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 June 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)
Transitional Small Business Disclosure Format:
Yes No X
----- -----
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 Stock, as of the latest practicable date.
Class Outstanding at July 24, 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 3,383,770 shares.
XEROGRAPHIC LASER IMAGES CORPORATION
INDEX
PAGES
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of June 30, 1997
(unaudited) and December 31, 1996 4
Statements of Operations for the six and three
month periods ended June 30, 1997 and
1996 (unaudited) 5
Statements of Cash Flows for the six month
periods ended June 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>
June 30, December 31,
1997 1996
----------- -----------
(unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash $145,652 $219,723
Accounts receivable, less allowance
for doubtful accounts of $2,000 in
1997 and $5,000 in 1996 24,937 20,314
---------- ----------
Total current assets 170,589 240,037
---------- ----------
Property and equipment, net 25,835 35,191
Other assets 7,274 4,432
---------- ----------
Total assets $203,698 $279,660
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
- ----------------------------------------------
Current liabilities:
Accounts payable $318,416 $352,346
Deferred revenue 34,333 101,000
Accrued expenses 269,947 179,943
Accrued severance costs 28,022 68,704
Current portion of capital leases 11,731 11,731
---------- ----------
Total current liabilities 662,449 713,724
---------- ----------
Capital lease obligations 9,421 16,908
Subordinated notes payable 283,688 283,688
---------- ----------
Total liabilities 955,558 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 June 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 June 30, 1997 and
1,778,646 outstanding at
December 31, 1996. 20,393 17,786
Additional paid-in capital 8,463,323 8,434,353
Accumulated deficit (9,238,728) (9,189,951)
----------- ------------
Total stockholders' equity (deficit) (751,860) (734,660)
----------- ------------
Total liabilities and stockholders' equity $203,698 $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 Six Months Ended
----------------------------------- -----------------------------------
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------- ------------- ------------- -------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C>
Product revenues $ 48,649 $ 49,130 $ 68,703 $ 108,841
Contract and license revenues 449,051 - 690,718 25,000
------------- ------------- ------------- -------------
Total revenues 497,700 49,130 759,421 133,841
------------- ------------- ------------- -------------
Cost and expenses:
Cost of product revenues 11,957 34,315 22,752 72,076
Cost of contract and license revenues 161,023 - 201,955 -
Research and development 155,555 87,283 268,046 157,766
Sales and marketing 14,036 7,073 21,366 19,863
General and administrative 151,175 167,103 296,443 268,519
------------- ------------- ------------- -------------
Total cost and expenses 493,746 295,774 810,562 518,224
------------- ------------- ------------- -------------
Profit or (loss) from operations 3,954 (246,644) (51,141) (384,383)
------------- ------------- ------------- -------------
Other income 1,050 - 5,789 -
Net interest expense (1,700) (5,361) (3,425) (11,189)
------------- ------------- ------------- -------------
Net profit or (loss) $ 3,304 $ (252,005) $ (48,777) $ (395,572)
============= ============= ============= =============
Net loss per common share $ 0.00 $ (0.18) $ (0.03) $ (0.29)
Weighted average common and common
equivalent shares outstanding 1,908,978 1,396,146 1,843,812 1,367,396
The accompanying notes are an integral part of the financial statements.
</TABLE>
<TABLE>
Xerographic Laser Images Corporation
Statements of Cash Flows
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1997 June 30, 1996
(unaudited) (unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (48,777) $ (395,572)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 9,356 14,537
Issuance of common stock for services rendered 31,577 3,450
(Increase) decrease:
Accounts receivable (4,623) 263,835
Inventory - (1,740)
Other assets (2,842) 2,891
Increase (decrease):
Accounts payable (33,930) 67,270
Deferred revenues (66,667) -
Accrued expenses 90,004 (95,738)
Accrued severance costs (40,682) (37,101)
--------------- ---------------
Net cash used by operating activities (66,584) (178,168)
--------------- ---------------
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 (7,487) (5,651)
--------------- ---------------
Net cash provided (used) by financing activities (7,487) 182,417
--------------- ---------------
Net increase (decrease) in cash (74,071) 4,249
Cash at beginning of period 219,723 -
--------------- ---------------
Cash at end of period $ 145,652 $ 4,249
=============== ===============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 3,424 $ 17,281
The accompanying notes are an integral part of the financial statements.
</TABLE>
XEROGRAPHIC LASER IMAGES CORPORATION
Notes to Financial Statements
June 30, 1997
1. Nature of Business and Basis of Presentation
--------------------------------------------
During the first half of 1997, Xerographic Laser Images Corporation, ("XLI"
or the "Company") has focused 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 product are targeted for the
large printer and printer controller OEM's that provide products to mass-
markets. These SuperChip Technology products are expected to provide the
Company with a family of revenue producing product offerings for the next
several years. To date five (5) companies have licensed the SuperChip VHDL
product for the incorporation of the Company's SuperChip Technology into
their own ASIC products. In addition, in the second quarter of 1997, the
Company entered into a co-development and license agreement with a Colorado-
based designer and marketer of integrated circuits. Pursuant to this
agreement, a SuperChip ASIC will be designed and fabricated for sale directly
by XLI. XLI expects to have samples of this SuperChip ASIC available for
evaluation during the third quarter of 1997, with chips available for sale
to printer OEMs. Initial sales activity for this ASIC has been focused
primarily in Japan and the USA where the majority of laser printer and
printer controller manufacturers are located.
The Company hopes to increase revenue through additional corporate
alliances and additional licensing of the SuperChip Technology. The Company
also plans to add additional engineering resources in 1997 in order to meet
the demands from existing and anticipated OEM agreements. The addition of
such resources will result in increased research and development costs and
may negatively affect cash flow. For the six months ending June 30, 1997,
the Company had negative cash flow from operations of $66,584.
Despite the favorable reception the Company has received for its SuperChip
Technology and the potential revenue that may be generated pursuant to
future co-development agreements with OEMs, significant risk remains due to
the Company's short range cash needs. The financial statements do not
include any adjustments relating to the recovery and classification of
recorded asset amounts or the amounts and classifications of liabilities
that might be necessary should the Company be unable to continue as a
going concern.
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 derived from XLI's
current technology in collaboration with strategic partners.
Revenues for the second quarter of 1997, which ended June 30, 1997 were
$497,700, an increase of $448,570 from 1996's second quarter revenues of
$49,130. Revenues for the six-month period ended June 30, 1997 were
$759,421, an increase of $625,577 from the $133,841 of revenue recorded for
the six months ended June 30, 1996. The Company recognized $449,051 in
contract and license revenues in connection with agreements with Samsung
Electronics Co., Ltd. and Xionics Document Technologies, Inc. in the
second quarter of 1997 and none in the second quarter of 1996.
The Company recorded a net profit of $3,304 for the second quarter of 1997,
as compared to a net loss of $252,005 for the same period in 1996. The
increase in profitability is attributable to the increase in contract and
license revenues in the second quarter of 1997.
The Company's gross margin on product sales was 75% for the second quarter
of fiscal year 1997 compared to 30% for the same period in 1996. The gross
margin for the six months ended June 30, 1997 was 67% compared to 34% 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 June 30, 1997
were $155,555 or approximately 31% of revenues as compared to $87,283 or
approximately 178% of revenues for the second quarter of 1996. Research and
development costs for the six months ended June 30, 1997 were $268,046, as
compared to $157,766 for the same period in 1996. The increase in research
and development costs from June 30, 1996 to June 30, 1997 of $110,280 was
due to the hiring of additional engineering personnel and increased use of
independent engineering consultants. 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 June 30, 1997
were $14,036 or approximately 3% of revenues as compared to $7,073 or
approximately 14% of revenues for the three month period ended June 30, 1996.
