OEM Supply Agreement

EXHIBIT 10.7


SPECTRA, INC.
ACCENT COLOR SCIENCES INC.
OEM SUPPLY AGREEMENT


IN THIS AGREEMENT, dated as of January 8, 1996, SPECTRA, INC. ("SPECTRA") and ACCENT COLOR SCIENCES INC. ("Customer"), collectively the "Parties", agree as follows:


DEFINITIONS


I. DEFINITIONS
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1. 1. "Affiliate" means any corporation, partnership, association, or other entity with respect to which a party, directly or indirectly through a subsidiary, has not less than a majority beneficial ownership, but only if that corporation, partnership, association, or other entity expressly agrees in writing to be bound by this Agreement, and only while that ownership relationship exists.


1.2. "Agreement" means this Supply Agreement between Spectra and Customer.


1.3. "Ancillary Hardware" means any hardware, other than Printheads, that is part of a Print Engine, including but not limited to ink reservoirs, pressure regulators, head drive electronics, ink supply tubing, etc.


1.4. "Customer's Field" and "Customer's Exclusive Field" shall be defined in accordance with Sections 9.1.1 and 9.2.1 below, respectively.


1.5. "Customer Product" shall mean a digital printer, printing system or printing subsystem, including a Mechanism and a Printhead, designed, manufactured or marketed by or on behalf of Customer, on a retail, distribution or OEM sales basis, the Printhead(s) in which have been purchased from Spectra.


1.6 "Customer Program Technology" shall mean any Technology developed or acquired by Customer in the course of developing Customer Products, whether patented or unpatented including any know-how for practicing such Technology, which relates directly to the operation of and the interface to Spectra Printheads, Inks or Hardware incorporating Spectra System Technology.


1.7. "Effective Date" means [date of agreement].


1.8. "Hardware means Print Engines, Printheads and Ancillary Hardware supplied by Spectra to Customer.


1.9. "Ink" means printing inks and other materials used in printing processes which are used in Printheads.


1.10. "Packaged Spectra Ink" means Spectra Ink of formulations currently referred to as "Launch" and "Sable" packaged in accordance with the Ink Specifications attached as Exhibit 1.


1.11. "Print Engine" shall mean a device comprised of (i) components for moving and controlling the movement of the Printhead and print media, paper path, and ink supply components (collectively, the "Mechanism"), (ii) a Printhead, and (iii) optionally a power supply and covers.


1.12. "Printhead" shall mean a piezoelectric device with multiple jets that eject droplets of Ink on demand.


1.13. "Purchase Order" means any purchase order that Customer issues to order Products from Spectra in accordance with this Agreement.


1.14. "Products" means Hardware and Spectra Ink supplied by Spectra to Customer.


1.15. "Purchase Year" shall mean a twelve month period beginning on April 1, of each year and ending on March 31 of the following year, except that the first Purchase Year shall begin on the date hereof and end on March 31, 1996.


1.16. "Reserved Markets" shall mean those markets and applications which Spectra has granted exclusive and/or non-exclusive rights to other Spectra customers, as more specifically defined in Schedule 3.


1.17. "Spectra Ink" shall mean Ink manufactured by or on behalf of Spectra.


1.18. "Spectra System Technology" shall mean System Technology that Spectra owns or has the right to sublicense to Customer, except for patents licensed to Spectra from Xerox Corporation, on the Effective Date.


1.19. "System Technology" shall mean Technology for the manufacture and use of Print Engines, including but not limited to transparency enhancement, heated platen print zone, offhead ink supply, and machine control electronics, but specifically excluding any Technology related to the manufacture of Printheads, or Inks.


1.20. "Spectra Future Systems Technology" shall mean System Technology that Spectra develops or acquires after the Effective Date, or as to which Spectra acquires after the Effective Date the right to sublicense to Customer, except for patents licenses to Spectra from Xerox Corporation.


1.21. "Technology" shall mean inventions, works of authorship, know-how, trade secrets, manufacturing processes, designs, and specifications, and shall include patents, patent applications and copyrights.


1.22. "Specifications" means the specifications for Spectra Products attached in Exhibit 1, including all changes made in accordance with this Agreement.


1.23. "Term" means the period beginning on the Effective Date and ending on the date on which this Agreement terminates under Section 12.


1.24. "Total Requirements" shall mean the aggregate of all Ink used by Customer or sold by Customer for use with Spectra Printheads.


