion, its
Subsidiaries and the Immersion Patent Portfolio Licensees
shall be entitled to receive, as to such Third Party Patents,
the lowest royalties and best terms and conditions as compared
to those paid by Microsoft, its Subsidiaries or any of their
sublicensees.
4. NO MICROSOFT TRADEMARK LICENSE. No trademark license is granted to
Immersion hereunder to use the Microsoft trademarks or to sublicense
such Microsoft trademarks to third parties.
5. MICROSOFT ONE-TIME PAYMENT TO IMMERSION
5.1 ONE-TIME PAYMENT: Within forty (40) days after the Effective
Date and Microsoft's receipt of an invoice from Immersion,
Microsoft shall make a one-time payment of [****] to Immersion
for the licenses granted to Microsoft and its Subsidiaries by
Immersion and its Subsidiaries with respect to the Microsoft
Products under the terms of Section 2.1 ("Sidewinder Product
Patent License") and Section 2.2 ("Microsoft Sublicensing
Rights"). If Immersion or its Subsidiaries have entered or do
enter into a license agreement with a third party with respect
to that third party's FF related claims in patents and patent
applications and such license rights are sublicensable by
Immersion or its Subsidiaries such that they become part of
the Immersion Patent Portfolio (hereinafter, "Third Party
Patents"), then: (i) if the Third Party Patents are
sublicensable by Immersion or its Subsidiaries on a royalty
free or one-time lump sum fee basis, then Microsoft and its
Subsidiaries shall immediately receive rights to such Third
Party Patents pursuant to Sections 2.1 and 2.2 and shall not
owe Immersion or its Subsidiaries any compensation over that
referenced in the first sentence of this Section 5.1 for
receiving such rights; (ii) if the Third Party Patents are
sublicensable by Immersion or its Subsidiaries solely on a
royalty bearing basis, then Immersion shall notify Microsoft
of the Third Party Patent license and Microsoft may elect on
behalf of itself and its Subsidiaries to take a royalty
bearing sublicense to such Third Party Patents subject to the
terms of Sections 2.1, 2.2 and 2.5 hereof (provided the
parties acknowledge that such a license for Third Party
Patents may not necessarily be irrevocable, non-terminable
and/or
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-10-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 11
perpetual), in which event, Microsoft and its Subsidiaries
shall be entitled to receive, as to such Third Party Patents,
the lowest royalties and best terms and conditions as compared
to those paid by Immersion, its Subsidiaries or any of their
sublicensees.
5.2 [****]
5.2.1 [****]
5.2.2 [****]
5.2.3 [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-11-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 12
5.2.4 [****]
5.2.5 Notwithstanding the above, this Section 5.2 shall not
apply to any license agreement entered into as part
of a settlement of pending litigation between
Immersion or its Subsidiaries, on the one hand, and
Microsoft or its Subsidiaries, on the other; except
that this exception shall not apply if Immersion
fails to notify Microsoft of Microsoft's or its
Subsidiaries' alleged infringement, and engage in
license discussions, prior to filing suit. Microsoft
agrees that after receiving such notice, it will not
file any action or proceeding contesting the
validity, enforceability or non-infringement of the
patent or patents with respect to which Immersion has
given it notice until after the parties have failed,
despite their good faith efforts, to reach agreement
on a license agreement and in no event earlier than
forty-five (45) days following Microsoft's receipt of
Immersion's notice. Similarly, Immersion agrees that
it will not file any action or proceeding alleging
infringement of the patent or patents until after the
parties have failed, despite their good faith
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-12-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 13
efforts, to reach agreement on a license agreement
and in no event earlier than thirty-five (35) days
following Microsoft's receipt of Immersion's notice.
In addition, statements regarding intellectual
property claims made by Immersion or its Subsidiaries
in connection with threatened or actual litigation
with a third-party with whom Immersion has entered
into an Other Immersion Agreement shall not be
admissible in any arbitration conducted pursuant to
Section 5.2.2 above.
6. OTHER TERMS AND CONDITIONS
6.1 PRESS RELEASE: The parties shall jointly prepare a press
release announcing this Agreement, consisting of mutually
agreed-upon text, press date, and city or cities of origin.
Neither party shall issue any other press release, sales or
marketing, promotional material, advertisements, or similar
materials discussing such party's relationship to the other
party, except as may be expressly authorized or required in
this Agreement or with the other party's prior written
agreement to the content and distribution of any such material
or information. Immersion shall be free to cite Microsoft as
an Immersion FF Patent Portfolio Licensee and to list
Microsoft in all materials that list other Immersion FF Patent
Portfolio Licensees.
6.2 PATENT MARKING: As soon as possible after the Effective Date,
and in no event later than ninety (90) days thereafter,
Microsoft shall mark all newly-manufactured Sidewinder
Products with (a) a label notifying purchasers that the
product may be governed by one or more patents enumerated in
the "About Box" or comparable location of the software
component of the Product; (b) a statement in the "About Box"
or comparable location that
-----------------------------------------------------------
This product may be subject to one or more of the following
patents owned by Immersion Corporation: __________________
-----------------------------------------------------------
(where the blank has been filled in with the numbers of the
patents set forth in Exhibit A, as such list is amended by
Immersion from time to time); and (c) a reference to
Immersion's then-current corporate web site
(www.force-feedback.com) in the About Box for the associated
driver software control panel or comparable location (which
reference shall, to the extent technically feasible, be a
hyperlink). Changes made by Microsoft to the list of patents
based on an amendment of such list by Immersion shall be made
within a commercially reasonable amount of time, and Immersion
agrees to compensate Microsoft for its reasonable costs
necessary to make such changes.
6.3 NO ADMISSION: Microsoft's and its Subsidiaries' license of the
Immersion FF Patent Portfolio and/or payment of the one-time
payment under Section 5.1 ("Microsoft One-Time Payment to
Immersion") and/or
-13-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 14
Immersion's and its Subsidiaries' license of the Microsoft FF
Patent Portfolio from Microsoft shall not be deemed to be
evidence or an admission that a product infringes any patent
of the other party, or that any patent of a party is valid or
enforceable.
6.4 TAXES:
(a) The amounts to be paid (or deemed paid) by either
party to the other do not include any foreign, U.S.
federal, state, local, municipal or other
governmental taxes, duties, levies, fees, excises or
tariffs, arising as a result of or in connection with
the transactions contemplated under this Agreement
including, without limitation, (i) any state or local
sales or use taxes or any value added tax or business
transfer tax now or hereafter imposed on the
provision of any services to the other party under
this Agreement, (ii) taxes imposed or based on or
with respect to or measured by any net or gross
income or receipts of either party, (iii) any
franchise taxes, taxes on doing business, gross
receipts taxes or capital stock taxes (including any
minimum taxes and taxes measured by any item of tax
preference), (iv) any taxes imposed or assessed after
the date upon which this Agreement is terminated, (v)
taxes based upon or imposed with reference to either
parties' real and/or personal property ownership and
(vi) any taxes similar to or in the nature of those
taxes described in (i), (ii), (iii), (iv) or (v)
above, now or hereafter imposed on either party (or
any third parties with which either party is
permitted to enter into agreements relating to its
undertakings hereunder) (all such amounts, together
with any penalties, interest or any additions
thereto, collectively "Taxes"). Neither party is
liable for any of the other party's Taxes incurred in
connection with or related to the sale of goods and
services under this Agreement, and all such Taxes
shall be the financial responsibility of the party
obligated to pay such taxes as determined by the
applicable law, provided that both parties shall pay
to the other the appropriate Collected Taxes in
accordance with subsection (b) below. Each party
agrees to indemnify, defend and hold the other party
harmless from any Taxes (other than Collected Taxes)
or claims, causes of action, costs (including,
without limitation, reasonable attorneys' fees) and
any other liabilities of any nature whatsoever
related to such Taxes to the extent such Taxes relate
to amounts paid under this Agreement.
(b) Any sales or use taxes described in (a)(i) above that
(i) are owed by either party solely as a result of
entering into this Agreement and the payment of the
fees hereunder, (ii) are required to be collected
from that party under applicable law, and (iii) are
based solely upon the amounts payable (or deemed
payable) under this Agreement (such taxes the
"Collected Taxes"), shall be stated separately as
applicable on payee's invoices and shall be remitted
by the other party to the payee, upon request payee
shall remit to the other
-14-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 15
party official tax receipts indicating that such
Collected Taxes have been collected and paid by the
payee. Either party may provide the other party an
exemption certificate acceptable to the relevant
taxing authority (including without limitation a
resale certificate) in which case payee shall not
collect the taxes covered by such certificate. Each
party agrees to take such commercially reasonable
steps as are requested by the other party to minimize
such Collected Taxes in accordance with all relevant
laws and to cooperate with and assist the other
party, in challenging the validity of any Collected
Taxes or taxes otherwise paid by the payor party.
Each party agrees to equally share the cost of any
successful other party-initiated ruling and/or appeal
or other determination that concludes that a
Collected Tax is not owing in whole or in part under
this Agreement. Each party shall indemnify and hold
the other party harmless from any Collected Taxes,
penalties, interest, or additions to tax arising from
amounts paid by one party to the other under this
Agreement, that are asserted or assessed against one
party to the extent such amounts relate to amounts
that are paid to or collected by one party from the
other under this Section. If any taxing authority
refunds any tax to a party which the other party
originally paid, or a party otherwise becomes aware
that any tax was incorrectly and/or erroneously
collected from the other party, then that party shall
promptly remit to the other party an amount equal to
such refund, or incorrect collection as the case may
be plus any interest thereon.
(c) If taxes are required to be withheld on any amounts
otherwise to be paid by one party to the other, the
paying party will deduct such taxes from the amount
otherwise owed and pay them to the appropriate taxing
authority. At a party's written request and expense,
the parties will use reasonable efforts to cooperate
with and assist each other in obtaining tax
certificates or other appropriate documentation
evidencing such payment, provided, however, that the
responsibility for such documentation shall remain
with the payee party.
(d) This Section 6.4 shall govern the treatment of all
taxes arising as a result of or in connection with
this Agreement notwithstanding any other Section of
this Agreement.
6.5 ESCALATION: In the event of any dispute arising under this
Agreement, authorized representatives of each of the parties
shall meet or communicate by phone or otherwise no later than
ten (10) working days after receipt of notice by either party
of a request for dispute resolution and shall enter into good
faith negotiations aimed at resolving the dispute. If the
representatives are unable to resolve the dispute in a
mutually satisfactory manner within the next five (5) working
days after the initial meeting or phone communication
described above, the dispute shall be
-15-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 16
referred to the top management level for FF-related matters in
each party, and each party shall designate a top management
executive with authority to resolve the dispute to meet in
good faith in an attempt to resolve the dispute within thirty
(30) days after receipt of the initial notice. This Section
6.5 ("Escalation") shall not limit either party's ability,
after referring the dispute to the top management levels of
the parties and expiration of the thirty (30) day period
following receipt of the initial notice, to seek an injunction
or other equitable relief for breach of obligations related to
intellectual property or as may otherwise be necessary to
protect any other rights of either party.
6.6 FORCE FEEDBACK EVANGELISM SERVICES: Immersion agrees that for
a period of twelve (12) months following the Effective Date,
it shall provide at least [****] per month of force feedback
evangelism services. "Force feedback evangelism services," as
used in this Section 6.6, means marketing services directed to
convincing and/or assisting developers to create force
feedback-capable software products.
7. TERM & TERMINATION
7.1 TERM: The term of this Agreement shall be for a period of time
up through the expiration of the last of the patents in the
Microsoft FF Patent Portfolio and Immersion FF Patent
Portfolio.
7.2 TERMINATION FOR CAUSE: If either party materially breaches any
obligation contained in this Agreement, the other party may
terminate this Agreement upon sixty (60) days' written notice;
provided, however, that cure of such material breach within
such sixty (60) day notice period shall bar termination on
account of such material breach.
7.3 EFFECT OF TERMINATION: In the event of termination of this
Agreement for any reason, except non-payment of the one-time
payment described in Section 5.1 ("One-Time Payment"), the
provisions of Section 2 ("Immersion License to Microsoft"),
Section 3 ("License and Covenant-Not-To-Sue Under Microsoft FF
Patent Portfolio"), Section 6.2 ("Patent Marking"), Section
6.3 ("No Admission"), Section 7 ("Term & Termination"),
Section 8 ("Confidentiality") and Section 9 ("Miscellaneous")
shall remain in force and shall survive any termination.
8. CONFIDENTIALITY.
8.1 CONFIDENTIALITY: All terms and conditions of this Agreement
shall be deemed Confidential Information as defined herein.
The parties expressly undertake to retain in confidence all
information and know-how transmitted to one party ("Receiving
Party") by the other party ("Disclosing Party") that the
Disclosing Party has designated as proprietary and/or
confidential or that, by the nature of the circumstances
surrounding the disclosure, ought in good faith to be treated
as proprietary and/or confidential ("Confidential
Information"). Confidential Information includes all
information relating to payments and terms under this
Agreement. The parties will make no use of Confidential
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-16-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 17
Information except under the terms and during the existence of
this Agreement. Confidential Information shall not include any
information that: (i) is or subsequently becomes publicly
available without the Receiving Party's breach of any
obligation owed the Disclosing Party; (ii) became known to
Receiving Party from a source other than Disclosing Party
other than by the breach of an obligation of confidentiality
owed to Disclosing Party; (iii) is independently developed by
Receiving Party. Nothing herein shall prevent a Receiving
Party's disclosure of Confidential Information as required by
applicable statutory or regulatory requirement (including,
without limitation, disclosure to comply with reporting
obligations associated with a legitimate corporate
transaction), or of such terms as directly affect a party's
licensee to said licensee in the event such licensee receives
a notice of infringement from the other party hereto, or
pursuant to a subpoena or document request. If a Receiving
Party is subject to a subpoena or document request calling for
the production of a Disclosing Party's Confidential
Information, the Receiving Party shall notify the Disclosing
Party as soon as practicable to permit the Disclosing Party to
endeavor to minimize disclosure by obtaining a protective
order or otherwise. Receiving Party's obligation under this
Section 8 with respect to any particular information shall
extend to the earlier of such time as such information is
publicly available through no fault of Receiving Party or ten
(10) years following termination of this Agreement.
9. MISCELLANEOUS
9.1 SUFFICIENT RIGHTS: Each party represents and warrants that it
has all legal right and power to grant the other party the
license rights granted in this Agreement, and that its
execution and performance of this Agreement will not violate
any law or agreement.
9.2 NOTICE: Any written notice under this Agreement shall be sent
by certified mail, return receipt requested, or its
equivalent, addressed as follows:
<TABLE>
<S> <C>
FOR NOTICES TO MICROSOFT: FOR NOTICES TO IMMERSION:
VICE PRESIDENT, HARDWARE LOUIS ROSENBERG, PRESIDENT
MICROSOFT CORPORATION IMMERSION CORPORATION
ONE MICROSOFT WAY 2158 PARAGON DRIVE
REDMOND, WASHINGTON 98052 SAN JOSE, CALIFORNIA, 95131
WITH A COPY TO: WITH A COPY TO:
MICROSOFT GENERAL COUNSEL STACY A. SNOWMAN, ESQ.
LAW & CORPORATE AFFAIRS GRAY CARY WARE & FREIDENRICH
MICROSOFT CORPORATION 139 TOWNSEND STREET, SUITE 400
ONE MICROSOFT WAY SAN FRANCISCO, CA 94107
REDMOND, WASHINGTON 98052
</TABLE>
9.3 SEVERABILITY: If any part of this Agreement is found to be in
violation of any law, or is found to be unenforceable,
contrary to public policy, or otherwise legally defective, the
Agreement shall be construed and interpreted without reference
to that part.
-17-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 18
9.4 ASSIGNMENT: This Agreement is not assignable or transferable
except in the case of a merger, acquisition or assignment or
transfer of all or substantially all of the assets of the
Microsoft Hardware Group of Microsoft or of Immersion and only
if the successor (in the case of a merger or acquisition) or
assignee or transferee (in the case of an asset sale) has
agreed in writing to be bound hereby to the same extent as was
the predecessor entity. Any other attempt to assign or
transfer this Agreement without the prior written consent of
the other party shall be void.
9.5 NO OBLIGATION TO ENFORCE: Neither party shall have any
obligation to enforce its patent rights against third parties.
9.6 NO INDEMNITY: Except as provided in Sections 2.3 and 9.12
hereof, neither party shall be liable to indemnify, defend, or
hold harmless the other party against charges of patent
infringement, trade secret infringement, trademark
infringement, trade dress infringement, or the like, arising
out of the subject matter of this Agreement.
9.7 DISCLAIMER: BOTH PARTIES DISCLAIM ALL WARRANTIES, EXPRESS OR
IMPLIED, EXCEPT AS PARTICULARLY DETAILED HEREIN. THE PARTIES
DO NOT WARRANT THAT THE MANUFACTURE, USE, SALE, IMPORT OR
LICENSE OF THEIR PATENTED INVENTIONS ARE FREE FROM
INFRINGEMENT OF THIRD PARTY PATENT OR OTHER RIGHTS.
9.8 RELEASE - IMMERSION TO MICROSOFT: Immersion and its
Subsidiaries hereby fully and forever release and discharge
Microsoft and its Subsidiaries, and their manufacturers,
importers and distributors, licensees and users from any and
all damages, liability, suits, claims and causes of action of
any kind, whether known or unknown, suspected or unsuspected,
arising out of patent infringement or alleged patent
infringement of the Immersion FF Patent Portfolio by:
(a) the manufacture, sale, offer for sale, importation
and use of the Sidewinder Products prior to the
Effective Date;
(b) the manufacture, sale, offer for sale, importation
and use of the R-4 Force Feedback Wheels manufactured
and sold by or for Microsoft's sublicensee, Saitek,
prior to the Effective Date; and
(c) any activities occurring prior to the Effective Date
that would have been licensed under Section 2.5 had
they occurred after the Effective Date.
9.9 MODIFICATION OF DIRECTINPUT: In consideration for the releases
granted by Immersion above, Microsoft on behalf of itself and
its Subsidiaries hereby agrees that they will not modify
DirectInput so as to disadvantage Immersion Products or
Immersion Licensee Products being commercially distributed by
or for Immersion or Immersion Licensees as of the Effective
-18-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 19
Date as compared to competitive Sidewinder Products being
commercially distributed by or for Microsoft or its
Subsidiaries as of the Effective Date, and further agrees that
DirectInput will support Immersion Products and Immersion
Licensee Products being commercially distributed by Immersion
or Immersion Product Licensees as of the Effective Date for a
period of at least three years from the Effective Date. For
purposes of satisfying these modification and support
obligations, Microsoft will be deemed to be in compliance if
(a) it refrains from modifying DirectInput so as to
disadvantage the Wingman Force and Wingman Formula Force
products currently being shipped by Logitech as compared to
competitive Sidewinder Products being commercially shipped by
or for Microsoft or its Subsidiaries as of the Effective Date;
and (b) for the above-referenced three year period,
DirectInput supports at least the Wingman Force and Wingman
Formula Force products currently being shipped by Logitech.
9.10 RELEASE - MICROSOFT TO IMMERSION: Microsoft and its
Subsidiaries hereby fully and forever release and discharge
Immersion and its Subsidiaries, and their manufacturers,
importers and distributors, licensees and users from any and
all damages, liability, suits, claims, and causes of action of
any kind, whether known or unknown, suspected or unsuspected,
arising out of patent infringement or alleged patent
infringement of the Microsoft FF Patent Portfolio by any and
all FF devices manufactured, used, sold or imported by
Immersion or its Subsidiaries prior to the Effective Date,
which products are listed in Exhibit D hereto.
9.11 NEW INFORMATION: In connection with the waiver and
relinquishment of the matters set forth in Sections 9.8 and
9.9 (hereinafter the "Released Matters"), each of the parties
acknowledges that it is aware that it or its attorneys or
accountants may hereafter discover claims or facts in addition
to or different from those which it now knows or believes to
exist with respect to the Released Matters or the other party
hereto, but that it is its intention hereby fully, finally and
forever to settle and release all of the Released Matters,
which now exist, may exist or heretofore have existed between
Immersion and Microsoft. In furtherance of this intention, the
releases herein given shall be and remain in effect as full
and complete mutual releases as to the Released Matters
notwithstanding the discovery or existence of any such
additional or different claim or fact.
9.12 ASSIGNMENT OF RELEASED MATTERS: Immersion and Microsoft each
warrant and represent to the other that as of the Effective
Date it is the sole and lawful owner of all right, title and
interest in and to all of the respective Released Matters and
that it has not heretofore voluntarily, by operation of law or
otherwise, assigned or transferred or purported to assign or
transfer to any person whomsoever any Released Matter or any
part or portion thereof of any claim, demand or right against
the other. Immersion and Microsoft shall indemnify and hold
harmless the other from and against any claim, demand, damage,
debt, liability, account, reckoning, obligation, cost,
expense, lien, action or cause of action
-19-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 20
(including payment of attorneys' fees and costs actually
incurred whether or not litigation be commenced) based on or
in connection with or arising out of any such assignment or
transfer or purported or claimed assignment or transfer.
9.13 BENEFICIARIES: Except with respect to the license rights,
covenant-not-to-sue and releases granted by this Agreement to
Saitek and/or to Immersion Product Licensees, this Agreement
is not for the benefit of any person who is not a party
signatory hereto or specifically named a beneficiary in this
paragraph or elsewhere in this Agreement. The provisions of
this Agreement and the releases contained herein shall extend
to and inure to the benefit of and be binding upon, in
addition to Immersion and Microsoft and their Subsidiaries,
just as if they had executed this Agreement: the respective
legal successors and assigns of each of Immersion and
Microsoft solely as permitted under the terms of Section 9.4
("Assignment").
9.14 REPRESENTATION: Each party acknowledges to the other party
that it has been represented by independent legal counsel of
its own choice throughout all of the negotiations which
preceded the execution of this Agreement and that it has
executed this Agreement with the consent and on the advice of
such independent legal counsel. Each party further
acknowledges that it and its counsel have had adequate
opportunity to make whatever investigation or inquiry they may
deem necessary or desirable in connection with the subject
matter of this Agreement prior to the execution hereof and the
delivery and acceptance of the consideration specified herein.
9.15 INDEPENDENT CONTRACTOR: Each party shall at all times act as
an independent entity, and shall be solely responsible for any
and all social security, unemployment, Workers' Compensation
and other withholding taxes for any and all of its employees.
Nothing in this Agreement shall be construed as creating a
partnership, joint venture or agency relationship between the
parties. Neither party has authority to make, assume or create
any representation, warranty, agreement, guarantee, claim or
settlement on behalf of the other party with respect to the
subject matter of this Agreement or otherwise. Each party
shall defend, indemnify and hold the other party, its
officers, directors, and employees harmless from all claims,
costs, expenses, fines, fees and damages resulting from any
claim arising out of or related to a breach of the provisions
of this paragraph by such party.
9.16 NO WAIVER: Failure by either party to enforce any provision of
this Agreement will not be deemed a waiver of future
enforcement of that or any other provision.
9.17 GOVERNING LAW: The interpretation, construction, and
performance of this Agreement shall be governed by the laws of
the State of Washington.
-20-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 21
9.18 AMBIGUITY: This Agreement has been drafted by both Microsoft
and Immersion, and no ambiguity shall be resolved against
either of them by virtue of its role in drafting this
Agreement.
9.19 PERSONAL INJURY AND PROPERTY DAMAGE CLAIMS: Each party or its
Subsidiaries who manufactures or sells any product
("Manufacturer") shall indemnify, protect, defend and hold the
other party ("Licensor") harmless from any claims, damages,
liabilities, judgments, settlements, losses, costs and
expenses (including court costs and reasonable attorneys' and
experts' fees) (collectively, "Costs") suffered or incurred by
the Licensor in respect of any third party claim to the extent
such third party claim or threatened claim arises from a
personal or alleged personal injury or damage or alleged
damage to property arising out of the third party's use of an
FF product manufactured or sold by the Manufacturer,
notwithstanding any license or covenant-not-to-sue granted the
Manufacturer by the Licensor hereunder.
9.20 NEGATION OF WARRANTIES AND OTHER OBLIGATIONS: Nothing in this
Agreement shall be construed:
(i) as a warranty or representation by a party as to the
validity or scope of any patents;
(ii) as granting by implication, estoppel or otherwise any
licenses or rights under patents or other
intellectual property rights of a party other than
expressly granted herein;
(iii) to require a party to file any patent application
relating to Force Feedback;
(iv) as a warranty that a party will be successful in
securing the grant of any patent relating to Force
Feedback or any reissue or extensions thereof; or
(v) to require a party to pay any maintenance fees or
take any other steps to maintain such party's patent
rights relating to Force Feedback.
9.21 ENTIRE AGREEMENT: This Agreement embodies the entire
understanding of the parties regarding the subject matter of
this document and supersedes all prior or contemporaneous
understandings and agreements, whether written or oral, and
can be modified only by a writing signed by both parties, or
their successors.
9.22 SUGGESTIONS AND FEEDBACK: Either party may from time to time
provide suggestions, comments or other feedback to the other
party with respect to Confidential Information provided
originally by the other party (hereinafter "Feedback"). Both
parties agree that all Feedback is and shall be entirely
voluntary and shall not, absent separate agreement, create any
confidentiality obligation for the receiving party. However,
the receiving
-21-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 22
party shall not disclose the source of any feedback without
the providing party's consent. Feedback shall be clearly
designated as such and, except as otherwise provided herein,
each party shall be free to disclose and use such Feedback as
it sees fit, entirely without obligation of any kind to the
other party. The foregoing shall not, however, affect either
party's obligations hereunder with respect to Confidential
Information of the other party.
9.23 COUNTERPARTS: This Agreement may be executed in counterparts,
which when taken together shall constitute a single, binding
agreement between the parties.
THEREFORE, the authorized representatives of the parties have executed this
Agreement in duplicate originals.
MICROSOFT CORPORATION IMMERSION CORPORATION
Signed: /s/ D. Stuart Ashman Signed: /s/ Louis Rosenberg
----------------------------- -----------------------
Name: D. Stuart Ashman Name: Louis Rosenberg
------------------------------- -------------------------
Title: GM Hardware Title: President
------------------------------ ------------------------
Date: 7/19/99 Date: 7/19/99
------------------------------- -------------------------
-22-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 23
Exhibit A
Immersion FF Patent Portfolio
<TABLE>
<CAPTION>
U.S. Patent Number Issue Date Title
------------------ ---------- -----
<S> <C> <C>
4,823,634 4/89 Multifunction Tactile
Manipulative Control
5,185,561 2/9/93 Torque Motor as a Tactile
Feedback Device in a Computer
System
5,220,260 6/15/93 Actuator Having
Electronically Controllable
Tactile Responsiveness
5,389,865 2/14/95 Method and System for
Providing a Tactile Virtual
Manipulator Defining an
Interface Device Therefor
5,414,337 5/9/95 Actuator Having
Electronically Controllable
Tactile Responsiveness
5,459,382 10/17/95 Method and System for
Providing a Tactile Virtual
Reality
5,513,100 4/30/96 Velocity Controller with
Force Feedback
5,559,412 9/24/96 Actuator Having
Electronically Controllable
Tactile Responsiveness
5,576,727 11/19/96 Electromechanical
Human-Computer Interface With
Force Feedback
5,589,854 12/31/96 Touching Feedback Device
5,629,594 5/13/97 Force Feedback System
5,691,898 11/25/97 Safe and Low Cost Computer
Peripherals With Force
Feedback for Consumer
Applications
5,701,140 12/23/97 Method and Apparatus for
Providing a Cursor Control
Interface With Force Feedback
5,721,566 2/24/98 Method and Apparatus for
Providing Damping Force
Feedback
5,731,804 3/21/98 Method and Apparatus for
Providing High Noise
</TABLE>
-23-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 24
<TABLE>
<S> <C> <C>
Mechanical I/O for Computer
Systems
5,734,373 3/31/98 Method and Apparatus for
Controlling Force Feedback
Interface Systems Utilizing a
Host Computer
5,739,811 4/14/98 Method and Apparatus for
Controlling Human Interface
Systems Providing Force
Feedback
5,769,640 6/23/98 Method and System for
Simulating Medical Procedures
including Virtual Reality and
Control Method and System for
Use Therein
5,754,023 5/19/98 Gyro-Stabilized Platforms for
Force-Feedback
B1 5,459,382 6/9/98 Method and System for
Providing a Tactile Virtual
Manipulator Defining an
Interface Device Therefor
5,767,839 6/16/98 Method and Apparatus for
Providing Passive
Human-Computer Interface
Systems
5,790,108 8/4/98 Controller
5,805,140 9/8/98 High Bandwidth Force Feedbck
Interface Using Voice Coils
and Flexures
5,821,920 10/13/98 Control Input Device for
Interfacing an Elongated
Flexible Object With a
Computer System
5,825,308 10/20/98 Force Feedback Interface
Having Isotonic and Isometric
Functionality
5,828,197 10/27/98 Mechanical Interface Having
Multiple Grounded Actuators
5,831,408 11/3/98 Force Feedback System
5,844,392 12/1/98 Haptic Browsing
5,872,438 2/16/99 Whole-Body Kinesthetic Display
5,880,714 3/9/99 Three-Dimensional Cursor
Control Interface With Force
Feedback
</TABLE>
-24-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 25
<TABLE>
<S> <C> <C>
5,889,670 3/30/99 Method and Apparatus for
Tactilely Responsive User
Interface
5,889,672 3/30/99 Tactilely Responsive User
Interface Device and Method
Therefor
5,907,487 5/25/99 Force Feedback Device With
Safety Feature
</TABLE>
-25-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 26
Exhibit B
Microsoft FF Patent Portfolio
[****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-26-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 27
Exhibit C
Microsoft FF-Capable Gaming Products
Combat Flight Simulator
Flight Simulator 98 (and prior versions thereof)
Cart Precision Racing
Midtown Madness
Motor Cross Madness
Monster Truck Madness 2 (and predecessor)
Mech Warrior 3 (and predecessors)
Starlancer
Urban Assault
Baseball Version 3D Fighter Ace (online version only)
Allegiance (online version only)
-27-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 28
Exhibit D
Released Immersion Products
[****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
-28-
MICROSOFT AND IMMERSION CONFIDENTIAL
<PAGE> 1
EXHIBIT 10.14
SEMICONDUCTOR DEVICE
COMPONENT PURCHASE AGREEMENT
This Semiconductor Device Component Purchase Agreement (the "Agreement")
is entered into by and between Immersion Corporation, a California corporation,
having its principal place of business at 2158 Paragon Drive, San Jose,
California (hereinafter "Immersion") and Kawasaki LSI U.S.A. Inc., a California
corporation, having its principal place of business at 2570 North First Street,
Suite 301, San Jose, California 95131 (hereinafter "KLSI"). The effective date
of this Agreement will be the date last signed below ("Effective Date").
RECITALS
WHEREAS, Immersion and KLSI have entered into an Agreement for ASIC
Design and Development, effective as of October 16, 1997 (the "ASIC
Design Agreement") under which the parties have designed and developed
an integrated circuit device which provides an optimized version of the
force-feedback functions delivered by the Immersion proprietary force
feedback firmware; and
WHEREAS, KLSI has agreed to manufacture and sell such integrated circuit
devices to Immersion, on an exclusive basis, for resale by Immersion
under the licenses and terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and agreements set
forth below and the other consideration cited herein, the parties agree
as follows:
1. DEFINITIONS.
In this Agreement, the following words and expressions shall have the following
meanings:
1.1. "AFFILIATE" means any corporation or business entity which is
controlled by, controls, or is under common control of an
Immersion customer. For this purpose, the meaning of the word
"control" shall include, without limitation, direct or indirect
ownership of more than fifty percent (50%) of the voting shares
of interest of such corporation or business entity.
1.2. "COMPONENT" means the "AXIS Chip" which is an integrated circuit
device designed to provide an optimized version of the
force-feedback functions delivered by the Immersion proprietary
force feedback firmware. The AXIS Chip was designed and developed
under the terms of the ASIC Design Agreement by KLSI and
Immersion and is further described in the Specification, but does
not include any firmware or hexcode to be loaded or loaded into
such devices. The Components will be produced in a .5 CBA format,
a .35 CBA format and a .35 standard cell format.
<PAGE> 2
1.3. "DEFECT" means (i) with respect to the Components, defects in
such Components which cause such Components not to operate in
conformance with the Specification and/or a defect in the
materials and/or workmanship of the Component and/or (ii) with
respect to the Documentation, defects in the Documentation which
render the Documentation inaccurate, erroneous or otherwise
unreliable.
1.4. "DELIVERABLES" shall mean the PLSSOP, the testable Prototype
Units, the First Articles and Documentation, as defined and
developed under the terms of the ASIC Design Agreement.
1.5. "DOCUMENTATION" means the Specification, the VHDL File for the
AXIS Chip and other documentation that accompanied the
Deliverables provided by KLSI to Immersion as required under the
ASIC Design Agreement.
1.6. "FIRST ARTICLES" shall mean a limited number of units of the
Components, in a given format (.5 CBA, .35 CBA or .35 standard
cell) as mutually agreed upon by the parties, which are
manufactured as a test run for review and acceptance by Immersion
prior to full production of the Component for sale to Immersion
under the terms of this Agreement.