Selling and marketing expenses for the six months ended June 30, 1997 were
$21,366, as compared to $19,863 for the same period in 1996. The slight
increase of $1,503 is attributable to a change in the commissions structure
in connection with board sales as the Company attempts to sell off its
remaining board inventory. The Company will promote its board products
primarily through telemarketing and its ASIC technology through third party
partnerships.
General and administrative expenses for the three month period ended June 30,
1997 were $151,175 or approximately 30% of revenues as compared to $167,103
or approximately 340% of revenues for the three month period ended June 30,
1996. The decrease is attributable to the refund of foreign income taxes
from the Korean Tax Authority in April 1997. General and administrative
expenses for the six months ended June 30, 1997 were $296,443 as compared to
$268,519 for the same period in 1996. This increase was primarily due to
professional fees (patent legal fees).
Liquidity and Capital Resources
At June 30, 1997 the Company had current assets of $170,589, current
liabilities of $662,449 and cash of $145,652.
The Company continues to fund its operations from its cash account and from
cash flow provided from contract development agreements and technology
licenses. Additionally, in April 1997 the Company received from Samsung
Electronics Co., Ltd. a $62,446 refund for taxes withheld on a development
contract in 1996.
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 exhibits are filed herewith:
Exhibit Number Title
-------------- -----
10.43 Development and License Agreement
dated May 30, 1997, between the
Company and SIS Microelectronics, Inc.
10.44 License and Royalty Agreement dated
June 26, 1997, between the Company
and PCPI Technologies, Inc.
(b) There were no reports on Form 8-K filed by the Company during
the quarter ended June 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: July 28, 1997 By: /s/ James L. Salerno
------------- --------------------------------------------
James L. Salerno, Chief Financial Officer
(Principal Financial and Accounting Officer)
DEVELOPMENT AND LICENSE AGREEMENT
This Agreement is made and entered into this 30th day of May,
1997, by and between XEROGRAPHIC LASER IMAGES CORPORATION, a Delaware
corporation ("XLI"), with its principal place of business at 101
Billerica Avenue, 5 Billerica Park, North Billerica, Massachusetts
01863, and SIS MICROELECTRONICS, INC., a Colorado corporation ("SIS),
with its principal place of business at 1831 Lefthand Circle, Suite E,
Longmont, Colorado 80501.
Recitals:
- --------
A. XLI owns patents and certain other intellectual property
rights relating to precision dot positioning using laser printer devices
to produce high-quality text, line art graphics and photographic images;
and
B. SIS is in the business of designing and marketing
integrated circuits; and
C. SIS wishes to license XLI Superchip Technology, as defined
below, for use with SIS technology embedded in integrated circuit products;
and
D. XLI wishes to have SIS design and fabricate or have
fabricated Superchip ASICs, as defined below, for sale to XLI customers.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties agree as follows:
1. Definitions
-----------
1.1 "XLI Superchip Technology" means the current XLI laser
printing technology specified in Exhibit A1 (Features) attached hereto.
1.2 "SIS Products" means SIS custom integrated circuits which
incorporate XLI Superchip Technology and other non-XLI technology for
scan, print, fax, copy or related printing applications.
1.3 "Superchip ASIC" means a stand-alone integrated circuit
designed by SIS for sale by XLI that incorporates the XLI Superchip
Technology.
1.4 "OEM" means Original Equipment Manufacturer.
1.5 "VHDL" (Virtual Hardware Description Language) means the
design description language that will be used to transfer XLI Superchip
Technology from XLI to SIS.
1.6 "ASIC" means Application Specific Integrated Circuit.
2. SIS Products
------------
2.1 Subject to the terms of this Agreement, XLI grants to SIS a
non-exclusive, non-transferable, worldwide fully paid right to use XLI
intellectual property rights, including patent, copyright and trade secret
rights, and right to use, copy, modify, reconfigure, reproduce, and
translate the XLI Superchip Technology for the purpose of embedding,
integrating and incorporating the XLI Superchip Technology with other SIS
technology (acquired technology or SIS's own proprietary technology) into
SIS Products. SIS shall not design, fabricate and market SIS Products
predominantly based on XLI Superchip Technology (other than pursuant to
this Agreement). The XLI Superchip Technology does not include rights to
any new features, upgrades, improvements, or other developments.
2.2 SIS shall have the right to sell SIS Products to third
party purchasers provided that : (i) SIS provides XLI with written
notification of the name and address, product type and product
identification or model designation for each third party purchaser;
(ii) any such third party purchasers shall be licensees of XLI; and
(iii) XLI provides written approval, which shall not be unreasonably
withheld, for each third party purchaser. XLI shall negotiate in good
faith with SIS customers that wish to license XLI Superchip Technology
on the same or substantially similar terms and conditions as its then
existing standard terms and conditions for XLI licensees. SIS shall
not sub-license or otherwise transfer, convey or assign any of the
rights to use the XLI Superchip Technology granted herein.
2.3 XLI shall bear no responsibility for the design,
development, sale, customer support, or distribution of SIS Products
and shall have no financial obligation for any such products. XLI
will provide reasonable technical support to SIS or SIS's customers
for SIS Products on a time and expense basis. Any direct expenses
incurred for equipment and materials, or travel expenses will be paid
for by SIS and XLI consulting and engineering development time requested
by SIS will be charged at XLI's then standard rates (currently $800 per
day) plus materials and other direct expenses. Notwithstanding any
provision to the contrary, XLI shall provide support to SIS, SIS's
customers and XLI's licensees with respect to any XLI products, subject,
with respect to XLI licensees, to the terms and conditions for support
as provided to XLI licensees pursuant to each licensee's particular
license agreement with XLI.
3. Superchip ASIC
--------------
3.1 SIS shall design, develop and fabricate or arrange for
fabrication, a Superchip ASIC, containing XLI Superchip Technology as
specified in Exhibit A1. XLI will be responsible for all marketing and
sales of Superchip ASICs. SIS shall sell Superchip ASICs only to XLI,
pursuant to the terms of this Agreement.
3.2 Except as provided in Sections 3.3 and 4.3, SIS shall
provide all design services for the Superchip ASIC's in accordance with
the schedule set forth in Exhibit A2. Except as provided in Sections 3.3
and 4.3, SIS shall bear all costs associated with the Superchip ASIC
design. The final specifications for Superchip ASIC will be mutually
agreed to and signed-off by XLI and SIS prior to the release to the
foundry for prototype fabrication.
3.3 XLI shall provide support to SIS for the design of the
Superchip ASIC at XLI's expense.
3.4 SIS will select the foundry for Superchip ASIC prototype
and production. At XLI's request, SIS shall provide notification to XLI
of the foundry and packaging sources. Except as provided in Sections 3.3
and 4.3, SIS shall provide all technical support to the foundry to ensure
proper implementation of the XLI Superchip Technology at SIS's own expense.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX to SIS for the foundry
costs for prototype samples of the Superchip ASICs. If these funds are
not provided to SIS at the time of design release to the foundry as
specified in Exhibit A2, then the remaining schedule in said exhibit shall
be adjusted accordingly. The product identification markings on the
Superchip ASIC will contain the XLI logo and any other marking(s)
reasonably required by XLI, provided that said markings conform to the
general practice of the integrated circuit industry and are provided to SIS
prior to release to the foundry as specified in Exhibit A2.
