AGREEMENT

 

Exhibit 10.22

 

	Strategic Alliance Agreement
	Intricon Corporation 1260 Red Fox Road Arden Hills, Minnesota 55112 United States
	and
	Dynamic Hearing Pty Ltd 2 Chapel Street, Richmond, VIC 3121 AUSTRALIA

 

 

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AGREEMENT

 

This Agreement is entered into and is effective as of the 1 ^st day of October, 2008 (Commencement Date) by and between IntriCon Corporation, a Pennsylvania Corporation having a place of business at 1260 Red Fox Road, Arden Hills, Minnesota 55112 USA (hereinafter IntriCon) and Dynamic Hearing Pty Ltd a Corporation organized under the laws of Victoria, Australia and having a place of business at 2 Chapel Street, Richmond, Victoria 3121, Australia (hereinafter Dynamic Hearing) agree to collaborate with each other as a Strategic Alliance. As such, this Strategic Alliance Agreement (SAA) outlines the principles and the understanding of the parties and defines related terms and conditions.

 

WHEREAS, Dynamic Hearing has developed technology useful for products in the Hearing Health (HH) Assisted Listening Device (ALD) and Professional Communications (PADA) markets and DSP platforms which are hereinafter defined.

 

WHEREAS, IntriCon has also developed technology for the HH, ALD and PADA markets and DSP platforms.

 

1.0

Purpose

 

1.1        The purpose of this alliance is to exploit the parties’ complimentary capabilities for producing DSP Technology products for the HH, ALD, and PADA markets.

 

2.0	Definitions

 

The following terms in the context of this SAA shall have the following meanings:

 

2.1

Assisted Listening Devices

 

An Assisted Listening Device (“ALD”) is a

 

1.

One way communications device

 

2.

Used for hearing protection or listening in challenging environments, and

 

3.

Contains Ultra Low Power (ULP) DSP and or ULP Wireless technology

 

2.2

Hearing Aids :

 

Hearing Aids are amplification devices primarily designed to compensate for hearing loss, designed for listening only (through a microphone, telecoil, Direct Audio Input or other similar audio pathways and run on a low power hybrid circuit. Hearing Aids may include in-the-ear Hearing Aids (ITE), behind-the-ear Hearing Aids (BTE), or completely-in-the-canal Hearing Aids (CIC).

 

2.3

Professional Audio/Communication Devices

 

Professional Audio/Communication Devices (“PADA”) are wired or wireless headsets or other devices used for one-way or two-way communications in professional or industrial settings such as law enforcement, sport events, professional performances, search and rescue, and military operations.

 

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2.4

DSP Technology :

 

DSP means digital signal processing. More specifically, for the purposes of this SAA, DSP Technology shall mean ON Semiconductor hardware and firmware algorithms used for the HH, PADA and ALD markets. Hardware shall include the ON Semiconductor Ezairo DSP, and the Single Chip Hearing Amplifier (SCHA) from ON Semiconductor.

 

2.5

IntriCon Technology :

 

IntriCon Technology is that technology:

 

(i)

for which a patent(s) has been granted and all fees relating to the grant including any associated maintenance or annuity fees have been paid. A granted patent does not include pending applications including those pending applications which are associated with a granted patent through a claim of priority;

 

(ii)

or has a patent pending, or

 

(iii)

is Technology under “record of invention”.

 

2.6

Dynamic Hearing Technology :

 

Dynamic Hearing Technology is that technology:

 

(i)

for which a patent(s) has been granted and all fees relating to the grant including any associated maintenance or annuity fees have been paid. A granted patent does not include pending applications including those pending applications which are associated with a granted patent through a claim of priority; or

 

(ii)

has a patent application pending, or

 

(iii)

is Technology under “record of invention”.

 

2.7

K/S HIMPP :

 

K/S HIMPP (hereinafter HIMPP) is a Danish partnership that owns numerous patents relating to Hearing Aids and associated technologies.

 

2.8

HIMSA :

 

HIMSA otherwise known as Hearing Instruments Manufacturers’ Software Association is a privately owned company that has developed a standardized hearing care software system.

 

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2.9

Base Product

 

Base Product means the DSP Technology including the ON Semiconductor Ezairo or SCHA chips, the EEPROM and the firmware loaded onto the EEPROM and the minimum printed circuit board package necessary to connect and house these items. The Base Product does not include additional PCB or flex circuits necessary to connect to other components of an Enhanced Product.

