SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QA
AMENDMENT NO. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to _____________
Commission File number 0-21154
CREE RESEARCH, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1572719
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2810 Meridian Parkway, Suite 144 Durham,
North Carolina 27713
(Address of principal executive offices)
(919) 361-5709
(Registrant's telephone number)
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
requirements for the past 90 days. Yes X No ___.
Number of registrant's shares of Common Stock, par value $0.005 per share,
outstanding as of October 21, 1996, was 12,306,858.
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EXPLANATORY NOTE
This Amendment is being filed solely to provide the License and
Technology Transfer Agreement between the Company and Shin-Etsu Handotai Co.
Ltd, dated September 30, 1996 (the "Agreement"). Confidential treatment for
certain portions of the Agreement was requested pursuant to Rule 24b-2. Certain
portions of the Agreement that were not previously disclosed pending the
Securities and Exchange Commission's determination of the Company's request for
confidential treatment are included herein.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (3) Exhibits (* filed herewith):
Exhibit No. Description
10.54* License and Technology Transfer Agreement between the
Company and Shin-Etsu Handotai Co. Ltd, dated September 30,
1996
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant duly caused this report on Form 10-QA to be signed on its behalf
by the undersigned, thereunto duly authorized.
CREE RESEARCH, INC.
By: /s/ F. Neal Hunter
Name: F. Neal Hunter
Title: President and Chief Executive Officer
Date: January 23, 1997
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EXHIBIT INDEX
Exhibit No. Description Sequential Page No.
10.54* License and Technology Transfer
Agreement between the Company
and Shin-Etsu Handotai Co. Ltd
dated September 30, 1996
[*] -- Certain information omitted and filed separately with the Commission
pursuant to a confidential treatment request under Rule 24b-2 of the Commission.
LICENSE AND
TECHNOLOGY TRANSFER AGREEMENT
between
CREE RESEARCH, INC.
("Licensor")
and
SHIN-ETSU HANDOTAI CO. LTD.
("Licensee")
Dated September 30, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
1. CONTRACT DOCUMENTS; DEFINITIONS..........................................................................1
1.1. Documents..................................................................................1
1.2. Definitions................................................................................1
2. LICENSE GRANT............................................................................................3
2.1. Grant..................................................................................... 3
2.2. Duration...................................................................................4
2.3. Exclusivity................................................................................4
2.4. Sublicenses................................................................................5
3. TECHNOLOGY TRANSFER......................................................................................6
3.1. Delivery of Documentation..................................................................6
3.2. Technical Assistance.......................................................................6
3.3. Targeted Process Yields....................................................................6
3.4. Restricted Information.....................................................................6
4. LICENSE FEE AND ROYALTIES................................................................................6
4.1. License Issue Fee..........................................................................6
4.2. Royalties..................................................................................7
4.3. Record-Keeping and Reporting...............................................................7
4.4. Payment....................................................................................8
5. ADDITIONAL LICENSE TERMS AND CONDITIONS..................................................................8
5.1. Cross-License to Covered Improvements......................................................8
5.2. ************************...................................................................8
5.3. Right of First Refusal on Wafer Manufacturing License.....................................10
5.4. Representations and Warranties of Licensor................................................10
6. INFRINGEMENTS...........................................................................................11
6.1. Infringement by Third Parties.............................................................11
6.2. Infringement of Third Party Rights........................................................12
7. CONFIDENTIAL INFORMATION................................................................................13
7.1. Definition and Identification.............................................................13
7.2. Confidentiality Obligations...............................................................13
7.3. Survival..................................................................................14
8. TERM AND TERMINATION....................................................................................14
8.1. Term......................................................................................14
8.2. Termination...............................................................................14
8.3. Rights after Termination..................................................................15
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9. LIMITATION OF LIABILITY.................................................................................15
10. ADDITIONAL UNDERTAKINGS................................................................................15
10.1. Confidentiality of Terms.................................................................15
10.2. Publicity................................................................................15
10.3. Patent Marking...........................................................................15
10.4. Use of Trademarks, Etc...................................................................16
10.5. Export Regulation........................................................................16
11. ASSIGNMENT.............................................................................................16
12. FORCE MAJEURE..........................................................................................16
13. GENERAL............................................................................................... 16
13.1. Notices..................................................................................16
13.2. Authority; No Conflicting Obligations; Governmental Approval.............................17
13.3. Relationship of the Parties..............................................................17
13.4. Dispute Resolution.......................................................................17
13.5. Severability.............................................................................17
13.6. Amendments; Waiver.......................................................................18
13.7. Enforcement Costs........................................................................18
13.8. Governing Law............................................................................18
13.9. Construction.............................................................................18
13.10. United Nations Convention...............................................................18
13.11. Fair Trade Commission Action............................................................18
13.12. Entire Agreement........................................................................18
</TABLE>
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LICENSE AND
TECHNOLOGY TRANSFER AGREEMENT
LICENSE AND TECHNOLOGY TRANSFER AGREEMENT (this "Agreement"), made and effective
as of the 30th day of September, 1996 (the "Effective Date"), by and between
CREE RESEARCH, INC., a corporation organized and existing under the laws of the
State of North Carolina and having offices at 2810 Meridian Parkway, Suite 176,
North Carolina 27713, USA (referred to below as "Licensor"), and SHIN-ETSU
HANDOTAI CO. LTD., a corporation organized and existing under the laws of Japan
and having offices at Togin Bldg., 4-2, Marunouchi 1-chome, Chiyoda-ku, Tokyo
100, Japan (referred to below as "Licensee").
Recitals
WHEREAS, the parties have agreed on the terms and conditions under which
Licensor will license technology to Licensee for the manufacture and sale of
certain products and desire to memorialize such terms and conditions in this
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual obligations
undertaken in this Agreement, the parties agree as follows:
1. CONTRACT DOCUMENTS; DEFINITIONS
1.1. Documents.
The following documents are annexed to and made a part
of this Agreement:
(a) Schedule 1 -- Licensed Products and Processes
(b) Schedule 2 -- Excluded Technology
(c) Schedule 3 -- Technology Transfer Services
(d) Schedule 4 -- License Fee and Royalties
Attachment A -- C430-DH85 Product Specifications
1.2 Definitions.
For purposes of this Agreement, the terms defined in this Section
1.2 shall have the meaning specified and such definitions shall
apply to both singular and plural forms:
(a) "Affiliates" of a designated corporation, company or other
entity means all entities which control, are controlled by,
or are under common control with the named entity, whether
directly or through one or more intermediaries. For
purposes of this definition "controlled" and "control" mean
ownership of more than fifty percent (50%) of the voting
capital stock or other interest having voting rights with
respect to the election of the board of directors or
similar governing authority.
(b) "Confidential Information" shall have the meaning defined
in Section 7.1.
(c) "Covered Improvements" means improvements to the Licensed
Products or Licensed Processes, whether or not patentable
and whether or not confidential, (i) which are described in
Schedule 1 and are developed or acquired by either
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party or their respective Affiliates prior to the
expiration or termination of this Agreement; and (iii)
which such party is lawfully entitled to communicate to the
other party for its use without breaching any restrictions
on use or disclosure owed to third parties.
(d) "Licensed Products" means LED die products conforming to
the description set forth in Schedule 1.
(e) "Licensed Processes" means the processes described in
Schedule 1 which are necessary for the manufacture of
Licensed Products.