3.5 Each Superchip ASIC developed pursuant to this Agreement by
SIS shall meet the final specifications signed off as provided in Section
3.2 in all material respects and shall be deemed accepted by XLI if not
rejected within ninety (90) days after deliver of any prototype Superchip
ASIC by SIS to XLI. Any rejection must be in writing and set forth in
detail the reasons for rejection with specific reference to the final
specifications signed off as provided in Section 3.2. Subject to
Section 11.1, SIS will bear the responsibility for all costs, including
any additional foundry costs, associated in correcting any design
deficiencies and providing Superchip ASIC prototypes that meet said
specifications in all material respects. If the prototypes meet the
signed-off specifications in all material respects but do not meet
requirements in actual printer tests due to faults in the VHDL and/or
modulator design information provided by XLI, SIS will use reasonable
efforts to correct such design flaws but is not responsible for the
foundry costs for new prototypes. XLI will construct a personal computer
test board to drive various print engines that will be utilized as for
determining the final approval of Superchip ASIC prototypes. XLI will
also provide, at no cost to SIS, a duplicate test board and software to
SIS for testing and debugging.
3.6 SIS will own and/or have secured necessary third party
licenses for the specific design database for the Superchip ASIC that is
released to the foundry. Notwithstanding, SIS may, on terms acceptable
to SIS (and as required by any third party licenses) license the design
database for the Superchip ASIC or a portion thereof to XLI and/or its
licensees to enable productions of XLI Superchip Technology.
3.7 SIS will be the supplier of Superchip ASIC production
requirements to XLI. All sales, marketing and customer support of
Superchip ASICs will be provided by XLI. XLI will be responsible for
processing all orders from the OEM customer base and will forward the
orders to SIS with the appropriate lead time required by the foundry.
SIS will provide one thousand (1,000) Superchip ASIC samples for sales
support, OEM evaluations, and OEM prototypes. SIS will act as production
coordinator for Superchip ASIC orders and will be responsible for all
communication with the foundry and the fulfillment of OEM production
orders. SIS will arrange for shipment of Superchip ASICs to XLI at
the address provided above.
3.8 SIS shall remain responsible for all production support
issues, including, but not limited to: financing orders, inventory
issues, yield monitoring, test problems and customer returns, and will
be responsible for supporting technical production issues directly
related to Superchip ASICs raised by XLI and/or its customers.
3.9 The price of each Superchip ASIC to XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX. Subject to the
provisions of Section 8.1 and at XLI's reasonable request, SIS will
provide to XLI the actual foundry cost of Superchip ASIC for purposes
of any special XLI customer order as detailed below. Any special XLI
customer order requirements, including, but not limited to, high volume
requirements, limited functionality and key customer accounts, shall be
subject to terms and conditions mutually agreed to and signed off by
SIS and XLI.
4. Design Transfer
---------------
4.1 XLI shall provide the XLI Superchip Technology to SIS in
accordance with the schedule included on attached Exhibit A2. Said XLI
Superchip Technology shall incorporate the functional design modules set
forth in Exhibit A1.
4.2 The XLI Superchip Technology will be provided by XLI using
the VHDL format, schematics, and other information mutually agreed upon as
necessary for SIS to design, and manufacture or have manufactured the SIS
Products and Superchip ASICs.
4.3 XLI shall, for the term of this Agreement, provide to SIS
and to SIS's customers necessary bug-fix maintenance and reasonable support
for the XLI Superchip Technology covered by this Agreement, Maintenance
and support shall include phone, fax and e-mail support, all material error
and bug corrections, technical information and documentation, subject, with
respect to SIS customers, to the terms and conditions for support as
provided to SIS customers pursuant to such customers' particular license
agreement with XLI. This maintenance and support obligation does not
entitle SIS to a right to use any new technology other than the XLI
Superchip Technology defined in this Agreement.
5. Discoveries and Inventions
--------------------------
5.1 SIS shall have no rights to the intellectual property of
XLI or to any improvements, modifications or changes made during the design
process to XLI Technology. All discoveries, developments, improvements,
and inventions made or conceived in the performance of the design and
development of the XLI Superchip Technology, including, but not limited to,
VHDL pursuant to this Agreement, shall be the sole and exclusive property
of XLI and XLI shall retain any and all rights to file any patent
application thereon. Notwithstanding any provision of this Agreement
to the contrary, SIS shall own all rights, including, but not limited to,
patent, copyright, trade secret, confidential information, trademarks,
design and engineering work, technical information and know-how, with
respect to all SIS technology previously developed by SIS and SIS designed
implementations or implementation technology developed pursuant to this
Agreement.
5.2 This Agreement does not grant to XLI by implication,
estoppel, or otherwise, a license to any patents, know how, or any other
intellectual property now or hereafter owned or developed by SIS except
as specifically provided in Section 5.1.
5.3 XLI acknowledges that SIS has been engaged in the research,
design and development of various integrated circuit and hardware
technologies related to software technology and that it is the intent
of SIS to continue these activities independently of, but concurrently
with, the development being undertaken by SIS pursuant to this Agreement.
Nothing in this Agreement shall impair SIS's right at all times to design,
develop, manufacture, market, use, or distribute, without obligation to XLI,
similar ideas, programs, directly or indirectly related to integrated
circuits or hardware related technologies related to software technology
which have been previously developed by SIS or which have been independently
developed or submitted by third parties to SIS subsequent to the date of
this Agreement. During the term of this Agreement, SIS shall not procure,
market and distribute products which are competitive with Superchip ASICs
developed pursuant to this Agreement. Notwithstanding the preceding
sentence, SIS may provide engineering services to third parties that
directly or indirectly compete with XLI for products which may, directly
or indirectly, be competitive with XLI's products.
6. Other Products
--------------
6.1 In the event XLI desires to develop variations of the
Superchip Technology into a family of ASIC products, the terms and
conditions relating to any design, manufacture and/or sale of such
products shall be subject to the mutual agreement of SIS and XLI.
7. Payment Terms
-------------
7.1 Except as otherwise specified in this Agreement, XLI will
pay SIS for all Superchip ASICs within forty-five (45) days from the
receipt of product at XLI.
7.2 The payments to SIS hereunder shall be effected in U.S.
dollars and shall be paid by check issued on a U.S. bank and mailed
to the address set forth in this Agreement or other address as
furnished in writing by SIS.
8. Confidentiality
---------------
8.1 XLI and SIS agree that any information, technical data or
know how, which is furnished to the other in written or tangible form by
either party under or in connection with this Agreement and marked as
"Proprietary Information" or "Confidential", will be maintained by the
receiving party in confidence during the term of this Agreement and for
a period of five (5) years thereafter and will not be used by the
receiving party except to fulfill the purposes of this Agreement. Oral
disclosure will be covered by this Agreement only if such disclosures
are reduced to writing within fifteen (15) business days of disclosure
and marked as provided above. Neither party shall be under any obligation
to maintain in confidence any portion of the Proprietary Information
received which is: (i) already in the possession of the receiving party
or its subsidiaries from other sources; (ii) independently developed by
the receiving party or its subsidiaries; (iii) publicly disclosed by the
disclosing party; (iv) received by the receiving party or its subsidiaries
from a third party with the right to disclose; or (v) approved for release
by written agreement with the disclosing party, or (vi) required to be
disclosed by law.