1.7. "POST LAYOUT SIMULATION SIGN OFF PACKAGE" or "PLSSOP" shall mean
the computer generated simulation of the Prototype Unit that is a
model of the Prototype Unit and that is used to review the
features and functionality which will be present in the Prototype
Unit, as defined and developed under the terms of the ASIC Design
Agreement.
1.8. "PROTOTYPE UNITS" shall mean initial working testable units of
the Components that conform to the PLSSOP and the Specifications,
as defined and developed under the terms of the ASIC Design
Agreement.
1.9. "SECOND SOURCE" means an alternative silicon provider licensed by
KLSI to produce a specific format (.35 CBA or .35 standard cell)
of the Component for KLSI, as a "back-up" resource for KLSI's
manufacturing obligations or licensed by Immersion to produce the
Component for Immersion.
1.10. "SPECIFICATION" means the Component specification in Exhibit A
("Specification") for each of the .5 CBA, .35 CBA and .35
standard cell formats.
2. PURCHASE OF COMPONENTS.
2.1. PURCHASE OF COMPONENTS BY IMMERSION.
2.1.1. COMPONENTS. The parties will agree upon a limited number
of units of the Components to be manufactured as First
Articles and which will serve as a test run for review
and acceptance by Immersion prior to full production of
2
<PAGE> 3
each of the formats (.5 CBA, .35 CBA or .35 standard cell) of the
Components under the terms of this Agreement. KLSI will not make
any changes to the design, materials, manufacturing (including
source and location) or processes without Immersion's prior
written consent. KLSI agrees to manufacture and sell to Immersion
and Immersion agrees to purchase from KLSI (by means of purchase
orders issued by Immersion to KLSI) the production units of the
Components, under the terms of this Agreement, for use by
Immersion and resale by Immersion to Immersion's customers and to
the Affiliates. KLSI will be the exclusive manufacturer of such
Components except as provided herein and the Components will be
sold exclusively to Immersion. Immersion makes no representation
or guarantee as to the quantity of Components that Immersion may
purchase under this Agreement. KLSI represents that KLSI has the
manufacturing capacity to fulfill, on a timely basis, all
Immersion orders for the Components and agrees to make good faith
efforts to increase capacity in order to fulfill Immersion's
requirements. Upon request by Immersion, KLSI will disclose
information to Immersion as necessary to demonstrate KLSI's
production readiness and ability to achieve steady cost effective
production.
2.1.2. HEXCODE. Prior to shipment of the Components to Immersion or an
Immersion customer or Affiliate, hexcode or firmware code will
need to be incorporated into each Component. KLSI and Immersion
agree that Immersion (in the case of Components to be shipped to
Immersion) or Immersion's customers or the Affiliates (in the
case of Components to be shipped to such customers or Affiliates)
will supply the required hexcode or firmware code directly to
KLSI for incorporation into the applicable Component. KLSI will
cause such firmware or hexcode and a vendor identification number
(which is supplied by Immersion or Immersion's customer or the
Affiliates, as applicable, directly to KLSI) to be loaded into
specified Components prior to delivery of such Components to
Immersion, Immersion's customers or the Affiliates, as
applicable. Subsequently, for each new release of firmware or
hexcode which is requested by Immersion or Immersion's customer
or the Affiliates to be implemented in Components to be purchased
(by Immersion for Immersion's use or for resale to Immersion's
customer or the Affiliates, as applicable) Immersion or
Immersion's customer or the Affiliates, as applicable, will
provide such firmware or hexcode to KLSI. Immersion will impose
an obligation on each Immersion customer and Affiliate, by means
of the contract between Immersion and such customer or Affiliate,
under which each such customer or Affiliate will be required to
provide the firmware or hexcode to KLSI in compliance with KLSI's
required lead time for Component orders involving new masks so as
to allow sufficient time for the new mask to be created and
implemented in such Components. Immersion and KLSI agree that the
lead time for orders
3
<PAGE> 4
involving new masks will be [****] longer than the usual [****]
lead time described in Section 4 ("Lead Times and Minimum Order
Quantities") for the particular format (.5 CBA, .35 CBA or .35
standard cell). KLSI will provide ceramic prototypes within two
(2) to three (3) weeks of a ROM spin.
2.2. SECOND SOURCE.
2.2.1. SECOND SOURCE SILICON PROVIDER OBLIGATION. KLSI will enter into
contractual relationships with certain silicon providers under
which each such silicon provider will stand ready to act as a
"back-up" Second Source for KLSI ("the Second Source Silicon
Provider Agreement") for the Components. Two different Component
designs will require a Second Source: (i) Components without an
analog to digital converter; and (ii) Components with an analog
to digital converter.
2.2.1.1. COMPONENTS WITHOUT AN ANALOG TO DIGITAL CONVERTER. Under
the terms of the Purchase Order No. 11305 dated June 30,
1998 (executed July 2, 1998), KLSI is obligated to
migrate the .35 CBA Component to a .35 standard cell
Component without the analog to digital converter.
Therefore, KLSI will enter into a Second Source Silicon
Provider Agreement to produce a .35 standard cell
Component as a back-up for both: (i) the .35 standard
cell Component without the analog to digital converter;
and (ii) the .35 CBA Component for those Component
orders which do not require the .35 CBA Component with
an analog to digital converter. KLSI further agrees that
the Second Source for the .35 standard cell without the
analog to digital converter will be capable of producing
such Components within thirty (30) days after the
completion of the migration from the .35 CBA to the .35
standard cell without an analog to digital converter.
For purposes of the previous sentence, the migration
shall be deemed complete upon Immersion's acceptance of
the .35 standard cell prototypes.
2.2.1.2. COMPONENTS WITH AN ANALOG TO DIGITAL CONVERTER. If
Immersion's orders for the .35 CBA with the analog to
digital converter reach [****]units per month, or [****]
is designing a [****] force feedback gaming product that
uses a Component requiring an analog to digital
converter (each a "Migration Trigger Event"), then,
within [****] of receiving notification of a Migration
Trigger Event from Immersion, KLSI shall begin the
migration of the .35 CBA Component with an analog to
digital converter to a .35 standard cell Component with
an analog to digital converter. KLSI shall
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
4
<PAGE> 5
complete the migration within [****] from the
date of such notification. KLSI shall bear all
costs and expenses of the migration, but the
parties acknowledge that KLSI may recover the
actual, documented costs of the migration by
[****] of the .35 standard cell Components [****]
or until the date [****] following the first sale
of the .35 standard cell Component with an analog
to digital converter to Immersion, whichever is
earlier. KLSI will enter into a Second Source
Silicon Provider Agreement to produce a .35
standard cell Component with an analog to digital
converter within [****] after it begins the
migration of the .35 CBA Component to the .35
standard cell Component with an analog to digital
converter. KLSI further agrees that the Second
Source for the .35 standard cell Components with
the analog to digital converter will be capable
of producing such Components within [****] after
the completion of the migration from the .35 CBA
to the .35 standard cell with an analog to
digital converter. For purposes of the previous
sentence, the migration shall be deemed complete
upon Immersion's acceptance of the .35 standard
cell prototypes.
2.2.1.3. SECOND SOURCE PROCEDURES. In any case where the
Die Bank System die are used as a resource by
such .35 standard cell Second Source to source
.35 CBA format Components, in KLSI's discretion,
the die used will be credited to Immersion's Die
Bank System account and replenished by KLSI at no
charge to Immersion. KLSI will provide an entire
manufacturing package of all of the Deliverables,
specifications, technology and other materials
which will be needed by each such Second Source
Silicon provider in order to manufacture the
applicable Components. Although it is the intent
of the parties that KLSI will manufacture the
Components as the primary silicon provider, it is
understood and agreed that KLSI may subcontract
the manufacture of Components to such Second
Sources, on a periodic basis, as necessary for
KLSI to be in compliance with its obligations
hereunder. KLSI will determine, in the case of
each Component order, whether such Components
will be manufactured by KLSI or by the applicable
Second Source silicon provider. KLSI will be in
the role of "governing seller" and therefore,
Immersion will purchase all Components from KLSI
(including the Components which are manufactured
by the Second Source silicon providers), except
that under a specified set of circumstances
described in Section 2.2.5 ("Trigger Events")
Immersion may, in its discretion, purchase
Components directly from KLSI's Second Source
silicon providers. Prior to
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
5
<PAGE> 6
execution of each Second Source Silicon Provider
Agreement, KLSI will identify each Second Source
silicon provider to Immersion.
2.2.2. TECHNOLOGY LICENSE TO THE SECOND SOURCE. Immersion
hereby grants KLSI a limited license, to sublicense each
Second Source silicon provider to utilize the Immersion
Preexisting Technology and Immersion Requested Revisions
(as defined in the ASIC Design Agreement) solely to
manufacture the Components under the terms of the
applicable Second Source Silicon Provider Agreement. In
addition, KLSI will license the Non-Immersion Technology
(as defined in the ASIC Design Agreement) to each Second
Source silicon provider so as to permit manufacture of
the Components by the applicable Second Source silicon
provider.
2.2.3. TERMS TO BE IMPOSED ON THE SECOND SOURCE SILICON
PROVIDER. KLSI will subcontract with each Second Source
silicon provider, under the terms of the Second Source
Silicon Provider Agreement, to obtain the applicable
Components from such Second Source silicon provider and
Immersion will be a third party beneficiary of each
subcontract between KLSI and KLSI's designated Second
Source silicon providers. KLSI, under the terms of each
Second Source Silicon Provider Agreement, will require
each such Second Source silicon provider to comply with
the lead times, cancellation and rescheduling terms and
minimum order quantities that are included in this
Agreement and the Quality Requirements included in any
Ancillary Agreements between KLSI and Immersion's
customers or Affiliates. KLSI will impose an obligation
on each Second Source silicon provider to sign an
Ancillary Agreement (which is identical to the KLSI
Ancillary Agreement) directly with Immersion's customers
or the Affiliates in any case where KLSI has entered
into such an agreement.
2.2.4. ESCROW ACCOUNT. KLSI recognizes that certain breaches of
KLSI's obligations under the terms of this Agreement
and/or the Ancillary Agreements may require prompt
implementation of business solutions to remedy such
breaches, including but not limited to, solutions which
allow Immersion and Immersion's customers or the
Affiliates (through purchases from Immersion) to obtain
the Components from an alternative source. KLSI agrees
to deposit all of the Deliverables (excluding First
Articles) specifications, technology and other materials
which would be needed by a Second Source silicon
provider to manufacture the Components (the "Second
Source Device Deposit") into an escrow account held by
an escrow agent, mutually agreed upon by the parties.
The Second Source Device Deposit can be accessed by
Immersion for delivery to a Second Source silicon
provider, of Immersion's choice, upon the occurrence of
certain events ("Trigger Events"). The occurrence of the
Trigger Events will be identified by Immersion by
written notice to the
6
<PAGE> 7
escrow agent in accordance with the terms of Section
2.2.6 ("Trigger Event Process"). Such escrow agreement
(the "Second Source Device Deposit Escrow Agreement")
will be between KLSI, Immersion and the escrow agent and
will be attached hereto as Exhibit D ("Second Source
Device Deposit Escrow Agreement"). KLSI will be
required, under the terms of the Second Source Device
Deposit Escrow Agreement to promptly deposit any future
updates or revisions to the Second Source Device Deposit
with the escrow agent.
2.2.5. TRIGGER EVENTS. The parties agree that in the following
situations described in (i), (ii) and (iii) below,
Immersion will be entitled to take certain steps to
mitigate KLSI's breach: (i) If KLSI is not in compliance
with the Quality Requirements directly imposed by
Immersion's customers or the Affiliates on KLSI under
the terms of the Ancillary Agreements, (ii) if KLSI is
in material breach of its delivery obligations to
Immersion for orders placed by Immersion for Immersion's
use or orders placed by Immersion for resale to
Immersion's customers or the Affiliates (and Immersion
therefore may be in breach of its obligations to its
customers or the Affiliates under the terms of the
agreements between Immersion and Immersion's customers
or the Affiliates, or (iii) if the Components delivered
to Immersion for Immersion's use or for sale to
Immersion's customers or the Affiliates by Immersion
exceed the warranty defect frequency levels permitted
under the terms of Section 5.3 ("Warranty Defect
Frequency Levels"). If any of the events described in
(i), (ii) or (iii) above occur and are not cured within
the thirty (30) day notice period described in Section
2.2.6 ("Trigger Event Process"), such event will be
deemed to be a "Trigger Event" under the Second Source
Device Deposit Escrow Agreement.
2.2.6. TRIGGER EVENT PROCESS. On the basis of Immersion
customer or Affiliate input, or in the case where the
Components purchased by Immersion are exhibiting
warranty defect frequency levels in excess of those
permitted under the terms of Section 5.3 ("Warranty
Defect Frequency Levels"), Immersion may, in Immersion's
discretion, send a written notice to KLSI, the
applicable Second Source silicon provider and the escrow
agent for the Second Source Device Deposit escrow
account, advising KLSI that if the noncompliance with
the Quality Requirements, material breach of the
delivery obligations to Immersion or excessive warranty
defect frequency levels, as applicable, are not cured
within [****] from receipt of Immersion's notice, that
the noncompliance with the Quality Requirements,
material breach of the delivery obligations to Immersion
or excessive warranty defect levels, as applicable, will
be deemed to be a "Trigger Event" under the Second
Source Device Deposit Escrow Agreement. The Second
Source Device Deposit will be released by the escrow
agent to Immersion for delivery to a Second Source
silicon
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
7
<PAGE> 8
provider of Immersion's choice upon the occurrence of a
Trigger Event. Notwithstanding the foregoing, Immersion
will still have the right, but not the obligation, to
purchase the Components from KLSI after occurrence of
the Trigger Event and although the rescheduling rules
described in Exhibit B ("Cancellation and Rescheduling
Polices and Fees") will still be in effect, Immersion
may cancel orders without obligation to pay cancellation
fees or base wafer maintenance invoices after the
Trigger Event (and KLSI will credit any base wafer
maintenance fees or die bank fees already paid, which
are not applied to base wafers actually used, to
Immersion's account within [****] of the Trigger Event).
2.2.7. IMMERSION'S SECOND SOURCE. Immersion may choose, in
Immersion's sole discretion, to designate any of KLSI's
Second Source silicon providers as Immersion's Second
Source silicon providers after occurrence of the Trigger
Event. Immersion will notify KLSI as to the Second
Source silicon providers selected by Immersion. KLSI
hereby grants Immersion a limited license to sublicense
the Second Source silicon providers selected by
Immersion to utilize the Non-Immersion Technology after
a Trigger Event so as to permit manufacture of the
Components by such Second Source silicon providers.
2.3. PURCHASE OF COMPONENTS BY IMMERSION'S CUSTOMER'S AFFILIATES. KLSI
acknowledges that Immersion's customers may be permitted, under
the terms of the agreement between Immersion and each of
Immersion's customers, to submit purchase orders for the
Components from the customer's Affiliates (on behalf of one or
more of such Affiliates) and KLSI further acknowledges that
Immersion may agree to process such orders as though the order
was an Immersion customer Component purchase order (i.e., receive
orders directly from the Affiliate, drop ship directly to the
Affiliate, invoice the Affiliate and handle returns and warranty
returns directly with the Affiliate). Immersion will require
Immersion's customer by contract, to impose on each Affiliate, by
means of a written agreement, prior to the placement of the first
Component order to Immersion by any Affiliate, all obligations
imposed on Immersion's customer under the terms of this Agreement
and the applicable Ancillary Agreement, if any. KLSI agrees to
enter into Ancillary Agreements with such Affiliates and in
response to Immersion's purchase orders, to ship Components
directly to such Affiliates under the same terms imposed upon
KLSI by this Agreement with respect to the Immersion customers.
2.4. SPECIFICATION ESCROW. KLSI acknowledges that in addition to the
Second Source Device Deposit escrow account which is for the
benefit of Immersion, Immersion's customers (or the Affiliates)
may request Immersion to escrow the Specification for the
Components for the benefit of Immersion's customers (or the
Affiliates). KLSI shall promptly provide to Immersion any future
updates or revisions to the Specification for deposit by
Immersion with the escrow agent.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
8
<PAGE> 9
3. ORDERING PROCEDURE.
3.1. FORECASTING. Immersion will require, by contract, that
Immersion's customers and/or Affiliates provide Immersion with a
written nonbinding [****] rolling forecast, updated by the first
day of each month, which describes the quantity of each
Component, by format (.5 CBA, .35 CBA or .35 standard cell), by
part number, proposed to be purchased by each Immersion customer
and Affiliates, by month. Immersion will provide a copy of such
forecasts directly to KLSI, accompanied by a written nonbinding
[****] rolling forecast for Immersion's own usage of Components,
by the fifteenth of each month. Immersion may, in its discretion,
integrate such forecast information into a single forecast. Such
forecasts will be invalid unless placed by Immersion's designated
purchasing agent.
3.2. PURCHASE ORDERS.
3.2.1. PURCHASE ORDER PROCESS. Immersion will issue purchase
orders to KLSI, specifying the end customer, the
shipping address, the Components by part number and
designating the hexcode or firmware to be loaded into
the Components. Such purchase orders may be submitted by
written, faxed or electronic means. KLSI will accept
Immersion's purchase orders and acknowledge such orders
in writing, to Immersion, within [****] of receipt. Such
purchase orders will be invalid unless placed by
Immersion's designated purchasing agent. The terms and
conditions of this Agreement shall apply to all orders
submitted by Immersion to KLSI and supersede any
different or additional terms on Immersion's or KLSI's
purchase orders, order acknowledgments or invoices, as
applicable.
3.2.2. SHIPMENT AND DELIVERY. KLSI will ship all components to
Immersion, Immersion's customers and the Affiliates, FOB
Narita, Japan. KLSI will provide Immersion with KLSI's
standard packaging specifications for Immersion's prior
approval. All Components will be shipped in accordance
with such standard packaging specifications unless
otherwise agreed to by KLSI and Immersion in writing, in
advance. KLSI will provide Immersion with all documents
that Immersion, Immersion's customers or the Affiliates
need to receive possession of the Components and to
ship, import and export the Components. KLSI shall use
best efforts to make deliveries to Immersion,
Immersion's customers and the Affiliates of orders so
accepted, promptly and within [****] of (before or
after) scheduled delivery dates. For purposes of this
Agreement, a "scheduled delivery date" is the date the
shipment leaves KLSI's dock FOB Narita, Japan.
3.2.3. LATE DELIVERIES. KLSI will promptly notify Immersion of
any possible delays and Immersion may elect in writing
to cancel any orders which
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
9
<PAGE> 10
KLSI (i) advises will not be delivered as scheduled (and
will be more than [****] late) or (ii) which are not
delivered as scheduled (and are more than [****] late)
and (iii) in either case, the cause of the late delivery
was attributable solely to KLSI, KLSI's Second Source
and/or other KLSI suppliers. Such cancellations by
Immersion will not be subject to the cancellation rules
and fees described in Exhibit B ("Cancellation and
Rescheduling Policies and Fees"). If Immersion does not
cancel a late order (meaning the shipment will be
received more than [****] after the scheduled delivery
date), KLSI will pay the premium transportation charges
necessary to meet Immersion's delivery obligations, or
to mitigate the delay. Allowing Immersion to cancel late
orders and payment of premium shipping are remedies
intended to mitigate KLSI's breach of its delivery
obligations and Immersion's acceptance of any such
remedies in no way waives Immersion's right to all other
available remedies. Orders which will not be delivered
or are not delivered in accordance with the scheduled
delivery date and which are canceled by Immersion will
nevertheless be counted as purchased for purposes of
quantity discounts, if any. Immersion shall not be
liable to Immersion's customers or the Affiliates for
any damages to Immersion's customers or the Affiliates
or to any other person for KLSI's failure to fill any
orders, or for any delay in delivery or error in filling
any orders for any reason whatsoever. KLSI agrees to
indemnify, defend and hold Immersion harmless from any
claim by any Immersion customer or Affiliate which is
based on KLSI's failure to fill any orders or for any
delay in delivery or error in filling any orders for any
reason whatsoever.
3.2.4. EARLY DELIVERIES. KLSI will not ship Components to
Immersion, Immersion's customers or the Affiliates more
than [****] prior to the scheduled delivery date without
Immersion's prior written consent. Immersion,
Immersion's customers and the Affiliates will be
entitled to return any Components delivered more than
[****] days in advance of the scheduled delivery date at
KLSI's risk and expense and Immersion's account will be
credited.
3.3. ACCEPTANCE OF COMPONENT ORDERS BY IMMERSION AND IMMERSION'S
CUSTOMERS AND AFFILIATES.
3.3.1. ACCEPTANCE PROCESS. Immersion agrees that the Components
purchased by Immersion from KLSI for Immersion's own use
will be deemed accepted within [****] of receipt from
KLSI, unless Immersion, by means of written notice,
notifies KLSI of a Defect, which has been verified by a
means mutually agreed upon between KLSI and Immersion,
which means may include, but will not be limited to,
Defect Test Suites as described below, within such
period. Immersion will require, under the terms of the
contract with each Immersion customer and
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
10
<PAGE> 11
each Affiliate, that the Components will be deemed
accepted by Immersion's customer or the Affiliate within
a specified number of days from receipt unless
Immersion's customer or the Affiliate, by means of
written notice, notifies Immersion of a Defect, which
has been verified by a means mutually agreed upon
between Immersion and such customer, and which may
include, but will not be limited to, Defect Test Suites
as described below, within such period.
3.3.2. DEFECT TEST SUITES. Immersion and KLSI may develop and
mutually agree upon a Defect Test Suite which will test
the Components, excluding the hexcode or firmware code
supplied by Immersion or the Immersion customer, using
specified test vectors to identify Defects. The Defect
Test Suites may be supplied to each Immersion customer
and Affiliate by Immersion for use as the basis for
acceptance or rejection of the Components (excluding the
hexcode or firmware code portion).
3.3.3. FIRST LEVEL INTERFACE. Immersion agrees to perform the
role of the first level interface with the Immersion
customers and the Affiliates and to verify whether there
is a Defect. Once Immersion has notified KLSI as to
Immersion's conclusion that the existence of a Defect
has been verified, by whatever means mutually agreed
upon between Immersion and the Immersion customer, KLSI
will work directly with the Immersion customers and the
Affiliates in compliance with the sample reject/failure
mode criteria and RMA procedure which have been agreed
upon between KLSI and such Immersion customer or
Affiliate under the terms of the Ancillary Agreement.
The Immersion customers and Affiliates will be permitted
to return the Components to KLSI for replacement within
[****] of KLSI's return approval notification. In such
case KLSI will ship the replacement Components to
Immersion's customer or the Affiliate on a priority
basis.
3.3.4. HEXCODE DEFECTS. KLSI and each Immersion customer or
Affiliate will mutually agree upon, in writing, under
the terms of the Ancillary Agreement, an appropriate
test suite for use by the Immersion customer or
Affiliate as the basis for acceptance or rejection of
the hexcode or firmware code portion of the Components.
3.3.5. IMMERSION AS A CUSTOMER. Once Immersion has notified
KLSI that Immersion has verified the existence of a
Defect in Components purchased by Immersion for
Immersion's use, KLSI and Immersion will coordinate
return of the defective Component units under the terms
of the reject/failure mode criteria and RMA procedure
described in Exhibit E ("KLSI RMA Procedures").
Immersion will be permitted to return the Components to
KLSI for replacement within [****] of KLSI's return
approval notification. KLSI will ship the replacement
Components
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
11
<PAGE> 12
to Immersion on a priority basis. In addition, KLSI and
Immersion will mutually agree upon, in writing, an
appropriate test suite for use by Immersion as the basis
for acceptance or rejection of the hexcode or firmware
code portion of the Components ordered by Immersion for
Immersion's use.
3.4. CHANGE ORDERS. Cancellation and rescheduling of Immersion's
Component orders will be governed by the cancellation and
rescheduling policies and fees described in Exhibit B
("Cancellation and Rescheduling Policies and Fees"). All
cancellation and/or rescheduling requests will be submitted to
Immersion by Immersion's customers and will be incorporated by
Immersion into a cancellation and/or rescheduling request
which will be submitted by Immersion to KLSI.
3.5. ANCILLARY AGREEMENT. Immersion agrees and acknowledges that
Immersion's customers will be permitted to negotiate with KLSI
to directly impose quality requirements on KLSI under the
terms of a separate, executed agreement (the "Ancillary
Agreement") and to mutually agree upon RMA procedures and
hexcode or firmware code loading and spin charges.
4. LEAD TIMES AND MINIMUM ORDER QUANTITIES. The parties agree that the lead
time for orders placed by Immersion to KLSI for the .5 CBA and .35 CBA
format Components will be [****] from receipt of the Immersion purchase
order by KLSI, subject to implementation of a Base Wafer Maintenance
Purchase Order System as described in Section 7.4 ("Base Wafer
Maintenance Purchase Order System"). The parties agree that the lead
time for orders placed by Immersion to KLSI for the .35 standard cell
will be [****] from receipt of the Immersion purchase order by KLSI,
subject to implementation of a Die Bank System as described in Section
7.5 ("Die Bank System"). Some exceptions may be taken to the [****] lead
time in the case of factory/subcontractor holiday periods, however, KLSI
shall notify Immersion of any shutdown impact and will define the
additional lead time necessary for ordering purposes on a case by case
basis at the time the order first appears in the forecast (within [****]
of receipt of the forecast from Immersion). The minimum order quantity
requirement is [****] Component units per Immersion purchase order,
however Components aggregated on a single purchase order may be
designated to be shipped to multiple Immersion customer and Affiliate
locations.
5. WARRANTY.
5.1. WARRANTY BY KLSI TO IMMERSION. KLSI acknowledges that although
Immersion may purchase Components for Immersion's use, for the
most part Immersion is purchasing the Components for resale to
Immersion's customers and that Immersion will be making a
warranty to each of Immersion's customers that for a period of
[****] from delivery of each quantity of the Components to
Immersion's customer, the Components, excluding the hexcode or
firmware code, will conform to the Specification and will be
free from defects in materials and
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
12
<PAGE> 13
workmanship. KLSI warrants to Immersion that for a period of
[****] from delivery of each quantity of the Components to
Immersion or directly to Immersion's customers or the
Affiliates, the Components, excluding the hexcode or firmware
code, will conform to the Specification and will be free from
defects in materials and workmanship.
5.2. WARRANTY PROCEDURES.
5.2.1. WARRANTY PROCESS. KLSI further agrees that in any instance where
Immersion's customer or an Affiliate has asserted a claim under
the warranty provided by Immersion to the customer or the
Affiliate (during the [****] warranty period) that a Component,
excluding the hexcode or firmware code, does not conform to the
Specification and/or is not free from defects in material and
workmanship, Immersion will identify the nature of the claim
through direct communication with the customer or the Affiliate
and will conduct Defect verification tests using the means,
including but not limited to Defect Test Suites, that has been
mutually agreed upon between Immersion and KLSI in accordance
with Section 3.3.2 ("Defect Test Suites"). Immersion will obtain
an appropriate sample of Component units, prior to notifying
KLSI of the customer or the Affiliate warranty claim. For
Components purchased by Immersion for Immersion's use, Immersion
will conduct verification tests using the means, including but
not limited to Defect Test Suites that has been mutually agreed
upon between Immersion and KLSI in accordance with the terms of
Section 3.3.2 ("Defect Test Suites") on an appropriate sample of
Components following the same procedures.
5.2.2. KLSI RESPONSIBILITIES. If Immersion determines, on the basis of
the verification criteria that the sample Component units are
defective, KLSI agrees that KLSI will accept receipt of
Immersion's test data and sample Component units and will treat
such delivery of test data and sample Component units from
Immersion as a warranty claim by Immersion under the warranty
provided by KLSI to Immersion under the terms of this Agreement.
If Immersion presents KLSI with a warranty claim which involves
Components which have been shipped to an Immersion customer or
Affiliate, KLSI will contact the customer or Affiliate under
KLSI's Return Authorization Program within [****] of receipt of
Immersion's test data and sample Component units and will accept
defective Component units back directly from Immersion's
customers or the Affiliates. KLSI will provide replacement
Component units directly to Immersion's customers or the
Affiliates on a one to one basis for each defective Component
returned by Immersion's customer or an Affiliate to KLSI, as
described above, within [****] of receipt of Immersion's test
data and sample Component units. If Immersion presents KLSI with
a warranty claim for Components which have been shipped to
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
13
<PAGE> 14
Immersion, KLSI will contact Immersion within [****] of receipt
of Immersion's test data and sample Component units and will
accept defective Component units back from Immersion. KLSI will
provide replacement Component units directly to Immersion on a
one to one basis for each defective Component returned by
Immersion, as described above, within [****] of receipt of
Immersion's test data and sample Component units. KLSI agrees to
be responsible for all insurance and shipping costs incurred by
Immersion and by Immersion's customers and the Affiliates in
returning defective Component units to KLSI. Immersion may, in
its sole discretion, instruct KLSI to accept return of the
defective Component units from Immersion, Immersion's customers
or the Affiliates, as applicable, and to credit Immersion's
account for the purchase price of such units, instead of
providing replacement units to Immersion, Immersion's customers
or the Affiliates, as applicable.
5.2.3. PURPOSE OF THE WARRANTY. Although this warranty extends only to
Immersion and not to Immersion's customers, KLSI agrees and
acknowledges that the purpose of this warranty is to cause KLSI
to provide warranty replacement units to Immersion's customer or
an Affiliate in each instance where Immersion's customer or an
Affiliate asserts a warranty claim to Immersion under the [****]
warranty provided by Immersion to Immersion's customers and the
Affiliates. KLSI further acknowledges and agrees that it is
Immersion's intent to avoid a situation where Immersion is
responsible under Immersion's warranty to Immersion's customer
or an Affiliate for defective Components and Immersion is
without recourse from KLSI to obtain replacement Component units
under the warranty provided by KLSI to Immersion.
5.3. WARRANTY DEFECT FREQUENCY LEVELS.
5.3.1. PROCESS IMPROVEMENT. Immersion and KLSI agree that the
Components manufactured by KLSI should be free from Defects and
that the Components should be manufactured under a stable
manufacturing process that is capable of producing high-quality
reliable components in volume. The acceptance procedure as
described in Section 3.3 ("Acceptance of Component Orders by
Immersion and Immersion's Customers and Affiliates) and the
warranty procedures described in Section 5.1 ("Warranty by KLSI
to Immersion") and 5.2 ("Warranty Procedures") are intended to
identify Defects and to allow Immersion, the Immersion customers
and the Affiliates to return Defective Components to KLSI.
Notwithstanding the acceptance and warranty procedures, KLSI and
Immersion recognize that if the frequency level of Defects in
the Components exceeds certain parameters, the acceptance and
warranty procedures will become expensive and time consuming. As
a result, the
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
14
<PAGE> 15
parties agree that KLSI will conduct a quality and reliability
improvement program on an ongoing basis and use the Defect data
obtained through the acceptance and warranty procedures to
document, analyze and implement a program to constantly reduce
the Defect frequency levels of the Components towards a zero
Defect standard.
5.3.2. RECORD KEEPING AND DOCUMENTATION. KLSI will maintain records of
corrective actions indicating the frequency of Defects during
fabrication of the Components, the proposed corrective process
change, evaluation of effectiveness of the corrective process
and the effective date of implementation of corrective measures.
KLSI will make such records available to Immersion upon request.
KLSI will provide documentation with each shipment of Components
which indicates that the Components shipped have been tested and
inspected by KLSI and have a defect rate no greater than [****]
dpm.
5.3.3. CORRECTIVE ACTION. KLSI will implement and maintain a corrective
action system, including failure analysis, for addressing and
correcting Defects reported under the acceptance and warranty
procedures. The parties agree that any time the Defect rate in
Components purchased by Immersion on a rolling basis or in any
shipment or consecutive series of shipments exceeds [****] dpm
and such Defects are traceable to a single failure mode,
Immersion will be entitled to notify KLSI that the Defect levels
are unacceptable and KLSI will respond by preparing and
proposing a Corrective Action Plan within [****] of KLSI's
confirmation of unacceptable Defects levels. KLSI will confirm
the unacceptable Defect levels within [****]of receipt of
Immersion's notice. The Corrective Action Plan will address
implementation and procedure milestones and timeframes for
remedying the unacceptable Defect levels.
5.3.4. SUSPENSION BY IMMERSION. Immersion will be permitted to delay
and/or postpone manufacturing and deliveries of Components which
have been ordered as well as future orders (a "Suspension") by
written notice to KLSI, pending correction of the excessive
Defect levels under the Corrective Action Plan. The Suspension
status invoked by Immersion's written notice will temporarily
relieve KLSI of its obligation to ship Components, will relieve
Immersion customers and the Affiliates of any obligation to
receive shipment of Components, and will not be treated as a
cancellation or rescheduling by Immersion under the terms of
this Agreement. KLSI will develop a remedy for the Defects under
the Corrective Action Plan at KLSI's sole expense and will
demonstrate to Immersion the effectiveness of such remedy. If
Immersion, in its discretion, approves the remedy, Immersion
will cancel the Suspension and KLSI will (i) incorporate such
remedy into all subsequent
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
15
<PAGE> 16
Components manufactured, (ii) replace all Component units in
Immersion, Immersion's customers' and/or the Affiliates'
inventory, and (iii) reimburse Immersion, the Immersion
customers and/or the Affiliates for any expenses and/or costs
associated with implementation of such remedy. If KLSI is unable
to propose and implement a remedy as described above, Immersion
will be entitled to treat such failure as a Trigger Event under
Section 2.2 ("Second Source") upon [****] written notice and
receive a refund for all defective Components in Immersion,
Immersion's customers' and the Affiliates' inventories.