 

2.10

Enhanced Product

 

Enhanced Product means a value added assembly or completed Hearing Aid or Assistive Listening Device which includes the Base Product as one of the component devices. The Enhanced Product may include other electronic components, flex circuitry, microphones, a receiver, plastic housings, volume controls, trimmer potentiometers, push button switches, programming connectors and other components.

 

2.11

Contact Center

 

Contact Center means a group of people who use Contact Center Products and provide telemarketing, mail ordering, customer care, technical support and similar functions either directly for an enterprise or on an outsourced basis by using automatic call directors for inbound centers and predictive dialers for outbound centers. A Contact Center may also use software-based systems rather than physical equipment.

 

2.12

Contact Center Products

 

Contact Center Products means any product, including without limitation, headsets (cordless or corded), amplifiers, telephones, soft phones, and software-based systems that are used in Contact Centers. For purposes of clarification, no product shall be deemed a “Contact Center Product” unless it is used in a Contact Center, including, without limitation, Bluetooth Products.

 

2.13

Miscellaneous Definitions :

 

(a)

headings are for convenience only and do not affect interpretation;

 

(b)

the singular includes the plural and conversely;

 

(c)

the meaning of general words introduced by including , or for example , or similar expressions is not limited by specific examples;

 

(d)

a reference to a person, corporation, trust, partnership, unincorporated body or other entity includes any of them;

 

(e)

a reference to a clause or Exhibit is a reference to a clause of, or an Exhibit to, this Agreement;

 

 

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(f)

a reference to an agreement or document (including a reference to this Agreement) is to the agreement or document as amended, varied, supplemented, novated or replaced, except to the extent prohibited by this Agreement or that other agreement or document;

 

(g)

a reference to a party to this Agreement includes the party’s successors, permitted substitutes and permitted assigns (and, where applicable, the party’s legal personal representatives);

 

(h)

a reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it;

 

(i)

if a translation of this Agreement into any other language is produced, the original English version is to be the definitive version of this Agreement;

 

(j)

the term Related Body Corporate has the meaning given in the Corporations Act 2001 (C’th); and

 

unless the context requires otherwise terms in bold italics have the meaning given below:

 

Business Day means a day other than a Saturday, Sunday or public holiday in Victoria, Australia;

 

Confidential Information means information in relation to a party, including its business activities that

 

(a)

is disclosed to the other party by or on behalf of the first party;

 

(b)

is acquired by the other party directly or indirectly from the first party; or

 

(c)

otherwise comes to the knowledge of the other party,

 

in connection with this Agreement whether the information is in oral, visual or written form or is recorded or embodied in any other medium and includes all such information disclosed to, or accessed by, the other party before this Agreement commences;

 

Exclusivity Date means October 1, 2008, the date Intricon makes its first quarterly payment of the Minimum Payment;

 

Identified Party means a party identified in Exhibit C before January 1, 2009 and all other parties are unidentified parties;

 

Improvements mean any modification, improvement, enhancement or development to the Licensed Subject Matter excluding always a development, modification, improvement or enhancement that is patentable in its own right or which is proprietary information of IntriCon.

 

Key Personnel means Elaine Saunders and Anthony Shilton;

 

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Licensed Subject Matter means Dynamic Hearing’s Technology, Software, and Documentation as described in Exhibit A and Exhibit B, in respect of which IntriCon is granted a license under this Agreement;

 

Product means a Base Product Unit or an Enhanced Product Unit ;

 

For purposes of computing Royalty Payments, a sale shall occur when IntriCon receives payment from a customer for a Base Product Unit ., or an Enhanced Product containing a Base Product ;

 

Services means technology transfer and other support provided to IntriCon by Dynamic Hearing;

 

Base Product Unit means a single Base Product item;

 

Territory means the world; and

 

Use means, in relation to:

 

(a)

the Technology, make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it; and

 

(b)

the Software and Documentation to reproduce any copyright works subsisting in such software or documentation.

 

2.14       Additional definitions are provided in Exhibits A and B attached here to which are considered to be part of this Agreement.

 

3.0	License Grant

 

3.1        Term: The initial term of this Agreement shall be five (5) years from the date of execution and may be extended subject to satisfactory agreement on ongoing commercial terms, to be agreed two (2) months prior to the expiration of this Agreement.