(f) "Licensed Rights" means the Subject Rights of Licensor.
(g) "Net Sales" means (for all purposes including computing Net
Sales of Licensed Products by Licensee and its Affiliates
and computing Net Sales of goods by Licensor to Licensee
and its Affiliates for use in the manufacture of Licensed
Products) the invoice price less: (i) actual cost of
freight charges, if any, separately stated in such
invoice; (ii) standard cash trade discounts actually
allowed, if any; (iii) any tax, duties or other
governmental charges on the sale, transportation, or
delivery which is separately stated on the invoice; and
(iv) credit and cash refunds for damaged or returned
goods.
"Net Sales" does not include sales or other dispositions
of Licensed Products by Licensee to its Affiliates, or
transfers among Licensee's Affiliates, but does include
all sales or other dispositions of Licensed Products by
Licensee or its Affiliates to others.
In computing Net Sales of Licensed Products
by Licensee and its Affiliates, the following provisions
also apply:
(A) With respect to sales of Licensed Products made to
any purchaser which does not deal at arm's length
with the seller, or if Licensed Products are made
available by Licensor or its Affiliates to any third
party under circumstances in which no sale takes
place, Net Sales shall be computed using the then
current highest published list price of Licensee and
its Affiliates for Licensed Products offered for sale
or, if no such list price has been published, the
average of the published list prices of equivalent
products offered by other manufacturers (including
Licensor).
(B) If Licensed Products are sold in the form of
combination products containing one or more products
or parts in addition to the Licensed Products, Net
Sales for such combination products shall be
calculated by multiplying actual Net Sales of such
combination products by the fraction A/(A+B), where A
is the invoice price of the Licensed Product, if sold
separately by Licensee or its Affiliate, and B is the
invoice price of any other product or part in the
combination, if sold separately by Licensee or its
Affiliate.
(C) If the other products or parts in the combination are
not sold separately by Licensee, Net Sales for such
combination products shall be calculated by
multiplying actual Net Sales of such combination
products by the fraction A/C where A is the invoice
price of the Licensed Product if sold
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separately by Licensee or its Affiliate and C is the
invoice price of the combination product.
(D) If neither the Licensed Products nor the combination
product is sold separately by Licensee or its
Affiliate, Net Sales for such combination products
shall be calculated by multiplying actual Net Sales of
such combination products by the fraction A/C where A
is Licensee's and its Affiliates' total actual cost of
the Licensed Products and C is Licensee's and its
Affiliates' total actual cost of the combination
product.
(h) "Patent Rights" means, insofar as the same apply within the
Territory with respect to the Licensed Products or Licensed
Processes, those patents and patent applications which are
listed on the separate schedule of patents and patent
applications delivered by Licensor to Licensee concurrently
with the execution of this Agreement, and all patents
issuing from such patent applications including all
divisions, reexaminations, reissues and continuations
thereof.
(i) "Subject Rights" means all intellectual property rights
(including, by way of example, patents, patent
applications, inventions, know-how, trade secrets,
copyrights and Confidential Information, but excluding
trademarks and trade names) protecting Subject Technology
which rights are owned or controlled by a party or its
Affiliates at the Effective Date or at any time during the
term of this Agreement. "Controlled" as used with respect
to Subject Rights means at least the degree of control
needed to grant licenses of the scope and content granted
in this Agreement.
(j) "Subject Technology" means all information pertaining to
the manufacture of Licensed Products, including know-how,
trade secrets and inventions (whether patentable or not),
owned or possessed by a party or its Affiliates at the
Effective Date or at any time during the term of this
Agreement; provided, however, that "Subject Technology"
does not include information described in Schedule 2.
(k) "Territory" means the country of Japan.
2. LICENSE GRANT
2.1 Grant.
(a) Subject to the terms and conditions of this Agreement,
Licensor hereby confers upon Licensee a license, under the
Licensed Rights, to make, use and sell Licensed Products
within the Territory and to use the Licensed Processes
within the Territory for the manufacture of Licensed
Products.
(b) No license is conferred hereby to make, have made, use or
sell articles which are not Licensed Products (other than
as a step in the manufacture of Licensed Products) or to
use the Licensed Processes for any purpose other than
manufacture of the Licensed Products. Except as otherwise
provided in Section 2.1(c) below, no license is conferred
hereby to make, have made, use or sell Licensed Products
outside the Territory or to use the Licensed Processes at
any location outside the Territory. Without limiting the
foregoing, the license does not include the right to (and
Licensee agrees that it will not) sell substrates with
epitaxial layers made using the Licensed Processes nor use
such substrates for
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any purpose other than the manufacture of Licensed
Products.
(c) Licensor and Licensee may from time to time agree in
writing, on a customer by customer basis, that Licensee may
sell Licensed Products to specific customers outside the
Territory on a nonexclusive basis. Licensor and Licensee
may from time to time agree in writing, on a
country-by-country basis with respect to countries outside
the Territory, that Licensee may make and use the Licensed
Products and Licensed Processes within such country on a
nonexclusive basis. Actions of Licensee in accordance with
the terms and conditions of a written agreement which
references this paragraph and is signed on behalf of the
parties shall be considered licensed pursuant to this
Section 2.1. Nothing in this Agreement shall be construed
to obligate the parties to enter into any agreement under
this paragraph.
(d) Any sales of Licensed Products which Licensee is authorized
to make to a customer outside the Territory pursuant to
Section 2.1(c) may be made by Licensee or its Affiliates
directly or through Sumitomo Corporation and its
Affiliates.
2.2. Duration.
The license granted under Section 2.1 shall commence on the
Effective Date and, except as otherwise provided in Section
8.3, shall continue until the later of the expiration of the
last-to-expire patent included in the Licensed Rights or for so
long as any of the Subject Technology is used in the
manufacture of the Licensed Products.
2.3. Exclusivity.
(a) The license granted under Section 2.1 shall be exclusive
within the Territory during the term of this Agreement as
provided in this Section 2.3.
(b) Licensor may sell Licensed Products to the Licensee or its
Affiliates or pursuant to the Distributorship Agreement
dated June 22, 1995 among Licensor, Licensee and the other
parties named therein, as such agreement may be amended
from time to time, but Licensor:
(i) shall not otherwise retain any right to sell the
Licensed Products within the Territory during the term
of this Agreement; and
(ii) shall not retain any right to make or use the Licensed
Products within the Territory during the term of this
Agreement, or to use the Licensed Processes within the
Territory during the term of this Agreement for the
manufacture of the Licensed Products.
(c) Nothing in this Agreement shall prevent Licensor:
(i) after the expiration or termination of this Agreement,
from making, having made, using or selling Licensed
Products within the Territory or using Licensed
Processes within the Territory,
(ii) at any time, from making, having made, using or
selling Licensed Products outside the Territory or
using Licensed Processes outside the
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Territory, or
(iii) at any time, from using Licensed Processes within the
Territory for the manufacture of products other than
LED products.
(c) The exclusivity conferred hereby shall mean, except as otherwise
provided in this Section 2.3, that:
(i) Licensor warrants that it has not previously granted
any license to any third party, with respect to
Subject Technology owned by Licensor at the Effective
Date, to make, have made, use or sell Licensed
Products within the Territory during the term of this
Agreement, or to use the Licensed Processes within the
Territory during the term of this Agreement for the
manufacture of Licensed Products; and
(ii) Licensor covenants that it will not hereafter, with
respect to Subject Technology owned by Licensor at the
Effective Date, grant any license to any third party,
*****************************************************
***************************************** chip-on-
board applications, to make, have made, use or
sell Licensed Products within the Territory during the
term of this Agreement, or to use the Licensed
Processes within the Territory during the term of this
Agreement for the manufacture of Licensed Products.
