TABLE OF CONTENTS

 

TABLE OF CONTENTS	2
ARTICLE I	4
DEVELOPMENT PROJECT	4
1.01 Development Project	4
ARTICLE II	5
INTELLECTUAL PROPERTY	5
2.01 Existing Intellectual Property	5
2.02 Rights in Foreground Technology	5
2.03 Rights in Inventions	6
2.04 Licensed Patents	6
2.05 Licensed Technical Information	7
2.06 Lucent’s Reservation of Rights and Permitted Activities	9
2.07 No Other Licenses	10
ARTICLE III	11
DEVELOPMENT AND LICENSE FEES AND ROYALTIES	11
3.01 Development Fee	11
3.02 Royalties	12
3.03 Exclusivity Fee	12
3.04 Sales Referral Fee	13
3.05 Payments and Records	13
3.06 Taxes	14
ARTICLE IV - TERM AND TERMINATION	15
4.01 Term	15
4.02 Termination for Convenience	15
4.03 Termination for Cause	16
4.04 Survival	17
ARTICLE V	17
PROTECTION OF INFORMATION	17
5.01 Lucent and Company Confidential Information	17
5.02 Exceptions to Confidentiality	19
5.03 Export Control	19
ARTICLE VI	20
MISCELLANEOUS PROVISIONS	20
6.01 Compliance with Rules and Regulations and Indemnification	20
6.02 Agreement Prevails	21
6.03 Warranty and Disclaimer	22
6.04 Addresses	23
6.05 Integration	23
6.06 Assignability	23
6.07 Choice of Law	24
6.08 Escalation and Dispute Resolution	24
6.09 Relationship Between Parties	26
6.10 Force Majeure	26
6.11 Headings	26

 

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6.12 Waiver	26
6.13 Severability	26
6.14 Non-Solicitation	27
6.15 Foundry Services	27
6.16 Publicity	27
6.17 Execution in Counterparts	27
APPENDIX A	29
DEFINITIONS	29
APPENDIX B	33
Statement of Work	33

 

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DEVELOPMENT & LICENSING AGREEMENT

 

THIS DEVELOPMENT & LICENSING AGREEMENT (“Agreement”), effective as of the date the last Party signs this Agreement (“Effective Date”), is made by and between Lucent Technologies Inc., a Delaware corporation, with offices located at 600 Mountain Avenue, Murray Hill, New Jersey 07974-0636 (“Lucent”) and ISONICS CORPORATION, a corporation organized under the laws of California, with offices located at 5906 McIntyre Street, Golden, Colorado 80403 (“Company”).  Lucent and Company are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.  The Parties agree as follows:*

 

WHEREAS, Lucent has knowledge and expertise in technology known as a infrared imaging, and

 

WHEREAS, Company desires to engage Lucent in a Development Project in order to assess the commercial feasibility of and to develop a Licensed Product (defined below) useful in the field of infrared imaging; and

 

WHEREAS , as part of the Development Project, the Parties intend to define specific tasks, deliverables, schedules and payments in mutually agreed upon Statements of Work (SOW’s), the first of which is set forth in the Appendix B, and

 

WHEREAS , the Parties wish to define their roles and responsibilities in connection with the Development Project, and the fees and royalties to be paid by Company to Lucent,

 

NOW THEREFORE , it is hereby agreed as follows:

 

ARTICLE I
DEVELOPMENT PROJECT

 

1.01 Development Project

 

Lucent shall, during the Development Period, supply staff, facilities and equipment sufficient, in its sole discretion, to perform the Development Project described in the Statement of Work in Appendix B, and to provide the Deliverables to Company.  Representatives for Lucent and Company shall meet as needed, either in person or by telephone, to evaluate and discuss the progress of the Development Project.

 

*                  Any term in capital letters which is defined in Appendix A - Definitions shall have the meaning specified therein.

