<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 period ended March 31, 1997
or
/ / Transition Report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
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Commission File number 000-21907
Racom Systems, Inc.
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(Exact name of small business issuer as specified in it charter)
Delaware 84-1182875
----------------------------- ---------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
6080 Greenwood Village, CO
Greenwood Village, CO 80111
(Address of principal executive offices)
(303) 771-2077
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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 No X
--- ---
There are 13,032,532 shares of the registrant's common stock, $.01 par
value outstanding as of April 30, 1997.
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RACOM SYSTEMS, INC.
FORM 10-QSB
INDEX
Part I Financial Information Page
Item 1. Condensed Balance Sheets as of
December 31, 1996 and
March 31, 1997 1
Condensed Statements of Operations
for the three months ended
March 31, 1996 and 1997 3
Condensed Statements of Cash Flows
for the three months ended
March 31, 1996 and 1997 4
Notes to Condensed Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II Other Information and Signatures 9
<PAGE>
RACOM SYSTEMS, INC.
CONDENSED BALANCE SHEETS
ASSETS DECEMBER 31, MARCH 31,
1996 1997
----------- -----------
(Unaudited)
Current Assets:
Cash and cash equivalents $314,202 $3,790,568
Accounts receivable 79,201 58,987
Accounts receivable-related party 33,558 15,797
Inventory 428,401 418,834
License revenue receivable-related party 646,162 170,890
Prepaid expenses and other - 102,928
----------- -----------
Total Current Assets 1,501,524 4,558,004
Property and Equipment:
Machinery and equipment 351,120 353,629
Furniture and fixtures 56,801 58,756
Leasehold improvements 3,328 3,328
----------- -----------
411,249 415,713
Less accumulated depreciation (260,364) (285,415)
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150,885 130,298
Investment in joint venture 257,736 162,705
Other Assets:
Technology license from related party,
net of accumulated amortization of
$684,898 and $724,309, respectively 1,715,102 1,675,691
Organization costs, net of accumulated
amortization of $24,873 and $25,730,
respectively 857 -
Debt issuance costs, net of accumulated
amortization of $8,788 and $106,587,
respectively 97,799 -
Deferred offering costs 161,948 -
----------- -----------
1,975,706 1,675,691
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$3,885,851 $6,526,698
----------- -----------
----------- -----------
The accompanying notes are an integral part of these condensed financial
statements.
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RACOM SYSTEMS, INC.
CONDENSED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
DECEMBER 31, MARCH 31,
1996 1997
----------- -----------
(Unaudited)
Current Liabilities:
Accounts payable and
accrued liabilities $631,425 $690,109
Accounts payable-related parties 552,298 34,333
Notes and interest payable-related party 1,029,596 -
Bridge notes payable 1,040,000 -
Capital lease obligation 1,331 1,068
Deferred license revenue-related party 93,397 93,397
----------- -----------
Total Current Liabilities 3,348,047 818,907
Deferred license revenue-related party 303,540 280,191
----------- -----------
Total Liabilities 3,651,587 1,099,098
Stockholders' Equity:
Preferred stock, no par value, 5,000,000
shares authorized, no shares issued
or outstanding - -
Common Stock, $.01 par value, 20,000,000
shares authorized, 13,032,532 shares
issued and outstanding 115,325 130,325
Additional paid-in capital 10,272,591 16,281,088
Accumulated deficit (10,153,652) (10,983,813)
----------- -----------
Total Stockholders' equity 234,264 5,427,600
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Total Liabilities and Stockholders' Equity $3,885,851 $6,526,698
----------- -----------
----------- -----------
The accompanying notes are an integral part of these condensed financial
statements.
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RACOM SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended March 31,
-------------------------
1996 1997
-------------------------
Revenues:
Product sales $147,775 $31,053
Product sales-related parties 6,311 17,416
Custom product development projects 500,000 -
License revenues-related party 466,984 223,365
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1,121,070 271,834
Cost of revenues 308,496 115,246
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Gross margin 812,574 156,588
Operating Expenses:
Research and development 96,994 256,409
General and administrative 240,817 177,179
Sales and marketing 224,373 211,204
Equity in loss of joint venture 324,980 95,031
Amortization expense 50,306 136,935
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937,470 876,758
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Loss from operations (124,896) (720,170)
Other expenses:
Interest expense - (39,716)
Interest expense-related parties (12,902) (17,405)
Interest income 3,701 2,625
Other (875) (55,495)
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Net loss $(134,972) $(830,161)
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Net loss per share $(0.01) $(0.07)
Weighted average common and common
equivalent shares outstanding 11,844,793 11,782,532
---------- ----------
---------- ----------
The accompanying notes are an integral part of these condensed financial
statements.
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RACOM SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
-------------------------
1996 1997
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<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $(134,972) $(830,161)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 75,498 65,319
Equity in loss of joint venture 324,980 95,031
Amortization of debt offering costs - 97,799
Loss of disposal of fixed assets 875 -
Decrease (Increase) in:
Prepaid expenses - (102,928)
Accounts receivable-trade 91,467 20,214
Accounts receivable-related party (9,452) 17,761
Inventory (143,336) 9,567
License revenue receivable - 475,272
Increase (decrease) in:
Accounts payable and accrued liabilities 134,478 58,684
Accounts payable-related parties 46,278 (517,965)
Deferred license revenue 466,984 (23,349)
Accrued interest - 39,102
Accrued interest-related party 12,465 17,405
--------- ----------
Net cash provided by (used in) operating activities 865,265 (578,249)
Cash Flows From Investing Activities:
Purchase of fixed assets (5,681) (4,464)
Proceeds from sale of fixed assets 596 -
Investment in joint venture (466,984) -
--------- ----------
Net cash used in investing activities (472,069) (4,464)
Cash Flows From Financing Activities:
Proceeds from issuance of common stock - 7,125,000
Payment of offering costs - (939,555)
Repayment on notes payable-related party - (2,126,103)
Payments on capital lease liability (177) (263)
--------- ----------
Net cash (used in) provided by financing activities (177) 4,059,079
Net Increase in Cash and Cash Equivalents 393,019 3,476,366
Cash and Cash Equivalents at Beginning of Period 512,435 314,202
--------- ----------
Cash and Cash Equivalents at End of Period $905,454 $3,790,568
--------- ----------
--------- ----------
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest - $ 39,102
Interest-related parties - 287,001
Income taxes - -
</TABLE>
The accompanying notes are an integral part of these condensed financial
statements.
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RACOM SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1997
Note 1 - Basis of Presentation
The accompanying financial information of the Company at March 31, 1997
and for the period then ended and have been prepared from the books and
records of the Company without audit. The information is prepared
in accordance with the rules prescribed for filing condensed interim
financial statements and, accordingly, does not include all disclosures
that may be necessary for complete financial statements prepared in
accordance with generally accepted accounting principles. The disclosures
presented are sufficient, in management's opinion, to make the interim
information presented not misleading. All adjustments, consisting of
normal recurring adjustments, which are necessary so as to make the interim
information not misleading, have been made. Results of operations for the
three months ended March 31, 1997 are not necessarily indicative of results
of operations that may be expected for the year ending December 31, 1997.
It is recommended that this financial information be read with the complete
financial statements included in the Company's Form 10-KSB for the year
ended December 31, 1996 previously filed with the Securities and Exchange
Commission.
Note 2 - Net Loss Per Common and Common Equivalent Share.
Net loss per common and common equivalent share has been computed based
upon the weighted average number of common shares and common share
equivalents outstanding. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, common stock and common stock equivalent
shares issued by the Company at prices below the initial public offering
price during the twelve month period prior to the offering (using the
treasury stock method for common stock equivalents at an assumed offering
price of $4.75 per share) have been included in the calculation as if
they were outstanding for all periods presented regardless of whether they
were antidilutive.
Note 3 - New Accounting Standard
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share", which supersedes Accounting Principles Board Opinion No. 15,
"Earnings per Share". SFAS No. 128 is effective for annual and interim
periods ending after December 15, 1997 and simplifies the computation of
earnings per share by replacing the presentation of primary earnings per
share with a presentation of basis earnings per share. SFAS No. 128
requires dual presentation of basic and diluted earnings per share by
entities with complex capital structures. Basic earnings per share
includes no dilution and is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential
dilution of securities that could share in the earnings of an entity. The
Company does not believe that its loss per share calculations will be
materially affected as a result of adopting SFAS No. 128.
Note 4 - Tripartite Agreement
The Company signed an agreement with Ramtron International Corporation
("Ramtron") and Intag International Limited ("Intag") to significantly
increase the availability of Ramtron's ferroelectric random access memory
(FRAM) technology for use in radio frequency identification (RFID) markets
and applications. The agreement replaces all existing licensing, supply
and memorandum of understanding agreements between the parties. Under the
agreement, the Company retained its rights to sublicense Ramtron's
ferroelectric technology for use in ferroelectric RFID products to no more
than five (5) parties pursuant to Ramtron's approval of such sublicensee.
The Company has, to date, sublicensed such technology to two separate
companies. Ramtron has agreed to coordinate its own licensing of FRAM
technology, including the licensing of FRAM technology for use in RFID
applications with the Company, until such time as the Company completes
its five sublicensing agreements. The parties to the agreement have agreed
to share, with certain limitations, future licensing and royalty revenues
associated with such ferroelectric RFID licensing activities. In addition,
Ramtron granted the Company the right to purchase certain agreed upon
percentages of its FRAM product manufacturing capacity.
Note 5 - Subsequent Events
On May 7, 1997, Racom Japan ("RJ") sold 3,020 shares of its stock to third
parties reducing the Company's ownership to 22.8%. During the second
quarter the Company will recognize its proportionate share of the deferred
revenue related to this transaction.
Page 5
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The results of operations for the quarter ended March 31, 1997 are not
necessarily indicative of the Company's expected performance for any
future period. Information contained herein is supplemental to the
Company's annual report on Form 10-KSB for the year ended December 31, 1996 and
the Company's Prospectus declared effective on March 12, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Investors should carefully consider the following information as well as
other information contained in this Report before making an investment in the
Common Stock. Information contained in this Report contains "forward-looking
statements" which can be identified by the use of forward-looking terminology
such as "believes," "expects," "may," "should" or "anticipates" or the negative
thereof or other variations thereon or comparable terminology, or by discussions
of strategy. No assurance can be given that the future results covered by the
forward-looking statements will be achieved. The following matters constitute
cautionary statements identifying important factors with respect to such
forward-looking statements, including certain risks and uncertainties, that
could cause actual results to vary materially from the future results covered in
such forward-looking statements. Other factors could also cause actual results
to vary materially from the future results covered in such forward-looking
statements.
