Patent License Agreement

EXHIBIT 10.1


CONFIDENTIAL TREATMENT REQUESTED: Certain portions of this document have been omitted pursuant to a request for confidential treatment and, where applicable, has been marked with an asterisk to denote where omissions have been made. The confidential material has been filed separately with the Commission.


PATENT LICENSE AGREEMENT


BETWEEN


LEXAR MEDIA, INC. AND SAMSUNG ELECTRONICS CO., LTD.


This Lexar Patent License Agreement ("Agreement") is made and entered into
--------- as of this 29th day of March 2001 ("Effective Date") between Lexar Media, Inc.,
-------------- a Delaware corporation ("Lexar") and Samsung Electronics Co., Ltd., a
----- corporation of South Korea ("Samsung").
-------


RECITALS


A. Lexar is the owner and user of certain proprietary technology related to flash memory controllers, flash memory and system architecture.


B. Samsung designs, manufactures, and sells certain flash memory technology.


C. Contemporaneously with the execution of this Agreement, Lexar and Samsung are executing a Purchase Agreement ("Purchase Agreement") and Lexar and
------------------ Samsung Semiconductor, Inc. are executing a Consignment Contract ("Consignment
----------- Contract") pursuant to which Lexar will purchase from Samsung certain flash - -------- memory and Samsung will purchase from Lexar certain flash controller products.


D. Samsung desires to receive from Lexar a non-exclusive license to Lexar's proprietary technology to manufacture, market and sell certain flash memory products and components thereof on the terms and conditions of this Agreement.


NOW, THEREFORE, Lexar and Samsung hereby agree as follows:


1. DEFINITIONS


1.1 "Affiliate" means, with respect to any entity, any other entity
--------- that controls, is controlled by or is under common control with such entity. For purposes of this Agreement, an entity shall be in "control" of an entity if it owns or controls at least fifty percent (50%) of the equity securities of the subject entity entitled to vote for the election of directors (or, in the case of an entity that is not a corporation, for the election of the corresponding managing authority), or otherwise has the power to control the management and policies of such other entity.


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1.2 "Flash Controller" means a device within Flash Card Products
---------------- (whether implemented in firmware, hardware and/or software) that controls the operation of a memory within such Flash Card Products.


1.3 "Flash Card Products" means a Flash Memory System on a card
------------------- having a connector that attaches it to a host system.


1.4 "Flash Memory System" means an integrated circuit memory system
------------------- that contains: (a) one or more interconnected flash memory devices or flash memory integrated circuits, and (b) in-system control, I/O and other support circuit(s) that are: (i) interconnected with the flash memory devices or flash memory integrated circuits and (ii) necessary to the operation of the memory system.


1.5 "Global Market Share" means the percentage of Flash Card Products
------------------- units sold worldwide by form factors in accordance with data as published by International Data Corporation ("IDC").


1.6 "Global Market Share Ceiling" means (i) * percent (*%) of the
--------------------------- Global Market Share; or (ii) * percent (*%) of the Global Market Share, if Lexar fails to satisfy the minimum purchase requirements under Section 4.1 of the Purchase Agreement during the first six (6) quarters following the effective date of the Purchase Agreement. After the first twelve (12) quarters following the effective date of the Purchase Agreement, the Global Market Share Ceiling is * percent (*%) of the Global Market Share.


1.7 "Have Manufactured" means only that the licensee may contract
----------------- with a third party or parties to manufacture the licensed product for and on behalf of the licensee.


1.8 "High-Speed Memory Stick" means a memory data storage device that
----------------------- meets the High-Speed Memory Stick Specifications.


1.9 "High-Speed Memory Stick Specifications" means the specifications
-------------------------------------- for a certain flash memory data storage device developed by Sony (as such specifications are from time to time modified or replaced by Sony in its sole discretion).


1.10 "Improvements Technology" means any improvements or enhancements
----------------------- to the Lexar Technology that are conceived or developed by Samsung and that would, absent the licenses granted hereunder, infringe or constitute a misappropriation of the Lexar Intellectual Property Rights.