 

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The parties may, from time to time, agree upon additional statements of work (SOW’s) that will likewise be appended to and become a part of this Agreement.  Such additional SOW’s will require payment to Lucent of additional development fees, and may be executed on behalf of Company only by the Chief Executive Officer or a designated representative appointed by the CEO of Isonics Corporation, and on behalf of Lucent only by the President of the New Jersey Nanotechnology Consortium.  Each additional SOW will be governed by and construed in accordance with the terms and conditions of this Agreement, but to the extent there is any inconsistency between the terms and conditions of an additional SOW and those of this Agreement, the terms and conditions of the additional SOW shall take precedence and control the rights and obligations of the Parties.  Notwithstanding the foregoing, to the extent that any intellectual property terms and conditions of this Agreement are to be modified or superseded by the terms and conditions of an additional SOW, such intellectual property terms shall be specifically identified in the additional SOW and must be executed on behalf of Lucent only by the President – Intellectual Property Business and on behalf of Company by the Chief Executive Officer or a designated representative appointed by the CEO of Isonics Corporation.

 

In the event that either party requests access to facilities, sites, data processing and learning centers of the other Party, such access will be granted at the option of the Parties, subject to the provisions of Section 6.01.

 

ARTICLE II

INTELLECTUAL PROPERTY

 

2.01 Existing Intellectual Property

 

Except as provided in Sections 2.04 and 2.05 below, all right, title and interest in and to inventions, patents, works of authorship, trade secrets, know-how or any other intellectual property (a) existing prior to the Effective Date of this Agreement, or (b) developed independently by a Party outside of work performed under SOW’s attached to this Agreement, shall remain vested in the Party which owns it immediately prior to the Effective Date.  For the avoidance of doubt, existing intellectual property owned by Lucent that may be provided to Company pursuant to this Agreement shall be considered to be a part of Lucent Background Technology.

 

2.02 Rights in Foreground Technology

 

(a)                                   Except as specifically provided otherwise in this Agreement, all works of authorship, trade secrets, know-how or any other intellectual property first created and reduced to tangible, recordable or permanent form, by employees, contractors, consultants or agents of either Party during the Development Period and as a direct result of work performed under this

 

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Agreement, shall be termed “Lucent Foreground Technology” and shall be owned solely by Lucent.  Nothing contained the Agreement shall require Lucent to enforce its rights in such Lucent Foreground Technology against any third party.

 

(b)                                  For the avoidance of doubt, “Lucent Foreground Technology” shall not include existing intellectual property owned by Company that may be provided to Lucent pursuant to this Agreement.

 

2.03 Rights in Inventions

 

(a) All right, title and interest in and to inventions created during the Development Period and arising out of the Development Project either (i) solely by one Party, or (ii) jointly by one or more of Lucent’s employees, contractors, consultants or agents working together with one or more of Company’s employees, contractors, consultants or agents, shall be owned by Lucent.  Notwithstanding any other provision of this Agreement, there is no intention in this Agreement to transfer to Lucent any inventions, patents, patent applications, trade secrets, know-how, or other intellectual property owned by Company at the commencement of the Development Project or developed by Company outside of the Development Project during the term of this Agreement.

 

(b) Lucent may, at its expense, file patent applications on inventions described in Section 2.03(a) in one or more countries.  Company agrees to cooperate in such filings, and to furnish all documents, information, or other assistance that may be necessary for the preparation, filing and prosecution of each such application.  For the avoidance of doubt, Lucent shall not be required to file, prosecute or maintain any patent application on inventions described in Section 2.03(a). Nothing contained the Agreement shall require Lucent to enforce its rights in such inventions or any resulting patents thereon, against any third party.