The Company is a leading developer and marketer of contactless smart card
systems ("Smart Card(s)") used primarily in electronic commerce. Generally the
size of a credit card, Smart Cards are used in a number of consumer applications
including (i) access to restricted areas (replacing keys and identification
cards), (ii) public transportation fare collection (replacing bus tokens, taxi
cab charge cards, airline or railway tickets and the like), (iii) point of sale
purchases (replacing cash or credit cards at cafeterias, newsstands and related
point of sale locations where speed of purchase is important), and (iv)
miscellaneous small monetary transactions (replacing coins and cash at parking
lots, in vending machines and public telephones, etc.). Smart Card technology is
also used in industrial applications by attaching a "tag" containing the Smart
Card technology to the manufactured product in order to track the product from
the assembly line through quality control, warehousing, inventory control,
distribution and warranty.
The Company principally generates revenues from licensing, fee based
custom product development projects and sale of its Smart Card products. In
the future, the Company anticipates that a substantial portion of its
revenues will be generated from custom product development projects and the
sale of its Smart Card products. If the Company is unable to continually
replace larger custom product development projects as these projects are
completed, its operations will be adversely affected. Custom product
development projects are billed in stages based on certain agreed upon
performance milestones. Accordingly, financial results for any calendar
quarter may fluctuate widely depending on the stage of a custom product
development project or the amount of licensing payments in a particular
quarter.
As reflected in the Company's Financial Statements, the Company has
generated substantial operating losses since inception and has yet to generate
sufficient revenues to fund its operations. To date, the Company has completed a
series of smaller scale projects; however, the Company has not yet completed a
significant number of larger projects, and as a result, it is uncertain whether
the Company will be able to successfully market and sell its Smart Card products
in sufficient quantities and at sufficient prices and volumes to fund its
operations. During 1995 and 1996, the Company experienced significant cash flow
deficits and liquidity shortages and funded its operations primarily through the
sale of nonexclusive sublicenses to its technology, through proceeds from the
sale of its Common Stock, through bridge loan borrowings and through borrowings
from affiliates.
During 1997, the Company anticipates that increased operating revenues will
be achieved through a combination of product sales, custom product development
projects and the sale of non-exclusive licenses. In addition, the Company
anticipates incurring increased operating and research and development
expenditures in order to further develop and market its Smart Card products.
Page 6
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1996
REVENUES. Revenues decreased $849,236 from $1,121,070 for the three months
ended March 31, 1996 ("Interim 1996") to $271,834 for the three months
ended March 31, 1997 ("Interim 1997"). Interim 1996 revenues reflect the
initial payment under a custom product development contract totaling
$500,000 and recognition of revenues on a license from RJ, the Company's
joint venture with Nittetsu Shoji Co., Ltd. for the manufacture and sale of
FRAM based radio frequency products in Japan of $466,984. The amount
received for the license was $933,968. At the time of sale, the Company
owned a 50% interest in RJ and, accordingly, 50% of this amount
(representing the Company's intercompany profit due to its 50% equity
ownership in RJ on the date of the sublicense) was deferred and is being
recognized over the life of the related technology license asset owned by
RJ, which is five years, commencing on the date of sale. Interim 1996
product revenues reflected a shipment of products totaling $59,000 to one
customer for the installation of an automatic fare collection system in
Macau. 1997 revenues reflect the final installment owed on a sublicense
granted by RJ to a Japanese Company, under which the Company is entitled to
50% of all sublicense revenue earned by RJ. The sublicense resulted in the
Company recognizing $200,016 in licensing revenues. Interim 1997 revenues
also include $23,349 of licensing revenues recognized from the deferral of
the RJ license in 1996 as discussed above.
COST OF REVENUES AND GROSS MARGIN. As a percentage of revenues, gross
margin decreased from 72.5% in interim 1996 to 57.6% in interim 1997. The
gross margin is primarily a result of license revenues which have no
associated cost of revenues. The Company has not generated high profit
margins on product sales in part because of competition the Company
encounters with Contacted Cards which typically are sold at a lower price
than the Company's Contactless Smart Cards. Cost of revenues in interim
1996 included $113,440 of costs associated with a custom product
development project.
RESEARCH AND DEVELOPMENT EXPENSES ("R&D"). R&D increased $159,415 from
$96,994 in interim 1996 to $256,409 in interim 1997. R&D efforts relating
to the Company's Smart Card products expanded significantly during 1996 and
interim 1997. In January 1996, the Company began work on a joint
development project with Bull CP8. Engineering personnel resources and
development costs totaling $113,440 were directly related to the project
and are included in cost of revenues for interim 1996.
GENERAL AND ADMINISTRATIVE EXPENSES ("G&A"). G&A decreased $63,638 from
$240,817 in interim 1996 to $177,179 in interim 1997. Wages and benefits,
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office expenses and travel and entertainment expenses did not increase
significantly between the interim periods. Interim 1996 included
approximately $68,000 for consulting on several projects, including the
development of the Tran$Cash Group, one vertical marketing approach
currently being pursued by the Company which focuses on full, turn-key,
entrepreneurial solutions for electronic fare and toll collection and
e-ticketing in major transportation markets.
SALES AND MARKETING EXPENSES. Sales and marketing expenses decreased
$13,169 from $224,373 in interim 1996 to $211,204 in interim 1997. Wages
and benefits between the interim periods increased by approximately $24,000
due to the hiring of the Vice President of Business Development in June
1996 and the hiring of a product line marketing director in February 1997.
Interim 1996 included approximately $21,000 for consulting fees related to
developing the Company's products for use in the airline industry. Interim
1996 also included the cost of approximately $18,000 of demonstration
equipment used in sales and marketing activities.
EQUITY IN LOSS OF JOINT VENTURE. At March 31, 1997, the Company owned 40%
of RJ, decreased from 50% as of March 29, 1996. RJ was formed in 1993 for
the purpose of marketing, distributing and supporting the Company's Smart
Card products to be sold in Japan. The Company accounts for its investment
on the equity method and has recorded its share of RJ losses in its
financial statements to the extent of capital invested in RJ by the Company.
The equity in the losses of RJ decreased $229,949 from $324,980 in interim
1996 to $95,031 in interim 1997. In interim 1996, the Company invested an
additional $466,984 in RJ. Subsequently, third parties also invested in RJ
thereby reducing the Company's ownership to 40%. During 1996, the Company
recognized $141,953 of previously unrecognized losses from the prior year
in excess of its investment through December 31, 1995. RJ's losses were
primarily related to ongoing research and development activities as well as
longer sales cycles and trial tests demanded by Japanese customers.
AMORTIZATION EXPENSE. The Company's primary asset is a technology license
("Technology License') related to the design and manufacture of its Smart
Card products. The asset is amortized over its estimated useful life on a
straight line basis. Interim 1997 also includes $96,667 of amortization of
debt issuance costs associated with the bridge loan financing upon
repayment of the debt in March 1997.
OTHER INCOME (EXPENSE). During interim 1996, the Company incurred $12,902
in interest expense on various notes payable to Intag. The notes were due
on demand and carried annual interest of 10%. During interim 1997, the
Company incurred $57,121 in interest expense on various notes payable to
Intag, Ramtron and a group of lenders. The notes to Intag carried interest
at 10% and the notes to Ramtron and the group of lenders carried interest
at prime plus 2%. The notes and accrued interest were paid during interim
1997 upon completion of the Company's initial public offering ("IPO").
Interim 1997 included approximately $26,000 in currency exchange losses
on the sub-licensing
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transaction completed with RJ. Interim 1997 also reflects approximately
$30,000 withheld from the sublicensing transaction completed with RJ for
a 3% Japanese consumption tax.
NET LOSS. The Company is a C Corporation under the Internal Revenue Code
and for income tax reporting purposes as of December 31, 1996, has
approximately $9,600,000 of net operating loss carryforwards that expire at
various dates through 2011. The Tax Reform Act of 1986 contains provisions
which may limit the net operating loss carryforwards available to the
Company in any given year if certain events occur, including significant
changes in ownership interests.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary need for capital has been to finance expansion of
research and development of new Smart Card products, sales and marketing of its
products and operations. Substantial growth of the Company's revenues has been
limited due to limited financial resources and an inability to expand
receivables, build inventory and effectively sell and market Smart Card
products. The Company has financed its liquidity needs primarily through
completion of its March 1997 IPO.
At March 31, 1997, the Company's cash position was $3,790,568, an increase
of $3,476,366 from $314,202 as of December 31, 1996. During March 1997 the
Company completed its IPO generating gross proceeds of $7,125,000, and net
proceeds of $6,185,445. The Company used proceeds from the IPO to repay
outstanding debt and accrued interest of $2,126,103 and pay down accounts
payable by approximately $518,000. The Company received $475,272 of license
revenues receivable outstanding at December 31, 1996. The remaining proceeds
from the IPO will be used to fund working capital, expand sales and marketing
of the Smart Card products and continue research and development activities
of new Smart Card products.
Based on management's current projections, the Company believes that its
financial resources and cash flows from operations will be sufficient to finance
its current and planned operations for at least the next twelve months. There
can be no assurance, however, that the Company will not require additional
working capital and, if it does require such capital, that such capital will be
available to the Company on acceptable terms, if at all.
Part II. Other Information
Item 1. Legal Proceedings
-----------------
None.
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Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
None
Item 5. Other
-----
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a.) Exhibits:
Exhibit No. Title
----------- -----
10.16* Tripartite Technology Agreement entered into April 15, 1997
between Racom Systems, Inc., Ramtron International
Corporation and Intag International Limited.
27.01 Financial Data Schedule
* "Confidential treatment has been granted or requested with respect to
portions of this exhibit, and such portions have been replaced with "**".
Such confidential portions have been deleted and separately filed with
the Securities and Exchange Commission pursuant to Rule 24b-2."
(b) Reports on Form 8-K
The Company filed a Report on Form 8-K, dated May 2, 1997, in
connection with the execution of a Tripartite Agreement between the Company,
Ramtron and Intag which significantly increases the availability of Ramtron's
ferroelectric random access memory (FRAM) technology for use in radio
frequency identification (RFID) markets and applications.
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<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized in Greenwood Village, Colorado on May 15, 1997.
Racom Systems, Inc.
/s/ Richard L. Horton
- ----------------------
Richard L. Horton
President and Chief Executive Officer
May 15, 1997
<PAGE>
EXHIBIT 10.16
* "Confidential treatment has been granted or requested with respect to
portions of this exhibit, and such portions have been replaced with "**".