(e) It is understood that Licensor has previously granted
a nonexclusive license to a third party to make, have
made, use and sell certain LED products (including the
Licensed Products), subject to the limitation that
such third party shall not sell blue LED die without
Licensor's consent for any application other than a
"chip-on-board" application. ****************
"chip-on-board application" ************************
****************************************************
****************************************************
****************************************************
****************************************************
chip-on-board applications ***********************.
2.4. Sublicenses.
(a) The rights licensed under Section 2.1 may be exercised
by Licensee, or by any Affiliate of Licensee pursuant
to a sublicense granted to the Affiliate in accordance
with this Section 2.4, provided the Affiliate first
agrees in writing with Licensor to hold all
Confidential Information of Licensor in confidence
under terms of this Agreement and otherwise to comply
with all of the obligations imposed on Licensee under
this Agreement.
(b) Any sublicense shall be subject to the terms and
conditions of this Agreement, and any act or omission
by the sublicensee which would constitute a breach of
this Agreement if done or omitted by Licensee shall be
considered a breach of this Agreement by Licensee.
Without limiting the foregoing, Licensee shall in all
events remain responsible for the reporting and
payment to Licensor of all royalties due with respect
to sales by sublicensees.
(c) Except as permitted by this Section 2.4, the rights
licensed under Section 2.1 may not be sublicensed
without the Licensor's prior consent, which the
Licensor may
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withhold in its sole discretion, and may not be
transferred except as part of an assignment of this
Agreement made in accordance with Article 11.
3. TECHNOLOGY TRANSFER
3.1. Delivery of Documentation.
Licensor will provide Licensee documentation describing the Subject
Technology in such reasonable detail and to such an extent as is
adequate for competent technical personnel experienced in epitaxial
deposition and device fabrication generally to understand the
Subject Technology and to manufacture the Licensed Products. The
documentation will disclose all matters which, at the time of
delivery, are known or believed by Licensor's technical personnel,
responsible for its own manufacture of Licensed Products, to have a
material effect on the yield or repeatability of the Licensed
Processes and which are not obvious to competent technical
personnel experienced in epitaxial deposition and device
fabrication generally. The documentation to be delivered pursuant
to this Section 3.1 is listed in Schedule 3 and will be delivered
in accordance with the schedule set forth in Schedule 3.
3.2. Technical Assistance.
Licensor shall provide technical assistance to Licensee in
connection with the manufacture of the Licensed Products in the
manner and subject to the terms and conditions set forth in
Schedule 3.
3.3. Targeted Process Yields.
In providing documentation and technical assistance required by
this Article 3, and subject to the limitations on the commitment of
the time of Licensor's personnel set forth in Schedule 3, Licensor
will endeavor to assist Licensee in achieving on average, measured
during one (1) calendar month, a die yield per wafer which is not
less than *********************** of the Licensor's average die
yield per wafer in manufacturing Licensed Products during the
preceding six (6) calendar months. It is understood that Licensor
makes no warranty and provides no other assurance that such yields
can in fact be achieved. Licensor shall permit Licensee's duly
authorized representative, reasonably acceptable to Licensor, to
examine Licensor's records of its die yield per wafer at all
reasonable business hours to the extent and insofar as it is
necessary to verify the accuracy of the average die yield per wafer
reported by Licensor to Licensee for purposes of this paragraph.
3.4. Restricted Information.
Nothing in this Article 3 shall be construed to require Licensor to
grant Licensee access to, or otherwise to disclose to Licensee, any
information held by Licensor under restrictions on use or
disclosure which preclude disclosure to third parties.
4. LICENSE FEE AND ROYALTIES
4.1. License Issue Fee.
(a) In consideration of the license conferred by Section 2.1,
Licensee shall pay Licensor a license issue fee of Two Million
Seven Hundred Thousand Dollars
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($2,700,000) (U.S).
(b) The license issue fee shall be due and payable in installments
in the amounts and on the dates specified in Schedule 4.
(c) The license issue fee shall be considered fully earned at the
Effective Date of this Agreement. Thereafter Licensee's
obligation to pay the issue fee shall be unconditional, not
subject to set-off or deduction of any kind, and shall survive
any termination or expiration of this Agreement.
4.2. Royalties.
(a) Licensee shall pay to Licensor, for all sales of Licensed
Products made by Licensee and its sublicensees during the
period specified in Schedule 4, a royalty equal to the
percentage specified in Schedule 4 multiplied times the
difference between (i) the Net Sales of Licensed Products by
Licensee and its sublicensees minus (ii) the Net Sales to
Licensee and its sublicensees of materials supplied by Licensor
for use in the manufacture of Licensed Products.
(b) Upon payment in full of the license issue fee due under Section
4.1, and all royalties accrued during the period specified in
Schedule 4, the license conferred by Section 2.1 shall be fully
paid such that no further royalties shall be due with respect
to sales of the Licensed Products thereafter.
(c) Royalties shall accrue on sales of Licensed Products made
during the period specified in Schedule 4 notwithstanding any
earlier termination of this Agreement. This Article 4 shall
survive any termination of this Agreement so as to cover sales
of Licensed Products made thereafter on which royalties are due
under the terms hereof. Survival of this Article 4 shall not be
construed as conferring any additional license, whether express
or implied, respect to the Licensed Rights.
(d) In the event that, prior to expiration of the royalty period
specified in Schedule 4, all patents included in the Licensed
Rights shall have expired or been finally adjudged by a court
of competent jurisdiction to be invalid, and no patent
applications included in the Licensed Rights remain pending,
the parties shall in good faith negotiate an appropriate
adjustment in the royalty rate applicable to sales of Licensed
Products made thereafter.
4.3. Record-Keeping and Reporting.
(a) Licensee shall keep and shall cause its sublicensees to keep
true and accurate books of account concerning the Licensed
Products. Licensee shall render a statement within thirty (30)
days after the end of each calendar quarter setting forth the
quantity of the Licensed Products sold during the during the
quarter and the Net Sales and amount of royalties due thereon.
The royalties due shall be paid in U.S. Dollars simultaneously
with the sending of the statement. The amount of royalty first
calculated in Japanese Yen shall be converted into U.S. Dollars
at the T/T selling price rate quoted by Tokyo-Mitsubishi Bank as
of five (5) working days prior to the date of remittance.
(b) Licensee shall permit Licensor's duly authorized representative,
reasonably acceptable to Licensee, to examine the
above-mentioned books of account
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relating to the Licensed Products at all reasonable business
hours to the extent and insofar as it is necessary to verify the
accuracy of the statement rendered by the Licensee pursuant to
Section 4.3(a) above.
(c) Licensor shall have the right to designate a firm of certified
public accountants, reasonably acceptable to Licensee, to audit
the above-mentioned books of account relating to the Licensed
Products in order to ascertain the accuracy of the statement
rendered by the Licensee pursuant to Section 4.3(a) above. The
expense of the audit shall be Licensor's unless the audit shall
demonstrate a discrepancy (in Licensee's favor) greater than
five percent (5%) between the royalties reported and paid and
those which were actually due, in which event the audit expenses
shall be borne by Licensee.
