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EXHIBIT 10.25
DEVELOPMENT AGREEMENT
DEVELOPMENT AGREEMENT (the "Agreement") made as of the 16th of June 1994,
by and between COMPAQ COMPUTER CORPORATION, a Delaware corporation having its
principal place of business at 20555 S.H. 249, Houston, Texas 77070 [hereafter
"Compaq"] and JT STORAGE, INC., a Delaware corporation having its principal
place of business at 1289 Anvilwood Avenue, Sunnyvale, California 94089
[hereafter "JTS"].
PRELIMINARY RECITALS
WHEREAS, Compaq (i) is in the business of designing, manufacturing and
marketing Computer Products, including hard disk drives ("HDD"), computer
options/accessories, and software for such HDDs, and (ii) possesses expertise
and owns proprietary rights related to its products, including, but not limited
to, copyrights, know-how, inventions, trade secrets, patents, patent
applications and the like; and
WHEREAS JTS desires to promote its HDDs to the personal computer industry;
and
WHEREAS JTS desires to have Compaq endorse and adopt JTS's proposed design
for HDDs as an industry standard; and
WHEREAS Compaq's endorsement of JTS's proposed design for HDDs as an
industry standard will aid in the adoption by the industry at large; and
WHEREAS Compaq has agreed to assist JTS's efforts to promote and develop an
industry standard for certain HDD technology in exchange for the covenants,
licenses, and consideration recited herein; and
WHEREAS, the parties desire to develop hardware and software products which
will incorporate existing technology of JTS, and additional new technology to be
developed by JTS; and
WHEREAS, Compaq is a manufacturer of personal computer products sold and
distributed on a world-wide basis; and
WHEREAS, JTS has demonstrated some small form factor HDD technology and
product concepts which appear to be of particular use to Compaq for its personal
computer products; and
WHEREAS, JTS has certain technology that Compaq desires to utilize in its
personal computer products and JTS desires to complete development on
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such technology and make products using such technology available for use by
Compaq on the terms and conditions set forth herein; and
WHEREAS, JTS desires to License certain future additional developments
to Compaq, as hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and undertakings hereinafter set forth, the parties hereto hereby
agree as follows:
AGREEMENTS
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1.0 Certain Definitions
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1.1 Acceptance and Accepted means strict compliance with the provisions
of the applicable technical specification unless compliance is waived or
modified in writing by Compaq and shall be satisfied by JTS's submittal of the
software (firmware) and/or hardware (as specified by the Development Plan) with
a statement that such software and/or hardware [hereafter collectively referred
to as "Product"] complies with the applicable technical specification, provided,
however, that Compaq, in its sole discretion shall determine whether such
Product is in compliance with the applicable specification. After submittal by
JTS, Compaq shall test such Product, in randomly selected commercially
reasonable quantities, to verify compliance and to determine whether JTS can
reasonably produce the Product in commercial quantities. Compaq's tests shall be
performed as soon as commercially practical. In the event that the Product does
not comply with the applicable specifications (including but not limited to the
engineering specifications attached hereto, shock and vibration specification
and other specifications provided by Compaq), Compaq shall provide detailed
information of such non-compliance to JTS. In the event that Compaq does not
provide JTS with a written notice that the Product submitted by JTS is in
compliance with the applicable specifications within ten business (10) days [the
"First Period"] then in such event the Product submitted by JTS shall be deemed
to be in non-compliance. Thereafter, JTS shall have ten business (10) days [the
"Section Period"] to correct such non-compliance and resubmit the Product for
Acceptance. Compaq shall again have ten (10) business days [the "Third Period"]
to retest the Product and provide JTS with details, if any, of non-compliant
operation. In the event that Compaq does not provide JTS with a written notice
that the Product submitted by JTS is in compliance with the applicable
specifications during such Third Period then in that event the Product submitted
by JTS shall be deemed to be in non-compliance. In the event that Compaq does
not respond in writing within the aforesaid First Period and/or Third Period
with a written acceptance of the Product submitted, such submitted Product shall
be deemed to be in non-compliance and shall not be Accepted. The submittal by
JTS of a non-compliant Product shall not toll a Project Milestone or satisfy a
Project Milestone. In the event that JTS submits a non-
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compliant Product, Compaq may serve a notice of material breach and the Cure
Period shall run concurrently with any attempts by JTS to correct a
non-compliant Product and such Cure Period shall run concurrently with Compaq's
testing and verification program. Notwithstanding the foregoing, Acceptance of
a Product by Compaq shall not relieve JTS from its obligation to resolve any
hardware and/or software bugs which are discovered after Acceptance.
1.2 "Additional Developments" as applied to JTS, means any
improvements in, modifications on, derivative works of, variations of, new
designs of, discoveries related to, or developments utilizing any of the
Licensed Technology or any other additional development (including
reproduction tooling and drawings and product design and processes and
Accessories), whether separately developed, licensed or otherwise obtained by
or on behalf of such Person or jointly developed, licensed or otherwise
obtained by or on behalf of such Person during the term of this Agreement now
existing or hereafter developed, including patents and patent applications and
licenses therefore in each case, solely in connection with the development,
manufacture or sale of HDDs; provided that if Additional Developments are
obtained by a party hereto from an unaffiliated third party then the
obligations of the party hereto to license such Additional Development to the
other parties hereto shall be conditioned upon obtaining the consent of such
Unaffiliated third party to such license, which consent the party hereto shall
undertake its best efforts to obtain.
1.3 "Affiliate" as applied to any Person means any other Person
directly or indirectly controlling, controlled by, or under common control with,
that Person. For purposes of this definition, the term "control" (including,
with correlative meanings, the terms controlling, controlled by and under
common control with), as applied to any Person, means the possession, directly
or indirectly, of the power to vote 50% or more of the Voting Stock (or in the
case of a Person which is not a corporation, 50% or more of the ownership
interest, beneficial or otherwise) of such Person or otherwise to direct or
cause the direction of the management and policies of that Person, whether
through the ownership of Voting Stock or other ownership interest, by contract
or otherwise. All executive officers, 50% or greater shareholders and directors
of any Person shall be deemed to be Affiliates of such Person for the purposes
of this Agreement. "Unaffiliated" shall refer to a person or entity which is
not an Affiliate.
1.4 "Change in Corporate Control" means any circumstance in which (i)
any person, entity or group (other than pursuant to a venture capital
financing) acquires direct or indirect beneficial ownership [as defined in Rule
13d-3 under the Exchange Act of 1934 as Amended] in the aggregate securities of
a party representing more than thirty percent (30%) of the total combined
voting power of such party's then issued and outstanding voting securities,
(ii) the sale of all or substantially all of the assets of a party occurs to
any person or entity which is not a wholly-owned subsidiary of such party,
(iii) a party is liquidated, or (iv) a
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party experiences a change in the composition of a majority of its Board of
Directors as a result of an election contest.
1.5 "Derived Program" means, individually or collectively, any and all
derivations or Source made by compiling and/or processing of Source, or
modified, enhanced or extended versions thereof, to create a machine-readable
object code (binary), intermediate code or interpreted form, and all copies or
portions thereof. Derived Programs also include Documentation. For purposes of
this Agreement, Derived Programs shall be construed to be "derivative works"
and "compilations," within the meaning of such terms in the Copyright Act (17
U.S.C. Section 101 et seq.).
1.6 "Development Plan" means the product development and design plan
which is set out in Exhibit A.
1.7 "Documentation" means all written materials furnished hereunder by
either party, including, but not limited to, user and maintenance manuals, and
materials useful for designing, developing, testing, marketing and maintaining
products, and providing training related thereto.
1.8 "Effective Date" shall mean the date last affixed on the signature
line of this Agreement.
1.9 "Filing" means any documentation, application, filing,
registration or the like required to perfect the parties' interest in the
developed Technology under statutory intellectual property rights protection
mechanisms.
1.10 "Future Generation Products" means any HDD product, other than
the Nordic Series, that utilizes the Licensed Technology or Additional
Developments, and was developed or in development prior to end of the Term of
this Agreement.
1.11 "HDD" shall mean hard disk drive in any form factor or size.
1.12 "Licensed Products" means the Nordic Series and the Future
Generation Products.