Such confidential portions have been deleted and separately filed with
the Securities and Exchange Commission pursuant to Rule 24b-2."
TRIPARTITE TECHNOLOGY AGREEMENT
This TRIPARTITE TECHNOLOGY AGREEMENT (the "Agreement") is dated this 15th day
of April, 1997, by and among Ramtron International Corporation ("Ramtron"
and/or "Licensor"), a Delaware corporation having its principal office at 1850
Ramtron Drive Colorado Springs, Colorado 80921, Racom Systems Inc. ("Racom"),
a Delaware corporation having its principal office at 6080 Greenwood Plaza
Boulevard, Englewood, Colorado 80111, and Intag International Limited
("Intag"), a company incorporated in Australia, having its principal office at
Kyle House, 9th Floor, 27-31 Macquarie Place, Sydney, NSW 2000, Australia.
R E C I T A L S
A. Ramtron has developed and owns certain confidential and proprietary thin-
film ferroelectric technology pertaining to (i) the manufacture and production
of nonvolatile, random access semi-conductor memory devices that utilize
binary polarization states on the hysteresis curve of ferroelectric material,
(ii) technology pertaining to the material and process for the formation of
ferroelectric film, and (iii) unipolar high dielectric materials and
processes; including, but not limited to, the technology described in the
patents listed in Schedule 1 to this Agreement.
B. Ramtron and Racom entered into a Technology License Agreement dated
October 23, 1991 (the "License Agreement") whereunder Ramtron licensed its
Ferroelectric Technology to Racom for use in the design, manufacture, sale,
lease and distribution of Ferroelectric RF/ID Products, as such term is
defined in the License Agreement.
C. Ramtron and Racom entered into a Supply Agreement dated October 23, 1991
(the "Supply Agreement") whereunder Ramtron agreed to manufacture on behalf of
and supply to Racom, and Racom agreed to purchase from Ramtron, certain
Ferroelectric RF/ID Products.
D. Ramtron and Racom subsequently amended the License Agreement and Supply
Agreement pursuant to an amendment entitled "Amendment to Technology License
Agreement and Supply Agreement" dated March 31, 1994 ("First Amendment"), and
the parties negotiated a second amendment entitled "Second Amendment to
Technology License and Supply Agreement" dated February 17, 1995 ("Second
Amendment").
E. Ramtron, Racom and Intag entered into a binding Memorandum of
Understanding dated May 8, 1995 ("MOU") wherein Ramtron, Racom and Intag
agreed to (i) further modify the License Agreement, as amended, between
Ramtron and Racom, and (ii) enter into a License Agreement among the parties
incorporating the terms of the MOU between Ramtron and Intag.
<PAGE>
F. Subsequent to execution of the MOU, each of Ramtron, Racom and Intag now
desire to terminate the MOU and establish a new relationship that provides for
the license of Ramtron's Ferroelectric Technology for use in Ferroelectric
RF/ID Products to each of Racom and Intag on a nonexclusive basis to enable
each party to maximize the potential of commercializing Ferroelectric RF/ID
Products in the market and expand the number of royalty paying sublicensees.
Therefore, the parties have agreed to replace the MOU and License Agreement,
as amended, and further provide for termination of the Supply Agreement, as
amended and set forth new terms and conditions in one agreement.
G. As a part of this new arrangement, Ramtron undertakes that it will use its
best endeavors to ensure that all future Ferroelectric Memory Product
manufacturing licenses issued by Ramtron include the right to manufacture
Ferroelectric RF/ID Products. Similarly, Ramtron undertakes that it will not
unreasonably deny access to any party wishing to make Ferroelectric RF/ID
Products which incorporate within their structure Ferroelectric Technology, so
long as the royalty expectations for Ferroelectric RF/ID Products, as set out
in Section 2.7, are satisfied. Ramtron also undertakes that in its future
licensing of Ferroelectric Technology the terms of such licenses will not
unreasonably deny such access.
NOW THEREFORE, in consideration of the mutual promises contained herein, the
sufficiency and receipt of which is acknowledged, the Parties agree as
follows:
1. ARTICLE I - DEFINITIONS
When used in this Agreement, the following terms have the following meanings:
1.1 "Affiliate" means any enterprise, whether a corporation, unincorporated
association, joint venture, partnership or otherwise in which a person or
corporation, any holding company or subsidiary of such corporation, or any
holding company or subsidiary of such holding company, participates directly
or indirectly and in relation to such enterprise, such person, corporation or
any such holding company or subsidiary has the power to appoint the management
thereof, and control the majority of votes at a general meeting.
1.2 "Change in Control" shall mean if "person" or "group" (within the meaning
of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934)
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934) of voting shares of Licensees and is entitled to
exercise more than 50% of the total voting power of all outstanding voting
shares of Licensees (including any voting shares that are not then outstanding
of which such person or group is deemed the beneficial owner) unless such
"person" or "group" was entitled to exercise more than 50% of such total
voting power as of the Effective Date; or any consolidation of Licensees with,
or merger of Licensees into, any other entity, any merger of another entity
into Licensees, or any sale or transfer of all or substantially all of the
assets of Licensees to another entity (other than a merger which does not
result in any reclassification conversion, exchange or cancellation of
outstanding shares of Licensees or a merger which is effected solely to change
the jurisdiction of incorporation of Licensees).
1.3 "Dollars" or "dollars" or "$" means United States currency unless
otherwise specified.
1.4 "Effective Date" means the date of this Agreement as set forth in the
introductory paragraph of this Agreement.
<PAGE>
1.5 "Existing License Agreements" mean Seiko Epson Corporation ("Seiko"),
Deutsche ITT Industries GHBE ("ITT"), Toshiba Corporation ("Toshiba"),
and Samsung Electronics ("Samsung").
1.6 "Ferroelectric Memory Product" means any semiconductor non-volatile
memory device which utilizes Ferroelectric Technology."
1.7 "Ferroelectric RF/ID Products" means any semiconductor device which has
embedded within itself Ferroelectric Technology and which also contains the
necessary circuitry for that device to communicate by contactless means with a
remote device.
1.8 "Ferroelectric Technology" means all technology, referred to in
Recital A, and Improvements (as hereafter defined) necessary for the design,
development, and manufacture of RF/ID products.
1.9 "Improvements" means all improvements, enhancements and developments to
the Ferroelectric Technology that would relate to the design, development
and/or manufacturing of Ferroelectric RF/ID Products and technology, processes
and materials for use therein, made either by Ramtron or its Affiliates, or by
either of the Licensees or one of their sublicensees, or to which any such
party may be entitled or may become entitled. "Improvements" shall not
include any such improvements, enhancements and developments, if Ramtron,
Racom or Intag, or any of their Affiliates or sublicensees, as the case may
be, are prohibited from making same available to Ramtron or Licensees, as the
case may be, pursuant to a contact, extent at the time of signing this
agreement, with a third party or an Affiliate or pursuant to any judicial
order or proceeding.
Notwithstanding the foregoing, Licensees will not have the right to require
Ramtron or its Affiliates to utilize any Improvements which have not been
reduced to commercial practice by Ramtron or its Affiliates. Licensees'
rights to the Ferroelectric Technology and to any and all Improvements, shall
not be diminished in any way whatsoever if Ramtron or its Affiliates do not
reduce to commercial practice, for any reason whatsoever, any and all such
Improvements.
1.10 "Licensees" mean Racom and Intag collectively.
1.11 "Net Sales" means the total of all gross amounts either Racom, Intag,
their sublicensees, or Ramtron (as the case may be) invoices or charges
purchasers or sublicensees or otherwise receives, whether from purchasers or
sublicensees for or with regard to the sale, license or other transfer for
value of Ferroelectric RF/ID Products in integrated circuit or wafer form,
that are manufactured and sold, disposed of, or otherwise transferred by (or
manufactured on behalf of Racom and/or Intag by any sublicensee or
subcontractor) less costs of insurance incident to transportation and shipping
charges, excise taxes and customs duties allowances for actual returns and
uncollectible accounts. Should Licensees, any sublicensee, or Ramtron sell
such Ferroelectric RF/ID Products in combination with other components or
equipment, then the calculation of Net Sales shall be based on the price
normally charged by Licensees, sublicensees, or Ramtron for such Ferroelectric
RF/ID Products when separately invoiced or priced, or if no such separately
invoiced or priced sales of such Ferroelectric RF/ID Products have been made,
then the calculation of Net Sales shall be based on the price which Licensees,
sublicensees, or Ramtron, would charge for such Ferroelectric RF/ID Products
in an arm's length commercial sale transaction for cash.
<PAGE>
1.12 "Omni-license" means a license which permits a licensee to manufacture
for customers Ferroelectric Memory Products without regard to the application
for which the customer intends to use those Ferroelectric Memory Products.
1.13 "Royalty Period" means a period of three (3) months ending on the last
day of March, June, September and December of each year (or portion thereof)
this Agreement is in effect referred to in Section 2.8, following the
expiration of the immediately preceding Royalty Period.
1.14 "Royalty Year" means each period comprised of each consecutive set of
four (4) Royalty Periods.
1.15 "Technology License" has the meaning set forth in Section 2.1, 2.2
and 2.3.
2. ARTICLE II - TECHNOLOGY LICENSE AND FEES
2.1 GRANT OF LICENSE TO RACOM. Upon the terms and subject to the
of this Agreement, Ramtron hereby grants to Racom, free of charge, a
worldwide, non-exclusive, non-transferable, non-sublicensable (except as
provided in this Section 2.1), royalty-bearing right and license (the
"Technology License") to use Ferroelectric Technology, and all Improvements,
for the limited right to design, develop and/or manufacture, sell and use
Ferroelectric RF/ID Products. Racom may sublicense Ferroelectric Technology
for the limited right to design, develop, manufacture and sell Ferroelectric
RF/ID Products to no more than five (5) parties each of whom shall be
appointed by Racom and approved in writing by Ramtron, with such approval not
to be unreasonably withheld. In addition, Racom may sublicense Ferroelectric
Technology for the limited right to design, develop, and sell Ferroelectric
RF/ID Products to an unlimited number of parties each of whom shall be
appointed by Racom and approved in writing by Ramtron, with such approval not
to be unreasonably withheld. Ramtron agrees to coordinate its licensing
activities with Racom until such time as Racom completes its sublicensing of
its five full sublicensees. The parties specifically acknowledge that (i) the
sublicense created by the "Cooperative Agreement For Licensed Manufacturing of
Ferroelectric RFID Products" between Racom and Rohm Co., Ltd, dated June 21,
1995, and (ii) the **
** , shall
be deemed two (2) of the five (5) total full sublicensees under this Section
2.1.
