Document:

Exhibit 10.7

 

CROSS
LICENSE AGREEMENT

 

This Cross License Agreement, made as of September 19,
2005 (“License Agreement”), is by and between ADVANCED
LIGHTING TECHNOLOGIES, INC., an Ohio Corporation and its Affiliates
as defined herein (“ADLT”), and FIBERSTARS,
INC.,  a California
Corporation and its Affiliates as defined herein (“FBST”).

 

W I T N E S
S E T H

 

WHEREAS, ADLT and FBST have entered into a Master
Services Agreement of even date herewith (the “Master
Services Agreement”), which contemplates that the Parties will enter
into several ancillary agreements, including this License Agreement and certain
Development Agreements pursuant to which the Parties will provide research and
development Services and Custom Deliverables for each other;;

 

WHEREAS, the Parties and their affiliates have
previously been parties to a Cross License Agreement among ADLT, Unison Fiber
Optics Lighting systems, LLC and FBST, dated January 31, 2000, and ADLT
and Fiberstars wish to restate and re-define certain of the terms thereof (“Prior License Agreement”);

 

WHEREAS, ADLT and FBST wish to extend the licenses
granted to each other under the Prior License Agreement and to grant royalty
free licenses for intellectual property which may be developed by them under
the development agreements;

 

WHEREAS, ADLT and Fiberstars are or will be the
owners or licensees of patents, patent applications and design rights, and
further each party has by long experience and through diligent efforts
accumulated and owns or hereafter shall become the owner of technology and
product development information, know how, inventions, processes and trade
secrets;

 

NOW, THEREFORE, for and in consideration of the faithful
performance by each party hereto of the obligations and covenants herein
contained on their part to be performed, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:

 

ARTICLE 1    - DEFINITIONS

 

As used in this Agreement:

 

1.1           “Affiliates” shall mean any business entity in which ADLT or
FBST directly or indirectly owns or controls at least fifty percent (50%) of
the equity, profit interests or voting power.

 

1.2           “Civilian Transportation” shall mean all
passenger automobiles, commercial (non-military) aircrafts, trucks,
motorcycles, and off-road vehicles, but excludes ships, RVs (recreation
vehicles), limousines and mining equipment and other industrial or

 

 

military
vehicles or equipment.

 

1.3           “Commencement
Date” is defined in Section 3.11 of the Master Services Agreement.

 

1.4           “Developed IP” shall mean Developed IP as defined in either Section 2.9
of the Fiberstars Development Agreement or Section 2.10 of the ADLT
Development Agreement or both, as the context respectively implies

 

1.5           “Fiberoptic Field of Use” means lighting applications
or systems (and components of such systems) which include both (A) a
remote light source, and (B) either (i) fiberoptics, or (ii) light
pipes, or (iii) other light guides, for conveying light from the remote
source, but excluding applications in civilian transportation, television and
projection.

 

1.6           “Fiberstars Development Agreement” shall mean that certain
Fiberstars Development Agreement entered between the Parties on even date
herewith and attached to the Master Services Agreement as Exhibit D.

 

1.7           “Intellectual Property Right(s)”
is defined in Section 3.25 of the Master Services Agreement.

 

1.8           “Licensed Rights” shall mean (a) Patent Rights and (b) Intellectual
Property Rights to Developed IP.

 

1.9           Patent Rights - shall mean all utility and/or design patent
applications and/or patents owned or controlled by a party to this Agreement in
the United Sates and throughout the world at any time during the term of this
Agreement.

 

1.10         “Services” as used herein means Services as defined in either
Section 2.19 of the Fiberstars Development Agreement or Section 2.18
of the ADLT Development Agreement or both, as the context respectively implies.

 

ARTICLE 2               -GRANTS OF CROSS-LICENSES

 

2.1       ADLT grants to
FBST a royalty free, non-exclusive license, with the right to sub-license
limited solely to Affiliates, to make, have made, use, import, offer to sell
and sell products within the scope of the Licensed Rights in the United States
and all foreign countries, said license being limited to the Fiberoptic Field
of Use but having no restrictions as to the price, quantity or class of
customers to whom such products are offered for sale or sold.

 

2.2       FBST hereby
grants to ADLT a royalty free, non-exclusive license, with the right to
sub-license limited solely to Affiliates, to make, have made, use, import,
offer to sell and sell products within the scope of the Licensed Rights in the
United States and all foreign countries, said license excluding Fiberoptic
Field Of Use but having no restrictions as to the price, quantity or class of
customers to whom such products are offered for sale or sold.

 

2

 

2.3       To the extent
that the licenses granted under §§2.1 and 2.2 hereof pertain to Patent Rights,
such licenses shall extend to and expire upon the termination of the individual
patent within the Licensed Rights notwithstanding the expiration of this
Agreement or the termination of this Agreement under Article 4
hereof.  For avoidance of doubt, any
Licensed Rights existing as of any termination of this Agreement shall continue
to be licensed hereunder for the licensed party to continue to use for any old
or new product within the licensed party’s designated field of use.

 

2.4       The parties
agree to cooperate fully with respect to the registration of and extension of
the Licensed Rights in countries foreign to the United States.  No party shall be obligated to extend the
Licensed Rights to any foreign country, but the licensed party may extend them
and maintain them at its sole option and expense.

 

2.5       The licenses
granted under §§ 2.1 and 2.2 hereof are personal and are not assignable or
otherwise transferable to any third party without the prior consent of the
party granting the license, consent not being unreasonably withheld; excepting
however, in the event of a change of control by transfer of substantially all
of the business of the licensed party (by merger, sale of assets or otherwise),
the licenses granted by this Agreement may be transferred without the licensor’s
consent to the transferee entity for continued use of any product or service
which the transferor licensee had under development or production as of the
date of the change of control.

 

2.6       For purposes of
this Article “have made” includes manufacture of the products or their
components by third persons not party to this Agreement.

 

2.7       Notwithstanding
the provisions in Sections 2.2 and 2.5 hereof limiting sublicense grants by
ADLT, FBST hereby consents to ADLT granting non-exclusive sublicense rights to Rohm
and Haas Company (without right to grant further sub-sublicenses) to use that
portion of the Licensed Rights which had been owned by Rohm and Haas prior to January 31,
2000, so long as such sublicense use rights are limited and restricted to
exclude all Fiberoptic Field of Use.