9. Indemnification
---------------
9.1 XLI shall indemnify, defend and hold SIS harmless from any
claims, demands, liabilities, losses, damages, judgments or settlements
("Action"), including all reasonable costs and expenses related thereto,
including attorneys' fees, directly or indirectly resulting from any
claimed infringement or violation of any copyright, patent, trademark or
other intellectual property right with respect to XLI's technology or
property. Following notice of a claim or threat of actual suit provided
by SIS to XLI, XLI shall: (a) procure for SIS the right to continue to
use and distribute the particular product or technology at no additional
expense to SIS; or (b) provide SIS with a non-infringing version of the
particular product or technology; or (c) notify SIS that the particular
product or technology is being withdrawn from the market and terminate all
obligations only with respect to that particular product or technology.
9.2 SIS shall indemnify, defend and hold XLI harmless from any
claims, demands, liabilities, losses, damages, judgments or settlements
("Action"), including all reasonable costs and expenses related thereto,
including attorneys' fees , directly or indirectly resulting from any
claimed infringement or violation of any copyright, patent or other
intellectual property right with respect to SIS property incorporated
into Superchip ASICs, except to the extent such Action relates to XLI
specifications and provided that all Superchip ASICs are used in
accordance with the purposes of this Agreement and any documentation
provided by SIS, and XLI has adhered to its obligations under this
Agreement. Following notice of a claim or threat of actual suit
provided by XLI, SIS shall: (a) procure for XLI the right to continue
to use and distribute the particular Superchip ASICs at no additional
expense to XLI; or (b) provide XLI with a non-infringing version of
the particular Superchip ASIC; or (c) notify XLI that the particular
Superchip ASIC is being withdrawn from the market and terminate all
obligations only with respect to that particular Superchip ASIC.
9.3 Indemnification Conditions. Notwithstanding paragraph 9.1 of
this Agreement, XLI is under no obligation to indemnify and hold SIS
harmless unless: (a) XLI shall have been promptly notified of the suit
of claim by SIS and furnished, which shall include a copy of each
communication, notice or other action relating to the claim giving rise
to indemnification; (b) XLI shall have the right to assume sole authority
to conduct the trial or settlement of such claim or any negotiations
related thereto at XLI's own expense; and (c) SIS shall provide reasonable
information and assistance requested by XLI in connection with such claim
or suit.
10. Warranties
----------
10.1 XLI warrants that: (1) it has the legally enforceable
right to grant SIS the rights as set forth in this Agreement; (2) the
XLI Superchip Technology and VHDL, does not incorporate or infringe upon
any intellectual property not owned or licensed by XLI; (3) XLI has no
knowledge and has not been notified by any third party that any XLI
technology or technology used by XLI infringes upon any intellectual
property rights or other proprietary rights of a third party; (4) the
XLI Superchip Technology and VHDL shall conform in all material respects
to the specifications contained in Exhibit A of this Agreement.
10.2 SIS warrants that the Superchip ASIC shall conform in all
material respects to the specifications contained in Exhibit A1 attached
hereto for a period of one (1) year from delivery to XLI; provided that
Superchip ASICs are used in accordance with their intended purposes, in
approved environments and as provided in any documentation provided by
SIS or XLI.
11. Disclaimer of Warranties and Limitation of Remedies
---------------------------------------------------
11.1 EXCEPT AS SPECIFICALLY SET FORTH IN THIS AGREEMENT, EACH
PARTY SPECIFICALLY DISCLAIMS ALL WARRANTIES, EXPRESSED OR IMPLIED,
INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO DEFECTS IN ANY OF
ITS PRODUCTS OR OTHER DOCUMENTATION, OPERATION OR USE OF ANY OF ITS
PRODUCTS AND ANY PARTICULAR APPLICATION OR USE OF ANY OF ITS PRODUCTS.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY LOSS OR PROFIT
OR ANY OTHER COMMERCIAL DAMAGE, INCLUDING, BUT NOT LIMITED TO, SPECIAL,
INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER DAMAGES. BECAUSE SIS'S
DESIGN WORK CONSTITUTES A NEW, UNIQUE DESIGN OR APPLICATION, SIS
LIABILITY UNDER THIS AGREEMENT IS EXPRESSLY LIMITED TO PROVIDING
ADDITIONAL ENGINEERING WITH RESPECT TO ITS DESIGN WORK TO MAKE A GOOD
FAITH EFFORT TO SUBSTANTIALLY MEET THE TECHNICAL SPECIFICATIONS REQUIRED
BY THIS AGREEMENT, WHICH IN NO EVENT SHALL EXCEED THE AMOUNTS PAID BY
XLI TO SIS PURSUANT TO THIS AGREEMENT.
12. Term and Termination
--------------------
12.1 With respect to the Superchip ASIC, the term of this
Agreement shall be for the period ending upon the earlier of XXXXXXX
years from the date of first production shipment of a Superchip ASIC
or XXXXXXXXXXXXXXXXXXXXXXXXXXXXX Superchip ASIC, whichever occurs first.
With respect to SIS Products, this Agreement shall only terminate as
provided in Sections 12.2, 12.3 and 12.4, below. Upon any termination
of this Agreement with respect to the Superchip ASIC as provided by
Section 12.1, the obligations of XLI and SIS with respect to the
Superchip ASIC shall cease, subject to the provisions of Sections 12.4
and 12.5, below. Notwithstanding any provision to the contrary, upon
any such termination with respect to the Superchip ASIC, SIS and XLI
may agree to: (i) continue this Agreement subject to negotiation of
a mutually agreeable pricing structure with respect to Superchip ASICs;
or (ii) SIS's transfer of design technology for the Superchip ASIC
development or implemented by SIS pursuant to this Agreement to XLI on
terms and conditions acceptable to SIS in its sole and absolute
discretion, including, but not limited to, SIS's transfer fee and any
transfer or license fees due to third parties with respect thereto.
12.2 This Agreement may be terminated by either party in the
event the other party breaches a material term of this Agreement and
fails to cure such breach to the reasonable satisfaction of the
complaining party within thirty (30) days after written notice thereof
from the non-breaching party, or if such breach cannot reasonably be
cured within said thirty (30) days, the breaching party fails to
commence to cure such breach within thirty (30) days after written
notice and fails to complete such cure within sixty (60) days of the
date of such notice. Any termination shall be effective upon thirty
(30) days written notice to the breaching party after the expiration
of all cure periods as provided above.
12.3 Notwithstanding any other termination provision to the
contrary, in the event: (i) of a final adjudication of bankruptcy or
insolvency of either party, (ii) either party is put or decides to go
into dissolution or liquidation (other than in connection with a merger,
consolidation or amalgamation), or (iii) any cessation of business which
continues for more than thirty (30) consecutive days by either party,
the other shall have the right to immediately terminate this Agreement
by written notice to such party. Notwithstanding the foregoing:
(i) the right to use XLI Superchip Technology granted to SIS by this
Agreement shall survive the bankruptcy, insolvency, dissolution,
liquidation or cessation of business of XLI as provided above and SIS
shall continue to have the right to use XLI Superchip Technology as
permitted in this Agreement, and (ii) upon the bankruptcy, insolvency,
dissolution, liquidation or cessation of business by SIS as provided
above, SIS shall provide XLI with SIS technology necessary to
manufacture the Superchip ASIC and provide information to XLI
regarding third party licenses necessary to manufacture the Superchip
ASIC to allow XLI to attempt to negotiate the transfer of such license.