4.4. Payment.
(a) All payments under this Article 4 shall be made in U.S. dollars
by wire transfer deposited to Licensor's credit at such U.S.
bank as Licensor may from time to time designate.
(b) All taxes levied in accordance with the tax laws of Japan, or
any other country in which Licensed Products are sold under this
Agreement, on any payments to be made by the Licensee to the
Licensor hereunder (not including any taxes on Licensee's net
income) shall be borne by the Licensor. When, pursuant to such
tax laws, the Licensee is required to withhold such taxes and
pay them to the taxing authority on the Licensor's behalf, the
Licensee is hereby authorized to withhold and deduct such taxes
from the applicable payments to the Licensor, provided that the
Licensee shall furnish the Licensor with the tax receipts or
other evidence showing the payment of such taxes.
(c) Any amounts to be paid under this Agreement which are not paid
at the later of the date due or the expiration of any stated
grace period shall accrue interest from the date due until the
date paid at a rate equal to one percent (1%) plus the prime
rate as published by the Chase Manhattan Bank (N.A.), New York,
New York or any successor bank thereof.
5. ADDITIONAL LICENSE TERMS AND CONDITIONS
5.1. Cross-License to Covered Improvements.
If either party or its Affiliates develops or acquires any
Covered Improvements prior to the expiration or termination of
this Agreement, it will promptly disclose such Covered
Improvements to the other party, and the other party and its
Affiliates shall be deemed to have an irrevocable, nonexclusive
license to practice the same for the purpose of making, using
and selling Licensed Products. The license shall not include the
right to grant sublicenses. The license shall be royalty-free,
except as otherwise provided in this Agreement with respect to
Licensed Products sold by Licensee and its Affiliates. It is
understood that neither party makes any warranty or provides any
other assurance that any improvements will in fact be made.
5.2. ************************.
(a) Licensor and Licensee each agree that it will not, and will not
allow its Affiliates,
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during the term of this Agreement or at any time thereafter, to
assert against the other party or its Affiliates any Subject
Rights on account of the manufacture, use or sale by such other
party or its Affiliates of ****************************
**************************** on silicon carbide substrates,
provided that such substrates are manufactured by Licensor or
its Affiliates or acquired from third parties in accordance with
Section 5.2(e).
(b) Nothing in this Agreement shall obligate either party to
transfer or disclose to the other information concerning the
design, manufacture or other aspects of ********************
****************************** where such information is not
necessary to the manufacture of the Licensed Products.
(c) Except as otherwise provided in Section 5.2(d), this Section 5.2
constitutes a covenant to refrain from asserting certain rights
and not the grant of a license, and nothing herein shall
encumber the Subject Rights of either party or bind any assignee
thereof.
(d) In the event that either party or its Affiliates are joint
owners with any third party of Subject Rights which the third
party owner is entitled assert contrary to Section 5.2(a), then
the party to this Agreement which jointly owns such rights shall
grant the other party and its Affiliates a royalty-free,
nonexclusive license as provided in this paragraph, if and to
the extent the terms of such joint ownership permit such
licensing. The license shall be effective during the term of
this Agreement, shall not include the right to grant
sublicenses, and shall grant the right to practice such Subject
Rights to make, use and sell *********************************
********************* on silicon carbide substrates, provided
that such substrates are manufactured by Licensor or its
Affiliates or acquired from third parties in accordance with
Section 5.2(e).
(e) If a third party supplier (other than an Affiliate of Licensee)
extends a bona fide written offer to supply silicon carbide
substrates to Licensee or its Affiliates for use in
manufacturing *********************************************
*********** as described in this Section 5.2, Licensee and its
Affiliates may purchase the quantity offered by such supplier
pursuant to the offer, provided that (i) such third party
substrates meet or exceed the specifications of the
corresponding product offered by Licensor; (ii) Licensee gives
Licensor written notice of the terms of the third party offer
and Licensor does not, within thirty (30) days thereafter, agree
to supply such quantity at the price and in accordance with the
delivery schedule and other terms and conditions stated in the
third party offer, and (iii) the aggregate quantity of such
substrates (measured by nominal wafer area) purchased by
Licensee and its Affiliates from third party suppliers during
each period of twelve months following the Effective Date of
this Agreement does not exceed the aggregate quantity purchased
from Licensor during such period. Without limiting the
foregoing, if in Licensee's view such substrate products offered
by Licensor are noncompetitive with substrates offered by other
suppliers in respect of price or specifications, or Licensor is
unable to deliver substrates adequate to meet Licensee's
requirements for use in manufacturing ************************
******************** ***************, and in either case
Licensee furnishes Licensor reasonably adequate evidence of such
facts, then upon Licensee's request representatives of the
parties shall meet and in good faith discuss and endeavor to
agree upon an appropriate amendment to this Section
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5.2(e) or other action to address Licensee's reasonable
concerns.
5.3. Right of First Refusal on Wafer Manufacturing License.
(a) Licensor agrees that it will not, during the first three (3)
years of the term of this Agreement, grant to any third party
(other than an Affiliate of Licensor) any license to manufacture
silicon carbide substrates (including but not limited to bulk
growth of silicon carbide, any polish, wafering, wafer
refinishing or other pre-epitaxial process) within the Territory
except in compliance with this Section 5.3(a). Licensor will
first offer the license to Licensee in writing. If Licensee does
not accept the offer by written notice of acceptance received by
Licensor within ninety (90) days after Licensee receives the
offer, Licensor may at any time thereafter grant the license to
any third party provided that the terms of the license are no
more favorable than those previously offered to Licensee.
(b) Each party agrees that it will not, during the first three (3)
years of the term of this Agreement, grant to any third party
(other than its Affiliates), or permit its Affiliates to grant
to any third party (other than another Affiliate), any license
to make, use, sell or otherwise practice any Other LED
Technology (as defined below) within the Territory in the case
of Licensor, or outside the Territory in the case of Licensee,
except in compliance with this Section 5.3(b). The party
desiring to grant such license (the "offering party") shall
first offer the license to the other party in writing (the
"other party"). If the other party does not accept the offer by
written notice of acceptance received by the offering party
within thirty (30) days after the other party received the
offer, the offering party may at any time thereafter grant the
license to any third party, provided that the terms of the
license are no more favorable than those previously offered to
the other party. For purposes of this Section 5.3(b), the term
"Other LED Technology" means:
(i) improvements to blue LED die which are not within the
definition of Licensed Products and Covered Improvements;
(ii) technology for *****************************************;
and
(iii) other LED product technology.
5.4. Representations and Warranties of Licensor.
(a) Licensor warrants and represents:
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<PAGE>
(i) that it has the entire right, title and interest in and to the
Patent Rights;
(ii) that to the best of its knowledge there are no known
outstanding claims or licenses or other encumbrances upon such
Patent Rights, except as otherwise disclosed in Section
2.3(e);
(iii) that the Patent Rights are the only patents or patent
applications now owned or controlled by the Licensor which
cover the Licensed Products and/or the making, using or
selling of the Licensed Products within the Territory; and
(iv) that Licensor has no information which would, in its opinion,
render any of the claims of any of the Patent Rights invalid
and/or unenforceable.