1.13 "Licensed Technology" all technical information and intellectual
property of JTS, including without limitation, patents, patent applications and
copyrights (and all extensions, continuations, continuations in part,
divisions, reexaminations and reissues thereof), trade secrets, inventions,
source codes, object codes, flow charts, processes, techniques, specifications,
drawings, parts layouts, parts lists, all technical information and other
intellectual property pertaining to Parts, circuitry, tooling and testing
requirements, know-how, manuals and other technical data and support
documentation, whether or not patentable or copyrightable and whether or not
actually patented or copyrighted.
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1.14 "Nordic Series" means any HDD with a width of between 3.25 and
3.75 inches and a height of less than .40 (four-tenths) inches, and all
Licensed Technology pertaining principally thereto.
1.15 "JTS Patents" means all domestic and foreign patents and utility
models which issue from any applications filed by or for JTS and/or its
Subsidiaries during the Term of this Agreement but does not include design,
ornamental, industrial design patents, or design registrations.
1.16 "Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a governmental entity or any department, agency or political
subdivision thereof.
1.17 "Project Milestones" means that set of milestones which is set
forth in Exhibit B.
1.18 [*]
1.19 "Source" means software (firmware) source code provided or
developed under this Agreement, and any portion thereof. Source is provided in
human-readable form and contains specific algorithms, instructions, plans,
routines and the like, for controlling the operation of a central processing
unit (including microprocessors, controllers, etc.), or otherwise used by a
central processing unit to do a particular job or solve a particular problem.
Machine-readable form (a "Derived Program") is derived upon compilation of such
Source. Source may be provided as printed listings of code or on magnetic
media, and includes any Documentation and information related to Source. Source
includes corrections, modifications, and enhancements thereto by JTS during the
Term.
1.20 "Subsidiary" means any entity of which fifty percent (50%) or more
of the voting rights are owned or controlled, directly or indirectly, by a
party hereto, provided, however, that such entity shall be deemed to be a
Subsidiary only for so long as such ownership or control exists.
1.21 "Technology" means, Background Technology, developed Technology or
Residuals, and includes, but is not limited to, technical information, data and
processes, whether tangible or intangible, including, without limitation, any
and all techniques, discoveries, inventions, copyrights, mask works, VHSIC
hardware description language ("VHDL") descriptions, net
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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lists, know-how, patents (including any extension, reissue or renewal
patents), patent, mask work or copyright applications, inventor certificates,
trade secrets, designs, drawings, specifications, schematics, software programs
(including Source and object codes), microcode, operating and instructional
manuals, magnetic tapes, methods of production and any other proprietary
information.
1.22 "Term" shall mean the period commencing with the execution of this
Agreement and ending on the fifth anniversary of this agreement. This Agreement
shall automatically renew for an additional five (5) year period, if Compaq is
purchasing HDDs from JTS in commercially reasonable quantities during the fifth
year.
1.23 "Use" or "Used" means the application, exploitation,
commercialization and sublicensing of Technology, including (i) modifying
Technology to form derivative works, (ii) incorporating portions of original or
modified Technology into products, (iii) research, design, experimentation,
development, or marketing of products, and (iv) making, having made, leasing,
selling or otherwise transferring hardware Background Technology in products.
2.0 Development of Nordic HDD
A. JTS agrees to develop the Nordic HDDs in conformance with the
Development Plan attached hereto as Exhibit A and in conformance with the
Project Milestones as set forth in the attached Exhibit B. JTS agrees that the
Project Milestones shall not have been satisfied until the Nordic design is
Accepted by Compaq. Failure to meet a Project Milestone, produce an HDD in
conformance with the Development Plan, and/or failure to design an HDD in
conformance with the Nordic Technical Specifications shall be deemed to be a
material default of this Agreement.
B. JTS further agrees that the Nordic HDDs shall be in strict
conformance with the Nordic Technical Specifications attached hereto as Exhibit
C. The parties agree that to the extent that Exhibit C contains "TBDs" (To Be
Determined) such information shall be inserted into the specification at a later
date and that such information shall be negotiated in good faith by the parties
prior to July 30, 1994 unless otherwise agreed to in writing by both parties.
JTS agrees that the information designated as "TBD" is not material and will
not result in any changes to the Milestone Dates, Schedule, and/or result in
additional cost. To the extent that JTS later finds that the information
designated as "TBD" will impact the Milestone Dates, Schedule, and/or result in
additional cost, JTS will notify Compaq in writing within five (5) business days
of the time that Compaq provides JTS with the information designated as "TBD"
which has resulted in a change to the Milestone Date, Schedule, and/or resulting
in additional cost. In the event that JTS does not notify Compaq within five (5)
business days, then in
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such event the information furnished as a "TBD" will be deemed to have no
impact on the Milestone Dates, Schedule, and/or cost of the project.
C. In consideration for JTS' agreement to design the Nordic HDD in
conformance with the Development Plan and the Project Milestones and in
conformance with the Nordic Technical Specifications, Compaq shall pay [*]
as non-recurring engineering charges (NRE) to JTS for the development of two
Nordic HDDs, [*] (hereafter collectively referred to as "Nordic HDDs").
The NRE charges referred to above shall be payable as follows:
[*]
D. In the event of a material default by JTS, JTS agrees to refund any
NRE moneys advanced by Compaq. JTS further agrees that in the event of a
material default by JTS, Compaq at its sole option, may apply the NRE previously
paid by Compaq, as an offset against its purchases of other HDD (e.g. Palladium
or Sterling) from JTS. The offset may be applied at any time and in any
increments which Compaq may in its sole judgment effect.
E. In consideration of the covenants and obligations set forth in this
Agreement, JTS agrees that it shall not undertake any other development projects
for any third party and that it will focus the appropriate resources to the
development of the Nordic HDDs. A breach of this provision shall be deemed to be
a material breach of this Agreement.
F. JTS agrees that Compaq shall have no obligations to provide any
technology, licenses, firmware, development resources, engineering resources or
any contribution, other than the NRE listed above, to the Nordic development
efforts.
G. In consideration of the covenants and obligations set forth in this
Agreement, Compaq will have a first right of refusal on all of Nordic production
for a period of [*] commencing with volume production of Nordic HDDs.
Additionally, JTS agrees that during the Term of this Agreement, Compaq shall
[*] Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
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have a right of first refusal to license and/or otherwise acquire any newly
developed JTS product and/or technology on a right of first refusal and on
pricing and royalties which are [*] .
H. Except for any of its pre-existing obligations to TEAC, JTS agrees
not to license the Nordic design to a third party manufacturer.
I. In consideration of the convenants and obligations set forth in this
Agreement, JTS agrees that Compaq will have price preferences which shall result
in Compaq's price being at least [*] lower than any price paid by any other
party for JTS' HDDs, such price preferences commencing with volume production
of Nordic HDDs and shall extend for the initial Term of this Agreement. In the
event this Agreement is extended beyond the initial Term, then in such event
Compaq will have a price preference which shall result in Compaq's price being
at least [*] lower than any price paid by any other party for JTS' HDDs.
J. In consideration of the covenants and obligations set forth in this
Agreement, JTS agrees not to market the Nordic HDDs to any third party before
the Nordic HDDs are Accepted by Compaq and JTS further agrees that it will not
sell any Nordic HDDs to any third party for the [*] . JTS shall be free to
market Nordic HDDs to third parties during the [*] provided however, that
marketing efforts shall not include the sale of Nordic HDDs to such third
parties in contravention of the [*] . Additionally, JTS agrees that it will
not sample in quantities exceeding two (2) Nordic HDDs to any third party
during the [*] .
K. Following Acceptance by Compaq of the Nordic HDDs and - provided
further that JTS is able to supply Compaq with quantities of Nordic HDDs as set
out in the applicable purchasing documents within the schedule provided in such
purchasing documents, if Compaq fails to fulfill its minimum purchase
obligations of Nordic HDDs (as such obligation is set forth in the accompanying
purchasing documents), then in that event JTS shall notify Compaq of its
default. In the event that Compaq fails to cure such default within thirty (30)
days of such notice, then in such event JTS shall be relieved of any further
obligations with respect to the [*] . Notwithstanding the foregoing, Compaq
and JTS agree that Compaq will not be declared to be in default of its
purchasing obligations if JTS is not able to deliver HDDs on the schedule
agreed to in writing by the parties. JTS further acknowledges that in the
event Compaq is required to place orders for HDDs with an alternate supplier
because of reasonable uncertainty of JTS' delivery, such decision may result
in Compaq's inability to purchase HDDs from JTS. JTS agrees that such
inability shall not be considered as a default condition.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
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L. Upon expiration of the [*] , and in consideration of the
covenants and obligations set forth in this Agreement, Compaq will receive a
royalty of [*] HDD for each Nordic HDD sold to a third party, such royalty
payable for the initial Term of this Agreement. In the event that this Agreement
is extended beyond the initial Term, then in such event, Compaq will receive a
royalty of [*] HDD for each Nordic HDD sold to a third party. The foregoing
royalties shall be payable quarterly in accordance with the provisions of this
Agreement and subject to the audit provision of this Agreement.