 

ARTICLE 3           - TERM

 

3.1       The initial
term of this Agreement shall begin on the Commencement Date and continue for
five (5) years from the Commencement Date.

 

3.2       The term shall
automatically renew for an additional five (5) years unless any party
shall provide at least sixty (60) days prior written notice of termination
prior to the last day of the initial term.

 

3

 

ARTICLE 4           TERMINATION

 

4.1       Subject to
provisions of Section 4.3, this Agreement may be prospectively terminated
with respect to the grant of a license to use any additional Intellectual
Property Rights by any party upon written notice to the other party upon 180
days’ prior written notice, or immediately upon any termination of a
Development Agreement.

 

4.2       This License
Agreement may be terminated for cause by either Party upon written notice to
the other Party, where the other Party has been found by a court of competent
jurisdiction in the United States to be in violation of law with respect to
this License Agreement including violation of state or federal antitrust laws,
or otherwise has materially breached or defaulted this License Agreement and
has failed to cure such breach or default within sixty (60) days of receiving
notice setting out the nature and extent of such breach or default in
reasonable detail.

 

4.3       The provisions
of Section 2.3 hereof shall remain in effect after any termination of this
Agreement

 

ARTICLE 5           - INFRINGEMENT

 

5.1       No licensing
party makes any warranty with respect to non-infringement of the rights of
third parties by the exercise of the Licensed Rights, and the licensed party
shall bear the defense of and satisfy all liability resulting from any such
charge of infringement. The licensing party may, at its sole option and
expense, join in the defense.  The
licensing party agrees to provide technical assistance to the licensed party at
the request of and at the expense of the licensed party.

 

5.2       Each party who
learns of infringement by a third party shall bring to the attention of the
other parties all instances of infringement by third parties of the Licensed
Rights.  The licensed party shall have
the option to enforce the Licensed Rights within the licensed field of use at
its own expense, in which event the licensing party may, at its sole option and
expense, join in any enforcement action and share in any recovery in a manner
equitable with the licensing party’s damages and participation therein.  Should the licensed party decline to enforce
the Licensed Rights, the licensing party may do so at its sole expense and
shall be entitled to all recovery therefrom. 
Each party agrees to provide technical assistance to the enforcing party
at the request of and at the expense of the enforcing party.

 

ARTICLE 6           - NOTICE

 

6.1       Any notice
required or authorized to be given by either party under this Agreement shall
be in writing and shall be deemed effectively made when sent by first class
mail or by facsimile transmission with telephone confirmation.  Notices shall be addressed to the other party
at the following address:

 

4

 

Advanced Lighting Technologies, Inc.

32000 Aurora Road

Solon, Ohio 44139

Attention: 
Wayne J. Vespoli

Fax: 
440-519-0503

 

Fiberstars, Inc.

32000 Aurora Road

Solon, OH 
44139

Attention: Roger Buelow, Chief Technology
Officer

Fax: 440 519-1038

 

ARTICLE 7           - MISCELLANEOUS

 

7.1       This Agreement
shall be governed by and construed in accordance with the laws of the State of
Ohio.

 

7.2       No modification
of this Agreement or waiver of any of its terms or conditions will be of any
force or effect unless made in writing and signed by the party claiming to be
bound.

 

7.3       If a court of
competent jurisdiction determines that one or more paragraphs of this Agreement
are invalid or unenforceable, such decision shall not affect the remainder of
the Agreement.

 

7.4       None of the
parties shall be deemed to have waived any of its rights under this Agreement
by failure to take any action to enforce any of its rights at any particular
time.

 

7.5       None of the
parties or any of its affiliates or licensees shall make any representations,
extend any warranties of any kind, or assume any responsibility or obligations,
or confer any right by implication, estoppel or otherwise, binding upon any of
the other parties hereto, other than the licenses and rights herein expressly
granted.

 

7.6       The parties
agree to use their diligent efforts in order to reach an amicable agreement
with respect to all disagreements which might arise from the application of
this Agreement.  All disputes arising
under this Agreement which are not settled amicably as specified above shall be
finally settled in accordance with the following:

 

(1)           The parties
will attempt in good faith to resolve any controversy or claim arising out of
or relating to this Agreement promptly by negotiations between senior
executives of the parties who have authority to settle the controversy.

 

(2)           The disputing
party shall give the other party written notice of the dispute.  Within twenty (20) days after receipt of said
notice, the receiving party shall submit to the other a written response.  The notice and response shall

 

5

 

include (a) a statement
of each party’s position, and (b) the name and title of the executive who
will represent the party.  The executives
shall meet at a mutually acceptable time and place within one (1) month of
the date of the disputing party’s notice and thereafter as often as they
reasonably deem necessary to exchange relevant information and to attempt to
resolve the dispute.

 

(3)           If the matter
has not been resolved within two (2) months of the disputing party’s
notice, or if the party receiving said notice will not meet within one (1) month,
either party may initiate mediation of the controversy or claim in accordance
with the Center for Public Resources Model Procedure for Mediation of Business
Disputes.

 

(4)           If the matter
has not been resolved pursuant to the aforesaid mediation procedure within two (2) months
of the initiation of such procedure, or if either party will not participate in
mediation, the controversy shall be settled by arbitration in accordance with
the Center for Public Resources Rules for Non-Administered Arbitration of
Business Disputes by a sole arbitrator. 
The arbitrator shall be selected from the CPR Panels of Distinguished
Neutrals.  The arbitration shall be
governed by the United States Arbitration Act, Title 9 U.S.C. and 35 U.S.C.
§294, and judgment upon the award rendered by the arbitrator may be entered by
any court having jurisdiction thereof. 
The place of arbitration shall be a neutral venue where neither party
has its principal place of business, or such other location as mutually agreed.  The arbitrator shall be empowered to award
damages.  In the case of fraud, the
arbitrator in addition to damages, may award attorney fees (including in-house
and outside attorney fees) but not punitive damages.

 

(5)           All deadlines
specified in this Article 7 may be extended by mutual agreement.