Racom shall, in its sole discretion, and as one of its five full sublicenses,
take the lead in pursuing discussions with ** regarding licensing the
Ferroelectric Technology for use in Ferroelectric RF/ID Products. Ramtron may
pursue ** directly regarding licensing the Ferroelectric Technology for
applications other than Ferroelectric RF/ID Products, provided that any such
license must exclude use of the Ferroelectric Technology for Ferroelectric
RF/ID Products, unless otherwise consented to in writing by Racom. Similarly,
Racom shall have the right to designate other potential sublicensees, up to a
maximum of its five full sublicensees (including Rohm and ** , as
described above), with respect to which Racom shall take the lead in pursuing
discussions regarding licensing the Ferroelectric Technology for use in
Ferroelectric RF/ID Products. Ramtron may pursue such designated parties
directly regarding licensing the Ferroelectric Technology for applications
other than Ferroelectric RF/ID Products, provided that any such license must
exclude use of the Ferroelectric Technology for Ferroelectric RF/ID Products,
unless otherwise consented to in writing by Racom. Once Racom has designated
a potential sublicensee in the manner described above, Racom may only remove
such party as one of Racom's five designees with the prior written consent of
Ramtron, which consent shall not be unreasonably withheld.
<PAGE>
The Technology License granted herein may not be used by Racom, or any
sublicensee, for any purpose other than those specifically stated in this
Section 2.1.
2.2 GRANT OF LICENSE TO INTAG. Upon the terms and subject to the conditions
of this Agreement, Ramtron hereby grants to Intag, free of charge, a
worldwide, non-exclusive, non-transferable, non-sublicensable (except as
provided in this Section 2.2), royalty-bearing right and license (the
"Technology License") to use Ferroelectric Technology, and all Improvements,
for the limited right to design, develop, manufacture, have manufactured by a
licensee of Ferroelectric Technology and/or sell Ferroelectric RF/ID Products.
Intag may sublicense Ferroelectric Technology for the limited right to design,
develop, and sell Ferroelectric RF/ID Products to an unlimited number of
parties each of whom shall be appointed by Intag and approved in writing by
Ramtron, with such approval not to be unreasonably withheld.
The Technology License granted herein may not be used by Intag, or any
sublicensee, for any purpose other than those specifically stated in this
Section 2.2.
The license to manufacture granted to Intag in this Section 2.2 shall at the
election of Intag be granted directly to a nominated Affiliate of Intag.
2.3 GRANT OF LICENSE TO RAMTRON. Licensees and/or their sublicensees shall
grant to Ramtron, free of charge, a royalty-free, worldwide and perpetual
license or sublicense, as the case may be, to design, develop, manufacture,
use, sell or otherwise transfer any Improvements to the Ferroelectric
Technology licensed from Ramtron. Any sublicense agreement entered into
between Licensees and a sublicensee after the Effective Date shall provide
that any sublicensee making an Improvement in the design, development and/or
manufacturing of the Ferroelectric Technology shall be required to provide for
a royalty free sublicense in favor of Ramtron for all Improvements:
i) made solely by the sublicensee; and/or
ii) made jointly by any Licensee and the sublicensee.
2.4 TERMINATION OF LICENSE AGREEMENT, SUPPLY AGREEMENT AND MOU. Effective
on the date of execution of this Agreement by all parties herein, the License
Agreement, as amended, Supply Agreement, as amended, and the MOU shall be
deemed void and of no further effect, and this Agreement shall supersede and
replace such referenced agreements. The parties acknowledge that in respect
of such termination, each releases and discharges the other from any and all
claims which may exist against the other under the License Agreement, Supply
Agreement or the MOU. In consideration of Intag having paid US$600,000 to
Ramtron on May 19, 1995, and in consideration of Intag and Racom having agreed
to forgo the rights and privileges they would have otherwise enjoyed had the
MOU proceeded to a license, Ramtron hereby agrees to make Intag and Racom the
beneficiary of a portion of future Ferroelectric RF/ID Product royalties as
well as a portion of revenues derived from the letting of manufacturing
licenses for Ferroelectric Memory Products, as set forth in Section 2.7 of
this Agreement.
<PAGE>
2.5 MANUFACTURING CAPACITY TO RACOM AND INTAG. Ramtron hereby acknowledges
that it may have access rights to a certain percentage of manufacturing
capacity of several of its licensees for the manufacture of ferroelectric
based products. Ramtron shall provide Racom with the right to purchase up to
** and Intag with the right to purchase up to **
of the capacity made available to Ramtron that is dedicated to the manufacture
of Embedded Ferroelectric Products (hereby defined as standard, nonvolatile
ferroelectric semiconductor memory monolithically combined with other logic or
electronic functionality). Any of Racom's or Intag's rights to any percentage
of Ramtron's manufacturing capacity shall be through Ramtron (and not directly
through any of Ramtron's licensees) and under terms and conditions as shall be
mutually agreed to between Ramtron and Racom, and/or between Ramtron and
Intag, but in no event on terms more favorable than may exist or may be
negotiated between Ramtron and its licensee(s), or that create any additional
costs or obligations to Ramtron and no less favorable than the commercial
terms offered by Ramtron to any third parties. Finally, nothing contained in
this Section 2.5 shall require any of Ramtron's licensees to manufacture
directly for or on behalf of Racom and/or Intag Ferroelectric RF/ID Products
or make available to Racom and/or Intag capacity that is dedicated to the
manufacture of such products.
2.6 ACKNOWLEDGEMENT OF ITT, SEIKO, TOSHIBA AND SAMSUNG LICENSE AGREEMENTS.
The parties herein acknowledge the existence of licenses granted by Ramtron to
Deutsche ITT Industries GMbH ("ITT"), Seiko Epson Corporation ("Seiko"),
Toshiba Corporation ("Toshiba") and Samsung Electronics ("Samsung")
[collectively, "Existing License Agreements"] pursuant to licenses granted by
Ramtron under the Existing License Agreements to exploit the Ferroelectric
RF/ID Technology under License Agreements dated 2 March 1989, 1 June 1988, 31
July 1995, and 31 December 1996, respectively, as amended from time to time.
This Agreement is expressly subject to the terms and conditions of each of the
ITT license agreement, Seiko license agreement Toshiba license agreement and
Samsung license agreement. Ramtron may extend the terms of the referenced ITT
and Seiko license agreements, provided that during such extended term, Ramtron
shall require ITT and Seiko, as applicable, to comply with this Agreement
including, but not limited to, the provisions of Article 2.7(a). The exercise
of license rights by each of ITT, Seiko, Toshiba and Samsung pursuant to their
respective existing license agreements shall not be deemed to infringe on the
rights granted to Licensees hereunder.
2.7 ROYALTIES. Upon the Effective Date of this Agreement, the parties agree
as follows:
a) RAMTRON ROYALTIES. Ramtron hereby agrees to pay continuing
royalties to Racom and Intag each one-third (1/3) of ** of the Net Sales
Price of all Ferroelectric RF/ID Products sold by Ramtron and its Affiliates,
respectively. In addition, Ramtron hereby agrees to negotiate with third
parties under license agreements entered into after the Effective Date a
target royalty of ** , but not less than ** , of the Net Sales Price
of all Ferroelectric RF/ID Products sold pursuant to such license agreements,
of which Ramtron shall pay Racom and Intag each one-third (1/3) of such
royalties received.
b) RACOM ROYALTIES. Racom hereby agrees to pay continuing royalties
to Ramtron and Intag each one-third (1/3) of ** of the Net Sales Price of
all Ferroelectric RF/ID Products sold by Racom and its Affiliates,
respectively. In addition, Racom hereby agrees to negotiate with its
sublicensees as contemplated under Section 2.2 a target royalty of ** ,
but not less than ** , of the Net Sales Price of all Ferroelectric RF/ID
Products sold by such sublicensees, of which Racom shall pay Ramtron and Intag
each one-third (1/3) of such royalties received.
<PAGE>
c) INTAG ROYALTIES. Intag hereby agrees to pay continuing royalties
to Ramtron and Racom each one-third (1/3) of ** of the Net Sales Price of
all Ferroelectric RF/ID Products sold by Intag and its Affiliates,
respectively. In addition, Intag hereby agrees to negotiate with its
sublicensees as contemplated under Article 2.2 a target royalty of ** ,
but not less than ** of the Net Sales Price of all Ferroelectric RF/ID
Products sold by each sublicensee, of which Intag shall pay Ramtron and Racom
each one-third (1/3) of such royalties received.
In those cases wherein Ramtron, Racom or Intag purchase Ferroelectric RF/ID
Products from a sublicensee and the terms of that purchase exclude payment of
royalty by such sublicensee, then the party purchasing such Ferroelectric
RF/ID products will make good the royalty payment to the other two parties.
Such royalty payment to each of the other two parties shall be one-third (1/3)
of the amount purchased times the royalty rate otherwise payable by the
sublicensee.
The following table identifies several existing and potential licensees and
sublicensees of the Parties, and sets forth for each such licensee and
sublicensee the royalties payable by such parties in respect of the sale of
Ferroelectric RF/ID Products. The table also sets forth the basis upon which
the royalties and, to the extent applicable, license fees payable by such
parties are to be shared among Ramtron, Racom and Intag.
Ferroelectric RF/ID Product License Fees and Royalties
LICENSE ROYALTY SHARING OF LICENSE FEE
ROYALTY SHARING (If
Applicable)
- ---------- ------- ------------- ------------------------
All Future ** 1/3, 1/3, 1/3 Dependent on nature of
Licensees license. If pure RF/ID,
** (Ramtron/Racom/
Intag). If omni-license,
** (Ramtron/
Racom/Intag). If RF/ID
is excluded, no sharing
- ------------------------------------------------------------------------------
Rohm (Japan ** Pass-through to N/A
market only) Ramtron
- ------------------------------------------------------------------------------
Rohm (Rest ** 1/3, 1/3, 1/3 N/A
of World)
- ------------------------------------------------------------------------------
Toshiba N/A N/A N/A
- ------------------------------------------------------------------------------
** ** 1/3, 1/3, 1/3 N/A
- ------------------------------------------------------------------------------
** TBD 1/3, 1/3, 1/3 N/A
- ------------------------------------------------------------------------------
** TBD 1/3, 1/3, 1/3 N/A
- ------------------------------------------------------------------------------
Samsung ** 1/3, 1/3, 1/3 N/A
- ------------------------------------------------------------------------------
** ** ** **
- ------------------------------------------------------------------------------
<PAGE>
From time to time Intag, Ramtron, and/or Racom may agree to develop
specialized products utilizing Ferroelectric Technology that do not fall
within the definition of Ferroelectric RF/ID Products. The parties will
mutually agree separately on the purpose of such specialized products and the
basis upon which the parties will derive compensation.
