EXHIBIT 10.1
DEVELOPMENT AGREEMENT(1)
This Development Agreement
("Agreement"), dated as of March 30, 2005 (the
"Agreement Date"), is between
M-Systems Flash Disk Pioneers Ltd., an Israeli
company having its principal
place of business at Central Park 2000, 7 Atir Yeda
St., Kfar Saba, 44425, Israel
("M-Systems"), and PowerHouse Technologies Group,
Inc., a Delaware corporation
having its principal place of business at 2694
Bishop Drive, Suite 270, San
Ramon CA 94583 ("PowerHouse"). M-Systems and
PowerHouse may be referred to
individually as a "Party" or collectively as
"Parties".
1.
INTRODUCTION
1.1.
PowerHouse is
engaged in the development of mobile computing
software;
1.2.
M-Systems has
developed and sells a "flash based" key chain
storage device known as the DiskOnKey(R) ("DiskOnKey");
1.3.
M-Systems
desires PowerHouse to perform certain development work
to modify technologies of PowerHouse to operate in and
in
conjunction with M-Systems USB Drives (as such term is
defined
below); and
1.4.
M-Systems
further desires to receive and PowerHouse desires to
grant to M-Systems the right to use and distribute the
Migo
Products (as such term is defined below) to be used in,
together
and in conjunction with M-Systems USB Drives subject to the
terms
and conditions of this Agreement.
ACCORDINGLY, in consideration of the mutual covenants and
promises
contained herein, the Parties agree as follows:
2.
DEFINITIONS
As
used in this Agreement, the following capitalized terms shall have
the
following meanings:
2.1.
Associated
Company means any corporation, company or other legal
entity, where more than fifty percent (50%) of the voting power
of
which is, now or hereafter, owned or controlled, directly
or
indirectly by a Party hereto, or jointly by the Parties
hereto;
provided, however, that any corporation, company or other
legal
entity shall be an Associated Company of a Party only for as
long
as
such ownership or control exists.
2.2.
Intellectual
Property Rights means rights in patents (including
reissues, divisions, continuations, continuation-in-part,
and
extensions thereof), utility models, and registered and
unregistered designs including copyrights, trade secrets and
any
other form of protection afforded by law to inventions,
models,
designs or other Information, and applications therefor
including
without limitation, patents, trademarks, copyrights and
trade
secrets relating to the Development Projects and that are:
(i)
owned or controlled by a Party or an Associated Company, and
(ii)
exist prior to the beginning of the Development hereunder
or
result from activities that are independent from said
Development,
and (iii) developed by each party pursuant to this Agreement
in
the course and as part of the Development Project.
PowerHouse's
Intellectual Property Rights includes without limitation
all
PowerHouse Technology. M-Systems' Intellectual Property
Rights
includes without limitation all M-Systems Technology.
(1) Legend: In this document,
[*] connotes material that has been omitted
pursuant to a request for
confidential treatment of the same. Such omitted
material has been filed with
the Securities and Exchange Commission on a
confidential
basis.
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2.3.
Business Day
means any day other than a Saturday, a Sunday or any
day, which is otherwise an official bank holiday in the
United
States of America.
2.4.
Confidential
Information means all Information disclosed to one
Party by the other Party that is marked or designated
Confidential
or Proprietary or, in the case of verbal disclosures, which
are
summarized in a writing, marked or designated Confidential
or
Proprietary and furnished within thirty days to the
Party
receiving such Confidential Information; provided that the lack
of
such summary in writing shall not derogate from the
qualification
of oral information as a Confidential Information
hereunder.
2.5.
Development
Projects means the development work to be performed by
each Party in accordance with the work allocation and
time
schedule as set forth in a Statement of Work, and any
mutually
agreed modifications or extensions thereof, with the aim
to
develop Software Applications, as defined below.
2.6.
Escrow Agent
shall mean such party as agreed upon between the
parties.
2.7.