 

(6)           The procedures
specified in this Article 7 shall be the sole and exclusive procedures for
the resolution of disputes between the parties arising out of or relating to
this Agreement; provided, however, that a party may seek a preliminary
injunction or other preliminary judicial relief if in its judgment such action
is necessary to avoid irreparable damages. 
Despite such action, the parties will continue to participate in good
faith in the procedures specified in this Article 7.  All applicable statutes of limitation shall
be tolled while the procedures specified in the Article 8 are
pending.  The parties will take such
action, if any, required to effectuate such tolling.

 

7.7   Neither this
Agreement nor any interest herein is assignable, transferable or delegatable by
one party without prior written consent of the other parties, other then as set
forth in Article 2 hereof.

 

6

 

7.8   To the extent
not in conflict with this License Agreement, the terms of this Agreement shall
be governed by the Master Services Agreement, including such provisions
covering confidentiality, headings, approval and other provisions.

 

IN WITNESS
WHEREOF, the parties
have caused this document to be executed in duplicate as of the date and year
first above written.

 

	
   

  	
   

  	
  ADVANCED LIGHTING

  
	
   

  	
   

  	
  TECHNOLOGIES,
  INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Wayne Vespoli

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Wayne Vespoli

  	
   

  
	
   

  	
   

  	
  Its:

  	
  EVP

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FIBERSTARS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ John M. Davenport

  	
   

  
	
   

  	
   

  	
  Name:

  	
  John M. Davenport

  	
   

  
	
   

  	
   

  	
  Its:

  	
  CEO

  	
   

  
							

 

7Exhibit 10.8

 

MASTER SERVICES AGREEMENT

 

This Master Services Agreement (“Master Services Agreement”) is entered into
by and between Fiberstars, Inc., a California corporation (“Fiberstars”), and Advanced Lighting
Technologies, Inc., an Ohio corporation and its Affiliates (“ADLT”). 
Each of Fiberstars and ADLT is a “Party”
and are “Parties” to this Master
Services Agreement.

 

RECITALS

 

WHEREAS, Fiberstars is planning
a public offering of shares of its capital stock (the “Offering”);
and

 

WHEREAS, ADLT wishes to
participate in the Offering as a selling shareholder, and to offer for sale all
406,649 shares of Fiberstars’ capital stock that are owned by ADLT (“ADLT Shares”), and Fiberstars is agreeable to such
participation; and

 

WHEREAS, if the Offering is consummated,
the Parties will have the capital necessary to enter into and consummate
several additional agreements between them, including: agreements to provide
research and development services for each other; agreements for the purchase
and implementation of equipment which will be used to manufacture products that
the Parties may wish to purchase from each other; a mutual supply agreement;
and a cross-licensing agreement.

 

NOW, THEREFORE, contingent upon
the consummation of the Offering and the sale of the ADLT Shares, and in
consideration of the mutual representations, promises and covenants set forth
herein, the Parties agree as follows:

 

1.             PURPOSE.

 

The purpose of the Agreement is to set forth the terms and conditions
under which the Parties will provide the Services, and will deliver to and/or
develop for the other, the tangible and intangible items (including
Intellectual Property, reports, documents, software, products and Equipment)
and other Deliverables, as further described in one or more ancillary
agreements attached hereto as the “Exhibit(s)”
or described under a Statement of Work
(or SOW) or Purchase Order
attached or made a part of such Exhibits, and all as further defined
below.  The Exhibits, Purchase Order(s),
Statement(s) of Work and such other documents attached to or referred to herein
(the “Ancillary Document(s)”),
together with this Master Services Agreement constitute the Parties’ entire
agreement relating to its subject matter (collectively, the “Agreement”).

 

2.             SCOPE.

 

The Exhibits that are part of the Agreement as of the Commencement Date
shall include each of the following:

 

(a)           ADLT Development
Agreement, attached hereto as Exhibit A;

 

(b)           Cross License
Agreement, attached hereto as Exhibit B;

 

 

(c)           Equipment Purchase and
Supply Agreement, attached hereto as Exhibit C;

 

(d)           Fiberstars Development
Agreement, attached hereto as Exhibit D;
and

 

(e)           Mutual Supply
Agreement, attached hereto as Exhibit E.

 

During the Term, the Parties may add one or more additional Exhibits or
other Ancillary Documents to the Agreement and otherwise modify the Agreement
by mutual written agreement.  If there is
a conflict between the documents comprising the Agreement, the order of
precedence and control shall be: (i) the Exhibits; (ii) this Master
Services Agreement; (iii) Statement(s) of Work; (iv) Purchase
Order(s); (v) Change Orders and other documents explicitly made a part of
the Agreement.  For the purposes of
clarity, where the Ancillary Documents are silent, this Master Services
Agreement shall govern.  Notwithstanding
any of the foregoing, if a document, including a Statement of Work, Purchase
Order or Change Order, expressly states that one or more of its terms shall
apply despite contrary language in the Exhibits or Master Services Agreement, then
such term or terms of such document shall take precedence and control.  The Agreement cancels and supersedes all
prior and contemporaneous oral and written communications between the Parties
concerning the subject matter hereof, and prevails over any conflicting or
additional terms contained in any such document or communication between the
Parties relating to its subject matter. 
Notwithstanding the foregoing, the Agreement does not cancel or
supersede any existing license between the Parties for the use of any
intellectual property.

 

3.             DEFINITIONS.

 

In addition to other terms defined in the Agreement,
the following terms have the following meanings:

 

3.1           “AAA” is defined in Section 23.6.

 

3.2           “ADLT Shares” is defined in the recitals.

 

3.3           “Additional Charge(s)” is defined  in Section 8.2.

 

3.4           “Affiliate(s)” means any
entity in which ADLT or Fiberstars directly or indirectly owns or controls at
least fifty percent (50.0%) of such entity’s equity, profit interests or voting
power.

 

3.5           “Agreement” is defined in Section 1.

 

3.6           “Acceptance” means the applicable Party’s
written confirmation of its satisfactory testing, evaluation and/or inspection
of Deliverables or Services pursuant to criteria set forth by the applicable
Ancillary Documents, including the applicable Specifications and Statements of
Work.

 

3.7           “Ancillary Document(s)” is defined
in Section 1.

 

2

 

3.8           “Applicable Law(s)” means any and
all applicable laws, statutes, regulations, rules, order and ordinances of any
supranational, federal, state and local governing body.

 

3.9           “Background IP” is defined in Section 15.1.