12.4 If termination is due to a SIS breach of its obligations
under this Agreement, the rights granted to SIS herein shall be
terminated and SIS shall have no further right to continue to use the
XLI Superchip Technology. If this Agreement is terminated, partially
or completely, due to XLI's breach of its obligations hereunder, the
rights granted to SIS shall survive termination and SIS shall maintain
the right to use XLI Superchip Technology as permitted by this Agreement.
12.5 Except as provided in Section 12.3, any partial or complete
termination or expiration of this Agreement shall be subject to the
following terms and conditions:
(a) For any partial termination with respect to the Superchip
ASIC, SIS shall not solicit or accept any additional orders from
XLI for Superchip ASICs after the effective date of such partial
termination or expiration. SIS shall have the right, but not the
obligation, to process and fulfill any orders pending or received
prior to or as of the effective partial termination or expiration
date.
(b) For any partial expiration or termination with respect to
the Superchip ASIC, the license granted to SIS pursuant to
Section 2, above, shall terminate on the date of the last
shipment of Superchip ASICs as provided in Section 12.5 (a),
above.
(c) With respect to any termination or expiration of this
Agreement in its entirety, SIS shall not solicit or accept
additional orders for Superchip ASICs or SIS Products after the
effective date of such termination or expiration, except as
specifically provided above. SIS shall have the right, but not
the obligation, to process and fulfill any orders pending or
received prior to or as of the effective termination or
expiration date.
(d) With respect to any termination or expiration of this
Agreement in its entirety, the license granted to SIS pursuant
to Section 2, above, shall terminate on the date of the last
shipment of Superchip ASICs or SIS Products as provided in
Section 12.5 (c), above, except as otherwise provided above.
13. Notices
-------
13.1 Written notices hereunder are deemed to be given when
received if telexed or faxed only upon confirmation of such telex or fax
by recipient and within five (5) days of mailing if mailed by air courier,
postage prepaid, return receipt, to the address of the other party as set
forth herein, or such other address as shall be furnished in writing by
either party.
14. Non-assignability
-----------------
14.1 This Agreement is not assignable by either party without
the prior written consent of the other party. Any attempt to assign this
Agreement without the prior written consent of the other party shall be
void.
15. No Joint Venture
----------------
15.1 This Agreement creates no agency, partnership, employment,
joint relationship or joint venture between the parties or mutual
responsibility on behalf of one party for the debts or liabilities of the
other. The parties agree that each is acting as an independent contractor
and that any employees of SIS are in no way employees of XLI. Neither
party shall have the power or authority to bind or obligate the other
except as expressly set forth in this Agreement.
16. Other Agreements
----------------
16.1 This Agreement contains the entire understanding of the
parties with respect to the subject matter hereof and supersedes all prior
agreements, if any, relating thereto, written or oral, between the parties.
Amendments to this Agreement must be in writing and signed by the duly
authorized officers of the parties.
17. Force Majeure
-------------
17.1 Neither party shall be liable for delay in performance or
failure to perform in whole or in part the terms of this Agreement due to
strike, labor dispute, act of war, riot or civil commotion, act of public
enemy, fire, flood or other cause beyond the control of such party.
18. Arbitration
-----------
18.1 All disputes that may arise in connection with this
Agreement that cannot be settled by the parties themselves shall be
submitted to binding arbitration to a single arbitrator having
knowledge and experience with the microprocessor industry selected by
the parties in Boston, Massachusetts in accordance with the commercial
rules and regulations of the American arbitration Association. In the
event the parties cannot agree on a single arbitrator as provided above,
each party shall select one arbitrator having knowledge and experience
with the microprocessor industry and the arbitrators so chosen shall
select a third arbitrator having knowledge and experience with the
microprocessor industry in accordance with the rules and regulations
of the American Arbitration Association. The panel shall be required
to provide a written decision with full explanation of its findings.
All costs of arbitration shall be divided equally between the parties,
and the parties agree to be bound by the decision of such arbitration
panel. Notwithstanding the foregoing, this section does not apply to
the breach of provisions pertaining to confidentiality and/or proprietary
rights, and either party may petition a court of law for injunctive
relief and such other rights and remedies as it may have at law or equity
with respect to such breaches.
19. Governing Law
-------------
19.1 The construction, validity and the performance of this
Agreement shall be governed by the laws of the Commonwealth of
Massachusetts.
20. Export Compliance
-----------------
20.1 XLI shall be exclusively responsible for the procurement
and renewing of all export and import licenses required under United
States or any foreign law for the export or import of its products
and any products that directly or indirectly incorporate SIS
technology and shall pay all costs and other expenses in connection
with such procurement and renewal. In addition, XLI agrees to comply
with any applicable export or import laws of the United States or any
foreign country with respect to the import or export of its products
and any products containing SIS technology from the United States.
21. Trademark Usage
---------------
21.1 Each party grants the other party a limited license to
reproduce trademarks and trade names of the other party for the sole
purpose of allowing each party to maximize the mutual benefits of this
Agreement. Any and all trademarks and trade names associated with any
products related to XLI technology and SIS technology or shall remain
the exclusive property of the owner of such marks or trade names.
Whenever one party utilizes any trademark or trade name of the other
party in any form on printed material, the other party shall provide
a footnote reading "[insert name of mark being used] is a trademark of
[insert name of appropriate party]". In order to provide quality
control protection, any party using the trademark or tradename of the
other party shall submit to the other party a representative sample
of all promotional and advertising material that utilizes the other
party's mark on a quarterly basis for review by the other party. After
review of such submission(s), the party that owns the trademarks and
tradenames may reasonably request the other party to improve or
otherwise modify the materials and/or products associated with such
trademarks and tradenames and the other party agrees to implement
such modifications for improvements within a reasonable time.
22. Severability
------------
22.1 If any provision hereof is determined by a court of
competent jurisdiction or arbitration to be invalid or unenforceable,
such determination shall not affect the validity or enforceability of
any other provision hereof.
23. Waiver
------
23.1 Either party hereto may specifically waive any breach of
this Agreement by the other party, but no such waiver shall be deemed to
have been given unless such waiver is in writing, is signed by the
waiving party and specifically designates the breach waived, nor shall
any such waiver constitute a continuing waiver of similar or other
breaches.
IN WITNESS WHEROF, the duly authorized representatives of the
parties have executed this Agreement as of the Effective Date.