 

2.04 Licensed Patents

 

(a) Provided that Company has paid development fees as set forth in Section 3.01 and the license fees and royalties as set forth in Section 3.02, and subject to the provisions of this Agreement, Lucent hereby grants to Company a personal, non-transferable (except as permitted in Section 6.06), worldwide and non-exclusive license (without any right to sublicense) under (i) Lucent Patents and (ii) patents that issue to Lucent from inventions owned by Lucent pursuant to Section 2.03. The patents in subsections (i) and (ii) in the preceding sentence shall be referred to collectively as “Licensed Patents”.  The aforesaid license shall be limited to (1) performing the Development Project, (2) to allow Company to make, have made, use and sell Licensed Products manufactured with the use of the Licensed Technical Information pursuant to this Agreement.  Lucent does not grant the right to sublicense the Licensed Patents, it being understood,

 

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however, that the “have made” right granted to Company in this Section 2.04(a) shall apply in connection with the second source supplier contemplated by Appendix B.

 

(b) Subject to the provisions of this Agreement, Company hereby grants to Lucent a worldwide, non-exclusive, perpetual, royalty free, personal, non-transferable (except as permitted in Section 6.06) license (without any right to sublicense) under patents and/or patent applications owned or controlled by Company at any time during the Term of this Agreement to (i) perform the Development Project during the Development Period, and (ii) to make, have made, use, sell and import Licensed Products that Lucent is permitted to make, use, sell or import pursuant to Section 2.06. The patent and/or patent applications referred to above do not include any patents or patent applications owned or controlled by Company that are primarily related to: (i) isotopically enriched semiconductor wafer material technology, (ii) isotopically enriched luminescent materials technology, or (iii) isotopically enriched optical materials technology.

 

(c) Licenses granted pursuant to Sections 2.04(a) and 2.04(b) are not to be construed either (i) as consent by the licensor to any act which may be performed by the licensee, except to the extent impacted by a patent licensed herein to the licensee, or (ii) to include licenses to contributorily infringe or induce infringement under U.S. law or a foreign equivalent thereof.

 

2.05 Licensed Technical Information

 

(a) Provided that Company has paid development fees as set forth in Section 3.01 and the royalties as set forth in Section 3.02, and subject to the provisions of this Agreement, Lucent hereby grants to Company a personal, nontransferable (except as permitted in Section 6.06) worldwide right to use, copy, perform or display Licensed Technical Information, and create, use, copy, perform or display Derivative Works of the Licensed Technical Information, under any and all copyrights and trade secret rights specific to the Licensed Technical Information (patent rights are specifically set forth in Section 2.04) that Lucent has the right to license, and that exists as of the Effective Date or that is created as a result of a Development Project during the term of this Agreement.  The aforesaid license shall be limited to (1) performing the Development Project, (2) to allow Company to make, have made, use and sell Licensed Products manufactured with the use of the Licensed Technical Information pursuant to this Agreement.  The license under copyrights and trade secret rights specific to the Lucent Foreground Technology shall be exclusive (except as under Lucent’s Reservation of Rights and Permitted Activities below, while the license under copyrights and trade secret rights specific to the Lucent Background Technology shall be non-exclusive.  For the avoidance of doubt, the license to create, use, copy, perform or display Derivative Works of the Licensed Technical Information shall be limited to use of such Derivative Works solely in connection with

 

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Licensed Products, and shall exclude any right to create, use, copy, perform or display devices that (a) are not based upon a micro-electro-mechanical system (“MEMS”) [**see cover page note] or [**see cover page note] structure implemented to be sensitive to changes in emissive or reflective infrared radiation that illuminates at least a portion of the surface of the structure, or (b) are for applications that do not produce an image.

 

Lucent does not grant Company the right to sublicense Licensed Technical Information except for the right to procure components for their own use.  Company agrees that Software included in the Licensed Technical Information will be provided to customers only in object code form, in accordance with the provisions of Section 2.05(c).

 

(b) Subject to the provisions of this Agreement and during the term of this Agreement, Company hereby grants to Lucent a personal, nontransferable (except as permitted in Section 6.06) and nonexclusive, royalty-free, worldwide license to use and/or copy Company Information for the purpose of conducting the Development Project.  Company does not grant the right to sublicense the any of the rights granted to Lucent in this Section 2.05(b).