 

3.10         “Change Order” means a change order document
signed by authorized representatives of both Parties, which modifies a Statement
of Work or the terms of any Purchase Order pursuant to Section 8.1 and 8.2
of this Master Services Agreement.  For
the purposes of clarity, Change Orders excludes requests for cancellations
under Section 8.3.

 

3.11         “Code” is defined in Section 19.

 

3.12         “Commencement Date” means the closing of the
sale of the ADLT Shares after the effective date of the Offering.

 

3.13         “Confidential Information” means any and all data and
information disclosed hereunder which is conspicuously marked with “Confidential,”
or “Proprietary” or other similar legend, or which by its nature should
reasonably be considered to be confidential, whether disclosed in writing or
otherwise.  “Confidential Information”
includes, without limitation, technical and business information relating to
either Party’s products, research and development, production, manufacturing
and engineering processes, costs, profit or margin information, employee
skills, customers, marketing, and production, future business plans and the
terms of the Agreement (except as authorized under Section 23.10).

 

3.14         “Covered
Party” and “Covering Party”
are defined in Section 11.2(b).

 

3.15         “Custom Deliverable(s)” shall mean Deliverables
that are not standard or normal to the Supplying Party’s product or service
offering and which are specifically created, designed, developed or performed
for or on behalf of the Purchasing Party (including whether as a work for hire
or as a commissioned work) by the Supplying Party according to Specifications
provided by the Purchasing Party, and for which the Supplying Party has no
right to make or have made or sell or have sold except for and to the
Purchasing Party.  Custom Deliverables
shall include the Deliverables provided under the Fiberstars Development
Agreement and ADLT Development Agreement.

 

3.16         “Deliverable(s)” means all of the
applicable Equipment, Documentation, Services and any other products (including
Products as defined under the Mutual Supply Agreement), goods, work products,
milestones, technologies, original works, documents, information, things,
designs, designations, discoveries, inventions, data whether in computer
readable form or otherwise, methods, formulae, tools, computer programs
(including source code and any other software or firmware) and any other items
to be delivered by the Supplying Party to the other Party pursuant to the
Agreement.

 

3

 

3.17         “Development Agreement(s)” is defined
in Section 15.2(b).

 

3.18         “Documentation” means all documentation or
reference materials relating to or describing Deliverables, whether currently
existing or created in the future, and whether in written or electronic form,
including without limitation any specifications, technical manuals, user
manuals, training materials and consulting materials.

 

3.19         “EAR” is defined in Section 20.

 

3.20         “Equipment” means the equipment procured by
a Party pursuant to the Equipment Purchase Agreement, attached hereto as Exhibit C.

 

3.21         “Exhibit(s)” is defined
in Section 1.

 

3.22         “Force Majeure Event” is defined in Section 23.7(a).

 

3.23         “Including” and its derivatives (such as “include” and “includes”) means including without limitation.  This term is as defined, whether or not
capitalized in the Agreement.

 

3.24         “Insolvent
Party” is defined in Section 22.1.

 

3.25         “Intellectual
Property” or (“IP”)
means ideas, concepts, technical information, data, designs, drawings,
specifications, tools, schematics, know-how, artwork, photographs, technology,
modules, components, designs, utilities, subsets, objects, processes, tools,
models, software programs (including, without limitation, source and object
codes), manuals and other documentation, data, databases, processes, methods of
production, manufacturing methods, trade secrets, and other related information
and materials, and other works of authorship or creation, whether tangible or
intangible, together with any Intellectual Property Rights relating thereto.

 

3.26         “Intellectual Property Right(s)”
means all worldwide common law or statutory rights protected under (a) patents,
patent applications, and patent rights; (b) rights associated with
original works, authorship, moral rights, copyrights and all its exclusive
rights; (c) rights relating to the protection of trade secrets and
confidential information, (d) rights associated with designs, industrial
designs, and semiconductor design; (e) rights analogous to those set forth
above and any and all other industrial or intellectual property rights; and (f) registrations,
divisionals, continuations, continuations-in-part, renewals, reissues,
reexaminations, and extensions of the foregoing (as applicable) now existing or
hereafter filed, issued or acquired.

 

3.27         “Invoice” means any invoice issued by the
Supplying Party consistent with the provisions of the Agreement.

 

3.28         “IP Indemnitor” and “IP Indemnitee”
is defined in Section 12.2.

 

4

 

3.29         “ITAR” is defined in Section 20.

 

3.30         “Item(s)”
shall mean any material, article, part or other component provided as part of
or incorporated into the Deliverable.

 

3.31         “Joint Intellectual Property” is defined in Section 15.2(a).

 

3.32         “Minimum
Order Lead Time(s)” is defined in Section 6.2.

 

3.33         “Minimum Order Quantity” is defined in Section 6.2.

 

3.34         “Offering” is defined in the recitals.

 

3.35         “Order(s)” is defined
in Section 6.1.

 

3.36         “Order
Acknowledgement” is
defined in Section 6.2.

 

3.37         “Other Party’s Materials” is
defined in Section 17.

 

3.38         “Personnel” shall mean any person employed by or under the
control of a Party under the Agreement, or under the control of a person or
entity under the control of such Party, including without limitation an
employee, agent, contractor, consultant, Subcontractor or employee of an agent,
contractor, consultant or Subcontractor.

 

3.39         “Prohibited Foreign National(s)”
is defined in Section 20.

 

3.40         “Purchase Order” means any purchase order
issued by the Purchasing Party under an Exhibit with reference to and
consistent with the Agreement requesting any Deliverables from the Supplying
Party, and specifying the Deliverables’ type, quantity, purchase price,
requested delivery dates and delivery location.

 

3.41         “Purchasing Party” means the Party (either Fiberstars or
ADLT, as the case may be and as the context implies) receiving Deliverables or
Services under the Agreement as may have been originally requested by it
pursuant to an Ancillary Document.

 

3.42         “Residual Information” is defined in Section 14.3.

 

3.43         “Services” means any service, labor,
engineering, programming, management, assignment, project, consulting,
development, work and any other activity performed by a Supplying Party
pursuant to a Statement of Work.

 

3.44         “Specifications” means the information and data that specify
technical or functional requirements or describe the criteria for performance
(as the case may be and as the context implies) and generally shall include the
function, purpose, efficacy, capabilities, design, properties, requirements,
processes, maintenance

 

5

 

requirements, operational
requirements, operating capacity and other technical and functional
characteristics and/or measurements of the applicable Deliverable.

