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Exhibit 10.27
LICENSE AND REMARKETER AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of February 14,
2003 (the "Effective Date"), by and between American Technology Corporation,
located at 13114 Evening Creek Drive South, San Diego, California 92128 ("ATC"),
and General Dynamics Armament and Technical Products, Inc., located at 128
Lakeside Avenue, Burlington, Vermont 05401 ("GDATP").
WHEREAS, ATC has developed or acquired and owns or has the right to
license, certain patent rights, technical information and know-how, including
trade secrets and copyrights therein, relating to the design, manufacture,
testing, operation and maintenance of certain transducers and high intensity
directed acoustics; and
WHEREAS, GD-ATP desires to obtain an exclusive, worldwide license to
make, have made, use and sell Products (defined below) and sell ATC Products
(defined below) for and to Customers (defined below) for Applications (defined
below), which use or incorporate the Technologies (defined below);
NOW, THEREFORE, for and in consideration of the covenants and
undertakings herein provided, and other good and valuable consideration, the
receipt and sufficiency of which is reciprocally acknowledged, IT IS AGREED AS
FOLLOWS:
1. DEFINITIONS.
"Affiliate" means, with respect to any person or entity, any present or
future entity directly or indirectly controlling, controlled by, or under common
control with such person or entity. With respect to GD-ATP, the term
"Affiliates" includes, but is not limited to, General Dynamics Corporation and
any direct or indirect subsidiary of General Dynamics Corporation.
"Agreement Year" means, for the first Agreement Year, the period
commencing on the Effective Date and ending December 31, 2003, and thereafter,
each successive calendar year during the Term.
"Applications" means the applications listed in Attachment A.
"ATC Products" means the Products listed in Attachment B.
"Claims" has the meaning specified in Section 9(a).
"Customers" means the customers listed in Attachment A.
"Components" means the components based on the Technologies and listed
on Attachment B.
"Confidential Information" has the meaning specified in Section 10.
***Confidential Portions of this document have been redacted and filed
separately with the Commission
"Improvements" means any and all improvements including but not limited
to findings, discoveries, inventions, additions, modifications, or changes to or
relating to the Technologies, Components or Products or to processes for
manufacturing, testing, operating or maintaining Products or Components.
"Losses" has the meaning specified in Section 9(a).
"Products" means any and all products using or incorporating any
Component or Technology, including without limitation ATC Products.
"Technology" or "Technologies" means all inventions (whether or not
patentable), issued patents, pending applications for patents, and patents which
may be issued from current applications (including divisionals, reissues,
renewals, re-examinations, continuations, continuations in part and extensions),
technical knowledge and information, whether public or proprietary, including,
but not limited to, all drawings, bills of materials, specifications, manuals,
trade secrets, and proprietary or confidential technical information,
copyrightable works (whether or not copyrighted), software and computer
programs, electronic data files, manufacturing and production processes,
maintenance information, and any other such technical information owned by ATC
or which ATC has the right to license during the term of this Agreement and
relating to the technologies set forth on Attachment A. Technologies shall also
include any Improvements or copyrighted materials related to the foregoing
developed by or for ATC prior to or during the term of this Agreement or by
GD-ATP during the term of this Agreement.
"Term" means the term of this Agreement as specified in Section 4(a) as
may be extended pursuant to that section.
"Trademarks" has the meaning specified in Section 2(f).
2. LICENSE AND REMARKETING RIGHTS.
(a) LICENSE GRANT. ATC hereby grants GD-ATP, and GD-ATP accepts, a
worldwide, exclusive, even as to ATC and except as to any Affiliate of GD-ATP,
license (with a limited right to sublicense as set forth herein) to use the
Technologies to make, have made, use, import, export, sell, offer to sell,
and/or service Products, including but not limited to ATC Products, for
exclusive use in the Applications and for exclusive sale to the Customers listed
on Attachment A; provided, however, that all Products sold by GD-ATP pursuant to
this Agreement shall include one (1) or more Components; provided further, that
all Components shall be acquired by GD-ATP exclusively from ATC. GD-ATP shall
have the right to grant sublicenses hereunder, without ATC's consent (i) to any
of its Affiliates to the full extent of GD-ATP's rights under this Agreement,
and (ii) to any third party for the purposes of having made, making, importing,
exporting, repairing and servicing Products. Nothing herein shall limit ATC's
ability to sell items directly to the United States government to the extent not
otherwise in violation of this Agreement or 48 C.F.R. 52.203-6.
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(b) COMPONENT PURCHASES. GD-ATP agrees that all Components incorporated
into Products shall be acquired exclusively from ATC. With respect to Components
purchased other than for GD-ATP's or a sublicensee's use for research, display
or demonstration purposes, ATC shall charge GD-ATP or the sublicensee [***], as
may be amended from time to time, and [***]. [***]. ATC may add Components to
Attachment B, and, upon twenty (20) days prior written notice, change the list
prices for Components specified on Attachment B. GD-ATP recognizes that ATC may
manufacture components having different features than the Components, and which
incorporate the Technologies, for applications other than the Applications and
for customers other than Customers. [***].
(c) ATC PRODUCT PURCHASES. GD-ATP and its sublicensees may purchase ATC
Products for resale with or without modification by GD-ATP or its sublicensees.
