SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
-------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-11236
XEROGRAPHIC LASER IMAGES CORPORATION
------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 51-0319174
-------- ----------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
101 Billerica Avenue, 5 Billerica Park, North Billerica, MA 01862
- ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(508) 670-5999
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirement for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date.
Class Outstanding at October 23, 1997
------- ---------------------------------
Common Stock, $.01 par value
per share 2,039,310 *
Series A Convertible Preferred
Stock, $.01 par value
per share 315,238
* Common stock including equivalents, options and warrants exercisable
at current market price or lower equal 3,600,969 shares.
Transitional Small Business Disclosure Format:
Yes No X
----- -----
XEROGRAPHIC LASER IMAGES CORPORATION
INDEX
PAGES
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of September 30, 1997
(unaudited) and December 31, 1996 4
Statements of Operations for the nine and three
month periods ended September 30, 1997 and
1996 (unaudited) 5
Statements of Cash Flows for the nine month
periods ended September 30, 1997 and 1996
(unaudited) 6
Notes to Financial Statements
(unaudited) 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-10
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities
Item 3 Defaults Upon Senior Securities
Item 4 Submission of Matters to a Vote of Security
Holders
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K 11
Signatures 12
<TABLE>
Xerographic Laser Images Corporation
Balance Sheets
<CAPTION>
September 30 December 31
1997 1996
------------ -----------
(unaudited)
<S>
ASSETS <C> <C>
--------
Current assets:
Cash $15,328 $219,723
Accounts receivable, less allowance
for doubtful accounts of $2,000 in
1997 and $5,000 in 1996 19,237 20,314
Other current assets 9,040 -
----------- -----------
Total current assets 43,605 240,037
----------- -----------
Property and equipment, net 21,157 35,191
Other assets 2,798 4,432
----------- -----------
Total assets 67,560 279,660
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $300,703 $352,346
Deferred revenue - 101,000
Accrued expenses 238,841 179,943
Accrued severance costs 3,750 68,704
Current portion of capital leases 11,731 11,731
----------- -----------
Total current liabilities 555,025 713,724
----------- -----------
Capital lease obligations 6,488 16,908
Subordinated notes payable 283,688 283,688
----------- -----------
Total liabilities 845,201 1,014,320
----------- -----------
Stockholder's equity (deficit)
Series A Preferred stock, $.01 par
value; authorized 1,000,000 shares;
315,238 issued and outstanding at
September 30, 1997 and December 31,
1996. 3,152 3,152
Common stock, $.01 par value;
30,000,000 shares authorized:
2,039,310 issued and outstanding at
September 30, 1997 and 1,778,646
issued and outstanding at
December 31, 1996 20,393 17,786
Additional paid-in capital 8,463,323 8,434,353
Accumulated deficit (9,264,509) (9,189,951)
----------- -----------
Total stockholders' equity (deficit) (777,641) (734,660)
----------- -----------
Total liabilities and stockholders'
equity (deficit) $67,560 $279,660
=========== ===========
The accompanying notes are an integral part of the financial statements
</TABLE>
<TABLE>
Xerographic Laser Images Corporation
Statements of Operations
<CAPTION>
Three Months Ended Nine Months Ended
---------------------------- ----------------------------
September 30 September 30 September 30 September 30
1997 1996 1997 1996
------------ ------------ ------------ ------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Product revenues $25,843 $57,654 $94,545 $166,495
Contract and license revenues 266,823 225,000 957,541 250,000
---------- ---------- ---------- ----------
Total revenues 292,666 282,654 1,052,086 416,495
Cost and expenses:
Cost of product revenues 4,232 33,319 26,983 105,395
Cost of contract and license rev 20,200 - 222,155 -
Research and development 125,567 90,701 393,614 248,467
Sales and marketing 11,468 13,518 32,834 33,381
General and administrative 149,257 122,693 445,700 391,212
---------- ---------- ---------- ----------
Total cost and expenses 310,725 260,231 1,121,286 778,455
Loss from operations (18,059) 22,423 (69,200) (361,960)
Other income - 326 5,789 1,826
Net interest expense (7,722) (17,132) (11,147) (29,821)
---------- ---------- ---------- ----------
Net (loss) ($25,781) $5,617 ($74,558) ($389,955)
========== ========== ========== ==========
Net loss per common share ($0.01) $0.00 ($0.04) ($0.26)
Weighted average common and common
equivalent shares outstanding 2,039,310 1,778,647 1,908,978 1,493,925
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Xerographic Laser Images Corporation
Statements of Cash Flows
<CAPTION>
Nine Months Ended Nine Months Ended
September 30 September 30
1997 1996
----------------- -----------------
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ($74,558) ($389,955)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 14,034 23,259
Issuance of common stock as compensation 31,577 15,325
(Increase) decrease:
Accounts receivable 1,077 123,250
Inventory - 9,154
Other assets (7,406) 4,177
Increase (decrease):
Accounts payable (51,643) 89,202
Deferred revenues (101,000) -
Accrued expenses 58,897 12,822
Accrued severance costs (64,954) (54,113)
--------- ---------
Net cash used in operating activities (193,975) (166,879)
--------- ---------
Cash flows from financing activities:
Cash overdraft - (1,432)
Proceeds from issuance of subordinated
notes - 195,000
Payments of notes payable - (5,500)
Payments under capital lease obligations (10,420) (9,228)
--------- ---------
Net cash provided (used in investing activities) (10,420) 178,840
--------- ---------
Net increase (decrease) in cash (204,395) 11,961
Cash at beginning of period 219,723 -
--------- ---------
Cash at end of period $15,328 $11,961
========= =========
Supplemental disclosure of cash flow information:
Cash paid for interest $11,147 $22,003
The accompanying notes are an integral part of the financial statements.
</TABLE>
XEROGRAPHIC LASER IMAGES CORPORATION
Notes to Financial Statements
September 30, 1997
1. Nature of Business and Basis of Presentation
--------------------------------------------
The Company continues to focus on the implementation and commercialization of
the XLI SuperChip Enhancement Technology ("SuperChip Technology") in ASIC
(Application Specific Integrated Circuit) and VHDL (Virtual Hardware
Description Language) product forms. These products are targeted for the
large printer and printer controller OEM's that provide products to mass
markets. SuperChip Technology products is expected to provide the Company
with a line of Increased revenue levels for the next several years.
Prototype SuperChip ASICs (now being marketed as the XLI-2050 Chip) were
received late in the third quarter and are undergoing qualification testing
by the Company's engineers. During the fourth quarter of this year the sales
activity of the XLI-2050 will be the major focus for the Company including
the release of an XLI-2050 Test & Evaluation board for OEMs to directly
evaluate the XLI ASIC driving their own print engines. The Company has hired
a Vice President of Sales and Marketing to lead the marketing and sales of
the SuperChip Enhancement Technology on a worldwide basis. XLI plans to
provide engineering samples of the XLI-2050 to several potential OEM customers
during the fourth quarter and to have production XLI-2050 chips available in
the first quarter of 1998.
During the third quarter, the Company also completed a design (funded through
a licensee non-recurring engineering development project) for a scaling/
enhancement ASIC for flat-panel displays. Prototype ASIC chips are expected
in the fourth quarter of this year. Although this is an extension of the
Company's Technology outside the printer market, there are no current plans
to market such a product and, if done so, there is no assurance that this
product would have market acceptance.