5.4. DISCLAIMER. EXCEPT FOR THE EXPRESS WARRANTIES CONTAINED HEREIN, KLSI
MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
6. INDEMNIFICATION.
6.1. INDEMNIFICATION BY KLSI.
6.1.1. SCOPE OF KLSI'S INDEMNITY. Subject to prompt notification by
Immersion, cooperation by Immersion and control of all litigation
and/or settlement by KLSI, KLSI shall indemnify, defend and hold
Immersion, Immersion's customers and the Affiliates harmless from
and against any and all damages, costs and expenses ("Costs")
suffered or incurred by Immersion, Immersion's customers and the
Affiliates as a result of any third party claim that the
Components, as delivered by KLSI (whether manufactured by KLSI or
KLSI's Second Source silicon provider) to Immersion, Immersion's
customers or the Affiliates, but excluding any firmware or
hexcode loaded onto any Components and further excluding the
Immersion Preexisting Technology and Immersion Requested
Revisions (as defined in the ASIC Design Agreement), infringe any
patent, copyright or misappropriates any trade secret of any
third party.
6.1.2. MITIGATION BY KLSI. In the case of any third party claim
involving the Components which is covered by the indemnity
described in Section 6.1.1 ("Scope of KLSI's Indemnity"), KLSI
may, in its sole discretion (i) provide Immersion with a modified
version of the Components which comply with the functionality and
features of the Specification so that the Components become
noninfringing (as a replacement for Components in Immersion,
Immersion's customer's and the Affiliates inventory and for
future sales), (ii) provide Immersion other components which are
functionally equivalent (as a replacement for Components in
Immersion, Immersion's customer's and the Affiliates inventory
and for future sales), (iii) procure for Immersion a license to
continue to use and sell the Components, or, (iv) in the
alternative, if none of the foregoing
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
16
<PAGE> 17
alternatives are commercially reasonable, accept return of the
infringing Components in Immersion's, Immersion's customer's
and/or the Affiliate's inventory and refund to Immersion the
purchase price paid for such inventory. Each party agrees to
notify the other promptly of any matters in respect to which the
foregoing indemnity in Section 6.1.1 ("Scope of KLSI's
Indemnity") may apply. If notified in writing of any action or
claim for which KLSI is to provide indemnity, KLSI shall defend
those actions or claims at KLSI's expense and pay the Costs
awarded against Immersion, Immersion's customers and/or
Affiliates in any such action, or pay any settlement of such
action or claim entered into by KLSI.
6.1.3. EXCEPTIONS TO KLSI'S INDEMNITY OBLIGATION. The foregoing
indemnity by KLSI will not apply to any infringement claim to the
extent it arises from (i) any modification of any Component by
parties other than KLSI or KLSI subcontractors under contract
with KLSI, or (ii) an infringement which would not occur in the
Component but which does occur when the Component is incorporated
into the devices.
6.2. INDEMNIFICATION BY IMMERSION.
6.2.1. SCOPE OF IMMERSION'S INDEMNITY. Subject to prompt notification by
KLSI, cooperation by KLSI and control of all litigation and/or
settlement by Immersion, Immersion shall indemnify, defend and
hold KLSI harmless from and against any and all damages, costs
and expenses ("Costs") suffered or incurred by KLSI as a result
of any third party claim that the Immersion Preexisting
Technology and Immersion Requested Revisions (as defined in the
ASIC Design Agreement) as incorporated into the Components as
manufactured under the terms of this Agreement, but excluding any
firmware or hexcode loaded onto any Components, infringe any
patent, copyright or misappropriate any trade secret of any third
party.
6.2.2. MITIGATION BY IMMERSION. In the case of any third party claim
involving the Components which is covered by the indemnity
described in Section 6.2.1 ("Scope of Immersion's Indemnity"),
Immersion may, in its sole discretion, (i) provide KLSI with a
modification to the Immersion Preexisting Technology and/or
Immersion Requested Revisions for use in the Components, or (ii)
procure for Immersion a license to continue to use the Immersion
Preexisting Technology and/or Immersion Requested Revisions in
the Components. Each party agrees to notify the other promptly of
any matters in respect to which the foregoing indemnity in
Section 6.2.1 ("Scope of Immersion's Indemnity") may apply. If
notified in writing of any action or claim for which Immersion is
to provide indemnity, Immersion shall defend those actions or
claims at Immersion's expense and pay the Costs awarded against
KLSI in any such action, or pay any settlement of such action or
claim entered into by Immersion.
17
<PAGE> 18
6.2.3. EXCEPTIONS TO IMMERSION'S INDEMNITY OBLIGATION. The
foregoing indemnity by Immersion will not apply to any
infringement claim to the extent it arises from (i) any
modification of the Immersion Preexisting Technology
and/or Immersion Requested Revisions by parties other
than Immersion or Immersion subcontractors under
contract with Immersion, or (ii) an infringement which
would not occur in the Immersion Preexisting Technology
and/or Immersion Requested Revisions but which does
occur when the Immersion Preexisting Technology and/or
Immersion Requested Revisions are incorporated into the
Components.
7. FINANCIAL TERMS.
7.1. PRICE. The pricing for the Components will be in U.S. dollars and
shall be as set forth in Exhibit C ("Pricing"). KLSI has advised
Immersion that there is a [****] CBA ROM spin charge per each new
(or new revision of) hexcode or firmware implemented in the
Components. Such charge will be paid by Immersion within [****]
of KLSI's invoice in the case of Components ordered by Immersion
for Immersion's use. Such charge will be invoiced by KLSI
directly to the Immersion customers or the Affiliates, as
applicable, in the case of Components ordered by Immersion for
shipment to Immersion's customers or the Affiliates, since the
hexcode or firmware will be provided to KLSI directly by the
Immersion customers or the Affiliates, as applicable. KLSI will
not reserve or retain a security interest in the Components. In
any case where the respin is due to KLSI's failure to perform,
such respin will be expedited at no charge.
7.2. PAYMENT. KLSI will invoice Immersion for all Components shipped
to Immersion, the Immersion customers or the Affiliates, as
applicable and will invoice the Immersion customers and
Affiliates for any ROM spin charges. The invoice from KLSI to
Immersion for each shipment of Components will be due and payable
to KLSI within [****] after acceptance of the Components by
Immersion, Immersion's customer or the Affiliates as described in
Section 3.2.2 ("Deemed Acceptance by Immersion"). KLSI shall not
require a letter of credit or prepayment as precondition to
manufacturing Components for sale to Immersion or delivering
Components to Immersion, Immersion's customers or the Affiliates.
7.3. TAXES AND DUTIES. In addition to any payments due to KLSI under
this Agreement, Immersion shall pay amounts equal to any taxes,
duties, or other amounts, however designated, which are levied or
based upon such payments, or upon this Agreement, provided,
however, that Immersion shall not be liable for taxes based on
KLSI's net income.
7.4. BASE WAFER MAINTENANCE PURCHASE ORDER SYSTEM. KLSI and Immersion
agree that in order for KLSI to maintain the [****] lead time
required under the
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
18
<PAGE> 19
terms of this Agreement with respect to the .5 CBA and .35 CBA
format Components, as well as the flexibility requested in the
reschedule and cancellation windows described in Exhibit B
("Cancellation and Rescheduling Policies and Fees"), it will be
necessary for KLSI to implement a Base Wafer Maintenance program.
Under the program, KLSI will manufacture a "maintenance quantity"
of Component base wafers which have been manufactured up to the
metalization phase and set aside for use exclusively to produce
Components in fulfillment of Immersion's purchase orders. The
"maintenance quantity" will be determined on a monthly basis by
KLSI and will be calculated using the upcoming month's quantity
of Components as reflected in the Immersion rolling [****]
forecast for .5 CBA and .35 CBA format Components submitted to
KLSI. To facilitate the program, Immersion agrees to issue an
open rolling purchase order for .5 CBA and .35 CBA format
Components. If Immersion cancels or discontinues the Base Wafer
Maintenance program without providing KLSI [****] notice and if
such cancellation or discontinuation is due to no fault of KLSI
for either non-delivery or quality issues, then Immersion will be
responsible for the amount of the Base Wafer Maintenance purchase
order which is equal to one month's average usage (based on the
average purchase order quantity for the previous six months) at
[****] of the applicable current unit price. An invoice will be
sent by KLSI to Immersion within [****] of Immersion's
cancellation or discontinuation of the program and will be due
and payable by Immersion within [****] after receipt. KLSI agrees
that KLSI is obligated to use up the base wafer "maintenance
quantity" prior to any termination of this Agreement and that the
rolling open purchase order will be deemed to be canceled upon
notice of such termination.
7.5. DIE BANK SYSTEM. KLSI and Immersion agree that in order for KLSI
to maintain the [****] lead time required under the terms of this
Agreement with respect to the .35 standard cell format
Components, as well as the flexibility requested in the
reschedule and cancellation windows described in Exhibit B
("Cancellation and Rescheduling Policies and Fees"), it will be
necessary for KLSI to implement a Die Bank System program. Under
the program, KLSI will manufacture a "maintenance quantity" of
Component die which have been manufactured up to the finished die
phase and set aside for use exclusively to produce Components in
fulfillment of Immersion's purchase orders. The "maintenance
quantity" will be determined on a [****] basis by KLSI and will
be calculated using the upcoming month's quantity of Components
as reflected in the Immersion rolling [****] forecast for .35
standard cell format Components submitted to KLSI. To facilitate
the program, Immersion agrees to issue an open rolling purchase
order for .35 standard cell format Components. If Immersion
cancels or discontinues the Die Bank System program without
providing KLSI [****] notice and if such cancellation or
discontinuation is due to no fault of KLSI for either
non-delivery or quality issues, then Immersion will be
responsible for the amount of the Die Bank System
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
19
<PAGE> 20
purchase order which is equal to one month's average usage (based
on the average purchase order quantity for the previous [****])
at [****] of the applicable current unit price. An invoice will
be sent by KLSI to Immersion within [****] of Immersion's
cancellation or discontinuation of the program and will be due
and payable by Immersion within [****] after receipt. KLSI agrees
that KLSI is obligated to use up the die "maintenance quantity"
prior to any termination of this Agreement and that the rolling
open purchase order will be deemed to be canceled upon notice of
such termination.
8. TERMINATION.
8.1. TERM. The initial term of this Agreement shall be for a period of
[****] commencing on the Effective Date, unless otherwise earlier
terminated by the parties according to the terms of this
Agreement. Thereafter, this Agreement shall automatically renew
for subsequent one-year periods, unless either party terminates
the Agreement by written notice at least [****] prior to the end
of the initial term or any renewal term.
8.2. TERMINATION WITHOUT CAUSE. Immersion may terminate this Agreement
without cause upon [****] prior written notice.
8.3. TERMINATION FOR CAUSE. Either party may terminate this Agreement
by written notice if the other party materially breaches the
terms of this Agreement. Such termination shall become effective
upon [****] written notice of breach, provided the breaching
party fails to cure its breach within the notice period.
8.4. EFFECT OF TERMINATION.
8.4.1. GENERALLY. Upon termination of this Agreement, Immersion's
obligation to pay KLSI for Components delivered to
Immersion, Immersion's customers and/or Affiliates, as
applicable, up through the effective date of termination
shall survive and Immersion will pay for all such
Components in accordance with the terms of this Agreement,
subject to all rights of acceptance and rejection and
warranty returns and credits.
8.4.2. LIMITATION. EXCEPT FOR DIRECT DAMAGES RESULTING FROM A
BREACH OF THE TERMS OF THIS AGREEMENT, NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR DAMAGES OF ANY SORT, DIRECT OR
INDIRECT, INCLUDING LOST PROFITS, AS A RESULT OF
TERMINATING THIS AGREEMENT IN ACCORDANCE WITH THE TERMS OF
THE AGREEMENT.
9. PERSONAL INJURY AND PROPERTY DAMAGE CLAIMS. Neither party shall have any
obligation to indemnify, protect, defend and hold the other party
harmless from any Costs suffered
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
20
<PAGE> 21
or incurred by the other party to the extent such third party claim or
threatened claim arises from a personal or alleged personal injury or
damage or alleged damage to property arising out of the third party's
use of the Components or the devices containing the Components.
10. CONFIDENTIALITY AND PROPRIETARY NOTICES.
10.1. OBLIGATIONS. During the course of this Agreement, each party may
be a disclosing party (hereinafter called "Discloser") for
transmitting certain proprietary information to the other party
(hereinafter called "Recipient"). Recipient agrees to treat as
confidential all such proprietary information, including all
information, written or oral, relating thereto, including, but
not limited to, know how, concepts, techniques, drawings,
specifications, processes, computer programs, firmware, hexcode,
designs and systems, manufacturing and marketing information,
received from Discloser, and Recipient agrees not to publish such
information or disclose same to others except to those employees,
subcontractors and sublicensees to whom disclosure is necessary
to order to carry out the purpose for which such information is
supplied. Recipient shall inform such employees, subcontractors
and sublicensees of the confidential nature of such information
and of their obligation to keep same confidential. Recipient
further agrees not to use such proprietary information for
Recipient's own benefit or for the benefit of others, other than
in accordance with this Agreement, without Discloser's prior
written consent, and that all tangible materials, including
written material, photographs, discs or other documentation
embodying such proprietary information shall remain the sole
property of Discloser and shall be delivered to Discloser upon
Discloser's request. Upon Discloser's request, the Receiving
party shall return any and all copies of Discloser's confidential
information or, at Discloser's option, the Receiving party shall
destroy such copies and notify Discloser in writing when such
copies have been destroyed.
10.2. EXCEPTIONS. The foregoing obligations of confidentiality do not
apply to information which was previously known to Recipient, is
rightfully received from a third party by Recipient, or becomes
publicly known or available without breach of this Agreement by
Recipient.
10.3. PROPRIETARY NOTICES. KLSI will cause the outside package and top
level metal mask work layer of the Components to bear a mask work
and copyright notice for Immersion's benefit.
11. LIMITATION OF LIABILITY.
11.1. CONSEQUENTIAL DAMAGES. IN NO EVENT WILL EITHER PARTY BE LIABLE
FOR LOST PROFITS, OR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF
LIABILITY, ARISING IN ANY WAY IN CONNECTION WITH THIS AGREEMENT.
THIS LIMITATION WILL
21
<PAGE> 22
APPLY EVEN IF THE PARTIES HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL
PURPOSE OF ANY LIMITED REMEDY.
11.2. LIMITATIONS OF LIABILITY OTHER THAN INDEMNITY OBLIGATIONS. EXCEPT
WITH RESPECT TO EITHER PARTY'S OBLIGATIONS OF INDEMNITY,
INCLUDING, BUT NOT LIMITED TO, COSTS OF DEFENSE AND "COSTS" (AS
DEFINED ABOVE) SET FORTH IN SECTION 6 ("INDEMNIFICATION") IN NO
CASE WILL EITHER PARTY'S TOTAL CUMULATIVE LIABILITY OR
OBLIGATIONS UNDER THE TERMS OF OR ARISING OUT OF THIS AGREEMENT
EXCEED [****]
12. GENERAL PROVISIONS.
12.1. SUCCESSION AND ASSIGNMENT. Neither party may assign this
Agreement unless the other party consents in advance in writing
to the assignment, provided, however, that the Agreement may be
assigned to a corporate successor in interest in the case of a
merger or acquisition or in the case of a sale of assets without
the prior approval of the other party. Any attempt to assign this
Agreement in violation of the provisions of this Section 12.1
("Succession and Assignment") shall be void.
12.2. NOTICES. Notices required under this Agreement shall be addressed
as follows, except as otherwise revised by written notice:
TO IMMERSION: TO KLSI:
Louis B. Rosenberg, Ph.D. _______________
President _______________
Immersion Corporation Kawasaki LSI USA Inc.
2158 Paragon Drive 2570 North First Street
San Jose, CA 95131 Suite 301
U.S.A. San Jose, CA 95131
U.S.A.
12.3. GOVERNING LAW. The validity, interpretation and performance of
this Agreement shall be governed by the substantive laws of the
State of California, without the application of any principle
that leads to the application of the laws of any other
jurisdiction.
12.4. NO AGENCY. Neither party is to be construed as the agent or to be
acting as the agent of the other party hereunder in any respect.
12.5. MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one
single Agreement between the parties.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
22
<PAGE> 23
12.6. NO WAIVER. No delay or omission by either party hereto to
exercise any right or power occurring upon any noncompliance or
default by the other party with respect to any of the terms of
this Agreement shall impair any such right or power or be
construed to be a waiver thereof. A waiver by either of the
parties hereto of any of the covenants, conditions, or agreements
to be performed by the other shall not be construed to be a
waiver of any succeeding breach thereof or of any covenant,
condition, or agreement herein contained. Unless stated
otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other
remedies available to either party at law, in equity, or
otherwise.
12.7. SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or
impaired thereby.
12.8. AMENDMENTS IN WRITING. Any amendment to this Agreement shall be
in writing and signed by both parties hereto.
12.9. INTERPRETATION. Since this Agreement was prepared by both parties
hereto, it shall not be construed against any one party as the
drafting party.
12.10. SURVIVAL. Sections 2.2 ("Second Source"), 5 ("Warranty"), 6
("Indemnification"), 7.4 ("Base Wafer Maintenance Purchase Order
System"), 7.5 ("Die Bank System"), 8 ("Termination"), 9
("Personal Injury and Property Damage Claims"), 10
("Confidentiality and Proprietary Notices"), 11 ("Limitation of
Liability") and 12 ("General Provisions") will survive and
continue after the expiration or termination of this Agreement.
12.11. DISPUTE RESOLUTION. Except in the case of a breach of an
obligation related to a party's intellectual property rights, in
the event either party concludes that it is in its best interest
to file any legal action against the other, the party shall
contact the other party's management and at least two (2) senior
managers from each party shall meet without legal counsel or
interruption for a minimum amount of three (3) eight (8) hour
periods and diligently attempt to resolve all disputed matters.
If the parties are unable to resolve their difference and either
party desires to file a legal action against the other, at least
two (2) senior managers from each party and their respective
counsels shall meet for three (3) eight (8) hour periods and
diligently attempt to resolve all disputed matters. Either party
may request that an independent third party bound to mutually
agreed upon obligations of confidentiality attend such meeting in
order to assist the parties in reaching a reasonable resolution.
All oral and written information exchanged in these meetings
shall be exchanged in an effort to settle all disputed matters.
If either party still desires to file a legal action against the
other after these prescribed meetings, such party may file a
legal action against the other party as allowed by
23
<PAGE> 24
applicable law in Santa Clara County state court or in the
federal court. The parties agree that if a party does not attend
all of the prescribed meetings it waives its rights to any
monetary damages in the legal action(s) it files.
12.12. FORCE MAJEURE. Neither party shall be liable for any failure or
delay in its performance under this Agreement due to causes,
including, but not limited to, acts of God, acts of civil or
military authority, fires, epidemics, floods, earthquakes, riots,
wars, sabotage, court orders and governmental actions, which are
beyond its reasonable control ("Force Majeure"); provided that
the delayed party: (i) gives the other party written notice of
such cause promptly; and (ii) uses its best efforts to correct
such failure or delay in its performance. Notwithstanding the
foregoing, KLSI agrees that failure to deliver the Components to
Immersion or Immersion's customers will have a significant effect
on Immersion's ability to comply with Immersion's contractual
obligations to its customers. As such, KLSI agrees that delays in
production of the Components in a single silicon facility, with
respect to a particular format, whether at KLSI or a Second
Source, including but not limited to, process problems,
availability of materials, or other such manufacturing delays,
shall not constitute a Force Majeure. Accordingly, KLSI will take
all reasonable measures to establish, maintain and qualify Second
Source capability so as to insure a continuous supply of the
Components.
12.13. ENTIRE AGREEMENT. This Agreement, with the exception of the ASIC
Design Agreement, constitutes the complete agreement of the
parties, and supersedes any other agreements, written or oral,
concerning the subject matter hereof, with the exception of the
ASIC Design Agreement.
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have signed this Agreement as of the date and year last set forth below.
KLSI: IMMERSION:
KAWASAKI LSI USA. IMMERSION CORPORATION
By: /s/ Hakuo Watanabe By: /s/ Louis Rosenberg
---------------------------- ------------------------------
Print Name: Hakuo Watanabe Print Name: Louis Rosenberg
----------------------- -----------------------
Title: CFO Title: President
---------------------------- ----------------------------
Date: 8/17/98 Date: Aug. 17, 1998
---------------------------- ----------------------------
24
<PAGE> 1
EXHIBIT 10.15
AMENDMENT NO. 1
TO
SEMICONDUCTOR DEVICE PURCHASE AGREEMENT
This Amendment (the "Amendment") No. 1 to the Semiconductor Device
Component Purchase Agreement dated August 17, 1998, by and between Immersion
Corporation, a California corporation, having its principal place of business at
2158 Paragon Drive, San Jose, California (hereinafter "Immersion") and Kawasaki
LSI U.S.A. Inc., a California Corporation, having its principal place of
business at 2570 North First Street, Suite 301, San Jose, California 95131
(hereinafter "KLSI"), modifies and amends the Semiconductor Device Component
Purchase Agreement (the "Agreement") in certain respects as follows:
1. The parties desire to amend the Agreement to permit KLSI to sell the
"Components" directly to certain designated customers, and therefore Paragraph
2.1.3, entitled "KLSI Sales to Direct Customers" as described below is hereby
added to the Agreement.
2. Paragraph 2.1.3.1, entitled "In General": The following Paragraph
2.1.3.1 is hereby added to the Agreement:
The parties agree that Paragraph 2.1.1 ("Components") of the
Agreement requires that the Components will be sold exclusively to
Immersion. Notwithstanding the foregoing, Immersion may from time to
time desire that KLSI sell certain designated Components ("Specific
Components") directly to certain designated customers ("Direct
Customers"). In such case, Immersion will issue a Direct Customer
Authorization Form substantially in the form attached hereto as
Schedule 1 ("Direct Customer Authorization Form") to KLSI. KLSI
agrees that Immersion may define the Specific Components to include
only certain formats of the Component, such as the .35 CBA format or
the .35 standard cell format. Upon execution by Immersion and KLSI
of each Direct Custom Authorization Form, KLSI may negotiate
directly with such Direct Customer to enter into a component
purchase agreement under terms mutually agreed upon by KLSI and the
Direct Customer. Subject to the limitations described in Section
2.1.3.4 ("Limitations") and Section 2.1.3.7 ("Second Source
Limitation"), KLSI and each Direct Customer will be free to address
lead times, pricing, hexcode deliveries, quality requirements and
other relevant terms as mutually agreed upon by KLSI and such Direct
Customer.
3. Paragraph 2.1.3.2, entitled "Direct Customer Royalty": The following
Paragraph 2.1.3.2 is hereby added to the Agreement:
KLSI agrees to compensate Immersion by means of a royalty which will
be due and owing for each unit of the Specific Components sold to a
Direct Customer. The specific royalty due for sales of Specific
Components to each Direct Customer will be described in the
applicable Direct Customer Authorization Form. KLSI agrees to pay
the royalties due to Immersion for each
<PAGE> 2
shipment of Specific Components to a Direct Customer within [****]
days of acceptance of the Specific Components by the Direct
Customer.
4. Paragraph 2.1.3.3, entitled "Mitigation Trigger Events": The following
Paragraph 2.1.3.3 is hereby added to the Agreement:
Orders from Direct Customers shall be counted toward
Immersion's orders for purposes of reaching the [****] units per
month.
5. Paragraph 2.1.3.4, entitled "Die Bank and Base Wafer": The following
Paragraph 2.1.3.4 is hereby added to the Agreement:
Immersion's Die Bank System and Base Wafer Maintenance Program
will not be used for Direct Customers.
6. Paragraph 2.1.3.5, entitled "Second Source Limitation": The following
Paragraph 2.1.3.5 is hereby added to the Agreement:
KLSI may use its Second Source to produce Specific Components
for resale by KLSI to Direct Customers but KLSI may not grant Direct
Customers the right to buy directly from the KLSI Second Source.
7. Paragraph 2.2.3 entitled "Terms to be Imposed on the Second Source
Silicon Provider": The following language shall be added to the end of the
existing paragraph 2.2.3:
The parties agree that under certain circumstances where KLSI has
entered into an agreement with a Direct Customer in accordance with
the terms of Section 2.1.3.1 ("In General"), KLSI may be required,
by the Direct Customer, to agree that in the case of a material
breach by KLSI of Quality Requirements or delivery obligations, KLSI
will permit the Direct Customer, as a limited remedy, to enter into
a direct purchase arrangement with KLSI's Second Source for the
Specific Components. Immersion hereby grants KLSI the right to enter
into such an arrangement to permit Direct Customers to purchase the
Specific Components under the circumstances described above, so long
as KLSI imposes an obligation for the Second Source silicon provider
to compensate Immersion by means of the specific royalty applicable
to the Specific Components as described in the applicable Direct
Customer Authorization Form within [****] days of delivery of the
Specific Components by the Second Source to the Direct Customer.
KLSI also agrees to insure that the obligation to pay Immersion on a
timely basis is an obligation enforceable by Immersion as a third
party beneficiary of the Second Source Silicon Provider Agreement.
In addition to the provision set forth in Section 5.3(c) of the
Agreement Draft for the ASIC Design and Development dated October
16, 1997, KLSI agrees to notify Immersion if KLSI works with any
Direct Customer to design, develop and/or knowingly manufacture any
integrated circuit devices for "force feedback" applications that
compete with the Components. For purposes of this Agreement the term
"force
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-2-
<PAGE> 3
feedback" shall mean simulation of feel or tactile sensations using
at least one actuator controlled by one or more microprocessors such
that modulation of said actuator creates feel or tactile sensations.
8. Schedule 1 ("Direct Customer Authorization Form") attached hereto is
hereby added to the Agreement as Exhibit F thereto.
9. In the event of inconsistencies between the Agreement and this
Amendment, the terms and conditions of this Amendment shall be controlling.
Unless specifically modified or changed by the terms of this Amendment, all
terms of the Agreement shall remain in effect and shall apply fully as described
and set forth in the Agreement. Capitalized terms used and not defined herein
are used with the meanings set forth in the Agreement.
IMMERSION: KLSI:
IMMERSION CORPORATION: KAWASAKI LSI U.S.A., INC.:
By: /s/ Louis Rosenberg By: /s/ Hakuo Watanabe
----------------------------- -----------------------------------
Print Name: Louis Rosenberg Print Name: Hakuo Watanabe
--------------------- ---------------------------
Title: President Title: Chief Financial Officer
------------------------- --------------------------------
Date: April 26, 1999 Date: April 27, 1999
------------------------- --------------------------------
-3-
<PAGE> 4
Schedule 1
Direct Customer Authorization Form
This Direct Customer Authorization Form No. 1 contains the special terms
and conditions applicable to the Direct Customer described below and will be
incorporated by reference into the Semiconductor Device Component Purchase
Agreement (the "Agreement") between Immersion and KLSI effective as of 8/17/98
for a term of [****]. This Direct Customer Authorization Form shall be effective
on the date last executed below. All terms used in this Direct Customer
Authorization Form shall retain the same meaning as defined in the Agreement and
such definitions are incorporated herein by reference.
<TABLE>
<S> <C>
1. Name of Proposed Direct Customer: [****]
2. Royalty to be paid to Immersion: [****]
[****]
3. Name of Specific Component (and [****]
number, if applicable)
</TABLE>
IN WITNESS HEREOF, the parties hereto have duly caused this Direct
Customer Authorization Form to be signed by their duly authorized
representatives.
IMMERSION: KLSI:
IMMERSION CORPORATION: KAWASAKI LSI U.S.A., INC.:
By: /s/ Louis Rosenberg By: /s/ Hakuo Watanabe
----------------------------- -----------------------------------
Print Name: Louis Rosenberg Print Name: Hakuo Watanabe
--------------------- ---------------------------
Title: President Title: Chief Financial Officer
------------------------- --------------------------------
Date: April 26, 1999 Date: April 27, 1999
------------------------- --------------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 5
Direct Customer Authorization Form
This Direct Customer Authorization Form No. 1 contains the special terms
and conditions applicable to the Direct Customer described below and will be
incorporated by reference into the Semiconductor Device Component Purchase
Agreement (the "Agreement") between Immersion and KLSI effective as of 6/4/99
for a term of [****]. This Direct Customer Authorization Form shall be effective
on the date last executed below. All terms used in this Direct Customer
Authorization Form shall retain the same meaning as defined in the Agreement and
such definitions are incorporated herein by reference.
<TABLE>
<S> <C>
1. Name of Proposed Direct Customer: [****]
2. Royalty to be paid to Immersion: [****]
[****]
3. Name of Specific Component (and [****]
number, if applicable)
</TABLE>
IN WITNESS HEREOF, the parties hereto have duly caused this Direct
Customer Authorization Form to be signed by their duly authorized
representatives.
IMMERSION: KLSI:
IMMERSION CORPORATION: KAWASAKI LSI U.S.A., INC.:
By: /s/ Louis Rosenberg By: /s/ Hakuo Watanabe
----------------------------- -----------------------------------
Print Name: Louis Rosenberg Print Name: Hakuo Watanabe
--------------------- ---------------------------
Title: President Title: Chief Financial Officer
------------------------- --------------------------------
Date: April 26, 1999 Date: April 27, 1999
------------------------- --------------------------------
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.16
INTERCOMPANY INTELLECTUAL PROPERTY LICENSE AGREEMENT
IMMERSION CORPORATION AND MICROSCRIBE, LLC
This Intercompany Intellectual Property License Agreement (the
"Agreement") is by and between Immersion Corporation, a California corporation,
with an office at 2158 Paragon Drive, San Jose, California (hereinafter
"Immersion") and MicroScribe, LLC, a California limited liability company, with
offices in San Jose, California (hereinafter "Licensor"), is entered into
effective as of July 1, 1997 (the "Effective Date").
RECITALS
A. Licensor is the owner of certain intellectual property rights
related to 3D digitizing.
B. The parties desire that Licensor grant a license to Immersion for the
MicroScribe Technology under the MicroScribe Intellectual Property Rights to
enable Immersion to manufacture, market and sell 3D digitizing technology
products, on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and agreements set
forth below and the other consideration cited herein, the parties agree as
follows.
AGREEMENT
1. DEFINITIONS
In this Agreement the following words and expressions shall have the
following meanings:
1.1 AFFILIATES means any corporation or business entity which is
controlled by, controls, or is under common control of a party. For this
purpose, the meaning of the word "control" shall include, without limitation,
direct or indirect ownership of more than fifty percent (50%) of the voting
shares of interest of such corporation or business entity.
1.2 MICROSCRIBE INTELLECTUAL PROPERTY RIGHTS means the patents,
copyrights, trademarks, trade secrets, know-how, mask work rights and all other
intellectual property rights related to the MicroScribe Technology, including
without limitation the issued patents and patent applications described in
Exhibit A ("MicroScribe Intellectual Property"), and any continuations,
continuations in-part, divisional applications, revisions and/or re-examinations
based on the foregoing.
1.3 MICROSCRIBE TECHNOLOGY means certain three dimensional ("3D")
digitizing technology, including but not limited to, a mechanical digitizing arm
used to input three dimensional data into a computer, and related digitizing
software applications (including InScribe and Vertisketch for Lightwave) and
digitizing software drivers, in object code and source code form, which
technology is currently used commercially in a product line sold under the
MicroScribe trademark as such product is further described in Exhibit B
("MicroScribe Technology").
1
<PAGE> 2
1.4 NET RECEIPTS means the gross receipts received by Immersion upon any
sales of Royalty Bearing Products to unaffiliated third parties, less any actual
returns and/or credits. Net Receipts shall not include freight, insurance and
taxes. No other costs incurred in the manufacture, sale, distribution, or
exploitation of Royalty Bearing Products shall be deducted from gross receipts
in the calculation of Net Receipts. If Royalty Bearing Products are bundled with
other items sold by Immersion and are not invoiced separately, royalties will be
paid based on Immersion's then-current average sales price for each such Royalty
Bearing Product when sold as a separate item (averaged for the applicable
Quarter in which the Net Receipts are received by Immersion for the country in
which the sale was made) in like quantities in arms length transactions to
unrelated third parties.
1.5 ROYALTY BEARING PRODUCT means a 3D digitizing technology product
which either incorporates or utilizes the MicroScribe Technology and/or would
otherwise infringe the MicroScribe Design Patent [****] without a license.
2. DELIVERY AND GRANT OF LICENSES
2.1 DELIVERY. Licensor will deliver the MicroScribe Technology within
five (5) days of the Effective Date of this Agreement.
2.2 GRANT OF LICENSE. Subject to the terms of this Agreement, Licensor
grants to Immersion a worldwide, nonexclusive license under any MicroScribe
Intellectual Property Rights owned or licensable by Licensor, to use, reproduce,
modify, and create derivative works based upon the MicroScribe Technology in
order to develop, use, make, and have made 3D digitizing technology products,
and to sell, offer to sell, lease, license, import, demonstrate, perform,
display, market and distribute such 3D digitizing technology products, with the
further right to sublicense such rights through multiple tiers of sublicenses.