M. In consideration of the covenants and obligations set forth in this
Agreement, Compaq will be licensed to use the Nordic designs [hereafter
"Licensed Technology"] to make and have made any HDDs, for use in Compaq's
products; such license shall permit Compaq to use the Nordic design on a
royalty-free basis in the event that JTS is unable to meet Compaq's volume or
shipment schedule and such schedule is set forth in a mutually agreed Corporate
Purchase Agreement, or in the event of a material default on the Nordic
development program. Compaq's right to use the Nordic design shall be of
sufficient scope to permit Compaq to improve/modify the JTS design.
N. Provided that JTS is not in default and in the event that Compaq in
its sole discretion chooses to have Nordic HDDs manufactured by a third party
after Acceptance of the Nordic design, then in that event Compaq shall pay JTS a
royalty at the rate of [*] HDD during the initial Term of this Agreement;
such HDDs shall bear JTS' trademarks. In the event that this Agreement is
extended beyond the initial Term of this Agreement. Compaq's royalty obligation
shall be reduced from [*] HDD to a royalty of [*] HDD Compaq's right to
use the Licensed Technology and the Nordic design shall be of sufficient scope
to permit Compaq to improve/modify the JTS design.
O. In consideration of the foregoing covenants and obligations set
forth above by JTS, Compaq agrees that it will design the Nordic HDD products
into at least one of its computer products and further agrees to place purchase
orders for the Nordic HDDs as set forth in the Corporate Purchase Agreement.
3.0 Compaq's Purchasing Obligations
Upon Compaq's Acceptance of the Nordic HDDs, qualification of JTS'
manufacturing operations and compliance with other terms and conditions as set
forth in Compaq's purchasing documents, (including but not limited to Corporate
Purchase Agreement (CPA)); Compaq will place purchase orders towards the
purchase of a minimum quantity of [*] HDDs over a
two (2) year period. Compaq's obligations to purchase HDDs shall be as more
specifically set forth in the accompanying CPA and purchasing documents.
* Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
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4.0 Transfer of Licensed Technology
4.1 Delivery by JTS
A. Licensed Technology and Additional Developments. As of the date
of this Agreement, JTS will deliver to Compaq copies or originals of all of the
Nordic Licensed Technology in its possession. From time to time during the term
of this Agreement in a reasonably prompt manner as, JTS shall, at its sole
expense, deliver to Compaq in written form, and such other useful format and
media as may be reasonably required for the manufacture and support of the
Licensed Products, all Licensed Technology and Additional Developments that
come into the possession of JTS or any of its Affiliates not previously so
delivered.
B. Disclosure of Additional Developments. Without limiting the
foregoing, with respect to Additional Developments, JTS shall at the time this
Agreement is executed and delivered and from time to time thereafter; but in
no event less frequently than quarterly, disclose to Compaq in writing and
confer with it as to all Additional Developments under consideration or in
development by or on behalf of JTS or any of its Affiliates.
4.2 Confidentiality.
A. JTS and Compaq each agree to undertake all reasonable efforts
to treat, and to cause each of its Affiliates, licensees and sublicensees to
treat, as confidential all proprietary information with respect to the Licensed
Technology and Additional Developments. Each of the parties hereto acknowledge
that another party hereto may find it necessary to disclose general
descriptions of proprietary information during the conduct of its business to
banks and other financial institutions contemplating the provision of project
financing to such party. In addition, each of the parties hereto acknowledge
that another party hereto may find it necessary to disclose proprietary
information in connection with the proper grant of sublicenses to parties other
than a party hereto. Under such circumstances, JTS or Compaq, as the case may
be, may make such information available to third parties to the limited extent
necessary for such third party to fulfill its supply or other permitted
purposes, provided that such party shall first obtain from the recipients, a
fully-executed confidentiality agreement which is at least as restrictive as
the confidentiality agreement contained herein; provided, however, that the
foregoing shall not restrict Compaq's or JTS's right to provide technical
information (other than the Restricted Ancillary Technology) and test data that
is reasonably requested by customers in the ordinary course of business.
B. With respect to information not subject to Section 4.2(A)
above, each of JTS and Compaq agree to undertake all reasonable efforts to
treat, and to cause each of its Affiliates to treat, as confidential all other
proprietary information of any party hereto obtained through its relationship
with another
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party hereto established hereunder or otherwise, and will not disclose any such
information to a third party except as necessary to comply with its obligations
to TEAC but in no event shall JTS disclose any Compaq Confidential Information,
or otherwise use such information for its own purposes.
C. Neither JTS nor Compaq shall be bound by the provisions of this
Section 4.2 with respect to information which (a) was previously known to the
recipient at the time of disclosure; (b) is in the public domain at the time of
disclosure; (c) becomes a part of the public domain after the time of
disclosure, other than through disclosure by the recipient or some other third
party who is under an agreement of confidentiality with respect to the subject
information or obtained the information from the recipient; (d) is required to
be disclosed by law or (e) is disclosed by a third party not bound by any
agreement of confidentiality with respect to such information which third party
did not obtain from the recipient.
D. Each of JTS and Compaq shall take action as another party hereto
may reasonably request from time to time to safeguard the confidentiality of
any information subject to the terms of this Section 4.2.
E. To the extent that United States Export Control Regulations, or
similar laws of any jurisdiction, are applicable, neither of JTS nor Compaq
shall, without having first fully complied with such regulations, (i) knowingly
transfer, directly or indirectly, any unpublished technical data obtained or to
be obtained from the other party hereto to a destination outside the United
States, or such other relevant jurisdiction, or (ii) knowingly ship, directly
or indirectly, any product produced using such unpublished technical data to
any destination outside the United States, or such other relevant jurisdiction.
F. The obligations of JTS and Compaq under this Section 4.2 shall
survive the expiration or earlier termination of all or any part of this
Agreement.
4.3 Support of Licensed Technology. From time to time under this
Agreement, each of the parties hereto shall provide the other parties hereto
with any support materials that they shall have on hand and which shall be
reasonably requested for the manufacture, of the Licensed Products as provided
for herein, including, without limitation, any manuals, reports, specifications
or drawings required by customers to use the Licensed Products in the
manufacture of their products. Each of Compaq and JTS shall also allow the
other access to each of their engineering staffs and will allow each others
engineers to visit each of their manufacturing, or research facilities, for the
purpose of providing or receiving support of the technology licensed by each of
them hereunder.
5. Licensing Matters
5.1 Grant of License by JTS. Subject to the terms of this Agreement,
JTS hereby grants to Compaq:
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A. Nonexclusive Rights to Manufacture. The nonexclusive right and
license to manufacture the Licensed Products, and to use the Licensed
Technology and any Additional Developments made by JTS and/or its Affiliates in
connection therewith.
B. Nonexclusive Rights to Sell. The nonexclusive right and license to
sell the Licensed Products, in Compaq Products or as options for use in Compaq
Products, and to use the Licensed Trademarks, the Licensed Technology and any
Additional Developments made by JTS and/or its Affiliates in connection
therewith.
C. Nonexclusive Rights to Use. The nonexclusive right to use the
Licensed Technology and Additional Developments made by JTS and/or any of its
Affiliates for the purpose of making Additional Developments.
5.2 Sublicensing. The licenses granted in Section 5.1 above shall not
include the right to sublicense to a third party, except (i) that either party
may sublicense such licenses in connection with the manufacturing of Nordic HDDs
and/or parts and accessories therefore, for use in the manufacture or assembly
of finished goods to fulfill orders placed by Compaq, and, (ii) that either
party may sublicense their rights to manufacture or assemble to a third party
making products to Nordic specifications as necessary to fill Compaq orders for
Nordic HDDs and under the tradenames or trademarks of JTS.
Further, the parties shall from time to time consider in good faith the
granting of additional sublicenses to other manufacturers for the purpose of
providing multiple sourcing requested by Compaq.