SIS MICROELECTRONICS, INC. XEROGRAPHIC LASER IMAGES
CORPORATION
By: /s/ William Burkard By: /s/ Anthony D. D'Amelio
---------------------------- ------------------------
Title: CEO Title: CEO
---------------------------- ------------------------
EXHIBIT A: Product Features & Schedule
A1: Features
- --------------
Current Superchip ASIC VHDL Core Modules for printer, copier, fax,
and multi-function applications in color and monochrome laser print
engines with the following feature sets:
200x100, 200, 300, and 600 DPI Edge Enhancement
XXXXXXXXXXXXXXXXXXXXX
Multi-bit Grayscale Date Mode @ 300 or 600 DPI
1 bit Photo Enhancement Mode
Toner Saver Mode
Parallel and Serial Data Interfaces
Digital Modulator for Sub-pixel Modulation
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
512 x 8 Internal LUT (look-up-table)
Design Target Maximum Video Rate: 50 MHz
Minimum Video Rate: 3 MHz
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXX
A2: Schedule
- --------------
Transfer of VHDL design to SIS XXXXXXXXXXXXX
Sign-off by XLI and SIS XXXXXXXXXXXXX
Release to Foundry XXXXXXXXXXXXX
Prototype Chips (un-tested) XXXXXXXXXXXXX
Production Quantities XXXXXXXXXXXXX
LICENSING AND ROYALTY AGREEMENT
This Agreement is made and entered into this 26th day of
June, 1997 by and between XEROGRAPHIC LASER IMAGES CORPORATION, a Delaware
corporation, ("XLI") with its principal place of business at 101 Billerica
Avenue, 5 Billerica Park, North Billerica, Massachusetts 01862 and PCPI
Technologies Inc., a Delaware corporation, ("PCPI") with its principal place
of business at 11031 Via Frontera, San Diego, CA 92127.
1.0 Definitions
-----------
1.1 "XLI Technology" means the current XLI laser printing technology
specified in Exhibit A1(Features) attached hereto.
1.2 "PCPI Products " means PCPI ASICs or chip set product offerings which
incorporate XLI Technology that are part of a controller or raster
image processor for scan, print, fax, copy or related imaging
applications.
1.3 "OEM" means Original Equipment Manufacturer.
1.4 "VHDL" ( Virtual Hardware Description Language) means the design
description language that defines XLI Technology and that will be
used to transfer XLI Technology from XLI to PCPI.
1.5 "Superchip ASIC" means XLI's stand-alone integrated circuit that
incorporates essentially only the XLI Technology specified in
Exhibit A1(Features).
2.0 License and Royalty Fee
-----------------------
2.1 PCPI will pay XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX to XLI in
consideration for a XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXX of PCPI Products (which ever occurs first) non-exclusive license
for XLI Technology to be incorporated into PCPI Products. At the end
of the term, PCPI may continue to use the XLI Technology only in
products designed prior to the termination date of this contract and
shall not design or build any new products which incorporate the XLI
technology. This contract may be renewed under terms agreed to by
both XLI and PCPI. The XLI Technology will be provided by XLI to
PCPI using the VHDL format, or such other format as may be reasonably
required, schematics and other information necessary for PCPI to
design, manufacturer and market ASICs for its PCPI Products. The
technology licensed in this Agreement is for existing XLI Technology
as defined by the features in Exhibit A1 and the VHDL delivered to
PCPI in the second quarter of 1997. PCPI shall not design, fabricate
or market PCPI Products predominantly based on XLI Technology. XLI
Technology does not include rights for any new features, upgrades,
improvements, or modifications, that XLI may develop in the future
other than the bug-fix maintenance and support provided in Section
3.3. XLI will offer PCPI new technology developed by XLI, on terms
determined only by XLI, for a period of two (2) years from the
signing of this contract.
2.2 PCPI shall identify XLI as the source of its image enhancement
technology in its sales and product literature on all PCPI Products
containing XLI Technology or Superchip ASIC. This provision may be
canceled by written notice from either party to this contract.
2.3 Royalties
2.4.1 PCPI will pay to XLI royalties based upon PCPI Product units
shipped to PCPI OEM customers with adjustments made for any returned
units, in which one or more of the XLI Technology features setforth
in Exhibit A1 has been enabled, per the following schedule:
------------------------------------------------------------------------
| | | Monochrome Engine XXXX |
| Cumulative Volume | Monochrome Engine Speed | XXXXXXXXXXXXXXXXXXXXXX |
| | XXXXXXXXXXX | Engines |
-----------------------------------------------------------------------|
| 1 to 50,000 | XXXXX | XXXXX |
|-------------------|-------------------------|------------------------|
| 50,000 to 100,000 | XXXXX | XXXXX |
|-------------------|-------------------------|------------------------|
| >100,000 | XXXXX | XXXXX |
------------------------------------------------------------------------
Royalties shall accrue at the time PCPI Products are shipped to PCPI's
OEM customers. It is specifically understood that not all controller
boards or PCPI ASIC products shipped will make use of the XLI
Technology features set forth in Exhibit A1 and PCPI shall not pay
royalties to XLI for PCPI Product units in which no part of the XLI
Technology is enabled. In accordance with Section 7 hereof, PCPI will
pay royalties on all PCPI Product units shipped in which one or more
of the XLI Technology features is enabled at time of shipment to the
OEM customer as well as on all PCPI Product units configured such
that the XLI Technology features are not permanently disabled and
can be enabled as an upgrade in the field at a later date.
3.0 Obligations of XLI
------------------
3.1 XLI shall provide the XLI Technology to PCPI for the PCPI Products
in accordance with the schedule included on attached Exhibit A2.
Said XLI Technology shall incorporate the functional design modules
set forth in Exhibit A1.
3.2 In partial consideration for the XXXXXXXXXXXXXXXXXXXXXXXXXXX XLI
shall provide two man-weeks of XLI consulting time during the first
year of the Agreement for transfer/integration of the VHDL and for
the training of a PCPI employee(s) in engine calibration. Any direct
expenses incurred for equipment and materials, or travel expenses
will be paid for by PCPI. Additional XLI consulting and engineering
development time requested by PCPI will be quoted at XLI's then
standard rates (currently $800 per day) plus materials and other
direct expenses.
3.3 XLI shall, during the first year of this Agreement, provide to PCPI
necessary bug-fix maintenance and support for the XLI Technology
licensed hereunder. Maintenance and support shall include, but shall
not be limited to, phone, fax and e-mail support, all error and bug
corrections, technical information and documentation reasonably
necessary for PCPI to integrate the XLI Technology into the PCPI
Products. This maintenance and support obligation does not entitle
PCPI to any new technology outside the XLI Technology defined in this
Agreement.
3.4 XLI shall, at PCPI's option, provide engine calibration services for
PCPI's customers at the cost of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
for monochrome engines and XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX for
color engines.
4.0 Grant of License Rights
-----------------------
4.1 XLI grants to PCPI a non-exclusive, worldwide license to use, copy,
reconfigure , reproduce, and translate the XLI Technology for the
purpose of embedding, integrating and incorporating the XLI
Technology into PCPI Products for distribution and sale to PCPI OEM
customers for use in such OEM's electronic goods. PCPI OEM customers
or PCPI licensed customers shall not be required to pay XLI any
future license fees for the license granted to PCPI herein.
4.2 PCPI shall not sub-license or otherwise transfer, convey or assign
any of the rights to use the XLI Technology granted hereunder except
as part of PCPI Products as permitted herein, provided however, that
PCPI shall have the right to have a third party manufacture PCPI
Products that incorporates XLI Technology. PCPI shall have no
rights to incorporate the XLI Technology into a stand-alone
integrated circuits essentially containing only XLI Technology and
competing with XLI Superchip ASICs or other XLI products containing
XLI Technology.
4.3 This Agreement does not grant to XLI by implication, estoppel, or
otherwise, a license to any patents, know-how, or any other
intellectual property now or hereafter owned or developed by PCPI.