2.3 TRADEMARK LICENSE. Licensor hereby grants to Immersion a
nonexclusive, worldwide license, to use in connection with marketing Royalty
Bearing Products, the trademark(s) used by Licensor ("Marks") to identify the
MicroScribe Technology and Immersion agrees to use such Marks on and in
connection with the Royalty Bearing Products. Immersion acknowledges that all
use of the Marks will inure to the benefit of Licensor. At Licensor's reasonable
request, Immersion shall provide Licensor with samples of Immersion's use of
Licensor's trademarks. Immersion agrees to abide by Licensor's reasonable
written trademark policies as issued and provided to Immersion from time to
time. In any case where the Marks are not used in compliance with Licensor's
trademark policies and such use has been approved in writing by Licensor, upon
receipt of written notice from Licensor, Immersion will promptly correct the
non-compliance and submit samples of compliant use to Licensor for approval.
3. ROYALTIES
3.1 ROYALTY. Immersion shall pay Licensor a royalty based on a
percentage of the Net Receipts for each Royalty Bearing Product sold by
Immersion to unrelated third parties in arms
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-2-
<PAGE> 3
length transactions, in accordance with the royalty schedule attached as Exhibit
C ("Royalty Schedule").
3.2 PAYMENTS AND REPORTS. The royalties to be paid by Immersion to
Licensor hereunder shall be due [****] after the close of each calendar quarter.
Royalty reports setting forth the royalty calculation shall be included with
such payments.
3.3 AUDIT RIGHTS OF ROYALTY PAYMENTS. Licensor shall have the right, at
Licensor's expense, to have an independent auditor mutually agreed upon by
Licensor and Immersion audit the Net Receipts and the royalty payments of
Immersion on an annual basis, unless such audit reveals any underpayment of
royalties in an amount greater than [****] of actual royalties due for any Year,
in which case Immersion shall promptly remit an amount equal to the underpayment
and shall pay the reasonable costs of such audit. Such audit shall be preceded
by at least thirty (30) business days advance written notice and shall be
performed during normal business hours by the auditor. The auditor shall have
access to only those books and records of Immersion which are reasonably
necessary to determine the relevant royalties due for Royalty Bearing Products.
4. TERM AND TERMINATION
4.1 TERM. Unless earlier terminated in accordance with the provisions of
this Agreement, this Agreement will remain in force for [****]. The parties
agree that upon a Change of Control of Licensor, this Agreement will terminate,
except that the parties may, by mutual written agreement, waive such termination
or mutually agree on a later termination date. For purposes of this Agreement,
the term "Change of Control of Licensor" shall mean the occurrence of (i) a
transaction pursuant to which any person (or group of persons) other than
Immersion or its affiliates (a "Third Party") acquires more than 50% of the
outstanding units of Licensor, (ii) a merger or other business combination
involving Licensor pursuant to which any Third Party acquires more than 50% of
the outstanding units of Licensor or the entity surviving such merger or
business combination or (iii) any other transaction pursuant to which any Third
Party acquires control of assets of Licensor having a fair market value (as
determined by Immersion in good faith) equal to more than 50% of the fair market
value of all the assets of Licensor immediately prior to such transaction.
4.2 TERMINATION FOR BREACH. This Agreement may be terminated by either
party upon written notice to the breaching party, if the breaching party
materially breaches this Agreement and fails to remedy the breach within [****]
after being given written notice thereof.
4.3 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement for any reason, Immersion agrees to pay Licensor for royalties due
under this Agreement. Upon any termination of this Agreement, Immersion shall
have one hundred and twenty (120) days to distribute any remaining inventory in
process and/or in existence as of the effective date of the termination, subject
to the obligation for Immersion to pay royalties hereunder for any such
distribution by Immersion.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-3-
<PAGE> 4
5. WARRANTY OF TITLE
Licensor represents and warrants that Licensor either has ownership of,
or sufficient rights in, the MicroScribe Technology and MicroScribe Intellectual
Property to enter into this Agreement and to grant all the rights set forth
herein.
6. INDEMNIFICATION
6.1 INFRINGEMENT. Subject to prompt notification by Immersion,
cooperation by Immersion and control of all litigation and/or settlement by
Licensor, Licensor shall indemnify, defend and hold harmless Immersion from and
against any and all costs and damages suffered or incurred by Immersion as a
result of any third party claim that any MicroScribe Technology as delivered by
Licensor infringes upon any third party intellectual property right. Each party
agrees to notify the other promptly of any matters in respect to which the
foregoing indemnity in this Section 6 ("Indemnification") may apply. If notified
in writing of any action or claim for which Licensor is to provide indemnity,
Licensor shall defend those actions or claims at its expense and pay the costs
and damages awarded against Immersion in any such action, or pay any settlement
of such action or claim entered into by Licensor.
6.2 PERSONAL INJURY AND PROPERTY DAMAGE CLAIMS. Neither party shall have
any obligation to indemnify, protect, defend and hold the other party harmless
from any costs or damages suffered or incurred by the other party to the extent
such third party claim or threatened claim arises from a personal or alleged
personal injury or damage or alleged damage to property arising out of the third
party's use of the 3D digitizing technology.
7. LIMITATION OF LIABILITY
7.1 DISCLAIMER OF CERTAIN TYPES OF DAMAGES. IN NO EVENT WILL LICENSOR OR
IMMERSION BE LIABLE FOR LOST PROFITS, OR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN
ANY WAY IN CONNECTION WITH THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF
LICENSOR AND IMMERSION HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
7.2 LIMITATION. EXCEPT WITH RESPECT TO MICROSCRIBE'S OBLIGATIONS OF
INDEMNITY, IN NO CASE WILL EITHER PARTY'S TOTAL CUMULATIVE LIABILITY OR
OBLIGATIONS UNDER THE TERMS OF OR ARISING OUT OF THIS AGREEMENT EXCEED THE
ROYALTIES PAID BY IMMERSION TO MICROSCRIBE.
7.3 NEGATION OF WARRANTIES AND OTHER OBLIGATIONS.
7.3.1 Nothing in this Agreement shall be construed:
-4-
<PAGE> 5
(i) as a warranty or representation that anything made,
used, sold or otherwise disposed of under any
license granted in this Agreement is or will be
free from infringement by patents, copyrights,
trade secrets, trademarks, or other rights of third
parties;
(ii) as granting by implication, estoppel or otherwise
any licenses or rights under patents or other
intellectual property rights of Licensor other than
expressly granted herein; or
(iii) (a) to require Licensor to file any patent
application relating to any 3D digitizing
technology and (b) a warranty that Licensor will be
successful in securing the grant of any patent
relating to any 3D digitizing technology or any
reissue or extensions thereof.
7.3.2 Except for Licensor's obligations of indemnity set forth
herein, Licensor does not assume any responsibility for the manufacture of the
3D digitizing technology products, or use of any 3D digitizing technology
products manufactured or sold by or for Immersion under the licenses granted
herein. All warranties in connection with such products shall be made by
Immersion as manufacturer or seller of such products and such warranties shall
not directly or by implication obligate Licensor in any way.
8. GENERAL
8.1 ENTIRE AGREEMENT. This Agreement constitutes the complete agreement
of the parties and supersedes any other agreements, written or oral concerning
the subject matter hereof.
8.2 SUCCESSION AND ASSIGNMENT. Neither party may assign this Agreement
without the prior written consent of the other party except that either party
may assign this Agreement to a corporate successor in interest in the case of a
merger or acquisition or in the case of a sale of assets without the prior
approval of the other party. Any attempt to assign this Agreement in violation
of the provisions of this Section 8.2 ("Succession and Assignment") shall be
void.
8.3 NOTICES. Notices required under this Agreement shall be addressed as
follows, except as otherwise revised by written notice:
TO IMMERSION: TO MICROSCRIBE:
Louis B. Rosenberg, Ph.D. Tim Lacey
President MicroScribe LLC
Immersion Corporation 2158 Paragon Drive
2158 Paragon Drive San Jose, CA 95131
San Jose, CA 95131
8.4 GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the substantive laws of the State of California,
without the application of any principle that leads to the application of the
laws of any other jurisdiction.
-5-
<PAGE> 6
8.5 NO AGENCY. Neither party is to be construed as the agent, partner,
or joint venturer or to be acting as the agent, partner or joint venturer of the
other party hereunder in any respect, solely by reason of this Agreement.
8.6 MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one single Agreement
between the parties.
8.7 NO WAIVER. No delay or omission by either party hereto to exercise
any right or power occurring upon any noncompliance or default by the other
party with respect to any of the terms of this Agreement shall impair any such
right or power or be construed to be a waiver thereof. A waiver by either of the
parties hereto of any of the covenants, conditions, or agreements to be
performed by the other shall not be construed to be a waiver of any succeeding
breach thereof or of any covenant, condition, or agreement herein contained.
Unless stated otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
either party at law, in equity, or otherwise.
8.8 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
8.9 AMENDMENTS IN WRITING. Any amendment to this Agreement shall be in
writing and signed by both parties hereto.
8.10 INTERPRETATION. Since this Agreement was prepared by both parties
hereto, it shall not be construed against any one party as the drafting party.
8.11 SURVIVAL. Sections 3.1 ("Royalties"), 3.2 ("Payments and Reports"),
4.3 ("Effect of Termination"), 6 ("Indemnification"), 7 ("Limitation of
Liability") and 8 ("General") shall survive any termination or expiration of
this Agreement
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have signed this Agreement as of the date and year last set forth below.
IMMERSION CORPORATION, MICROSCRIBE, LLC,
a California corporation a California limited liability company
By: /s/ Louis Rosenberg By: /s/ Timothy A. Lacey
--------------------------------- ---------------------------------
Name: Loius Rosenberg Name: Tim Lacey
--------------------------------- ---------------------------------
Title: President Title: Manager
--------------------------------- ---------------------------------
Date: Date:
--------------------------------- ---------------------------------
-6-
<PAGE> 7
EXHIBIT A
MICROSCRIBE INTELLECTUAL PROPERTY
Licensed Patents:
[****]
Trademarks:
[****]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
-7-
<PAGE> 8
EXHIBIT B
MICROSCRIBE TECHNOLOGY
MicroScribe Technology includes the items listed below:
(1) the following Microscribe software and source code:
(a) Microscribe firmware;
(b) Microscribe calibration software;
(c) Inscribe;
(d) Alias Driver;
(e) Vertisketch; and
(f) SDK (software development kit);
(2) the following Microscribe manufacturing documentation:
(a) Microscribe bill of materials;
(b) Microscribe drawings and database;
(c) Microscribe schematics; and
(d) Microscribe layout files and electronics;
(3) Microscribe fabrication tooling;
(4) Microscribe calibration, production fixtures, and test
electronics;
(5) Microscribe reseller contact information;
(6) Microscribe user documentation; and
(7) a copy of the Microscribe calibration files.
-8-
<PAGE> 9
EXHIBIT C
ROYALTY SCHEDULE
Royalties shall be based on the following formula:
[****]
The Threshold Amount for Net Receipts shall be equal to the following:
1) [****] for calendar year 1997;
2) [****] for calendar year 1998;
3) [****] for calendar year 1999;
4) [****] for calendar year 2000;
5) [****] for calendar year 2001; and
6) [****] for all years thereafter.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 1
EXHIBIT 10.17
PATENT LICENSE AGREEMENT
This Patent License Agreement (the "Agreement") is by and between
Immersion Corporation, a California corporation, with an office at 2158 Paragon
Drive, San Jose, California (hereinafter "Immersion") and MicroScribe, LLC, a
California limited liability company, with an office in San Jose, California
(hereinafter "Licensor"). This Agreement is entered into effective as of July 1,
1997 (the "Effective Date").
RECITALS
A. Licensor is the owner of certain patents and patent applications
which may have applicability to Immersion's force feedback products.
B. The parties desire that Licensor grant an exclusive license for
applications and implementations involving force feedback functionality under
the patents and patent applications.
NOW, THEREFORE, in consideration of the promises and agreements set
forth below and the other considerations cited herein, the parties agree as
follows.
AGREEMENT
1. Definitions. In this Agreement, the following words and expressions
shall have the following meanings:
1.1 Affiliates means any corporation or business entity which is
controlled by, controls, or is under common control of a party. For this
purpose, the meaning of the word "Control" shall include, without limitation,
direct or indirect ownership of more than fifty percent (50%) of the voting
shares of interest of such corporation or business entity.
1.2 Licensed Patents means the patent continuation applications
described in Exhibit A ("Licensed Patents") and any issued patents,
continuations, continuations-in-part, or divisional applications derived from
the foregoing, and any divisions, reissues and re-examinations based on any of
the foregoing.
1.3 Force Feedback Field of Use means applications and
implementations involving a human to computer interactive interface that
provides controlled resistance, force sensations, or computer simulated tactile
sensations to the human operator during manipulation.
2. Grant of License. Licensor grants to Immersion a worldwide, royalty
free, exclusive, irrevocable, perpetual (for the duration of each Licensed
Patent) license under the Licensed Patents to make, have made, use, sell, offer
to sell and import products in the Force Feedback Field of Use and to sublicense
such rights to Affiliates and to third parties, through multiple tiers of
sublicenses.
1
<PAGE> 2
3. Consideration. Immersion assigned the Licensed Patents to Licensor
in exchange for [****] and [****] of Licensor pursuant to the terms of an
Exchange Agreement dated effective as of July 1, 1997, subject to Licensor's
grant of the license granted in Section 2 ("Grant of License and Limitations").
4. Term. This Agreement will remain in force and effect up until the
expiration of the [****].
5. Warranty of Title. Licensor represents and warrants that Licensor is
the owner of the Licensed Patents and has sufficient rights to grant the rights
granted herein.
6. Limitation of Liability. IN NO EVENT WILL LICENSOR OR IMMERSION BE
LIABLE FOR LOST PROFITS, OR ANY SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL
DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN ANY WAY IN
CONNECTION WITH THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF LICENSOR AND
IMMERSION HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
7. Negation of Warranties and Other Obligations. Nothing in this
Agreement shall be construed:
(i) as a warranty or representation that anything made, used,
sold or otherwise disposed of under any license granted in this Agreement is or
will be free from infringement by patents, copyrights, trade secrets,
trademarks, or other rights of third parties;
(ii) as granting by implication, estoppel or otherwise any
licenses or rights under patents or other intellectual property rights of
Licensor other than expressly granted herein;
(iii) (a) to require Licensor to file any patent application
relating to any technology or (b) a warranty that Licensor will be successful in
securing the grant of any patent relating to any technology or any reissue or
extensions thereof; or
(iv) to require Licensor to assume any responsibility for the
manufacture of any products manufactured or sold by or for Immersion under the
license granted herein. All warranties in connection with such products shall be
made by Immersion, the Immersion Affiliates or other licensees as manufacturers
or sellers of such products and such warranties shall not directly or by
implication obligate Licensor in any way.
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
2
<PAGE> 3
8. General.
8.1 Entire Agreement. This Agreement constitutes the complete
agreement of the parties and supersedes any other agreements, written or oral
concerning the subject matter hereof.
8.2 Succession and Assignment. Neither party may assign this
Agreement without the prior written consent of the other party except that
either party may assign this Agreement to a corporate successor in interest in
the case of a merger or acquisition or in the case of a sale of assets without
the prior approval of the other party. Any attempt to assign this Agreement in
violation of the provisions of this Section 8.2 ("Succession and Assignment")
shall be void.
8.3 Notices. Notices required under this Agreement shall be
addressed as follows, except as otherwise revised by written notice:
To Immersion: To MicroScribe:
Louis B. Rosenberg, Ph.D. Tim Lacey
President MicroScribe LLC
Immersion Corporation 2158 Paragon Drive
2158 Paragon Drive San Jose, CA 95131
San Jose, CA 95131
8.4 Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by the substantive laws of the State of
California, without the application of any principle that leads to the
application of the laws of any other jurisdiction.
8.5 No Agency. Neither party is to be construed as the agent,
partner, or joint venturer or to be acting as the agent, partner or joint
venturer of the other party hereunder in any respect, solely by reason of this
Agreement.
8.6 Multiple Counterparts. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one single Agreement
between the parties.
8.7 No Waiver. No delay or omission by either party hereto to
exercise any right or power occurring upon any noncompliance or default by the
other party with respect to any of the terms of this Agreement shall impair any
such right or power or be construed to be a waiver thereof. A waiver by either
of the parties hereto of any of the covenants, conditions, or agreements to be
performed by the other shall not be construed to be a waiver of any succeeding
breach thereof or of any covenant, condition, or agreement herein contained.
Unless stated otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
either party at law, in equity, or otherwise.
3
<PAGE> 4
8.8 Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
8.9 Amendments in Writing. Any amendment to this Agreement shall be
in writing and signed by both parties hereto.
8.10 Interpretation. Since this Agreement was prepared by both
parties hereto, it shall not be construed against any one party as the drafting
party.
4
<PAGE> 5
IN WITNESS WHEREOF, the authorized representatives of the parties
hereto have signed this Agreement.
IMMERSION CORPORATION, MICROSCRIBE, LLC,
a California corporation a California limited liability company
By: /s/ Louis Rosenberg By: /s/ Timothy A. Lacey
-------------------------------- ----------------------------------
Name: Louis Rosenberg Name: Timothy A. Lacey
------------------------------- -------------------------------
Title: President Title: Manager
------------------------------ -------------------------------
Date: Date:
------------------------------- -------------------------------
5
<PAGE> 6
Exhibit A
The Licensed Patents include the following:
(1) [****].
(2) [****].
* Certain information on this page has been omitted and filed
separately with the Commission. Confidential treatment has
been requested with respect to the omitted portions.
6
<PAGE> 1
EXHIBIT 10.18
INTELLECTUAL PROPERTY LICENSE AGREEMENT
IMMERSION CORPORATION AND LOGITECH, INC.
This Intellectual Property License Agreement (the "Agreement") between
Immersion Corporation, a California corporation, with principal offices in San
Jose, California (hereinafter "Immersion") and Logitech Inc., a California
corporation, with principal offices in Fremont, California (hereinafter
"Logitech"), is entered into as of [****] (the "Effective Date").
RECITALS
A. Immersion is the owner of several United States patent applications and
one issued United States patent relating to certain force-feedback technology.
B. Concurrently with this Agreement, Immersion and Logitech are entering
into a Technology Product Development Agreement dated the same date as this
Agreement. Pursuant to the Technology Product Development Agreement, Immersion
will develop and deliver to Logitech certain deliverables which are covered by
copyrights and trade secret rights owned by Immersion, as well as patents now
held or that may issue to Immersion in the future.
C. Logitech intends to develop "[****]" (as defined below) which may or
may not incorporate or utilize the deliverables to be delivered under the
Technology Product Development Agreement.
D. The parties desire that Immersion grant a license to Logitech under the
foregoing intellectual property rights of Immersion to develop and distribute
[****], whether or not they incorporate or utilize the deliverables to be
delivered under the Technology Product Development Agreement, all on the terms
and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and agreements set forth
below and the other consideration cited herein, the parties agree as follows.
1. DEFINITIONS
In this Agreement the following words and expressions shall have the
following meanings:
1.1 AFFILIATES. This means any corporation or business entity which is
controlled by, controls, or is under common control of a Party. For this
purpose, the meaning of the word "control" shall include, without limitation,
direct or indirect
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
1
<PAGE> 2
ownership of more than fifty percent (50%) of the voting shares of interest of
such corporation or business entity.
1.2 DEFECT. This means, with respect to any non-software Deliverable,
failure to materially conform to the applicable then-current Specifications for
such non-software Deliverable.
1.3 DEFECT CORRECTION. This means either a modification or addition that
eliminates or works around a Defect in a non-software Deliverable so as to cause
the non-software Deliverable to comply with the applicable then-current
Specification.
1.4 DELIVERABLES. This means the various deliverables, which are tangible
implementations or items including interim deliverables or final prototype
deliverables, identified as such and described in any development schedule to
the Development Agreement and delivered to Logitech thereunder.
1.5 DEVELOPMENT AGREEMENT. This means the Technology Product Development
Agreement between Immersion and Logitech dated the same date as this Agreement.
1.6 ENHANCEMENT OR ENHANCEMENTS. This means any force-feedback
modification or addition made by Immersion, under the terms of Section 6.7
("Other Development") and Section 7.2 ("Enhancements by Immersion") of the
Development Agreement for the [****], and which is a tangible implementation
other than a Defect Correction or Error Correction, that when incorporated into
the [****], materially reduces product costs of a [****] or materially changes
the functional capability or form factor (e.g., joystick to steering wheel).
1.7 ERROR. This means, with respect to any software Deliverable, failure
of any such software Deliverable to materially conform to the applicable
then-current Specification for such software Deliverable.
1.8 ERROR CORRECTION. This means either a modification or addition that
eliminates or works around an Error in the software Deliverable so as to cause
the software Deliverable to comply with the then-current Specification.
1.9 FINAL PROTOTYPE. This means a Deliverable which is the final
functional form of the [****], if any, including software and hardware, produced
by Immersion under a development schedule to the Development Agreement, which
prototype serves as a model for the final production version of the [****], if
any, and which conforms to the applicable Specification.
1.10 [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 3
1.11 [****]
1.12 IMMERSION PRODUCT MODEL TECHNOLOGY. This means that subset of
Immersion Technology delivered as a Deliverable under the terms of a development
schedule of the Development Agreement, or as an Enhancement or New Technology,
which is actually utilized in or in connection with and/or embedded in the final
production version of the Joystick Product, any subsequent Product Model of the
Joystick Product or any Product Model of any [****].
1.13 [****]
1.14 IMMERSION TECHNOLOGY. This means any and all technology created or
acquired by Immersion, or licensed to Immersion by third parties, including but
not limited to software created by employees or consultants of Immersion, (i)
first developed or reduced to practice before or after the Effective Date solely
by Immersion independent of the scope of the work under the Development
Agreement or (ii) first developed or reduced to practice after the Effective
Date and within the scope of a Deliverable developed solely by Immersion (a)
under a development schedule in effect under the terms of the Development
Agreement, (b) as an Enhancement or (c) as New Technology.
1.15 INTELLECTUAL PROPERTY RIGHTS. This means the Licensed Patents and
utility models, copyrights and mask work rights, including without limitation
all applications and registrations with respect thereto, rights in trade
secrets, know-how, and all other intellectual property rights, excluding
trademarks and tradenames and patents other than the Licensed Patents.
1.16 JOYSTICK PRODUCT. This means the final production version of the
joystick described in the Specification in the first Exhibit A
("Specifications") of the Development Agreement which utilizes and/or contains
Immersion Product Model Technology, including but not limited to the applicable
[****], documentation, Defect Corrections and Error Corrections
thereto.
1.17 LICENSED PATENTS. This means (i) United States patent no. 5,576,727,
titled "Electricalmechanical Human-Computer Interface with Force Feedback", (ii)
all
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 4
patents that may issue based upon any of the United States patent applications
listed in Schedule A1 and A2 hereto or upon any corresponding foreign patent
applications that have been or may be filed, or upon any continuations,
continuations-in-part, or divisional applications related to any of the
foregoing that have been or may be filed, and (iii) any divisions, reissues and
reexaminations based on any of the foregoing.
1.18 NET RECEIPTS. This means the gross receipts received by Logitech and
its Affiliates without taking into account any foreign withholding taxes that
may apply to transfers between Logitech and its affiliates upon any sales of
Royalty Bearing Products to unaffiliated third parties, [****] No other costs
incurred in the manufacture, sale, distribution, or exploitation of Royalty
Bearing Products shall be deducted from gross receipts in the calculation of Net
Receipts. If Royalty Bearing Products are bundled with other items sold by
Logitech or its Affiliates and are not invoiced separately, royalties will be
paid based on Logitech's (or if no Logitech averages sales price exists, the
applicable Affiliate average sales price) then-current average sales price for
each such Royalty Bearing Product when sold as a separate item (averaged for the
applicable Quarter in which the Net Receipts are received by Logitech or its
Affiliates, as applicable, for the country in which the sale was made) in like
quantities in arms length transactions to unrelated third parties other than
Logitech or Logitech Affiliates).
1.19 NEW TECHNOLOGY. This means any force-feedback technology modification
or addition made by Immersion, for the [****], other than a Defect Correction or
Error-Correction, that when incorporated into the Joystick Product or other
[****], materially changes the utility, efficiency, market value, functional
capability or application, and which is developed by Immersion on a
non-exclusive basis and made "generally available" for use in [****] in the
[****] and which is delivered by Immersion to Logitech as a tangible
implementation pursuant to the terms of Section 7.4 ("New Technology") of the
Development Agreement. For purposes of this definition, "generally available"
shall mean offered under nonexclusive license to any one unaffiliated third
party (other than the original third party for whom the technology, modification
or addition was originally developed) for use in [****] in the [****].
1.20 OEM OR OEMS. This means any third party (not including Affiliates)
that does not manufacture [****] and that wishes to purchase finished [****] for
sale in the [****] under its own brand name.
1.21 PARTY OR PARTIES. This means Immersion and/or Logitech.
1.22 PRODUCT LAUNCH. This means the date on which first commercial-level
shipping of the Joystick Product or any Product Model commences to third party
unaffiliated customers of Logitech or a Logitech Affiliate.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 5
1.23 PRODUCT MODEL. This means a single model of the Joystick Product or
any other [****]. "Product Model" shall mean each variation of a Joystick
Product or [****] which (i) differs by virtue of addition of or alteration
through an Enhancement or (ii) constitutes a change in form factor (e.g.
joystick to steering wheel) or (iii) incorporates a material change in
force-feedback functionality made by a party other than Immersion. Purely
cosmetic alterations (e.g., color or styling) to the physical appearance of the
Joystick Product or a [****], or changes that do not alter the force-feedback
functionality but reduce manufacturing costs shall not be deemed a Product
Model.
1.24 ROYALTY BEARING PRODUCT. This means a [****] which either (1)
incorporates or utilizes Immersion Product Model Technology that is not
otherwise made generally available to the public by Immersion without charge or
(2) is covered (a) by a Licensed Patent or (b) by a copyright of Immersion
embodied in any Immersion Product Model Technology that is not otherwise made
generally available to the public by Immersion without charge.
1.25 QUARTER OR QUARTERS. This means Logitech's yearly fiscal quarters.
Specifically, Logitech's yearly fiscal quarters begin and end on the following
dates: first quarter, April 1 - June 30; second quarter, July 1 - September 30;
third quarter, October 1 - December 31; and fourth quarter, January 1 - March
31.
1.26 SPECIFICATION(S). This means the Joystick Product specification
attached as the original Exhibit A ("Specification") to the Development
Agreement and each [****] specification associated with a development schedule
which is attached by amendment to the Development Agreement.
1.27 YEAR. This means any full four-Quarter period.
1.28 Any reference to the words "PURCHASE," "SALE," or "SELL," when used
in connection with intellectual property, shall mean license.
2. GRANT OF LICENSES
2.1 GRANT WITH RESPECT TO THE LICENSED PATENTS. Subject to the terms of
this Agreement, Immersion grants to Logitech a [****]. Except as provided in
Section 2.3 ("Right to Sublicense"), no right to sublicense the Licensed Patents
is granted by Immersion to Logitech.
2.2 GRANT WITH RESPECT TO THE IMMERSION PRODUCT MODEL TECHNOLOGY. Subject
to the terms of this Agreement, Immersion grants to Logitech a [****].
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 6
No access rights or license to the source code for the [****] are granted to
Logitech except as provided under the terms of Section 13 ("Source Code Escrow")
of the Development Agreement. Logitech and its Affiliates have no right and
Logitech agrees not to disassemble or decompile any portion of the software
portions of the Immersion Product Model Technology.
2.3 RIGHT TO SUBLICENSE. Subject to the terms of Section 2.6 ("Trademark
License from Immersion"), Immersion grants to Logitech the right to [****].
Logitech agrees that any act or omission by a Logitech Affiliate that is
inconsistent with Logitech's obligations under the terms of this Agreement shall
be deemed to be an act or omission by Logitech and a breach of this Agreement by
Logitech.
2.4 DURATION. Subject to the obligation to pay royalties, the licenses set
forth above will extend to the full end of the term for which any Licensed
Patent is issued or any other Intellectual Property Right of Immersion licensed
hereunder is in force, unless sooner terminated as provided in this Agreement.
2.5 LABEL REQUIREMENTS. Subject to the terms of Section 2.6 ("Trademark
License for Immersion") and Section 2.7 ("Administration Procedure"), Logitech
shall place belly labels on [****] which are Royalty Bearing Products which
shall include the language and related logo: "I-Force(TM) Force Feedback
Technology Licensed from Immersion Corporation" (hereinafter the "Legend").
Logitech shall also place or have placed the Legend on retail manuals and boxes
as designated in Exhibit B ("Immersion Package Labeling Specification"). If OEM
customers object to belly label marking, the Parties will mutually agree upon a
reasonable solution in writing in advance. Logitech shall not remove Immersion's
copyright notices from any copies of the [****].
2.6 TRADEMARK LICENSE FROM IMMERSION. Subject to the procedures set forth
in subsection 2.7 below and Immersion's prior written approval, Immersion hereby
grants to Logitech a nonexclusive, nontransferable, worldwide license, to use in
connection with marketing the Joystick Product or any [****], the trademark(s)
used by Immersion ("Marks") to identify the Immersion Product Model
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6
<PAGE> 7
Technology and/or Licensed Patents and Logitech agrees to use such Marks on and
in connection with Royalty Bearing Products except in the case of OEM products
where, if the OEM customer objects, the parties will mutually agree upon a
reasonable solution in writing, in advance. Logitech acknowledges that all use
of the Marks will inure to the benefit of Immersion. Logitech shall not register
Immersion's Marks in any jurisdiction and will not adopt any trademark for use
on the Joystick Product or [****] which is confusingly similar to any trademark
of Immersion or which includes a prominent portion of any trademark of
Immersion. At Immersion's reasonable request, Logitech shall provide Immersion
with samples of Logitech's use of Immersion trademarks. Logitech agrees to abide
by Immersion's reasonable written trademark policies as issued and provided to
Logitech from time to time. In any case where the Marks are not used in
compliance with Immersion's trademark policies and such use has been approved in
writing by Immersion, upon receipt of written notice from Immersion, Logitech
will promptly correct the non-compliance and submit samples of compliant use to
Immersion for approval.
2.7 ADMINISTRATIVE PROCEDURES. The Parties agree that in order to provide
Immersion with appropriate information necessary for the orderly administration
of the Licensed Patents and Marks, Logitech will provide Immersion with prompt
written notice prior to Product Launch of each Product Model and will enclose an
information package which contains two prototypes or production units of the
Product Model sufficient to enable Immersion to determine which of the Licensed
Patents cover the Product Model and to review and approve the use of the Marks.
If in any case Immersion believes that the quality of the Product Model does not
meet Immersion's commercially reasonable standards, Logitech will not be
permitted to ship the Product Model with the Marks until the quality issue is
resolved, but Logitech may in is discretion ship such Product Model without the
Marks and shall be relieved of its obligation to use the Marks on that Product
Model.
2.8 GRANT WITH RESPECT TO KNOW-HOW. Subject to the terms of this
Agreement, each party grants to the other a worldwide, nonexclusive license to
use any know-how of such party disclosed to the other party pursuant to the
Development Agreement.
3. ROYALTIES
3.1 NEW TECHNOLOGY ROYALTIES. As provided in Section 9.6 ("New
Technology") of the Development Agreement, New Technology will be provided to
Logitech subject to royalties which are mutually agreed upon in writing by
Immersion and Logitech.
3.2 PER PRODUCT MODEL ROYALTY. Except as provided by Section 3.1 above,
Logitech shall pay Immersion a royalty based on a percentage of the Net Receipts
for each Product Model of a Royalty Bearing Product sold by Logitech or any
Logitech
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 8
Affiliates to unrelated third parties (other than Logitech or Logitech
Affiliates) in arms length transactions, in accordance with the following.
[****] Shipments of Royalty Bearing Products between Logitech and the Logitech
Affiliates or between Logitech Affiliates will not be considered to be sold or
otherwise transferred until sold to an unrelated customer of Logitech or a
Logitech Affiliate.
3.3 [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
8
<PAGE> 9
3.4 PAYMENTS AND REPORTS. The royalties to be paid by Logitech to
Immersion hereunder shall be due [****] days after the close of each Quarter.
Royalty reports setting forth the royalty calculation by Product Model and
identifying whether the sales were made by Logitech or Logitech Affiliates shall
be included with such payments. Logitech will pay and account to Immersion for
royalties due hereunder with respect to sales or other disposition of Royalty
Bearing Products by any Logitech Affiliates, and for that purpose, sales of
Royalty Bearing Products by any Logitech Affiliate (other than sales or other
disposition by an Affiliate to Logitech or to another Logitech Affiliate) will
be deemed to be sales by Logitech.