With respect to ATC Products purchased other than for GD-ATP's or a
sublicensee's use for research, display or demonstration purposes, ATC shall
charge GD-ATP and its sublicensees [***], as may be amended from time to time,
and [***]. ATC may add ATC Products to Attachment B and upon twenty (20) days
prior written notice change the list prices for ATC Products specified on
Attachment B. GD-ATP recognizes that ATC may manufacture products having
different features than the ATC Products, and which incorporate the
Technologies, for applications other than the Applications and for customers
other than Customers. [***].
(d) ADDITIONAL CUSTOMERS. During the Term of this Agreement, GD-ATP may
request ATC to add customers to the list of Customers in Attachment A by
submitting a request in writing to ATC. Such request shall inform ATC of the
nature of GD-ATP's relationship with the proposed customer, and the basis for
GD-ATP's request. ATC shall respond to such request within twenty (20) days
subsequent to its receipt, and the decision to grant such request shall be
within the sole discretion of ATC. Nothing in this Agreement shall restrict ATC
from licensing the Technologies or selling Components or Products (i) to persons
other than Customers or (ii) for applications not designated in Attachment A, on
an exclusive or non-exclusive basis.
(e) IMPROVEMENTS TO THE TECHNOLOGIES. Improvements to the Technologies
developed solely by or on behalf of [***] shall be [***] (the "Developing
Party"), subject to the license grants made in Section 2(a) and in this Section
2(e). [***] a worldwide, non-exclusive, perpetual, fully paid-up, royalty-free
license (with the right to sublicense) to make, have made, use, sell, offer to
sell and/or service products using and/or incorporating any Improvement to the
Technologies developed by or on behalf of [***]. Each party shall promptly
disclose to the other party each of its Improvements. With respect to any
Improvement to the Technologies that is jointly developed by the parties or is
developed on behalf of both parties (with or without collaboration by either
party or both parties) ("Joint Improvements"), the parties agree that [***] in
and to any such Joint Improvement, as well as in and to any patent applications
and patents thereon in all countries, subject to the provisions hereof. [***].
(f) TRADEMARK LICENSE. During the term of this Agreement, and
thereafter to the extent necessary to allow GD-ATP and/or its sublicensees to
exercise their rights and fulfill their obligations under Section 4(b), ATC
hereby grants GD-ATP a worldwide, non-exclusive, fully paid-up, royalty-free
license to use ATC's trademarks, trade names, logos, other distinguishing marks
of ATC (collectively, "Trademarks") and ATC marketing materials on or in
connection with Products which GD-ATP or its sublicensees market or sell as
permitted by this Agreement; provided, however, that GD-ATP shall at least
maintain ATC's quality standards in connection with Products and shall not
intentionally do or cause anything to be done to adversely affect ATC's rights
in and to the Trademarks. GD-ATP shall not distribute any marketing materials
that have not been first approved by ATC, which approval shall not be
unreasonably withheld.
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(g) DEMONSTRATION PRODUCTS AND MARKETING MATERIALS. ATC shall provide
GD-ATP with demonstration Products as appropriate (but at least one (1)
demonstration unit of each existing and new Product), free of charge, as
mutually agreed, and with copies of its sales and marketing literature regarding
ATC and the Products as reasonably required by GD-ATP, and with sufficient
training in the use of the Products to permit GD-ATP to make effective sales
presentations, all at no charge to GD-ATP. GD-ATP and its sublicensees may
purchase additional Products and Components for their internal research, display
and demonstration purposes [***] in Attachment B. If GD-ATP and ATC reasonably
believe that specialized marketing materials or demonstration Products are
necessary in connection with a particular potential Customer in an Application,
ATC shall provide such materials and support to GD-ATP which shall reimburse ATC
for such materials and support [***]. Any request for payment by ATC pursuant to
this section shall be in writing and accompanied by a detailed description of
ATC's cost.
(h) MARKETING ASSISTANCE. GD-ATP shall provide reasonable display space
for Products at certain trade shows as mutually agreed to by the parties. In
addition, GD-ATP shall use reasonable efforts to assist ATC with efforts to
obtain government/customer funding to further develop existing or new Products
employing the Technologies. GD-ATP will not exert improper influence to solicit
or obtain government contracts, and has not represented to ATC that it is able
to obtain any government contract through improper influence. The parties agree
and acknowledge that use of government funds for development as contemplated
hereunder may preclude either party from exercising exclusive rights in certain
information related to new Products employing the Technologies, and that
obtaining government funding may cause certain trade secret and patent rights to
be granted to the government, which in turn may permit the government to
disclose such information to third parties.