 

(c) Provided that Company has paid development fees as set forth in Section 3.01 and the royalties as set forth in Section 3.02, and subject to the provisions of this Agreement, Lucent hereby grants to Company a personal, nontransferable and nonexclusive right to sublicense object code Software that is part of the Licensed Technical Information (but not, in any event, Lucent Patents) to third parties solely for the purpose of using Licensed Products, provided that Company obtains agreement in writing from such third party, before or at the time of furnishing any portion of such object code Software, that:

 

(1)                                   only a personal, nontransferable and nonexclusive right to use such object code Software is granted to such third party;

 

(2)                                   no ownership interest in such object code Software is transferred to such third party;

 

(3)                                   such third party will not copy such object code Software except as necessary to use such object code Software in connection with Licensed Products and for backup and archive purposes in connection with such use;

 

(4)                                   if a third party’s right-to-use is terminated for any reason, such third party will either destroy or return all copies of such object code Software in its possession;

 

(5)                                   such third party will not transfer such object code Software to any other party except as authorized by Company;

 

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(6)                                   such third party will not export or re-export such object code Software without the appropriate United States and/or foreign government licenses;

 

(7)                                   such third party will not reverse compile or disassemble such object code Software; and

 

(8)                                   Lucent does not warrant such object code Software to the third party, does not assume any liability to the third party regarding such object code Software and does not undertake to furnish any support or information regarding such object code Software to the third party.

 

(d)                                  Company shall use its reasonable commercial efforts to enforce the agreements with customers specified in Section 2.05(c).  Such agreement shall provide that Lucent shall be a third party beneficiary of any such agreements.  On request, Company will provide Lucent with copies of all such agreements, and provide Lucent with results of any audits conducted to assure compliance with such agreements.

 

(e)                                   Each portion of object code Software sublicensed by Company pursuant to this Agreement shall include an appropriate copyright notice.  Such copyright notice may be the copyright notice or notices appearing in or on the corresponding portions of the object code Software as provided by Lucent to Company or, if Company makes copyrightable changes in developing object code Software, Company’s copyright notice.

 

2.06 Lucent’s Reservation of Rights and Permitted Activities

 

(a)                                   Notwithstanding the exclusivity provisions set forth in Section 2.05, Lucent reserves the right to use the Lucent Foreground Technology:

 

(1)                                   for non-commercial purposes, such as for education and research;

 

(2)                                   to perform the Permitted Activities, as described in Section 2.06(b);

 

(3)                                   for its own internal business purposes;

 

(4)                                   for all applications that do not produce an image; and

 

(5)                                   to make, have made, use, lease and sell Licensed Products, provided they are combined with and offered as a part of Lucent Communications Products.

 

(b) For the purposes of this Agreement, “Lucent’s Permitted Activities” shall mean all or any of the following activities:

 

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(1)                                   Licensing the Lucent Foreground Technology to others to make use, lease and sell products other than Licensed Products;

 

(2)                                   Intentionally omitted;

 

(3)                                   Engaging in any activity with and granting licenses relating to the Lucent Foreground Technology to a state, local or federal governmental entity, for the purposes of any governmental grant.  Lucent may perform such activities alone or in conjunction with one or more third parties, provided however, that the preceding sentence shall not be construed to permit Lucent to grant licenses relating to the Lucent Foreground Technology to any such third party with respect to the sale of Licensed Products by the third party directly to the government;

 

(4)                                   Publishing papers, making presentations, and filing patent applications that include portions of the Lucent Foreground Technology;

 

(5)                                   Providing semiconductor foundry services through Lucent Bell Labs Research’s New Jersey Nanotechnology Consortium provided that such services do not include using a substantial portion of the Lucent Foreground Technology to make Licensed Products; and

 

(6)                                   Fulfilling any commitment made by a Lucent entity other than the Bell Laboratories’ New Jersey Nanotechnology Consortium (a wholly-owned subsidiary of Lucent), which commitment was made directly or indirectly for the benefit of a 3rd party and which arose (1) prior to the Effective Date of this Agreement or (2) in connection with a development project commenced prior to the Effective Date of this Agreement.

