Patent and Technology License Agreement

 

 

[*]       Indicates   confidential   portion has been omitted pursuant to a request

         for   confidential   treatment   and has been   filed   separately   with the

         Commission.

 

                     Patent and Technology License Agreement

 

 

          This Patent and   Technology   License   Agreement   (the   "Agreement")   is

entered into as of May 5, 2004, (the "Effective   Date") by and between   Shocking

Technologies,   Inc.,   a   Delaware   corporation   with   principle   offices at 5561

Country   Club   Parkway,   San Jose,   CA 95138   ("STI");   Oryx,   Inc.,   a Delaware

corporation with principle   offices at 4340 Almaden   Expressway,   Suite 220, San

Jose, CA 95118 ("Oryx") and SurgX,   Inc., a wholly owned subsidiary of Oryx with

principle   offices at 4340 Almaden   Expressway,   Suite 220,   San Jose,   CA 95118

("SurgX" together with Oryx, collectively the "Licensor").

 

         WHEREAS, Licensor is the owner of certain patents and technologies; and

 

         WHEREAS,   STI   wishes to   obtain,   and   Licensor   is   willing to grant,

certain licenses to such patents and technologies   under the specified terms and

conditions set forth herein;

 

         NOW THEREFORE, the parties hereto, for good and valuable consideration,

the receipt and sufficiency of which are hereby   acknowledged,   and intending to

be legally bound hereby, agree as follows:

 

         1. DEFINITIONS.   The following terms, as used in this Agreement,   shall

have the meanings set forth below:

 

               1.1   "Existing   Agreements"   means   the   rights   granted   to   the

entities under the license agreements set forth in Exhibit B attached hereto.

 

               1.2 "Initial Period" means the period commencing on the Effective

Date and ending two (2) years thereafter.

 

               1.3   "Intellectual   Property   Rights"   means   any   or   all of the

following   and any and all   worldwide   rights in,   arising out of or   associated

therewith:    (i)   Patents;   (ii)   copyrights   (including   any   registrations   or

applications   therefor) and other works of   authorship;   (iii) trade secrets and

(iv) all other intellectual   property or proprietary rights corresponding to the

foregoing anywhere in the world

 

               1.4 "Licensed   Patents"   means the Patents set forth in Exhibit A

attached hereto and any and all other Patents owned or controlled by Licensor as

of the Effective Date and during the Term.

 

               1.5 "Licensed   Product" means any products developed by STI where

the manufacture,   use, sale, offer for sale or import of such product would, but

for this Agreement, infringe a Valid Claim of the Licensed Patents.

 

               1.6 "Licensed   Technology"   means (i) the Technology set forth in

Exhibit A attached hereto and (ii) any other   Technology   which is controlled by

Licensor as of the Effective Date or during the Term that is necessary or useful

 

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for, or contributes in whole or in part to, the practice of the Licensed Patents

or exploitation of the Technology set forth in Exhibit A.

 

               1.7 "Net Revenues" means Net Sales and Sublicense Fees.

 

               1.8 "Net Sales" means the total amount   actually   received by STI

based on the sale of   Licensed   Products to third   parties,   less the sum of the

following   deductions   to the extend   included in the gross invoice   price:   (i)

cash,   trade   or   quantity   discounts;    (ii)   sales   or   use   taxes,    tariffs,

import/export   duties other excise taxes imposed upon   particular   sales;   (iii)

transportation   and insurance   charges;   (iv) allowances or credits to customers

due to returns;   and (v)   amounts   received in   connection   with   demonstration,

prototype or other non-commercial samples of Licensed Products.

 

               1.9   "Patents"   mean any and all (i)   pending   or   issued   United

States,    foreign,   or   international    patent   or   patent    application;    (ii)

continuations,   continuations-in-part,   substitutions or divisional applications

thereof; (iii) patents issuing on any of the foregoing; (iv) renewal,   reissues,

re-examinations   or extensions of any such patents or patent   applications;   and

(v) foreign counterparts or equivalents of any of the foregoing.

 

               1.10 "Semiconductor Packaging Materials" means all materials used

in   the   assembly   of   an   integrated   circuit   including   but   not   limited   to

substrates,   mold   compounds and wafer scale   packaging,   wafer   redistribution,

wafer bumping and logical, technical successors thereto.