In October 1997, the Company entered into a license agreement with Pixel
Magic, Inc. (a provider of ASIC's and controller designs to OEMs) for the
SuperChip Enhancement Technology in both the VHDL and ASIC forms. Including
the agreement with Pixel Magic, the Company has entered into six license
agreements for its SuperChip Technology to date.
The information furnished has been prepared from the Company's accounts
without audit. In the opinion of management, all adjustments and accruals
(consisting only of normal recurring adjustments), which are necessary for a
fair presentation of operating results, are reflected in the accompanying
financial statements. Certain information and footnote disclosures normally
included in the Company's annual financial statements have been condensed or
omitted. These interim financial statements should be read in conjunction
with the audited financial statements for the year ended December 31, 1996,
which are contained in the Company's 1996 Form 10-KSB filed with the
Securities and Exchange Commission.
2. Net Loss per Common Share
-------------------------
Net loss per share is computed based upon the weighted average number of
common shares outstanding. Common equivalent shares are not included in the
per share calculations as the effect of their inclusion would be nondilutive.
3. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
- ---------------------
Results of Operations
The Company's strategy is to design and develop products for the OEM market
derived from the Company's proprietary high resolution technology in
collaboration with strategic partners.
Revenues for the third quarter of 1997, which ended September 30, 1997 were
$292,666, an increase of $10,012 from 1996's third quarter revenues of
$282,654. Revenues for the nine-month period ended September 30, 1997 were
$1,052,086 an increase of $635,591 from the $416,495 of revenue recorded for
the nine months ended September 30, 1996. The Company recognized $266,823 in
contract and license revenues in connection with agreements with three major
licensees in the third quarter of 1997 and $225,000 in the third quarter
of 1996.
The Company recorded a net loss of $25,781 for the third quarter of 1997, as
compared to a net profit of $5,617 for the same period in 1996. The decrease
in profitability is attributable to an increase in cost associated with
generating contract and license revenues and an increase in research and
development expense of $34,866 and an increase in general and administrative
expense of $26,564 offset by the increase in contract and license revenue of
$41,823 in the third quarter of 1997.
The Company's gross margin on product sales was 84% for the third quarter of
fiscal year 1997 compared to 42% for the same period in 1996. The gross
margin for the nine months ended September 30, 1997 was 71% compared to 37%
for the same period in 1996. This was mainly due to the board inventory
being written off in December 1996.
Research and development costs for the three month period ended September 30,
1997 were $125,567 or approximately 43% of revenues as compared to $90,701 or
approximately 32% of revenues for the third quarter of 1996. Research and
development costs for the nine months ended September 30, 1997 were $396,614,
as compared to $248,467 for the same period in 1996. The increase in
research and development costs from September 30, 1996 to September 30, 1997
of $145,147 was due to the hiring of additional engineering personnel and
purchase of engineering development supplies. The Company's engineering
emphasis will continue to be on the development of ASICs incorporating the
Company's proprietary high resolution technology for the OEM market.
Selling and marketing expenses for the three month period ended September 30,
1997 were $11,468 or approximately 4% of revenues as compared to $13,518 or
approximately 5% of revenues for the three month period ended September 30,
1996. Selling and marketing expenses for the nine months ended September 30,
1997 were $32,834, as compared to $33,381 for the same period in 1996.
General and administrative expenses for the three-month period ended
September 30, 1997 were $149,257 or approximately 51% of revenues as compared
to $122,693 or approximately 43% of revenues for the three-month period ended
September 30, 1996. The increase of $26,564 is attributable to an increase
in payroll expense and the increased use of independent consultants. General
and administrative expenses for the nine months ended September 30, 1997 were
$445,700 as compared to $391,212 for the same period in 1996. This increase
of $54,488 was primarily due to an increase in payroll expense and the
increased use of independent consultants.
Liquidity and Capital Resources
At September 30, 1997 the Company had current assets of $43,605, current
liabilities of $555,025 and cash of $15,328.
The Company has the option of prepaying subordinated notes at 50% interest
($141,844) prior to November 30, 1998.
The Company continues to fund its operations from available cash and from
cash flow provided from contract development agreements and technology
licenses. On October 15, 1997, the Company received a cash payment of
$375,000 as a license fee and prepaid royalties in connection with a
nonexclusive license agreement entered into by the Company.
The Company has no current plans to undertake a debt or equity financing in
1997. Funds for operations and development efforts will come from the
Company's available cash and from current or anticipated licensing and
royalty fees. If the Company is unable to fund its operations from cash
flow, the Company's development efforts and operations will be materially
adversely effected.
The Company has no current commitments for any material capital expenditures.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any material
legal proceedings.
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during
the period covered by this report.
Item 5. Other Information
Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibit is filed herewith.
Exhibit Number Title
-------------- -----
10.45 Technology License and Supply
Agreement dated October 15, 1997,
between the Company and Pixel
Magic, Inc.
(b) There were no reports on Form 8-K filed by the Company
during the quarter ended September 30, 1997.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Xerographic Laser Images Corporation
------------------------------------
(Company)
Date: October 29, 1997 By: /s/ James L. Salerno
-------------------- --------------------------------------
James L. Salerno, Chief Financial Officer
(Principal Financial and Accounting Officer)
TECHNOLOGY LICENSE AND SUPPLY AGREEMENT
This Technology License and Supply Agreement (the "Agreement") is
made and entered into October 15, 1997 (the "Effective Date") by and between
Xerographic Laser Images Corporation, a Delaware corporation, with its
principal place of business at 101 Billerica Avenue, 5 Billerica Park, North
Billerica, Massachusetts 01862 ("XLI") and Pixel Magic, Inc., a
Massachusetts corporation, with its principal place of business at 300
Brickstone Square, Andover, Massachusetts 01810 ("Pixel").
RECITALS
WHEREAS, Pixel is engaged in the development, design, manufacture and
distribution of semiconductors and related software, including semiconductors
based on compression/decompression and image processing technologies;
WHEREAS, XLI is engaged in the development, design, manufacture and
distribution of hardware and software products for the printer and printer
controller market;
WHEREAS, Pixel desires to license certain imaging processing technology
from XLI for incorporation into Pixel's products, and XLI is willing to grant
such licenses on the terms and conditions set forth in this Agreement;
WHEREAS, Pixel desires to purchase a certain chip from XLI for
incorporation into Pixel's reference designs and XLI is willing to sell such
chip to Pixel on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein and other valuable consideration the adequacy of which is hereby
acknowledged, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 "Affiliate" shall mean any entity which controls, is controlled
by or is under common control with Pixel. An entity shall be regarded as in
control of another entity for purposes of this Section 1.1 if it owns or
controls more than fifty percent (50%) of the shares of the subject entity
entitled to vote in the election of directors (or, in the case of an entity
that is not a corporation, for the election of the corresponding managing
authority).
1.2 "Combination Product" shall mean a Superchip integrated or
bundled with other Pixel ASICs or Pixel integrated circuitry as a Pixel product
offering or Pixel reference design.
1.3 "Confidential Information" shall have the meaning as set forth
in Section 12.1 below.
1.4 "Distributor" shall have the meaning as set forth in Section
3.2 below.
1.5 "Digital Modulator" shall mean the Digital Modulator Feature
embodied in the XLI Technology as described in more detail in Exhibit A hereto.