 

3.2        Dynamic Hearing grants to IntriCon in accordance with this Agreement, for the Term, a license, to Use Dynamic Hearing’s Technology, Software and Documentation developed as of the Commencement Date to manufacture, import, sell and offer for sale throughout the Territory, Products containing Dynamic Hearing’s Technology and Software. This grant specifically excludes products for Contact Centers, and the use of ADRO Technology in electrical stimulation of the auditory system.

 

3.3        IntriCon accepts that Dynamic Hearing owns all rights in relation to the Licensed Subject Matter except for those rights being specifically granted hereunder, and that Dynamic Hearing is under no obligation to provide the source code of any software.

 

3.4        Commencing on the Exclusivity Date, and continuing for so long as IntriCon continues to make such payments, the license granted to IntriCon under this Agreement will, subject to the terms and conditions of this Agreement, be exclusive for Hearing Aids. The exclusivity shall not prevent Dynamic Hearing entering into agreements with any Identified Party subject to the terms herein. On or before January 1, 2009, Dynamic Hearing will provide IntriCon with an updated version of Exhibit C which will include a complete list of identified parties. After January 1, 2009, no additions to Exhibit C are allowed unless agreed to by IntriCon in writing.

 

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3.5        IntriCon acknowledges that Dynamic Hearing’s rights to license technology and software to companies manufacturing implantable devices is not restricted in any way.

 

IntriCon acknowledges that Dynamic Hearing’s rights to license any Dynamic Hearing Technology or Software to Identified Parties, and provide support as agreed with Identified Parties, is in no way restricted.

 

3.6        No further design support will be given to Sound Design Technologies, Ltd (hereinafter Sound Design) which includes the recent purchase of Gennum Corporation’s hearing instrument business after 30 October 2009, if all conditions of IntriCon’s exclusivity are met.

 

3.7        Intricon acknowledges that Dynamic Hearing is negotiating with several third parties regarding licensing Dynamic Hearing Technology and Software, relating to its Hearing Aid Designer™ and other products and services. The rights granted under such agreements shall be included as exceptions to the exclusivity of IntriCon’s License Grant, if such agreements are executed by Dynamic Hearing and the third party before January 1, 2009. Such third parties and their relevant subsidiaries will be Identified Parties and added to the Exhibit C. Agreements with identified parties are allowed exceptions and no Agreements are allowed with unidentified parties.

 

3.8        Commencing on October 1, 2008, and continuing for so long as IntriCon continues to make minimum payments as defined in 4.3, Dynamic Hearing agrees that it will not license any Dynamic Hearing Technology for Hearing Aids, subject to Clause 3.5.

 

3.9        If any Identified Party, (with the exception of Sound Design) purchases DSP product sold or made by IntriCon with Dynamic Hearing’s Hearing Aid Designer™ software and requests assistance to achieve HIMPP compliance for products using such DSP chips, IntriCon will use its best efforts to comply with the request for HIMPP compliance.

 

3.10      Where IntriCon supplies Products to a third party, IntriCon will, at its cost:

 

(a)

obtain and maintain all governmental and regulatory approvals necessary for it to exercise, and comply with all laws and regulations applicable to the exercise of, its license rights under this Agreement; and

 

(b)

comply, and ensure that all Products comply, at all times with any technical standards as may reasonably be required by law, and any licensing requirements, standards, or protocols established by the Hearing Instrument Manufacturers’ Software Association ( HIMSA ) and the Hearing Instrument Manufacturers’ Patent Partnership ( HIMPP ), it being acknowledged that Dynamic Hearing makes no representation or warranty that the exercise of the rights granted under this Agreement will not infringe any rights held by HIMSA, HIMPP or any other third party.

 

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3.11       Where Dynamic Hearing supplies Dynamic Hearing Technology directly to a customer on DSP chips supplied by IntriCon, then, IntriCon will use its best efforts to comply with the request for HIMPP compliance or notify the third party customer of the customers obligations, as per 3.10 (a) and (b).

 

3.12       Dynamic Hearing may continue indefinitely selling products and services to new customers using the ON Semiconductor DSP hybrid chip. For the absence of doubt, the Exclusivity grant of 3.2 does not restrict Dynamic Hearing from licensing Dynamic Hearing Technology and DSP Software on any ON Semiconductor platform, purchased by a third party or by Dynamic Hearing, from IntriCon. With the exception of the Identified Parties, Dynamic Hearing agrees that it will not sell the Dynamic Hearing DSP Software for Hearing Aids configured to run on any hardware other than that provided by ON Semiconductor, except in circumstances as described in this Agreement. Dynamic Hearing may continue to sell products and services to non-Hearing Aid Customers using the ON Semiconductor DSP hybrid chips including the Bela Signa.