(b) Licensor warrants and represents that it has no knowledge of any
patent, Japan or foreign (other than the Patent Rights) owned or
controlled by anyone which:
(i) covers the Licensed Products, and/or
(ii) would prevent the Licensee from making, using or selling
the Licensed Products
(c) Licensor warrants and represents that it has full right and
authority to disclose all Subject Technology which is disclosed to
Licensee hereunder and to grant to Licensee the right to use said
Subject Technology within the Territory as provided in this
Agreement, and further warrants that it is aware of no claim in or
to any present Subject Technology nor any residuary right therein
by any third party whether governmental agency, educational
institution, corporation or private person.
(d) Licensor further warrants that the Subject Technology to be
furnished to Licensee pursuant to Article 3 shall be the same as
that used by Licensor for the manufacture of Licensed Products at
the time of furnishing thereof.
6. INFRINGEMENTS
6.1. Infringement by Third Parties.
(a) Each party shall advise the other promptly upon becoming aware of
any infringement by a third party of any Patent Right within the
Territory. The Licensor shall, within reasonable limits and at its
own discretion, promptly take such action (legal or otherwise) as
is required to restrain such infringement. The Licensee shall
cooperate fully with the Licensor, at the latter's reasonable
expense, in the Licensor's effort to restrain such infringement.
The Licensee may be represented by counsel of its own selection at
its own expense in any suit or proceeding brought to restrain such
infringement, but the Licensor shall have the right to control the
suit or proceeding and obtain all benefits in the recoveries
resulting from such suit or proceeding, whether by judgment,
award, decree or settlement.
(b) If, within sixty (60) days of the Licensee's giving notice to the
Licensor of any third party infringement within the Territory, the
Licensor fails to institute an
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<PAGE>
infringementaction or proceeding that the Licensee reasonably feels
is required, the Licensee shall have the right at its own
discretion at any time thereafter to institute an action or
proceeding in the Territory for infringement of any of the claim or
claims of the Patent Rights. It is agreed that in such event the
Licensee or its sublicensee may institute any such suit in its own
name or in the names of each party to this Agreement (subject, in
the case of Licensor, to its prior written consent which shall not
be unreasonably withheld) and the Licensee shall bear the expense
of any such suit or suits and shall obtain all of the benefits in
the recoveries resulting therefrom, whether by judgment, award,
decree or settlement. Should the Licensee bring any such suit or
proceeding, the Licensor shall cooperate in all reasonable ways
with the Licensee in such suit or proceeding at the Licensee's
expense.
(c) Both the parties hereto may mutually agree to bear equally the
costs and expenses in any such suit or proceeding. If the parties
so agree, they shall share equally in any and all benefits in the
recovery whether by judgment, award, decree or settlement.
6.2. Infringement of Third Party Rights.
(a) If any third party claims or institutes legal action against the
Licensee alleging that the manufacture, sale, or use of the
Licensed Products under the license conferred by this Agreement
infringes patent rights of such third party, the Licensee shall
promptly notify the Licensor in writing of such claim or action.
(b) Upon such notice, the Licensor and the Licensee shall consult and
discuss whether it would be reasonable to bring or defend any suit
or proceeding concerning infringement of a third party's patent in
the Territory or whether other measures should be undertaken in
order to avoid the time and expense inherent in any such suit or
proceeding. Both parties shall have the right to participate, at
their own expense and through counsel of their own choosing, in any
settlement discussions relating to, or the defense of, any claim of
infringement lodged as a consequence of the Licensee's marketing of
Licensed Products within the Territory under the license conferred
by this Agreement.
(c) Should the Licensee or its sublicensees be required either by
judgment, award or decree, or by settlement consented to by the
Licensor (which consent shall not be unreasonably withheld) to make
royalty payments to a third party (other than an Affiliate of
Licensee) as a consequence of any claim that the Licensee's or its
sublicensees' marketing of the Licensed Products in a country
within the Territory, under the license conferred by this
Agreement, infringes patent rights of such third party, it is
agreed that the running royalties due and payable to the Licensor
under this Agreement for the manufacture, use and sale of the
Licensed Products in such country shall be reduced by an amount
equal to that which the Licensee or its sublicensees are required
to pay said third party; provided, that (i) Licensee promptly
notifies Licensor in writing of any such claim of infringement,
(ii) Licensee cooperates fully with the Licensor, at the Licensee's
expense, in the defense thereof, and (iii) Licensee allows the
Licensor to control the defense to such claim and any settlement
discussions relating thereto.
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<PAGE>
7. CONFIDENTIAL INFORMATION
7.1. Definition and Identification.
(a) "Confidential Information" means any information concerning the Subject
Technology received by one party (the "receiving party") from the other
party or its Affiliates (the "disclosing party"), including but not
limited to processes and process parameters, methods, practices,
techniques, designs, technical plans, algorithms, computer programs and
related documentation, supplier lists, marketing plans, research and
development strategies, evaluation of relevant technologies, and any
other information relating to the development, design, engineering,
testing, manufacture, marketing, use of, or to methods and apparatus
related to the manufacture or use of, the Licensed Products, which the
receiving party has been informed or has a reasonable basis to believe
is confidential to the disclosing party.
(b) "Confidential Information" shall not extend to information which: (i)
was known to the receiving party prior to receipt from the disclosing
party; (ii) was lawfully available to the public prior to receipt from
the disclosing party; (iii) becomes lawfully available to the public
after receipt from the disclosing party, through no act or omission on
the part of the receiving party; (iv) corresponds in substance to any
information received in good faith by the receiving party from any
third party without restriction as to confidentiality; or (v) is
independently developed by an employee or agent of the receiving party
who has not received or had access to such information.
(c) Information which the disclosing party wishes to have treated as
Confidential Information under this Agreement shall be identified at
the time of disclosure as "confidential" by marking, or in the case of
oral disclosures, shall be confirmed as such in writing within thirty
(30) days following the oral disclosure. However, if not so identified,
the receiving party before making use of any such information that
could reasonably be assumed to be Confidential Information for any
purpose, other than exercise of the licenses granted hereunder or the
performance of this Agreement, shall inquire of the disclosing party as
to the status of such information and shall designate and treat the
same as Confidential Information if so requested.
(d) In the event that visiting personnel are present on the premises of the
host party, all information of the host party received or learned by
the visiting personnel shall be treated as Confidential Information of
the host party, regardless of whether such information is related to
the Subject Technology or marked or otherwise identified as
confidential.
7.2. Confidentiality Obligations.
(a) Each party agrees to maintain received Confidential Information in
confidence and not to use such Confidential Information for any purpose
other than exercise of the licenses granted hereunder and the
performance of this Agreement. Neither party shall disclose any
Confidential Information without the prior written approval of the
disclosing party, except as required to comply with any order of a
court or any applicable rule, regulation or law of any jurisdiction or
as provided in Section 10.1. In the event that a receiving party is
required by judicial or
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administrative process to disclose Confidential Information of the
disclosing party, it shall promptly notify the disclosing party and to
the extent permitted by the circumstances allow the disclosing party a
reasonable time to oppose such process.
(b) Each party shall protect Confidential Information of the other by using
the same degree of care, but not less than a reasonable degree of care,
to prevent unauthorized disclosure or use as that party uses to protect
its own confidential information of like nature. Within each party and
their respective Affiliates, Confidential Information shall be
disclosed only to employees to whom disclosure is reasonably necessary
to the exercise of the licenses granted hereunder or the performance of
this Agreement. Each party shall limit the number of copies made of any
item of received Confidential Information.