1.6 "Digital Modulator Feature IC" shall mean an Integrated IC which
incorporates the Digital Modulator Feature.
1.7 "End User" shall mean a person or entity who acquires an
Integrated IC or Combination Product, directly or indirectly from Pixel, solely
for personal or internal use and not for resale.
1.8 "Feature" shall mean a technology feature (e.g. digital
modulation or edge enhancement) embodied in the XLI Technology as described
in more detail in Exhibit A hereto.
1.9 "Improvements" shall mean any upgrade, enhancement, extension,
revision, improvement, addition or other modification to the existing XLI
Technology related to or for the purpose of supporting color printing developed
by XLI during the eighteen month period from the Effective Date of this
Agreement.
1.10 "Integrated IC" shall mean a Pixel ASIC which incorporates any
portion of the XLI Technology, provided that, the Pixel ASIC includes
substantial functional value.
1.11 "Intellectual Property Rights" shall mean all XLI Technology
worldwide patents and other patent rights, utility models, copyrights, mask
work rights, trade secrets, and all other intellectual property rights, in
whatever form throughout the world, including without limitation all
applications and registrations with respect thereto.
1.12 "Multiple Feature IC" shall mean an Integrated IC which
incorporates two or more Features.
1.13 "OEM" shall mean an original equipment manufacturer who acquires
an Integrated IC, Superchip or Combination Product, directly or indirectly from
Pixel, for incorporation into its product offering for resale.
1.14 "Pixel ASIC" shall mean an application-specific integrated
circuit designed and/or offered for sale by Pixel for use in digital printers,
scanners, copiers and multifunction devices.
1.15 "Production Cost" with respect to a Superchip unit shall mean
XLI's direct and indirect costs associated with the manufacture, packaging and
storage of such Superchip unit, including the costs of quality assurance and
quality control all as determined in accordance with generally acceptable
accounting practices (GAAP).
1.16 "Specifications" shall mean the Chip Specifications and the
Technology Specifications.
1.16.1 "Chip Specifications" shall mean the technical,
functional and other specifications for the Superchips as set forth in Exhibit
B, as may be modified from time to time by mutual agreement of the parties
hereto.
1.16.2 "Technology Specifications" shall mean the technical,
functional and other specifications for the XLI Technology as set forth in
Exhibit C, as may be modified from time to time by mutual agreement of the
parties hereto.
1.17 "Superchip" shall mean any XLI proprietary chip or chipset that
meets the Chip Specifications set forth in Exhibit B and any future version
thereof incorporating, and limited to, Improvements developed by XLI at any
time prior to eighteen months from the Effective Date of this Agreement.
1.18 "Update" shall mean a version of the XLI Technology designated
as such (or with a similar term) by XLI which incorporates one or more bug
fixes/corrections or performance enhancements, but does not include additional
capability or functionality.
1.19 "VHDL" shall mean Virtual Hardware Description Language.
1.20 "XLI Technology" shall mean (i) any and all proprietary
printing technology owned or controlled by XLI as of the Effective Date of
this Agreement, including without limitation the technology described in
Exhibits B and C hereto (ii) any and all Improvements and Updates, and
(iii) any and all Intellectual Property rights in (i) and (ii).
ARTICLE 2
LICENSE FEE
2.1 Licensee Fee. In consideration of XXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXX and the rights and licenses granted to Pixel
hereunder, Pixel agrees to pay to XLI a license fee of XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX and a prepaid royalty fee of XXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Such fees shall be due and payable as
follows:
2.1.1 Execution. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX of the Effective Date.
2.1.2 Enhanced Print Quality Milestone. XXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXX within ten (10) days of XLI demonstrating Contone mode
printing utilizing the XLI Technology of quality equal to or better than DPTech
technology as shown on the Xerox c55 printer. XLI shall notify Pixel in writing
of the occurrence of the foregoing milestone and provide Pixel any Improvements
necessary for Pixel to implement the same in its Integrated ICs. Pixel's
obligation to pay the amount required under this Section 2.1.2 is subject to
Pixel's verification that the milestone event has occurred. Notwithstanding
the verification requirement set forth in this Section 2.1.2, Pixel shall have
the right to promote and market the XLI Technology for color applications,
provided that Pixel shall not have the right to sell the XLI Technology for
color applications XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
2.2 Non-Refundable; Creditable. Except as provided in Section
13.4.1 below, the amounts paid or payable under this Article 2 are non-
refundable XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX and any future prepaid
royalties are fully-creditable against royalties due to XLI pursuant to
Section 5.1 below.
2.3 Additional Pre-paid Royalty Fee. Upon full amortization of
the initial prepaid royalty fee of XXXXXXXX, and provided further that Pixel
decides in its sole discretion to continue to exercise the license rights
granted to it in Article 3 below, then Pixel will pay to XLI an additional
prepaid royalty fee of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX which
will be fully creditable against future royalties.
ARTICLE 3
LICENSE
3.1 License. XLI hereby grants to Pixel a non-exclusive, worldwide
right and license under the XLI Technology to (i) use, copy, modify,
reconfigure, reproduce, translate and create derivative works of the XLI
Technology for the purpose of embedding, integrating and incorporating the
XLI Technology into Integrated ICs; (ii) make, use, and sell Integrated ICs;
(iii) practice any method, process or procedure; and (iv) have any of the
foregoing performed solely on its behalf by third parties provided that such
third parties are subject to confidentiality obligations which protect against
the unauthorized use and disclosure of XLI's Confidential Information, in each
case for the purposes of selling or otherwise distributing Integrated IC's to
End Users or OEMs either on a stand-alone or on an integrated product basis.
Any improvements and Updates transferred to Pixel are included in the foregoing
license grants.
3.2 Distributors. Pixel may exercise its distribution rights
granted under this Article 3 through the use of distributors, resellers,
value-added resellers, dealers or sales representatives (each a "Distributor")
and Affiliates; provided that Pixel uses commercially reasonable efforts to
ensure that each Distributor and Affiliate complies with the applicable terms
and conditions of this Agreement.
3.3 Limitations. Except as otherwise expressly provided herein,
Pixel shall not sublicense or otherwise transfer, convey or assign any of its
rights or licenses under the XLI Technology granted hereunder; provided, however
Pixel shall have the right to sublicense its Affiliates within the scope of
the rights granted to Pixel under Section 3.1 above. Notwithstanding anything
herein to the contrary, Pixel shall not use the XLI Technology to develop
Integrated ICs containing solely or substantially only XLI Technology for sale
on a stand-alone basis. Pixel shall not, nor allow any third party to
disassemble, decompile or reverse engineer the XLI Technology or any
Improvements or Updates thereto.
3.4 No Implied Licenses. Nothing in this Agreement shall be
construed as granting Pixel, by implications, estoppel or otherwise, any
license or other right to any patents, know-how or other intellectual property
to XLI except for the rights and licenses expressly granted to Pixel herein,
and XLI retains all rights not so granted.
ARTICLE 4
TECHNOLOGY TRANSFER
Promptly upon receipt of the amount set forth in Section 2.1.1 above,
XLI shall transfer the XLI Technology to Pixel in VHDL or such other format as
Pixel may reasonably request. Thereafter, as available, for the term of this
Agreement, XLI shall transfer Improvements to Pixel in VHDL or such other
format as Pixel may reasonably request. The foregoing provisions of this
Article 4 shall not limit XLI's obligations under Article 8 below.