3.5 AUDIT RIGHTS OF ROYALTY PAYMENTS. Immersion shall have the right to
have an independent auditor mutually agreed by Logitech and Immersion audit the
method used to calculate the average sales price, as well as the sales data
pursuant to Section 1.19 ("Net Receipts") and the royalty payments of Logitech
for itself and its Affiliates on an annual basis, but shall pay the costs of
such audit, unless such audit reveals any underpayment of royalties in an amount
greater than [****] of actual royalties due for any Year, in which case Logitech
shall promptly remit an amount equal to the underpayment and shall pay the
reasonable costs of such audit. Such audit shall be preceded by at least five
(5) business days advance written notice and shall be performed during normal
business hours by the auditor. The auditor shall have access to only those books
and records of Logitech which are reasonably necessary to determine the relevant
sales royalties due for Royalty Bearing Products for Logitech itself and its
Affiliates and the correctness of the royalty payments hereunder. Any and all
non-public information related to Logitech, its Affiliates, or their business
revealed in the course of such audit shall be kept confidential by the auditor
and by Immersion, and shall not be disclosed by the auditor to anyone other than
employees or professional advisors of Immersion who have a reasonable need to
know in connection with such audit, or used for any purpose, except to the
extent reasonably necessary to determine the correctness of royalty payments
made hereunder.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
9
<PAGE> 10
4. TERM AND TERMINATION
4.1 TERM. Unless earlier terminated in accordance with the provisions of
this Agreement, this Agreement will extend until the [****]
4.2 TERMINATION BY LOGITECH.
4.2.1 TERMINATION WITHOUT CAUSE. Logitech may terminate this
Agreement without cause upon [****] written notice, and such written notice
under the terms of this Agreement shall also serve as written notice of the
termination of the Development Agreement, if such Agreement is still in effect
at such time, and the Development Agreement will then terminate within [****] of
such notice pursuant to the terms of Section 12.1 ("Termination by Logitech
Without Cause") and such termination shall be deemed to be a termination without
cause by Logitech and will be construed in accordance with the terms of Section
12.3 ("Effect of Termination") therein.
4.2.2 TERMINATION WITH CAUSE. Logitech may terminate this Agreement
by written notice to Immersion if Immersion has materially breached the terms of
this Agreement and fails to cure the breach after written notice of breach to
Immersion and a [****] time period to cure.
4.3 TERMINATION BY IMMERSION FOR FAILURE TO PAY ROYALTIES. Immersion may
terminate this Agreement by written notice to Logitech in the event that
Logitech or any Logitech Affiliate breaches the terms of Section 3 ("Royalties")
including but not limited to any failure to pay any royalties due and payable by
Logitech and/or any of the Logitech Affiliates under this Agreement and Logitech
fails to cure such breach after written notice of breach and a [****] time
period to cure. If Immersion issues a written notice of termination to Logitech
under the terms of this Section 4.3 ("Termination by Immersion for Failure to
Pay Royalties") such notice shall also serve as written notice of termination
for cause by Immersion under the terms of Section 12.2 ("Termination for Cause")
of the Development Agreement, if such Agreement is still in effect at such time.
If the breach described in the aforementioned written notice of termination is
not cured in accordance with the terms of this Section 4.3 ("Termination by
Immersion for Failure to Pay Royalties"), the Development Agreement will then
terminate within [****] of such notice pursuant to the terms of Section 12.2
("Termination for Cause") and such termination will be deemed to be a
termination for cause by Immersion for purposes of Section 12.3 ("Effect of
Termination") and the effects of termination will be construed in accordance
with the terms of Section 12.3 ("Effects of Termination") therein.
4.4 TERMINATION BY IMMERSION FOR BREACH OF PATENT LICENSE. Immersion may
terminate this Agreement in the event that Logitech engages in activity which
exceeds the scope of the patent license granted in Section 2.1 or breaches the
labeling
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
10
<PAGE> 11
requirement of Section 2.5 and fails to cure the breach after written notice of
breach and a [****] time period to cure. Except as set forth in this Section 4.4
or Section 4.3, the patent license granted in Section 2.1 shall not be
terminable by Immersion. If Immersion issues a written notice of termination to
Logitech under the terms of this Section 4.4 ("Termination by Immersion for
Breach") such notice shall also serve as written notice of termination for cause
by Immersion under the terms of Section 12.2 ("Termination for Cause") of the
Development Agreement, if such Agreement is still in effect at such time. If the
breach described in the aforementioned written notice of termination is not
cured in accordance with the terms of this Section 4.4 ("Termination by
Immersion for Breach"), the Development Agreement will then terminate within
[****] of such notice pursuant to the terms of Section 12.2 ("Termination for
Cause") and such termination will be deemed to be a termination for cause by
Immersion for purposes of Section 12.3 ("Effect of Termination") and the effects
of termination will be construed in accordance with the terms of Section 12.3
("Effects of Termination") therein.
4.5 TERMINATION OF LICENSES TO IMMERSION PRODUCT MODEL TECHNOLOGY BY
IMMERSION FOR BREACH. Immersion may terminate the licenses granted with respect
to Immersion Product Model Technology in Section 2.2 above in the event that
Logitech engages in activity which exceeds the scope of such license or breaches
the terms of Section 2.3 or the labeling requirement of Section 2.5 and fails to
cure the breach after written notice of breach and a [****] time period to cure.
Termination of the licenses with respect to the Immersion Product Model
Technology shall not affect the patent licenses granted hereunder. Except as set
forth in this Section 4.5 or Section 4.3, the licenses granted in Section 2.2
shall not be terminable by Immersion.
4.6 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement for any reason, Logitech agrees to pay Immersion for royalties due
under this Agreement from Logitech or any Logitech Affiliate. Upon a termination
of this Agreement for cause or without cause, Logitech and each Affiliate shall
have [****] to distribute any remaining inventory in process and in existence as
of the effective date of the termination, subject to the obligation for Logitech
to pay royalties hereunder for any such distribution by Logitech and/or any
Logitech Affiliates. EXCEPT FOR DIRECT DAMAGES RESULTING FROM A BREACH OF THE
TERMS OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO A BREACH BY LOGITECH OR
ANY LOGITECH AFFILIATE OF SECTION 2 ("GRANT OF LICENSES"), NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR DAMAGES OF ANY SORT AS A RESULT OF TERMINATING THIS
AGREEMENT IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT.
5. WARRANTY
Immersion represents and warrants that Immersion either has ownership of,
or sufficient rights in, the Immersion Product Model Technology to be delivered
under the terms of the Development Agreement and the Licensed Patents to enter
into this
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
11
<PAGE> 12
Agreement and grant all the rights set forth herein. As of the Effective Date of
the Agreement, Immersion is not aware of and has not received any notice of any
claim by a third party that the copyrights, patents, trade secrets, trademarks
or other intellectual property rights of any third party are infringed by the
Immersion Product Model Technology that Immersion, in its sole discretion
intends to, as of the Effective Date, use to comply with Immersion's development
obligations under the terms of the Development Agreement, except as disclosed to
Logitech in writing prior to the date of this Agreement. Immersion further
represents and warrants that (i) it neither holds nor has applied for a patent
that is dominant to the Licensed Patents and (ii) that Schedule A contains all
patent applications filed or contemplated to be filed as of the Effective Date
that relate to force-feedback technology.
6. INDEMNIFICATION
6.1 TRADEMARK INFRINGEMENT INDEMNIFICATION BY IMMERSION. Subject to the
limitations on cumulative liability under Section 7.1 ("Disclaimers of Certain
Types of Damages") and Section 7.3 ("Limitations of Liability with Respect to
Indemnity Obligations"), and Immersion's approval for Logitech to use the Legend
and the Marks pursuant to Section 2.5 ("Label Requirements"), Section 2.6
("Trademark License") and Section 2.7 ("Administrative Procedures") and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, Immersion shall indemnify,
defend and hold Logitech harmless from and against any and all claims, damages,
liabilities, judgments, settlements, losses, costs and expenses (including court
costs and reasonable attorneys' and experts' fees) (collectively, "Costs")
suffered or incurred by Logitech arising out of a claim of infringement of any
Immersion Mark or Legend used by Logitech on a [****]in the [****] which is
based on Logitech's use under the labeling requirement of Section 2.5 ("Label
Requirements") and/or the terms of Section 2.6 ("Trademark License") and Section
2.7 ("Administrative Procedures"). In the case of an infringement or alleged
infringement by any such Immersion Mark or Legend used by Logitech on a [****]
in the [****]: (i) Logitech will have the right to remove such Marks and/or
Legend from Logitech [****] while any dispute or litigation concerning the same
is pending, and shall begin using such marks again only after such infringement
claims or disputes have been settled or dismissed with prejudice, and (ii)
Immersion will have the right to require Logitech to stop using such Marks
and/or Legend and will provide a new trademark to be used in connection with the
Immersion Product Model Technology and/or Licensed Patents, as applicable. Each
party agrees to notify the other promptly of any matters in respect to which the
foregoing indemnity in this Section 6.1 may apply. If notified in writing of any
action or claim for which Immersion is to provide indemnity, Immersion shall
defend, subject to the limitations of liability set forth in Section 7.1
("Disclaimer of Certain Types of Damages") and 7.3 ("Limitations of Liability
With Respect to Indemnity Obligations"), those actions or claims at Immersion's
expense and pay the Costs awarded against Logitech in any such action, or pay
any settlement of such action or claim entered into by Immersion.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
12
<PAGE> 13
6.2 COPYRIGHT INFRINGEMENT AND TRADE SECRET MISAPPROPRIATION
INDEMNIFICATION BY IMMERSION.
6.2.1 SCOPE. Subject to the limitations of cumulative liability
under Section 7.1 ("Disclaimer of Certain Types of Damages") and Section 7.3
("Limitations of Liability With Respect to Indemnity Obligations") and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, Immersion shall indemnify,
defend and hold Logitech harmless from and against any and all Costs suffered or
incurred by Logitech as a result of any third party claim that any Immersion
Product Model Technology delivered by Immersion to Logitech infringes any
copyright or misappropriates any trade secret of any third party. In the case of
any third party claim involving the [****] portion of the Immersion Product
Model Technology, Immersion may, in its sole discretion, provide Logitech with a
modification to the affected [****] so that the [****] portion of the Immersion
Product Model Technology becomes noninfringing or in the alternative, may
provide Logitech other software which is functionally equivalent. Each party
agrees to notify the other promptly of any matters in respect to which the
foregoing indemnity in this Section 6.2 ("Copyright Infringement and Trade
Secret Misappropriation Indemnification by Immersion") may apply. If notified in
writing of any action or claim for which Immersion is to provide indemnity,
Immersion shall defend, subject to the limitations of liability set forth in
Section 7.1 ("Disclaimer of Certain Types of Damages") and 7.3 ("Limitations of
Liability With Respect to Indemnity Obligations"), those actions or claims at
Immersion's expense and pay the Costs awarded against Logitech in any such
action, or pay any settlement of such action or claim entered into by Immersion.
6.2.2 EXCEPTIONS. The foregoing indemnity will not apply to any
infringement claim to the extent it arises from (i) any modification of any
Immersion Product Model Technology by parties other than Immersion or Immersion
subcontractors under contract with Immersion, (ii) use of any Immersion Product
Model Technology in conjunction with other non-Immersion products or components
where there would be no infringement absent such use with such other products or
components or (iii) an infringement which would not occur in the Immersion
Product Model Technology or any Final Prototype in which such Immersion Product
Model Technology is incorporated but which does occur in the final production
version of a [****].
6.3 PERSONAL INJURY AND PROPERTY DAMAGE CLAIMS. Neither party shall have
any obligation to indemnify, protect, defend and hold the other party harmless
from any Costs suffered or incurred by the other party to the extent such third
party claim or threatened claim arises from a personal or alleged personal
injury or damage or alleged damage to property arising out of the third party's
use of [****].
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
13
<PAGE> 14
6.4 PRODUCT LIABILITY INSURANCE. The Parties agree that they shall each
secure insurance covering product liability. Such insurance shall provide
coverage of at least [****] per occurrence and shall remain in effect during the
term of this Agreement. Each party will promptly cause the other party to be
named as an additional insured.
6.5 PATENT INFRINGEMENT INDEMNIFICATION BY IMMERSION.
6.5.1 SCOPE. Subject to the limitations of cumulative liability
under Section 7.1 ("Disclaimer of Certain Types of Damages") and Section 7.3
("Limitations of Liability With Respect to Indemnity Obligations"), and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, [****] Each Party agrees to
notify the other promptly of any matters in respect to which the foregoing
indemnity in this Section 6.5 may apply. If notified in writing of any action or
claim for which Immersion is to provide indemnity, Immersion shall defend,
subject to the limitations of liability set forth in Section 7.1 ("Disclaimer of
Certain Types of Damages") and 7.3 ("Limitations of Liability With Respect to
Indemnity Obligations") and the provisions of Section 6.5.3 below, those actions
or claims at its expense and pay the Costs awarded against Logitech in any such
action, or pay any settlement of such action or claim entered into by Immersion.
In any such action, Logitech will make available to Immersion all defenses
against such action or claim known or available to Logitech.
6.5.2 EXCEPTIONS TO THE SCOPE OF THE INDEMNITY. Immersion shall have
no liability or obligation with respect to any claim of patent infringement to
the extent it arises from [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
14
<PAGE> 15
6.5.3 [****]
(a) [****]
(b) [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
15
<PAGE> 16
(c) [****]
6.6 REMEDIES IN THE EVENT OF PROHIBITION OF USE. The provisions and
remedies set forth in Section 6.6 shall continue to be applicable with respect
to any copyright infringement or trade secret misappropriation under the terms
of Section 6.2 ("Copyright Infringement and Trade Secret Misappropriation"), and
any After-Issued Patents for which Immersion does not supply written notice to
Logitech in accordance with Section 6.5.3(a) above and any U.S. Patents issued
prior to the Effective Date of this Agreement. If a preliminary or final
judgment shall be obtained against Logitech's use, sale or distribution of a
[****] that incorporates any Immersion Product Model Technology based
infringement within the scope of the indemnity set forth in Section 6.1, 6.2 or
6.5 (subject to the exceptions set forth therein), or if any Immersion Product
Model Technology is, or in Immersion's opinion, is likely to become, subject to
a claim for such infringement, then Immersion shall, at its expense, either (a)
modify the Immersion Product Model Technology so that the incorporated Immersion
Product Model Technology becomes noninfringing, or (b) procure for Logitech the
right to continue to use such Immersion Product Model Technology, or (c)
substitute for the infringing Immersion Product Model Technology other
technology that conforms to the Specifications in Exhibit A of the development
agreement (which shall itself be deemed to be Immersion Product Model
Technology). [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
16
<PAGE> 17
6.7 INDEMNITY BY LOGITECH. Subject to the limitations of liability set
forth in Section 7 below, and subject to prompt notification by Immersion,
cooperation by Immersion and control of all litigation and/or settlement by
Logitech, Logitech shall [****]
7. LIMITATIONS OF LIABILITY
7.1 DISCLAIMER OF CERTAIN TYPES OF DAMAGES. IN NO EVENT WILL LOGITECH OR
IMMERSION BE LIABLE FOR LOST PROFITS, OR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN
ANY WAY IN CONNECTION WITH THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF
LOGITECH AND IMMERSION HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
7.2 LIMITATIONS OF LIABILITY OTHER THAN INDEMNITY OBLIGATIONS. EXCEPT WITH
RESPECT TO THE PARTIES' OBLIGATIONS OF INDEMNITY, INCLUDING, BUT NOT LIMITED TO
COSTS OF DEFENSE AND "COSTS" (AS DEFINED ABOVE) SET FORTH IN SECTION 6 ABOVE
WHICH ARE LIMITED BY THE TERMS OF SECTION 7.3 ("LIMITATIONS OF LIABILITY WITH
RESPECT TO INDEMNITY OBLIGATIONS") AND WITH RESPECT TO ANY ROYALTIES DUE AND
PAYABLE BY LOGITECH HEREUNDER, IN NO CASE WILL EITHER PARTY'S TOTAL CUMULATIVE
LIABILITY OR OBLIGATIONS UNDER THE TERMS OF OR ARISING OUT OF THIS AGREEMENT
EXCEED [****]
7.3 LIMITATIONS OF LIABILITY WITH RESPECT TO INDEMNITY OBLIGATIONS. IN NO
CASE WILL EITHER PARTY'S TOTAL CUMULATIVE LIABILITY WITH RESPECT TO ITS
OBLIGATIONS OF INDEMNITY INCLUDING, BUT NOT LIMITED TO COSTS OF DEFENSE AND
"COSTS" (AS DEFINED ABOVE) UNDER SECTION 6 ABOVE EXCEED THE GREATER OF [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
17
<PAGE> 18
7.4 NEGATION OF WARRANTIES AND OTHER OBLIGATIONS.
7.4.1 Nothing in this Agreement shall be construed:
(i) as a warranty or representation by Immersion as to
the validity or scope of any Licensed Patents;
(ii) as a warranty or representation that anything made,
used, sold or otherwise disposed of under any license
granted in this Agreement is or will be free from
infringement by patents, copyrights, trade secrets,
trademarks, or other rights of third parties;
(iii) as granting by implication, estoppel or otherwise any
licenses or rights under patents or other Intellectual
Property Rights of Immersion other than expressly
granted herein, regardless of whether such patents are
dominant or subordinate to any Licensed Patents, or
(iv) (a) to require Immersion to file any patent
application relating to force-feedback in [****], (b)
a warranty that Immersion will be successful in
securing the grant of any patent relating to force-
feedback in [****] or any reissue or extensions
thereof, and (c) to require Immersion to pay any
maintenance fees or take any other steps to maintain
Immersion's patent rights relating to force feedback
in [****], provided, however, that in the event
Immersion elects not to pay any maintenance fee or
take any step to maintain such patents, Immersion
shall so notify Logitech a reasonable period in
advance and Logitech may, at its option, pay such
maintenance fee or take such steps.
7.4.2 Except for Immersion's obligations of indemnity set forth
herein, Immersion does not assume any responsibility for the definition of the
Specifications, the manufacture of the [****], or use of any [****] which is
manufactured or sold by or for Logitech or the Logitech Affiliates under the
Licensed Patent licenses granted herein. All warranties in connection with such
[****] shall be made by Logitech or the Logitech Affiliates as manufacturers or
sellers of such [****] and such warranties shall not directly or by implication
obligate Immersion in any way.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
18
<PAGE> 19
8. THIRD PARTY ENFORCEMENT
Immersion shall not have any obligation or duty under this Agreement to
any party, including but not limited to Logitech, to enforce any patents or
Licensed Patents against any third party infringing any claim or claims of any
patent and/or the Licensed Patents provided, however, that should Logitech
become aware of any actual infringement of the Licensed Patents by a [****]
distributed in the [****] by a third party, which [****] directly competes (e.g.
Joystick to Joystick or wheel to wheel) with a [****] currently shipped by
Logitech which is covered by the Licensed Patents, Logitech will promptly
communicate the details to Immersion. Immersion shall thereupon have the right
to take no action or whatever action Immersion deems necessary, including cease
and desist letters, negotiation, the filing of lawsuits, and/or settlement to
terminate such infringement and the strategy and/or conclusion of such action or
settlement shall be within Immersion's sole discretion. Logitech shall cooperate
with Immersion if Immersion takes any such action but all expenses of Immersion
shall be borne by Immersion. If Immersion recovers any damages or compensation
for any action Immersion takes hereunder, including any settlement, Immersion
shall retain [****] of such damages. If Immersion does not elect to take any
action hereunder within [****] days of being made aware of such infringement by
Logitech, then Logitech shall have the right, but not the obligation, to provide
Immersion with a Patent Enforcement Justification, as defined below, and if the
proposed enforcement action meets the Patent Enforcement Justification criteria,
Logitech may take and control any such action, subject to Immersion's absolute
right to control any and all assertions or admissions which relate to the scope
or validity of Immersion's Licensed Patents. For purposes of this Section 8, a
Patent Enforcement Justification is a written report prepared by Logitech which
includes: (i) the name and address of the entity manufacturing the [****] that
is allegedly infringing the Licensed Patents and the names and addresses of any
entities distributing such [****], (ii) an analysis of which of the Licensed
Patent claims are infringed, (iii) a comparison of the allegedly infringing
[****] and the affected [****] distributed by Logitech with which such allegedly
infringing [****] competes (which comparison analyzes the competitive threat as
to (a) feature and function, (b) positioning, and (c) price point), (iv) the
number of units of the [****] sold by Logitech in the most recent [****] full
Quarters and, if known or reasonably estimable, the number or estimate of the
number of units of the allegedly infringing [****] sold in the most recent
[****] full Quarters, on a geographic area basis. The criteria which must be met
by such report, in order to permit Logitech to "justify" and to go forward with
an infringement action, as are follows:
(i) Logitech must be selling over [****] units of the affected [****] in
the market in which the infringement is occurring during the most
recent [****] full Quarters or, if the Product Launch occurred
during the most recent [****] full Quarters, Logitech reasonably
estimates in good faith that it will sell over [****] units of the
affected [****] in the
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
19
<PAGE> 20
market in which the infringement is occurring during the next [****]
full Quarters;
(ii) the allegedly infringing [****] must be substantially similar to the
affected [****] as to features and functions such that the allegedly
infringing [****] is having or reasonably will have a serious impact
on the sales of the affected Logitech [****];
(iii) the Licensed Patents to be enforced against the allegedly infringing
[****] also cover the affected Logitech [****]; and
(iv) the number of units of the allegedly infringing [****] sold in the
market in which the infringement is occurring in the most recent
[****] full Quarters or reasonably estimated in good faith to be
sold in the next [****] full Quarters must meet or exceed [****]
units.
If the aforementioned criteria are met, Immersion will cooperate with Logitech,
at Logitech's expense, including but not limited to joining any legal
proceedings as a named plaintiff to the extent required to confer jurisdiction,
and all of Logitech's expenses will be borne by Logitech. Immersion may elect to
have counsel of its own choosing participate at Immersion's sole expense in any
legal proceedings instituted by Logitech, but Logitech shall retain [****] of
any damages Logitech recovers for any such proceedings including any settlement,
provided however that (i) Logitech shall first reimburse Immersion for
Immersion's Costs to participate in such action out of any recovery which
exceeds Logitech's Costs for such action. Immersion must agree to any settlement
of any infringement or of any action brought hereunder by Logitech, which
consent will not be unreasonably withheld.
9. GENERAL
9.1 ENTIRE AGREEMENT. This Agreement and its Appendices, together with the
Development Agreement and its Exhibits, constitutes the complete agreement of
the parties and supersedes any other agreements, written or oral (including all
correspondence, emails and the letter regarding [****] and the letter regarding
[****], and the two letters each dated [****] regarding extension of the [****]
letter and continued business relationship between the Parties and all such
subsequent extension letters) concerning the subject matter hereof and such
materials do not have any effect upon the rights and obligations of the Parties
under this Agreement.
9.2 SUCCESSION AND ASSIGNMENT. Either party may assign this Agreement
provided that the other party has consented in writing to the assignment or
delegation and provided, further, that the rights and obligations of the parties
may be assigned to a corporate successor in interest in the case of a merger or
acquisition or in the case of a
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
20
<PAGE> 21
sale of assets without the prior approval of the other party. Any attempt to
assign this Agreement in violation of the provisions of this Section 9.2 shall
be void.
9.3 NOTICES. Notices required under this Agreement shall be addressed as
follows, except as otherwise revised by written notice:
TO IMMERSION: TO LOGITECH:
Louis B. Rosenberg, Ph. D. General Counsel
President Logitech, Inc.
Immersion Corporation 6505 Kaiser Drive
2158 Paragon Drive Fremont, CA 94555-3615
San Jose, CA 95131
9.4 GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the substantive laws of the State of California,
without the application of any principle that leads to the application of the
laws of any other jurisdiction.
9.5 NO AGENCY. Neither party is to be construed as the agent, partner, or
joint venturer or to be acting as the agent, partner or joint venturer of the
other party hereunder in any respect.
9.6 NO RECRUITMENT. During the term of this Agreement and for one (1) year
after the termination or expiration of this Agreement, each Party agrees not to
recruit any employee of the other Party.
9.7 MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one single Agreement
between the parties.
9.8 NO WAIVER. No delay or omission by either Party hereto to exercise any
right or power occurring upon any noncompliance or default by the other Party
with respect to any of the terms of this Agreement shall impair any such right
or power or be construed to be a waiver thereof. A waiver by either of the
Parties hereto of any of the covenants, conditions, or agreements to be
performed by the other shall not be construed to be a waiver of any succeeding
breach thereof or of any covenant, condition, or agreement herein contained.
Unless stated otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
either party at law, in equity, or otherwise.
9.9 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
21
<PAGE> 22
9.10 AMENDMENTS IN WRITING. Any amendment to this Agreement shall be in
writing and signed by both parties hereto.
9.11 INTERPRETATION. Since this Agreement was prepared by both parties
hereto, it shall not be construed against any one party as the drafting party.
9.12 DISPUTE RESOLUTION. Except in the case of a breach of an obligation
related to a Party's Intellectual Property Rights, in the event either Party
concludes that it is in its best interest to file any legal action against the
other, the Party shall contact the other Party's management and at least two (2)
senior managers from each Party shall meet without legal counsel or interruption
for a minimum amount of three (3) eight (8) hour periods and diligently attempt
to resolve all disputed matters. If the Parties are unable to resolve their
difference and either Party desires to file a legal action against the other, at
least two (2) senior managers from each Party and their respective counsels
shall meet for three (3) eight (8) hour periods and diligently attempt to
resolve all disputed matters. Either Party may request that an independent third
party bound to mutually agreed upon obligations of confidentiality attend such
meeting in order to assist the Parties in reaching a reasonable resolution. All
oral and written information exchanged in these meetings shall be exchanged in
an effort to settle all disputed matters. If either Party still desires to file
a legal action against the other after these prescribed meetings, such Party may
file a legal action against the other Party as allowed by applicable law in
Santa Clara County state court or in the federal court. The Parties agree that
if a Party does not attend all of the prescribed meetings it waives its rights
to any monetary damages in the legal action(s) it files.
9.13 SURVIVAL. Sections 3.2, 3.4, 3.5, 4.6, 5, 7 and 9 shall survive any
termination or expiration of this Agreement. In addition, the provisions of
Sections 6.1, 6.2, 6.5, 6.6 and 6.7 shall survive with respect to any units of a
Product Model of Royalty Bearing Products sold or otherwise distributed by
Logitech before the termination or expiration of this Agreement, provided,
however, that Immersion's obligations of indemnity under Sections 6.1, 6.2, 6.5
and 6.6 shall not survive in the event Immersion terminates this Agreement for
cause, including but not limited to, failure by Logitech to pay royalties due
hereunder.
9.14 FORCE MAJEURE. With the exception of the obligation to pay monies due
and owing, each Party hereto shall be excused from performance hereunder for any
period and to the extent that it is prevented from performing any services
pursuant hereto, in whole or in part, as a result of delays caused by the other
Party or an act of God, war, civil disturbance, court order, governmental
action, laws, orders, regulations, directions or requests, or as a result of
events such as acts of public enemies, earthquakes, fires, floods, strikes or
other labor disturbances of the other Party or any third party, or other cause
beyond its reasonable control and which it could not have prevented by
reasonable precautions, and such nonperformance shall not be a default hereunder
or a ground for termination hereof.
22
<PAGE> 23
9.15 RESTRICTED USE OF SCHEDULE A. Logitech agrees to keep the serial
numbers of the pending patent applications set forth in Schedules A1 and A2
confidential until such applications issue or such information is otherwise made
available to the public by Immersion, and agrees not to use the information in
Schedule A for any purpose other than the performance or enforcement of this
Agreement, including but not limited to using the information to initiate
interference proceedings.
Upon execution of this Agreement, Schedule A1 shall be supplied by
Immersion to Logitech in an envelope marked "IMMERSION CONFIDENTIAL INFORMATION
SCHEDULE A1 TO INTELLECTUAL PROPERTY LICENSE AGREEMENT. TO BE SEEN BY LOGITECH
INC. PRESIDENT, CHAIRMAN OF THE BOARD, GENERAL COUNSEL AND OUTSIDE COUNSEL
ONLY." Schedule A1 shall include the serial numbers (for issued License Patents)
and the application numbers (of pending Licensed Patent applications), and the
jurisdictions where such patents have issued and where such applications have
been filed. Schedule A1 may only be reviewed by Logitech Inc.'s President,
Chairman, General Counsel and outside lawyers. Schedule A1 shall be maintained
in a sealed envelope in a secure location with Logitech.
Upon execution of the Agreement, Schedule A2 shall be supplied by
Immersion to Logitech in a sealed envelope marked "IMMERSION CONFIDENTIAL
INFORMATION SCHEDULE A2 TO INTELLECTUAL PROPERTY LICENSE AGREEMENT. TO BE SEEN
BY LOGITECH INC. PRESIDENT, CHAIRMAN OF THE BOARD, GENERAL COUNSEL AND OUTSIDE
COUNSEL ONLY." Schedule A2 shall include all the information included in
Schedule A1 as well as the titles and filing dates of the applications. Schedule
A2 will not be opened except as may be necessary to perform or enforce this
Agreement. Schedule A2 shall be maintained in a sealed envelope in a secure
location within Logitech.
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have signed this Agreement as of the date and year last set forth below.
LOGITECH, INC. IMMERSION CORPORATION
By: /s/ B. Zwarenstein By: /s/ Louis Rosenberg
-------------------------- ----------------------------------
Name: B. Zwarenstein Name: Louis Rosenberg
-------------------------- ----------------------------------
Title: CFO Title: President/CEO
-------------------------- ----------------------------------
Date: 4/2/97 Date: 4/2/97
-------------------------- ----------------------------------
23
<PAGE> 1
EXHIBIT 10.19
INTELLECTUAL PROPERTY LICENSE AGREEMENT
IMMERSION CORPORATION AND LOGITECH, INC.
This Intellectual Property License Agreement (the "Agreement") between
Immersion Corporation, a California corporation, with principal offices in San
Jose, California (hereinafter "Immersion") and Logitech Inc., a California
corporation, with principal offices in Fremont, California (hereinafter
"Logitech"), is entered into as of [****] (the "Effective Date").
RECITALS
A. Immersion is the owner of several United States patent applications and
several issued United States patents relating to certain force-feedback
technology.
B. Concurrently with this Agreement, Immersion and Logitech are entering
into a Technology Product Development Agreement and an OEM Purchase Agreement,
each of which are dated the same date as this Agreement. Pursuant to the
Technology Product Development Agreement, Immersion will develop and deliver to
Logitech certain deliverables which are covered by copyrights and trade secret
rights owned by Immersion, as well as patents now held or that may issue to
Immersion in the future. Pursuant to the OEM Purchase Agreement, Immersion will
supply certain components to Logitech to be used in peripheral devices produced
by Logitech.
C. Logitech intends to develop "Planar Force Feedback Cursor Control
Devices" (as defined below) which may or may not incorporate or utilize the
deliverables to be delivered under the Technology Product Development Agreement.
D. The parties desire that Immersion grant a license to Logitech under the
foregoing intellectual property rights of Immersion to develop and distribute
Planar Force Feedback Cursor Control Devices, which incorporate or utilize the
deliverables to be delivered under the Technology Product Development Agreement,
all on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the promises and agreements set forth
below and the other consideration cited herein, the parties agree as follows.
1. DEFINITIONS
In this Agreement the following words and expressions shall have the
following meanings:
1.1 AFFILIATES. This means any corporation or business entity which is
controlled by, controls, or is under common control of a Party. For this
purpose, the meaning of the word "control" shall include, without limitation,
direct or indirect ownership of more than fifty percent (50%) of the voting
shares of interest of such corporation or business entity.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
1.2 DEFECT CORRECTION. This means either a modification or addition that
eliminates or works around a Defect in a non-software Deliverable so as to cause
the non-software Deliverable to comply with the applicable then-current
Specification.
1.3 DEFECT. This means, with respect to any non-software Deliverable,
failure to materially conform to the applicable then-current Specifications for
such non-software Deliverable.
1.4 DELIVERABLES. This means the various deliverables, which are tangible
implementations or items including interim deliverables or final prototype
deliverables, identified as such and described in any development schedule to
the Development Agreement and delivered to Logitech thereunder.
1.5 DEVELOPMENT AGREEMENT. This means the Technology Product Development
Agreement between Immersion and Logitech dated the same date as this Agreement.
1.6 ENHANCEMENT OR ENHANCEMENTS. This means any force-feedback
modification or addition made by Immersion, under the terms of Section 6.7
("Other Development") and Section 7.2 ("Enhancements by Immersion") of the
Development Agreement for the [****], and which is a tangible implementation
other than a Defect Correction or Error Correction, that when incorporated into
the Planar Force Feedback Cursor Control Device, materially reduces product
costs of a Planar Force Feedback Cursor Control Device or materially changes the
functional capability or form factor.
1.7 ERROR CORRECTION. This means either a modification or addition that
eliminates or works around an Error in the software Deliverable so as to cause
the software Deliverable to comply with the then-current Specification.
1.8 ERROR. This means, with respect to any software Deliverable, failure
of any such software Deliverable to materially conform to the applicable
then-current Specification for such software Deliverable.
1.9 FEELIT MOUSE PRODUCT. This means the final production version of the
mouse product described in the Specification in the first Exhibit A
("Specifications") of the Development Agreement which utilizes and/or contains
Immersion Product Model Technology, including but not limited to the applicable
[****], documentation, Defect Corrections and Error Corrections
thereto.