 

3.45         “Statement(s) of Work” or “SOW(s)” means a document or documents
mutually accepted by the Parties, labeled “Statement of Work” that describes
the Services, including as applicable, a description of Deliverables and such
Deliverables’ Specifications that Supplying Party will provide to the
Purchasing Party under the Agreement.

 

3.46         “Subcontractors” mean third parties retained
by either Party to perform all or portions of the Services as permitted by the
Agreement.

 

3.47         “Supplying Party” means the Party (either Fiberstars or ADLT,
as the case may be and as the context implies) providing or delivering the
Deliverables to the other Party as the Purchasing Party under the Agreement
pursuant to an Ancillary Document.

 

3.48         “Term” is defined in Section 21.

 

3.49         “Termination for Default” is defined in Section 22.2.

 

3.50         “Terminating Party” is defined in Section 22.3.

 

4.             PRICING.

 

4.1           Prices.

 

Unless otherwise agreed
to in writing, prices or fees shall be F.O.B. Solon, Ohio and shall be
specified under the applicable Exhibits governing the particular Services or
Deliverables to be provided under such Exhibits.  Also, unless otherwise agreed to in writing
all prices and fees are inclusive of all expenses including, cost of labor,
materials, travel and lodging of the Supplying Party’s Personnel (if
applicable); provided, however, prices and fees are exclusive of
any other shipping charges and insurance, as well as any and all state and
local sales, use, excise or similar taxes, which, if applicable, are additional
and will be separately stated on the invoices. 
Notwithstanding the foregoing, in lieu of payment of specified taxes,
each Party may provide the other with a tax exemption certificate acceptable to
the relevant taxing authorities.

 

4.2           Payment.

 

All payments shall be made in U.S. dollars and shall be made at net 45
days after the Invoice date.  All
Invoices and Purchase Orders regarding the Agreement must reference the
Agreement.  All Invoices shall be
provided in reasonable detail for each Party to audit Invoices against Purchase
Orders, SOWs and Deliverables.  Any
disputed Invoice will be settled pursuant to the procedures set forth Section 23.5
herein for dispute resolution.

 

6

 

5.             TERMS
OF DELIVERY; DELIVERY DATES.

 

5.1           Risk
of loss shall pass to the Purchasing Party upon delivery of the Deliverable, to
the Purchase Party’s Personnel or common carrier, at the point of
shipment.  Supplying Party shall be
responsible for the administration of all custom and export clearances
procedures but the Purchasing Party shall be responsible for any payments
related thereto, including custom or excise taxes or duties.  If the applicable timetables for delivery and
performance, are not already set for as part of an applicable Exhibit,
timetables, schedules, or other delivery dates, shall be governed by this Section 5.

 

5.2           If
a Purchase Order or SOW is received by the other Party with a requested
delivery date allowing at least the Minimum Order Lead Time (as defined below),
the Supplying Party shall deliver the Deliverable by the requested delivery
date on the Purchase Order.  If the
Purchase Order does not allow at least a Minimum Order Lead Time, the Supplying
Party shall be obligated to deliver the Deliverables by the Minimum Order Lead
Time, but not before, unless otherwise agreed to in writing by the Supplying
Party.  Partial deliveries may be made
without express prior consent by of the other Party.

 

5.3           The
Parties agree that time is of the essence with respect to all provisions of the
Agreement that specify a time for performance or delivery, including payment
obligations.

 

6.             ORDERING
PROCEDURES.

 

6.1           Unless
otherwise specified under an Exhibit, from time to time, each of the Parties,
as the Purchasing Party, may issue Purchase Orders or SOWs (collectively, “Order(s)”) to the
Supplying Party for Deliverables or Services as part of this Agreement.  Any such Orders shall not be deemed accepted
by the Supplying Party until accepted in writing.

 

6.2           Unless
otherwise explicitly specified by an Exhibit, Orders requested by the
Purchasing Party under the Agreement must be received by the other Party as the
Supplying Party with reasonable prior notice to the requested delivery date (“Minimum Order Lead Time(s)”).  The Parties acknowledge and agree that the
Minimum Order Lead Time shall be determined by mutual agreement of the Parties,
and that the requested delivery date shall be mutually acceptable to both
Parties.  All Minimum Order Lead Times
shall be set forth in the applicable Orders. 
In addition, the Parties agree that an Order may be subject to Minimum Order
Quantities.  The “Minimum Order Quantity” is the quantity set
forth in an agreed Purchase Order or Statement of Work as the minimum quantity
or number of units of a product or Deliverable that must be included in an
Order to secure the contracted pricing. 
Upon reasonable request, each of the Parties as the Supplying Party will
provide the other Party the Minimum Order Lead Times for each of applicable the
Deliverables for forecasting purposes. 
The Supplying Party will use commercially reasonable efforts to fulfill
such Order and will send its

 

7

 

acceptance or rejection
of the Order (“Order Acknowledgement”),
within seven (7)  days following receipt of the Order.  In case of rejection, the Supplying Party
will provide the Purchasing Party in writing its reasons for rejecting such
Order.  Upon such rejecting the
Purchasing Party may amend its Order and resubmit such Order under the
procedures set forth herein.  Unless
otherwise specified by an Exhibit, neither Party (as a Supplying Party) shall
be obligated to provide any Custom Deliverables by virtue of its receipt of an
Order.

 

7.             INSPECTION;
ACCEPTANCE.

 

The Party delivering the Deliverables under the Agreement as the Supplying Party shall notify the other
Party as the Purchasing Party
when the applicable Deliverable is ready for shipment.  Upon delivery of the Deliverables to the
Purchasing Party’s designated location, the Purchasing Party shall have thirty
(30) days to inspect and test the Deliverables. 
During such inspection and testing of the Deliverables, if the
Purchasing Party determines that a Deliverable does not function to
Specifications or otherwise does not conform to its Specifications, the
Purchasing Party shall provide an explanation of the nature and extent of the
nonconformity to the Supplying Party in reasonable detail.  Thereafter, the Supplying Party shall have
the option to (a) promptly correct any defect by repairing or replacing
any defective Item(s) or (b) replace the Deliverables.  If the Purchasing Party receives no written
notice pursuant to this Section within thirty (30) days of delivery of the
Deliverable, Acceptance shall be deemed to have occurred.  An Acceptance shall not constitute a waiver
or diminution of the Supplying Party’s warranty obligations.