Escrow Agreement
shall mean a separate agreement to be executed by
PowerHouse, M-Systems and the Escrow Agent in the form
attached
hereto as Exhibit E, which agreement shall embody the
appropriate
escrow terms for deposit of the Source Code.
2.8.
Information
means circuits, protocols, drawings, specifications,
samples, models, processes, procedures, instructions,
technology,
applied development engineering data, reports, and all
other
technical or commercial information, data and documents
excluding
any Intellectual Property Rights related to such
Information,
which is
(i) owned or controlled by a Party, and existing prior
to
the beginning of the Development under this Agreement, or
(ii)
resulting from activities of a Party that are independent from
the
Development under this Agreement or (iii) developed as part of
and
in the course of the Development Projects.
2.9.
Migo Personal
shall mean the Migo USB Drive software product
offered by PowerHouse as of the Agreement Date for all
currently
supported platforms and all currently provided functionality,
with
the exception of the Outlook synchronization feature. The
Migo
Personal shall contain an upgrade mechanism which shall be
defined
by both parties and fully managed and operated by
PowerHouse;
provided, however, that the upgrade mechanism will permit
upgrade
only to the same Migo software and functionality as Migo
Professional.
2.10. Migo Products shall mean the Migo
Personal, the Migo Professional
and/or the Migo Upgrade.
2.11. Migo
Professional shall mean the Migo USB Drive software
product
offered by PowerHouse as of the Agreement Date for all
currently
supported software platforms and all currently provided
functionality, including the Outlook synchronization
feature.
2.12. Migo Upgrade
shall have such meaning as described in Section 3.3.
2.13. M-Systems
Customers shall mean purchasers or licensees of
M-Systems USB Drives and/or technology, as relevant,
whether
labeled under M-System's name or under M-Systems
partners',
resellers' or OEM's names.
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2.14. M-Systems
Technology shall mean, without limitation, DiskOnKey
designs and technology (as more fully described in Exhibit
A).
2.15. M-Systems USB
Drives shall mean USB Drives manufactured by or on
behalf of M-Systems or by its Associated Companies,
partners,
resellers or OEM's utilizing the M-Systems Technology.
2.16. PowerHouse
Technology shall mean the technology described in
Exhibit B.
2.17. Statement of
Work means a plan for the Development Projects under
this Agreement as set out in the Product Development Plan
and
includes product specifications, a development schedule,
deliverables, acceptance criteria.
2.18. U3 shall mean U3
LLC, a Delaware limited liability company under
authorization of the members of U3 Group, which includes
M-Systems
and SanDisk Corporation, and has developed a next generation
USB
flash drive technology.
2.19. U3 Drives shall
mean a USB Drive which complies fully with the U3
specifications.
2.20. U3 Software
shall mean software products, solely to the extent
such software products run on a U3 Drive, where such
software
products comply with all portions of the Software and U3
Related
Products Agreement to be entered into by a software provider
and
U3.
2.21. USB Drive means
any removable data storage products comprised of a
non-detachable fixed USB connector (i.e., not connected via
a
cable of any length) and embedded flash, or other, memory for
data
storage, contained within a single integrated shell
package.
2.22. Migo EULA means
the End User License Agreement included with each
Migo Product.
3. BUSINESS
COLLABORATION
M-Systems shall promote the Migo Products in accordance with
the
following guidelines:
3.1.
PowerHouse will
develop the Migo Products and will adapt them to
run as U3 Software in accordance with U3 guidelines and
pursuant
to the terms of the Software and U3 Related Products Agreement
to
be entered into by PowerHouse and U3.
3.2.
PowerHouse
hereby grants M-Systems and its Associated Companies a
worldwide, transferable license to market, distribute,
promote,
offer for sale, offer for re-sale and sell the Migo Products as
an
integrated part of M-Systems USB Drives only, and to use
and
display the trademarks, names, service marks, and logos
of
PowerHouse related to the Migo Products or in connection with
such
M-Systems USB Drives only. [*]
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3.3.
[*]
3.4.