(i) EXCLUSIVITY. GD-ATP will provide ATC with annual good faith
forecasts of the dollar amount of purchases for each Component and ATC Product
that GD-ATP expects GDATP and its sublicensees to purchase from ATC. Each
forecast shall separately forecast sales with respect to each of the
Technologies identified in Attachment C. The forecast for the first Agreement
Year is set forth on Attachment C. On or before each annual anniversary of the
Effective Date during the Term, GD-ATP shall provide a good faith forecast of
its dollar purchase forecast per Technology for the next Agreement Year. Such
purchase forecasts will not be binding on GD-ATP, except to the extent provided
by this section with respect to exclusivity. GD-ATP and ATC will attempt to
agree in good faith prior to each Agreement Year on an aggregate dollar purchase
forecast for the next Agreement Year, taking into account prior year sales and
prior year growth in sales, new ATC Products and Components and anticipated new
sales to Customers. The license granted in Section 2(a) hereof shall become
non-exclusive for a particular Technology (and only for that Technology) if all
of the following conditions occur with respect to that Technology in a
particular Agreement Year: (i) the total dollar amount of purchase orders
actually received from GD-ATP and all of its sublicensees for Components and ATC
Products relating to that Technology, plus any funding obtained from any source
or provided for research and development relating to that Technology, is less
than [***] (the "Exclusivity Threshold") and [***]; (ii) [***] is not
attributable to any material action, inaction or fault of ATC, or material
government restrictions on GD-ATP's or its sublicencees' ability to sell the
Products for use in Applications or to sell to material Customers; and (iii) no
Force Majeure Event (as defined below) has prevented the achievement by GD-ATP
and its sublicensees of the Exclusivity Threshold; provided, however, that the
license granted in Section 2(a) shall remain exclusive for all Technologies
[***]. Purchases and/or funding obtained [***].
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(j) MARKETING EFFORTS. GD-ATP shall (i) create product and marketing
strategies for the Applications, (ii) market the Products and/or ATC Products to
Customers for the Applications, (iii) provide service consistent with the nature
of the business to the Customers, and (iv) assist ATC in identifying new
products based on the Technologies that may be appropriate for development at
ATC's discretion for the Customer Applications.
3. INTERNAL USE PURCHASES. GD-ATP and its sublicensees may purchase
Products and Components for their respective internal research, display and
demonstration purposes, and not for resale at the [***] described in Attachment
B. [***].
4. TERM AND TERMINATION.
(a) TERM. The initial term of this Agreement is for a period of five
(5) years from the Effective Date. GD-ATP shall have the option of extending the
term for an additional five (5) years by providing ATC with at least thirty (30)
days' prior written notice of its intention to extend the term before the term
would otherwise expire. Notwithstanding the foregoing, GD-ATP may terminate this
Agreement at any time without cause by providing ATC with at least sixty (60)
days' prior written notice of such termination.
(b) RIGHTS ON TERMINATION. In the event that this Agreement is
terminated for any reason other than a breach by GD-ATP, GD-ATP and its
sublicensees shall continue to have the right to (i) resell ATC Products and
Components, (ii) manufacture and have manufactured Products pursuant to existing
Customer contracts, (iii) sell Products to exhaust its inventory of Components,
ATC Products and Products in existence at the date of termination and to fulfill
obligations under any existing Customer contracts, and (iv) provide maintenance
and related services to Customers using the Technology, Components, ATC Products
and Products; and GD-ATP shall continue to have the right to grant sublicenses
hereunder for the purpose of exercising its rights under this Section 4(b).
(c) EFFECT OF DEFAULT. In the event that either party defaults in the
performance of any of its material duties or obligations set forth in this
Agreement, and such default is not substantially cured within thirty (30) days
after written notice is given to the defaulting party specifying the default,
then the non-defaulting party may, by giving written notice thereof to the
defaulting party, terminate this Agreement as of the date specified in such
notice of termination.
(d) EFFECT OF BANKRUPTCY. Any licenses granted hereunder shall not be
affected by a voluntary filing for bankruptcy or insolvency regarding either
party, or an involuntary filing not dismissed within ninety (90) days, or any
adjudication that either party is bankrupt or insolvent, or by the filing of any
petition or answer seeking reorganization, readjustment, or arrangement of the
business of either party under any federal or state law relating to bankruptcy
or insolvency, or by the appointment of a receiver for all or substantially all
of the property of either party, or by the making by either party of any
assignment or attempted assignment for the benefit of creditors, or by the
institution of any proceedings for the liquidation or winding up of either
party's business. ATC acknowledges that in the event a petition for bankruptcy
of ATC is filed under federal bankruptcy law and this Agreement is rejected in
the bankruptcy proceedings, GD-ATP may elect to retain its license rights as
this Agreement is an executory contract protected under Section 11 U.S.C.
Section 365(n).
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(e) EFFECT OF TERMINATION. Upon the expiration or any termination of
this Agreement, the license granted hereunder to GD-ATP shall terminate, except
as provided in Sections 2(e) and 4(b). GD-ATP shall, except as provided
hereunder, thereupon cease and desist from making, having made, using, selling,
and distributing the Products, or using the Trademarks, and will likewise cease
and desist from any and all use of the Technology, including the proprietary
rights therein, subject to the rights granted to GD-ATP in Sections 2(e) and
4(b), and GD-ATP shall have no further obligation hereunder. All proprietary
information, including Confidential Information, in whatever form, in the
custody or control of either party or any third-party contractor, bearing on the
subject matter of this Agreement or transferred incident to activities
hereunder, shall be returned to the disclosing party, or secured, or destroyed,
as is reasonable in each case in light of all circumstances, so as to enable the
maintenance of confidentiality with respect thereto, and preserve the value of
the Confidential Information to the parties.
5. PERMITTED ACTIVITIES.
(a) GD-ATP'S ACTIVITIES. Nothing in this Agreement shall be construed
to prevent GD-ATP from: (i) engaging in any activities with respect to products
or services competitive with those supplied by ATC or entering into agreements
with third parties having a similar purpose or similar terms to this Agreement;
or (ii) independently developing and/or selling any materials, products or
services which are similar to those of ATC as long as they do not infringe on
any existing ATC patents or patents that issue from pending ATC applications and
they were not developed using any ATC Confidential Information; or (iii) using
data, processing, techniques, ideas, and other know-how gained during the
performance of this Agreement in the furtherance of its business, to the extent
such use does not conflict with the confidentiality provisions of this
Agreement.