(c) Each party shall appropriately notify each employee, agent or
consultant to whom any disclosure of received Confidential Information
is made and shall obtain their agreement that they will maintain
Confidential Information in confidence in accordance with the
provisions set forth herein. Each party represents and warrants to the
other that its employees, agents and consultants to whom any disclosure
of received Confidential Information is made shall be subject to a
valid, binding and enforceable agreement to maintain such Confidential
Information in confidence in accordance with the provisions set forth
herein.
7.3. Survival.
The obligations of confidentiality set forth in this Article 7 shall
continue for so long as the Confidential Information continues to come
within the definition thereof set forth in Section 7.1 and shall
survive the expiration or any termination of this Agreement.
8. TERM AND TERMINATION
8.1. Term.
(a) This Agreement shall become effective on the Effective Date first above
written.
(b) This Agreement shall continue to be effective for a period of seven (7)
years from the Effective Date, unless this Agreement is sooner
terminated pursuant to other provisions of this Agreement.
8.2. Termination.
If one or more of the following events shall have occurred and be
continuing:
(a) one party shall at any time commit a breach of any of the terms and
conditions of this Agreement, or the Supply Agreement executed
concurrently herewith, and shall fail to remedy such breach within
thirty (30) days after written notice thereof from the other party; or
(b) one party shall be dissolved, liquidated or declared insolvent or
bankrupt; or
(c) any representation or warranty made by one party in this Agreement
shall prove to have been incorrect or misleading in any material
respect when made;
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<PAGE>
then and in any such event, the other party shall have the right
forthwith to terminate this Agreement by written notice thereof to the
defaulting party, to take effect immediately upon such notice, without
prejudice to any other rights and remedies conferred by this Agreement
or by law.
8.3. Rights after Termination.
After termination, each party shall retain the right to use Subject
Technology licensed to it hereunder to make, use and sell Licensed
Products in accordance with the terms and conditions and subject to the
limitations set forth in this Agreement, except that in case of
termination for breach pursuant to Section 8.2 the breaching party
shall not retain nor have such rights and except that in case of
termination under Section 13.11 neither party shall retain nor have
such rights.
9. LIMITATION OF LIABILITY
Except as expressly provided otherwise in this Agreement, neither party shall
under any circumstances be liable to the other for indirect, incidental,
special or consequential damages (including, but not limited to, loss of
profits, revenue or business) resulting from or in any way related to this
Agreement, or the termination of this Agreement, or arising out of or alleged
to have arisen out of breach of this Agreement or the exercise of any license
granted hereunder. This limitation applies regardless of whether such damages
are sought based on breach of contract, warranty, negligence, strict
liability or other legal theory.
Without limiting the foregoing, except as expressly provided otherwise in
this Agreement, Licensor shall have no liability whatsoever to Licensee or
any third parties for or on account of any injury, loss or damage, of any
kind or nature, sustained by, or any damage assessed or asserted against, or
any other liability incurred by or imposed upon Licensee or any other person
or entity, arising out of or in connection with or resulting from the
manufacture, use or sale of the Licensed Products or use of the Licensed
Processes or other Subject Technology, or any advertising or other
promotional activities with respect to any of the foregoing.
10. ADDITIONAL UNDERTAKINGS
10.1. Confidentiality of Terms.
The parties agree that the terms of this Agreement shall be treated as
Confidential Information of each other subject to Article 7; provided,
however, that either party may, upon notice to the other, make such
public disclosures regarding this Agreement as in the opinion of
counsel for such party are required by applicable securities laws or
regulations.
10.2. Publicity.
The parties agree to cooperate in the preparation of a mutually
acceptable joint press release announcing the relationship established
hereby, to be issued promptly following execution of this Agreement,
but shall otherwise make no public announcement regarding the terms of
this Agreement.
10.3. Patent Marking.
Licensee agrees to use reasonable efforts to ensure that Licensed
Products sold by it and its sublicensees are marked in accordance with
applicable patent laws with the number of
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<PAGE>
any appropriate patents included in the Licensed Rights.
10.4. Use of Trademarks, Etc.
Licensee agrees that it will not, without the prior written consent of
Licensor, (i) use in advertising, publicity or otherwise in connection
with any Licensed Products sold under this Agreement, any trade name,
trademark, trade device, service mark, or symbol owned by Licensor or
its Affiliates; or (ii) represent, either directly or indirectly, that
any product of Licensee or its sublicensees is a product manufactured
by Licensor or its Affiliates, or vice versa.
10.5. Export Regulation.
Licensee agrees to comply in all respects with all applicable laws and
regulations of the United States government or any agency thereof
pertaining to exports.
11. ASSIGNMENT
Neither this Agreement nor any of the rights or obligations created herein
is assignable by either of the parties hereto without the prior written
consent of the other party, except to a successor to its entire business or
of substantially all of its assets relating to the manufacture, use, sale or
other disposal of the Licensed Products, provided, however, that any such
assignment shall require the delivery to the other party of the assignee's
written agreement to accept such assignment and be bound by this Agreement.
Any purported assignment in violation of this paragraph shall be void. No
assignment shall relieve the assignor of responsibility for the performance
of its obligations hereunder.
12. FORCE MAJEURE
If the performance of this Agreement or any obligations under this Agreement
is prevented, restricted, or interfered with by reason of fire, flood,
explosion, or other casualty, accident, or act of God; strikes or labor
disturbances; war, whether declared or not, or other violence; sabotage; any
law, or order, proclamation, regulation, ordinance, demand, or requirement
of any government agency; or any other event beyond the reasonable control
of the parties, whether similar or dissimilar to the foregoing and whether
or not foreseen, the affected party, upon giving prompt notice to the other
party, shall be excused from such performance to the extent of such
prevention, restriction or interference. The affected party shall use its
reasonable efforts to avoid or remove such cause of non-performance or to
limit the impact of the event on such party's performance and shall continue
performance with the utmost dispatch whenever such causes are removed.
13. GENERAL
13.1. Notices.
All notices under this Agreement shall be in writing and sent by
prepaid airmail post, by reputable courier service, or by facsimile
message (with a confirmation copy concurrently dispatched by prepaid
airmail post or courier service), to the addresses of the respective
parties as set forth by their signatures below or to such other
address as the party may hereafter specify by written notice so given.
Notices shall be effective upon receipt at the location of the
specified address.
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<PAGE>
13.2. Authority; No Conflicting Obligations; Governmental Approval.
(a) Each party warrants that its has all requisite power and authority to
enter into and perform this Agreement, and that it has no agreement
with any third party or commitments or obligations which conflict in
any way with its obligations hereunder. Each party agrees during the
term of this Agreement not to enter into any agreement, commitment or
obligation in conflict with its obligations under this Agreement.
(b) Each party warrants to the other that all approvals of any
governmental agency required for such party to enter into and perform
its obligations under this Agreement have been obtained prior to the
execution hereof.
13.3. Relationship of the Parties.
The relationship of the parties under this Agreement is intended to be
that of independent contractors. Nothing herein shall be construed to
create any partnership, joint venture or agency relationship of any
kind. Neither party has any authority under this Agreement to assume
or create any obligations on behalf of or in the name of the other
party or to bind the other party to any contract, agreement or
undertaking with any third party.