2.8 CERTIFICATION AND PAYMENT OF ROYALTIES. Each party shall, on or before
April 30th, July 31st, October 31st and January 31st in each year during which
royalties are payable under this Agreement (respectively each such three month
period is referred to herein as "Royalty Period") furnish to the non-reporting
parties a statement, certified by a financial officer of the reporting party,
concerning the Net Sales by or on behalf of the reporting party of
Ferroelectric RF/ID Products sold, disposed or otherwise transferred by the
reporting party during the preceding Royalty Period in sufficient detail to
permit the computation of the royalties due for such Royalty Period, and shall
accompany such statement by payment, in immediately available dollar funds, of
the royalties due according to that statement. On or before the last day of
the first three month period following the end of each Royalty Year, each
reporting party shall furnish to the non-reporting parties a comparable
statement, certified by an internationally recognized firm of independent
certified public accountants, certifying the Net Sales by or on behalf of such
reporting party of Ferroelectric RF/ID Products sold, disposed, or otherwise
transferred by the reporting party during the preceding Royalty Year. Each
reporting party shall accompany such statement by payment in immediately
available dollar funds of any amounts due to the non-reporting parties for
such preceding Royalty Year.
In those instances where royalties payable by Intag or certain sublicensees
are subject to withholding tax, the royalty distribution specified in Section
2.7 will be net of such withholding. The parties will mutually agree
separately at the end of each Royalty Year as to an equitable treatment for
the various withholding amounts.
2.9 DISPUTE REGARDING ROYALTIES AND LICENSE FEES. In the event of any
dispute regarding the amount of any royalty payment or license fee payment (or
any transfer cost component thereof) allegedly due under or pursuant to this
Agreement, the parties shall agree in commercial good faith on and appoint an
internationally recognized firm of independent certified public accountants,
who shall audit the books and records of the reporting party in question and
determine the amount, if any, of the disputed royalty payment or payments or
license fee payments (or any transfer cost component thereof), which
determination shall be final and legally binding on the affected parties for
all purposes of this Agreement. If the parties are unable to agree on such a
firm of independent certified public accountants, such a firm shall be
appointed by the Chairman, President or the highest officer at such time of
the American Institute of Certified Public Accountants. Each party shall pay
an equal amount of the cost of any audit conducted pursuant to this Section.
2.10 LICENSE FEES. For those instances wherein, subsequent to the Effective
Date of this Agreement, Ramtron grants a license to Ferroelectric Technology
inclusive of Ferroelectric RF/ID Products, Ramtron shall pay to each of Intag
and Racom ** of the license fee derived
by such a license, net of any technology transfer cost. For those instances
wherein, subsequent to the Effective Date of this Agreement, Ramtron grants a
license to Ferroelectric Technology solely for Ferroelectric RF/ID Products,
Ramtron shall pay to Intag ** and to Racom **
of the license fee derived by such a license, net of any technology
transfer cost. If the Ramtron license of Ferroelectric Technology excludes
Ferroelectric RF/ID Products there shall be no division of license fees
between the parties.
<PAGE>
For the purposes of this Section, the term "technology transfer cost" shall
mean that portion of the license fee or other up-front charges that is
intended to cover the costs, in terms of engineering and management time,
wafer processing costs, assembly, packaging, test and evaluation costs and
similar costs, that Ramtron reasonably anticipates incurring in connection
with the transfer to the licensee of the licensed technology. The Licensees,
acting jointly, shall have the right, upon reasonable notice and during normal
business hours, to review and audit the books and records of Ramtron in order
to confirm that the amount of such costs is reasonable under the circumstances
and bears a reasonable relationship to the level of effort required of Ramtron
in transferring the licensed technology to the relevant licensee.
The Parties acknowledge that Ramtron has the right to grant one or more
licenses to the Ferroelectric Technology for use with Ferroelectric RF/ID
Products to alliance partners who agree to make an investment in Ramtron's fab
or to set up a manufacturing joint venture with Ramtron in lieu of payment to
Ramtron of a license fee. The Parties further acknowledge that, in one such
case, Ramtron shall be entitled to accept such a commitment in lieu of a
license fee without any obligation to compensate either Licensee for the
foregone license fee. In such case, Ramtron agrees to target a ** royalty,
to be shared equally, for all Ferroelectric RF/ID Products sold by or for such
party, whether manufactured by such party, by Ramtron or by any such joint
venture.
From time to time Ramtron may separately agree with one or both Licensees to
pay a fee for certain marketing assistance rendered in developing third party
interest in securing a license to manufacture products based on Ferroelectric
Technology. Agreement on such fees will be established in advance in writing
and be approved according to the level of marketing assistance to be rendered.
3. ARTICLE III - TECHNICAL MATERIALS OR ASSISTANCE
3.1 TECHNICAL ASSISTANCE. Ramtron is to provide reasonable technical
transfer assistance to Racom, Intag or any of their sublicensees upon request.
Where the Parties mutually agree upon the provision of technical assistance by
Ramtron, such services will be provided by Ramtron at its then-current
engineering rates and/or wafer processing and related costs.
3.2 HOLD HARMLESS/INDEMNIFICATION. In the event that any employee of
Licensees, or an employee of any sublicensee, visits Ramtron's premises, or
any employee of Ramtron shall visit Licensees', or sublicensee's, premises as
contemplated pursuant to this Section, then Licensees, and/or sublicensee,
shall be responsible for any and all liability of any type whatsoever to any
other person, firm or entity arising from any direct or indirect action or
inaction relating to the carrying out of its employee's duties under the terms
of this Section. Licensees, and/or sublicensees, shall also cause their
employees to be covered by their respective liability insurance policy or
policies. Whether or not any action or inaction of any such employee is
covered by insurance, Ramtron, Licensees and/or sublicensees, shall each hold
the other harmless and indemnify the other against and from all losses,
claims, damages, liabilities, obligations or expenses (including attorneys
fees, court costs, and costs of investigation) incurred or to which it may
become subject as a result of any action or inaction relating to the carrying
out of said employee's duties as contemplated herein.
<PAGE>
4. ARTICLE IV - NONTRANSFERABILITY OF TECHNOLOGY LICENSE
4.1 NONTRANSFERABILITY. Except as provided in Section 2.1 and Section 2.2,
the Technology License may not be assigned, sublicensed, subdivided or
transferred in any way whatsoever by Licensees without Ramtron's prior written
consent, such consent may be withheld at Ramtron's sole discretion. Pursuant
to the authority set forth in Section 2.1 and Section 2.2, each of Racom and
Intag shall notify Ramtron in writing of any proposed sublicense of rights to
design, develop or manufacture Ferroelectric RF/ID Products, and such
sublicense shall be deemed to have been consented to by Ramtron unless Ramtron
notifies either Racom or Intag, as the case may be, of its refusal to consent,
with reasons, writing within thirty (30) calendar days of receipt of such
notice. In addition, Ramtron hereby agrees to notify each of Racom and Intag
in writing at least thirty (30) days prior to the execution by Ramtron of any
License Agreement that provides for the license of Ramtron's Ferroelectric
Technology for use in Ferroelectric RF/ID Products, so long as it is legally
permissible for Ramtron to provide such advanced notice. If it is not legally
permissible for Ramtron to provide such prior notice, Ramtron will provide
such notice as soon as it is permissible for Ramtron to do so.
4.2 CHANGE IN CONTROL. For purposes of this Agreement and each Technology
License, any of the following events shall be deemed to be an attempted
transfer of the Technology License and shall be subject to the provisions of
this Agreement:
(a) A "person" or "group" [within the meaning of Sections 13(d) and
14(d) (2) of the Securities Exchange Act of 1934] becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of
voting shares of any Licensee and is entitled to exercise more than 50% of the
total voting power of all outstanding voting shares of such Licensee
(including any voting shares that are not then outstanding of which such
person or group is deemed the beneficial owner) unless such "person" or
"group" was entitled to exercise more than 50% of such total voting power as
of the Effective Date; or
(b) Any consolidation of any Licensee with, or merger of any Licensee
into, any other entity, any merger of another entity into any Licensee, or any
sale or transfer of all or substantially all of the assets of any Licensee to
another entity (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares
of such Licensee, or a merger which is effected solely to change the
jurisdiction of incorporation of such Licensee).
This Section shall not apply to any shares issued by Racom in accordance with
the provisions of the October 23, 1991 Shareholders' Agreement, as amended
November 14, 1994.
4.3 TRANSFER BY CHANGE IN CONTROL. No Licensee may transfer the Technology
License by any of the events described in this Article IV without Ramtron's
prior written consent, such consent not to be unreasonably withheld.
5. ARTICLE V - DISCLAIMERS OF WARRANTY AND LIMITATIONS OF LIABILITY
5.1 RELIANCE ON DISCLAIMERS AND LIMITATIONS. The license royalties for the
Technology License, and the substance of the other rights and duties of
Licensees and Ramtron in this Agreement, have been negotiated in reliance on,
and are based upon the applicability and enforceability of, the disclaimers,
warranties and limitations of liability contained in this Article 5.
<PAGE>
5.2 DISCLAIMER OF WARRANTY. EXCEPT AS SPECIFICALLY PROVIDED IN THIS ARTICLE
V, RAMTRON MAKES NO WARRANTIES TO LICENSEES OR TO ANY OTHER PARTY BY VIRTUE OF
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREUNDER, AND RAMTRON
EXPRESSLY DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS, IMPLIED OR ARISING BY
USAGE OF TRADE, INCLUDING ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, AND LICENSEES UNCONDITIONALLY ACCEPTS SUCH
DISCLAIMER. LICENSEES SHALL NOT MAKE OR PASS ON TO ITS CUSTOMERS (WHOLESALE OR
RETAIL) OR SUBLICENSEES ANY WARRANTY OR REPRESENTATION ON BEHALF OF RAMTRON.