(b) ATC'S PRICING. GD-ATP recognizes that the Components, ATC Products
and Products targeted for the Applications herein are expected to be different
in quality and features than products that ATC has developed or may develop from
the Technologies for other markets and applications for consumers or industrial
customers or others. Except for the exclusivity relating to Applications,
Customers, Products, and ATC Products set forth herein, [***].
6. REPRESENTATIONS AND WARRANTIES.
(a) MUTUAL WARRANTIES. Each party to this Agreement represents and
warrants to the other party that: (i) such party has the full corporate right,
power and authority to enter into this Agreement and to perform all acts
required of it hereunder; (ii) the execution of this Agreement by such party,
and the performance by such party of its obligations and duties hereunder, do
not and will not violate any agreement to which such party is a party, or by
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which it is otherwise bound; (iii) when executed and delivered by such party,
this Agreement will constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with the terms and
conditions of this Agreement; (iv) it is not subject to any pending or
threatened litigation or governmental action that could materially interfere
with its performance of this Agreement; and (v) such party is in compliance with
and will comply with all applicable U.S. material laws, rules and regulations
with respect to its obligations under this Agreement. Neither party has been
induced to enter into this Agreement by any representations or promises not
specifically stated herein.
(b) INTELLECTUAL PROPERTY WARRANTY. ATC represents and warrants to
GD-ATP, its sublicensees and Customers that the exercise by GD-ATP, its
sublicensees and Customers of rights granted under this Agreement will not
infringe upon any patent, trademark, copyright, trade secret, or other
intellectual property or proprietary right of any third party.
(c) PRODUCT WARRANTY. ATC represents and warrants to GD-ATP, its
sublicensees and Customers that the Components and ATC Products comply with the
highest industry standards and will be free from defects in materials and
workmanship for a period of one (1) year from the date of installation by GD-ATP
or a sublicensee, or [***] from the date of shipment by ATC, whichever is
earlier. If a defect exists, ATC will (i) repair the defective item at no
charge, using new replacement parts or, if not prohibited under a government
contract or by law, refurbished replacement parts, (ii) exchange the item with
an item that is new or which has been manufactured from new or, if not
prohibited under a government contract or by law, serviceable used parts and is
at least functionally equivalent to the original item, or (iii) reimburse the
total amount paid for the defective item. A replacement or repaired item shall
be warranted for the remainder of the warranty period or [***] from the date the
replacement or repaired item is shipped from ATC, whichever provides longer
coverage. GD-ATP, its sublicensee or a Customer (as applicable) shall deliver
the defective item, at its expense, to ATC at the address first written above.
The parties agree and acknowledge that GD-ATP, its sublicensee or a Customer (as
applicable) shall be responsible for all loss or damage during shipment of an
item by them pursuant to this paragraph. Repaired or replaced items will be
shipped to GD-ATP, its sublicensee or a Customer (as applicable) via the same
shipping method as they were received by ATC, at ATC's expense and risk of loss.
(d) AUTHORIZED WARRANTIES. No agent, employee, or representative of
GD-ATP has any authority to bind ATC to any affirmation, representation, or
warranty concerning the Components or the Products, unless such affirmation,
representation, or warranty is specifically included in this Agreement or in
another document generated by ATC which expressly authorizes GD-ATP to make
specified warranties. Any unauthorized affirmation, representation, or warranty
shall not be enforceable by GD-ATP or any subsequent buyer of any Components or
Products. GD-ATP shall be liable for any representations or warranties made by
it, whether in writing or orally, other than those made by ATC herein, unless it
receives written approval from ATC.
7. INTELLECTUAL PROPERTY ENFORCEMENT. Each of GD-ATP and ATC shall notify
the other party in writing of any suspected or known infringement or
misappropriation of the Technology by a third party, and shall inform the other
party of any evidence in their possession of such infringement or
misappropriation, and provide details to the extent known of such infringement.
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(a) ACTION BY ATC. ATC shall have the option but not the obligation to
take such measures as may be required to terminate any infringement or
misappropriation by a third party. Any such action shall be at the sole expense
of ATC. ATC shall be entitled to all damages and settlement proceeds from third
parties resulting from any such proceeding. GD-ATP shall provide any assistance
reasonably requested by ATC in the preparation and prosecution of that claim, at
the expense of ATC.
(b) ACTION BY GD-ATP. Should ATC decide to not pursue a Claim, as
defined in Section 9(a), against a third party for misappropriation or
infringement under Section 7(a), GD-ATP shall be entitled to pursue such Claim.
Any such Claim shall be at the sole expense of GD-ATP. GD-ATP shall be entitled
to all damages and settlement proceeds from any third parties resulting from any
such Claim. ATC shall provide any assistance reasonably requested by GD-ATP in
the preparation and prosecution of that Claim, at the expense of GD-ATP.
(c) JOINDER BY ATC. At its sole option, ATC may join as plaintiff in
any action brought to enforce a Claim by GD-ATP brought pursuant to Section 7(b)
with respect to the Technologies. In such event, the parties shall share equally
the expenses of any such action. Each party shall be entitled to one-half of all
damages and settlement proceeds recovered after first reimbursing each party for
any amounts expended by them in the prosecution of such Claim.