6.0 Royalty Payments
6.1 Calculation of Royalties Payable by Compaq. Compaq shall be
responsible for only one royalty on each Nordic HDD manufactured by Compaq
pursuant to its royalty-bearing license irrespective of the number of patents,
patent claims, copyrights, trademarks, trade names or other types of Licensed
Technology and Additional Developments that may pertain to such Future
Generation Product. Royalties paid shall be net of any returns.
6.2 Calculation of Royalties Payable by JTS. JTS shall be responsible
for only one royalty on each Nordic HDD sold to a third party [hereafter
sometimes referred to as a "Market Development Royalty"] pursuant to the royalty
provisions of this agreement. Royalties paid shall be net of any returns.
6.3 Payment of Royalties. Royalties shall be based on sales made in
any given calendar quarter as reflected in Compaq's or JTS invoices (as the case
may be) to its customers, as the case may be, in such calendar quarter. All
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royalty payments for each calendar quarter shall be made within sixty (60) days
subsequent to the end of such quarter, and shall be subject to any applicable
withholding tax requirements. Each of JTS and Compaq agrees to maintain accurate
and complete records showing Nordic HDDs sold by it and to comply with such
further requirements as set forth in the Record Keeping and Audit provisions of
this Agreement.
6.4 Proprietary Rights. Subject to the provisions of this Agreement and
any other written agreement between the parties hereto entered into after the
date hereof the parties agree that the following provisions shall govern the
parties intellectual property rights:
A. JTS's Rights to the Licensed Technology. Subject to the other express
terms of this Agreement, JTS shall retain all title and other rights (including
copyrights, patent rights, trade secret rights and other proprietary rights)
to the Licensed Technology.
B. Rights to JTS Additional Developments. JTS shall retain all title
and other rights (including copyrights, patent rights, trade secret rights and
other proprietary rights) to:
(i) the information, design and technology of property (including the
Licensed Products and Additional Developments) and all manufacturing processes
with respect thereto developed by JTS independently from Compaq, and all
modifications and derivative works of the foregoing made by JTS; and
(ii) all service marks, trademarks, tradenames, and any other
designations with respect to JTS products.
C. Rights to Compaq's Additional Developments. Compaq shall retain all
title and other rights (including copyrights, patent rights, trade secret
rights and other proprietary rights) to:
(i) the information, design and technology of property (including the
Licensed Products and Additional Developments) and all manufacturing processes
with respect thereto developed by Compaq independently from JTS, and all
modifications, improvements and derivative works of the foregoing made by each
of Compaq; and
(ii) all service marks, trademarks, tradenames, and any other
designations with respect to Compaq's products.
D. Joint Developments. From time to time during the term of this
Agreement the parties may agree in writing to develop products through a joint
project between each other using the technology owned and/or engineers employed
by each of them (a "Joint Development") to develop Future Generation Products.
Any technology or other intellectual property developed under a Joint
14
Development shall be owned jointly by the parties, and the parties mutually
shall agree in writing upon the method(s) for commercial exploitation of such
technology. Royalties on Joint Developments shall be negotiated in the future.
In addition, any patents or copyrights resulting from any such Joint
Development shall be applied for and owned jointly by the parties. The
individual expenses incurred by either party in connection with any Joint
Development (e.g. engineering, development, prototypes, testing, travel,
lodging, allowances and any other expenses incurred in connection with the
project) shall be borne by the party incurring the expense. Notwithstanding
anything to the contrary contained herein, neither party shall transfer or
license any of its rights in or to any technology or other intellectual
property developed under a Joint Development without the written consent of the
other party, except pursuant to sublicenses permitted in this Agreement. To the
extent that Compaq and JTS engage in joint development in the course of
developing the Nordic HDDs, each party shall retain ownership in its own
development and there shall be no obligation to license or otherwise provide
such development to the other party, except as necessary to manufacture Nordic
HDDs for Compaq.
E. Markings. All Licensed Products shall bear such markings with
respect to patents (or patents pending) and/or trademarks, as shall be
reasonably requested by the licensing party to comply with applicable law or
otherwise required to protect its proprietary rights.
7.0 Limitation Of Liability.
EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, NEITHER PARTY HEREUNDER NOR
ANY OF ITS OFFICERS, DIRECTORS, EMPLOYEES, AFFILIATES, OR AGENTS SHALL BE
LIABLE TO THE OTHER PARTY HEREUNDER OR TO ANY THIRD PARTY FOR ANY LOSS OF USE,
LOSS OF GOODWILL, INTERRUPTION OF BUSINESS, OR FOR INDIRECT, INCIDENTAL,
SPECIAL, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST REVENUES OR PROFITS) OR
SIMILAR DAMAGES, WHETHER BASED ON TORT (INCLUDING WITHOUT LIMITATION,
NEGLIGENCE OR STRICT LIABILITY), CONTRACT, OR OTHER LEGAL OR EQUITABLE GROUNDS,
EVEN IF SUCH PARTY HAS BEEN ADVISED OR HAD REASON TO KNOW OF THE POSSIBILITY OF
SUCH DAMAGES.
8.0 Term And Termination
8.1 License Perpetual. Except as otherwise provided in Section 8.2
below, the term of this agreement and the licenses and immunities from suit
hereunder shall be perpetual.
8.2 Termination of Rights. If any party hereto shall commit a
material breach of any of the terms of this Agreement, or any of the related
purchasing documents, and such breach continues for thirty (30) days after
receipt of written notice specifying such breach in reasonable detail, then any
non-breaching party
15
shall have the right to terminate all of the breaching party's rights hereunder
by delivery of written notice of such termination. Notwithstanding the foregoing
any such termination shall have no effect on the breaching party's duties and
obligations hereunder, which shall continue past such termination in full force
and effect. Compaq's rights to use JTS' technology and designs shall not be
reduced or diminished in the event of a Termination for default by JTS.
8.3 Bankruptcy, Etc. A party's rights (but not its obligations) under this
Agreement shall terminate automatically if any party attempts to assign this
Agreement, except under circumstances permitted hereunder, or hereto suspends
business, or files a voluntary petition pursuant to or purporting to be pursuant
to any reorganization of insolvency law of any jurisdiction, or an involuntary
petition pursuant to or purporting to be pursuant to any reorganization or
insolvency law of any jurisdiction or an involuntary petition pursuant to or
purporting to be pursuant to any reorganization of insolvency law of any
jurisdiction is filed and is not dismissed within sixty (60) days, or any party
makes an assignment for the benefit of creditors, or applies for or consents to
the appointment of a receiver or trustee of a substantial part of its property
or a receiver or trustee of a substantial part of its property is otherwise
appointed and is not removed within sixty (60) days.
9.0 Force Majeure And Damage Exclusions.
Notwithstanding any other provision of this Agreement:
A. Force Majeure. Either party shall be excused from any failure or delay
in performance resulting directly or indirectly from inability to obtain parts
or other necessary materials from usual sources of supply, transit failure or
delay, labor disputes, governmental orders or restrictions, fire, flood or other
acts of nature, accident, war, civil disturbance, or any other causes beyond
such party's reasonable control. A party affected by a force majeure shall
resume performance promptly upon cessation of same.
10.0 Warranties And Representations: Release
A. Of JTS. JTS represents and warrants that (i) JTS validly existing and in
good standing under the laws of the State of Delaware and having full power and
authority to carry on its business as it is now being conducted and to own or
lease the properties and assets it now owns or leases, and being duly qualified
to do business, and being in good standing, (ii) JTS has all necessary right,
power and authority to enter into this Agreement (iii) neither the execution and
delivery of this Agreement by JTS nor its performance hereunder will conflict
with or result in the breach of any of the terms or conditions of or constitute
a default under the charter documents of JTS or of any contract, agreement,
commitment, indenture, mortgage, note, bond, license or other instrument or
obligation to which it is a party or by which it or any of its property or
assets may be bound, (iv) this Agreement has been duly and validly executed by
JTS and
16
constitutes the valid and binding obligation of JTS enforceable in accordance
with its terms (c) no consent, approval or authorization of, or declaration,
filing or registration with, an foreign, federal, state, or local governmental
or regulatory authority, or any other party, is required to be made by JTS in
connection with the execution, delivery and performance of this Agreement and
the transactions contemplated hereby. EXCEPT FOR THE REPRESENTATIONS AND
WARRANTIES SPECIFICALLY PROVIDED IN THIS AGREEMENT ALL OF THE ADDITIONAL
DEVELOPMENTS PROVIDED BY JTS HEREUNDER ARE PROVIDED "AS IS" AND JTS
EXPRESSLY DISCLAIMS ANY AND ALL OTHER WARRANTIES, INCLUDING ANY EXPRESS OR
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
B. Of Compaq. Compaq represents and warrants that it has received a
copy of the TEAC agreement with JTS.