GENERAL TERMS FOR SPECTRA PRODUCTS


2. FORECASTS: PURCHASE ORDER
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2.1. Customer will order Spectra Products through the issuance of purchase orders at least ninety (90) days in advance of the requested delivery dates. All preprinted terms and conditions on purchase orders are superseded entirely by the terms and conditions of this Agreement. Each purchase order will adequately identify the Spectra Product ordered by use of Spectra's product code, set forth the requested quantity, and specify the requested delivery method and date. Purchase orders must be in writing and may be sent via facsimile to Spectra's then current facsimile number.


2.2 Upon receipt of any purchase order submitted in accordance with this Agreement, Spectra will either: (i) accept the order, which will establish the delivery date; or (ii) notify Customer of Spectra's inability to deliver Spectra Product at the time or times requested. If Spectra cannot fulfill Customer's purchase orders as requested due to a shortage of any Spectra Product, Spectra shall use its reasonable efforts to satisfy Customer's purchase requirements as closely as possible. If Spectra ships an order, Spectra will have been deemed to have accepted it.


2.3 Spectra Products will be delivered to Customer in packaging reasonably acceptable to Customer, given shipment, warehousing and storage requirements. (Customer will advise Spectra in writing of any special packaging or labeling requirements at the time in placing an order.) Delivery will be made FOB Spectra's manufacturing, warehousing or transshipment facility.


2.4. Customer will provide Spectra with a non-binding, rolling six (6) month forecast of Spectra Product requirements; provided, however, that orders placed under Section 2.1 hereunder are noncancellable and non-deferrable beginning ninety (90) days prior to scheduled delivery date. In general, Spectra requires up to six (6) months advance notice to add significant additional manufacturing capacity, and may not be able to meet orders as a result of changes in or requirements in excess of those set forth in six-month rolling forecasts.


HARDWARE PURCHASE TERMS


3. HARDWARE PRICES AND TERMS
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3.1. Customer shall pay Spectra the amounts specified in Schedule I, subject to the terms and provisions thereof, for each Spectra Hardware Product which Customer orders from Spectra under Section 2.


3.2. Customer will pay Spectra for each Spectra Hardware Product as follows: (i) twenty-five percent (25%) no later than sixty (60) days prior to the requested delivery date, (ii) twenty-five percent (25%) no later than thirty (30) days prior to the requested delivery date, and (iii) the balance within thirty (30) days after delivery to Customer by Spectra. All past due amounts shall accrue delinquency charges at the rate of one percent (I%) per month.


4. HARDWARE WARRANTIES AND REPAIRS
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4.1. Spectra warrants to Customer that:


4.1.1. Each Spectra Hardware Product shall conform to the Specifications and be free from defects in materials and workmanship for the lesser of 180 days after the Hardware Product is delivered to Customer's customer or 270 days after title to that Spectra product passes to Customer under this Agreement;


4.1.2. Each Spectra Hardware Product shall comply with the applicable rules and regulations of agencies defined in the Specifications.


4.2. THE WARRANTIES IN SECTION 4.1 ARE IN LIEU OF ALL OTHER SPECTRA HARDWARE PRODUCT WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.


4.3. If, within the warranty period specified in Section 4.1.1, a Spectra Hardware Product does not comply with any warranty in Section 4.1 and Customer notifies Spectra of such noncompliance prior to 30 days after the end of s u c h period, Customer may ship such product back to Spectra at Customer's expense. Spectra shall at its option promptly repair or replace that Spectra Product. Spectra shall pay the costs of any such repair or replacement, including transportation costs incurred returning repaired or replaced products to Customer unless (i) the Spectra Product is not defective, in which case Customer shall pay


Spectra's reasonable costs of inspection and all transportation charges, or (ii) the Spectra product is defective due to Customer's or any third party's damage, misuse, abuse, or failure to use ink equivalent to the Spectra Ink, in which case Customer shall pay all costs of repair or replacement and transportation. Customer must mark each package it returns to Spectra under this Section 4.3 with a Returned Materials Authorization ("RMA") number, which Spectra shall furnish to Customer on request, and shall include with each returned Spectra Product a writing which specifies the reasons why Customer rejected that Spectra Hardware Product.


4.4. Non-Warranty Hardware Repairs. Whenever practical, Spectra will provide depot repair services on Hardware for repairs not covered by the foregoing warranty. Upon authorized return to Spectra's designated facility under an RMA, Spectra shall repair Hardware at Customer's expense, on a time and materials basis, at Spectra's then current prices for parts and rates for service. In cases where Hardware cannot be successfully repaired, Customer, at its option, may either replace the returned Hardware by purchasing a new unit from Spectra at then current prices or reimburse Spectra for its valid repair efforts and costs on the returned unit. Repairs are warranted by Spectra for the remainder of the original warranty period or ninety (90) days, whichever is longer.


