Exhibit 10.16
CONFIDENTIAL TREATMENT HAS BEEN
REQUESTED FOR PORTIONS OF THIS EXHIBIT. THE COPY FILED HEREWITH
OMITS THE INFORMATION SUBJECT TO THE CONFIDENTIALITY REQUEST.
OMISSIONS ARE DESIGNATED AS [XXXXX]. A COMPLETE VERSION OF THIS
EXHIBIT HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
SETTLEMENT and LICENSE
AGREEMENT
THIS SETTLEMENT and LICENSE
AGREEMENT (the “Agreement”) dated as of the 4th day of
December 2006 (the “Effective Date”), is entered into
between Color Kinetics Incorporated, a Delaware corporation
(“CK” or “Color Kinetics”) and Super Vision
International, Inc., a Delaware corporation (“SV” or
“Super Vision”), (collectively the
“parties”).
WHEREAS, Color Kinetics develops,
manufactures, and/or distributes certain technology relating to
semi-conductor lighting;
WHEREAS, Super Vision develops,
manufactures and distributes semi-conductor lighting
products;
WHEREAS, Super Vision has been found
to infringe five patents in a suit that was brought by Color
Kinetics in the United States District Court, District of
Massachusetts;
WHEREAS, Super Vision is currently
asserting patent infringement against Color Kinetics in the United
States District Court, Eastern District of Texas and Color Kinetics
is currently asserting non-infringement and invalidity of the same
patent in a declaratory judgment action brought in the United
States District Court, District of Massachusetts;
WHEREAS, the parties wish to settle
all claims that both parties may have against each other and enter
into a license agreement under which Super Vision will develop,
distribute and sell Licensed Products, as defined below;
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual covenants herein contained,
the parties hereby agree as follows:
ARTICLE 1 —
DEFINITIONS
For purposes of the Agreement, the
terms defined in this article shall have the respective meanings
set forth below:
1.1 “Affiliate” shall
mean, with respect to any Person, any other Person that directly or
indirectly controls, is controlled by, or is under common control
with, such Person. Without limitation, a Person shall be regarded
as in control of another Person if it owns, or directly or
indirectly controls, more than fifty percent (50%) of the
voting stock or other ownership interest of the other
Person.
1.2 “CK Patent Rights”
shall mean all CK United States and foreign utility patents that
have been issued as of the Effective Date. A complete list of these
issued patents is provided on Schedule A.
1.3 “Direct Copy Licensed
Product” shall mean a Licensed Product marketed by Super
Vision that is substantially similar, in terms of its size, shape,
and appearance, to a product that Color Kinetics is marketing at
the time that Super Vision proposes to introduce the Licensed
Product. It being understood however that such ” Direct Copy
Licensed Products” shall not include standard light form
factors such as an MR16, Edision-style bulb, etc.
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1.4 “End Users” shall
mean the ultimate owners or users of a product and shall not
include intermediate distributors or sales
representatives.
1.5 “Excluded Field”
shall mean (i) all consumer products, excluding automotive
aftermarket products, (ii) color-changing or color temperature
variable LED-based lighting fixtures, controllers, and software for
use in an aircraft, and (iii) color-changing or color temperature
variable LED-based lighting fixtures, controllers, and software to
be sold directly or indirectly to Pentair, Inc., its subsidiaries
or affiliates.
1.6 “Licensed Products”
shall mean the Direct Copy Licensed Products and the Other
(Non-Direct Copy) Licensed Products listed in Schedule B and
additional products added to Schedule B from time to time as
provided in Article 4.2. Licensed Products shall only include
integrated, stand-alone products and shall not include OEM
components that are intended to be integrated into a Third Party
finished product.
1.7 “Net Revenue” shall
mean (a) the greater of (i) the revenue that Super Vision
receives in connection with the use, sale, rental, or other
distribution of a Licensed Product from a Third Party, without
reduction for discounts, allowances or commissions, or
(ii) the cost incurred in manufacturing the Licensed Product,
(b) minus any and all transportation and insurance charges and
all sales, excise or similar taxes and duties billed to the
purchaser of the Licensed Product.
1.8 “Person” shall mean
an individual, corporation, partnership, trust, business trust,
association, joint-stock company, joint venture, pool, syndicate,
sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed
herein.
1.9 “Term” shall mean
eleven (11) years from the Effective Date.
1.10 “Third Party” shall
mean any Person other than Super Vision, Color Kinetics and their
respective Affiliates.
1.11 “Trademarks” shall
mean the CK Trademarks listed on Schedule A.
1.12 Certain Additional Definitions.
As used in this Agreement, “herein,”
“hereunder” and “hereof” shall refer to
this Agreement as a whole, and “including” shall mean
“including but not limited to” and “including,
without limitation.”
ARTICLE 2 — SETTLEMENT OF ALL
OUTSTANDING CLAIMS
2.1 Super Vision shall file a motion
for dismissal with the Eastern District of Texas Court to dismiss
with prejudice the Super Vision patent infringement lawsuit filed
against Color Kinetics, Case No. 2-06CV-146-TJW, within ten
(10) days of the Effective Date of this Agreement.