5.0 Discoveries and Inventions
--------------------------
5.1 PCPI shall have no rights to the intellectual property of XLI or to
any improvements, modifications or changes made thereto during the
design process, by either party. All discoveries, developments,
improvements, modifications, and inventions made or conceived in
the performance of the design and development of the XLI Technology
pursuant to this Agreement, shall be the sole and exclusive
property of XLI.
6.0 Other Products
--------------
6.1 XLI's Superchip ASIC shall be available to PCPI to be offered to
OEMs as part of a PCPI controller proprietary chip set solution.
Pricing of Superchip ASIC (FOB, North Billerica MA) provided by
XLI to PCPI shall be as follows:
------------------------------------------------------------------------------
| | Monochrome Engine | Monochrome Engine | Monochrome Engine |
| Annual Volume | Speed | Speed | XXXXXXXXXXXXXXXXX |
| | XXXXXXXXXXX | XXXXXXXXXXXX |& All Color Engines|
|----------------|-------------------|-------------------|-------------------|
|1,000 to 50,000 | XXXXX | XXXXX | XXXXX |
|----------------|-------------------|-------------------|-------------------|
7.0 Payment Terms
-------------
7.1 PCPI will pay XLI a fee of XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
for an initial license which amount shall be due as follows: XXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXX upon the signing of this Agreement and
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX upon delivery of the VHDL code.
7.2 Royalties as provided in Section 2.3 will be paid quarterly within
30 days of the end of each quarter. During the term of the Agreement
XLI or XLI's agent, upon thirty (30) days written notice shall have
the right to inspect and audit any and all records relating to
licenses and sales of PCPI Products for the sole purpose of verifying
PCPI's compliance with the terms and conditions of this Agreement,
provided that XLI shall make no more than one (1) such audit per
calendar year. Any such audit shall be conducted at PCPI's place
of business during regular business hours or other mutually agreed
upon time and location. XLI shall bear the cost of such audit
unless it is determined that PCPI has underpaid the royalty amount
due to XLI by One Thousand Dollars ($1,000), in which case PCPI
shall bear the costs of such audit. XLI or XLI's agent shall sign
a nondisclosure agreement obligating the auditor not to disclose
PCPI proprietary information obtained during such audit which does
not pertain to the XLI Technology. Royalty payments not made timely
shall be subject to a late payment fee of one percent per month.
7.3 The purchase price of Superchip ASICs, provided by XLI, will be due
and payable to the terms stated in purchase orders issued by PCPI
and accepted by XLI.
7.4 The payments to XLI hereunder shall be effected in U.S. dollars and
shall be transmitted by telegraphic transfer remittance to the
following bank account or to such other bank account as XLI may
notify PCPI in writing:
BAYBANK , 7 N. E. Executive Park, BURLINGTON, MA.
ABA Routing No. 0110-0174-2
Account No. 259-39719
8.0 Confidentiality
---------------
8.1 XLI and PCPI agree that any proprietary information, technical
data, trade secrets or know how, which is furnished to the other
in written or tangible form by either party under or in connection
with this Agreement and marked as "Proprietary Information" or
"Confidential", will be maintained by the receiving party in
confidence during the term of this Agreement and for a period of
five (5) years thereafter and will not be used by the receiving
party except to fulfill the purposes of this Agreement. Oral
disclosure will be covered by this Agreement only if such
disclosures are reduced to writing within 10 business days of
disclosure and marked as provided above. Neither party shall be
under any obligation to maintain in confidence any portion of the
Proprietary Information received which is: (i) already in the
possession of the receiving party or its subsidiaries from other
sources; (ii) independently developed by the receiving party or its
subsidiaries; (iii) publicly disclosed by the disclosing party;
(iv) received by the receiving party or its subsidiaries from a
third party with the right to disclose; or (v) approved for release
by written agreement with the disclosing party, or (vi) required
to be disclosed by law.
9.0 Indemnification
---------------
9.1 The indemnification provisions of this Section 9.1shall survive
termination of this Agreement for any reason.
(a) XLI warrants that it has sufficient right, title and interest in
and to the XLI Technology to enter into and to perform its
obligations under this Agreement free from rights of third parties.
Subject to the limitations of this Section 9.1, XLI agrees to
indemnify PCPI against infringement or violation of copyright,
patent, trade secret, or other form of intellectual property rights
as described below.
(b) XLI shall, at its expense, defend PCPI and hold PCPI harmless from
and against any suit, claim or proceeding brought against PCPI
alleging that any use of the XLI Technology (in whole or in part),
as delivered by XLI, infringes any patent, copyright, trade secret,
or other form of intellectual property rights of any third party to
the extent such patent, copyright, trade secret or other form of
intellectual property rights relates to the XLI Technology provided
by XLI. Such indemnification shall include any and all damages
arising out of any such claim, including any court costs, attorneys
fees, and reasonably related litigation expenses, provided that PCPI
(i) promptly notifies XLI in writing of any such suit, claim, or
proceeding and tenders the defense thereof to XLI; (ii) allows XLI
to direct the defense of and/or handle such suit, claim or
proceeding at XLI's expense; (iii) gives XLI all information and
assistance reasonably necessary to defend the same at XLI's sole
expense, and (iv) does not enter into any settlement of the suit,
claim or proceeding without XLI's prior written consent (which shall
not be unreasonably withheld). Following notice of any such suit,
claim, or proceeding described in this section, XLI shall have the
option to procure for PCPI at XLI's expense the right or license to
use the XLI Technology as furnished hereunder, or to replace or
modify the XLI Technology to render same non-infringing.
(c) Except in the case of liability resulting from willful infringement
of another's rights by PCPI, the maximum aggregate amount or amounts
PCPI shall be obligated to pay to indemnify all indemnified parties
under this Agreement or otherwise shall in no event exceed an amount
equal to the aggregate amount of payments made by PCPI to XLI
pursuant to this Agreement.
9.2 Notwithstanding the provisions of 9.1 above, XLI shall not be liable
to PCPI in the event that the alleged infringement by the XLI
Technology is due to modifications made to the XLI Technology by
PCPI and not approved by XLI.
10.0 XLI Warranties
--------------
10.1 XLI warrants that: (1) it has the legally enforceable right to
grant PCPI the license set forth in this Agreement; (2) to its
knowledge the XLI Technology does not incorporate or infringe
upon any intellectual property not owned or licensed by XLI;
(3) XLI has not been notified by a third party that the XLI
Technology might infringe any intellectual property rights or
other proprietary rights of a third party; (4) the XLI Technology
shall conform in all material respects to the specifications
contained in Exhibit A of this Agreement.