 

8.             CHANGES;
CANCELLATION.

 

8.1           Modifications;
Change Orders:  Either Party (as the Purchasing Party) may request an Order
originally issued by such Party be modified through the delivery of a Change
Order to the other Party (as the Supplying Party).  The Change Order may include requests for the
following changes: (a) substitute one model of Deliverable for another
model, (b) include additional quantities of a Deliverable, or (c) reconfigure
the Deliverable.  The Purchasing Party’s
Change Order shall describe such requested modification in appropriate written
detail.  Change Orders shall not be
binding or effective until the Supplying Party provides its Acceptance of the
Change Order.

 

8.2           Acceptance
of Change Orders.  Within a
reasonable period of time of receipt of a Change Order, the Party receiving
such Change Order as the Supplying Party shall provide the Purchasing Party
with a written response which shall describe the effect of the Change Order
and, if appropriate, reasonably itemize any required additional expenses or
increase in compensation, charges and/or other changes including changes to the
delivery schedule that would be involved as a result of implementing such
Change Order (“Additional Charges”).  If,
after receipt of the response, the Purchasing Party desires to perform such
Change Order, the Purchasing Party shall provide the Supplying Party with
written

 

8

 

confirmation thereof,
upon which the Supplying Party may issue its Acceptance of the Change Order, as
modified by the Additional Charges.

 

8.3           Cancellation.  Each of the Parties may as the Purchasing
Party, without charge, cancel its Order upon written notice to the other Party
at any time prior to the commencement of the performance of the applicable
Services or prior to the Supplying Party’s reasonable procurement of materials
or Items specifically needed to fulfill such Order.  After a Party commences performance of
applicable Services or reasonably procures materials or Items specifically
needed to fulfill an Order, the Purchasing Party may cancel such Order upon
written notice to the other Party and, in that event, if the Supplying Party
delivers all such materials or Items (including applicable Deliverables as
then-completed) to the Purchasing Party then the Purchasing Party shall pay (a) the
Supplying Party for Services rendered by Supplying Party prior to the
termination date (as calculated on a pro rata basis based on completion of
Deliverables and pursuant to amounts specified in such Order), and (b) the
Supplying Party’s reasonable out-of-pocket expenses of its procurement of
necessary materials to the reasonable extent the Supplying Party is unable to
use such materials or Items for any other Order or for another customer.  All such costs and expenses will be set forth
in written documentation and provided to the Purchasing Party, along with an
Invoice, in accordance with the Agreement.

 

9.             USE OF
SUBCONTRACTORS.

 

Unless
otherwise stated in an Ancillary Document, each Party shall not delegate its
obligations to Subcontractors in the performance of their obligations without
the consent of the other Party, which consent shall not be unreasonably
withheld or delayed.   Notwithstanding
any of the foregoing, (a) each Party shall remain fully and solely
responsible and liable for proper performance of all its obligations under the
Agreement, and (b) each Party shall ensure that its Subcontractors are
informed of and agree in writing to comply with all applicable terms and
conditions of the Agreement, including any obligations of confidentiality or
assignment of Intellectual Property Rights. 
Each Party shall have the right to require the Supplying Party’s
Subcontractors execute any other appropriate documentation prior to any use of
such Subcontractor in providing Services or Deliverables.

 

10.          SUPPORT
AND MAINTENANCE SERVICES.

 

10.1         Third
Party Warranty and Support. To the extent any warranties of the Supplying
Party’s licensors, vendors, OEMs and suppliers may be passed on to the
Purchasing Party from the Supplying Party with respect to applicable
Deliverables and Services, the Supplying Party will do so.

 

10.2         Support
and Maintenance Services.  In
addition to each of the Parties’ warranty obligations, each of the Parties as a
Supplying Party will provide at the other Party’s requests, reasonable service
and support related to any nonconformity or defect or damage of the
Deliverables provided hereunder to the other Party.

 

9

 

During the warranty
period, if any, the Parties shall be required to support its Deliverables
without charge pursuant to the Agreement. 
After the warranty period, each of the Parties shall support the
Deliverables in accordance with the maintenance terms and conditions (if any)
specified in the applicable Exhibit for such Deliverable.

 

10.3         Product
Changes.  Each of the Parties shall
notify the other Party of any intended product change by specifying the change,
the reason(s) therefor, Items affected and the known impacts to the form, fit
or function of such Deliverable or changes that may affect the other Party’s
use or such other Party’s customer’s or end user’s use of such
Deliverables.  With respect to any
product change significantly impacting health or safety, each Party shall
notify the other Party within twenty-four (24) hours.  Any changes to Custom Deliverables are
subject to the written approval of the other Party (as the Purchasing Party),
which will not be unreasonably withheld. 
Notwithstanding the foregoing, all Deliverables as changed must still
substantially and materially comply with the Specifications, unless otherwise
agreed in writing by the Purchasing Party.

 

11.          REPRESENTATIONS
AND WARRANTIES.

 

11.1         General
Warranties.  Each of the Parties
represents and warrants that: (a) it has the right, power and authority to
enter in to the Agreement and that it and its Personnel have the same to fully
perform all of its obligations hereunder; (b) entering into, and fully
performing all of its obligations under the Agreement does not and will not
violate any agreement or obligation between it and any third party; and (c) to
the best of its knowledge, it has obtained all necessary releases, consents,
rights, licenses, representations, warranties and assignments prior to the
commencement of the Services and the provision of Deliverables for the other
Party.

 

11.2         Warranties
on Deliverables and Services.

 

(a)       Except
for Custom Deliverables and Services, each of the Parties as a Supplying Party
represents and warrants that its Deliverables shall be free from defects in
material and workmanship and shall conform to the applicable Specifications for
twelve (12) months from the later of the date of shipment or the date of
final Acceptance.  Each of the Parties as
a Supplying Party represents and warrants that: (a) its
Custom Deliverables shall be free from defects in material and workmanship and
shall conform to the applicable Specifications for six (6) months from the
later of the date of shipment or the date of final Acceptance; and (b) any
and all Services will be performed in a timely, competent and professional
manner by duly qualified and experienced Personnel possessing all relevant
certifications, licenses and permits.