5.3 LIMITATION OF LIABILITY FOR TERMINATION. NOTWITHSTANDING ANYTHING
CONTAINED IN THIS AGREEMENT OR UNDER APPLICABLE LAW TO THE CONTRARY, IN NO
EVENT SHALL RAMTRON BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES, INCLUDING WITHOUT LIMITATION, LOSS OF BUSINESS, INCOME
OR PROFITS, RESULTING FROM RAMTRON'S TERMINATION OF THIS AGREEMENT, WHETHER OR
NOT RAMTRON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES ARISING IN ANY
WAY OUT OF THE TERMINATION OF THIS AGREEMENT. Without limiting the generality
of the foregoing, Licensees assume all risks arising out of or relating to
their inability to meet any commitments made to and/or perform any agreements
entered into with any customer (wholesale or retail) of Licensees in the event
of any termination by Ramtron of this Agreement. Provided, however, that
nothing contained in this Section is intended to disclaim or waive any rights
that Licensees may have against Ramtron with respect to actual and direct
damages suffered by Licensees as a result of the breach of this Agreement or
the wrongful termination of this Agreement by Ramtron and provided further
that nothing contained in this Section shall prejudice or restrict Licensees'
right and entitlement to also terminate this Agreement in the event of any
material breach of this Agreement by Ramtron.
6. ARTICLE VI - PROTECTION OF FERROELECTRIC TECHNOLOGY
6.1 PATENTS, COPYRIGHTS, AND INTELLECTUAL PROPERTY. Ramtron shall at its
own cost obtain such patent, copyright or similar registration or intellectual
property protection of the Ferroelectric Technology used in the design,
development or manufacture of Ferroelectric RF/ID Products throughout the
world as is reasonable having regard to: the relative cost thereof; the
benefit of the protection obtained; and, all other relevant circumstances.
Upon request by Licensees, Ramtron shall provide Licensees an up to date list
of all issued patents pertaining to the Ferroelectric Technology used in the
design, development or manufacture of Ferroelectric RF/ID Products.
Licensees, and/or any sublicensee, shall at their own cost obtain such patent,
copyright or similar registration or intellectual property protection for
Improvements made solely by such Licensees, or Improvements made jointly by
Licensees and a sublicensee(s), which are used in the design, development or
manufacture of Ferroelectric RF/ID Products throughout the world as is
reasonable having regard to: the relative cost thereof; the benefit of the
protection obtained; and, all other relevant circumstances. Upon request by
Ramtron, Licensees, and/or any sublicensee, shall provide Ramtron an up to
date list of all issued patents pertaining to Improvements made to the
Ferroelectric Technology used in the design, development or manufacture of
Ferroelectric RF/ID Products.
6.2 MUTUAL COOPERATION - IMPROVEMENTS
The parties herein shall constitute a patent committee which shall consist of
one senior technical person from Ramtron, Racom and Intag respectively. The
patent committee shall meet quarterly or at intervals deemed necessary after
execution of this Agreement to share information concerning Improvements to
Ferroelectric Technology and to determine whether or not an Improvement shall
constitute a sole patent right of either Ramtron, Racom or Intag, or a joint
patent right between and/or among Ramtron, Racom or Intag.
<PAGE>
In relation to sole patent rights, the inventing party, Ramtron, Racom or
Intag, as the case may be, shall retain sole ownership. The inventing party
shall grant to the other party or parties, as the case may be, and/or its
sublicensees a nonexclusive, nonsublicenseable, nontransferable,
nonassignable, worldwide license, free of charge, to use the sole patent
rights pursuant to the terms of this Agreement.
Joint patent rights shall be jointly owned by the parties with each party
owning an equal undivided ownership interest. Each party may, for the life of
each joint patent right, use the joint patent rights for any purpose without
any payment to the other party, provided that a grant of license of such joint
patent rights to a third party other than each party's Affiliate and/or
sublicensees shall be subject to the prior written approval of the other
party. Such approval shall not be unreasonably withheld. Any dispute as to
any determination of the patent committee will be resolved in accordance with
Section 11.11 of this Agreement.
Ramtron shall have the responsibility for filing all United States and foreign
patent applications. Racom and/or Intag, as the case may be, shall share
equally in the legal, filing, and maintenance fees associated with filing
joint applications.
6.3 NOTICE OF INFRINGEMENT. Ramtron and Licensees (and any sublicensee
which Licensees shall cause to act hereunder) shall promptly advise the other
parties in writing of any claim, action, lawsuit, or proceeding threatened,
made, or brought against them or either of them for infringement of a patent
issued to a third party, or for violation of a third party's patent, trade
secret, or other intellectual property right based in any instance upon
Licensees' use of the Technology License, or Licensees' sale, lease, or
distribution of Ferroelectric RF/ID Products or based in any instance upon
Ramtron or any of Ramtron's licensees or Affiliates of which Ramtron knows,
use of the Ferroelectric Technology as the case may be.
6.4 INFRINGEMENT BY FERROELECTRIC TECHNOLOGY. In the event that the
Ferroelectric Technology is, or in the reasonable judgment of Ramtron, is
likely to become the subject of any legal action based in whole or in part on
a claim that the Ferroelectric Technology infringes the proprietary rights of
any person, Ramtron may reasonably demand that Licensees, or any sublicensee,
cease to use the Technology License and that Licensees, or any sublicensee,
cease to sell, lease and distribute Ferroelectric RF/ID Products utilizing the
allegedly infringing Ferroelectric Technology until and unless there is a
final judgement or other final resolution establishing Ramtron's right to
continue licensing the Ferroelectric Technology. In the event that Licensees,
or any sublicensee, fails to cease to use the Technology License or fails to
cease selling, leasing and distributing Ferroelectric RF/ID Products utilizing
the allegedly infringing Ferroelectric Technology promptly upon such demand by
Ramtron, Licensees, or any sublicensee, shall indemnify and hold Ramtron
harmless against any and all costs and expenses (including reasonable
attorneys fees) paid or payable by Ramtron as a result of Licensees', or any
sublicensee's, failure to promptly cease such activities. Notwithstanding
anything else contained herein to the contrary, the failure by Licensees, or
any sublicensee, to cease use of the Technology License and the selling,
leasing and distributing of Ferroelectric RF/ID Products shall not constitute
a breach of or default under this Agreement. However, in the event of any
such failure by Licensees, or any sublicensee, Ramtron shall be entitled to
require Licensees, or any sublicensee, to provide, and Licensees, and/or any
<PAGE>
sublicensee, shall provide to Ramtron, reasonable security for Licensees', or
any sublicensee's, indemnification obligation to Ramtron as a result of
Licensees', or any sublicensee's, continued use of the Technology License
and/or manufacture, lease or sale of the Ferroelectric RF/ID Products.
Ramtron shall have control of the defense of such claim, action, lawsuit or
proceeding, and shall pay the costs thereof (except any cost of the Licensees'
associated attorneys, if any); and Licensees, and/or any sublicensee, shall
assist Ramtron, at Ramtron's cost and expense in the defense of any such
claim, action, lawsuit, or proceeding. Licensees, or any sublicensee, shall
have the right to be represented by an attorney at its own expense in any such
controversy.
6.5 ASSISTANCE BY RAMTRON. Ramtron shall use its best efforts to provide
Licensees with (i) reasonable assistance in connection with the defense and
settlement of a claim or action, including all the necessary information
related to the infringing technology, and (ii) reasonable consultation for
Licensees' achievement of a viable alternative solution to avoid such
infringement issue. THIS SECTION 6.5 STATES RAMTRON'S TOTAL LIABILITY AND
RESPONSIBILITY, AND LICENSEES' SOLE REMEDY FOR ANY ACTUAL OR ALLEGED
INFRINGEMENT OF ANY PATENT, TRADEMARK, COPYRIGHT, OR OTHER INTELLECTUAL
PROPERTY RIGHT BY THE FERROELECTRIC TECHNOLOGY LICENSED HEREUNDER, OR ANY PART
THEREOF. THIS SECTION 6.5 IS IN LIEU OF AND REPLACES ANY OTHER EXPRESSED,
IMPLIED OR STATUTORY WARRANTY AGAINST INFRINGEMENT. IN NO EVENT SHALL RAMTRON
BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES
RESULTING FROM ANY SUCH INFRINGEMENT.
6.6 ASSISTANCE BY LICENSEES. Licensees shall use their best efforts to
provide Ramtron with (i) reasonable assistance in connection with the defense
and settlement of a claim or action, including all necessary information
related to the infringing technology, and (ii) reasonable consultation for
Ramtron's achievement of a viable alternative solution to assist in such
infringement issue. THIS SECTION 6.6 STATES LICENSEE'S TOTAL LIABILITY AND
RESPONSIBILITY, AND RAMTRON'S SOLE REMEDY (EXCEPT TO THE EXTENT SET FORTH IN
SECTION 6.4 HEREOF), FOR ANY ACTUAL OR ALLEGED INFRINGEMENT OF ANY PATENT,
TRADEMARK, COPYRIGHT, OR OTHER INTELLECTUAL PROPERTY RIGHT BY THE
FERROELECTRIC RF/ID PRODUCTS, OR ANY PART THEREOF. THIS SECTION 6.6 IS IN
LIEU OF AND REPLACES ANY OTHER EXPRESSED, IMPLIED, OR STATUTORY WARRANTY
AGAINST INFRINGEMENT, EXCEPT AS SET FORTH IN SECTION 6.4 HEREOF. IN NO EVENT
SHALL LICENSEES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, OR
CONSEQUENTIAL DAMAGES RESULTING FROM ANY SUCH INFRINGEMENT.
6.7 INFRINGEMENT BY THIRD. Upon becoming aware of any material infringement
by a third party of any of the rights covered by this Agreement, each party
shall promptly notify the other party of such infringement. After receipt of
notice of such infringement, Ramtron shall have the right in its sole
discretion, either to (i) assert a claim, action, lawsuit or legal proceeding
on its own behalf and/or on behalf of either Licensee herein, in which case
Ramtron shall be entitled to all awards and recoveries resulting directly
from, and shall be responsible for any and all costs and expenses arising out
of, such claim, action, lawsuit or proceeding or (ii) determine not to assert
any claim, lawsuit, legal proceeding or action of any kind against the alleged
infringer. In the event that Ramtron elects not to assert any claim, lawsuit,
legal proceeding or action of any kind against the alleged infringer, then
Ramtron shall, if requested by either Licensee in writing, permit and
authorize such Licensee to assert a claim, action, lawsuit or legal proceeding
against the alleged infringer, in which case such Licensee shall be entitled
<PAGE>
to any and all awards and recoveries resulting directly from, and shall be
responsible for any and all costs and expenses arising out of, such claim,
action, lawsuit or legal proceeding; provided, however, that in such event, if
at any time after such Licensee has commenced any claim, action, lawsuit or
legal proceeding against the alleged infringer, Ramtron elects to join in such
proceeding, then such Licensee shall take all actions necessary to allow
Ramtron to formally join in such proceeding and thereafter Ramtron shall have
the right to participate in and direct and control any such action or
proceeding and Ramtron shall be responsible for any and all further costs and
expenses arising after the commencement of Ramtron's participation in any such
claim, action, lawsuit or legal proceeding; provided further that
notwithstanding any intervention by Ramtron in any such proceeding, the
Licensee shall be entitled to any and all awards and recoveries resulting
directly from such proceeding after reimbursing Ramtron for all actual out-of-
pocket costs and expenses incurred by Ramtron in connection with such
proceeding. Notwithstanding the foregoing, each Licensee shall be entitled to
commence and join in any proceedings to recover any losses or damage suffered
by such Licensee on their own account provided such Licensee shall bear all
the costs and expenses of so doing.