1.11 "Intellectual Property Rights" means, with respect to a party,
---------------------------- all rights of such party in and to all patents, patent applications, and patents issuing from such patent applications in any country or jurisdiction in the world.


1.12 "Lexar Intellectual Property Rights" means the Intellectual
---------------------------------- Property Rights owned by or licensed to Lexar (but, in either case, only Intellectual Property Rights owned by or licensed to Lexar wherein Lexar has the right to grant sublicenses without payment


Material has been omitted and filed separately with the Commission.


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of compensation to any third party other than Lexar employees), anytime within the fifth anniversary of the Effective Date, in and to the Lexar Technology.


1.13 "Lexar Technology" means the technology described in Lexar's
---------------- patents and patent applications.


1.14 "Licensed Lexar Products" means, individually or collectively,
----------------------- Flash Controllers, Flash Card Products, Memory Sticks, High-Speed Memory Sticks and Smart Media.


1.15 "Memory Stick" means a flash memory data storage device that
------------ meets the Memory Stick Specifications. Memory Stick includes without limitation Sony's miniature Memory Stick known as the "Duo".


1.16 "Memory Stick Specifications" means the specifications for a
--------------------------- certain flash memory data storage device developed by Sony (as such specifications are from time to time modified or replaced by Sony in its sole discretion).


1.17 "Net Selling Price" means the gross sales price of a product
----------------- invoiced by Samsung or its Affiliates to customers that are not Affiliates for the sale or other distribution of Licensed Lexar Products, less (a) credits, allowances, discounts, sales commission, and rebates to such customers; (b) chargebacks from the account of such customers for damaged and returned products; (c) freight and insurance costs incurred in transporting such product to such customers; (d) cash, quantity and trade discounts, rebates and other price reductions for such product given to such customers under price reduction programs that are consistent with industry practices and price reductions given for similar products by Samsung or its Affiliates; (e) sales, use, value-added and other direct taxes incurred on the sale of such product to such customers; and (f) customs duties, surcharges and other governmental charges incurred in exporting or importing such product to such customers. In the case of Licensed Lexar Products sold or distributed with other products during any quarter, the Net Selling Price of such Licensed Lexar Products shall be the average Net Selling Price of the same or comparable model of Licensed Lexar Products sold separately to unaffiliated third parties in arm's length transactions during such calendar quarter.


1.18 "Samsung Intellectual Property Rights" means the Intellectual
------------------------------------ Property Rights owned by or licensed to Samsung in and to the Improvements Technology.


1.19 "Secure Digital" means a type of Flash Card Products having a
-------------- flash memory storage device that meets the Secure Digital Specifications.


1.20 "Secure Digital Specifications" means the specifications for a
----------------------------- certain flash memory data storage device developed by The Secure Digital Association (as such specifications are from time to time modified or replaced by The Secure Digital Association in its sole discretion).


1.21 "Secure Multi-Media" means a type of Flash Card Products having
------------------ a flash memory storage device that meets the Secure Multi-Media specifications.


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1.22 "Smart Media" means a flash memory storage device that meets the
----------- Smart Media Specifications.


1.23 "Smart Media Specifications" means the specifications for a
-------------------------- certain flash memory storage device developed by the Smart Media Association (as such specifications are from time to time modified or replaced by the Smart Media Association in its sole discretion).


1.24 "Flash Card Controller" means a device (whether implemented in
--------------------- firmware, hardware and/or software) that controls the operation of Flash Card Products.


1.25 "Flash Products" means flash storage or controller product
-------------- including but not limited to flash memory, Flash Controller, Flash Card Product, Flash Memory System, and Flash Card Controller.


2. GRANT OF LICENSE RIGHTS


2.1 Lexar License Grants.
--------------------


(a) Until the last to expire of the Lexar Intellectual Property Rights, and subject to Samsung's compliance with the terms and conditions of this Agreement, Lexar hereby grants to Samsung a * license under all Lexar Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell Smart Media.