M-Systems, to
the extent commercially practicable, will promote
the Migo Upgrade as the primary Migo Product to
M-Systems
Customers. Furthermore, M-Systems will actively promote
PowerHouse's interests with M-Systems' Customers, aiming
at
allowing PowerHouse to market its Migo Product upgrades
directly
to M-Systems' Customers end-user base. PowerHouse will
provide
M-Systems with its recommended marketing messages in order
to
promote the bundling of the Migo Products with the M-Systems
USB
Drives.
3.5.
PowerHouse will
make such changes to the trademark labeling
included in the Migo Products as an M-Systems Customer
reasonably
deems necessary for such M-Systems Customer to promote the
Migo
Products. M-Systems Customers' promotional and packaging
materials
which include the Migo brand name must be submitted to
PowerHouse
for approval, which approval shall not be unreasonably
withheld.
3.6.
PowerHouse will
provide first level support for all Migo Products
directly to M-Systems and M-Systems Customers and their
end-users,
for 30 days from the date of the first use of the software by
the
end user. With respect to any M-Systems Customer who chooses
to
provide first level support itself to its end-users,
PowerHouse
will provide training and second level support as may be
required
by such M-Systems Customer and accepted by PowerHouse.
PowerHouse
will provide training 3 times per year at PowerHouse's
location.
If the training is requested at other locations, there will
be
charges associated with the training in amounts determined
by
PowerHouse and which will be borne by the M-Systems Customer.
In
the case where PowerHouse is providing the level-1 support, if
it
is determined that the problem is not related to Migo
Products,
M-Systems will pay PowerHouse for providing such first line
of
support. A process and the fee structure will be established
prior
to the product launch. Without derogating from the
preceding
sentence, PowerHouse shall provide M-Systems and
M-Systems
Customers with such upgrades, features, technical support
and
maintenance services as it provides to its other
customers
generally and without special negotiation of terms and
conditions.
Upgrades for this purpose shall be considered fixes and
enhancements to the existing product and will not include
new
features or functionality that may be marketed and sold
by
PowerHouse as value added products.
3.7.
Exclusivity.
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3.7.1. Other than for those customers and with respect
to
those products listed next to their names in Exhibit F, during
the
Term of this Agreement, PowerHouse shall not provide any
other
party and any other party's customers with services or
applications for USB Drives provided or similar to those
provided
to M-Systems Customers as set forth in this Agreement, and
shall
not bundle, or allow to be bundled. The Migo Products
(or
variations thereof) with any other USB Drive other than
M-Systems'
USB Drives. Exhibit F may be amended upon the mutual
written
agreement of the parties.
Notwithstanding anything to the contrary contained elsewhere
in
this Agreement or any exhibit or schedule hereto, the
exclusivity
set forth above shall not be deemed to restrict or limit in
any
manner the full and complete right of PowerHouse to market,
sell,
license and distribute Migo Products:
(a) for
use in connection with (1) MP3 players, (2)
Cell/smart phones, (3) PDAs, (4) SIM cards, (5) USB
watches and/or (6) memory cards in devices marketed
by PowerHouse or others (other than standalone USB
Drives), if PowerHouse offers M-Systems a 30-day
right of first refusal to acquire the rights for any
such device on the terms offered to the first third
party acquiring rights for any such device from
PowerHouse and M-Systems does not exercise such
right; and
(b) to
PowerHouse customers who or which acquire Migo
Products (including USB Drives on which Migo
Products are installed) directly from PowerHouse.
3.7.2. For the avoidance of any doubt M-Systems shall be
entitled in its sole and absolute discretion to market and
sell
the M-Systems USB Drives, either directly or indirectly,
without
the Migo Products, and, except as expressly provided
herein,
PowerHouse shall have no right or claim under this Agreement
or
otherwise for loss of profit, loss of revenues or the
like.
3.8.
Beginning on the
date (the "English Language Start Date") which is
two months after the Migo Products have been approved for
English
Language Gold Release pursuant to section 4.5, M-Systems
shall
bundle with M-Systems USB Drives [*].