ARTICLE 5
ROYALTIES; RECORDKEEPING
5.1 Per-Unit Royalty. Subject to the terms and conditions of this
Article 5 and in consideration for the rights and licenses granted to Pixel
under Article 3 above, Pixel shall pay to XLI the following royalties upon
Pixel, its Affiliates or Distributors' sale of an Integrated IC to an End
User or an OEM:
5.1.1 Digital Modulator Feature IC. XXXXXXXXXXXXXXXXXX for
each Digital Modulator Feature IC sold by Pixel, its Affiliates or Distributors
to an End User or an OEM; and
5.1.2 Multiple Feature IC. XXXXXXXXXXXXXXXXXXX for each
Multiple Feature IC sold by Pixel, its Affiliates or Distributors to an End
User or an OEM.
For avoidance of doubt, no royalty shall be due hereunder with respect to
transfer of an Integrated IC by or on behalf of Pixel to its Affiliates or
Distributors for resale (unless such transfer is a revenue recognition event
for Pixel), provided however the royalty shall be due upon sale of such an
Integrated IC to an End User or OEM.
5.2 Single Royalty. For avoidance of doubt, it is understood and
agreed that once the royalty has been paid hereunder with respect to a
particular Integrated IC unit, no further royalty or other payment is due to
XLI for the End User or OEM's use of such Integrated IC unit.
5.3 XXXXXXXXXXXXXXXXXXXXX.
5.3.1 Royalty. If XLI enters into an arrangement with a
third party pursuant to which XLI grants to such third party the same or
substantially the same rights to the XLI Technology on the same or substantially
the same terms and conditions as those granted to Pixel herein, at royalty
rates lower than the corresponding rates provided for in Section 5.1 above,
then XLI will promptly notify Pixel of such arrangement and give Pixel the
opportunity to substitute such lower royalty rates from the date when such
lower rate is available to such third party.
5.3.2 Enforcement. If Pixel provides XLI with written
evidence demonstrating to XLI prima facie infringement or misappropriation of
any or all of XLI's Intellectual Property Rights within the XLI Technology by
a third party that is commercializing a product in competition with Integrated
ICs sold by Pixel, its Affiliates or Distributors or which infringement results
in a material adverse effect on the business of Pixel, its Affiliates or
Distributors, Pixel may by notice request XLI to take steps to enforce such
Intellectual Property Rights. If XLI fails within six (6) months of the
receipt of such notice to either (i) cause such infringement to terminate
(by entering into a licensing arrangement with such alleged infringer or
otherwise) or (ii) initiate and thereafter maintain legal proceedings against
the infringer, the royalties due by Pixel pursuant to Section 5.1 above shall
be reduced by fifty percent (50%) with respect to sales of Integrated ICs in
the geographic area(s) in which products sold by the alleged infringer
continue to compete with Integrated ICs sold b Pixel, its Affiliates or
Distributors, until such time that said infringement has been terminated.
5.4 Returns. In the event Pixel, its Affiliates or Distributors
distribute an Integrated IC unit for which a royalty is or has been paid and
thereafter accepts return of same Integrated IC unit, Pixel may credit the
royalty paid therefor against royalties due XLI pursuant to Section 5.1 above.
5.5 Promotional Copies. Pixel may distribute a reasonable number
of Integrated ICs as promotional, demonstration or evaluation units, without
incurring a royalty therefor to XLI under the provisions of Section 5.1 above.
5.6 Royalty Reports and Payments. After the first sale of an
Integrated IC for which royalties are payable under this Article 5, Pixel
shall make quarterly written reports to XLI within forty-five (45) days after
the end of each calendar quarter, stating in each such report the number of
Single Feature ICs and Multiple Feature ICs sold during the calendar quarter.
Simultaneously with the delivery of each such report, Pixel shall pay to XLI
the total royalties, if any, due to XLI for the period of such report. If no
royalties are due, Pixel shall so report.
5.7 Records; Inspection. Pixel shall keep complete, true and
accurate books of account and records for the purpose of determining the
royalty amounts payable under this Article 5. Such books and records shall
be kept reasonably accessible for at least three (3) years following the end
of the calendar quarter to which they pertain. Such records will be open for
inspection during such three (3)-year period by a representative or agent of
XLI for the purpose of verifying the royalty statements. XLI's representative
or agent will be obliged to execute a reasonable confidentiality agreement
prior to commencing any such inspection. Such inspections may be made no more
than once each calendar year, at reasonable times mutually agreed by Pixel and
XLI. XLI shall bear the costs and expenses of inspections conducted under this
Section 5.7, unless a variation or error producing an underpayment in royalties
payable exceeding ten percent (10%) of the amount paid for the period covered
by the inspection and any unpaid amounts that are discovered shall be paid by
Pixel to XLI within thirty (30) days after receipt of an invoice for the same.
The parties will endeavor to minimize disruption of Pixel's normal business
activities to the extent reasonably practicable.
ARTICLE 6
SUPPLY OF SUPERCHIPS
6.1 Product Supply. Subject to the terms and conditions of this
Agreement, during the term of this Agreement, XLI agrees to sell and deliver
to Pixel all of Pixel's and its OEM's requirements for units of the Superchip
solely for purposes of sale by Pixel, its Affiliates, Distributors and its OEMs
as incorporated into Combination Products. During the term of this Agreement,
XLI agrees not to discontinue production or sale to Pixel of any version of
this Superchip unless the orders from Pixel and its OEMs are less than ten
thousand (10,000) units of such version of the Superchip per six (6)-month
period for six consecutive months. In the event that XLI determines to
discontinue supply of any version of the Superchip due all or in part to Pixel's
and its OEMs' failure to meet the minimum order requirements set forth in this
Section 6.1, XLI agrees to provide written notice to Pixel of such
discontinuation and shall cooperate to allow Pixel to place final orders during
a time frame agreed upon by Pixel and XLI.
6.2 Terms and Conditions. All Superchip purchases hereunder shall
be subject to the terms and conditions of this Agreement. ANY ADDITIONAL OR
INCONSISTENT TERMS OR CONDITIONS OF ANY PURCHASE ORDER OR ACKNOWLEDGMENT GIVEN
OR RECEIVED PURSUANT TO THIS AGREEMENT SHALL HAVE NO EFFECT AND SUCH TERMS AND
CONDITIONS ARE HEREBY EXCLUDED.
6.3 Forecasts. During the term of this Agreement, Pixel shall
submit to XLI, by the fifth (5th) day of each month, a rolling written
forecast of the quantities of Superchips estimated to be required by Pixel on
a month-by-month basis for six (6) consecutive months. Pixel shall exercise
every reasonable effort to achieve an accurate forecast, but the forecast is an
estimate only provided to XLI for capacity planning purposes.
6.4 Orders.
6.4.1 Orders by Pixel. Pixel's orders shall be made pursuant
to a written purchase order ("Purchase Order") in a form mutually acceptable to
the parties and which at a minimum, provides for Pixel's desired quantities of
Superchip units and ship dates. XLI shall deliver units of the Superchip to
Pixel on or prior to the delivery dates specified in the Purchase Order. In
the event that XLI is unable to deliver any units within (30) days of the
specified delivery date, without limitation to any other rights and remedies
that Pixel may have at law or under this Agreement, Pixel shall have the right
to cancel the order without charge and with no penalty upon written notice to
XLI. The lead time for the delivery of units of the Superchip shall not exceed
sixteen (16) weeks from the date of acknowledgment of the Purchase Order. XLI
shall use its best efforts to acknowledge each Purchase Order in writing within
one week of receipt. All orders shall be F.O.B. N. Billerica, MA.