 

               1.11   "Sublicense   Fees" means amounts   actually   received by STI

from   Sublicensees   for the   manufacture,   use and   sale   of   Licensed   Products

excluding (i) amounts in consideration   for the sale of all or substantially all

of the business or assets of STI; (ii) amounts   received for securities   (equity

or debt);   (iii) amounts received as payment or   reimbursement   for research and

development; (iv) amount received in connection with demonstration, prototype or

other   non-commercial   samples of   Licensed   Products   and (v) any   governmental

charges,   including,   but not   limited to,   withholding   or other taxes (but not

income taxes) paid or payable by STI on amounts received in consideration   for a

sublicense hereunder. In the event that STI receives non-cash consideration from

Sublicensees,   then such   consideration   shall be included in the   definition of

Sublicense   Fees (unless one of the   foregoing   exclusions   apply),   at the fair

market value of such non-cash consideration. In the event that any such non-cash

consideration   is not readily   convertible   into cash, the parties shall discuss

the timing and manner of payment of such Sublicense Fees.

 

               1.12 "Sublicensee"   means any third party to whom STI has granted

a sublicense under the Licensed Patents and Licensed   Technology to manufacture,

use and sell Licensed Products.

 

               1.13   "Technology"   means   any   and   all   technology,    technical

information,    Confidential   Information,    know-how,    inventions,    processes,

procedures,   compositions,   chemicals,   compounds,   devices, methods,   formulae,

protocols, techniques, designs, drawings and other data.

 

               1.14   "Valid   Claim"   shall mean (i) a claim in an issued   Patent

which has not been held   unenforceable,   unpatentable or invalid by the decision

of a court or other governmental agency of competent jurisdiction, from which no

 

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appeal can be taken or has been taken and from which time has expired to take an

appeal,   and   (ii) a claim   in a   Patent   application   that has not been on file

longer   than five (5) years   from the   earliest   priority   date and has not been

issued a Patent.

 

         2. DELIVERY; GRANT OF RIGHTS & TRAINING.

 

               2.1 Delivery. Promptly following STI's payment of the Intial Fee,

Licensor   shall deliver to STI the Technology set forth in Exhibit A in a format

and location reasonably requested by STI. In addition to the foregoing, Licensor

shall during the Term,   promptly upon STI's   request,   but in no event more than

fifteen   (15)   days   thereafter,   deliver   or make   available   to STI any   other

Technology   which is owned or controlled by Licensor as of the Effective Date or

during the Term that is necessary or useful for, or   contributes   in whole or in

part to, the practice of the Licensed   Patents or exploitation of the Technology

set forth under Exhibit A.

 

               2.2 Grant of Rights.

 

                      2.2.1   Exclusive    License.    Subject   to   the   terms   and

conditions   set forth herein,   including but not limited to Section 2.2.3 below,

and   the   Existing   Agreements,   Licensor   hereby   grants   to STI an   exclusive,

worldwide,   irrevocable,   non-assignable   (except as set forth in   Section   11.2

below)   right   and   license,    including    the   right   to   grant   and   authorize

sublicenses, (1) under the Licensed Patents to make, have made, use, sell, offer

for sale and   import   products,   components   and   services   that   involve,   use,

incorporate   or otherwise   relate to   Semiconductor   Packaging   Materials and to

practice any process,   method,   or procedure in   connection   therewith;   and (2)

under all of   Licensor's   Intellectual   Property   Rights   (other   than under the

Licensed   Patents) in and to the   Licensed   Technology   to (i) modify and create

derivative   works of the Licensed   Technology   ("Derivative   Works");   (ii) use,

copy,   display,   and perform the Licensed   Technology and Derivative   Works; and

(iii) distribute,   directly or indirectly,   including by way of sublicense,   the

Licensed   Technology   and   Derivative   Works   in each   case in   connection   with

products,   components and services that involve,   use,   incorporate or otherwise

relate to   Semiconductor   Packaging   Materials   or the   practice of any process,

method,   or procedure in connection with such products,   components or services.

For avoidance of doubt, the exclusivity   under the foregoing   license grant with

respect to Semiconductor   Packaging Materials   specifically excludes any product

made by applying   discrete   components   or   mechanical   devices such as pre-made

tape, film, connectors and the like, made according to Licensed Technology.

 

                      2.2.2   Non-exclusive   License.   Subject   to the   terms and

conditions   set forth herein,   including but not limited to Section 2.2.3 below,

Licensor   hereby   grants   to   STI   a   non-exclusive,    worldwide,    irrevocable,

non-transferable   (except as set forth in Section 11.2 below) right and license,

including the right to grant and authorized sublicenses,   (1) under the Licensed

Patents   to make,   have made,   use,   sell,   offer for sale and import   products,

components   and services and to practice   any process,   method,   or procedure in

connection   therewith;   and (2) under all of   Licensor's   Intellectual   Property

Rights (other than under the Licensed Patents) in and to the Licensed Technology

to   (i)   modify   and   create    derivative   works   of   the   Licensed    Technology

("Derivative   Works");   (ii) use,   copy,   display,   and   perform,   the   Licensed

Technology and Derivative Works; and (iii)   distribute,   directly or indirectly,

including by way of sublicense, the Licensed Technology and Derivative Works.