Notwithstanding anything in this Agreement to the contrary, any Improvement
owned by Racom, Intag and/or a sublicensee to a Ferroelectric RF/ID Product
which results in a claim, action, lawsuit or legal proceeding initiated by a
third party relating to such Improvement, shall be the sole responsibility of
the owner or owners.
7. ARTICLE VII - CONFIDENTIALITY
7.1 CONFIDENTIALITY. The parties agree with each other to keep strictly
confidential and not without the prior written consent of the other parties to
disclose to any person or entity any information, except as allowed by
Sections 7.5 and 7.6 below, which is part of or which relates to the
Ferroelectric Technology and/or the Ferroelectric RF/ID Products. Each party
further agrees to bind in a manner so as to be legally enforceable its
employees, agents, consultants, advisors and representatives to such
confidentiality including without limitation as to such disclosures as may be
necessary for the parties performance of their obligations and enjoyment of
their rights under this Agreement, and otherwise as the relevant other party
may consent to in writing.
7.2 MARKING OF DOCUMENTS AND MATERIALS. In furtherance, but not in
limitation of the provisions of Section 7.1, each party shall use its
reasonable endeavors to cause all written materials and other physical
documents and materials of all types relating to or containing information of
or about the Ferroelectric Technology, Ferroelectric RF/ID Products to be
plainly marked to indicate the secret, proprietary and confidential nature
thereof, and to prevent the use or reproduction thereof, directly or
indirectly.
7.3 INDEMNIFICATION. Without limitations of any other right, remedy or
benefit accruing to either party under this Agreement or by law, each party
shall indemnify the other party fully for all damages caused by any disclosure
or use of any information intended to be kept secret, confidential and
proprietary in accordance with this Article VIII by such party or its
representatives, employees, agents, consultants, sublicensees, etc.
7.4 SURVIVAL. This Article VII shall survive the expiration or earlier
termination of this Agreement and of either Technology License and shall
remain in effect for so long as either Licensee is manufacturing, selling or
distributing Ferroelectric RF/ID Products anywhere in the world.
<PAGE>
7.5 PUBLIC DOMAIN. The provisions of this Article VII shall not apply to
any information that the party can demonstrate by written evidence was in the
public domain through no unlawful action or omission by such party or obtained
from third parties not bound by law or confidentiality agreements to maintain
the confidentiality thereof.
7.6 OBLIGATIONS TO DISCLOSE. This Article VII shall not prohibit the
parties from disclosing under legally enforceable obligations any information
required to be disclosed to any governmental authorities and shall not
prohibit the parties from disclosing general financial and technical
information in order to obtain funding or other financial advantages from any
authority or institution or corporation, or for the relevant party to exercise
its rights and perform its obligations in respect of the Technology License or
to otherwise carry on its business in the ordinary course. Other than as set
forth in Section 2.1 and Section 2.2, as the case may be, nothing contained in
this Section shall entitle either Licensee to transfer or assign the
Ferroelectric Technology or the Technology License.
7.7 TRADEMARK. Licensees shall have the right to utilize Ramtron's FRAM
trademark in connection with Ferroelectric RF/ID Products. Ramtron makes no
representation, warranty or covenant of any type whatsoever regarding such
trademark.
8. ARTICLE VIII - TERMS AND TERMINATION
8.1 EXPIRATION. This Agreement and the Technology License shall remain in
full force and effect from the Effective Date until termination under this
Article. Unless terminated earlier, this Agreement and the Technology License
shall terminate on the date of the expiration of the last to expire of any
effective rights protecting the material part of the Ferroelectric Technology
as it relates to the design, development and/or manufacturing of Ferroelectric
RF/ID Products anywhere in the world, whether by applicable law of patents,
trade secrets, or other equivalent applicable legal protection of proprietary
business know-how and technology.
8.2 TERMINATION FOR BREACH. In the event of a material breach or default by
a party in the performance of its respective duties, obligations or
undertakings set forth in this Agreement, the other party shall have the right
to give written notice to the defaulting party, notifying such party of the
specific breach or default involved and, if within ninety (90) days after such
notice the defaulting party shall not have remedied or commenced diligently to
remedy the breach or default and thereafter prosecute such remedy to
completion within a commercially reasonable time, the aggrieved party shall
have the right in addition to any other right, remedy or benefit it may have
under this Agreement or applicable law, to terminate this Agreement and the
Technology License as to the defaulting party upon five (5) days written
notice to the defaulting party and effective upon the fifth (5th) day after
the giving of such termination notice, this Agreement and the Technology
License shall be terminated as to the defaulting party without any further act
or writing whatever.
8.3 TERMINATION. Notwithstanding any other provision of this Agreement and
in addition to any other right, remedy or benefit the Parties may have under
this Agreement or applicable law, each Party shall have the unconditional
right to terminate this Agreement and the Technology License as to any
defaulting party effective immediately, if:
<PAGE>
(a) The defaulting Party fails or refuses to: (i) pay to the other
Party on the date due any payment provided to be made to such other Party
within thirty (30) days of written demand after the due date thereof any
royalties due hereunder; provided, however, nothing in this subparagraph shall
be construed to relieve any Party of its liability to pay to any other Party
royalties on all Ferroelectric RF/ID Products manufactured by such Party and
sold, leased or otherwise transferred by such Party prior to or after the date
of such termination in accordance with this Agreement.
(b) At any time any other Party is adjudged by a court of law to be
bankrupt or insolvent, or files petition in bankruptcy or an answer admitting
the material facts recited in such petition if filed by another, or is put or
decides to go into dissolution or liquidation, or otherwise discontinues its
business, makes an assignment for the benefit of its creditors or enters into
any other general arrangement with its creditors, becomes insolvent, or has a
trustee, receiver or custodian of any kind appointed to administer any
substantial amount of its property, or is placed or enters into any comparable
situation under the laws of any other nation, or any state or province in
which its operations may be conducted, or otherwise seeks to take advantage of
any bankruptcy or insolvency statute now or hereafter in effect in any such
location. Any other Party purports to assign, sublicense or transfer in any
way whatsoever the Technology License in contravention of the provisions of
this Agreement. In addition to the foregoing, notwithstanding any other
provision of this Agreement and in addition to any other right, remedy or
benefit Ramtron may have under this Agreement or applicable law, Ramtron shall
have the unconditional right to terminate this Agreement and the Technology
License as to the defaulting party effective immediately, if Racom, Intag, or
both, uses or attempts to use without the expressed permission of Ramtron
within the terms of this agreement the Technology License in the manufacture,
sale, lease, distribution or transfer of any type whatsoever of a product or
application based on Ferroelectric Technology which does not involve or relate
to Ferroelectric RF/ID Products.
8.4 TERMINATION BY LICENSEES. Notwithstanding any other provision of this
Agreement and in addition to any other right, remedy or benefit Licensees may
have under this Agreement or applicable law, each Licensee shall have the
right and option in its sole discretion to terminate this Agreement and
Technology License with respect to such Licensee without payment of any
penalty and without incurring any obligation to pay royalties after the
effective date of such termination if, with respect of Ferroelectric RF/ID
Products, any order is made or given in any proceedings which are commenced
against such Licensee or Ramtron having the effect of restraining or impairing
the exercise of the Technology License or any of such Licensees' material
rights under this Agreement.
8.5 EFFECTS OF TERMINATION. Upon termination of this Agreement and the
Technology License for whatever reason:
(a) The rights under the Technology License and all intellectual
property and other rights granted to any Party under this Agreement shall
immediately revert to, and vest in, the owner of such rights and absolutely no
interest whatever in any of such rights, in whole or in part shall thereafter
remain in such other Party or any of its subcontractors, agents, employees or
shareholders, sublicensee, and/or any person or entity in any way affiliated
with, or related to, such other Party. Accordingly, from the date of said
termination such rights, and any of them, may not, and they shall not, be
<PAGE>
exercised in any way, in whole or in part, by the affected Party or any person
or entity with whom such Party shall have entered into any agreement or
understanding relating in any way to the Technology License or any of the
rights granted to such Party under this Agreement whether or not such
agreement or understanding shall have been approved by the other Party or
Parties unless such Party has lawfully acquired or is lawfully able to use
such rights.
(b) Except and to the extent that the affected Party has lawfully
acquired or is lawfully able to exercise such rights, such Party, and/or any
sublicensee, shall cease forthwith the manufacture, sale and distribution of
the Ferroelectric RF/ID Products under the Technology License and not use
further, except as herein provided, and return to the other Party or Parties
specifications, data sheets, drawings, designs, photographs, photostats,
negatives, undeveloped film, tape recordings and other electronic records,
writing in any language and any other documents or materials furnished to such
Party or otherwise obtained by such Party from the other Party or Parties,
including without limitation any and all notes and written or electronic
transcriptions on any part of the Ferroelectric Technology and any and all
similar materials in any way, in whole or in part, based thereof, as well as
any and all similar materials which in any way contain, reflect or relate to
any of the Ferroelectric Technology.
(c) The affected Party, and any sublicensee, shall offer in writing to
the other Party or Parties the right to purchase any or all Ferroelectric
RF/ID Products which are unsold at the time of such termination. The price
for such goods to the other Party or Parties shall not be less favorable than
the price offered to third parties. If the other Party or Parties does not
accept any such offer within seven (7) days following receipt then it shall be
deemed to have declined same.
8.6 SALE OF INVENTORY. Notwithstanding the provisions of Section 8.5, after
the termination of this Agreement and the Technology License, the affected
Party shall be entitled to sell existing inventory of Ferroelectric RF/ID
Products which are in such Party's possession on the date of such termination,
if any, but only to existing customers of such Party as of the date of
termination. Royalties shall be payable on any such sales in accordance with
Article II of this Agreement.
8.7 SURVIVAL. Article V (Disclaimers of Warranty and Limitations of
Liability), VI (Protection of Ferroelectric Technology), VII
(Confidentiality), XI (Miscellaneous) and sections 8.5, 8.6, 8.7, 11.3, 11.5,
11.10 and 11.11 of this Agreement shall permanently survive any termination or
expiration of this Agreement.