6.4.2 Orders by OEMs. Notwithstanding anything herein to the
contrary, its is understood that Pixel may order Superchip units hereunder on
behalf of and for delivery to OEMs and such Superchips shall be made available
on the same terms and at the same Price as those for Pixel.
6.4.3 Cancellation and Rescheduling. The parties agree to
negotiate in good faith a mutually acceptable policy for cancellation and
rescheduling by Pixel of its Purchase Orders for Superchips.
6.5 Price. The price to be paid by Pixel per Superchip unit ordered
by Pixel during the term of this Agreement shall be XLI's Production Cost
therefor plus a XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX (the "Price"). Any royalty
fees paid pursuant to this Section 6.5 shall be fully creditable against the
prepaid royalty fees set forth in Sections 2.1 and 2.3.
6.6 Delivery. With respect to exact delivery dates, XLI shall use
its best efforts to ship ordered quantities of Superchips in accordance with
Purchase Orders submitted.
6.6.1 Allocation. In the event that XLI is unable to supply
both worldwide requirements of Superchips and quantities ordered by Pixel in
accordance with Section 6.4 above due to force majeure or otherwise, XLI shall
allocate the quantities of Superchips that XLI has in inventory, and that XLI
is able to produce, so that Pixel receives at least its proportional share of
available supplies as determined based on reasonable forecasts (taking into
consideration past usage and usage performance against forecast) of Pixel, XLI
and XLI's other distributors.
6.6.2 Right to Manufacture. If for three (3) consecutive
months XLI fails to supply Pixel's ordered quantities of Superchips pursuant to
acknowledged Purchase Orders, and provided that such failure is not due to any
action or inaction of Pixel, then Pixel may manufacture (or have manufactured)
pursuant to this Section 6.6.2 below the quantity of such Superchips for sale
by Pixel, its Affiliates, Distributors or OEMs as incorporated into
Combination Products. Such right shall continue in effect for the term of
this Agreement.
6.6.2.1 License to Manufacture. Subject to all other
terms and conditions of this Agreement, including Section 15.3, XLI hereby
grants to Pixel, and Pixel hereby accepts a license (the "Manufacturing
License") under any and all of XLI's Intellectual Property rights, without
right of sublicense (except to the extent necessary to exercise have made
rights) necessary to make, have made, use Superchips for sale by Pixel, its
Distributors, Affiliates or OEMs as incorporated into Combination Products.
Without limiting the foregoing, it is understood that the Manufacturing
License shall terminate on any termination of this Agreement.
6.6.2.2 Exercise of Manufacturing License. Pixel
agrees not to exercise any of its rights under the Manufacturing License
except to the extent expressly permitted in this Section 6.6.2. In such
event, XLI shall provide to Pixel copies of all documentation and other
materials within XLI's control that is reasonably necessary for Pixel to
manufacture (or have manufactured) Superchips, including design data bases
and process specifications, and shall fully cooperate with Pixel to establish
alternative supply, including sources of materials. Pixel may exercise its
right to have Superchips manufactured in accordance with this Section 6.6.2
through two third party contract manufacturers subject to XLI's approval, not
to be unreasonably withheld; and provided that such third party manufacturers
are subject to confidentiality obligations which protect against the
unauthorized use and disclosure of XLI's Confidential Information.
6.6.2.3 Royalty. In the event that Pixel exercises
the Manufacturing License in accordance with this Section 6.6.2, Pixel agrees
to pay to XLI a XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for each Combination Product
sold by Pixel, its Affiliates, Distributors or OEMs. Further in such event
the terms and conditions of Sections 5.2 through 5.7 shall apply mututis
mutandis to such payments.
6.7 Invoicing. XLI shall submit an invoice to Pixel upon shipment
of Superchips ordered by Pixel. All invoices shall be sent to Pixel's address
for notices hereunder, and each such invoice shall state Pixel's aggregate and
unit Price for Superchips in a given shipment, plus any insurance, taxes or
other costs incident to the purchase or shipment initially paid by XLI but to
be borne by Pixel hereunder.
6.8 Shipping, Title, Risk of Loss. XLI will ship in accordance
with Pixel's shipping instructions. In the absence of specific instructions,
XLI reserves the right to ship by the most appropriate method. Pixel is
responsible for all freight, handling, insurance and other transportation
charges and agrees to pay all such charges. For all shipments, title to the
Superchip passes to Pixel when presented by XLI or its agent to the carrier,
from which point Pixel is responsible for risk of all loss, damage to, or
theft of all Superchips.
6.9 Returns. Units of Superchip received by Pixel as a result of
an error by XLI in shipment may be returned for credit. Units of the Superchip
with defects covered by the warranty may be returned for remedy under the
warranty set forth in Section 9.1.
6.10 Records; Inspection. XLI shall keep complete, true and
accurate books of account and records for the purpose of determining the
Production Cost for Superchips delivered to Pixel and its designees hereunder.
Such books and records shall be kept reasonably accessible for at least three
(3) years following the end of the calendar quarter to which they pertain.
Such records will be open for inspection during such three (3)-year period by
a representative or agent of Pixel for the purpose of verifying the royalty
statements. Pixel's representative or agent will be obliged to execute a
reasonable confidentiality agreement prior to commencing any such inspection.
Such inspections may be made no more than once each calendar year, at
reasonable times mutually agreed by XLI and Pixel. Pixel shall bear the
costs and expenses of inspections conducted under this Section 6.9, unless a
variation or error producing an overpayment in amounts payable exceeding ten
percent (10%) of the amount paid for the period covered by the inspection and
any overpaid amounts that are discovered shall be paid by XLI, together with
interest on such unpaid amounts at the rate specified in Section 7.2 below,
to Pixel within thirty (30) days after receipt of an invoice for the same.
The parties will endeavor to minimize disruption of XLI's normal business
activities to the extent reasonably practicable.
ARTICLE 7
PAYMENTS
7.1 Payment Method. All amounts payable under this Agreement
shall be made by bank wire transfer in immediately available funds to an
account designated by XLI. All payments hereunder shall be made in U.S.
dollars. Payment for amounts invoiced pursuant to Section 6.7 above shall be
made net thirty (30) days after receipt of the invoice or Superchips invoiced
therein, whichever is later.
7.2 Taxes. The Price is to be exclusive of any tax, value-added
tax, fee, duty or governmental charge, however designated, which may be levied
or based on units of the Superchip, their sale, importation, use or possession.
All such taxes or duties shall be for the account of XLI and stated separately
on the invoice. Any withholdings or other taxes that must be withheld on
behalf of XLI with respect to amounts due to XLI pursuant to this Agreement
shall be deducted by Pixel from such amounts prior to remittance, unless XLI
provides Pixel with a valid tax exemption certificate authorized by the
appropriate taxing authority. Pixel shall furnish to XLI written evidence of
any such taxes withheld.