11.0 Record Keeping And Audit Rights
A. Reports. Each party hereto shall keep and maintain full and accurate
records relating to sale and manufacture of Nordic HDDs. To the extent that a
party is obligated to pay royalties, such party shall prepare and submit
quarterly reports to the other party no later than sixty (60) days following
the last business day of all calendar quarters, certified by an officer of such
party, specifying, at a minimum, the quantity of each royalty-bearing products
sold during the previous quarter and the royalty due for such royalty-bearing
products. The information contained in such reports will be retained in
confidence and access to such information shall be restricted to the finance
and legal groups. The obligations to provide royalty reports shall only apply
to royalty-bearing products. Each party shall retain such business records as
necessary to support the royalty reports for a period of three (3) years
following the end of a reporting period.
B. Audit. Each party agrees to allow mutually acceptable independent
auditors to audit and analyze appropriate accounting records to ensure
compliance with all terms of this Agreement. Any such audit shall be permitted
by the party to be audited within fifteen (15) days of receipt of a written
request by the party requesting such audit, during normal business hours, at
a time mutually agreed upon by the party to be audited. The cost of such an
audit will be borne by the party requesting the audit unless a material
discrepancy is found (underpayment of royalties for the quarter) or records are
not maintained and available in accordance with this section, in which case the
audited party agrees to pay the requesting party for the costs associated with
the audit, but in no event shall such costs exceed twenty thousand dollars
($20,000) for such audit.
C. Interest. In the event that there is an underpayment of royalties,
the underpaid royalties shall be promptly remitted with interest, such interest
accruing from the date such royalties should have been paid. The applicable
17
interest rate shall be equal to the higher of twelve percent (12%) per annum or
at two percent (2%) over prime. The interest rate shall be compounded monthly.
12.0 Immunity From Suit
A JTS hereby grants to Compaq, its Subsidiaries and to its and their
customers, mediate and immediate, a personal, non-transferable immunity from
suit under any JTS Patents for the formation, combination, and use of any JTS
Nordic HDD with other hardware or software products. The foregoing immunity from
suit shall extend to an apparatus, method, or process used in the manufacture of
a Nordic HDD.
13.0 Additional Licenses
A JDD Firmware License. Subject to the provisions of this Agreement,
JTS hereby grants to Compaq a nonexclusive, transferable, worldwide, non-royalty
bearing, irrevocable license to:
(1) use and prepare derivative works of source code for JTS's firmware, on
equipment located within Compaq's control, such source code to be used
for internal purposes only;
(2) reproduce, perform, display, sublicense and distribute, in any HDD,
such firmware (in object code form) to third parties; each third party
shall have the right correspondingly to sublicense other third parties
along the chain of distribution to end users;
(3) reproduce, perform, display, sublicense and distribute, in any HDD,
Compaq prepared derivatives of the firmware (in object code form) to
third parties; each third party shall have the right correspondingly
to sublicense other third parties along the chain of distribution to
end users; and
(4) reproduce, perform, display, sublicense and distribute Compaq
derivations of the JTS firmware under a source code license agreement.
B License under JTS Patents
(1) JTS hereby grants to Compaq a nonexclusive, transferable, worldwide
license under JTS Patents to use, make, have made, lease, sell and
otherwise transfer any HDD with Compaq products, either alone or
connected to or in conjunction with other computer hardware or
software. All licenses granted under this Agreement
18
shall be of sufficient scope to permit Compaq to exercise all rights
granted in this Agreement and shall include the right to grant
sublicenses of equivalent scope to Compaq's Subsidiaries, which
Subsidiaries may correspondingly sublicense other Subsidiaries.
Licenses to Subsidiaries shall be valid and subsisting for as long as
the parent has a valid and subsisting license and only for as long as
the parent has corporate control of the Subsidiary receiving a license
hereunder.
(2) JTS hereby grants to Compaq, its Subsidiaries and its and their
customers, mediate and immediate, a personal, non-transferable
immunity from suit under JTS Patents for the formation and use of any
Compaq product with other hardware or software products. The foregoing
immunity from suit extends to any apparatus, method, or process per se
if such apparatus, method, or process infringes a JTS Patent when used
for its intended purpose or is combined with a Compaq product.
C. JTS hereby grants Compaq a royalty-free, irrevocable, worldwide
license to use, publish, have published, copy, have copied, distribute, have
distributed, prepare derivative works and have such derivative works prepared
of any Documentation produced by JTS for any Nordic HDD.
D. In furtherance of Compaq's licenses granted in above, JTS agrees to
provide Compaq with magnetic copies of modifications, enhancements, versions,
version releases, updates, and bug fixes which JTS makes to its firmware. JTS
agrees to use its best efforts to inform Compaq of its plans to release major
modifications and version releases and of the anticipated release date to
permit Compaq to formulate corresponding release dates and to permit Compaq to
phase out its production of obsolete versions and updates. Magnetic copies of
major modifications and version releases shall be provided to Compaq at least
30 days prior to commercial release by JTS to other JTS customers or 30 days
prior to commercial release by JTS's licensees (whichever comes first).
Magnetic copies of minor bug fixes, updates, modifications, etc. shall be
provided to Compaq as soon as reasonably possible but in every event prior to
the expiration of sixty (60) days from commercial release by JTS or commercial
release by JTS's licensees.
14.0 Miscellaneous Provisions
A. EXPORT. Notwithstanding any rights, license or privileges specified in
this Agreement, each party agrees that it will not export any technology or
product provided by the other party hereunder or jointly developed hereunder,
or any part thereof, either directly or indirectly, without first obtaining any
required licenses to so export from the United States Government, and
19
further agrees that it will comply with all laws, rules and regulations
applicable to the export or re-export of such technology or product.
B. INFRINGEMENT CLAIMS. Compaq and JTS shall notify each other of any
potential or actual infringement or misappropriation by any third party of any
patent, copyright or other proprietary right that forms part of the HDD
technology and shall provide each other with any available evidence of such
infringement or misappropriation. If the parties determine that they will
cooperate in an action relating to the foregoing, the parties shall jointly
take all reasonable steps necessary to enjoin and prevent such infringement or
misappropriation, including the institution and maintenance of legal or
equitable proceedings, and shall promptly execute all papers and perform
such other acts as may be reasonably required to join in any such suit, action
or proceeding, provided, however, that a party may, at its option, be
represented by counsel of its choice. Upon any such joinder, each party shall
pay the fees of its own separate counsel (if any) and shall bear fifty percent
(50%) of all other reasonable costs incurred in connection with such suit,
action or proceeding. If a party, in its reasonable business judgment,
concludes that the steps necessary to enjoin such infringement or
misappropriation are not economically justifiable under the circumstances, it
may decline to join in any action proposed or taken by the other party,
provided, however, that if the other party determines that it shall proceed in
such action, the declining party shall provide all reasonable assistance and
information, at its sole cost and expense, to the other party in support of
such action. Any amount recovered in any such suit, action or proceeding
brought by the parties jointly (whether recovered through judgment or
settlement) shall be allocated to Compaq and JTS, pro-rata, for reimbursement of
the reasonable expenses incurred by the parties in connection with such
proceedings in accordance with their cost-sharing arrangement set forth in this
section, and to the extent to which amounts recovered are in addition to the
amount of such expenses, such additional amounts shall be shared equally by the
parties. Any amount recovered by a party individually pursuing any such suit,
action or proceeding shall inure solely to the benefit of such party.
C. Third-Party Claims of Infringement to Technology. Each party agrees
to promptly notify the other party upon becoming aware of any suit or
proceeding brought against it by any third party which is based on a claim that
the HDD technology infringes any patent, copyright or other proprietary right.
The parties may, upon mutual agreement, cooperate in the defense against such
suit or proceeding, and in such case shall promptly execute all papers and
perform such other acts as may be reasonably required to join in such defense.
In such circumstance where the parties cooperate in a defense, each party
shall pay the fees of its own separate counsel (if any) in such defense, and
shall bear fifty percent (50%) of all other reasonable costs incurred in
connection with such suit, action or proceeding. In any event, each party shall
provide all reasonable assistance and information to the other party in support
thereof.