(d) SETTLEMENT. The settlement of any Claim involving any consent or
agreement allowing any third party any rights with respect to the intellectual
property of ATC shall require the prior written consent of ATC.
8. LIMITATION OF LIABILITY.
(a) MUTUAL LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING THAT MAY
BE TO THE CONTRARY IN THIS AGREEMENT, UNDER NO CIRCUMSTANCES WILL EITHER PARTY,
ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS BE LIABLE TO THE
OTHER PARTY, ITS AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES OR CUSTOMERS FOR ANY
CONSEQUENTIAL, INDIRECT, SPECIAL, PUNITIVE OR INCIDENTAL DAMAGES OR LOST
PROFITS, WHETHER FORESEEABLE OR UNFORESEEABLE, ARISING OUT OF BREACH OF
CONTRACT, MISREPRESENTATION, NEGLIGENCE, STRICT LIABILITY IN TORT OR OTHERWISE,
EVEN IF THE PARTY HAS PREVIOUSLY BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES. THIS EXCLUSION AND LIMITATION SHALL BE EFFECTIVE TO THE EXTENT
PERMITTED BY APPLICABLE LAW.
(b) LIMITATION OF PRODUCT WARRANTY LIABILITY. THE PRODUCT WARRANTY AND
REMEDIES SET FORTH ABOVE ARE EXCLUSIVE AND IN LIEU OF ALL OTHER WARRANTIES,
REMEDIES AND CONDITIONS, WHETHER ORAL OR WRITTEN, EXPRESS OR IMPLIED, REGARDING
PRODUCT MATERIALS AND WORKMANSHIP. ATC SPECIFICALLY DISCLAIMS ANY AND ALL
IMPLIED WARRANTIES, INCLUDING WITHOUT LIMITATION WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE. IF ATC CANNOT LAWFULLY DISCLAIM IMPLIED
WARRANTIES, ALL SUCH WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE LIMITED IN DURATION TO THE DURATION OF THE
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PRODUCT WARRANTY. NO ATC LICENSEE, DISTRIBUTOR, RETAILER, INSTALLER, OR EMPLOYEE
IS AUTHORIZED TO MAKE ANY MODIFICATION, EXTENSION, OR ADDITION TO THE PRODUCT
WARRANTY. ATC SHALL NOT BE LIABLE FOR, NOR SHALL THE PRODUCT WARRANTY INCLUDE OR
APPLY TO, LOSS OR DAMAGE CAUSED BY OR RESULTING FROM ANY OF THE FOLLOWING: (i)
IMPROPER INSTALLATION OF THE PRODUCT OR THE FAILURE BY A PARTY OTHER THAN ATC TO
INSTALL THE PRODUCT IN STRICT COMPLIANCE WITH ATC'S SPECIFICATIONS; (ii)
IMPROPER OPERATION OR USE OF THE PRODUCT; (iii) USE OF THE PRODUCT BEYOND ITS
RATED CAPACITY OR SPECIFICATIONS; (iv) IMPROPER OR UNAUTHORIZED MODIFICATION,
ALTERATION OR REPAIR; (v) A FORCE MAJEURE EVENT (AS DEFINED BELOW); OR (vi) THE
ENFORCEMENT OF ANY LAW OR ORDINANCE REGULATING USE OF THE PRODUCT, EXCEPT FOR
ANY LAW OR ORDINANCE IN EFFECT AS OF THE EFFECTIVE DATE. For purposes of this
Section 8(b), GD-ATP shall be considered an authorized agent of ATC.
9. INDEMNITY.
(a) INTELLECTUAL PROPERTY INDEMNITY BY ATC. ATC shall defend, hold
harmless, and indemnify GD-ATP, its Affiliates, its sublicensees and their
respective employees, directors, officers, contractors, subcontractors,
customers, attorneys, partners and agents ("GD-ATP Indemnitees") from and
against any and all damages, judgments, liabilities, payments made in
settlement, costs, and expenses, including reasonable attorneys' fees
(collectively, "Losses") for claims, actions or proceedings ("Claims") arising
out of ATC's breach of any warranty set forth in this Agreement or alleging that
GD-ATP Indemnitees' use of a Product, ATC Product, Component or any of the
Technologies infringes or violates any patent, copyright, trade secret, license,
or other intellectual property right of any third party, provided that a GD-ATP
Indemnitee promptly notifies ATC of any such Claim. ATC shall have control over
the defense or settlement of such Claim, except that GD-ATP Indemnitees may
participate in the defense of any such suit or proceeding through counsel of
their choice and at their expense. The GD-ATP Indemnitees shall provide ATC such
reasonable assistance as ATC may require, at ATC's expense, in defending or
settling such Claim. In the event that a Product, ATC Product, Component or any
of the Technologies, or any portion thereof, is held to constitute an
infringement and its use is enjoined, ATC may, at its option and expense, (i)
modify the infringing Product, ATC Product, Component or Technology so that it
or they are non-infringing, (ii) procure for GD-ATP the right to continue to use
the infringing Product, ATC Product, Component or Technology, or (iii) replace
the Product, ATC Product, Component or Technology with functionally equivalent,
non-infringing replacement products or technologies. Notwithstanding the
foregoing, this indemnification shall not apply if the claimed infringement is
attributable solely to a GD-ATP Indemnitee's use of the Product, ATC Product,
Component or Technology in combination with other products such that the
Product, ATC Product, Component or Technology would not be infringing apart from
its use in the combination, or if such Claim arises from ATC's compliance with
GD-ATP's designs, specifications or instructions, or from GD-ATP's or a
sublicensee's modification of the Product, ATC Product, Component or Technology
and, in both instances, the Claim could not be brought but for compliance with
GD-ATP's designs, specifications or instructions or the modification by GD-ATP
or the sublicensee.