 

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                      2.2.3   Exercise of   Licenses.   STI's right to exercise the

rights and licenses   under   Sections 2.2.1 and 2.2.2 shall only arise upon STI's

payment of the Initial Fee.

 

                2.3   Reservation   of Rights.   Subject to the rights and   licenses

granted in this   Section 2, each party   retains   and shall own all of its right,

title   and   interest   in and to their   respective   Technology   and   Intellectual

Property   Rights.   All rights not   expressly   granted   hereunder   are   expressly

reserved by each party.

 

         3. LICENSE FEES AND ROYALTIES.

 

         In   consideration of the licenses and rights granted by Licensor to STI

hereunder, STI will pay the following fees:

 

               3.1 Initial Fee. For the Initial   Period STI will pay to Licensor

a one-time   initial fee of fifty thousand dollars   ($50,000.00)   ("Initial Fee")

upon the earlier of either (i) six (6) months after the   Effective   Date or (ii)

within thirty (30) days of STI receiving its first round of financing.

 

               3.2   Additional   License   Fees and   Royalties.   At the end of the

Initial Period, STI may select one of the payment options set forth in Exhibit C

to   extend   the Term of this   Agreement   as set forth   under   Section 6 below or

immediately   terminate   the   Agreement.   To the extent STI opts to so extend the

Term of the Agreement,   STI may credit the amount of the Initial Fee against the

up front license fee payment selected by STI in Exhibit C.

 

               3.3 Multiple   Royalties.   In no event shall more than one royalty

be due   hereunder   with   respect   to any   unit of   Licensed   Product.   If STI is

required to pay a non-affiliated   third party amounts with respect to a Licensed

Product under agreements for Patent rights or other Technology which STI, in its

reasonable   judgment,   determines   are   necessary   to   exercise   the   rights and

licenses   granted    hereunder,    STI   may   deduct   such   amount   owing   to   such

non-affiliated   third parties (prior to any reductions) from the amounts used to

calculate Net Revenues.

 

               3.4 Combination Products. In the event that a Licensed Product is

sold in   combination   with   another   product,   component or service for which no

royalty   would   be due   hereunder   if   sold   separately,   Net   Sales   from   such

combination sales for purposes of calculating the amounts due under this Section

3 shall be as reasonably allocated by STI between such Licensed Product and such

other product, component or service.

 

               3.5   Intercompany   Sales.   STI shall   have no   obligation   to pay

Licensor   royalties   on   sales   of the   Licensed   Product   between   STI   and its

affiliates;   provided that royalties shall be paid to Licensor for resale of the

Licensed Products by STI or its affiliates to unrelated third parties.

 

               3.6 Royalty Term.   Subject to Section 3.7 below,   payments of Net

Revenues with respect to the Licensed   Patents will commence upon the payment of

the Extension Fee and will end on the expiration,   revocation or invalidation of

the last Valid Claim under the Licensed Patents.

 

               3.7   Initial   Period   Payments.   During   the term of the   Initial

Period, any Net Revenues earned by STI from the commercial sale or sublicense of

Licensed Products or rights granted hereunder, respectively, shall be subject to

a flat [*] percent   ([*]%)   royalty rate,   reportable   and payable in accordance

with

 

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Section 4. In the event STI exercises its right to extend the Agreement pursuant

to Section 3.2 above,   STI shall   either   reduce or   increase   the amount of the

up-front license fee set forth under Exhibit C by the Royalty Rate   Differential

Amount.   For purposes of this Section 3.7, the term "Royalty   Rate   Differential

Amount" means the   difference   in the amount of royalties   payable by STI during

the Initial   Period based on the [*] percent ([*]%) royalty rate on Net Revenues

and the amount STI would   have paid had the   percentage   rate STI opts for under

Exhibit C been in effect   during the Initial   Period.   By way of example had STI

received   $100,000 in Net Revenues   during the Initial Period (i) if STI were to

select "Option 1" under Exhibit C, STI would   increase the up-front   license fee

by $[*] which   represents   the difference   between the royalties   payable by STI

during the Initial Term (i.e.   $[*] ([*]% of $100,000)) and the amount STI would

have paid had the [*] percent ([*]%) royalty rate provided under "Option 1" been

in effect   during the Initial   Period (i.e.   $[*] ([*]% of $100,000) and (ii) if

STI were to select   "Option 5" under Exhibit C, STI would   decrease the up-front

license   fee by $[*] which   represents   the   difference   between   the   royalties

payable by STI during the Initial Term (i.e.   $[*] ([*]% of   $100,000))   and the

amount STI would have paid had the [*]   percent   ([*]%)   royalty   rate   provided

under   "Option 1" been in effect during the Initial   Period (i.e.   $[*] ([*]% of

$100,000).