2.2 Color Kinetics shall file a
notice of dismissal with the District of Massachusetts Court to
dismiss without prejudice the Color Kinetics declaratory judgment
lawsuit filed against Super Vision and High End Systems Inc., Case
No. 1:06-cv-10641-RCL, within ten (10) days of the
Effective Date of this Agreement.
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2.3 Super Vision shall waive, and
hereby waives, any and all right to appeal the Final Judgment and
Order entered in the District of Massachusetts Court, Case
No. 02-CV-11137-MEL (the “Final
Judgment”). Color Kinetics shall be entitled to seek
immediately enforcement of the permanent injunction if the licenses
granted under this Agreement for any patent-in-suit is terminated
for any reason.
2.4 Super Vision
shall pay Color Kinetics $825,000 as settlement for all claims that
the parties may have against each other to include all patent
infringement damages and legal costs and fees that arose prior to
the execution of this Agreement and the award specified in the
Final Judgment. Super Vision shall deliver to Color Kinetics a
promissory note at the time of this execution of this Agreement in
the amount of $825,000 payable to Color Kinetics. Such
promissory note shall be due and payable in full by
December 25, 2007, to be paid in equal twelve (12) month
installments of $68,750 beginning January 25, 2007 and payable
by the 25 th
of each
month following until paid in full. The promissory note to be
provided to Color Kinetics is provided in Schedule D. On
satisfaction of the last payment by Super Vision under this
paragraph and provided that Super Vision has not otherwise breached
this Agreement, Color Kinetics shall waive payment of the amount
awarded in the Final Judgment.
2.5 Super Vision shall not disparage
or challenge the validity of any Color Kinetics issued patents
during the Term nor take any actions that are likely to impair such
Color Kinetics patents.
ARTICLE 3 — RIGHTS AND
LICENSES GRANTED BY COLOR KINETICS
3.1 Color Kinetics hereby grants to
Super Vision a royalty-bearing, non-exclusive license under the CK
Patent Rights to develop Licensed Products during the Term and to
manufacture, have made, use, distribute, import, sell and offer to
sell Licensed Products worldwide during the Term; provided,
however, that this license grant shall not include a license to
manufacture, have made, use, distribute, import, sell and offer to
sell Licensed Products within the Excluded Field. The license
granted to Super Vision provides no right to sublicense, except
that Super Vision shall be entitled to subcontract the development
and manufacture of Licensed Products, in whole or in part for sale
or distribution solely to Super Vision.
3.2 Super Vision hereby grants to
Color Kinetics a royalty-free, non-exclusive license under U.S.
Patent 4,962,687 (“‘687 patent”) to develop,
manufacture, have made, use, distribute, import, sell and offer to
sell products during the entire life of the ‘687 patent,
i.e., from the time in which the ‘687 patent was granted
until it expires. The license granted to Color Kinetics provides no
right to sublicense, except that Color Kinetics shall be entitled
to subcontract the development and manufacture of products, in
whole or in part for sale or distribution solely to Color
Kinetics.
ARTICLE 4 — OBLIGATIONS OF
SUPER VISION
4.1 Manufacture; Quality Control;
Warranty and Liability Claims. Super Vision shall assume full
responsibility for the manufacture of Licensed Products, for the
maintenance of reasonable quality control standards, and for all
warranty and liability claims by any Third Party with respect to
the Licensed Products. CK reserves the right to review and approve
Licensed Products in order to determine whether they meet
CK’s reasonable quality standards; if CK has objections to
the quality of a Licensed Product,
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CK shall notify Super Vision of there concern in
writing and Super Vision shall have 45 days to remedy any quality
standard concern. If Super Vision does not reasonably remedy the
quality control concern, then CK shall be entitled to prohibit use
of the Trademarks in respect of such Licensed Product by giving
Super Vision notice to that effect in writing.
4.2 Licensed Products. Super Vision
shall be entitled to add products to Schedule B as Licensed
Products from time to time by providing written notice to CK,
describing the product in reasonable detail and providing
photographs or drawings of the product, no later than thirty
calendar days prior to its first use, marketing, offer for sale,
sale or other disposal. Within thirty calendar days from receiving
the product information CK shall notify Super Vision whether CK has
determined that the proposed product is to be treated as a Direct
Copy Licensed Product.
4.3 Sales, Marketing, Advertising
and Marking. Super Vision shall be solely responsible for the
marketing and sales of the Licensed Products and all advertising of
the Licensed Products. Super Vision will mark the Licensed
Products, and packaging for the Licensed Products, with the
“Licensed by Color Kinetics” logo as specified in the
CK Licensing Partner Program Style Guide, as it may be amended from
time to time (Super Vision shall be responsible for compliance with
amendments only upon reasonable prior notice). Super Vision will
mark the front of the packaging of the Licensed Products and the
front of the Licensed Products with U.S. Patent Nos. which will be
identified by CK from time to time.