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(b) GENERAL INDEMNITY BY ATC. ATC shall defend, hold harmless, and
indemnify the GD-ATP Indemnitees from and against any and all Losses (including,
but not limited to, damages for injury to or death of employees or other
individuals or destruction of property) arising directly or indirectly from or
in connection with any breach of this Agreement, negligence, gross negligence or
willful misconduct by ATC or its agent, provided that a GD-ATP Indemnitee
promptly notifies ATC of any such Claim. ATC shall have control over the defense
or settlement of such Claim, except that GD-ATP Indemnitees may participate in
the defense of any such suit or proceeding through counsel of their choice and
at their expense. The GD-ATP Indemnitees shall provide ATC such reasonable
assistance as ATC may require, at ATC's expense, in defending or settling such
Claim.
(c) GENERAL INDEMNITY BY GD-ATP. GD-ATP agrees to defend, hold harmless
and indemnify, at its sole expense, ATC and its Affiliates and their employees,
directors, officers, contractors, subcontractors, attorneys, partners, agents,
successors and assigns ("ATC Indemnitees") from and against any and all Losses
(including, but not limited to, damages for injury to or death of employees or
other individuals or destruction of property) arising directly or indirectly
from or in connection with (i) the incorporation of any Components into products
by GD-ATP or a sublicensee if such Claim could not have arisen but for such
incorporation, (ii) any breach of this Agreement by GD-ATP, and (iii)
negligence, gross negligence or willful misconduct by GD-ATP or its
sublicensees, provided that an ATC Indemnitee promptly notifies GD-ATP of any
such Claim. GD-ATP shall have control over the defense or settlement of such
Claim, except that ATC may participate in the defense of any such Claim through
counsel of its choice and at its own expense. The ATC Indemnitees shall provide
GD-ATP such assistance as GD-ATP may require, at GD-ATP's expense, in defending
or settling such Claim. The parties agree and acknowledge that GD-ATP shall
under no circumstances defend, hold harmless or indemnify any ATC Indemnitee
hereunder for a Claim arising out of or related to a breach of this Agreement,
negligence, gross negligence or willful misconduct on the part of ATC or its
agent, or arising out of any warranty or indemnity obligations of ATC.
10. CONFIDENTIALITY. Each party agrees to protect the confidentiality of
any information concerning the other party, the other party's customers
(including without limitation Customer information provided to ATC by GD-ATP
under Section 2(d)), trade secrets, business methods, processes, or procedures,
or other information learned during the course of performance under this
Agreement and marked "Confidential," in accordance with the terms set forth in
the Non-Disclosure Agreement executed between the parties on January 28, 2003,
as the same may be amended from time to time.
11. AUDIT RIGHTS. GD-ATP shall maintain records for two (2) years following
the date of the payments to which such records pertain, sufficient to allow
verification of compliance with the terms of this Agreement and the accuracy of
payments made by GD-ATP to ATC hereunder. An independent auditor mutually
agreeable to ATC and GD-ATP shall be permitted, [***], to audit such records
during normal business hours upon fourteen (14) days prior written notice. Such
audit shall be subject to the confidentiality terms of this Agreement. [***]
shall bear the cost and expense of such audit, [***]. GD-ATP shall promptly pay
ATC all underpayments; provided, however that GD-ATP shall have no obligations
to pay any such underpayments to ATC which GD-ATP in good faith believes are not
properly owed, provided that the issue of whether any such purported
underpayment is owed is the subject of a pending dispute resolution procedure as
provided by Section 13(k).
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***Confidential Portions of this document have been redacted and filed
separately with the Commission
12. NONSOLICIT. Neither party shall recruit or solicit employees or
independent contractors of the other party until [***] after the end of the Term
of this Agreement without the advance written consent of the other party.
13. GENERAL.
(a) 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 prohibited by or
invalid under applicable law, such provision will be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
this Agreement.
(b) FORCE MAJEURE. Neither Party shall be liable or deemed to be in
default for any delay, interruption, or failure in performance under this
Agreement resulting from the following events: acts of God, acts of civil or
military authority; acts of the public enemy; war; accidents, fires, explosions,
power surges, earthquakes, floods, or unusually severe weather; strikes or labor
disputes; delays in transportation or delivery outside the reasonable control of
the affected party; epidemics; and any similar event beyond the affected party's
reasonable control ("Force Majeure Event"). The party whose performance is
affected by a Force Majeure Event will use reasonable efforts to avoid, remove
or minimize the impact of such event on the performance of its obligations at
the required level at the earliest possible date. If either party is, or
anticipates it is likely to be, delayed or prevented from performing its
obligations in connection with a Force Majeure Event, such party will notify the
other party within ten (10) business days after such party first becomes aware
of such Force Majeure Event.