1.10 FINAL PROTOTYPE. This means a Deliverable which is the final
functional form of the Planar Force Feedback Cursor Control Device, if any,
including software and hardware, produced by Immersion under a development
schedule to the Development Agreement, which prototype serves as a model for the
final production version of the Planar Force Feedback Cursor Control Device, if
any, and which conforms to the applicable Specification.
1.11 IMMERSION PRODUCT MODEL TECHNOLOGY. This means that subset of
Immersion Technology delivered as a Deliverable under the terms of a development
schedule of the
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
2
<PAGE> 3
Development Agreement, or as an Enhancement or New Technology, which is actually
utilized in or in connection with and/or embedded in the final production
version of the FEELit Mouse Product, any subsequent Product Model of the FEELit
Mouse Product or any Product Model of any Planar Force Feedback Cursor Control
Device.
1.12 [****]
1.13 IMMERSION TECHNOLOGY. This means any and all technology created or
acquired by Immersion, or licensed to Immersion by third parties, including but
not limited to software created by employees or consultants of Immersion, (i)
first developed or reduced to practice before or after the Effective Date solely
by Immersion independent of the scope of the work under the Development
Agreement or (ii) first developed or reduced to practice after the Effective
Date and within the scope of a Deliverable developed solely by Immersion (a)
under a development schedule in effect under the terms of the Development
Agreement, (b) as an Enhancement or (c) as New Technology.
1.14 INTELLECTUAL PROPERTY RIGHTS. This means the Licensed Patents and
utility models, copyrights and mask work rights, including without limitation
all applications and registrations with respect thereto, rights in trade
secrets, know-how, and all other intellectual property rights, excluding
trademarks and tradenames and patents other than the Licensed Patents.
1.15 LICENSED PATENTS. This means any and all patents owned or licensable
by Immersion at any time during the term of this Agreement containing one or
more claims which cover any Planar Force Feedback Cursor Control Device.
1.16 [****]
1.17 [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
3
<PAGE> 4
1.18 NET RECEIPTS. This means the gross receipts received by Logitech and
its Affiliates without taking into account any foreign withholding taxes that
may apply to transfers between Logitech and its affiliates upon any sales of
Royalty Bearing Products to unaffiliated third parties, [****] No other costs
incurred in the manufacture, sale, distribution, or exploitation of Royalty
Bearing Products shall be deducted from gross receipts in the calculation of Net
Receipts. If Royalty Bearing Products are bundled with other items sold by
Logitech or its Affiliates and are not invoiced separately, royalties will be
paid based on Logitech's then-current average sales price for each such Royalty
Bearing Product (or if no Logitech averages sales price exists, the applicable
Affiliate average sales price) when sold as a separate item (averaged for the
applicable Quarter in which the Net Receipts are received by Logitech or its
Affiliates, as applicable, for the country in which the sale was made) in like
quantities in arms length transactions to unrelated third parties other than
Logitech or Logitech Affiliates).
1.19 NEW TECHNOLOGY. This means any force-feedback technology modification
or addition made by Immersion, for the [****], other than a Defect Correction or
Error Correction, that when incorporated into the FEELit Mouse Product or other
Planar Force Feedback Cursor Control Device, materially changes the utility,
efficiency, market value, functional capability or application, and which is
developed by Immersion on a non-exclusive basis and made "generally available"
for use in Planar Force Feedback Cursor Control Devices in the [****] and which
is delivered by Immersion to Logitech as a tangible implementation pursuant to
the terms of Section 7.4 ("New Technology") of the Development Agreement. For
purposes of this definition, "generally available" shall mean offered under
nonexclusive license to any one unaffiliated third party (other than the
original third party for whom the technology, modification or addition was
originally developed) for use in Planar Force Feedback Cursor Control Devices in
the [****].
1.20 OEM OR OEMS. This means any third party (not including Affiliates)
that does not manufacture Planar Force Feedback Cursor Control Devices and that
wishes to purchase finished Planar Force Feedback Cursor Control Devices for
sale in the [****] under its own brand name.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
4
<PAGE> 5
1.21 PARTY OR PARTIES. This means Immersion and/or Logitech.
1.22 PRODUCT LAUNCH. This means the date on which first commercial-level
shipping of the FEELit Mouse Product or any Product Model commences to third
party unaffiliated customers of Logitech or a Logitech Affiliate.
1.23 PRODUCT MODEL. This means a single model of the FEELit Mouse Product
or any other Planar Force Feedback Cursor Control Device. "Product Model" shall
mean each variation of a FEELit Mouse Product or Planar Force Feedback Cursor
Control Device which (i) differs by virtue of addition of or alteration through
an Enhancement or (ii) constitutes a change in form factor or (iii) incorporates
a material change in force-feedback functionality made by a party other than
Immersion. Purely cosmetic alterations (e.g., color or styling) to the physical
appearance of the FEELit Mouse Product or a Planar Force Feedback Cursor Control
Device, or changes that do not alter the force-feedback functionality but reduce
manufacturing costs shall not be deemed a Product Model.
1.24 QUARTER OR QUARTERS. This means Logitech's yearly fiscal quarters.
Specifically, Logitech's yearly fiscal quarters begin and end on the following
dates: first quarter, April 1 - June 30; second quarter, July 1 - September 30;
third quarter, October 1 - December 31; and fourth quarter, January 1 - March
31.
1.25 ROYALTY BEARING PRODUCT. This means a Planar Force Feedback Cursor
Control Device which either (1) incorporates or utilizes Immersion Product Model
Technology that is not otherwise made generally available to the public by
Immersion without charge or (2) is covered (a) by a Licensed Patent or (b) by a
copyright of Immersion embodied in any Immersion Product Model Technology that
is not otherwise made generally available to the public by Immersion without
charge.
1.26 SPECIFICATION(S). This means the FEELit Mouse Product specification
attached as the original Exhibit A ("Specification") to the Development
Agreement and each Planar Force Feedback Cursor Control Device specification
associated with a development schedule which is attached by amendment to the
Development Agreement.
1.27 YEAR. This means any full four-Quarter period.
1.28 Any reference to the words "PURCHASE," "SALE," or "SELL," when used
in connection with intellectual property, shall mean license.
2. GRANT OF LICENSES
2.1 GRANT WITH RESPECT TO THE LICENSED PATENTS. Subject to the terms of
this Agreement, Immersion grants to Logitech a [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
5
<PAGE> 6
2.2 GRANT WITH RESPECT TO THE IMMERSION PRODUCT MODEL TECHNOLOGY. Subject
to the terms of this Agreement, Immersion grants to Logitech a [****]. No access
rights or license to the [****] for the [****] are granted to Logitech except
(i) as provided under the terms of Section 13 ("[****] Escrow") of the
Development Agreement and (ii) as provided under the terms of Section 2.2.1
("Firmware [****]"). Logitech and its Affiliates have no right and Logitech
agrees not to disassemble or decompile any portion of the software portions of
the Immersion Product Model Technology.
2.2.1 FIRMWARE [****]. Immersion may elect, from time to time, and
in its sole discretion, to (i) disclose portions of the Immersion firmware to
Logitech in [****] form solely for informational purposes and as Confidential
Information under the terms of Section 16 ("Confidentiality") of the Technology
Product Development Agreement and (ii) to deliver portions of the Immersion
firmware (which is Immersion Product Model Technology and delivered as a
Deliverable or an Enhancement under the terms of the Technology Product
Development Agreement) to Logitech in [****] form solely for informational
purposes and as Confidential Information under the terms of Section 16
("Confidentiality"). Such firmware [****], if delivered to Logitech, will not be
used by Logitech for other than informational purposes unless Immersion notifies
Logitech, in writing, that such specific firmware [****] is classified as
"Authorized For Modification." With respect to firmware [****] which has been
designated by Immersion as "Authorized For Modification," Immersion grants to
Logitech a [****]. No license to distribute the firmware [****] in [****] form
is granted herein.
2.3 RIGHT TO SUBLICENSE. Subject to the terms of Section 2.6 ("Trademark
License from Immersion"), Immersion grants to Logitech the right to sublicense
any of the rights set forth in Section 2.1 ("Grant With Respect to the Licensed
Patents") and Section 2.2 ("Grant With Respect to the Immersion Product Model
Technology") above subject to the limitations of this Agreement: (i) to any
Affiliate of Logitech and (ii) to any non-Affiliate third party of Logitech
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
6
<PAGE> 7
solely for the purpose of assisting Logitech in the design or development of
Planar Force Feedback Cursor Control Devices in the [****]. Logitech agrees that
any act or omission by a Logitech Affiliate that is inconsistent with Logitech's
obligations under the terms of this Agreement shall be deemed to be an act or
omission by Logitech and a breach of this Agreement by Logitech.
2.4 DURATION. Subject to the obligation to pay royalties, the licenses set
forth above will extend to the full end of the term for which any Licensed
Patent is issued or any other Intellectual Property Right of Immersion licensed
hereunder is in force, unless sooner terminated as provided in this Agreement.
2.5 LABEL REQUIREMENTS. Subject to the terms of Section 2.6 ("Trademark
License for Immersion") and Section 2.7 ("Administration Procedure"), Logitech
shall place belly labels on Force Feedback Cursor Control Devices which are
Royalty Bearing Products which shall include the language and related logo:
"FEELitTM Force Feedback Technology Licensed from Immersion Corporation"
(hereinafter the "Legend"). Logitech shall also place or have placed the Legend
on retail manuals and boxes as designated in Exhibit B ("Immersion Package
Labeling Specification"). Logitech shall not remove Immersion's copyright
notices from any copies of the [****]. The parties agree that in the case of
each Planar Force Feedback Cursor Control Device noticed by Logitech to
Immersion under the terms of Section 2.7 ("Administrative Procedures"),
Immersion will provide Logitech with a list of applicable Licensed Patents which
will identify the "Key Licensed Patents" which will be identified on the belly
label of the particular device and will also identify the "Document Patents"
which will be identified in the product documentation included with the device.
The language on the belly label for the Key Licensed Patents will read as
follows: "{List Key License Patents} and other patents listed in associated
documentation." If OEM customers object to belly label marking or the inclusion
of patents in the documentation as described above, the Parties will mutually
agree upon a reasonable solution in writing in advance.
2.6 TRADEMARK LICENSE FROM IMMERSION. Subject to the procedures set forth
in Section 2.7 ("Administrative Procedures") below and Immersion's prior written
approval, Immersion hereby grants to Logitech a nonexclusive, nontransferable,
worldwide license, to use in connection with marketing the FEELit Mouse Product
or any Planar Force Feedback Cursor Control Device, the trademark(s) used by
Immersion ("Marks") to identify the Immersion Product Model Technology and/or
Licensed Patents and Logitech agrees to use such Marks on and in connection with
Royalty Bearing Products except in the case of OEM products where, if the OEM
customer objects, the parties will mutually agree upon a reasonable solution in
writing, in advance. Logitech acknowledges that all use of the Marks will inure
to the benefit of Immersion. Logitech shall not register Immersion's Marks in
any jurisdiction and will not adopt any trademark for use on the FEELit Mouse
Product or Planar Force Feedback Cursor Control Device which is confusingly
similar to any trademark of Immersion or which includes a prominent portion of
any trademark of Immersion. At Immersion's reasonable request, Logitech shall
provide Immersion with samples of Logitech's use of Immersion trademarks.
Logitech agrees to abide by Immersion's reasonable written trademark policies as
issued and provided to Logitech from time to time. In any case where the Marks
are not used in compliance with
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
7
<PAGE> 8
Immersion's trademark policies and such use has been approved in writing by
Immersion, upon receipt of written notice from Immersion, Logitech will promptly
correct the non-compliance and submit samples of compliant use to Immersion for
approval.
2.7 ADMINISTRATIVE PROCEDURES. The Parties agree that in order to provide
Immersion with appropriate information necessary for the orderly administration
of the Licensed Patents and Marks, Logitech will provide Immersion with prompt
written notice prior to Product Launch of each Product Model and will enclose an
information package which contains two prototypes or production units of the
Product Model sufficient to enable Immersion to determine which of the Licensed
Patents cover the Product Model and to review and approve the use of the Marks.
If in any case Immersion believes that the quality of the Product Model does not
meet Immersion's commercially reasonable standards, Logitech will not be
permitted to ship the Product Model with the Marks until the quality issue is
resolved, but Logitech may in is discretion ship such Product Model without the
Marks and shall be relieved of its obligation to use the Marks on that Product
Model.
2.8 GRANT WITH RESPECT TO KNOW-HOW. Subject to the terms of this
Agreement, each party grants to the other a worldwide, nonexclusive license to
use any know-how of such party disclosed to the other party pursuant to the
Development Agreement.
3. ROYALTIES
3.1 NEW TECHNOLOGY ROYALTIES. As provided in Section 9.2 ("New Technology
Royalties") of the Development Agreement, New Technology will be provided to
Logitech subject to royalties which are mutually agreed upon in writing by
Immersion and Logitech.
3.2 PER PRODUCT MODEL ROYALTY. Except as provided by Section 3.1 ("New
Technology Royalties"), Logitech shall pay Immersion a royalty based on a
percentage of the Net Receipts for each Product Model of a Royalty Bearing
Product sold by Logitech or any Logitech Affiliates to unrelated third parties
(other than Logitech or Logitech Affiliates) in arms length transactions, in
accordance with the following. The royalty percentage for each Product Model
shall be [****] for all units of a Royalty Bearing Product sold. Shipments of
Royalty Bearing Products between Logitech and the Logitech Affiliates or between
Logitech Affiliates will not be considered to be sold or otherwise transferred
until sold to an unrelated customer of Logitech or a Logitech Affiliate.
3.3 [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
8
<PAGE> 9
3.4 PAYMENTS AND REPORTS. The royalties to be paid by Logitech to
Immersion hereunder shall be due [****] after the close of each Quarter. Royalty
reports setting forth the royalty calculation by Product Model and identifying
whether the sales were made by Logitech or Logitech Affiliates shall be included
with such payments. Logitech will pay and account to Immersion for royalties due
hereunder with respect to sales or other disposition of Royalty Bearing Products
by any Logitech Affiliates, and for that purpose, sales of Royalty Bearing
Products by any Logitech Affiliate (other than sales or other disposition by an
Affiliate to Logitech or to another Logitech Affiliate) will be deemed to be
sales by Logitech.
3.5 AUDIT RIGHTS OF ROYALTY PAYMENTS. Immersion shall have the right to
have an independent auditor mutually agreed by Logitech and Immersion audit the
method used to calculate the average sales price, as well as the sales data
pursuant to Section 1.19 ("Net Receipts") and the royalty payments of Logitech
for itself and its Affiliates on an annual basis, but shall pay the costs of
such audit, unless such audit reveals any underpayment of royalties in an amount
greater than [****] of actual royalties due for any Year, in which case Logitech
shall promptly remit an amount equal to the underpayment and shall pay the
reasonable costs of such audit. Such audit shall be preceded by at least five
(5) business days advance written notice and shall be performed during normal
business hours by the auditor. The auditor shall have access to only those books
and records of Logitech which are reasonably necessary to determine the relevant
sales royalties due for Royalty Bearing Products for Logitech itself and its
Affiliates and the correctness of the royalty payments hereunder. Any and all
non-public information related to Logitech, its Affiliates, or their business
revealed in the course of such audit shall be kept confidential by the auditor
and by Immersion, and shall not be disclosed by the auditor to anyone other than
employees or professional advisors of Immersion who have a
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
9
<PAGE> 10
reasonable need to know in connection with such audit, or used for any purpose,
except to the extent reasonably necessary to determine the correctness of
royalty payments made hereunder.
4. TERM AND TERMINATION
4.1 TERM. Unless earlier terminated in accordance with the provisions of
this Agreement, this Agreement will extend until the [****]
4.2 TERMINATION BY LOGITECH.
4.2.1 TERMINATION WITHOUT CAUSE. Logitech may terminate this
Agreement without cause upon [****] written notice, and such written notice
under the terms of this Agreement shall also serve as written notice of the
termination of the Development Agreement, if such Agreement is still in effect
at such time, and the Development Agreement will then terminate within [****] of
such notice pursuant to the terms of Section 12.1 ("Termination by Logitech
Without Cause") and such termination shall be deemed to be a termination without
cause by Logitech and will be construed in accordance with the terms of Section
12.3 ("Effect of Termination") therein.
4.2.2 TERMINATION WITH CAUSE. Logitech may terminate this Agreement
by written notice to Immersion if Immersion has materially breached the terms of
this Agreement and fails to cure the breach after written notice of breach to
Immersion and a [****] day time period to cure.
4.3 TERMINATION BY IMMERSION FOR FAILURE TO PAY ROYALTIES. Immersion may
terminate this Agreement by written notice to Logitech in the event that
Logitech or any Logitech Affiliate breaches the terms of Section 3 ("Royalties")
including but not limited to any failure to pay any royalties due and payable by
Logitech and/or any of the Logitech Affiliates under this Agreement and Logitech
fails to cure such breach after written notice of breach and a [****] time
period to cure.
If Immersion issues a written notice of termination to Logitech under the terms
of this Section 4.3 ("Termination by Immersion for Failure to Pay Royalties")
such notice shall also serve as written notice of termination for cause by
Immersion under the terms of Section 12.2 ("Termination for Cause") of the
Development Agreement, if such Agreement is still in effect at such time. If the
breach described in the aforementioned written notice of termination is not
cured in accordance with the terms of this Section 4.3 ("Termination by
Immersion for Failure to Pay Royalties"), the Development Agreement will then
terminate within [****] of such notice pursuant to the terms of Section 12.2
("Termination for Cause") and such termination will be deemed to be a
termination for cause by Immersion for purposes of Section 12.3 ("Effect of
Termination") and the effects of termination will be construed in accordance
with the terms of Section 12.3 ("Effect of Termination") therein.
4.4 TERMINATION BY IMMERSION FOR BREACH OF PATENT LICENSE. Immersion
may terminate this Agreement in the event that Logitech engages in activity
which exceeds the scope
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
10
<PAGE> 11
of the patent license granted in Section 2.1 ("Grant With Respect to the
Licensed Patents") or breaches the labeling requirement of Section 2.5 ("Label
Requirements") and fails to cure the breach after written notice of breach and a
[****] time period to cure. Except as set forth in this Section 4.4 or Section
4.3 ("Termination by Immersion for Failure to Pay Royalties"), the patent
license granted in Section 2.1 ("Grant With Respect to the Licensed Patents")
shall not be terminable by Immersion. If Immersion issues a written notice of
termination to Logitech under the terms of this Section 4.4 ("Termination by
Immersion for Breach") such notice shall also serve as written notice of
termination for cause by Immersion under the terms of Section 12.2 ("Termination
for Cause") of the Development Agreement, if such Development Agreement is still
in effect at such time. If the breach described in the aforementioned written
notice of termination is not cured in accordance with the terms of this Section
4.4 ("Termination by Immersion for Breach"), the Development Agreement will then
terminate within [****] of such notice pursuant to the terms of Section 12.2
("Termination for Cause") and such termination will be deemed to be a
termination for cause by Immersion for purposes of Section 12.3 ("Effect of
Termination") and the effects of termination will be construed in accordance
with the terms of Section 12.3 ("Effects of Termination") therein.
4.5 TERMINATION OF LICENSES TO IMMERSION PRODUCT MODEL TECHNOLOGY BY
IMMERSION FOR BREACH. Immersion may terminate the licenses granted with respect
to Immersion Product Model Technology in Section 2.2 ("Grant With Respect to the
Licensed Patents") in the event that Logitech engages in activity which exceeds
the scope of such license or breaches the terms of Section 2.3 ("Right to
Sublicense") or the labeling requirement of Section 2.5 ("Label Requirements")
and fails to cure the breach after written notice of breach and a [****] time
period to cure. Termination of the licenses with respect to the Immersion
Product Model Technology shall not affect the patent licenses granted hereunder.
Except as set forth in this Section 4.5 ("Termination of Licenses to Immersion
Product Model Technology by Immersion for Breach") or Section 4.3 ("Termination
by Immersion for Failure to Pay Royalties"), the licenses granted in Section 2.2
("Grant With Respect to the Licensed Patents") shall not be terminable by
Immersion.
4.6 EFFECT OF TERMINATION. Notwithstanding any termination of this
Agreement for any reason, Logitech agrees to pay Immersion for royalties due
under this Agreement from Logitech or any Logitech Affiliate. Upon a termination
of this Agreement for cause or without cause, Logitech and each Affiliate shall
have [****] to distribute any remaining inventory in process and in existence as
of the effective date of the termination, subject to the obligation for Logitech
to pay royalties hereunder for any such distribution by Logitech and/or any
Logitech Affiliates. EXCEPT FOR DIRECT DAMAGES RESULTING FROM A BREACH OF THE
TERMS OF THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO A BREACH BY LOGITECH OR
ANY LOGITECH AFFILIATE OF SECTION 2 ("GRANT OF LICENSES"), NEITHER PARTY SHALL
BE LIABLE TO THE OTHER FOR DAMAGES OF ANY SORT AS A RESULT OF TERMINATING THIS
AGREEMENT IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
11
<PAGE> 12
5. WARRANTY
Immersion represents and warrants that Immersion either has ownership of,
or sufficient rights in, the Immersion Product Model Technology to be delivered
under the terms of the Development Agreement and the Licensed Patents to enter
into this Agreement and grant all the rights set forth herein. As of the
Effective Date of the Agreement, Immersion is not aware of and has not received
any notice of any claim by a third party that the copyrights, patents, trade
secrets, trademarks or other intellectual property rights of any third party are
infringed by the Immersion Product Model Technology that Immersion, in its sole
discretion intends to, as of the Effective Date, use to comply with Immersion's
development obligations under the terms of the Development Agreement, except as
disclosed to Logitech in writing prior to the date of this Agreement. Immersion
further represents and warrants that it neither holds nor has applied for a
patent that is dominant to the Licensed Patents.
6. INDEMNIFICATION
6.1 TRADEMARK INFRINGEMENT INDEMNIFICATION BY IMMERSION. Subject to the
limitations on cumulative liability under Section 7.1 ("Disclaimers of Certain
Types of Damages") and Section 7.3 ("Limitations of Liability with Respect to
Indemnity Obligations"), and Immersion's approval for Logitech to use the Legend
and the Marks pursuant to Section 2.5 ("Label Requirements"), Section 2.6
("Trademark License") and Section 2.7 ("Administrative Procedures") and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, Immersion shall indemnify,
defend and hold Logitech harmless from and against any and all claims, damages,
liabilities, judgments, settlements, losses, costs and expenses (including court
costs and reasonable attorneys' and experts' fees) (collectively, "Costs")
suffered or incurred by Logitech arising out of a claim of infringement of any
Immersion Mark or Legend used by Logitech on a Planar Force Feedback Cursor
Control Device in the [****] which is based on Logitech's use under the labeling
requirement of Section 2.5 ("Label Requirements") and/or the terms of Section
2.6 ("Trademark License") and Section 2.7 ("Administrative Procedures"). In the
case of an infringement or alleged infringement by any such Immersion Mark or
Legend used by Logitech on a Planar Force Feedback Cursor Control Device in the
[****]: (i) Logitech will have the right to remove such Marks and/or Legend from
Logitech Planar Force Feedback Cursor Control Devices while any dispute or
litigation concerning the same is pending, and shall begin using such marks
again only after such infringement claims or disputes have been settled or
dismissed with prejudice, and (ii) Immersion will have the right to require
Logitech to stop using such Marks and/or Legend and will provide a new trademark
to be used in connection with the Immersion Product Model Technology and/or
Licensed Patents, as applicable. Each party agrees to notify the other promptly
of any matters in respect to which the foregoing indemnity in this Section 6.1
("Trademark Infringement indemnification by Immersion") may apply. If notified
in writing of any action or claim for which Immersion is to provide indemnity,
Immersion shall defend, subject to the limitations of liability set forth in
Section 7.1 ("Disclaimer of Certain Types of Damages") and 7.3 ("Limitations of
Liability With Respect to Indemnity Obligations"),
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
12
<PAGE> 13
those actions or claims at Immersion's expense and pay the Costs awarded against
Logitech in any such action, or pay any settlement of such action or claim
entered into by Immersion.
6.2 COPYRIGHT INFRINGEMENT AND TRADE SECRET MISAPPROPRIATION
INDEMNIFICATION BY IMMERSION.
6.2.1 SCOPE. Subject to the limitations of cumulative liability
under Section 7.1 ("Disclaimer of Certain Types of Damages") and Section 7.3
("Limitations of Liability With Respect to Indemnity Obligations") and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, Immersion shall indemnify,
defend and hold Logitech harmless from and against any and all Costs suffered or
incurred by Logitech as a result of any third party claim that any Immersion
Product Model Technology delivered by Immersion to Logitech infringes any
copyright or misappropriates any trade secret of any third party. In the case of
any third party claim involving the [****] portion of the Immersion Product
Model Technology, Immersion may, in its sole discretion, provide Logitech with a
modification to the affected [****] so that the [****] portion of the Immersion
Product Model Technology becomes noninfringing or in the alternative, may
provide Logitech other software which is functionally equivalent. Each party
agrees to notify the other promptly of any matters in respect to which the
foregoing indemnity in this Section 6.2 ("Copyright Infringement and Trade
Secret Misappropriation Indemnification by Immersion") may apply. If notified in
writing of any action or claim for which Immersion is to provide indemnity,
Immersion shall defend, subject to the limitations of liability set forth in
Section 7.1 ("Disclaimer of Certain Types of Damages") and 7.3 ("Limitations of
Liability With Respect to Indemnity Obligations"), those actions or claims at
Immersion's expense and pay the Costs awarded against Logitech in any such
action, or pay any settlement of such action or claim entered into by Immersion.
6.2.2 EXCEPTIONS. The foregoing indemnity will not apply to any
infringement claim to the extent it arises from (i) any modification of any
Immersion Product Model Technology by parties other than Immersion or Immersion
subcontractors under contract with Immersion, (ii) use of any Immersion Product
Model Technology in conjunction with other non-Immersion products or components
where there would be no infringement absent such use with such other products or
components or (iii) an infringement which would not occur in the Immersion
Product Model Technology or any Final Prototype in which such Immersion Product
Model Technology is incorporated but which does occur in the final production
version of a Planar Force Feedback Cursor Control Device.
6.3 PERSONAL INJURY AND PROPERTY DAMAGE CLAIMS. Neither party shall have
any obligation to indemnify, protect, defend and hold the other party harmless
from any Costs suffered or incurred by the other party to the extent such third
party claim or threatened claim arises from a personal or alleged personal
injury or damage or alleged damage to property arising out of the third party's
use of Planar Force Feedback Cursor Control Devices.
6.4 PRODUCT LIABILITY INSURANCE. The Parties agree that they shall each
secure insurance covering product liability. Such insurance shall provide
coverage of at least [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
13
<PAGE> 14
per occurrence and shall remain in effect during the term of this Agreement.
Each party will promptly cause the other party to be named as an additional
insured.
6.5 PATENT INFRINGEMENT INDEMNIFICATION BY IMMERSION.
6.5.1 SCOPE. Subject to the limitations of cumulative liability
under Section 7.1 ("Disclaimer of Certain Types of Damages") and Section 7.3
("Limitations of Liability With Respect to Indemnity Obligations"), and further
subject to prompt notification by Logitech, cooperation by Logitech and control
of all litigation and/or settlement by Immersion, [****] Each Party agrees to
notify the other promptly of any matters in respect to which the foregoing
indemnity in this Section 6.5 ("Patent Infringement Indemnification by
Immersion") may apply. If notified in writing of any action or claim for which
Immersion is to provide indemnity, Immersion shall defend, subject to the
limitations of liability set forth in Section 7.1 ("Disclaimer of Certain Types
of Damages") and 7.3 ("Limitations of Liability With Respect to Indemnity
Obligations") and the provisions of Section 6.5.3 ("Exceptions With Respect to
Patents Issued After the Effective Date"), those actions or claims at its
expense and pay the Costs awarded against Logitech in any such action, or pay
any settlement of such action or claim entered into by Immersion. In any such
action, Logitech will make available to Immersion all defenses against such
action or claim known or available to Logitech.
6.5.2 EXCEPTIONS TO THE SCOPE OF THE INDEMNITY. Immersion shall have
no liability or obligation with respect to any claim of patent infringement to
the extent it arises from [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
14
<PAGE> 15
6.5.3 [****]
(a) [****]
(b) [****]
(c) [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
15
<PAGE> 16
6.6 REMEDIES IN THE EVENT OF PROHIBITION OF USE. The provisions and
remedies set forth in this Section 6.6 ("Remedies In the Event of Prohibition of
Use") shall continue to be applicable with respect to any copyright infringement
or trade secret misappropriation under the terms of Section 6.2 ("Copyright
Infringement and Trade Secret Misappropriation"), and any After-Issued Patents
for which Immersion does not supply written notice to Logitech in accordance
with Section 6.5.3(a) ("Notice by Immersion and Supply of Modified or Substitute
Technology") and any U.S. Patents issued prior to the Effective Date of this
Agreement. If a preliminary or final judgment shall be obtained against
Logitech's use, sale or distribution of a Planar Force Feedback Cursor Control
Device that incorporates any Immersion Product Model Technology based
infringement within the scope of the indemnity set forth in Section 6.1
("Trademark Infringement indemnification by Immersion"), 6.2 ("Copyright
Infringement and Trade Secret Misappropriation Indemnification by Immersion") or
6.5 (Patent Infringement Indemnification by Immersion") (subject to the
exceptions set forth therein), or if any Immersion Product Model Technology is,
or in Immersion's opinion, is likely to become, subject to a claim for such
infringement, then Immersion shall, at its expense, either (a) modify the
Immersion Product Model Technology so that the incorporated Immersion Product
Model Technology becomes noninfringing, or (b) procure for Logitech the right to
continue to use such Immersion Product Model Technology, or (c) substitute for
the infringing Immersion Product Model Technology other technology that conforms
to the Specifications in Exhibit A of the Development Agreement (which shall
itself be deemed to be Immersion Product Model Technology). [****]
6.7 INDEMNITY BY LOGITECH. Subject to the limitations of liability set
forth in Section 7 ("Limitations of Liability"), and subject to prompt
notification by Immersion, cooperation by Immersion and control of all
litigation and/or settlement by Logitech, Logitech shall [****]
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
16
<PAGE> 17
7. LIMITATIONS OF LIABILITY
7.1 DISCLAIMER OF CERTAIN TYPES OF DAMAGES. IN NO EVENT WILL LOGITECH OR
IMMERSION BE LIABLE FOR LOST PROFITS, OR ANY SPECIAL, INDIRECT, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN
ANY WAY IN CONNECTION WITH THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN IF
LOGITECH AND IMMERSION HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
7.2 LIMITATIONS OF LIABILITY OTHER THAN INDEMNITY OBLIGATIONS. EXCEPT WITH
RESPECT TO THE PARTIES' OBLIGATIONS OF INDEMNITY, INCLUDING, BUT NOT LIMITED TO
COSTS OF DEFENSE AND "COSTS" (AS DEFINED ABOVE) SET FORTH IN SECTION 6
("INDEMNIFICATION") WHICH ARE LIMITED BY THE TERMS OF SECTION 7.3 ("LIMITATIONS
OF LIABILITY WITH RESPECT TO INDEMNITY OBLIGATIONS") AND WITH RESPECT TO ANY
ROYALTIES DUE AND PAYABLE BY LOGITECH HEREUNDER, IN NO CASE WILL EITHER PARTY'S
TOTAL CUMULATIVE LIABILITY OR OBLIGATIONS UNDER THE TERMS OF OR ARISING OUT OF
THIS AGREEMENT EXCEED [****]
7.3 LIMITATIONS OF LIABILITY WITH RESPECT TO INDEMNITY OBLIGATIONS. IN NO
CASE WILL EITHER PARTY'S TOTAL CUMULATIVE LIABILITY WITH RESPECT TO ITS
OBLIGATIONS OF INDEMNITY INCLUDING, BUT NOT LIMITED TO COSTS OF DEFENSE AND
"COSTS" (AS DEFINED ABOVE) UNDER SECTION 6 ("INDEMNIFICATION") EXCEED THE
GREATER OF [****]
7.4 NEGATION OF WARRANTIES AND OTHER OBLIGATIONS.
7.4.1 Nothing in this Agreement shall be construed:
(i) as a warranty or representation by Immersion as to the
validity or scope of any Licensed Patents;
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
17
<PAGE> 18
(ii) as a warranty or representation that anything made,
used, sold or otherwise disposed of under any license
granted in this Agreement is or will be free from
infringement by patents, copyrights, trade secrets,
trademarks, or other rights of third parties;
(iii) as granting by implication, estoppel or otherwise any
licenses or rights under patents or other Intellectual
Property Rights of Immersion other than expressly
granted herein, regardless of whether such patents are
dominant or subordinate to any Licensed Patents, or
(iv) (a) to require Immersion to file any patent application
relating to force-feedback in Planar Force Feedback
Cursor Control Devices, (b) a warranty that Immersion
will be successful in securing the grant of any patent
relating to force-feedback in Planar Force Feedback
Cursor Control Devices or any reissue or extensions
thereof, and (c) to require Immersion to pay any
maintenance fees or take any other steps to maintain
Immersion's patent rights relating to force feedback in
Planar Force Feedback Cursor Control Devices, provided,
however, that in the event Immersion elects not to pay
any maintenance fee or take any step to maintain such
patents, Immersion shall so notify Logitech a reasonable
period in advance and Logitech may, at its option, pay
such maintenance fee or take such steps.