9. ARTICLE IX - GOVERNMENTAL REQUIREMENTS
9.1 COMPLIANCE WITH LAWS. In performing their respective duties hereunder
and in carrying out their activities under the Technology License, the parties
shall comply with all applicable laws, regulations, procedures, ordinances and
rulings of any governmental authority having jurisdiction over Licensees,
sublicensees, Ramtron, Licensees' or any sublicensee's use of the Technology
License, or Licensees', or any sublicensee's, design manufacture, use, sale,
lease or distribution of Ferroelectric RF/ID Products.
<PAGE>
9.2 EXPORTS. Without limitation of any other provision of this Agreement,
neither Licensee nor any sublicensee shall, without receiving the prior
authorization of the United States Office of Export Administration or other
appropriate governing body exercising controls over exports and re-exports of
United States goods and technical data, export or re-export directly or
indirectly any technical data included in Ferroelectric RF/ID Products or the
Ferroelectric Technology that is used to design, develop and/or manufacture
Ferroelectric RF/ID Products to any country or area forbidden to such exports
under United States law or regulation.
9.3 GOVERNMENTAL APPROVALS. Licensees, and/or any sublicensee, shall be
solely responsible for obtaining any necessary approval of this Agreement by
any governmental authorities having jurisdiction over Licensees', and/or any
sublicensee's, activities pursuant to this Agreement, and to obtain the
consent of any governmental authorities to the remittance of payments under
this Agreement in accordance with its terms, in the event that any such
consent should become necessary.
10. ARTICLE X - PAYMENTS AND TAXES
10.1 PAYMENTS. Any and all payments of every kind which may be payable by
Licensees, or Ramtron, as the case may be, under the terms of this Agreement
shall be paid in immediately available funds in the currency as nominated by
the beneficiary at such bank as Ramtron, Racom and/or Intag may from time to
time designate in writing.
10.2 TAXES. Any and all taxes (including withholding taxes payable in
connection with this Agreement), duties, excises and imposts payable with
respect to any sums due under this Agreement to Ramtron, Racom and/or Intag
(as the case may be), shall be borne by the beneficiary of such amounts due
and deducted from the due royalty, as appropriate; provided that the Parties
agree to cooperate to the extent reasonably possible to minimize the amount of
such taxes, duties, excises and imposts.
11. ARTICLE XI - MISCELLANEOUS
11.1 SUCCESSORS AND ASSIGNS AND BINDING EFFECT. The rights and benefits of
the parties under this Agreement shall accrue to, and run in favor of, each
party's successors and assigns. The rights and obligations of the parties
under this Agreement shall be binding upon their respective successors and
assigns.
11.2 ASSIGNMENTS. Except as provided in Article IV, and notwithstanding the
provisions of Section 12.1, no party shall make or purport to make any
assignment, transfer or conveyance, in whole or in part, of its rights and
obligations under this Agreement without the prior written consent of the
other party such consent to be within the other party's sole discretion.
11.3 GOVERNING LAW. This Agreement shall take effect under, be construed
and enforced according to, and be governed by the laws in force in the State
of Colorado, USA, without reference to conflict of laws principles, and
subject to section 12.10, the parties irrevocably submit to the personal and
exclusive jurisdiction and venue of the Colorado state courts of El Paso
County, Colorado.
<PAGE>
11.4 SEVERABILITY. The provisions of this Agreement are severable. If any
provision or part of this Agreement shall be held by any court or other
official body of competent jurisdiction to be invalid of unenforceable for any
reason, the remaining provision or parts hereof shall continue to be given
effect and shall bind the parties hereto unless the unenforceability or
illegality has the consequence of substantially altering the respective rights
and obligations of the parties hereto.
11.5 NO PARTNERSHIP OR OTHER RELATIONSHIP CREATED. The parties are not, nor
shall any party hold itself out to be, the partner, agent, joint venturer,
employee or independent contractor of the other for any purpose whatever, nor
shall any legal or fiduciary relationship between them, other than as may be
explicitly provided in this Agreement, exist by virtue of this Agreement. No
party shall be or become liable for any representation, act or omission of the
other as a consequence of this Agreement and no party is to create any such
liability on behalf of the other. This Agreement is not for the benefit of any
third party and shall not of itself be deemed to give any right or remedy to
any third party for any purpose whatever.
11.6 WAIVERS. Any waiver exercised under any provision of this Agreement
shall not be deemed a general waiver with respect to any other provision of
this Agreement, and no failure to exercise and no delay in exercising, any
right, power or privilege hereunder shall operate as a waiver thereof, except
where specified to the contrary herein, nor shall any single or partial
exercise of any right, power or privilege hereunder preclude any other or
further exercise thereof or of any other right, power or privilege. The rights
and remedies provided herein are, and shall be interpreted to be, cumulative
and not exclusive of any other rights provided by law or otherwise.
11.7 NOTICES. All notices permitted or required to be given to the parties
of this Agreement shall be in writing and delivered personally or sent by
certified or registered airmail (return receipt required, postage prepaid), by
air freight (return receipt requested), or by telefax or telex (with receipt
acknowledgment requested) addressed to the respective parties at its usual and
principal place of business. Such notices shall be deemed to have been
effectively given and received on the day of delivery if delivered personally,
or, if by telegram, telecopy, telex, or air freight, on the next day following
the sending of such notice by telegram, telecopy, telex, or air freight
provided that receipt shall have been acknowledged, and, if mailed, on the
seventh (7th) business day following such mailing.
11.8 ENTIRE AGREEMENT. This Agreement contains the entire and only
agreement of Licensees and Ramtron with respect to the Technology License and
supersedes entirely any and all other agreements either oral or written
between the parties with respect thereto , and each of Racom, Intag and
Ramtron acknowledge that it has no claims against the others under or arising
from any prior understanding or document. No agreement, statement or promise
relating to the subject matter of this Agreement which is not contained herein
shall be valid or binding.
11.9 CHANGES OR AMENDMENT. Any change, revision, termination or attempted
waiver of any of the provisions contained in this Agreement shall not be
binding unless in writing and signed by the party against whom the same is
sought to be enforced. This Section may only be waived in writing. This
Agreement shall be amended or supplemented only by written instrument duly
executed by or on behalf of the parties hereto, and if and when so
supplemented or amended shall include all such supplements and any amendments.
<PAGE>
11.10 DISPUTE RESOLUTION. Except as otherwise provided herein, any
controversy among the parties involving the construction, application or
conditions of this Agreement, or any claims arising out of or relating to this
Agreement or the breach thereof shall first attempt to be settled through good
faith negotiations. Senior management level representatives of each party
directly responsible for the matters underlying the controversy shall meet as
reasonably requested in writing by the complaining party to resolve the
controversy. Such senior parties shall meet at a mutually agreed time and
place within twenty (20) business days of receipt of such notice. They shall
discuss the controversy and negotiate in good faith for a period of at least
thirty (30) business days in an effort to resolve the controversy. To this
end, the parties hereby recognize that on September 24, 1996 a meeting was
held to discuss the principles, guidelines and common framework by which the
parties would address the interpretation of this Agreement, including the
protection of their respective interests and commercial expectations regarding
the development of Ferroelectric RF/ID related technology. The material
results of these discussions were memorialized in certain meeting minutes.
The parties hereby agree to abide by the spirit of such meeting minutes, with
the aim of adopting the guidelines as set forth therein, as the framework to
resolve those issues underlying the controversy. In the event of any conflict
between the terms of this Agreement and the terms of such meeting minutes,
this Agreement shall control.
11.11 ARBITRATION. Any dispute or claim arising out of or in connection
with this Agreement, which has not been settled by discussion as described in
Section 11.10 above, will be finally settled by binding arbitration in
Colorado Springs, Colorado under the Rules of Arbitration of the Chamber of
Commerce by one arbitrator appointed in accordance with those rules. The
arbitrator will apply Colorado law to the merits of any dispute or claim,
without reference to conflict of law principles. Judgment of the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof notwithstanding the foregoing, the parties may apply to any court of
competent jurisdiction for temporary or preliminary injunctive relief without
breach of this arbitration provision.
11.12 ATTORNEYS FEES. In the event of any controversy, claim or dispute
between the parties hereto arising out of or relating to this Agreement,
including but not limited to a controversy settled by arbitration, the
prevailing party shall be entitled to recover from the losing party reasonable
expenses, including attorneys' fees and costs.
11.13 FORCE MAJEURE. If the performance by any party of any of its
obligations under this Agreement shall be in any way prevented, interrupted,
or hindered as a result of any force majeure, including, without limitation,
war, civil disturbance, strike or other labor disturbance, lockout,
legislation or restriction of any governmental or other authority, fire,
unavailability of materials or finished goods, delay of carriers or any other
similar circumstances (other than financial difficulties) beyond the
reasonable control of such party, the obligations of the party concerned shall
be wholly or partially suspended during the continuance and to the extent of
such prevention, interruption or hindrance, provided however, that local
commercial unavailability of materials or finished goods shall not alone
constitute force majeure for purposes hereof if such materials or finished
goods are otherwise (even if it is at a higher cost) available. A party
unable to perform timely its obligations under this Agreement due to any of
the foregoing reasons must take all reasonable steps to remedy its
nonperformance or delay its performance with the least possible delay and by
doing whatever may reasonably be done to mitigate the adverse affect of its
nonperformance upon the other party of this Agreement.
<PAGE>
11.14 HEADINGS. The headings of the Sections of this Agreement have been
inserted for convenience or reference only and shall in no way affect the
interpretation of any of the terms or conditions of this Agreement.
11.15 SIGNATURES. The parties represent and warrant that execution of this
Agreement has been duly by all necessary corporate action including, without
limitation, approval by the respective board's of directors of each party, and
that this Agreement constitutes a legally binding and enforceable obligation
of the respective parties herein.
IN WITNESS WHEREOF, the undersigned parties to this Agreement have executed
this document as of the date and year first above written.
"LICENSOR"
RAMTRON INTERNATIONAL CORPORATION
By: /S/ L. David Sikes
Title: Chairman and CEO
"LICENSEE" "LICENSEE"
RACOM SYSTEMS, INC. INTAG INTERNATIONAL LIMITED
By: /S/ Richard L. Horton By: /S/ Charles Fear
Title: President and CEO Title: Chairman
<TABLE> <S> <C>
<PAGE>
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<PERIOD-END> MAR-31-1997
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0
0
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</TABLE>