 

(b)       For
breach of any representation or warranty in this Section 11.2 during the
warranty period, the Party seeking remedy (“Covered
Party”)

 

10

 

will promptly notify
the Party providing the warranty (the “Covering
Party”) in writing of any claimed defect or nonconformity and such
Covering Party will respond within twenty four (24) hours.  If applicable or practical, upon request, the
Covered Party will return the defective or nonconforming Deliverable for repair
or replacement.  Repaired or replaced
products will be warranted for the longer of (a) the remainder of the
warranty period or (b) six (6) months.  The Covering Party agrees to notify the
Covered Party in advance of, and obtain the Covered Party’s approval before
incurring, any costs of repair, labor, parts and freight on Items not covered
by the terms of the applicable warranty.

 

(c)       In
case of Services, the Covering Party shall re-perform the Services to cure any
breach while still meeting all applicable Specifications and other requirements
of the Agreement.

 

(d)       This
warranty is voidable to the extent that (i) Covered Party or its
end user or customer does not reasonably comply with or use the
Deliverables pursuant to the requirements and recommendations and tolerance
levels, (ii)  reasonable examination by the Covering Party reveals that
the Deliverables are not in breach or not defective or such nonconformity does
not exist, (iii)  reasonable examination discloses to the Covering Party’s
reasonable satisfaction that a defect or nonconformity in fact exists and was
caused, in whole or in part, by events or conditions beyond Covering Party’s
reasonable control or by any acts or omissions of the Covered Party, its
end user or customer, including without limitation, negligence, misuse,
neglect, improper installation, improper application, accident, unauthorized
maintenance or repair, alteration by a person other than the Covering Party (or
as authorized by the Covering Party), operating and/or environmental conditions
which deviate from the applicable Specifications, or use of Items or services
not supplied by or approved by the Covering Party.

 

(e)       THE
WARRANTIES SET FORTH IN SECTION 11.2 ARE EXCLUSIVE OF ALL OTHER WARRANTIES
WHETHER WRITTEN, ORAL, EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND OF ALL OTHER
OBLIGATIONS OR LIABILITIES ON THE PART OF MANUFACTURER.  THE FOREGOING CONSTITUTES THE SOLE AND
EXCLUSIVE REMEDY FOR DEFECTIVE OR NONCONFORMING DELIVERABLES, GOODS, MATERIALS,
SPARE PARTS, SERVICE OR SOFTWARE.

 

12.          INDEMNITY

 

12.1         General
Indemnity.  Each Party shall, at its
sole cost, indemnify, hold harmless and defend the other Party (with counsel
reasonably approved by the other Party), and its affiliates, shareholders,
directors, officers, employees and agents from and against any loss, cost,
liability or claim by any third party (including without

 

11

 

limitation court costs
and reasonable fees of attorneys and other professionals) arising out of or
related to the negligent or intentional acts or omissions of such indemnifying
Party and its Personnel.  The
indemnifying Party’s obligations under this Section 12.1 are contingent
upon (a) the indemnified Party giving prompt written notice to the
indemnifying Party of any such claim, (b) the indemnified Party allowing
the indemnifying Party to control the defense and any related settlement, and (c) the
indemnified Party furnishing the indemnifying Party with all necessary information
and reasonable assistance in the defense of any such claim.

 

12.2         IP
Indemnity.  Except as provided in Section 12.3
with respect to Custom Deliverables, in addition to and without limitation of
any other right or remedy available to the Parties, if any of the Deliverables,
or the use or operation thereof, become, or are likely to become, the subject
of a claim of Intellectual Property Rights infringement or misappropriation,
then the Supplying Party responsible for providing such Deliverable (“IP Indemnitor”) shall at its expense
indemnify the Purchasing Party receiving such Deliverable (“IP Indemnitee”) by either (a) promptly
procuring the right for the IP Indemnitee to continue using the Deliverables on
substantially the same terms as provided in the Agreement; or (b) replace
or modify, as soon as reasonably practicable the Deliverables so that they
become non-infringing (provided, however, that any replaced or modified
Deliverables supplied by IP Indemnitor contain the same or equivalent
functionality and performance as the infringing Deliverables).  Neither Party as IP Indemnitor shall be
obligated to indemnify the other Party under this Section 12.2 to the
extent that such third party claim results from: (i) the IP Indemnitor’s
compliance with designs or specifications approved in writing by the IP
Indemnitee; (ii) use by the IP Indemnitee of the Deliverables in
combination with other products not supplied by or designated by the IP
Indemnitor to the extent that such claim would not have occurred but for such
combination; or (iii) the IP Indemnitee’s modifications of the
Deliverables made without the express authorization of the IP Indemnitor; but,
only to the extent that such claim would have been avoided but for such
modifications.

 

12.3         IP
Indemnity for Custom Deliverables. 
In case of Custom Deliverables, the indemnity obligations shall be set
forth in the applicable Ancillary Document to which the Custom Deliverables
relate.

 

13.          TRAINING.

 

Upon request, each of the Parties as the Supplying Party will use
reasonable efforts to provide training Services in support of the
Deliverables.  Such training Services
shall include instructors and instructional documentation suitable to train the
Purchasing Party’s Personnel in the use of the Deliverables, at times, dates,
and locations mutually agreed upon by the Parties.  The fees for such training Services, the
description and any additional terms and conditions for such Services related
to such training will be made pursuant to the applicable Ancillary Documents
such as under a SOW or Purchase Order with reference to the applicable Exhibit to
which such Services relate.  The fees for
such

 

12

 

training Services shall not be any greater than the then-current rate
charged for time and materials of the Party supplying such training Services.