11.0 Limitation of Remedies
----------------------
11.1 THE FOREGOING WARRANTIES STATED WITHIN THIS PARAGRAPH HEREUNDER
ARE IN LIEU OF ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING THE
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
USE OR PURPOSE, WHETHER OR NOT MADE KNOWN TO EACH PARTY, WHETHER
IN TORT, CONTRACT STRICT LIABILITY, OR OTHERWISE, EXCEPT TO THE
EXTENT OF THE INDEMNIFICATION PROVISIONS CONTAINED IN SECTION 9.1
OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE TO
EACH PARTY, OR ANY SUBLICENSEE OR ANY OTHER PERSON, FIRM OR
CORPORATION, OR OTHER ENTITY FOR ANY OTHER DAMAGES, INCLUDING,
BUT NOT LIMITED TO, INCIDENTAL OR CONSEQUENTIAL DAMAGES, ARISING
OUT OF THIS AGREEMENT OR IN CONNECTION WITH THE USE OF THE XLI
TECHNOLOGY OR ANY PART THEREOF, OR ANY DAMAGES WHATSOEVER
RESULTING FROM LOSS OF USE, LOSS OF PROFITS, LOSS OF GOODWILL OR
REPUTATION, LOSS OF DATA, OR OTHERWISE ARISING IN ANY MANNER OUT
OF THIS AGREEMENT OR THE USE OR PERFORMANCE OF THE XLI TECHNOLOGY,
OR ANY PART THEREOF, WHETHER IN A CONTRACT, TORT OR OTHER FORM OF
ACTION. THE WARRANTIES GIVEN ABOVE CONSTITUTE THE ONLY WARRANTIES
MADE BY EACH PARTY WITH RESPECT TO THIS AGREEMENT. SUCH WARRANTIES
ARE IN LIEU OF, AND EACH PARTY HEREBY WAIVES, ALL OTHER WARRANTIES
OR GUARANTEES OF EACH PARTY WHETHER EXPRESS OR IMPLIED.
11.2 IN NO EVENT WILL XLI BE LIABLE TO PCPI FOR DAMAGES EXCEEDING THE
AMOUNT PAID TO XLI BY PCPI UNDER THE TERMS OF THIS AGREEMENT, AND
PCPI SHALL NOT BE LIABLE FOR MORE THAN THE XXXXXXXXX LICENSE FEE
WHEN AND AS PAID TO XLI.
12.0 Termination
-----------
12.1 This Agreement may be terminated by either party in the event the
other party breaches a material item of this Agreement and fails
to cure such breach to the reasonable satisfaction of the
complaining party within thirty (30) days after written notice
thereof from the non-breaching party, or if such breach cannot
reasonably be cured within said thirty (30) days, the breaching
party fails to commence to cure such breach within thirty (30)
days after written notice and fails to complete such cure within
ninety (90) days of the date of such notice.
12.2 The license granted to PCPI by this Agreement shall survive the
bankruptcy or insolvency or direct or indirect taking over or
assumption of control of XLI or PCPI, and PCPI shall continue to
have the right to use the XLI Technology as permitted in this
Agreement and subject to the terms of this Agreement. However,
in the event of bankruptcy or insolvency of either party, the
parties shall have the right to mutually agree to terminate this
Agreement by written agreement.
12.3 If termination is due to a PCPI material breach of its obligations
under this Agreement, the rights granted to PCPI herein shall be
terminated and PCPI shall have no further right to continue to use
the XLI Technology. If this Agreement is terminated due to XLI's
breach of its obligations hereunder, the rights granted to PCPI
shall survive termination and PCPI shall continue to have the
right to use the XLI Technology as permitted by this Agreement and
subject to the royalty payments. Notwithstanding the foregoing,
termination of this Agreement for any reason shall not affect the
right of existing PCPI OEM's and such existing OEM's end users to
continue to use and have access to the PCPI ASIC(s) or chip set
products containing the Superchip ASIC, provided such OEM's were
granted access to the XLI Technology as permitted by this
Agreement.
13.0 Notices
-------
13.1 Written notices hereunder shall be made to the respective CEO's of
PCPI and XLI, and are deemed to be given when received if telexed
or faxed and within five days of mailing if mailed by air courier,
postage prepaid, return receipt, to the address of the other party
as set forth herein, or such other address as shall be furnished
in writing, by either party.
14.0 Non-assignability
-----------------
14.1 This Agreement is not assignable by either party without the prior
written consent of the other party. Any attempt to assign this
Agreement without the prior written consent of the other party
shall be void.
15.0 No Joint Venture
----------------
15.1 This Agreement creates no agency, partnership, employment, joint
relationship or joint venture between the parties or mutual
responsibility on behalf of one party for the debts or liabilities
of the other. The parties agree that each is acting as an
independent contractor and that any employees of PCPI are in no
way employees of XLI. Neither party shall have the power or
authority to bind or obligate the other except as expressly set
forth in this Agreement.
16.0 Other Agreements
----------------
16.1 This Agreement contains the entire understanding of the parties
with respect to the subject matter hereof and supersedes all
prior agreements relating thereto, written or oral, between the
parties. Amendments to this Agreement must be in writing and
signed by the duly authorized officers of the parties.
17.0 Force Majeure
-------------
17.1 Neither party shall be liable for delay in performance or failure
to perform in whole or in part the terms of this Agreement due to
strike, labor dispute, act of war, riot or civil commotion, act of
public enemy, fire, flood or other cause beyond the control of
such party.
18.0 Arbitration
-----------
18.1 All disputes that may arise in connection with this Agreement that
cannot be settled by the parties themselves shall be submitted to
a panel of three arbitrators in Delaware proceeding under the
rules and regulations of the American Arbitration Association.
The panel shall be required to provide a written decision with
full explanation of its findings. All costs of arbitration shall
be divided equally between the parties, and the parties agree to
be bound by the decision of such panel.
19.0 Governing Law
-------------
19.1 The construction, validity and the performance of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts.
20.0 Disclosure
----------
20.1 Both parties to this Agreement will not disclose the existence of
this Agreement unless disclosure is required by law. XLI or PCPI
will not use the logo of the other party in advertising or
marketing materials or disclose the existence of this Agreement or
the terms of this Agreement to a third party without the written
consent of the other party to this contract.
IN WITNESS WHEREOF the duly authorized representatives of the parties have
executed this Agreement as of the Effective Date.
PCPI Technologies, Inc. Xerographic Laser Images Corporation
By: /s/Edward W. Savarese By: /s/Anthony D. D'Amelio
-------------------------- ---------------------------
Title: President & CEO Title: President & CEO
-------------------------- ---------------------------
EXHIBIT A: Licensed Features & Schedule
A1: Licensed Features
- ----------------------
Current Superchip VHDL Core Modules for printer, copier, fax, and
multi-function applications in color and monochrome laser print
engines with the following feature sets:
200x100, 200, 300, and 600 DPI Edge Enhancement
XXXXXXXXXXXXXXXXXXXXX
Multi-bit gray scale data @ 300 or 600 DPI
1 bit Photo Enhancement
Toner Saver Mode
Digital Modulator for sub-pixel modulation
Maximum Video Rate: XXXXXXXXXXXXXXXXXX
Minimum Video Rate: XXXXXXXXXXXXXXXXXX
A2: Schedule
- -------------
Delivery of the XLI VHDL design database to PCPI for the above
Superchip features XXXXXXXXXX
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 145652
<SECURITIES> 0
<RECEIVABLES> 26937
<ALLOWANCES> 2000
<INVENTORY> 0
<CURRENT-ASSETS> 170589
<PP&E> 490704
<DEPRECIATION> 464869
<TOTAL-ASSETS> 203698
<CURRENT-LIABILITIES> 662449
<BONDS> 0
0
3152
<COMMON> 20393
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 203698
<SALES> 68703
<TOTAL-REVENUES> 759421
<CGS> 22752
<TOTAL-COSTS> 224707
<OTHER-EXPENSES> 585855
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3425
<INCOME-PRETAX> (51141)
<INCOME-TAX> 0
<INCOME-CONTINUING> (51141)
<DISCONTINUED> 0
<EXTRAORDINARY> 5789
<CHANGES> 0
<NET-INCOME> (48777)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.00)
</TABLE>