 

2.07   No Other Licenses

 

(a) No right is granted herein to either Party to use any identification (such as, but not limited to, trade names, trademarks, service marks or symbols, and abbreviations, contractions or simulations thereof) owned by or used to identify the other Party or any of its Subsidiaries or any of its or their products, services or organizations, and that, with respect to the subject matter of this Agreement, each Party agrees it will not without the express written permission of the other Party (i) use any such identification in advertising, publicity, packaging, labeling or in any other manner to identify itself or any of its products, services or organizations; or (ii) represent directly or indirectly that any product, service or organization of the receiving Party is a product, service or organization of the other Party or any of its Subsidiaries, or that any product or service of such Party

 

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is made in accordance with or utilizes any information of the other Party or any of its Subsidiaries.

 

(b) Except as expressly set forth in Article II, no other right or license is either granted or implied by either party to the other with respect to any technical or business information, or with respect to rights in any patents, trademarks, copyrights, trade secrets, mask work protection rights, and other intellectual property.

 

ARTICLE III

DEVELOPMENT AND LICENSE FEES AND ROYALTIES

 

3.01 Development Fee

 

Company shall pay to Lucent a development fee in respect to its development obligations hereunder in the total amount of Twelve Million (U.S.$12,000,000) U.S. Dollars, to be paid by Company to Lucent as follows:

 

(a) An initial fee of Two Million (U.S.$2,000,000) U.S. Dollars, payable as follows:

 

(i) One Million (U.S.$1,000,000) U.S. Dollars upon execution of this Agreement by Company and delivery of this Agreement to Lucent; and

 

(ii) One Million (U.S.$1,000,000) U.S. Dollars within ten (10) days after the date Company provides Lucent with written acceptance of the first development plan prepared by Lucent, in accordance with the provisions set forth in the Statement of Work, Appendix B, Section 3(c).  The cure period set forth in Section 4.03(a) shall apply with respect to the payment set forth in this subsection.

 

(b) The balance of Ten Million (U.S.$10,000,000) U.S. Dollars shall be payable to Lucent in ten (10) equal installments of One Million (U.S.$1,000,000) U.S. Dollars, the first such installment being due (90 days) after the date the Company accepts the first development plan, and each subsequent installment being due three (3) months thereafter.  The final installment, if not sooner paid, shall be due and payable no later than two and one-half (2-1/2) years after the first payment made under this Section 3.01(b).

 

(c) Lucent shall render invoices, but payment is due whether or not an invoice is sent.

 

(d)  If additional development work is added to the Development Project by mutual agreement of the Parties, pursuant to additional SOW’s appended to Appendix B, additional development fees may be charged.

 

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(e) All payments made in respect of the development fee shall be non-refundable.

 

(f) Notwithstanding 3.01(e), in the event that Company notifies Lucent that the first development plan is not accepted in accordance with the provisions set forth in the Statement of Work, Section 3(d) or, within the ten day period for accepting or rejecting the first development plan, Company notifies Lucent that  Company board approval has not been obtained, Lucent shall refund to Company Nine Hundred Thousand (U.S.$900,000) U.S. Dollars, and thereupon Company shall have no further payment obligations to Lucent, and Lucent shall have no further development obligations to Company.

 

3.02 Royalties

 

(a) In consideration for the patent licenses granted to Company in accordance with Section 2.04 and the license to Licensed Technical Information in accordance with Section 2.05, and subject to the minimum royalties set forth in Section 3.02(b) Company agrees to pay Lucent a royalty in an amount equal to [**see cover page note] ( [**see cover page note] %) percent of the Fair Market Value of Licensed Products that are sold, leased or otherwise put into use by Company or any of its Subsidiaries anywhere in the world.  The Parties agree that the royalty provided in this Section shall be apportioned equally between technology licenses and patent licenses.