(c) NO AGENCY. The relationship between ATC and GD-ATP is only that of
independent contractors. Nothing in this Agreement shall be construed or
interpreted as creating an agency, joint venture, or partnership relationship
between the parties. Neither party shall have, nor shall it hold itself out as
having any right, power, or authority to create any contract or obligation,
either express or implied, on behalf of, in the name of, or binding upon the
other party or to pledge the other party's credit, or to extend credit in the
other party's name unless that party consents thereto in advance in writing.
GD-ATP may appoint or otherwise designate suitable sales representatives,
employees, and agents ("Representatives") to perform GD-ATP's obligations.
GD-ATP shall be solely responsible for its Representatives and their acts.
(d) PUBLIC RELEASES. Except as provided in Section 2(f) of this
Agreement or as required by law or regulation, neither party may use the
trademarks or trade names of the other party or issue a news release, public
announcement, advertisement, or other form of publicity concerning the existence
of this Agreement or the services to be provided under this Agreement without
obtaining prior written approval from the other party.
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***Confidential Portions of this document have been redacted and filed
separately with the Commission
(e) ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Except as expressly permitted by this Agreement, neither party shall
assign, sublicense, delegate, or transfer any of its rights or obligations
hereunder without the prior written consent of the other party; provided,
however, that both parties shall be allowed to assign this Agreement without the
other's consent to an Affiliate or as part of any reorganization or purchase of
substantially all of the assets of or ownership interest in, the assigning
party. This Agreement shall be binding upon, and inure to the benefit of, each
party and its respective successors and permitted assigns.
(f) WAIVER. The failure of either party to insist upon the performance
of any provision herein or to exercise any right or privilege granted to it
hereunder, shall not be construed as a waiver of such provision or any
provisions herein, and the same shall continue in full force. The various rights
and remedies given to or reserved by either party herein or allowed by law,
shall be cumulative, and no delay or omission to exercise any of its rights
shall be construed as a waiver of any default or acquiescence, nor shall any
waiver of any breach of any provision be considered the condoning of any
continuing or subsequent breach of the same provision.
(g) AMENDMENTS, MODIFICATIONS AND SUPPLEMENTS. Any amendment,
modification, supplement or change hereto must be in writing and signed by the
parties hereto. No other act, document, usage or custom shall be deemed to amend
or modify this Agreement.
(h) GOVERNING LAW. This Agreement shall be governed by and interpreted
in accordance with the laws of the State of New York without giving effect to
conflict-of-laws principles thereof. Each party consents to the personal
jurisdiction in the state and federal courts in the State of New York and agrees
not to commence any actions arising out of or relating to this Agreement in any
other state.
(i) NOTICES. All notices required to be sent hereunder shall be in
writing and shall be deemed to have been given on: (i) the date sent by
confirmed facsimile, (ii) the date it was delivered by courier, or (iii) if by
certified mail return receipt requested, the date received, to the addresses and
to the attention of the persons set forth below, or to such other address or
individual as the parties may specify from time to time by written notice to the
other party:
If to ATC: American Technology Corporation
Attention: Terry Conrad
13114 Evening Creek Drive South
San Diego, California 92128
Phone: (858) 679-2114 Fax: (858) 679-0545
With a copy to: _________________________________________
_________________________________________
_________________________________________
_________________________________________
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***Confidential Portions of this document have been redacted and filed
separately with the Commission
If to GD-ATP: Director, Contracts
General Dynamics Armament
and Technical Products, Inc.
128 Lakeside Avenue
Burlington, VT 05401
Phone: (802) 657-6719 Fax: (802) 657-7203
With a copy to: General Counsel
General Dynamics Armament
and Technical Products, Inc.
128 Lakeside Avenue
Burlington, VT 05401
Phone: (802) 657-6592 Fax: (802) 657-6590
(j) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same document. The exchange of a fully
executed Agreement (in counterparts or otherwise) by facsimile shall be
sufficient to bind the parties to the terms and conditions of this Agreement.
(k) ARBITRATION. Except with respect to claims regarding a breach of
obligations related to Confidential Information or infringement of intellectual
property rights, including without limitation the right of a party to apply to a
court of competent jurisdiction for a temporary restraining order, preliminary
injunction or other equitable relief to preserve the status quo or to prevent
irreparable harm, all claims, disputes, controversies, or other matters in
question arising out of or relating to this Agreement that cannot be resolved by
the parties through face-to-face negotiations, first between the respective
manager for each party involved in the day-to-day performance of this Agreement,
and then, if still not resolved, between senior executives of each party, will
be settled by binding arbitration in accordance with the Commercial Rules
("Rules") of the American Arbitration Association then in effect. All
arbitration proceedings will be held in New York, New York, and will be
conducted by a single arbitrator mutually agreed upon by the parties; provided,
however, that in the event the parties cannot agree on an arbitrator, each party
shall choose one arbitrator and the two arbitrators shall choose a third
arbitrator and the arbitration proceedings shall be conducted by the foregoing
panel of three arbitrators. If the two initial arbitrators cannot agree upon a
third arbitrator within ten days after the appointment of the second arbitrator,
the third arbitrator shall be selected in accordance with the Rules. The parties
may take discovery by any means allowed by the Federal Rules of Civil Procedure
then in effect. The arbitrator may exclude from evidence any evidence not
previously shared with the other side. The cost of any arbitration or litigation
will be borne equally by the parties pending the arbitrator's awards. The
prevailing party in any arbitration proceeding or litigation hereunder will be
entitled, in addition to any other relief granted to it, to recover reasonable
attorneys' fees and the costs incurred in connection with the arbitration or
litigation. The arbitrator shall be bound by the express provisions set forth in
this Agreement and by the substantive law of the courts of New York that relate
to any controversy arising from this Agreement, and shall not modify any terms
of this Agreement or make any award of damages in excess of the amounts set
forth in this Agreement or grant any relief not expressly set forth in this
Agreement. The determinations of the arbitrator shall be final and, except as
provided by law, shall not be subject to judicial review. Any court of competent
jurisdiction may enforce any award or determination rendered by the arbitrator.