7.4.2 Except for Immersion's obligations of indemnity set forth
herein, Immersion does not assume any responsibility for the definition of the
Specifications, the manufacture of the Planar Force Feedback Cursor Control
Devices, or use of any Planar Force Feedback Cursor Control Device which is
manufactured or sold by or for Logitech or the Logitech Affiliates under the
Licensed Patent licenses granted herein. All warranties in connection with such
Planar Force Feedback Cursor Control Devices shall be made by Logitech or the
Logitech Affiliates as manufacturers or sellers of such Planar Force Feedback
Cursor Control Devices and such warranties shall not directly or by implication
obligate Immersion in any way.
8. THIRD PARTY ENFORCEMENT
Immersion shall not have any obligation or duty under this Agreement to
any party, including but not limited to Logitech to enforce any patents or
Licensed Patents against any third party infringing any claim or claims of any
patent and/or the Licensed Patents provided, however, that should Logitech
become aware of any actual infringement of the Licensed Patents by a Planar
Force Feedback Cursor Control Device distributed in the [****] by a third party,
which Planar Force Feedback Cursor Control Device directly competes with a
Planar Force Feedback Cursor Control Device currently shipped by Logitech as a
formal product release which is covered by the Licensed Patents, Logitech will
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
18
<PAGE> 19
promptly communicate the details to Immersion. Immersion shall thereupon, within
[****] of being made aware by Logitech of such infringement, send copies of the
relevant Licensed Patents to such third party, however, Immersion shall have the
right to take no further action or whatever action Immersion deems necessary,
including cease and desist letters, negotiation, the filing of lawsuits, and/or
settlement to terminate such infringement and the strategy and/or conclusion of
such action or settlement shall be within Immersion's sole discretion. Logitech
shall cooperate with Immersion if Immersion takes any such action but all
expenses of Immersion shall be borne by Immersion. If Immersion recovers any
damages or compensation for any action Immersion takes hereunder, including any
settlement, Immersion shall retain [****] of such damages. If Immersion does not
elect to take such further action hereunder within [****] of being made aware of
such infringement by Logitech, then Logitech shall have the right, but not the
obligation, to provide Immersion with a Patent Enforcement Justification, as
defined below, and if the proposed enforcement action meets the Patent
Enforcement Justification criteria, Logitech may take and control any such
action, subject to Immersion's absolute right to control any and all assertions
or admissions which relate to the scope or validity of Immersion's Licensed
Patents. For purposes of this Section 8 ("Third Party Enforcement"), a Patent
Enforcement Justification is a written report prepared by Logitech which
includes: (i) the name and address of the entity manufacturing the Planar Force
Feedback Cursor Control Device that is allegedly infringing the Licensed Patents
and the names and addresses of any entities distributing such Planar Force
Feedback Cursor Control Device, (ii) an analysis of which of the Licensed Patent
claims are infringed, (iii) a comparison of the allegedly infringing Planar
Force Feedback Cursor Control Device and the affected Planar Force Feedback
Cursor Control Device distributed by Logitech with which such allegedly
infringing Planar Force Feedback Cursor Control Device competes (which
comparison analyzes the competitive threat as to (a) feature and function, (b)
positioning, and (c) price point), (iv) the number of units of the Planar Force
Feedback Cursor Control Device sold by Logitech in the most recent [****] full
Quarters and, if known or reasonably estimable, the number or estimate of the
number of units of the allegedly infringing Planar Force Feedback Cursor Control
Device sold in the most recent [****] full Quarters, on a geographic area basis.
The criteria which must be met by such report, in order to permit Logitech to
"justify" and to go forward with an infringement action, as are follows:
(i) Logitech must be selling over [****] units of the
affected Planar Force Feedback Cursor Control Device in the market in which the
infringement is occurring during the most recent [****] full Quarters or, if the
Product Launch occurred during the most recent [****] full Quarters, Logitech
reasonably estimates in good faith that it will sell over [****] units of the
affected Planar Force Feedback Cursor Control Device in the market in which the
infringement is occurring during the next [****] full Quarters;
(ii) the allegedly infringing Planar Force Feedback
Cursor Control Device must be substantially similar to the affected Planar Force
Feedback Cursor Control Device as to features and functions such that the
allegedly infringing Planar Force Feedback Cursor Control Device is having or
reasonably will have a serious impact on the sales of the affected Logitech
Planar Force Feedback Cursor Control Device;
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
19
<PAGE> 20
(iii) the Licensed Patents to be enforced against the
allegedly infringing Planar Force Feedback Cursor Control Device also cover
the affected Logitech Planar Force Feedback Cursor Control Device;
(iv) the number of units of the allegedly infringing
Planar Force Feedback Cursor Control Device sold in the market in which the
infringement is occurring in the most recent four (4) full Quarters or
reasonably estimated in good faith to be sold in the next four (4) full Quarters
must meet or exceed [****] units; and
(v) Logitech has included the applicable Licensed
Patent numbers on the affected Planar Force Feedback Cursor Control Device in
accordance with the terms of Section 2.5 ("Label Requirements").
If the aforementioned criteria are met, Immersion will cooperate with Logitech,
at Logitech's expense, including but not limited to joining any legal
proceedings as a named plaintiff to the extent required to confer jurisdiction,
and all of Logitech's expenses will be borne by Logitech. Immersion may elect to
have counsel of its own choosing participate at Immersion's sole expense in any
legal proceedings instituted by Logitech, but Logitech shall retain [****] of
any damages Logitech recovers for any such proceedings including any settlement,
provided however that (i) Logitech shall first reimburse Immersion for
Immersion's Costs to participate in such action out of any recovery which
exceeds Logitech's Costs for such action. Immersion must agree to any settlement
of any infringement or of any action brought hereunder by Logitech, which
consent will not be unreasonably withheld.
9. GENERAL
9.1 ENTIRE AGREEMENT. This Agreement, together with the Development
Agreement and its Exhibits, constitutes the complete agreement of the parties
and supersedes any other agreements, written or oral (including all
correspondence, emails and the letter regarding [****] concerning the subject
matter hereof and such materials do not have any effect upon the rights and
obligations of the Parties under this Agreement. This Agreement and the
Development Agreement in no way supersede or affect the Intellectual Property
License Agreement between Immersion and Logitech dated [****] and/or the
Technology Product Development Agreement between Immersion and Logitech dated
[****].
9.2 SUCCESSION AND ASSIGNMENT. Either party may assign this Agreement
provided that the other party has consented in writing to the assignment or
delegation and provided, further, that the rights and obligations of the parties
may be assigned to a corporate successor in interest in the case of a merger or
acquisition or in the case of a sale of assets without the prior approval of the
other party. In the case of any permissible assignment of this Agreement by
Immersion, the obligation for Logitech to include the phrase "from Immersion
Corporation" at the end of the Legend will be waived. Any attempt to assign this
Agreement in violation of the provisions of this Section 9.2 ("Succession and
Assignment") shall be void.
9.3 NOTICES. Notices required under this Agreement shall be addressed as
follows, except as otherwise revised by written notice:
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
20
<PAGE> 21
TO IMMERSION: TO LOGITECH:
Louis B. Rosenberg, Ph. D. General Counsel
President Logitech, Inc.
Immersion Corporation 6505 Kaiser Drive
2158 Paragon Drive Fremont, CA 94555-3615
San Jose, CA 95131
9.4 GOVERNING LAW. The validity, interpretation and performance of this
Agreement shall be governed by the substantive laws of the State of California,
without the application of any principle that leads to the application of the
laws of any other jurisdiction.
9.5 NO AGENCY. Neither party is to be construed as the agent, partner, or
joint venturer or to be acting as the agent, partner or joint venturer of the
other party hereunder in any respect.
9.6 NO RECRUITMENT. During the term of this Agreement and for one (1) year
after the termination or expiration of this Agreement, each Party agrees not to
recruit any employee of the other Party.
9.7 MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one single Agreement
between the parties.
9.8 NO WAIVER. No delay or omission by either Party hereto to exercise any
right or power occurring upon any noncompliance or default by the other Party
with respect to any of the terms of this Agreement shall impair any such right
or power or be construed to be a waiver thereof. A waiver by either of the
Parties hereto of any of the covenants, conditions, or agreements to be
performed by the other shall not be construed to be a waiver of any succeeding
breach thereof or of any covenant, condition, or agreement herein contained.
Unless stated otherwise, all remedies provided for in this Agreement shall be
cumulative and in addition to and not in lieu of any other remedies available to
either party at law, in equity, or otherwise.
9.9 SEVERABILITY. If any one or more of the provisions of this Agreement
shall be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
9.10 AMENDMENTS IN WRITING. Any amendment to this Agreement shall be in
writing and signed by both parties hereto.
9.11 INTERPRETATION. Since this Agreement was prepared by both parties
hereto, it shall not be construed against any one party as the drafting party.
9.12 DISPUTE RESOLUTION. Except in the case of a breach of an obligation
related to a Party's Intellectual Property Rights, in the event either Party
concludes that it is in its best interest to file any legal action against the
other, the Party shall contact the other Party's management and at least two (2)
senior managers from each Party shall meet without legal
21
<PAGE> 22
counsel or interruption for a minimum amount of three (3) eight (8) hour periods
and diligently attempt to resolve all disputed matters. If the Parties are
unable to resolve their difference and either Party desires to file a legal
action against the other, at least two (2) senior managers from each Party and
their respective counsels shall meet for three (3) eight (8) hour periods and
diligently attempt to resolve all disputed matters. Either Party may request
that an independent third party bound to mutually agreed upon obligations of
confidentiality attend such meeting in order to assist the Parties in reaching a
reasonable resolution. All oral and written information exchanged in these
meetings shall be exchanged in an effort to settle all disputed matters. If
either Party still desires to file a legal action against the other after these
prescribed meetings, such Party may file a legal action against the other Party
as allowed by applicable law in Santa Clara County state court or in the federal
court. The Parties agree that if a Party does not attend all of the prescribed
meetings it waives its rights to any monetary damages in the legal action(s) it
files.
9.13 SURVIVAL. Sections 3.2 ("Per Product Model Royalty"), 3.4 ("Payments
and Reports"), 3.5 ("Audit Rights of Royalty Payment"), 4.6 ("Effect of
Termination"), 5 ("Warranty"), 7 ("Limitations of Liability") and 9 ("General")
shall survive any termination or expiration of this Agreement. In addition, the
provisions of Sections 6.1 ("Trademark Infringement Indemnification by
Immersion"), 6.2 ("Copyright Infringement and Trade Secret Misappropriation
Indemnification by Immersion"), 6.5 ("Patent Infringement Indemnification by
Immersion"), 6.6 ("Remedies In the Event of Prohibition of Use") and 6.7
("Indemnity by Logitech") shall survive with respect to any units of a Product
Model of Royalty Bearing Products sold or otherwise distributed by Logitech
before the termination or expiration of this Agreement, provided, however, that
Immersion's obligations of indemnity under Sections 6.1 ("Trademark Infringement
Indemnification by Immersion"), 6.2 ("Copyright Infringement and Trade Secret
Misappropriation Indemnification by Immersion"), 6.5 ("Patent Infringement
Indemnification by Immersion"), and 6.6 ("Remedies In the Event of Prohibition
of Use") shall not survive in the event Immersion terminates this Agreement for
cause, including but not limited to, failure by Logitech to pay royalties due
hereunder.
9.14 FORCE MAJEURE. With the exception of the obligation to pay monies due
and owing, each Party hereto shall be excused from performance hereunder for any
period and to the extent that it is prevented from performing any services
pursuant hereto, in whole or in part, as a result of delays caused by the other
Party or an act of God, war, civil disturbance, court order, governmental
action, laws, orders, regulations, directions or requests, or as a result of
events such as acts of public enemies, earthquakes, fires, floods, strikes or
other labor disturbances of the other Party or any third party, or other cause
beyond its reasonable control and which it could not have prevented by
reasonable precautions, and such nonperformance shall not be a default hereunder
or a ground for termination hereof.
22
<PAGE> 23
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have signed this Agreement as of the date and year last set forth below.
Logitech: Immersion:
LOGITECH, INC. IMMERSION CORPORATION
By: /s/ By: /s/ Louis Rosenberg
------------------------------ ---------------------------------
Title: S.V.P./ G.M. Title: President
------------------------------ ---------------------------------
Date: April 13, 1998 Date: April 13, 1998
------------------------------ ---------------------------------
23
<PAGE> 1
EXHIBIT 10.20
TECHNOLOGY PRODUCT DEVELOPMENT AGREEMENT
IMMERSION CORPORATION AND LOGITECH, INC.
This Technology Product Development Agreement (the "Agreement") between
Immersion Corporation, a California corporation, with principal offices
in San Jose, California (hereinafter "Immersion") and Logitech Inc., a
California corporation, with principal offices in Fremont, California
(hereinafter "Logitech"), is entered into as of [****] (the "Effective
Date").
RECITALS
WHEREAS, Logitech and Immersion desire to establish a mutually
beneficial business relationship and to develop, verify and launch under
their best efforts high quality and competitively priced "FEELit Mouse"
force-feedback [****]; and,
WHEREAS, Immersion is in the business of developing certain computer
peripheral force feedback industrial, business, gaming, arcade and
medical devices, and represents it is the owner and/or licensee of
certain know-how, trade secrets and issued or pending patents; and,
WHEREAS, Logitech is in the business of developing, manufacturing and
distributing software and electrical computer peripheral devices such as
input data, gaming, and control devices including, but not limited to,
[****], and represents it is the owner and/or licensee of certain
know-how, trade secrets and issued or pending patents; and,
WHEREAS, Logitech desires to develop internally and with third parties,
use, manufacture and distribute [****] which utilize FEELit Mouse
technology.
NOW, THEREFORE, in consideration of the promises and agreements set
forth below and the other consideration cited herein, the parties agree
as follows:
1. PURPOSE AND SCOPE OF THE AGREEMENT
1.1 PURPOSE. The purpose of this Agreement is to expressly define the
terms and conditions of Logitech's and Immersion's business
relationship with respect to force-feedback [****] projects.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 2
1.2 SCOPE. The scope of this Agreement encompasses Immersion's and
Logitech's respective development, service and support rights and
obligations regarding [****] projects provided for herein.
2. DEFINITIONS
In this Agreement, including the Exhibits hereto, the following words
and expressions shall have the following meanings:
2.1 AFFILIATES. This means any corporation or business entity which
is controlled by, controls, or is under common control of a
Party. For this purpose, the meaning of the word "control" shall
include, without limitation, direct or indirect ownership of more
than fifty percent (50%) of the voting shares of interest of such
corporation or business entity.
2.2 DEFECT. This means, with respect to any non-software Deliverable,
failure to materially conform to the applicable then-current
Specifications for such non-software Deliverable.
2.3 DEFECT CORRECTION. This means either a modification or addition
that eliminates or works around a Defect in a non-software
Deliverable so as to cause the non-software Deliverable to comply
with the applicable then-current Specification.
2.4 DELIVERABLES. This means the various deliverables, which are
tangible implementations or items, including interim deliverables
or final prototype deliverables, identified as such and described
in Exhibit B ("Development Schedule"), or any subsequent
development schedule attached hereto by amendment.
2.5 ENHANCEMENT OR ENHANCEMENTS. This means any force-feedback
modification or addition made by Immersion under the terms of
Section 6.7 ("Other Development") and Section 7.2 ("[****]"), for
the [****], and which is a tangible implementation, other than a
Defect Correction or Error Correction, that when incorporated
into the [****], materially reduces the product cost of a [****],
or materially changes the functional capability, or form factor.
2.6 ERROR. This means, with respect to any software Deliverable,
failure of any such software Deliverable to materially conform to
the applicable then-current Specification for such software
Deliverable.
2
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 3
2.7 ERROR CORRECTION. This means either a modification or addition
that eliminates or works around an Error in the software
Deliverable so as to cause the software Deliverable to comply
with the then-current Specification.
2.8 FEELIT MOUSE PRODUCT. This means the final production version of
the mouse described in the first Exhibit A ("Specifications")
which utilizes and/or contains Immersion Product Model
Technology, including but not limited to the applicable [****],
documentation, Defect Corrections and Error Corrections
thereto.
2.9 FINAL PROTOTYPE. This means a Deliverable which is the final
functional form of the [****], if any, including software and
hardware, produced by Immersion under a development schedule,
which prototype serves as a model for the final production
version of the [****], if any, and which conforms to the
applicable Specification.
2.10 IMMERSION PRODUCT MODEL TECHNOLOGY. This means that subset of
Immersion Technology delivered as a Deliverable under the terms
of a development schedule, or as an Enhancement or New
Technology, which is actually utilized in or in connection with
and/or embedded in the final production version of the FEELit
Mouse Product, any subsequent Product Model of the FEELit Mouse
Product or any Product Model of any [****].
2.11 [****]
2.12 IMMERSION TECHNOLOGY. This means any and all technology created
or acquired by Immersion, or licensed to Immersion by third
parties, including but not limited to software created by
employees or consultants of Immersion, (i) first developed or
reduced to practice before or after the Effective Date solely by
Immersion independent of the scope of the work under this
Agreement or (ii) first developed or reduced to practice after
the Effective Date and within the scope of a Deliverable
developed solely by Immersion (a) under a development schedule in
effect under the terms of this Agreement, (b) as an Enhancement
or (c) as New Technology.
3
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 4
2.13 INTELLECTUAL PROPERTY LICENSE AGREEMENT. This means the
Intellectual Property License Agreement between Immersion and
Logitech dated the same date as this Agreement.
2.14 JOINT TECHNOLOGY. This means any and all technology created
and/or invented jointly by Immersion and Logitech employees or
consultants after the Effective Date and within the scope of
development of the FEELit Mouse Product or any [****] and/or any
Enhancements under the terms of this Agreement. The term "Joint
Technology" specifically excludes Immersion Technology and
Logitech Technology.
2.15 LOGITECH PRODUCT MODEL TECHNOLOGY. This means that subset of
Logitech Technology which is actually utilized in or in
connection with and/or embedded in the final production version
of the FEELit Mouse Product, any subsequent Product Model of the
FEELit Mouse Product or any Product Model of any [****].
2.16 LOGITECH TECHNOLOGY. This means any and all technology created or
acquired by Logitech, or licensed to Logitech by third parties,
including but not limited to software created by employees or
consultants of Logitech (i) first developed or reduced to
practice before or after the Effective Date solely by Logitech
independent of the scope of the work under this Agreement or (ii)
first developed or reduced to practice after the Effective Date
solely by Logitech and within the scope of a development schedule
in effect under the terms of this Agreement.
2.17 [****]
2.18 [****]
4
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 5
2.19 NEW TECHNOLOGY. This means any force-feedback technology
modification or addition made by Immersion, for the [****], other
than a Defect Correction or Error-Correction, that when
incorporated into a [****], materially changes the utility,
efficiency, market value, functional capability or application,
and which is developed by Immersion on a non-exclusive basis and
made "generally available" for use in [****] in the [****] and
which is delivered by Immersion to Logitech as a tangible
implementation pursuant to the terms of Section 7.4 ("New
Technology"). For purposes of this definition, "generally
available" shall mean offered under nonexclusive license to any
one unaffiliated third party (other than the original third party
for whom the technology, modification or addition was originally
developed) for use in [****] in the [****].
2.20 OEM OR OEMS. This means any third party (not including
Affiliates) that does not manufacture [****] and that wishes to
purchase finished [****] for sale in the [****] under its own
brand name.
2.21 PARTY OR PARTIES. This means Immersion and/or Logitech.
2.22 PRODUCT LAUNCH. This means the date on which first
commercial-level shipping of the FEELit Mouse Product or any
Product Model commences to third party unaffiliated customers of
Logitech or a Logitech Affiliate.
2.23 PRODUCT MODEL. This means a single model of the FEELit Mouse
Product or any other [****]. "Product Model" shall mean each
variation of a FEELit Mouse Product or [****] which (i) differs
by virtue of addition of or alteration through an Enhancement or
(ii) constitutes a change in form factor or (iii) incorporates a
material change in force-feedback functionality made by a party
other than Immersion. Purely cosmetic alterations (e.g., color or
styling) to the
5
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 6
physical appearance of the FEELit Mouse Product or a [****], or
changes that do not alter the force-feedback functionality but
reduce manufacturing costs shall not be deemed a Product Model.
2.24 QUARTER OR QUARTERS. This means Logitech's yearly fiscal
quarters. Specifically, Logitech's yearly fiscal quarters begin
and end on the following dates: first quarter, April 1 - June 30;
second quarter, July 1 - September 30; third quarter, October 1 -
December 31; and fourth quarter, January 1 - March 31.
2.25 ROYALTY BEARING PRODUCT. This means a [****] which either (1)
incorporates or utilizes Immersion Product Model Technology that
is not otherwise made generally available to the public by
Immersion without charge or (2) is covered by a Licensed Patent
as defined in the Intellectual Property License Agreement or by a
copyright of Immersion embodied in any Immersion Product Model
Technology that is not otherwise made generally available to the
public by Immersion without charge generally.
2.26 SPECIFICATION(S). This means the FEELit Mouse Product
specification attached hereto as Exhibit A ("Specification") and
each [****] specification associated with a development schedule
which is attached by amendment to this Agreement.
2.27 YEAR. This means any full four-Quarter period.
2.28 Any reference to the words "PURCHASE," "SALE," or "SELL," when
used in connection with intellectual property, shall mean
license.
3. EXHIBITS
The following Exhibits shall be attached hereto and incorporated in
their entirety by this reference.
EXHIBIT A ("Specification"), the Specification, contains the description
of the FEELit Mouse Product.
EXHIBIT B ("Development Schedule"), the Development Schedule, contains
the Milestones, Deliverables and Deliverable Due Dates. The parties
agree to complete Exhibit B within thirty (30) days of the Effective
Date and add such Exhibit B to this Agreement by written amendment
within such time period.
EXHIBIT C ("Change Order Form"), is the Change Order Form.
EXHIBIT D ("Software License Agreement") is the end user software
license agreement.
6
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 7
EXHIBIT E ("Immersion Packaging Labeling Specification") is the
Immersion Packaging Labeling specification.
4. TERM
The initial term of this Agreement shall be for a period of [****]
commencing on the Effective Date, unless otherwise earlier terminated by
the Parties according to the terms of this Agreement. Thereafter, this
Agreement shall automatically renew for subsequent [****] periods,
unless either party terminates the Agreement by written notice at least
[****] prior to the end of the initial term or any renewal term.
5 ENGAGEMENT OF SERVICES
5.1 PROJECT ASSIGNMENT. Subject to the terms of this Agreement,
Immersion and Logitech will render the services and develop the
Deliverables described in Exhibit B ("Development Schedule"),
based upon Exhibit A ("Specifications"), which development
schedule and/or Specification may be modified by the Parties from
time to time in accordance with the procedures described in
Section 6.6 ("Modification of Specification"). Immersion shall
dedicate full-time employees of sufficient technical and
professional caliber to define, develop, complete and verify the
[****] it develops with Logitech in accordance with Exhibit B
("Development Schedule"), based on Exhibit A ("Specifications"),
and will assist Logitech in launching and supporting the
resulting [****] in accordance with the terms of Section 7.1
("Technical Service and Support").
5.2 PERFORMANCE OF SERVICES. Logitech has selected Immersion to
perform the services described in this Agreement based upon
Logitech receiving Immersion's personal services. Immersion may
not, therefore, subcontract or otherwise assign and delegate its
obligations under this Agreement without Logitech's prior written
consent.
5.3 PRESS RELEASE. Each of the Parties agree to credit appropriately
the other Party in all press releases, promotions, advertisement
and announcements that mention the force feedback [****]. Prior
to a Party releasing any information that references the other
Party, the publishing Party shall obtain the other Party's prior
written approval. The parties shall announce their FEELit Mouse
partnership within six months of the Effective Date.
7
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 8
6.[****] DEVELOPMENT
6.1 FUNDING. Logitech shall fund all costs related to its internal
development of the [****]. In consideration of the duties and
obligations of Immersion with respect to its development
obligations hereunder for Logitech, Logitech will pay Immersion
on a reasonable time and material basis. Immersion will be liable
for all taxes levied against Immersion which arise in connection
with Immersion's performance under this Agreement and the
payments received from Logitech. Any payment designated as due
and payable based upon completion of development of a specified
Deliverable(s) and acceptance by Logitech shall not be payable
until Logitech's acceptance thereof.
6.1.1 FEELIT MOUSE PRODUCT FUNDING. In consideration of
the duties and obligations of Immersion with respect to
development pursuant to Exhibit B ("Development
Schedule") by Immersion, Logitech will pay Immersion a
total amount of [****] (US Dollars) ("Development Fee"),
which sum is in addition to the [****] to be paid by
Logitech to Immersion under the terms of the Parties'
Phase 0 Term Sheet, receipt of which previous payment is
hereby acknowledged by Immersion. The Development Fee will
be payable based on a segmented development schedule with
scheduled deliverables as described in Exhibit B
("Development Schedule").
6.2 DEVELOPMENT MILESTONES. Immersion's development obligation under
the terms of this Agreement as described in Exhibit B
("Development Schedule") shall be conducted on a first priority
basis. The FEELit Mouse Product development schedule is described
with particularity in Exhibit B ("Development Schedule") and the
schedule is divided into milestones ("Milestones"), each of which
require the delivery of one or more Deliverables on specific
Deliverable due dates ("Deliverable Due Dates"). Upon completion
of each Milestone associated with a Deliverable under Exhibit B
("Development Schedule") as amended in writing by the Parties
from time to time, Immersion shall promptly deliver to Logitech
the applicable Deliverable called for under such Milestone.
Logitech agrees to promptly complete and deliver to Immersion
Deliverables required to be completed and delivered by Logitech
pursuant to the terms of Exhibit B ("Development Schedule").
6.3 DELIVERY AND ACCEPTANCE OF DELIVERABLES BY LOGITECH. Upon
completion of each Deliverable, Immersion shall deliver to
Logitech such Deliverable, including documentation, if included
as part of the Deliverable requirement, for evaluation by
Logitech. Logitech shall review, test, and evaluate each
Deliverable and where indicated in the Development Schedule,
accept or reject each Deliverable in
8
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 9
accordance with Exhibit B ("Development Schedule") and make the
associated payment, if any, for accepted Deliverables. Logitech
shall provide Immersion with written acceptance of each
Deliverable (for which acceptance is indicated as a requirement
in the Development Schedule), or a written statement of Defects
and/or Errors to be corrected within [****)] business days after
such delivery unless a different acceptance time period for a
Deliverable is described in Exhibit B ("Development Schedule") or
as otherwise mutually agreed upon in a writing signed by the
Parties. Immersion shall promptly correct such Defects and/or
Errors and return the corrected Deliverables for retesting and
reevaluation, and unless otherwise provided for in Exhibit B
("Development Schedule"), Logitech shall within [****] business
days after such redelivery provide Immersion with written
acceptance or a statement of Defects and/or Errors to be
corrected. The foregoing procedure shall be repeated until
Logitech accepts the Deliverable or finally rejects the
Deliverable and either terminates the Agreement or the
development project related to the unacceptable Deliverable
pursuant to Section 12 ("Termination").
6.4 PROGRAM MANAGERS. Immersion and Logitech shall each appoint a
program manager ("Program Manager"). Each Party reserves the
right to change such Program Manager, at any time, upon written
notice to the other Party. Immersion's appointed Program Manager
as of the Effective Date is [****]. Logitech's appointed Program
Manager as of the Effective Date is [****].
6.5 STATUS MEETINGS. The Parties shall notify each other of any
anticipated problems and any indication of delay in fixed or
tentative schedules. At least once each month, the Parties shall
conference, as mutually agreed, for progress discussions
describing in detail the status of the work performed and
discussion of possible resolution of any problems which have
arisen.
6.6 MODIFICATION OF SPECIFICATION. Logitech may modify the
Specifications at any time during development after consulting
with Immersion. If any such modification requires an increase in
the time or cost to perform by Immersion, an equitable adjustment
shall be negotiated and mutually agreed upon in writing by
Immersion and Logitech. Such changes will be implemented only
pursuant to a change order form in the form of Exhibit C ("Change
Order Form"), signed by both Parties. Such changes will become
effective and will be deemed incorporated into the Agreement as
an amendment to the applicable exhibit or section of the
Agreement. This procedure is used to control the technical
configuration of the Deliverables, as well as to control and
document costs and schedules. Logitech shall not be liable for
any work performed by Immersion which differs from the
then-current Specification and/or development schedule prior to
such work being authorized in a signed Change Order Form.
9
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 10
6.7 OTHER DEVELOPMENT. Should Logitech desire to have Immersion
design other [****] after the FEELit Mouse Product and/or
Enhancements, the Parties will mutually agree in writing upon a
supplemental development schedule substantially in the form of
Exhibit B ("Development Schedule"), and reasonable associated
development fees, and an accompanying Exhibit A
("Specifications") and shall amend this Agreement to incorporate
such project. Except as provided in Section 7.4 ("New
Technology"), all terms and conditions of this Agreement, and the
Intellectual Property License Agreement including royalty rates
set forth in the Intellectual Property License Agreement, Section
3 ("Royalties"), shall apply to any [****] developed under this
Agreement unless otherwise mutually agreed in writing.
7. IMMERSION'S POST-DEVELOPMENT OBLIGATIONS
7.1 TECHNICAL SERVICE AND SUPPORT. Immersion shall provide Logitech
with ongoing engineering and technical support up to at least
[****] hours per week for the [****], as reasonably requested by
Logitech. [****] In consideration of any such support, whether on
a priority or as-available basis, Logitech shall pay Immersion at
a reasonable time and materials rate.
7.1.1 EXCEPTION. Immersion shall promptly provide Error Corrections
without charge for any Errors, including software Errors in any
[****] including any firmware.
7.2 [****]
7.3 OEM REFERRAL. Should an OEM contact Immersion concerning
manufacture of a [****] for the [****], Immersion agrees to
direct such OEM to contact Logitech with respect to manufacturing
such [****].
10
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 11
The obligation of Immersion to direct OEMs to Logitech is
independent of Logitech having [****] and is not required for
such referrals. Logitech agrees that when contacted by any OEM
referred by Immersion, Logitech will include Immersion Product
Model Technology and/or technology covered by the Licensed
Patents as defined in the Intellectual Property License Agreement
in any initial proposals or designs for manufacturing a [****]
for such OEM. If Logitech's proposal or design incorporating
Immersion Product Model Technology and/or technology covered by
the Licensed Patents as defined in the Intellectual Property
License Agreement is accepted, Logitech agrees to make good faith
efforts to utilize Immersion Product Model Technology and/or
technology covered by the Licensed Patents as defined in the
Intellectual Property License Agreement in the [****]
manufactured for such OEM and to pay royalties therefor to
Immersion in accordance with this Agreement. If the OEM in its
own discretion elects to reject Logitech's proposal and/or design
which incorporates Immersion Product Model Technology and/or
technology covered by the Licensed Patents as defined in the
Intellectual Property License Agreement, then (i) Immersion
agrees and acknowledges that Logitech may manufacture a [****]
for the OEM without incorporating Immersion Product Model
Technology and/or technology covered by the Licensed Patents and
(ii) Logitech agrees and acknowledges that Immersion may enter
into an agreement with the OEM with respect to [****] in the
[****].
7.4 NEW TECHNOLOGY. [****], which royalty terms may or may not
be as favorable as the royalty terms in the Intellectual Property
License Agreement Section 3 ("Royalties"). [****].
7.5 NOTICE OF IMMERSION MANUFACTURE. Immersion shall provide
Logitech with [****] months' written notice prior to commencement
by Immersion of distribution of a [****] for the
11
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 12
[****] to be manufactured by Immersion or manufactured by a third
party on Immersion's behalf for distribution by Immersion under
Immersion's name. Upon expiration of this notice period,
Immersion may, but shall no longer be obligated to offer Logitech
Enhancements in accordance with Section 7.2 ("[****]"), may but
shall no longer be obligated to offer OEMs to Logitech in
accordance with Section 7.3 ("OEM Referral"), and may but shall
no longer be obligated to provide New Technology under Section
7.4 ("New Technology").
7.6 LOGITECH PREEMPTION PROTECTION. Provided that Logitech is in
compliance with its development obligations under the terms of
this Agreement, which will be measured by Logitech making
substantial progress toward meeting its milestones as indicated
in Exhibit B ("Development Schedule"), [****]
7.7 ADVISEMENT PERIOD. [****] For purposes of this Agreement, the
Advisement Period shall be a period which commences on the
Effective Date of this Agreement and ends [****] after the
Product Launch Commitment Date.
8. LOGITECH'S OBLIGATIONS
8.1 DEVELOPMENT. Logitech shall (i) work with Immersion to produce
each set of Exhibit A ("Specifications") which shall include
product features, performance and design criteria, power
requirements, schematics, quality requirements, and the
preliminary component summary; and Exhibit B ("Development
Schedule"), including technical assistance in the development
thereof; (ii) review, test and evaluate the Immersion
Deliverables for conformance with the applicable Specification,
and (iii) deliver the Logitech Deliverables to Immersion for use
in
12
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 13
development in accordance with Exhibit B ("Development
Schedule"). Immersion agrees not to disclose or copy for any
purpose Logitech's Specifications and Deliverables without the
express written consent of Logitech or in fulfillment of
Immersion's obligations under this Agreement.