(b) Until the last to expire of the Lexar Intellectual Property Rights, and subject to Samsung's compliance with the terms and conditions of this Agreement, Lexar hereby grants to Samsung a * license under all Lexar Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell Memory Sticks.


(c) Until the last to expire of the Lexar Intellectual Property Rights, and subject to Samsung's compliance with the terms and conditions of this Agreement, Lexar hereby grants to Samsung a * license under all Lexar Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell High-Speed Memory Sticks. However, Samsung shall have the right to terminate the grant of license in this Section 2.1 (c) at anytime during the term of this Agreement with a thirty-day (30) prior written notice.


(d) Subject to Samsung's compliance with the terms and conditions of this Agreement, during the initial five (5) year term of the Purchase Agreement (the "Initial Purchase Agreement Term"), Lexar covenants not
------------------------------- to sue: (i) Samsung or its Affiliates for the manufacture (including Having Manufactured), offer for sale, importation or sale of *; or (ii) any customer of Samsung or its Affiliates for the offer for sale, importation or sale of *.


(e) If Samsung elects to extend the Purchase Agreement after the Initial Purchase Agreement Term for a subsequent five (5) year term, on the same terms as originally set forth therein, then Lexar will grant to Samsung a * license under all Lexar Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell *. In the event that Samsung makes such an election, then the definition of "Lexar Intellectual Property Rights" shall be expanded to include the Intellectual Property Rights owned


Material has been omitted and filed separately with the Commission.


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by or licensed to Lexar (but, in either case, only Intellectual Property Rights owned by or licensed to Lexar wherein Lexar has the right to grant sublicenses without payment of compensation to any third party other than Lexar employees), anytime within the tenth anniversary of the Effective Date, in and to the Lexar Technology.


(f) If Lexar fails to purchase * dollars ($*) in Samsung Products (as defined in the Purchase Agreement) during the first six quarters of this Agreement, or if Lexar fails to purchase * ($*) in Samsung Products during the first twelve quarters of this Agreement, then with the exception of the * licenses set forth in paragraphs 2.1(b) and 2.1(c) which shall continue without modification, Lexar will grant to Samsung a * license through the term of this Agreement under all Lexar Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell * as of the first day of the quarter in which Lexar fails to make such purchases.


2.2 Sublicense. Samsung shall be permitted to sublicense the rights
---------- granted in Sections 2.1(a) to (c) and (e) to any Samsung Affiliates; provided that Samsung shall promptly notify Lexar in writing of sublicenses granted to such Affiliates and Samsung will be responsible for each such Affiliate's compliance with the terms and conditions of this Agreement. Each such sublicense must expressly and automatically terminate if the entity no longer is an Affiliate of Samsung.


2.3 Samsung Cross License and Covenant Not to Sue. Samsung hereby
--------------------------------------------- grants to Lexar a * license under all Samsung Intellectual Property Rights to manufacture, Have Manufactured, use, offer for sale, import and sell Licensed Lexar Products. Samsung covenants not to sue: (i) Lexar and its Affiliates for the manufacture (including Having Manufactured), offer for sale, importation or sale of Flash Card Products; or (ii) any customer of Lexar or its Affiliates for the offer for sale, importation or sale of Flash Card Products made or have made by Lexar. The rights and covenants granted hereunder shall not be assignable or transferable in any way, and Section 12.3 of this Agreement shall not be applicable hereto.


2.4 Restrictions.
------------


(a) Except as expressly provided in Sections 2.1 and 2.2 above, Samsung will have no right or license to use, sublicense, transfer or otherwise convey to any third party the Lexar Intellectual Property Rights, or any enhancement, improvement or derivative thereof.


(b) Samsung shall have no right to use the Lexar trade name or Lexar trademarks.


(c) Samsung's exercise of its "Have Manufactured" rights under Section 2.1 is contingent upon Samsung entering into a non-disclosure agreement with each manufacturer that protects the Confidential Information of Lexar to the same extent as provided for in this Agreement.


2.5 Reservation. No license or right is granted, by implication or
----------- otherwise, to either party hereunder under any patent rights, Confidential Information or other ...