 

(b) In consideration for the patent licenses granted to Company in accordance with Section 2.04 and the license to Licensed Technical Information in accordance with Section 2.05, beginning on the October 1 next following the earlier of (1) first commercial sale (other than commercial samples) of the Licensed Product; or, (2) the end of the Development Project, and on each subsequent October 1 thereafter, Company agrees to pay Lucent a minimum semi-annual royalty, creditable against the royalties otherwise due to Lucent for such semi-annual period pursuant to Section 3.02(a) in the amount of [**see cover page note] ($US [**see cover page note] ) Dollars. The Parties agree that the minimum royalty provided in this Section shall be apportioned equally between technology licenses and patent licenses.

 

(c) Amounts paid by Company to Lucent under this Agreement shall not be creditable toward any fees (i) payable under any agreement between Lucent and any purchaser from Isonics or user of Licensed Products purchased from Isonics, or (ii) otherwise due to Lucent as a result to the sale or use of Licensed Products by any third party.

 

3.03 Exclusivity Fee

 

For the Development Project set forth in the Statement of Work in Appendix B, the licenses granted by Lucent to Company under Lucent

 

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Foreground Technology shall remain exclusive, provided that Company is not in breach of this Agreement, and provided further that beginning on the October 1 next following the earlier of (1) first commercial sale (other than commercial samples) of the Licensed Product; or, (2) the end of the Development Project, and on each subsequent October 1 thereafter, Company pays to Lucent, in addition to the Development Fees and Royalties set forth above, an Exclusivity Fee in accordance with the table below:

 

Annual
Exclusivity
Payment #		Exclusivity Fee (in U.S. Dollars)
1		$ [**see cover page note]
2		$ [**see cover page note]
3		$ [**see cover page note]
4 and each year thereafter		$ [**see cover page note]

 

The amount paid by Company in respect of the annual Exclusivity Fee shall be credited to the Lucent fiscal year (October 1 through September 30) that the Royalties with respect to Licensed Technical Information and Licensed Patents are otherwise due to Lucent pursuant to Section 3.02.  There shall be no carry-over of any credit from one fiscal year to any subsequent fiscal year.

 

3.04 Sales Referral Fee

 

In addition to the fees, royalties and other payments set forth in this Agreement, Company agrees to pay Lucent a commission in the amount of [**see cover page note] ( [**see cover page note] %) percent of revenue received directly or indirectly by Company or any of its Subsidiaries with respect to sales of Licensed Products made to customers as a result of substantial sales effort provided by Lucent or its Subsidiaries.  Prior to Lucent making such sales referral, the Parties shall agree, in writing, on a written process applicable to same.

 

3.05 Payments and Records

 

(a) Payments to Lucent shall be made in United States dollars to the address specified in Section 6.04.

 

(b) The Development Fee set forth in Section 3.01 shall be paid in accordance with the schedule set forth in that Section.

 

(c) The royalty payments set forth in Section 3.02 shall be reportable and payable within thirty (30) days at the end of each semi-annual period ending on March 31 ^st and September 30th.  Company shall furnish to Lucent a statement,

 

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certified by an authorized representative of Company, identifying in a reasonable manner the number of units of Licensed Products that were subject to Royalty during such semi-annual period, and the amount payable to Lucent pursuant to Section 3.02.  If the statement indicates that a royalty pursuant to Section 3.02(a) less than the minimum royalty is payable, then the minimum royalty shall be paid in accordance with Section 3.02(b).

 

(d) The exclusivity fee payments set forth in Section 3.03 and the Sales Referral fee set forth in Section 3.04 shall be payable at the end of each semi-annual period ending on March 31 ^st and September 30th.

 

(e) Company shall keep full, clear and accurate records of units of Licensed Products. Company shall furnish whatever additional information Lucent may reasonably request from time to time to enable Lucent to ascertain the amounts of royalty fees payable pursuant hereto.