ARTICLE 8
SUPPORT
8.1 Support for Integrated ICs and Combined Products. The parties
acknowledge and agree that Pixel shall be responsible for providing all support
to its Distributors, End Users, OEMs and others with respect to the use and
implementation of the Integrated ICs and Combination Products.
8.2 Technical/Consulting Assistance. During the term of this
Agreement, upon reasonable notice and subject to reasonable availability, XLI
shall provide to Pixel, free of charge, up to One Hundred Twenty (120) hours of
on-site technical/consulting assistance relating to the use of or implementation
of the XLI Technology or Superchips, including the integration of the XLI
Technology into Integrated ICs and the Superchip into Combination products.
XLI shall provide additional technical/consulting assistance, as Pixel may
reasonably request and subject to XLI's reasonable availability, in excess of
the One Hundred Twenty (120) hours at the rate of $100.00 per hour. Without
limiting the foregoing, Pixel shall be responsible for all reasonable out-of-
pocket expenses incurred by XLI in providing technical/consulting assistance,
including reasonable equipment and materials costs and travel and lodging
expenses.
8.3 Other Support. XLI shall, during the term of this Agreement,
provide to Pixel all necessary bug-fix maintenance and support for the XLI
Technology and Superchip provided hereunder. Maintenance and support shall
include, but not be limited to, phone, fax and e-mail support, all material
error and bug corrections, technical information and documentation necessary
for Pixel to integrate the XLI Technology into Integrated ICs and the Superchip
into Combination Products. Such maintenance and support shall be free of
charge during the first year of the Agreement and thereafter shall be subject
to XLI's standard terms and rates therefor.
8.4 Updates. XLI will provide Pixel Updates of the XLI Technology
during the term of this Agreement to the same extent that it provides them to
its other licensees.
8.5 No New Technology. Nothing in this Article 8 shall be deemed
to grant to Pixel a license or other rights in any technology or other
intellectual property of XLI except for the XLI Technology.
ARTICLE 9
WARRANTIES
9.1 Product Warranties. XLI warrants to Pixel that at the time of
delivery, and for one (1) year thereafter, the XLI Technology shall conform to
the Technology Specifications and the Superchips supplied by or on behalf of
XLI to Pixel or its designees hereunder will be free from defects in
workmanship and materials and shall conform to the Chip Specifications.
9.1.1 Remedies.
9.1.1.1 Nonconforming Technology. In the event that
the XLI Technology fails to conform to the Technology Specifications, then
Pixel shall notify XLI in writing describing such nonconformity. XLI shall
use its best efforts to remedy such nonconformity within thirty (30) days and
provide Pixel XLI Technology which meets the Technology Specifications. If XLI
is unable to so provide Pixel with XLI Technology which meets the Technology
Specifications within such thirty (30) day period, Pixel may (i) extend such
period and XLI will continue to use its best efforts to remedy such
nonconformity during such extension or (ii) terminate its rights and licenses
hereunder with respect to the XLI Technology as set forth in Section 13.4.1
below.
9.1.1.2 Nonconforming Superchips. In the event that
any Superchip fails to conform to the Chip Specifications or contains defects
in workmanship or materials, then Pixel shall notify Pixel in writing
describing such nonconformity and/or defect and promptly return such
nonconforming/defective Superchip to the location designated by XLI and in
accordance with other reasonable instructions given by XLI. XLI shall either
(i) replace within fifteen (15) days at no charge to Pixel the nonconforming/
defective Superchip with a Superchip which conforms to the Chip Specifications
and is free of defects or (ii) refund to Pixel all amounts paid to XLI for
such nonconforming/defective Superchip and for shipping and insurance incurred
in returning such Superchip.
9.2 Representations and Warranties. XLI represents, warrants and
convenants that (i) the XLI Technology and the Superchip are the original work
and development of XLI and do not infringe on any patent, copyright, proprietary
right or trade secret of any other party; (ii) as of the Effective Date, no
action or proceeding alleging intellectual property infringement by the XLI
Technology or the Superchips has been threatened or is proceeding against XLI,
and XLI shall promptly notify Pixel in the event such action is initiated
against XLI; and (iii) XLI has the full power to enter into this Agreement, to
carry out its obligations hereunder and grant the rights and licenses granted
to Pixel pursuant to this Agreement.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
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XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
9.4 Exclusion of Other Warranties. EXCEPT FOR THE LIMITED
WARRANTIES PROVIDED IN THIS ARTICLE 9 ABOVE, NEITHER PARTY GRANTS TO THE OTHER
ANY WARRANTIES OR CONDITIONS OF ANY KIND, EXPRESS OR IMPLIED, BY STATUTE OR
OTHERWISE, REGARDING THE XLI TECHNOLOGY OR THE SUPERCHIPS, AND XLI SPECIFICALLY
DISCLAIMS ANY IMPLIED WARRANTIES OF FITNESS FOR ANY PURPOSE, MERCHANTABILITY,
AND NONINFRINGEMENT OF THIRD PARTY INTELLECTUAL PROPERTY RIGHTS.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnification of Pixel. XLI shall indemnify each of Pixel,
its Affiliates, Distributors and their directors, officers, employees and
customers and the successors and assigns of any of the foregoing (the "Pixel
Indemnitees"), and hold each Pixel Indemnitee harmless from and against any
and all liabilities, damages, settlements, claims, actions, suits, penalties,
fines, costs or expenses (including, without limitation, reasonable attorneys'
fees and other expenses of litigation) incurred by any Pixel Indemnitee,
arising from or occurring as a result of: (i) claims brought by third parties
alleging infringement or misappropriation of any third party Intellectual
Property Right arising from the exercise of the rights and licenses granted
by XLI hereunder with respect to the XLI Technology or Superchips; or (ii) the
gross negligence or willful misconduct of XLI. Notwithstanding the foregoing,
XLI will not have any obligation under this Section 10.1 to the extent a claim
is based upon (a) use of other than a current unaltered release of the XLI
Technology provided to Pixel at no additional cost hereunder in accordance
with this Agreement if such infringement would have been avoided by use of the
current unaltered release of the XLI Technology, or (b) completed products or
equipment or any assembly, combination, method or process in which the XLI
Technology or Superchip, as the case may be, is used when the infringement
would not result when the same are used alone.
10.2 Indemnification of XLI. Pixel shall indemnify XLI and its
directors, officers, employees and customers and the successors and assigns of
any of the foregoing (the "XLI Indemnitees"), and hold each XLI Indemnitee
harmless from and against any and all liabilities, damages, settlements,
claims, actions, suits, penalties, fines, costs or expenses (including,
without limitation, reasonable attorneys' fees and other expenses of
litigation) incurred by any XLI Indemnitee, arising from or occurring as a
result of the gross negligence or willful misconduct of Pixel.
10.3 Procedure. A party (the "Indemnitee") that intends to claim
indemnification under this Article 10 shall promptly notify the other party
(the "Indemnitor") in writing of any loss, claim, damage, liability or action
in respect of which the Indemnitee intends to claim such indemnification, the
Indemnitor shall have sole control of the defense and/or settlement thereof.