20
D. Injunctive Relief. Each party acknowledges and agrees that in the
event of an unauthorized use, reproduction, distribution or disclosure of any
confidential information or data contained in either party's technology, an
adequate remedy at law would not be available; and, therefore, injunctive or
other equitable relief would be appropriate to restrain such use, reproduction,
distribution or disclosure, threatened or actual. Such relief shall be in
addition to any other remedies provided herein.
E. Breach of Exclusivity. JTS acknowledges and agrees that in the
event a license is granted to a third party in breach of the [*] , an
adequate remedy at law would not be available; and, therefore, injunctive or
other equitable relief would be appropriate to restrain any use, reproduction,
distribution or disclosure, threatened or actual in contravention of the [*] .
Such relief shall be in addition to any other remedies provided herein.
F. Other Remedies. In the event of a material breach of this
Agreement, the other party shall have such remedies for direct damages
(including out-of-pocket expenses and funds paid to JTS) to which it is
entitled by law.
G. Assignment. This Agreement and the licenses granted hereunder are
to a specific entity or legal person, which does not include corporate
subsidiaries, affiliates or parent company of either party, and except as set
forth herein, all rights hereunder are not assignable nor are the obligations
imposed delegable by either party without the prior written consent of the
other party. Notwithstanding anything to the contrary, neither party may assign
its patent license or immunity to another party unless the acquiring party
agrees to provide a patent license, to the other party to this Agreement, of
the same scope and on the same terms as set forth in this Agreement.
H. Execution of Assignments and Non-Disclosure Agreements by Contract
Employees. JTS agrees to have each of its contract employees (including
contractors, independent agents, temporary employees, etc.) execute an
assignment of all intellectual property rights, including an assignment of
copyrights, inventions, and patents and a waiver of moral rights prior to
employment or retention by JTS. Additionally, such Contractor employees shall
execute appropriate non-disclosure agreements which obligate them to retain the
confidential information of JTS and its customers and licensees in strictest
confidence.
I. Execution of Assignments, Non-Disclosure Agreements, and
Non-Solicitation Agreements by Employees. JTS agrees to have each of its
employees execute an assignment of all intellectual property rights, including
an assignment of copyrights, inventions, and patents and a waiver of moral
rights prior to employment or retention by JTS. Additionally, such employees
shall execute appropriate non-disclosure agreements which obligate them to
retain the
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
21
confidential information of JTS and its customers and licensees in strictest
confidence. Such employees shall also execute an appropriate non-solicitation
agreement which prohibits the solicitation of JTS's employees by a former
employee.
J. Execution of Assignments, Non-Disclosure Agreements,
Non-Solicitation Agreements and Covenants Not to Compete by Officers and Key
Employees. JTS agrees to have each of its officers and key employees execute an
assignment of all intellectual property rights, including an assignment of
copyrights, inventions, and patents and a waiver of moral rights prior to
employment or retention by JTS. Additionally, such officer and key employees
shall execute appropriate non-disclosure agreements which obligate them to
retain the confidential information of JTS and its customers and licensees in
strictest confidence. Such officer and key employees shall also execute an
appropriate non-solicitation agreement which prohibits the solicitation of JTS'
employees by a former officer or key employee. In consideration for
Compaq's participation and as material inducement for Compaq participation in
this venture, JTS agrees to obtain, to the extent such agreements are
enforceable in the state or country where such employees reside, from its
current and future officers and key employees an agreement not to compete with
JTS' business interests for a period of fifteen (15) months following the
Effective Date of this Agreement.
15.0 Waiver.
The waiver by either party of any of its rights or any breaches of the
other party under this Agreement in a particular instance shall not serve as a
waiver of the same or different rights or breaches in subsequent instances. All
remedies, rights, undertakings and obligations hereunder shall be cumulative,
and none shall operate as a limitation of any other.
16.0 Section Heading and Language Interpretations: Business Days.
As used herein, "business day" shall mean each day other than Saturday,
Sunday and any day on which banks are nationally required to be closed in the
United States of America or Japan, or any other business holiday for either
party of which it has advised the other party in writing not less than 45 days
in advance. The descriptive headings in this Agreement are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement. All personal pronouns used in
this Agreement, whether used in the masculine, feminine or neuter genders shall
include all genders, the singular shall include the plural and vice versa and
shall refer solely to the parties signatory thereto unless otherwise
specifically provided. The use of the word "including" in this Agreement shall
be by way of example rather than by limitation.
17.0 Notices.
All notices, demands, consents, requests, approvals, and other
communications required or permitted hereunder shall be in writing and shall be
deemed effective only upon delivery (whether receipt is accepted or refused) at
the addresses set forth below (or at such other addresses within the United
22
States of America as shall be given in writing by any party to the others in
accordance with this Section 10. Notices may be delivered by hand, United
States registered or certified mail, return receipt requested, bonded private
courier service or by telecopier (followed immediately in writing by bonded
private courier service).
To Compaq: Compaq Computer Corporation
20555 S.H. 249
Houston, Texas 77070
Attn: Purchasing Department
with copy to:
P.C. Storage Development
Compaq Computer Corporation
20555 S.H. 249
Houston, Texas 77070
and copy to:
Managing Attorney - Licensing and Technology
Compaq Computer Corporation
20555 S.H. 249
Houston, Texas 77070
To JTS: JT Storage, Inc.
1289 Anvilwood Avenue
Sunnyvale, California 94089
Attention: President
Telecopy Number: (408) 747-0849
18.0 Assignment
A. Except as specifically provided herein, no party hereto may assign
any of its rights (in whole or in part), or delegate any of its obligations (in
whole or in part), hereunder without the prior written consent of the other
parties, which consent shall not be unreasonably withheld. In the event of an
IPO, Compaq's rights hereunder will succeed to a successor by merger or
acquisition to Compaq following an IPO.
B. In the event of an assignment by JTS of any its rights or delegation
of its obligations, or in the event of a Change in Control of JTS and its
23
operations, Compaq may at its sole option choose to terminate JTS' rights (but
not its obligations) under this Agreement.
19.0 Severability.
Whenever possible, each provision of this Agreement will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
20.0 Governing Law.
This Agreement shall be construed and enforced in accordance with, and
all questions concerning the construction, validity, interpretation and
performance of this Agreement shall be governed by, the laws of the State of
Texas, without giving effect to provisions thereof regarding conflict of laws.
21.0 Controlling Terms/Entire Agreement/Amendment.
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way. No provisions in the purchase
orders, acknowledgments or other business forms of either party which are
different from or in addition to the applicable terms set forth in this
Agreement shall be of any force or effect whatsoever unless it is acknowledged
to in writing by the other party expressly stating that each document supersedes
this Agreement as follows: "Notwithstanding any term of the Development
Agreement by and between JTS and dated June 16th, 1994." Any provision of this
Agreement may be amended only with the prior written consent of all of the
parties hereto.
22.0 Multiple Counterparts.
This Agreement may be executed on separate counterparts transmitted by
telecopy, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
23.0 Relationship of the Parties.
It is not the intent of the parties to create partnership or joint
venture or to assume partnership liability or responsibility by entering into
this Agreement. Each party hereto shall be deemed an independent contractor with
respect to the other party and neither party hereto shall have any right or
authority to assume or create any obligations on behalf of the other party
hereto or to make any representations on such other party's behalf. Accordingly,
the obligations of the parties with respect to the matters addressed herein
shall be limited to those specifically set forth in this Agreement or other
written agreements between the parties.
24
24.0 Public Disclosure.
Neither party hereto shall make any public release of information
regarding the terms of this Agreement relating to the royalties due hereunder
unless (i) such party has obtained the written consent of the other party
regarding the form, content and timing of such disclosure or (ii) such
disclosure is required by applicable law; provided that in the event of any
disclosure mandated by law, each party shall consult with the other as to the
content of such disclosure.
25.0 Right of Set-Off.
If in the good faith belief of one of the parties hereto (the "Insured
Party"), it is entitled to indemnification, reimbursement or payment hereunder,
in addition to any other remedies which it may have available to it, the Insured
Party shall have the right to set off the entire amount thereof against any
amounts which the Injured Party shall owe to the other party from time to time
thereafter for any reason, including any royalties due or which become due
hereunder.
26.0 No Strict Construction.
The language used in this Agreement will be deemed to be the language
chosen by the parties hereto to express their mutual intent, and no rule of
strict construction will be applied against any party hereto.