13.4. Dispute Resolution.
Any disputes or claims arising from this Agreement or its breach shall
be submitted to and resolved exclusively by arbitration conducted in
accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce. The arbitration shall be conducted
by three (3) arbitrators appointed in accordance with such rules. The
place of arbitration shall be in San Francisco, California. An award
rendered in the arbitration shall be final and binding upon the
parties and judgment may be entered thereon in any court of competent
jurisdiction. The arbitrators shall apply the laws specified in this
Agreement in determining the rights, obligations and liabilities of
the parties and shall not have the power to alter, modify, amend, add
to or subtract from any term or provision of this Agreement nor to
rule upon or grant any extension, renewal or continuance of this
Agreement, nor to award damages or other remedies expressly prohibited
by this Agreement, nor to grant injunctive relief, including interim
relief, of any nature, notwithstanding any contrary provisions of the
Rules of Conciliation and Arbitration specified above. If, under
applicable law, this arbitration provision is not enforceable as to a
particular claim brought by one party against the other, then legal
proceedings involving only that claim may be instituted solely in the
United States District Court of the Eastern District of North Carolina
or, if such court may not exercise jurisdiction, a court of the State
of North Carolina. For all purposes of this Agreement, all parties
hereby irrevocably consent to the jurisdiction of such court and waive
any defense based on improper or inconvenient venue or lack of
personal jurisdiction.
13.5. Severability.
If any provision of this Agreement is found invalid or unenforceable,
the remaining provisions will be given effect as if the invalid or
unenforceable provision were not a part of this Agreement.
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<PAGE>
13.6. Amendments; Waiver.
This Agreement may not be amended except in a writing signed by the
authorized representatives of both parties. No waiver of any provision
of this Agreement shall be effective unless made in writing and signed
by the party sought to be charged therewith. The failure of either
party to enforce any provision of this Agreement shall not constitute
or be construed as a waiver of such provision or of the right to
enforce it at a later time.
13.7. Enforcement Costs.
The prevailing party in any arbitration or judicial action brought to
enforce the provisions of this Agreement shall be entitled to recover
its costs and expenses, including reasonable attorneys' fees, incurred
in filing and prosecuting or defending such action.
13.8. Governing Law.
This Agreement shall be governed by and construed in accordance with
the laws of the State of North Carolina, without regard to conflicts
of laws principles.
13.9. Construction.
The captions contained in this Agreement are for reference only and
shall not be used in its construction or interpretation. The
provisions of this Agreement shall be construed and interpreted fairly
to both parties without regard to which party drafted the same.
13.10. United Nations Convention.
The United Nations Convention on Contracts for the International Sale
of Goods shall not apply to this Agreement.
13.11. Fair Trade Commission Action.
In the event that the Fair Trade Commission of Japan should advise or
recommend modification, amendment and/or deletion of any terms and
conditions of this Agreement pursuant to the "Law relating to
Prohibition of Private Monopoly and Methods of Preserving Fair Trade"
of Japan, Licensee shall immediately inform Licensor in writing of
such advice or recommendation and the parties hereto agree to
negotiate in good faith to modify, amend, and/or delete the terms and
conditions concerned in this Agreement in accordance with the said
advice or recommendation. In the event that the parties are unable to
agree in writing within thirty (30) days after Licensee informs
Licensor of the action of the Fair Trade Commission, either of the
parties hereto may upon written notice to the other terminate this
Agreement without incurring any liability.
13.12. Entire Agreement.
This Agreement sets forth the entire agreement between the parties
with respect to the subject matter hereof and supersedes all previous
agreements and understandings between the parties, whether oral or
written, relating to such subject matter.
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IN WITNESS WHEREOF, the parties, through their respective duly authorized
officers, have executed this Agreement to be effective as of the Effective Date
set out in the preamble hereto.
CREE RESEARCH, INC. SHIN-ETSU HANDOTAI CO. LTD.
By /s/ F. Neal Hunter By /s/ Ryuichi Hiraishi
--------------------------------- -------------------------------
Name F. Neal Hunter Name Ryuichi Hiraishi
--------------------------------- ------------------------------
Title President Title Director
--------------------------------- ----------------------------
Date September 30, 1996 Date
---------------------------------- ----------------------------
Address for Notices Address for Notices
Cree Research, Inc. Shin-Etsu Handotai Co. Ltd.
2810 Meridian Parkway, Suite 176 Togin Bldg.
Durham, North Carolina 27713 4-2, Marunouchi 1-chome, Chiyoda-ku
USA Tokyo 100, Japan
Attention: President Attention: Director,
Fax No: (919) 361-4630 Compound Semiconductor
-----------------------
Fax No: 03-3214-0017 Division
--------------------------
IN WITNESS WHEREOF, SUMITOMO CORPORATION, a corporation organized and existing
under the laws of Japan, and SUMITOMO CORPORATION OF AMERICA, a corporation
organized and existing under the laws of the State of New York, acting through
their respective duly authorized officers, have executed this Agreement below
and, for good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, do hereby covenant and agree to be bound in the same
manner as the parties hereto by the provisions of Article 7 and Section 10.1 of
this Agreement.
SUMITOMO CORPORATION OF AMERICA SUMITOMO CORPORATION
By /s/ Toshiaki Matsuo By /s/ K. Takaishi
------------------------------ ----------------------------
Name Toshiaki Matsuo Name K. Takaishi
---------------------------- --------------------------
Title Senior Vice President & Gen. Mgr. Title General Manager
--------------------------------- -------------------------
Date September 30, 1996 Date Electronic Materials &
--------------------------------- Equipment Dept.
-------------------------
Address for Notices Address for Notices
Sumitomo Corporation of America Sumitomo Corporation
345 Park Avenue 2-2, Hitotsubashi 1-chome, Chiyoda-ku
New York, New York 10154 Tokyo 100, Japan
USA General Manager
Attention: Michael Vitale Attention: Electronic Materials &
------------------------------ Equipment Dept.
Fax No: 415-984-3365
------------------------------ Fax No: 03-3217-6802
----------------
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SCHEDULE 1
Licensed Products and Processes
A. Licensed Products
The Licensed Products are blue LED die products which:
(1) are made on silicon carbide substrates,
(2) contain epitaxial layers comprised solely of
AlXGa(1-X)N,
(3) contain an insulating buffer between the substrate and
the epitaxial layers, and
(4) are produced using the Licensed Processes (not including
any Excluded Technology as described in Schedule 2).
The Licensed Products include but are not limited to those
conforming to the specifications for Licensor's DH-85 LED die
product as set forth in Attachment A hereto.
The Licensed Products shall also include any improved version
thereof made by Licensor during the term of this Agreement where the
improvements consist of Covered Improvements.
B. Licensed Processes
The Licensed Processes are (i) the processes necessary to perform
MOCVD epitaxial deposition on silicon carbide substrates as a step
in manufacturing the Licensed Products and (ii) the processes
necessary to fabricate and test the Licensed Products on silicon
carbide substrates having epitaxially deposited layers.
The Licensed Processes include the processes described above only
insofar as the same are in use by Licensor at the Effective Date and
as they may be improved by Licensor during the term of this
Agreement to allow the manufacture of Licensed Products that
incorporate Covered Improvements.
C. Covered Improvements
The Covered Improvements consist of the substitution of a conductive
buffer layer for the insulating buffer layer used between the
silicon carbide substrate and the gallium nitride layers in the
Licensed Product and any improvements made to the Licensed Processes
to allow for the manufacture of Licensed Products containing such a
conductive buffer layer.