The indemnity agreement in this Article 10 shall not apply to amounts paid in
settlement of any claim or other proceeding if such settlement is effected
without the consent of the Indemnitor, which consent shall not be unreasonably
withheld. The failure to deliver written notice to the Indemnitor within a
reasonable time after the commencement of any such action, if prejudicial to
its ability to defend such action, shall relieve such Indemnitor of any
liability to the Indemnitee under this Article 10 but the omission so to
deliver written notice to the Indemnitor shall not relieve the Indemnitor of
any liability that it may have to any Indemnitee otherwise than under this
Article 10. The Indemnitee under this Article 10 and its employees, shall
cooperate fully with the Indemnitor and its legal representatives and provide
full information in the investigation of any Claim covered by this
indemnification.
ARTICLE 11
OWNERSHIP
Except as expressly licensed herein, as between the parties, XLI
retains all right, title and ownership interest in and to the XLI Technology,
the Superchip and all other modifications, derivative works, improvements,
enhancements and new versions thereof developed by XLI, its employees, agents
or consultants and XLI shall retain any and all rights to file any patent
application thereon and Pixel shall have a nonexclusive, license under any
resulting patents without additional compensation. As between the parties,
Pixel retains all right, title and ownership interest in and to the Pixel
ASIC and to any modifications, improvements, enhancements and derivative works
of the XLI Technology created by Pixel during the term of this Agreement.
ARTICLE 12
CONFIDENTIALITY
12.1 Confidential Information. During the term of this Agreement
and for five (5) years thereafter, except as provided herein, each party shall
maintain in confidence, and shall not use for any purpose or disclose to any
third party, information disclosed by the other party in writing and marked
"Confidential" or that is disclosed orally and confirmed in writing as
confidential within fifteen (15) days following such disclosure (collectively,
"Confidential Information"). Confidential Information shall not include any
information that is: (i) already known to the receiving party at the time of
disclosure hereunder, or (ii) now or hereafter becomes publicly known other
than through acts or omissions of the receiving party, or (iii) is disclosed
to the receiving party by a third party under no obligation of confidentiality
to the disclosing party or (iv) independently developed by the receiving
party.
12.2 Permitted Usage. Notwithstanding the provisions of Section 12.1
above, the receiving party may use or disclose Confidential Information of the
disclosing party to the extent necessary to exercise its rights hereunder
(including commercialization of Integrated ICs and Combination Products) or
fulfill its obligations and/or duties hereunder and in prosecuting or defending
litigation, complying with applicable governmental regulations and/or submitting
information to tax or other governmental authorities; provided that if the
receiving party is required by law to make any public disclosures of
Confidential Information of the disclosing party, to the extent it may legally
do so, it will give reasonable advance notice to the disclosing party of such
disclosure and will use its reasonable efforts to secure confidential treatment
of Confidential Information prior to its disclosure (whether through protective
orders or otherwise). A party receiving Confidential Information shall take
the same measures to prevent unauthorized disclosure and maintain the
confidentiality of such Confidential Information as it takes with respect to
its own confidential information of similar importance, but shall in no event
take less than reasonable measures.
ARTICLE 13
TERM AND TERMINATION
13.1 Term. This Agreement shall commence as of the Effective Date
and shall continue in full force and effect unless and until terminated as
provided in this Article 13 below.
13.2 Termination for Breach. In the event of a material breach of
this Agreement, the nonbreaching party shall be entitled to terminate this
Agreement by written notice to the breaching party, if such breach is not
cured within thirty (30) days after written notice is given by the nonbreaching
party to the breaching party specifying the breach. However, if the party
alleged to be in breach of this Agreement disputes such breach within such
thirty (30) day period by giving written notice thereof to the nonbreaching
party, then the nonbreaching party shall not have the right to terminate this
Agreement unless it has been determined by a court of competent jurisdiction
that this Agreement was materially breached, and the breaching party fails to
comply with its obligations hereunder within thirty (30) days after such
determination.
13.3 Bankruptcy Proceedings. Either party hereto may terminate this
Agreement by notice to the other party, if (i) such other party shall make an
assignment of substantially all of its assets for the benefit of creditors,
file a petition of bankruptcy, petitions or applies to any tribunal for the
appointment of a custodian, receiver or any trustee for such party or
substantially all of such party's assets, or shall commence any proceedings
under any dissolution or liquidation law or statute of any jurisdiction
(provided that no entity succeeds to the business of such party following such
dissolution or liquidation) whether now or hereafter in effect which is not
dismissed within sixty (60) days; or (ii) there shall have been filed any such
petition or application against such other party, or any such proceeding shall
have been commenced against such party, in which an order for relief is entered
or which remains undismissed for a period of ninety (90) days or more; or
(iii) such other party by an act or knowing failure to act shall indicate such
party's consent to, approval of or acquiescence in, any such petition,
application or proceeding or order for relief or the appointment of a custodian,
receiver or any trustee for such party, or any substantial part of any such
party's properties, or shall suffer any such custodianship, receivership or
trusteeship to continue undischarged for a period of ninety (90) days or more.
13.4 Termination by Pixel.
13.4.1 For Nonconforming Technology. In the event that the
XLI Technology fails to conform to the Technology Specifications and XLI is
unable to so provide Pixel with XLI Technology which meets the Technology
Specifications within thirty (30) days after receipt of notice of such
nonconformity or any extension thereof, Pixel may terminate its rights and
licenses under Section 3.1 above with respect to the XLI Technology effective
upon written notice to XLI. Within fifteen (15) days of termination of this
Agreement with respect to the XLI Technology, XLI shall refund to Pixel all
amounts paid pursuant to Section 2.1 above.
13.4.2 For Convenience. Notwithstanding anything herein to
the contrary, Pixel may terminate this Agreement, in its entirety or as to
either the XLI Technology or Superchip supply, at any time by giving XLI at
least sixty (60) days prior written notice. From and after the effective date
of a termination under this Section 13.4.2 with respect to XLI Technology, all
of the parties rights and obligations with respect to the XLI Technology shall
terminate, including without limitation the license granted under Section 3.1
above. From and after the effective date of a termination under this Section
13.4.2 with respect to Superchips, all of the parties rights and obligations
with respect to Superchips shall terminate, including without limitation
Article 6 above. Upon a termination of this Agreement in its entirety under
this Section 13.4.2, all rights and obligations of the parties shall terminate,
except as provided in Section 13.5 below.
13.5 Effect of Termination.
13.5.1 Accrued Obligations. Termination of this Agreement for
any reason shall not release any party thereto from any liability (including
without limitation royalties or other amounts due) which, at the time of such
termination, has already accrued to the other party or which is attributable
to a period prior to such termination, nor preclude either party from pursuing
all rights and remedies it may have hereunder or at law or in equity with
respect to any breach of this Agreement.
13.5.2 Inventory. In the event this Agreement is terminated
for any reason with respect to the XLI Technology or in its entirety, Pixel
shall provide XLI with a written inventory of all Integrated ICs that Pixel,
its Affiliates and Distributors have in process of manufacture, in use or in
stock and Pixel, its Affiliates and Distributors shall have the right to sell
or otherwise dispose of such Integrated ICs, all subject to the payment to XLI
of royalties pursuant to Article 5 hereof.
13.5.3 Return of Materials. All Confidential Information
shall remain the sole property of the disclosing party. Within thirty (30)
days after the effective date of termination of this Agreement, each party
shall destroy all Confidential Information of other party, in its possession
or control and provide written certification of such destruction, or prepare
such Confidential Information for shipment to such other party, as the other
party may direct, at the other party's expense. Neither party shall make or
retain any copies of any Confidential Information of other party which may
have been entrusted to it; provided, however, each party may retain a single
archive copy of any Confidential Information solely for use by such party's
legal advisors in connection with review of its obligations hereunder.