Beginning on the date (the "International Start Date") which
is
the date on which Migo Products have been approved for
International Gold Release pursuant to section 4.5 (a)
the
schedule in the preceding sentence shall no longer be
applicable
and the following schedule shall apply:
(a)
[*]
(b)
[*]
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(c)
[*]
In the event the M-Systems fails to meet the commitment in
this
Section 3.9 and does not cure such failure after 30 days
written
notice, the exclusivity provisions in Section 3.8 shall
cease
until such time as M-Systems meets the commitment
herein.
3.9.
[*]
Notwithstanding anything to the contrary contained elsewhere
in
this Agreement or any exhibit or schedule hereto, the
restrictions
and price adjustments set forth above shall not be
deemed
applicable to or with respect to any sales or licenses of
Migo
Products:
(a) for
use in connection with (1) MP3 players, (2)
Cell/smart phones, (3) PDAs, (4) SIM cards, (5) USB
watches and/or (6) memory cards in devices marketed
by PowerHouse or others (other than standalone USB
Drives), if PowerHouse offers M-Systems a 30-day
right of first refusal to acquire the rights for any
such device on the terms offered to the first third
party acquiring rights for any such device from
PowerHouse and M-Systems does not exercise such
right; and
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(b) to
PowerHouse customers who or which acquire Migo
Products (including USB Drives on which Migo
Products are installed) directly from PowerHouse.
4.
DEVELOPMENT
4.1.
The parties will
appoint technical representatives to coordinate
technological cooperation between the parties (the
"Technical
Team"). The Technical Team will be responsible for discussing
and
overseeing the integration between Migo Products and M-Systems
USB
Drives.
4.2.
PowerHouse and
M-Systems will disclose to each other Information
to the extent necessary for implementing Development Projects
in
accordance with a Product Development Plan. The Product
Development Plan and any amendments thereof, once mutually
agreed
upon by the Parties will be incorporated by reference into
this
Agreement as an Addendum and shall constitute a part hereto.
The
initial Product Development Plans is attached as Exhibit C of
this
Agreement.
4.3.
The specific
goal of the Development Project is to develop
software applications required to bundle the Migo Products
with
M-Systems USB Drives and to provide M-Systems Customers with
the
Migo Products as set forth herein (the "Software
Applications").
4.4.
In implementing
Development Projects, PowerHouse and M-Systems
will cooperate fully to accomplish the work allocated to
each
party within the time schedule as set forth in the
Product
Development Plan. The parties acknowledge that the time
schedules
of a Statement of Work in a Product Development Plan are
best
estimates as of the time of its preparation and, unless
otherwise
agreed in writing, neither Party shall be liable for any delays
in
accomplishing the development work therein. Each of PowerHouse
and
M-Systems will be responsible for their respective
development
responsibilities and bear its own development costs, in
accordance
with a Product Development Plan. Each Party will complete
its
development responsibilities and achieve its milestones
in
accordance with the schedule. For each day a Party is late
in
achieving a milestone, then the deadlines for the other
Party's
outstanding milestones will be extended one day. If for any
reason
the development does not proceed in accordance with the
schedule,
either Party may request a meeting to discuss the delay. If such
a
meeting is requested, the Parties shall meet and discuss in
good
faith mechanisms to expedite development and avoid further
delays,
and will make necessary adjustments to the Product
Development
schedule.
4.5.
Without
derogating from the preceding section, it is the intent
of
the
parties that PowerHouse shall deliver a final (post QA)
U3
compliant version of each of the Migo Products by no later than
3
weeks following release of final U3 LaunchPad software.
M-Systems
shall confirm to PowerHouse when each Migo Product has
passed
M-Systems' internal acceptance tests and is U3 compliant.
Versions
M-Systems approves for release shall be known as "Gold
Releases".
Initially, the Migo Products will be prepared for release in
the
English Language (the "English Language Gold Release").
The
English