 

         4. REPORTING AND PAYMENT.

 

                4.1   Reporting.   Within   thirty (30) days after the close of each

calendar quarter during the Term of this Agreement in which royalty payments are

due on Net   Revenues,   STI shall   report to   Licensor   all   royalties   that have

accrued during such calendar quarter.   Such quarterly reports shall indicate the

total Net Revenues   received by STI and the amount of the total   royalties   owed

and STI shall   remit such   royalties   on the date such   report is   delivered   to

Licensor.   In case no royalties   have accrued for the quarter,   STI shall not be

obligated to provide such a report.

 

               4.2   Records   and Audit.   STI shall keep   complete   and   accurate

records of its Net Revenues in sufficient   detail to enable the amounts   payable

under Section 3 to be determined.   Upon Licensor's written request, but not more

frequently than once per calendar year, STI shall permit an   independent,   third

party auditor (other than on a contingency fee basis), at Licensor's expense, to

examine such records during STI's regular   business hours for the purpose of and

to the extent   necessary to verify any report required under this Agreement with

respect to Net Revenues received not more than three (3) years prior to the date

of   Licensor's   request.   In the event   that the   amounts   due to   Licensor   are

determined to have been underpaid,   STI shall pay to Licensor any amount due and

unpaid,   together   with   interest   on such amount at the prime rate in effect at

Bank of   America   NT&SA,   San   Francisco,   California,   or at the   maximum   rate

permitted by law, whichever is lower.

 

               4.3   Payments.   All   amounts   payable   hereunder   by STI shall be

payable in United States dollars.   If any currency   conversion shall be required

in connection with the payment of royalties hereunder,   such conversion shall be

made by using the exchange rates used by STI in   calculating   STI's own revenues

for financial reporting purposes.

 

         5. PATENT PROSECUTION & ENFORCEMENT.

 

               5.1   Patent   Prosecution.    Licensor   will   diligently   file   and

prosecute the Licensed Patents and timely pay all maintenance fees in connection

with any issued Patents that are part of or become part of the Licensed Patents.

Notwithstanding   the   foregoing,   Licensor   shall   have   the   right   in its sole

 

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discretion   to abandon   any such   issued   Patents   by not paying the   respective

maintenance   fee. If Licensor   intends to abandon any such issued Patent that is

part of the   Licensed   Patents,   Licensor   will   advise   STI in   writing of such

intention at least ninety (90) days prior to the intended   abandonment   date. In

such event,   STI may continue to pay to maintain such issued   Patents so long as

STI   notifies   Licensor in writing of such   intention   at least thirty (30) days

prior to the intended abandonment date. If Licensor fails to diligently file and

prosecute   the   Licensed   Patents or   otherwise   fails to maintain   any Licensed

Patents   in force,   then STI may elect to file or take over the   prosecution   or

maintenance   of any such   Licensed   Patents,   and STI   shall   bear all   expenses

incurred in connection   therewith,   provided that STI shall not be liable in any

respect,   either to Licensor or any third party,   with respect to STI's handling

of or the results   obtained from such prosecution or maintenance of any Licensed

Patent and further   provided   that any and all expenses   incurred in   connection

therewith shall be creditable against amounts owed by STI to Licensor hereunder.

Licensor   agrees   to   reasonably   cooperate   with   STI   in   preparing,    filing,

prosecuting,   and maintaining   any such Licensed   Patents and Licensor agrees to

execute any documents as shall be necessary or desirable for such purpose

 

               5.2 Enforcement of Intellectual Property Rights.

 

                      5.2.1   Enforcement   by   Licensor.   STI and   Licensor   will

promptly   notify   the   other   in   writing   (and   provide   any   evidence   in   its

possession)   of   any   suspected   infringement   by a   third   party   of any of the

Intellectual Property Rights licensed hereunder (a "Third-Party   Infringement").

Licensor   shall   file   and/or   pursue   any suit or   action   for any   Third-Party

Infringement of the Licensed Patents to the extent   Licensor's   failure to do so

could reasonably be expected to have more than a non-material   adverse effect on

(1) STI's market for the products and services   covered by or sublicenses to the

Licensed Patents or (2) STI's exclusivity under Section 2.2.1 above and Licensor

shall   not,   absent   STI's   permission,   enter   into   any   settlement   or   other

arrangement which grants a license or freedom to operate   (including by way of a

covenant not to sue) to any third party under the Licensed   Patents   which would

infringe upon or violate   STI's   exclusivity   under Section 2.2.1 abo