 

(f) Lucent shall have the right to make an examination and audit during normal business hours, not more frequently than annually and subject to prior clearance and coordination with the Company, of all records kept pursuant to this Section 3.05 by Company and such other records and accounts as may under recognized accounting practices contain information bearing upon the amounts of fees payable to Lucent under this Agreement.  Prompt adjustment shall be made by the proper party to compensate for any errors or omissions disclosed by such examination or audit.  Neither such right to examine and audit nor the right to receive such adjustment shall be affected by any statement to the contrary appearing on checks or otherwise unless such statement appears in a letter signed by the party having such right expressly waiving such right and such letter is delivered to the other party. If such audit discloses a reported error of five percent (5%) or greater with respect to the reported sums paid to Lucent by Company during the applicable period subject to such audit, Company shall fully reimburse Lucent, promptly upon demand, for the reasonable fees and disbursements for completing such audit.  Otherwise, Lucent shall be responsible for the cost of each such audit.

 

Overdue payments shall be subject to a late payment charge calculated at an annual rate of one percent (1%) over the prime rate (as posted in New York City during delinquency).  If the amount of such late payment charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum amount.

 

3.06 Taxes

 

(a) Company shall bear all taxes, duties, levies and similar charges (and any related interest and penalties), however designated, imposed as a result of the existence or operation of this Agreement, except (i) any net income tax imposed upon Lucent in a jurisdiction other than the United States if such tax is

 

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allowable as a credit against the United States income taxes of Lucent; and (ii) any net income tax imposed upon Lucent by the United States or any governmental entity within the United States (the fifty (50) states and the District of Columbia).

 

(b) If Company is required to bear a tax, duty, levy or similar charge pursuant to (a) above, Company shall pay such tax, duty, levy or similar charge and any additional amounts as are necessary to ensure that the net amounts received by Lucent hereunder after all such payments or withholdings equal the amounts to which Lucent is otherwise entitled under this Agreement as if such tax, duty, levy or similar charge did not apply.

 

ARTICLE IV - TERM AND TERMINATION

 

4.01 Term

 

The development activities for the initial Development Project contemplated by this Agreement shall be completed approximately thirty six (36) months after the Effective Date.  The Term for the license rights granted in this Agreement shall continue unless terminated in accordance with this Agreement.

 

4.02 Termination for Convenience

 

(a) The Parties will conduct quarterly progress meetings to review the status of the Development Project, the then current Statement of Work and any proposed changes, modifications, or clarifications thereto, expected future activities under this Agreement, and such other matters related to the Development Project as either Party may desire to discuss. Company may terminate the Development Project for convenience, by written notice to Lucent given within ten (10) days after a quarterly progress meeting, so long as such termination is prior to the first commercial (other than commercial samples) of a Licensed Product by Company.

 

(b) Upon termination pursuant to Section 4.02(a), Lucent will cease all further work on the Development Project, and Company shall be relieved of its obligation to make further installments of the Development Fee otherwise due to Lucent in accordance with Section 3.02(b).  Lucent shall be entitled to retain (or be paid) all installments that were paid (or became due) prior to termination.

 

(c) If Company terminates the Development Project, all licenses granted by Lucent to Company pursuant to Sections 2.04(a), 2.05(a) and 2.05(c) shall terminate.  All licenses granted by Company to Lucent pursuant to Sections 2.04(b) and 2.05(b) shall survive.  For the purposes of clarity, in the event that Company does not give Lucent such notice of termination at or after a quarterly

 

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meeting as set forth above, then Company will be deemed to have agreed that it is satisfied with the progress of the Development Project.

 

(d) Lucent may terminate this Development Project by virtue of Lucent’s divestiture of the portion of Bell Labs Research working on the Development Project.  In the event of such termination, Lucent’s liability shall be limited to a refund of the development fees actually paid by Company to Lucent specified pursuant to Section 3.01, for the three (3) year period immediately preceding the termination.    In such event, Lucent will deliver to Company copies of all of the then existing Licensed Technical Information in the possession of Lucent, within two (2) months following such termination.   Further, the licenses granted by Lucent shall continue, subject to Company paying the royalties set forth in Section 3.02, the exclusivity fee set forth in Section 3.03, and the sales referral fee set forth in Section 3.04.

 

4.03 Termination for Cause

 

Subject to termination provisions otherwise set forth in this Agreem