27.0 Remedies.
Each of the parties confirms that damages at law may be an inadequate
remedy for a breach or threatened breach of this Agreement and agrees that, in
the event of a breach or threatened breach of any provisions hereof, the
respective rights and obligations hereunder shall be enforceable by specific
performance, injunction or other equitable remedy, but nothing herein contained
is intended to, nor shall it limit or affect, any rights at law or by statute or
otherwise of any party aggrieved as against any other party for breach or
threatened breach of any provision hereof, it being the intention by this
section to make clear the agreement of the parties that the respective rights
and obligations of the parties shall be enforceable in equity as well as at law
or otherwise.
25
28.0 Preamble; Preliminary Recitals and Exhibits. The Preliminary Recitals set
forth in the Preamble hereto are hereby incorporated and made part of this
Agreement. Additionally, Exhibits A, B, and C are incorporated herein by
reference.
JT Storage COMPAQ COMPUTER CORP.
By: /s/ David B. Pearce By: /s/ Hugh Barnes
---------------------------- ---------------------------
David B. Pearce Hugh Barnes
President Sr. Vice President and
General Manager
Portable P.C. Division
Date: June 16, 1994 Date: 6/20/94
-------------------------- -------------------------
26
AMENDMENT TO DEVELOPMENT AGREEMENT
This Amendment is made effective as of the Effective Date between COMPAQ
COMPUTER CORPORATION, A Delaware corporation having a principal place of
business at 20555 S.H. 249, Houston, Texas 77070 (hereinafter "Compaq") and JT
STORAGE, INC., a Delaware corporation having a principal a place of business at
1289 Anvilwood Avenue, Sunnyvale, California 94089 (hereinafter "JTS") and
amends the Development Agreement between the parties of effective date of June
16, 1994 (hereinafter referred to as "Agreement").
PRELIMINARY RECITALS
WHEREAS, Compaq has paid to JTS consideration of Five Hundred Thousand U.S.
Dollars (U.S. $500,000.00) under the Agreement; and
WHEREAS, JTS has been negotiating with Western Digital Corporation ("WDC")
about entering into a Technology Transfer and License Agreement pursuant to
which, among other things, JTS will grant to WDC certain license and sublicense
rights with respect to JTS technology, including the Nordic Series design and
other technology referred to in the Agreement between JTS and Compaq; and
WHEREAS, JTS desires that Compaq release JTS from certain obligations in the
Agreement in order that JTS may finalize the Technology Transfer and License
Agreement; and
WHEREAS, Compaq desires to release JTS from such obligations if WDC will
provide equity funding to JTS and thereby make JTS a more viable entity and
further to enable WDC to become an alternate source of Nordic Series HDDs for
Compaq; and
WHEREAS, JTS has represented to Compaq that WDC will provide equity funding to
JTS and JTS agrees that it will not stand in the way of WDC being an alternate
source of Nordic Series HDDs to Compaq; and
WHEREAS, the parties are desirous of modifying the obligations of each other
that are in the Agreement, as described in this Amendment; and
NOW THEREFORE, in consideration of the premises and the mutual covenants and
undertakings hereinafter set forth, the parties hereto hereby agree as follows:
1.0 Definitions
1.1 Capitalized terms in this Amendment shall have the same meaning as given
them in the Agreement.
1.2 Delete Section 1.14 in its entirety and replace with the following:
"Nordic-Series" means any HDD with a width of between 3.25 and 3.75
inches and a height of 0.50 (five-tenths) inches or less, and all
Licensed Technology pertaining principally thereto.
1.3 Delete Section 1.18 in its entirety and replace with the following:
[*] means that period of exclusivity commencing on the date of a
publicly-announced delivery by Compaq of a revenue-bearing product
incorporating a Nordic Series HDD and extending for a period of [*]
thereafter, provided however, that such [*] shall not begin unless
and until the
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
27
Nordic Series HDD that will be incorporated into the Compaq
product has been Accepted by Compaq.
1.4 The term [*] in the Agreement shall be replaced with the
term [*] .
1.5 The term "Nordic" in the Agreement shall be replaced with the term
"Nordic Series."
1.6 The "Effective Date" of this Amendment shall be February 3, 1995. The
amendments to Sections 2.1.e. and 2.1.f. of this Amendment shall, solely with
respect to JTS's obligations to TEAC, be retroactively effective as of June 16,
1994.
2.0 Development of Nordic Series HDDs
2.1 The parties agree to modify the Agreement as follows:
a. Delete Exhibits A, B, and C in their entirety and replace
within thirty (30) days of the effective date of this Amendment with new
Exhibits A, B, and C.
b. Delete Section 2.0.B of the Agreement in its entirety and
replace with the following:
JTS further agrees that the Nordic Series HDDs shall be
in strict conformance with the Nordic Technical
Specifications attached hereto as Exhibit C. To the
extent that JTS finds that any information in Exhibit C
will impact the Milestone Dates, Schedule, and/or
result in additional cost. JTS will notify Compaq in
writing within five (5) business days of the time that
Compaq provides JTS with the information which has
resulted in a change to the Milestone Dates, Schedule,
and/or additional cost. In the event that JTS does not
notify Compaq within five (5) days, then in such event,
the information furnished will be deemed to have no
impact on the Milestone Dates, Schedule, and/or cost of
the project.
c. Delete Section 2.0.C in its entirety and replace with the
following:
In consideration for JTS's agreement to design the
Nordic Series HDDs in conformance with the Development
Plan and the Project Milestones and in conformance with
the Nordic Technical Specifications; Compaq shall pay
five hundred thousand dollars (U.S. $500,000.00) as
non-recurring engineering charges ("NRE") to JTS for the
development of two (2) Nordic Series HDDs: [*] .
The NRE charges referred to above shall be
payable as follows:
One Hundred percent (100%) of NRE already paid
by Compaq by JTS.
d. In Section 2.0.E, second line down from the top, after the word
"that", insert the following:
, except for JTS's obligations under the Technology
Transfer and License Agreement with WDC.
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
28
e. In Section 2.0.G, four lines down from the top, after the word
"Agreement," the phrase "except for any pre-existing obligation to TEAC and
JTS's obligations to WDC under the Technology Transfer and License Agreement."
f. Delete Section 2.0.H of the Agreement in its entirety and
replace instead with the following:
Except for any of JTS's pre-existing obligations to TEAC and
for the above-referenced Technology Transfer and License
Agreement with WDC, JTS agrees not to license the
Nordic Series design to a third party manufacturer. JTS
represents and warrants that the Technology Transfer and
License Agreement with WDC contains a prohibition against
WDC sublicensing the Licensed Technology to any third party
other than a WDC Subsidiary, as defined herein. "WDC
Subsidiary" is defined as an entity in which WDC holds at
least a fifty-one percent (51%) ownership, or, for WDC
manufacturing entities that are located in foreign
jurisdictions that require that the foreign entity own a
controlling interest, is controlled for all intent and
purposes by WDC and in which WDC holds at least a forty-nine
percent (49%) ownership, but only for so long as the
foregoing conditions are met.
g. Delete Section 2.0.J of the Agreement in its entirety and
replace with the following:
In consideration of the covenants and obligations set forth
in this Agreement, JTS agrees not to market any
particular Nordic Series HDD to any third party before such
Nordic Series HDD is Accepted by Compaq, and JTS further
agrees that it will not sell any Nordic Series HDDs [except
the Nordic three inch (3"), single disk, seven millimeter
(7mm) high, 270MByte HDD, the three inch (3"), dual disk,
ten and a half millimeter (10.5mm) high HDD with a capacity
of less than 700MBytes, and the three inch (3"), single
disk, ten and a half millimeter (10.5mm) high HDD with a
capacity of less than 350MBytes] to any third party for the
[*] . JTS shall be free to market Nordic Series HDDs to
third parties during the [*] provided however, that
marketing efforts shall not include the sale of Nordic
Series HDDs to such third parties in contravention of the
[*] . Additionally, JTS agrees that it will not sample
in quantities exceeding two (2) Nordic Series HDDs to any
third party during the [*]
h. In Section 2.0.K of the Agreement, delete all references to
[*] and replace with [*] Five lines down from the top, delete the phrase
"Nordic HDDs" and insert instead "HDDs."
i. Delete Section 2.0.L of the Agreement in its entirety and
replace with the following:
Upon expiration of the [*] and in consideration of the
covenants and obligations set forth in this Agreement,
Compaq will receive a royalty of [*] HDD for each Nordic
Series HDD sold to a third party, such royalty payable for
the initial Term of this Agreement. In the event that this
Agreement is extended beyond the initial Term, then in such
event, Compaq will receive a royalty of [*] HDD for each
Nordic Series HDD sold to a third party. Compaq agrees that
in the event that any third party, who is not licensed by
JTS, begins volume shipment of any Nordic Series equivalent
form factor and capacity HDDs, Company will renegotiate the
royalties of Section 2.0.L. in good faith. The foregoing
royalties shall be payable quarterly in accordance with the
provisions of this Agreement and subject to the audit
provision of
* Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
29
this Agreement. JTS agrees that WDC is obligated under
the above-referenced Technology Transfer and License
Agreement to pay to JTS the royalties described in the
following paragraph and further agrees that all such
royalties paid by WDC to JTS (hereinafter "WDC
Royalties") will be promptly paid by JTS to Compaq as
additional royalty under this Agreement. JTS hereby
grants to Compaq a perfected security interest in such
WDC Royalties and agrees to execute and file in
California and in Texas a Form UCC-1 with respect
thereto and all other documents and instruments as
Compaq may request to confirm or perfect such security
interest.