8.2 PREFERRED CUSTOMER STATUS.
8.2.1 REQUIREMENTS. Logitech shall have [****] during the
first [****] quarter period (the "Initial Period") following the
Product Launch. If the Product Launch falls within the first half
of a Quarter, such Quarter will be counted as the first such
Quarter. If the Product Launch falls in the second half of a
Quarter, the next Quarter will be counted as the first such
Quarter. Thereafter, except as provided in Section 7.5 ("Notice
of Immersion Manufacture"), for so long as (i) Logitech continues
to timely pay royalties to Immersion according to the
Intellectual Property License Agreement Section 3 ("Royalties")
in an amount equal to at least [****] ("Minimum Annual Revenue
Requirement") per [****] Quarter period (a "Revenue Period")
beginning at the expiration of the Initial Period, payable on a
quarterly basis as set forth in Section 8.2.2 ("Minimum Annual
Revenue Requirement"); and (ii) Logitech is not distributing
(directly or through OEMs) any force-feedback [****] which is not
a Royalty Bearing Product, Immersion agrees to grant Logitech
"preferred customer status." Notwithstanding the foregoing,
Logitech may, by written notice given at least [****] days prior
to the first day of any given Revenue Period terminate the [****]
for the upcoming Revenue Period. Upon termination of [****] as
described herein all of the obligations of Immersion and
Logitech, and any provisions in this Agreement, which are
contingent upon [****] shall be null and void and of no further
force or effect upon expiration of the then current four Quarter
period. If Logitech does not send a termination notice as
permitted herein, the [****] will continue for the duration of
the upcoming Revenue Period, except as otherwise provided herein.
If Immersion does not receive a termination notice from Logitech
as provided herein, Immersion will send a notice to Logitech,
confirming that no termination notice has been received, within
[****] days after the subject Revenue Period commences; however a
failure by Immersion to send such notice will not be a material
breach and will in no way change Logitech's "preferred customer
status."
13
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
<PAGE> 14
8.2.2 MINIMUM ANNUAL REVENUE REQUIREMENT. Each Minimum Annual
Revenue Requirement shall consist of [****] payments of [****]
each. Each quarterly payment shall be referred to as a "Quarterly
Payment". Each such Quarterly Payment shall be due on the last
day of each Quarter ("Preferred Status Quarter") and is payable
within [****] days after the end of each Preferred Status
Quarter. Royalties accrued in each Preferred Status Quarter as
provided in the Intellectual Property License Agreement Section 3
("Royalties") shall be credited toward the Quarterly Payments due
for such Preferred Status Quarter. If the actual royalties due
for the Preferred Status Quarter are less than the Quarterly
Payment due, Logitech will submit the actual royalty payment and
Logitech will pay the difference between the Quarterly Payment
due and the actual royalties due for the Preferred Status
Quarter. If the actual royalties due for the Preferred Status
Quarter are greater than the Quarterly Payment due, such excess
amount shall be credited toward future Quarterly Payments within
the same Revenue Period. Actual royalties paid in excess of the
Minimum Annual Revenue Requirement for a given Revenue Period
will not be applied as a credit toward Quarterly Payments due for
Preferred Status Quarters in a later Revenue Period. Should
Logitech not timely pay any required Quarterly Payment and fail
to make such payment within ten (10) days of receiving written
notice from Immersion and unless otherwise agreed to in writing
by the Parties, preferred customer status benefits as described
in Sections 7.1 ("Technical Services and Support"), 7.2
("Enhancement by Immersion") and 7.4 ("New Technology") shall no
longer be in force or effect, effective as of the date on which
such Quarterly Payment was due.
8.2.3 TERMINATION OF PREFERRED CUSTOMER STATUS. [****] Upon
expiration of such notice period, (i) Logitech shall no longer be
obligated to pay the Quarterly Payments starting on the date the
next Quarterly Payment would have come due after the expiration
of the [****] notice, however, Logitech will submit a pro rata
Quarterly Payment for the portion of the Quarter in which the
[****] was in effect prior to the expiration date of the [****]
notice which shall be applied in accordance with Section 8.2.2
("Minimum Annual Revenue Requirement") and (ii) all of the
obligations of Immersion and Logitech, and any provisions in this
Agreement which are contingent upon
14
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 15
[****] shall be null and void and of no further force or
effect upon expiration of the notice period.
8.3 DEVELOPER UNITS. Subject to the timely completion of Immersion's
development obligations under the terms of this Agreement,
Logitech agrees to produce [****] FEELit Mouse units (PVT) at
least [****] prior to the Product Launch. Immersion shall be
responsible for providing such units to software developers in a
timely manner.
8.4 PRODUCT LAUNCH COMMITMENT. Logitech agrees to use reasonable
efforts to launch the FEELit Mouse Product with a "Product
Availability Date" or "PAD" on or before [****] (such date (and
not the actual shipment date) shall be referred to as the
"Product Launch Commitment Date"). Immersion recognizes that the
actual shipment date may be adjusted to a later date due to
unforeseen events, manufacturing issues, and/or sourcing issues
and that Logitech, by way of this provision, is merely confirming
Logitech's commitment of the resources and priority level to make
Product Launch by [****] a strong possibility. The parties have
designated a date in the milestone schedule in Exhibit B
("Milestone Schedule") as the "Design Freeze" date, after which
Immersion shall not be responsible for schedule delays resulting
from subsequent Logitech changes to the design specification of
the FEELit Mouse. Immersion acknowledges that Immersion may be
responsible for several time sensitive and critical steps in a
given milestone schedule which will need to be completed prior to
the Design Freeze date. The parties agree that the Product Launch
Commitment Date of [****] is dependent upon this Design Freeze
date identified in the milestone schedule in Exhibit B
("Milestone Schedule") being met. Therefore, the parties agree
that for each day that the Design Freeze is adjusted to a later
date substantially due to Immersion's failure to complete
milestones which are substantially Immersion's responsibility to
complete and substantially within Immersion's control and upon
which the Design Freeze date is dependent, the Product Launch
Commitment Date will be moved back one day not including
weekends.
8.5 OEM SOLE SOURCE INITIATIVE. The parties intend to negotiate in
good faith to sign an OEM Purchase Agreement under which, for the
first [****] of such agreement, Logitech agrees to purchase all
of its peripheral device components requirements which can be met
by certain FEELit Mouse Controller Chip and Custom Actuator Core
components as defined in the OEM Purchase Agreement.
15
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 16
9. FINANCIAL TERMS
9.1 DEVELOPMENT FEES. Development of the FEELit Mouse Product will be
funded in accordance with the terms of Section 6.1 ("Funding")
and any subsequent development will be funded as provided under
the terms of Section 6.7 ("Other Development").
9.2 NEW TECHNOLOGY ROYALTIES. New Technology will be provided under
royalties which are subject to the terms of Section 7.4 ("New
Technology") and which are mutually agreed upon in writing by
Immersion and Logitech.
10. OWNERSHIP OF TECHNOLOGY
10.1 IMMERSION TECHNOLOGY. Immersion shall retain ownership of all
Immersion Technology (and Immersion Product Model Technology).
10.2 LOGITECH TECHNOLOGY. Logitech shall retain ownership of all
Logitech Technology (and Logitech Product Model Technology).
10.3 JOINT TECHNOLOGY. All Joint Technology shall be jointly
owned by Immersion and Logitech. Exploitation of and subsequent
development of Joint Technology, including commercial development
and/or licensing, will be by each Party without financial
accounting to, or the consent of, the other Party. Each Party
agrees to assist the other Party in any reasonable manner to
obtain and enforce intellectual property rights with respect to
the Joint Technology for the requesting Party's benefit in any
and all countries, and each Party agrees to execute, when
requested, applications and assignments to the requesting Party
and any other lawful documents deemed necessary by the requesting
Party to carry out the ownership provisions of this Agreement. If
called upon to render assistance under this Section 10.3 ("Joint
Technology"), a Party will be entitled to a fair and reasonable
fee, in addition to reimbursement of expenses incurred, at the
prior written request of the other Party.
10.4 JOINT TECHNOLOGY COPYRIGHTS. Each Party agrees to execute, upon
written request of the other Party, a signed transfer of an
undivided one-half interest in any Joint Technology copyright to
the other Party (so that the Parties are joint owners of the
copyright).
10.5 JOINT TECHNOLOGY INVENTIONS. Immersion and Logitech will
determine whether any Joint Technology inventions were conceived
or first actually or constructively reduced to practice within
the scope of development of the FEELit Mouse Product, or any
[****] and/or any Enhancements during the term of the Agreement,
and the Parties will discuss the circumstances of the invention.
The Parties will discuss whether a patent
16
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
<PAGE> 17
application should be filed for a particular Joint Technology
invention or, in the alternative, the Joint Technology invention
should be kept as a trade secret by the Parties. If the Parties
mutually agree to file a patent for a particular Joint Technology
invention, the Parties will discuss the patent filing details,
including but not limited to which Party shall file and prosecute
the U.S. and any foreign patent applications. The cost of such
filing and prosecution shall be evenly distributed between the
Parties. If the Parties cannot mutually agree to file for a
patent for a particular Joint Technology invention, such Joint
Invention shall be treated as a trade secret by both Parties
provided, however, such treatment shall not prevent either party
from shipping a product based upon such trade secret. In any case
where the Parties mutually agree to file for a patent, the
application shall include all inventors and the Parties shall
jointly own the patent. Should both Parties agree not to file for
a patent such Joint Invention shall be treated as a trade secret
by both Parties, provided, however, such treatment shall not
prevent either party from shipping a product based upon such
trade secret. Assignment of patent(s) issuing from application(s)
for Joint Technology inventions shall be made jointly to
Immersion and Logitech.
10.6 SURVIVAL OF JOINT TECHNOLOGY OBLIGATIONS. The obligations set
forth in this Section 10 ("Ownership of Technology") shall
survive the expiration or termination of this Agreement.
11. LOGITECH DEVELOPMENT LICENSE TO IMMERSION
Logitech grants Immersion a non-exclusive license to use the Logitech
Technology under Logitech's intellectual property rights, provided to
Immersion hereunder for purposes of performing Immersion's development
obligations under any development schedule attached to this Agreement,
to have and distribute internally Logitech Technology and to modify or
copy the materials exclusively for the purpose of performing the
development activities required under this Agreement. Immersion's
intellectual property license to Logitech with respect to all
Deliverables delivered hereunder and all development performed under the
terms of this Agreement, with the exception of Joint Technology is
described and subject to the terms and conditions of the Intellectual
Property License Agreement.
12. TERMINATION
12.1 TERMINATION BY LOGITECH WITHOUT CAUSE. Logitech may terminate
this Agreement and/or any development project without cause upon
[****] written notice.
12.2 TERMINATION FOR CAUSE. Immersion may terminate this Agreement
and/or any development project by written notice if Logitech
materially breaches Section 16
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
17
<PAGE> 18
("Confidentiality") or if Logitech fails to make development
payments as provided in this Agreement and any Exhibit B
("Development Schedule"). Immersion's termination shall become
effective upon [****] written notice of breach, provided Logitech
fails to cure its breach within the notice period. Logitech may
terminate this Agreement upon [****] written notice if Immersion
materially breaches this Agreement and fails to cure its breach
during the notice period.
12.3 EFFECT OF TERMINATION. If either Party terminates this Agreement
and/or a development project hereunder, both Parties will stop
all work in progress and minimize all related costs (e.g. pending
materials orders). If a Party independently elects to proceed
with its work in progress it shall be solely responsible for
related costs. If Logitech requests that Immersion complete work
in progress, Logitech shall be responsible for related costs
according to the applicable Exhibit B ("Development Schedule").
If Immersion terminates the Agreement as provided in Section 12.2
("Termination for Cause"), or Logitech terminates the Agreement
or an Exhibit B ("Development Schedule") without cause Logitech
shall pay Immersion for Deliverables due and delivered up to the
effective date of termination and Logitech shall also pay for
development fees then owing under this Agreement based upon a pro
rata portion of the number of calendar days elapsed since
completion of the last Deliverable for which payment was due and
the number of the days between such Deliverable and the next
sequent Deliverable for work done for such deliverable. If
Logitech terminates this Agreement or an Exhibit B ("Development
Schedule") for cause, no further payments shall be due under this
Agreement except for Deliverables accepted up to the date of
termination. In no event, however, will either Party's liability
under this Agreement for any development project of a [****]
exceed the amounts set forth in the applicable Exhibit B
("Development Schedule"). NEITHER PARTY SHALL BE LIABLE TO THE
OTHER FOR DAMAGES OF ANY SORT AS A RESULT OF TERMINATING THIS
AGREEMENT IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT.
12.4 THIRD PARTY ACQUISITION OF IMMERSION.
12.4.1 SPECIAL HANDLING PROVISIONS. In the case of a merger or
acquisition where Immersion is not the surviving entity or in the
case of a sale of assets by Immersion in accordance with the
terms of Section 18.2 ("Succession and Assignment"), Immersion is
not required to obtain Logitech's prior approval to assign this
Agreement, however, Immersion will provide Logitech with written
notice as soon as possible, consistent with and subject to
Immersion's obligations of confidentiality with respect to such
merger, acquisition or sale of assets transaction. Immersion
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
18
<PAGE> 19
recognizes that Logitech may have concerns with respect to
the assignee of this Agreement ("Assignee") if such
Assignee is viewed by Logitech to be a competitor,
however, notwithstanding competitive concerns, Logitech
may not desire to terminate this Agreement. Immersion
therefore agrees to permit Logitech to be able to require
that the following "special handling" provisions described
in this Section 12.4 ("Third Party Acquisition of
Immersion") be implemented if so requested by Logitech, in
writing.
12.4.2 CONFIDENTIAL INFORMATION SPECIAL HANDLING. If
Logitech desires to prevent the Assignee from accessing
Logitech's confidential information after assignment of
this Agreement because such Assignee is viewed by Logitech
as a competitor, Logitech may so notify Immersion in
writing and Immersion will implement special procedures to
keep the Logitech confidential information separate from
the Assignee's information and will limit disclosure of
the Logitech confidential information to those employees
who had previously had access prior to the assignment of
the Agreement. In such case, the Logitech confidential
information will be stored and used in a separate area in
order to limit access to only those former Immersion
employees who are authorized to work with such Logitech
confidential information. If invoked, such special
procedures will be observed for at least [****] from the
date of notice by Logitech so as to give Logitech time to
assess the situation, however, Logitech must cancel the
special procedures or terminate this Agreement in
accordance with Section 12.1 ("Termination by Logitech
Without Cause"), effective one year from the date of the
written notice which invoked the special procedures unless
the Assignee, in its sole discretion, agrees in writing to
continue the special procedures, for the mutual benefit of
the Parties. Upon Logitech's request Immersion shall
return any and all copies of Logitech's confidential
information or, at Logitech's option, Immersion shall
destroy such copies and notify Logitech in writing when
such copies have been destroyed, however if Logitech
requests such return or destruction, immersion shall be
released from all obligations under this Agreement which
Immersion is unable to perform without access to such
confidential information, if any.
12.4.3 TERMINATION OF OBLIGATIONS. After receipt by Logitech
of notice from Immersion as described in Section 12.4.1
("Special Handling Provisions"), Immersion may but shall
no longer be obligated to refer OEMs to Logitech in
accordance with Section 7.3 ("OEM Referral") and (iii)
provide New Technology under Section 7.4 ("New
Technology"). For [****] after receipt of such notice,
Immersion shall continue to
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
19
<PAGE> 20
provide to End User in accordance with Section 7.2
("[****]") on a reasonable (versus priority) commercial
basis.
13. [****] ESCROW. Logitech may request Immersion to deposit [****]
materials and if so, then Immersion shall promptly provide to a mutually
agreeable escrow agent, under the terms of a mutually agreeable escrow
agreement, all [****] [****], drawings, specifications, and other
information necessary for Logitech to continue development or support of
each Final Prototype or Deliverable described in the applicable Exhibit
B ("Development Schedule") ("[****] Materials"), which is being
developed under Exhibit B ("Development Schedule"). Immersion shall
promptly deposit any future updates or revisions with the escrow agent.
Under the terms of the escrow agreement, the escrow agent shall be
instructed to deliver such [****] Materials to Logitech upon a
certification from Logitech that Immersion has become bankrupt and is
unable to perform any of its material software development obligations
relating to software, including firmware, pursuant to Exhibit B
("Development Schedule") prior to completion of the Final Prototype of
any [****] and acceptance by Logitech pursuant to the terms of this
Agreement and/or fails to perform any of its material software
development obligations relating to software, including firmware,
pursuant to Exhibit B ("Development Schedule") prior to completion of
the Final Prototype of any [****] and acceptance by Logitech pursuant to
the terms of this Agreement or Logitech terminates the Agreement for
cause based on Immersion's failure to perform any of its material
software development obligations relating to software, including
firmware, pursuant to Exhibit B ("Development Schedule") prior to
completion of the Final Prototype of any [****] and acceptance by
Logitech pursuant to the terms of this Agreement. If Logitech elects to
disclose [****] materials (other than firmware [****] designated by
Immersion as "Authorized For Modification" pursuant to Section 2.2.1 of
the Intellectual Property License Agreement) to any Affiliate and prior
to any disclosure, Logitech shall enter into a written agreement with
such Affiliate and such written agreement shall contain terms similar to
subsections (i)-(v) below. Logitech will not disclose [****] material
(other than firmware [****] designated by Immersion as "Authorized For
Modification" pursuant to Section 2.2.1 of the Intellectual Property
License Agreement) to any third parties without Immersion's prior
written consent. Such disclosures, if any, shall be upon terms similar
to subsections (i)-(v) below. The escrow agreement will include the
following minimum terms and conditions, which shall not be applicable to
the firmware [****] that is designated by Immersion as "Authorized For
Modification" pursuant to Section 2.2.1 of the Intellectual Property
License Agreement, use of which is governed by the Intellectual Property
License Agreement:
(i) Immersion will grant Logitech the right to use the [****]
Materials solely for the purpose of maintaining object code
versions of the [****]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
20
<PAGE> 21
portion of the Immersion Product Model Technology in the [****]
or to continue development or support of the [****].
(ii) Logitech will acknowledge and agree that use of the [****] Materials
is furnished to Logitech on a confidential and secret basis for the sole
and exclusive use of Logitech, and not for copying, distribution, sale,
sublicense or disclosure to third parties except as provided under the
Intellectual Property License Agreement signed by the Parties. In the
event that Logitech obtains the [****] Materials pursuant to the terms
of the escrow agreement, Logitech will agree that it will not publish,
disclose or otherwise divulge the Immersion [****] to any person, except
officers, employees and independent contractors of Logitech who have
entered into non-disclosure agreements and need access to the Immersion
[****] Materials to perform their duties. Logitech may make [****]
machine-readable copy of the Immersion [****] Materials solely for
backup and archival purposes. Logitech agrees to reproduce and include
all copyright and other proprietary notices appearing in or on any and
all Immersion [****] Materials provided to Logitech by the escrow agent
on any copy made by Logitech.
(iii) Logitech will agree to take all necessary steps to prevent unauthorized
disclosure of the Immersion [****] Materials, including but not limited
to the following:
(a) The building in which Logitech uses the Immersion
[****] Materials shall have restricted access [****] a day;
(b) The Immersion [****] Materials shall be used only in a
location within such building to which access is further
restricted to persons authorized to use the Immersion [****];
(c) Logitech shall prevent telephone or other remote
access to the Immersion [****] Materials from other locations;
and
(d) The Immersion [****] Materials shall be installed only
on a single computer system which is password protected, and all
Immersion [****] Materials files will be password protected.
(iv) Logitech shall be liable to Immersion or its successor company for all
direct and indirect, consequential, special and incidental damages
resulting from any unauthorized disclosure by Logitech of the Immersion
[****]. To the extent, if any this Section 13 ("[****] Escrow") is
inconsistent or conflicts with any provision of this Agreement, this
Section 13 ("[****] Escrow") shall be controlling.
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
21
<PAGE> 22
(v) The obligations of this Section 13 ("[****] Escrow") shall
survive any termination or expiration of the escrow agreement.
14. LOGITECH WARRANTY.
Logitech represents and warrants that it will not knowingly provide to
Immersion any data, specifications, designs or similar information that
infringe upon or violate any intellectual property rights of a third
party.
15. TRADEMARK INFRINGEMENT INDEMNIFICATION BY IMMERSION
Subject to prompt notification by Logitech, cooperation by Logitech and
control of all litigation and/or settlement by Immersion, Immersion
shall indemnify, defend and hold Logitech harmless from and against any
and all claims, damages, liabilities, judgments, settlements, costs and
expenses (including reasonable attorneys' fees) suffered or incurred by
Logitech arising out of a claim of infringement of any Immersion
trademark, service mark, or trade name resulting from the labeling
requirement of Intellectual Property License Agreement Section 2.5
("Label Requirements"). In the case of an infringement or alleged
infringement of any such Immersion trademark, service mark, or trade
name, Immersion will have the right to require Logitech to stop using
such trademark, service mark, or trade name and will provide a new
trademark to be used in connection with the Immersion Product Model
Technology.
16. CONFIDENTIALITY.
16.1 OBLIGATIONS. During the course of this Agreement, each Party may
be a disclosing Party (hereinafter called Discloser) for
transmitting certain proprietary information to the other Party
(hereinafter called Recipient). Recipient agrees to treat as
confidential all such proprietary information, including all
information, written or oral, relating thereto, including, but
not limited to, know how, concepts, techniques, drawings,
specifications, processes, computer programs, designs and
systems, manufacturing and marketing information, received from
Discloser, and Recipient agrees not to publish such information
or disclose same to others except to those employees,
subcontractors and sublicensees to whom disclosure is necessary
to order to carry out the purpose for which such information is
supplied. Recipient shall inform such employees, subcontractors
and sublicensees of the confidential nature of such information
and of their obligation to keep same confidential. Recipient
further agrees not to use such proprietary information for
Recipient's own benefit or for the benefit of others, other than
in accordance with this Agreement, without Discloser's prior
written consent, and that all tangible materials, including
written material, photographs, discs or other documentation
embodying such proprietary information shall remain the sole
property of Discloser and shall be delivered to Discloser upon
Discloser's request. Upon
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
22
<PAGE> 23
Discloser's request a Receiving party shall return any and all
copies of Discloser's confidential information or, at Discloser's
option, the Receiving party shall destroy such copies and notify
Discloser in writing when such copies have been destroyed.
16.2 EXCEPTIONS. The foregoing obligations of confidentiality do not
apply to information which was previously known to Recipient, is
rightfully received from a third party by Recipient, or becomes
publicly known or available without breach of this Agreement by
Recipient.
17. LIMITATION OF LIABILITY.
17.1 EXCEPT AS PROVIDED IN SECTION 13 ("[****] ESCROW"), IN NO EVENT
WILL LOGITECH OR IMMERSION BE LIABLE FOR LOST PROFITS, OR ANY
SPECIAL, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, HOWEVER
CAUSED AND ON ANY THEORY OF LIABILITY, ARISING IN ANY WAY IN
CONNECTION WITH THIS AGREEMENT. THIS LIMITATION WILL APPLY EVEN
IF LOGITECH AND IMMERSION HAVE BEEN ADVISED OF THE POSSIBILITY OF
SUCH DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE
OF ANY LIMITED REMEDY.
17.2 EXCEPT WITH RESPECT TO THE PARTIES' OBLIGATIONS SET FORTH IN
SECTION 13 ("[****] ESCROW") AND WITH RESPECT TO ANY QUARTERLY
PAYMENTS DUE AND PAYABLE BY LOGITECH HEREUNDER, IN NO CASE WILL
EITHER PARTY'S TOTAL CUMULATIVE LIABILITY OR OBLIGATIONS UNDER
THE TERMS OF OR ARISING OUT OF THIS AGREEMENT EXCEED [****]
18. GENERAL PROVISIONS
18.1 ENTIRE AGREEMENT. This Agreement and its exhibits, together
with the Intellectual Property License Agreement, constitutes the
complete agreement of the parties and supersedes any other
agreements, written or oral (including all correspondence,
emails, such as but not limited to the letter regarding [****]
concerning the subject matter hereof and such materials do not
have any effect upon the rights and obligations of the Parties
under this Agreement. This Agreement and the Intellectual
Property License Agreement in no way supersede or affect the
Intellectual Property License Agreement between Immersion and
Logitech dated [****] and/or the
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
23
<PAGE> 24
Technology Product Development Agreement between Immersion and
Logitech dated [****].
18.2 SUCCESSION AND ASSIGNMENT. Either party may assign this Agreement
provided that the other party has consented in writing to the
assignment or delegation and provided, further, that the rights
and obligations of the parties may be assigned to a corporate
successor in interest in the case of a merger or acquisition or
in the case of a sale of assets without the prior approval of the
other party. Any attempt to assign this Agreement in violation of
the provisions of this Section 18.2 ("Succession and Assignment")
shall be void.
18.3 NOTICES. Notices required under this Agreement shall be addressed
as follows, except as otherwise revised by written notice:
TO IMMERSION: TO LOGITECH:
Louis B. Rosenberg, Ph.D. General Counsel
President Logitech, Inc.
Immersion Corporation 6505 Kaiser Drive
2158 Paragon Drive Fremont, CA 94555-3615
San Jose, CA 95131
18.4 GOVERNING LAW. The validity, interpretation and performance of
this Agreement shall be governed by the substantive laws of the
State of California, without the application of any principle
that leads to the application of the laws of any other
jurisdiction.
18.5 NO AGENCY. Neither party is to be construed as the agent or to be
acting as the agent of the other party hereunder in any respect.
18.6 NO RECRUITMENT. During the term of this Agreement and for one (1)
year after the termination or expiration of this Agreement, each
Party agrees not to recruit any employee of the other Party.
18.7 MULTIPLE COUNTERPARTS. This Agreement may be executed in several
counterparts, all of which taken together shall constitute one
single Agreement between the parties.
18.8 NO WAIVER. No delay or omission by either Party hereto to
exercise any right or power occurring upon any noncompliance or
default by the other party with respect to any of the terms of
this Agreement shall impair any such right or power or be
construed to be a waiver thereof. A waiver by either of the
parties hereto of any of the covenants, conditions, or agreements
to be performed by the other shall not be construed to be a
waiver of any succeeding breach thereof or of any covenant,
condition, or agreement herein contained. Unless stated
otherwise, all
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
24
<PAGE> 25
remedies provided for in this Agreement shall be cumulative and
in addition to and not in lieu of any other remedies available
to either party at law, in equity, or otherwise.
18.9 SEVERABILITY. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable,
the validity, legality or enforceability of the remaining
provisions of this Agreement shall not in any way be affected or
impaired thereby.
18.10 AMENDMENTS IN WRITING. Any amendment to this Agreement shall be
in writing and signed by both parties hereto.
18.11 INTERPRETATION. Since this Agreement was prepared by both parties
hereto, it shall not be construed against any one party as the
drafting party.
18.12 DISPUTE RESOLUTION. Except in the case of a breach of an
obligation related to a Party's intellectual property rights, in
the event either Party concludes that it is in its best interest
to file any legal action against the other, the Party shall
contact the other Party's management and at least two (2) senior
managers from each Party shall meet without legal counsel or
interruption for a minimum amount of three (3) eight (8) hour
periods and diligently attempt to resolve all disputed matters.
If the Parties are unable to resolve their difference and either
Party desires to file a legal action against the other, at least
two (2) senior managers from each Party and their respective
counsels shall meet for three (3) eight (8) hour periods and
diligently attempt to resolve all disputed matters. Either Party
may request that an independent third party, bound to mutually
agreed upon legations of confidentially, attend such meeting in
order to assist the Parties in reaching a reasonable resolution.
All oral and written information exchanged in these meetings
shall be exchanged in an effort to settle all disputed matters.
If either Party still desires to file a legal action against the
other after these prescribed meetings such Party may file a legal
action against the other Party as allowed by applicable law in
Santa Clara County state court or in the Federal Circuit. The
Parties agree that if a Party does not attend all of the
prescribed meetings it waives its rights to any monetary damages
in the legal action(s) it files.
18.13 SURVIVAL. Sections 6.1 ("Funding"), 6.1.1 ("FEELit Mouse Product
Funding"), 10 ("Ownership of Technology"), 12.3 ("Effect of
Termination"), 12.4 ("Third Party Acquisition of Immersion"), 13
("[****] Escrow"), 14 ("Logitech Warranty"), 15 ("Trademark
Infringement Indemnification by Immersion"), 16
("Confidentiality"), 17 ("Limitation of Liability") and 18
("General Provisions") will continue after the expiration or
termination of this Agreement.
*Certain information on this page has been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.
25
<PAGE> 26
18.14 FORCE MAJEURE. With the exception of the obligation to pay
monies due and owing, each Party hereto shall be excused from
performance hereunder for any period and to the extent that it is
prevented from performing any services pursuant hereto, in whole
or in part, as a result of delays caused by the other Party or an
act of God, war, civil disturbance, court order, governmental
action, laws, orders, regulations, directions or requests, or as
a result of events such as acts of public enemies, earthquakes,
fires, floods, strikes or other labor disturbances of the other
Party or any third party, or other cause beyond its reasonable
control and which it could not have prevented by reasonable
precautions, and such nonperformance shall not be a default
hereunder or a ground for termination hereof.
IN WITNESS WHEREOF, the authorized representatives of the parties hereto
have signed this Agreement as of the date and year last set forth below.
LOGITECH: IMMERSION:
LOGITECH, INC. IMMERSION CORPORATION
By: /s/ W.H. Hausen By: /s/ Louis Rosenberg
------------------------------ -------------------------
Name: W.H. Hausen Name: Louis Rosenberg
------------------------------ -------------------------
Title: SVP/GM Title: President
------------------------------ -------------------------
Date: 4/13/98 Date: April 13, 1998
------------------------------ -------------------------
26
<PAGE> 27
EXHIBIT A
[****]
*Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to
the omitted portions.
27
<PAGE> 28
EXHIBIT B
MILESTONE SCHEDULE
[INTENTIONALLY LEFT BLANK]
28
<PAGE> 29
EXHIBIT C
Change Order Form
Date:
Change Control Form No.:
Description of Change:
Reason for Change:
Man Hours:
Impact on Schedule:
Affect on Cost:
Accepted by Logitech: Accepted by Immersion:
LOGITECH, INC. IMMERSION CORPORATION
By: By:
---------------------------- ------------------------
Name: Name:
---------------------------- ------------------------
Title: Title:
---------------------------- ------------------------
Date: Date:
---------------------------- ------------------------
29
<PAGE> 30
EXHIBIT D
Software License Agreement
SOFTWARE LICENSE AGREEMENT. LOGITECH IS WILLING TO LICENSE THE ENCLOSED SOFTWARE
TO YOU ONLY ON THE CONDITION THAT YOU ACCEPT ALL OF THE TERMS CONTAINED IN THIS
LICENSE AGREEMENT. This is a legal agreement between (either an individual
end-user or an entity) and Logitech. By opening the software package, you are
agreeing to be bound by the terms and conditions of the Agreement. If you do not
agree to the terms of this Agreement, promptly return the software package and
other items that are part of this product in their original package with your
payment receipt to your point of purchase for a full refund.
GRANT OF LICENSE. Logitech and its suppliers grant you a nonexclusive license to
use one copy of the enclosed software program ("Software") on one computer only
with the Logitech product you have purchased. No other rights are granted. The
Software is in use if it is loaded on the computer's permanent or temporary
memory. For backup purposes only, you may make one copy of the Software. You
must include on the backup copy all copyright and other notices included on the
Software as supplied by Logitech. Installation on a network server for the sole
purpose of your internal distribution of the Software is permitted only if you
have purchased an individual Software package for each networked computer to
which the Software is distributed.
RESTRICTIONS. Logitech and its suppliers retain ownership of the Software. You
shall not decompile, disassemble, reverse-engineer, or modify the Software in
any way. You may not transmit the Software over a network (except as expressly
permitted by above), by telephone, or electronically using any means. You may
not transfer the software except upon a permanent transfer of the enclosed
Logitech product provided that all software updates are included in the
transfer, you do not retain a copy of the Software, and the transferee agrees to
be bound by the terms and conditions in the license. Upon any violation of the
provisions of this Agreement, rights to use the Software shall automatically
terminate and the Software must be returned to Logitech or all copies of the
Software destroyed.
30
<PAGE> 31
EXHIBIT E
Immersion Packaging Labeling Specification
Logitech must place or have placed the following notice or other similar mark,
at Immersion's request, on the underside (exterior) of those products which
incorporate Licensed Technology as well as on the packaging and manuals for such
products:
"FEELit(TM) Force Feedback Technology Licensed from Immersion Corporation".
Logitech must also place or have placed the following FEELit Mouse logo (or
future derivative of the mark as reasonably approved by Logitech) at Immersion's
request, prominently on retail packaging and manuals such that the logo is
clearly legible and occupies a rectangular area of no less than 0.70 inches by
0.825 inches. The mark must be displayed on at least two surfaces of the retail
packaging, including the front surface and specifically not including the bottom
surface.
[FEELIT LOGO]
---------------------
.70"
---------------------
.825"
31