4.4 Public Announcements. The
parties shall announce the existence of this Agreement in a
mutually agreeable press release or otherwise within ten days of
the Effective Date, unless otherwise required by law. The mutually
agreed to press release shall not disclose the financial terms of
the Agreement. The parties shall be entitled to disclose the amount
of the settlement, but not the royalty rates (unless required by
law), in later S.E.C. filings and company earnings
calls.
ARTICLE 5 — PAYMENT
OBLIGATIONS OF SUPER VISION
5.1 For Licensed Products, Super
Vision will pay the royalties on Net Revenue set forth in Schedule
C of this Agreement. Payment of Royalties is required only in
respect of such Patent Rights which have been granted and which are
in force at any time and from time to time. Thus, for example and
without limitation, no Royalties shall be payable in respect of
patent or utility model applications which have not yet been
granted or in respect of patents or utility models which have been
granted, but which are invalidated or held unenforceable (by a
decision not subject to or subjected to appeal) or which cease to
exist for any other reason. Further, for example and without
limitation, no Royalties shall be payable in respect of Licensed
Products which do not utilize Patent Rights granted and in force. A
Licensed Product shall be subject to payment of Royalties when sold
or otherwise distributed only when such Licensed Product has been
made, assembled (to include the manufacturing and/or assembling of
a component which is integrated into the Licensed Product) or sold
in a jurisdiction where CK has at least one valid and enforceable
patent included in the “CK Patent Rights” which is
utilized in the Licensed Product.
5.2 All Royalties
will be paid on a quarterly basis during the Term, with the first
payment due January 25, 2007 for sales that occur after the
Effective Date and prior to December 31, 2006. Thereafter, the
payment shall be made by the 25 th
of month
following the end of the calendar quarter. Each royalty report
shall set forth the calculation of the royalties due, including the
number and type of Licensed Products sold during the three month
(or shorter, if applicable) period. Royalties shall be payable in
US Dollars using the average exchange rate between USD and the
foreign currency during the relevant three (3) month period
according to the Wall Street
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Journal. CK shall have the right upon reasonable
notice not more twice per year to have an independent auditor
examine the books and records of Super Vision to ensure compliance
with the payment provisions of this Agreement. Underpaid amounts
shall be paid applying a late fee of 1.5% above the prime rate per
month (according to the Wall Street Journal on the date that the
amount in question became overdue) from original due date until all
overdue amounts, including accrued late charges, are paid in full.
If Super Vision has underpaid the amount due for any period by more
than five percent (5%) of the amount due, then Super Vision
shall pay for that audit and the next two subsequent
audits.
ARTICLE 6 —
CONFIDENTIALITY
6.1 During the Term and thereafter,
except as otherwise provided in this Agreement, neither of the
parties hereto shall disclose any terms or conditions of the
Agreement, or performance thereunder, to any Third Party without
the prior consent of the other party except (i) its auditors,
attorneys, insurance carriers and Affiliates, (ii) as required
by law, order or regulation of a governmental agency or a court of
competent jurisdiction, or (iii) in connection with a change
in control or financing; and the party making any such disclosure
in case (i), (ii) or (iii) shall seek reasonable
safeguards to maintain the confidentiality of the disclosure. The
foregoing shall not otherwise prevent disclosure of
(A) information that is now in the public domain or
subsequently enters the public domain by publication or otherwise
through no action or fault of the other party; (B) information
that is known to either party without restriction, prior to receipt
from the other party under this Agreement, from its own independent
sources as evidenced by such party’s written records, and
which was not acquired, directly or indirectly, from the other
party; (C) information that either party receives from any
third party reasonably known by such receiving party to have a
legal right to transmit such information, and not under any
obligation to keep such information confidential; and
(D) information independently developed by either
party’s employees or agents provided that either party can
show that those same employees or agents had no access to the
confidential information received hereunder.
6.2 No Use of Name. Except as
otherwise required by applicable law, regulation or order of a
governmental agency or court of competent jurisdiction, or as
expressly permitted by this Agreement, neither party shall use the
name of the other party or the other party’s directors,
officers or employees in any advertising, news release or other
unrestricted publication, without the prior express written consent
of the other party. The foregoing shall not preclude the mentioning
in general terms of the existence of this Agreement (without
details of Royalty Rates or term) by a party in its governmental
security filings or related earnings announcements.
ARTICLE 7 — INTELLECTUAL
PROPERTY OWNERSHIP
Color Kinetics shall retain the
entire, right, title and interest worldwide in the CK Patent Rights
and Trademarks, subject to the licenses granted herein.
Super Vision shall retain the
entire, right, title and interest worldwide in the Super Vision
Patent Rights and Trademarks, subject to the license granted
herein.
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ARTICLE 8 — REPRESENTATIONS AND
WARRANTIES
8.1 Mutual Representations. Each
party hereby represents and warrants to the o