INK PURCHASE TERMS


5. INK PURCHASE OBLIGATIONS
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5.1. Customer will purchase its Total Requirements of Ink from Spectra, provided that Customer may seek and utilize alternative or supplemental sources of Ink to the extent and for the period Spectra is unable to fulfill Customer's requirements. In the event Customer identifies a lower priced supplier of Ink that is the same quality and meets the functional Specification of Spectra Ink, Customer may present Spectra with bona fide evidence of such lower price, and documentation that the competitive ink meets the Ink Specifications. Spectra shall have the right to meet such price. In the event Spectra meets such price, Customer shall continue its purchases from Spectra. In the event Spectra elects not to meet such competitive price, Customer may purchase Ink for use i n conjunction with Printheads from such alternative supplier. Any Inks purchased by Customer from a third party must be qualified within a reasonable timeframe by Spectra to


Spectra's functional Specification at Customer's expense in order for Spectra to maintain existing warranty coverage on Hardware used with such third party Inks.


6. INK PRICES
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6.1. Prices for Packaged Spectra Ink shall be determined as set forth Schedule 1.


6.2. Customer shall pay Spectra for Ink as follows: (i) twenty-five percent (25%) no later than sixty (60) days prior to the requested delivery date, (ii) twenty-five percent (25%) no later than thirty (30) days prior to the requested delivery date, and (iii) the balance within thirty (30) days after delivery by Spectra. All past due amounts shall accrue delinquency charges at the rate of one percent (I%) per month.


7. SPECTRA INK WARRANTIES
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7.1. Spectra warrants to Customer that:


7.1.1. Each unit of Spectra Ink shall conform to the applicable
Spectra Ink Specifications for the lesser of 180 days after the Ink is
delivered to Customer's customer or 270 days after title to that Spectra
Ink passes to Customer under this Agreement;


7.1.2. Each unit of Packaged Spectra Ink shall comply with t h e
appropriate Ink specifications.


7.2 THE WARRANTIES IN SECTION 7.1 ARE IN LIEU OF ALL OTHER SPECTRA INK WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.


7.3. If, within the warranty period specified in Section 7.1.1 a Spectra Ink Product does not comply with any warranty in Section 7.1 and Customer notifies Spectra of such noncompliance prior to 30 days after the end of such period, Spectra shall promptly replace that unit. Spectra shall pay the costs of any such replacement, including transportation charges, unless (i) the unit is not defective, in which case Customer shall pay all transportation charges and, if


Customer's determination that the unit was defective was not in good faith, Spectra's reasonable costs of inspection, or (ii) the unit is defective due to Customer's or any third party's damage, misuse, or abuse in which case Customer shall pay all costs of repair or replacement and transportation. Customer must mark each package it returns to Spectra under this Section 7.3 with a Returned Materials Authorization number, which Spectra shall furnish to Customer on request, and shall include with each returned unit (or with a returned lot or batch, if the same defect occurs in more than one unit) a writing which specifies the reasons why Customer rejected that unit, lot, or batch.


GENERAL


8. LICENSES AND ROYALTIES
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8.1. Subject to the terms of this Agreement, (i) Spectra hereby grants to Customer a worldwide right and license, with rights to sublicense only in connection with Customer Products, under the Spectra System Technology to make, have made, use and sell Customer Products in Customer's Field an d Customer's Exclusive Field, and (ii) Customer hereby grants to Spectra a worldwide right and license, with rights to sublicense only in connection with Spectra products, under Customer Program Technology to make, have made, use and sell Spectra Products for resale outside of Customer's Exclusive Field. Except as set forth in Section 8.5 and 8.6, the license granted Customer herein expressly excludes the right to manufacture Printheads or Inks.


8.2 Spectra agrees to indemnify, defend and hold Customer and its customers harmless from and against any claim against them by Howtek, Hitachi Koki and Dataproducts, Inc., their affiliates, successors or assigns, that a n y Customer Print Engine that includes a Spectra Printhead infringes any patents o f such parties described in Schedule 2. This indemnity will apply only to those Customer Print Engines including Spectra Printheads purchased from Spectra while Customer is in good standing with respect to the payment of license fees and royalties provided for in this Section 8.


8.3. Cust ...