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***Confidential Portions of this document have been redacted and filed
separately with the Commission
(l) HEADINGS. The headings and sub-headings included in this Agreement
are for convenience only and do not in any way alter or affect the terms of this
Agreement.
(m) ENTIRE AGREEMENT. This Agreement, together with any exhibits and
any attachments hereto, sets forth the entire agreement of the parties with
respect to the subject matter hereof, and supersedes any prior agreement or
understandings. If any provision hereof is held to be invalid, void, or
unenforceable, the remainder of the provisions shall nevertheless remain
unimpaired and in effect.
(n) SURVIVAL. The following Sections of this Agreement shall survive
the expiration or any termination of this Agreement: 2(e), 4(a), 4(b), 4(e),
6(a), 6(b), 6(c), 6(d), 8(a), 8(b), 9(a), 9(b), 9(c), 10, [19(c)], 11 and 12.
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***Confidential Portions of this document have been redacted and filed
separately with the Commission
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in duplicate by their respective duly authorized representative
effective on the date and year first written above.
AMERICAN TECHNOLOGY CORPORATION
By: /s/ Terry Conrad
---------------------------------------------
Name: Terry Conrad
Title: President
GENERAL DYNAMICS ARMAMENT AND TECHNICAL PRODUCTS, INC.
By: /s/ Linda P. Hudson
---------------------------------------------
Name: Linda P. Hudson
Title: President
***Confidential Portions of this document have been redacted and filed
separately with the Commission
ATTACHMENT A
LISTING OF TECHNOLOGIES, CUSTOMERS AND APPLICATIONS
(PAGE 1 OF 2)
TECHNOLOGIES
- ------------
o High intensity directional acoustics (HIDA Technology) as
characterized by the results of GSA task order number [***], primary
GSA contract [***], Phase One final report
CUSTOMERS
- ---------
DoD including:
o US Army
o US Navy
o US Marine Corps
o US Air Force
o SOCOM
o DARPA
o DTRA
o National Laboratories (Sandia, Livermore, etc.)
Dept. of Homeland Security including:
o US Coast Guard
o Immigration and Naturalization Service / Border Patrol
o Customs Service
o Federal Protective Services
o Transportation Security Agency
o Other Federal, State and Local Agencies / organizations / entities
o National Guard
o Embassies o Federal and State Prisons
o DOE/U.S. Power Plants
o DEA
o CIA
o Federal, state and local law enforcement agencies
A-1
***Confidential Portions of this document have been redacted and filed
separately with the Commission
ATTACHMENT A
LISTING OF TECHNOLOGIES, CUSTOMERS AND APPLICATIONS (CONTINUED)
(PAGE 2 OF 2)
APPLICATIONS -- SCALEABLE EFFECTS WEAPONS
- -----------------------------------------
o Area Denial and Force Protection of vessels, ground vehicles, air
vehicles, facilities, units or forces, including
warning/communications applications
o Tactical weapon / self protection applications for man-mobile, manned
and unmanned vehicle, or fixed installations
o Crowd control applications: warn, disorient, deny, deceive, psyops,
clear, direct, and disperse
o Personnel stand-off
o Security stations including ports, geographical borders, perimeter
fencing, access gates, and building entrances
o Resolution of "human shield" situations
A-2
***Confidential Portions of this document have been redacted and filed
separately with the Commission
ATTACHMENT B
ATC PRODUCTS LIST PRICES (AS OF SEPTEMBER 1, 2002)*
HIDA RUGGED SCALEABLE EFFECT WEAPON WITH INTERNAL AMPLIFIER AND WIRELESS
- ------------------------------------------------------------------------
INTERFACE
- ---------
[***]
FUTURE PRODUCTS
- ---------------
[***]
*GD-ATP, its Affiliates and sublicensees can purchase these Products for their
internal use [***]
COMPONENTS LIST PRICES (AS OF SEPTEMBER 1, 2002)**
- --------------------------------------------------
HIDA COMPONENTS
- ---------------
[***]
** GD-ATP, its Affiliates and sublicensees can purchase Products and Components
for their internal use [***]. This shall also apply to future products using
Components that GD-ATP, its Affiliates and sublicensees purchase for internal
use.
ATC may add ATC Products and/or Components to this Attachment B from time to
time.
B-1
***Confidential Portions of this document have been redacted and filed
separately with the Commission
ATTACHMENT C
FORECAST OF REVENUE TO ATC
HIGH INTENSITY DIRECTIONAL ACOUSTICS
- ------------------------------------
YEAR 1
R&D funding provided by / through General Dynamics [***] to ATC
YEARS 2--5
R&D funding provided by / through General Dynamics - [***] Scaleable Effect
Weapon Sales - [***]
For purposes of this Attachment C, [***] shall be established pursuant to
Section 2(i).
C-1