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<PAGE>
SCHEDULE 2
Excluded Technology
"Subject Technology" as used in this Agreement does not include any information
concerning:
1. Bulk growth of silicon carbide.
2. Any polish, wafering, wafer refinishing or other pre-epitaxial
process other than wafer surface preparation steps necessary to
manufacture Licensed Products.
3. Any epitaxial deposition process other than those necessary to
manufacture the Licensed Products.
4. Any laser diode technology.
5. Design, manufacture or other aspects of ****************************
where such information is not necessary to the manufacture of the
Licensed Products.
6. Any information other than information which a party is lawfully
entitled to communicate to the other party for its use without
breaching any restrictions on use or disclosure owed to third
parties.
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SCHEDULE 3
Technology Transfer Services
A. Technical Documentation
Promptly following the Effective Date of this Agreement and in any
event not later than the number of days after the Effective Date
specified in the following schedule, Licensor will deliver to
Licensee the following documentation describing the Subject
Technology:
Not later than sixty (60) days after the Effective Date:
1. Listing of equipment manufactured by third parties
(including the manufacturer and model designation) used
by Licensor to perform epitaxial deposition on SiC
substrates as a step in manufacturing the Licensed
Products.
2. Listing of equipment manufactured by third parties
(including the manufacturer and model designation) used
by Licensor fabricate the Licensed Products on coated
substrates.
3. Descriptions and/or drawings and parts listings for any
modifications made by Licensor to the equipment listed
in Items 1 and 2 above for purposes of manufacturing the
Licensed Products, including a description of any
special maintenance needs of such modified equipment
known to Licensor.
4. Descriptions and/or drawings and parts listings for any
custom-built equipment used by Licensor in the Licensed
Processes, including a description of any special
maintenance needs of such equipment known to Licensor.
5. Drawings depicting the layout of those portions of
Licensor's production facilities in which the Licensed
Processes are performed.
6. Descriptions of the Licensed Processes, including all
process parameters and equipment settings used by
Licensor in performing the Licensed Processes, and the
specifications of all substrates, both with and without
epitaxial coatings, used by Seller for its own internal
production of Licensed Products.
Not later than one hundred eighty (180) days after the Effective
Date:
7. Descriptions of all standard testing procedures
performed by Licensor on Licensed Products before
shipment.
8. Such documents (if any) as Licensor may have prepared to
meet the requirements of the ISO-9000 standard with
respect to the manufacturing operations for the Licensed
Products.
B. Technical Assistance with Chip Fabrication Process
1. Prior to ordering equipment necessary for chip
fabrication, representatives of Licensee will visit
Licensor's facilities and shall be permitted access to
those portions of the facilities in which Licensor
fabricates and tests Licensed Products. Such access
shall be permitted for the purpose of observing
operation of the Licensed Processes. There shall
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<PAGE>
be one (1) such visit, which shall include up to four
(4) Licensee representatives and shall extend up to five
(5) working days.
2. Representatives of Licensee will visit Licensor's
facilities for the purpose of training Licensee's
personnel for the start-up of Licensee's operations with
respect to fabrication and testing of Licensed Products.
There shall be one (1) such visit, which shall include
up to four (4) Licensee representatives and shall extend
up to five (5) working days.
3. Representatives of Licensor will visit Licensee's
facilities to provide technological assistance for the
manufacture of Licensed Products. There shall be one (1)
such visit, which shall include up to two (2) Licensor
representatives and shall extend up to five (5) working
days.
C. Technical Assistance with Epitaxial Deposition Process
1. Prior to ordering equipment necessary for epitaxial
deposition, representatives of Licensee will visit
Licensor's facilities and shall be permitted access to
those portions of the facilities in which Licensor
performs epitaxial deposition the manufacture of
Licensed Products. Such access shall be permitted for
the purpose of observing operation of the Licensed
Processes. There shall be one (1) such visit, which
shall include up to four (4) Licensee representatives
and shall extend up to five (5) working days.
2. A representative of Licensee experienced in epitaxial
deposition will visit Licensor's facilities for the
purpose of being trained in the operation of the MOCVD
reactor and other equipment used for epitaxial
deposition in manufacturing Licensed Products. There
shall be one (1) such visit, which shall extend up to
six (6) weeks.
3. If requested by Licensee, and subject to mutual
agreement of the parties as to price, delivery and other
terms, Licensor will acquire and deliver to Licensee an
MOCVD reactor for use in manufacturing Licensed
Products. Prior to delivery to Licensee, Licensor shall
make or have the manufacturer make all modifications
necessary for use of the reactor in manufacturing
Licensed Products and will make the modified reactor
available for inspection by Licensee of its performance
at a site within the United States. Upon acceptance of
the modified reactor by Licensee, Licensor will arrange
for the manufacturer to deliver and install the reactor
at Licensee's facilities.
4. Representatives of Licensor will visit Licensee's
facilities to provide technological assistance with
manufacturing epitaxial wafers as a step in
manufacturing the Licensed Products. There shall be one
(1) such visit, which shall include up to two (2)
Licensor representatives and shall extend up to ten (10)
working days.
D. Terms and Conditions Applicable to Visits
Visits by one party's representatives to the facilities of the other
party pursuant to this Schedule shall be conducted in accordance
with and subject to the following:
1. Visits shall be scheduled at Licensor's and Licensee's
mutual convenience. Licensee shall make a request to
Licensor at least fifteen (15) days in advance of the
proposed visit for each visit to be scheduled.
2. Each party may require that representatives of the other
party granted access to its facilities agree in writing
to maintain all Confidential Information learned during
the visit in
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confidence under terms at least as strict as those
provided in this Agreement. Each party reserves the
right to preclude or restrict photographing of its
facilities during visits.
3. In connection with such visits each party shall be
solely responsible for:
(a) all salaries, travel and related expenses of its
visiting personnel; and
(b) any injury or damage sustained by them whether or not in
connection with such visit; and
(c) any damage or injury which may be caused by them to the
visited facilities or its employees by reason of their
negligence or intentional misconduct.
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SCHEDULE 4
License Fee and Royalties
A. License Issue Fee
The license issue fee to be paid under Section 4.1 shall be due and
payable in installments in the amounts and on the dates shown below:
Upon execution of this Agreement $ 700,000
December 31, 1996 $ 500,000
March 31, 1997 $ 500,000
June 30, 1997 $ 500,000
June 30, 1998 $ 500,000
The installment payments may be paid without interest at any time
within thirty (30) days after the date due.
B. Royalties
The royalties to be paid under Section 4.2 shall be due with respect
to all sales of Licensed Products by Licensee and its Affiliates and
any other sublicensees during the period ending seven (7) years
after the Effective Date of this Agreement.
The royalty shall be equal to ***************** percent
(**********%) multiplied times the difference between (i) the Net
Sales of Licensed Products by Licensee and its sublicensees minus
(ii) the Net Sales to Licensee and its sublicensees of materials
supplied by Licensor for use in the manufacture of Licensed
Products.
Sample quantities (up to an aggregate of 50,000 die) sold prior to
the commencement of commercial production of Licensed Products by
Licensee will not be subject to the royalty. Such sales shall
nonetheless be reported on the reports to be submitted under Section
4.3.
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Information in attachment omitted in its entirety and ATTACHMENT A
filed separately with the Commission pursuant to a
confidential treatment request under Rule 24b-2 of the Commission.
C430-DH85 PRODUCT SPECIFICATIONS