13.5.4 Rights of Others. Notwithstanding anything herein to
the contrary, after termination of this Agreement for any reason, End Users
and OEMs shall have the right to continue to their use or other exploitation
of any and all Integrated ICs, and Superchips acquired, directly or indirectly,
from Pixel in accordance with this Agreement.
13.6 Survival. Articles 1, 10, 12, 13, 14 and 15 and Sections 5.7
and 6.10 shall survive termination of this Agreement for any reason.
ARTICLE 14
LIMITATION OF LIABILITY
EXCEPT WITH RESPECT TO A BREACH OF SECTION 9.3, ARTICLE 12 OR LIABILITY
ARISING OUT OF ARTICLE 10, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE
OTHER OR ANY THIRD PARTY FOR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS, LOST
PROFITS, OR ANY OTHER SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES, HOWEVER
CAUSED AND UNDER ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT WHETHER
BASED IN CONTRACT, TORT (INCLUDING NEGLIGENCE), OR OTHERWISE. THESE LIMITATIONS
SHALL APPLY WHETHER OR NOT A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES AND NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED
REMEDY PROVIDED HEREIN.
ARTICLE 15
MISCELLANEOUS
15.1 Governing Law. This Agreement and any dispute arising from
the performance or breach hereof shall be governed by and construed and
enforced in accordance with, the laws of the Commonwealth of Massachusetts,
without reference to conflicts of laws principles and without regard to the
1980 Convention on the International Sale of Goods.
15.2 Disputes. If XLI and Pixel are unable to resolve any disputes
between them, either XLI or Pixel may, by written notice to the other, have
such dispute referred to the chief executive officers (or equivalent) of XLI
and Pixel, for attempted resolution by good faith negotiations within
twenty-one (21) days after such notice is received. Unless otherwise mutually
agreed, the negotiations between the designated officers shall be conducted by
telephone, within three (3) days and at times within the period stated above
offered by the designated officers of Pixel to the designated officer of XLI
for consideration or vice versa. If the parties are unable to resolve such
dispute in accordance with the aforementioned procedure or within such
twenty-one (21)-day period, the parties shall submit their dispute to an
independent mediator for one nonbinding mediation session. After such
nonbinding mediation session, either party shall have the right to pursue any
and all other remedies available to such party.
15.3 Force Majeure. Nonperformance of any party (except for
payment obligations) shall be excused to the extent that performance is
rendered impossible by strike, fire, earthquake, flood, governmental acts or
orders or restrictions, delay or failure of suppliers, or any other reason
where failure to perform is beyond the reasonable control and not caused by
the gross negligence or willful misconduct of the nonperforming party.
15.4 No Implied Waivers; Rights Cumulative. No failure on the
part of XLI or Pixel to exercise and no delay in exercising any right under
this Agreement, or provided by statute or at law or in equity or otherwise,
shall impair, prejudice or constitute a waiver of any such right, nor shall
any partial exercise of any such right preclude any other or further exercise
thereof or the exercise of any other right.
15.5 Independent Contractors. The relationship of XLI and Pixel
established by this Agreement is that of independent contractors. Nothing
in this Agreement shall be construed to create any other relationship between
XLI and Pixel. Neither party shall have any right, power or authority to
assume, create or incur any expense, liability or obligation, express or
implied, on behalf of the other.
15.6 Notices. All notices, requests and other communications
hereunder shall be in writing and shall be (i) personally delivered or
(ii) send by registered or certified mail, return receipt requested, postage
prepaid or (iii) by fax confirmed by notice send by either (i) or (ii), in
each case to the respective address or fax number specified below, or such
other address or fax number as may be specified in writing to the other
parties hereto:
Pixel: Pixel Magic, Inc.
300 Brickstone Square
Andover, MA 01810
Attn: Peter Besen
Fax: (508) 470-8892
with copy to: Oak Technology, Inc.
139 Kifer Court
Sunnyvale, CA 94068
Attn: General Counsel
Fax: (408) 774-5337
XLI: Xerographic Laser Images Corporation
101 Billerica Avenue
5 Billerica Park
North Billerica, MA 01862
Attn: Anthony D'Amelio
Fax: (978) 670-8835
with copy to: Warner & Stackpole
75 State St.
Boston, MA 02109
_____________________
Attn: Michael Hickey
Fax: (617) 951-9151
15.7 Assignment. Neither party's rights or obligations under this
Agreement may be assigned or otherwise transferred to a third party without the
prior written consent of the other party hereto. Notwithstanding the foregoing,
either party hereto may transfer or assign its rights and obligations under this
Agreement to a successor to all or substantially all of its business or assets
relating to this Agreement whether by sale, merger, operation of law or
otherwise; provided that such assignee or transferee agrees in writing to be
bound by the terms and conditions of this Agreement. Any attempted assignment
or other transfer in violation of this Section 15.7 shall be void. Subject to
the foregoing, this Agreement shall be binding upon and inure to the benefit of
the parties hereto, their successors and assigns.
15.8 Modification. No amendment or modification of any provision
of this Agreement shall be effective unless in writing signed by all parties
hereto. No provision of this Agreement shall be varied, contradicted or
explained by any oral agreement, course of dealing or performance or any other
matter not set forth in an agreement in writing and signed by all parties.
15.9 Severability. If any provision hereof should be held invalid,
illegal or unenforceable in any jurisdiction, all other provisions hereof
shall remain in full force and effect in such jurisdiction and shall be
liberally construed in order to carry out the intentions of the parties
hereto as nearly as may be possible. Such invalidity, illegality or
unenforceability shall not affect the validity, legality or enforceability of
such provision in any other jurisdiction.
15.10 Confidential Terms. Except as expressly provided herein, each
party agrees not to disclose any terms of this Agreement to any third party
without the consent of the other party, except as required by securities or
other applicable laws, and to such party's accountants, attorneys and other
professional advisors.
15.11 Headings. Headings used herein are for convenience only and
shall not in any way affect the construction of or be taken into consideration
in interpreting this Agreement.
15.12 Export Laws. Notwithstanding anything to the contrary
contained herein, all obligations of XLI and Pixel are subject to prior
compliance with United States export regulations and such other United States
laws and regulations as may be applicable, and to obtaining all necessary
approvals required by the applicable agencies of the government of the United
States. XLI and Pixel shall cooperate with each other and shall provide
assistance to the other as reasonably necessary to obtain any required
approvals.
15.13 Entire Agreement. This Agreement, including the Exhibits
attached hereto, constitutes the entire agreement with respect to the subject
mater hereof, and supersedes all prior or contemporaneous understandings or
agreements, whether written or oral, between XLI and Pixel with respect to
such subject matter.
15.14 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, and all of which
together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be dully executed and delivered effective as of the Effective Date.
XEROGRAPHIC LASER IMAGES PIXEL MAGIC, INC.
CORPORATION
("XLI") ("Pixel")
By: /S/Anthony D. D'Amelio By: /S/ Peter Besen
------------------------ -------------------------
Name: A. D. D'Amelio Name: Peter Besen
------------------------ -------------------------
Title: President & CEO Title: President
------------------------ -------------------------
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