 

3.13       Dynamic Hearing and IntriCon shall undertake a mutual roadmap review and agree whether or not the current ON Semiconductor chips will meet market requirements. If the Parties agree that the ON Semiconductor chips will not meet market requirements, IntriCon shall have six (6) months to correct the material deficiency. Material deficiency means that ON Semiconductors must have a chip that is within 10% of the best in class performance on each one of these characteristics: physical size, power supply current, computational capability and cost. If IntriCon is unable or unwilling to remedy such deficiency, IntriCon will lose its exclusivity under this license.

 

3.14       IntriCon agrees that nothing in this Agreement precludes Dynamic Hearing from licensing Dynamic Hearing Technology, including the ADRO™ Algorithm to manufacturers, including Siemens AG, Sonova Holdings AG, GN Resound Group, William Demant Holding A/S, Widex A/S, Starkey Laboratories Inc, and Cochlear Ltd.

 

3.15       Nothing herein shall preclude Dynamic Hearing from making and selling its own Hearing Aids. Nothing in this agreement prevents Dynamic Hearing from selling Hearing Aids manufactured by third parties in Dynamic Hearing’s own clinics.

 

3.16       No other exception to IntriCon’s exclusive license being granted herein shall exist unless such exception is specifically identified by a supplemental agreement between IntriCon and Dynamic Hearing.

 

4.0

Payments

 

4.1        IntriCon’s payments to Dynamic Hearing will comprise two payment components. A first payment component (minimum payment) will be a technology access fee for access to Dynamic Hearing Technology on a non-exclusive basis. A second payment component hereinafter (Second Component) will be for exclusive rights to Dynamic Hearing Technology as such exclusive rights are defined herein. The second component may comprise a combination of a royalty payment and fees for services.

 

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4.2        IntriCon will pay to Dynamic Hearing a fixed technology access fee of US$300,000 annually (hereinafter “Access Fee”), the payment of the technology access fee to be paid on a quarterly basis at the beginning of each calendar quarter. Payment of the technology Access Fee will maintain IntriCon’s non-exclusive rights to Dynamic Hearing Technology.

 

4.3        To maintain exclusive rights to Dynamic Hearing Technology for Hearing Aids IntriCon will make minimum annual payments to Dynamic Hearing as set out in the Minimum Payment Schedule. The Minimum Payment consists of the Access Fee of US$300,000 per annum and the Second Component that increases from year to year.

 

Minimum Payment Schedule (All amounts are in US Dollars):

 

 

The Minimum Payments will be paid quarterly in advance in equal installments at the beginning of each royalty quarter, as defined in 4.7. The first quarterly Minimum Payment (for the quarter beginning 1 ^st October, 2008) shall be made at the date of signing of this Agreement and the second quarterly minimum payment shall be made at January 1, 2009 with all further quarterly Minimum Payments following the schedule as defined in 4.7.

 

4.4        Intricon is entitled to credit for any amounts payable to Dynamic Hearing arising from per unit royalties and fees for services up to the value of the corresponding quarterly Second Component. In quarters where the per unit royalties and fees for services are less than the corresponding quarterly Second Component, IntriCon may carry forward the remaining credit to be offset against future quarters per unit royalties and fees for services.

 

Any amounts due from per unit royalties and fees for services that exceed the value of the corresponding quarterly payment of the Second Component, net of any carried forward credit, will be paid within 30 days of the end of that royalty quarter.

 

4.5        Once IntriCon has paid the minimum payments in 4.3, no further minimum payments, both Access Fee and Second Component, are required for access to Dynamic Hearing Technology or to maintain exclusivity over the term of this Agreement. IntriCon will continue to have the obligation to pay royalty payments under 4.9 and fees for services under 4.8.

 

4.6        In the event IntriCon has not yet paid the minimum payments and should IntriCon choose not to continue access to Dynamic Hearing Technology on an exclusive basis as referred to in 4.3, the following amounts will be payable:

 

(1)

the technology Access Fee payable quarterly in advance in equal installments at the beginning of each royalty quarter and;

 

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(2)

any mont