The royalty payable to WDC to JTS is as follows:
For so long as JTS is obligated to pay royalties to
Compaq for the sale of Nordic Series drives under this
Agreement, WDC shall pay to JTS, on a quarterly basis, a
royalty at a rate equivalent to the rate quoted in the
Development Agreement, not to exceed [*] per drive on
all sales of "Licensed Nordic Products" by WDC to any
third party other than Compaq (hereinafter referred to
as "Royalty Obligation"); provided, however, that at
such time as a third party competitor begins volume
shipment of any "3-Inch Disk Drive," such Royalty
Obligation will be reduced to a level to be negotiated
in good faith among WDC, JTS, and Compaq. Nothing in the
WDC/JTS Technology Transfer and License Agreement or in
this letter is intended to reduce or otherwise affect
JTS's obligation to Compaq to pay royalties to Compaq on
sales by JTS of Licensed Nordic Products. For purposes
of this letter and the WDC/JTS Technology Transfer and
License Agreement, "3-Inch Disk Drives" means every
magnetic-media storage system that includes control and
interfacing circuitry and hard disk assembly that
includes at least one magnetic rigid disk the diameter
of which is less than three and one-half inches (3 1/2")
and greater than two and three-quarters inches (2 3/4");
and "Licensed Nordic Products" means 3-Inch Disk Drives
that include the proprietary single-chip controller
currently embodied in JTS's Nordic Series design and any
derivative controller.
j. In Section 2.0.O of the Agreement, last line, delete "Nordic
HDDs" and insert instead "HDDs."
3.0 General
3.1 Other than as modified by this Amendment, all other terms and
conditions of the Agreement remain the same.
3.2 Whenever possible, each provision of this Amendment will be interpreted
in such manner as to be effective and valid under applicable law, but if any
provision of this Amendment is held to be invalid, illegal or unenforceable in
any respect under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect any other provision
or any other jurisdiction, but this Agreement will be reformed, construed and
enforced in such jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
3.3 Governing Law. This Amendment shall be construed and enforced in
accordance with, and all questions concerning the construction, validity,
interpretation and performance of this Amendment shall be governed by, the laws
of the State of Texas, without giving effect to provisions thereof regarding
conflict of laws.
3.4 This Amendment, together with the Agreement and those documents
expressly referred to therein, and the Corporate Purchase Agreement of June 21,
1994 between the parties herewith, embody the complete agreement
* Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.
30
and understanding among the parties and supersede and preempt any prior
understandings, agreements or representations by or among the parties, written
or oral, which may have related to the subject matter hereof in any way. No
provisions in the purchase orders, acknowledgements or other business forms of
either party that are different from or in addition to the applicable terms set
forth in this Amendment shall be of any force or effect whatsoever unless it is
acknowledged to in writing by the other party expressly stating that such
document supersedes this Amendment as follows: "Notwithstanding any term of the
Development Agreement dated June 16, 1994 between the parties, as amended." Any
provision of this Amendment may be amended only with the prior written consent
of all of the parties hereto.
IN WITNESS WHEREOF, the persons signing below warrant that they are duly
authorized to sign for, an on behalf of, the respective parties. This
Amendment has been executed in duplicate originals.
JT STORAGE COMPAQ COMPUTER CORPORATION
By: /s/ David B. Pearce By: /s/ Hugh Barnes
-------------------------- ----------------------------
David E. Pearce Hugh Barnes
President Senior Vice President
General Manager
Portable PC Division
Date: February 3, 1995 Date: 2/8/95
-------------------------- ----------------------------
5
31
[COMPAQ LETTERHEAD]
December 5, 1995
Mr. Lee Peterson
Vice President Sales & Marketing
JTS Corporation
166 Baypointe Parkway
San Jose, CA 95134
Subject: Nordic Series Exclusivity Issue; Proposed Amendment 2 to our
Development Agreement of June 16, 1994, ("Agreement") as
amended by the Amendment dated February 3, 1995 ("Amendment 1")
Dear Lee:
Thank you for your letter of November 28, 1995. We seem to be close to agreement
on the issues. While Compaq remains willing to provide JTS relief from the
current [*] on Nordic Series products, we would
like to ensure (1) that Compaq's prices for Nordic Series products are not
permitted to increase as a result of increased royalties required of third
parties, and (2) that the proposed terms also apply to Western Digital
Corporation ("WDC"). Compaq proposes, therefore, to modify our Agreement, as
amended by Amendment 1 (collectively "Amended Agreement") substantially as
outlined in your letter of November 28, 1995, with additional provision to
address provided these concerns. Accordingly, we propose the following as
Amendment 2 to our Amended Agreement:
* Sections 2.0.G and 2.0.I of the Amended Agreement will remain in effect. In
addition, Compaq's prices for Nordic Series products will be the lesser of the
amounts permitted under these Sections or Compaq's current prices.
* For clarification, the phrase [*] , wherever it appears in the Amended
Agreement, shall be replaced by [*] . The [*] will commence upon the
date of delivery by JTS of a revenue-bearing product and extend for a period
of [*] thereafter.
Section 2.0.J of the Amended Agreement is simply entirely deleted to reflect
the elimination of the [*] restriction placed on JTS.
* The first sentence the first paragraph of Section 2.0.L of the Amended
Agreement is replaced with the following sentence: "Compaq will receive a
royalty of (a) [*] /HDD for each Nordic Series HDD sold to a third party
during the [*] , and (b) [*] /HDD for each Nordic Series HDD sold to a
third party after the [*] , such royalty payable for the initial Term of
this Agreement."
* Certain information on this page has been omitted and filed separately with
the Commission. Confidential treatment has been requested with respect to the
omitted portions.
32
Mr. Lee Peterson -2- December 5, 1995
* The first sentence of the last paragraph of Section 2.0.L of the Amended
Agreement is replaced with the following sentence: "For so long as JTS is
obligated to pay royalties to Compaq for the sale of Nordic Series drives
under this Agreement, WDC will pay JTS, on a quarterly basis, a royalty at a
rate of (a) [*] /HDD for each Nordic Series HDD sold to a third party
other than Compaq during the [*] , and (b) [*] /HDD for each Nordic
Series HDD sold to a third party other than Compaq after the [*]
(collectively "Royalty Obligation"): provided, however, that at such time as
a third party competitor begins volume shipment of any "3-Inch Disk Drive,"
such Royalty Obligation will be reduced to a level to be negotiated in good
faith among WDC, JTS and Compaq.
* Capitalized terms in this letter shall have the same meaning given them in
the Amended Agreement. Other than as modified by this Amendment 2, all other
terms and conditions of the Amended Agreement remain the same.
Because we understand the importance of timing to JTS at this stage, JTS may
confirm its acceptance of the above by signing below and returning a counter
signed copy of this letter to me at the above address. This Amendment 2 shall
become effective upon JTS' acceptance and return of a countersigned copy of
this letter.
Very truly yours,
COMPAQ COMPUTER CORPORATION
/s/ James W. Hartzog
- -----------------------------
James W. Hertzog
Vice President AGREED TO:
Portable PC Division
JTS Corporation
By: /s/ D. T. Mitchell
---------------------------
Name: David T. Mitchell
Date: Dec. 15, 1995
* Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with respect
to the omitted portions.