 

14.          CONFIDENTIAL
INFORMATION.

 

14.1         Confidentiality
Obligations.  The Party receiving the
Confidential Information of the other Party shall, for a period of five (5) years
following the last disclosure by the disclosing Party of Confidential
Information hereunder, use all reasonable efforts to protect the
confidentiality and secrecy of the disclosing Party’s Confidential Information
disclosed hereunder and shall use all reasonable efforts to prevent any
improper disclosure or use thereof by its Personnel, in the same manner and
with the same degree of care (but in no event using less than a reasonable
degree of care) as it uses in protecting its own information of a similar confidential
nature.  Without limiting the generality
of the foregoing, the receiving Party will provide the disclosing Party’s
Confidential Information to only those Personnel of the receiving Party who
have a need to know that Confidential Information for the purposes of the
Agreement, and who have entered into written agreements with the receiving
Party containing provisions protecting the disclosing Party’s Confidential
Information that are consistent with the terms hereunder and that are at least
as restrictive.  Each Party agrees to
provide notice to the other promptly after learning of or having reason to
suspect a breach of any of the obligations of confidentiality hereunder.  Each receiving Party acknowledges that any
material violation by the receiving Party of the rights and obligations
provided in this Section 14 may result in immediate and irreparable injury
to the disclosing Party, and hereby agrees that the disclosing Party shall be
entitled to immediate temporary, preliminary and permanent injunctive relief
against any such continued violations upon adequate proof, as required by
applicable law.  Each Party hereby
submits itself to the personal jurisdiction of the courts of competent subject
matter jurisdiction for purposes of entry of such injunctive relief.  The obligations of either Party to the
Agreement with respect to the other’s Confidential Information also extend to
any third party’s proprietary or confidential information disclosed in the
course of dealings related to the Agreement.

 

14.2         Exclusions.  The confidentiality obligations of the
Agreement shall not apply with respect to Confidential Information that: (a) was
in the possession of, or was known by, the receiving Party prior to its receipt
from the disclosing Party, without an obligation to maintain its
confidentiality as evidenced by written documentation; (b) is or becomes
generally known to the public without violation of the Agreement; (c) is
obtained by the receiving Party without obligation of confidentiality from a
third party that is under no obligation to keep such information confidential; (d) is
independently developed by the receiving Party without any reference to or use
of the disclosing Party’s Confidential Information as evidenced by written
documentation; or (e) is required to be disclosed by applicable law; but,
only to the extent of such disclosure requirement and provided that the
receiving Party promptly provides the disclosing Party with reasonable
opportunity to contest and/or limit such disclosure and to request a

 

13

 

protective order or
confidential treatment with respect to such Confidential Information.

 

14.3         Residual
Information.  Notwithstanding
anything in the Agreement, a Party receiving Confidential Information shall be
free to use and disclose for any purpose the Residual Information acquired by
such Party during the course of performance of the Agreement, including
information relating generally to fiber optics. 
“Residual Information” shall mean
information or know-how in non-tangible form which is retained by Personnel of
a Party who have had access to Confidential Information during the performance
of the Agreement.  Nothing herein shall
authorize a Party to infringe on any Intellectual Property Rights of the other
Party.

 

15.          OWNERSHIP
OF INVENTIONS AND DEVELOPMENT

 

15.1         Background
Intellectual Property.  “Background IP” shall mean all Intellectual Property that a
Party and/or its licensors owned or developed prior to the Commencement Date
and/or from its engagement under the Agreement. 
Each Party shall retain exclusive ownership of the Intellectual Property
Rights of its Background IP.

 

15.2         General
Intellectual Property Rights.

 

(a)           Unless
stated otherwise in an Exhibit, all Intellectual Property discovered, made,
conceived, reduced to practice or developed solely by the Personnel of the
Supplying Party providing the Services or Deliverable under the Agreement shall
be the sole and exclusive property of such Supplying Party and such Supplying
Party shall own exclusively any and all Intellectual Property Rights associated
therewith.  Unless stated otherwise in an
Exhibit, all Intellectual Property discovered, made, conceived, reduced to
practice or developed jointly by Fiberstars Personnel and ADLT Personnel in the
performance of the Agreement (the “Joint Intellectual
Property”) shall be the joint property of Fiberstars and ADLT and
each shall own an undivided interest in any and all Intellectual Property
Rights associated therewith.  Each agrees
to, and hereby does, assign to the other Party an equal undivided interest in
all Intellectual Property Rights in such Joint Intellectual Property.  Each Party further agrees to reasonably
cooperate with the other Party with respect to providing information and preparing
and filing any documents necessary, including patent applications, to secure
such rights with respect to any such developed Joint Intellectual
Property.  All expenses incurred in
obtaining and maintaining such patents on Joint Intellectual Property Rights
shall be borne by the Parties equally. 
Notwithstanding the foregoing, a Party may, upon not less than thirty
(30) days’ prior written notice, assign and transfer to the other Party, all of
its ownership rights in and to any Joint Intellectual Property, and upon such
assignment and transfer of Joint Intellectual Property shall not be obligated
to share any

 

14

 

expenses of obtaining or
maintaining patent protection for such Joint Intellectual Property which are
incurred more than thirty (30) days following such notice or such longer period
as may be specified in such notice.

 

(b)           Notwithstanding
any of the foregoing, the Parties acknowledge and agree that each as a
Supplying Party shall be providing certain Services and Deliverables to the
other Party under the ADLT Development Agreement and the Fiberstars Development
Agreement (collectively, the “Development Agreement(s)”), under which certain of the Intellectual Property
discovered, made, conceived, reduced to practice or developed by the Supplying
Party’s Personnel under such Development Agreements, whether solely or jointly
with the other Party’s Personnel, in the performance of such Development
Agreements, shall be the sole and exclusive property of such other Party
pursuant to the terms and conditions of the Development Agreements and not of
the Supplying Party.

 

16.          INTELLECTUAL
PROPERTY USE RIGHTS AND OBLIGATIONS.

 

16.1         Cross
License.  The Parties have agreed to
cross license certain rights with respect to Background IP and Developed IP, as
reflected in more detail in Exhibit B.  

 

16.2         Proprietary
Marks.  Neither Party shall obscure,
deface, hide or remove any proprietary notices or marks of the other on any
Deliverables, unless otherwise agreed to in writing.

 

16.3         No
Reverse Engineering.  Unless
otherwise agreed to in writing or allowed under another Exhibit, the Parties
agree that each shall not reproduce, reverse engineer or deconstruct any
portion of the Deliverables.

 

17.          BAILMENT.

 

Each Party as the
Supplying Party agrees and acknowledges that it will hold possession of all
Deliverables whose title has passed to the other Party pursuant to the
Agreement, or which the Supplying Party creates or develops, or has created or
developed, for or on behalf of the other Party, and all materials paid for or
procured by the other Party and as may be provided to the Supplying Party from
time to time (collectively, the “Other Party’s Material(s)”) for the
exclusive benefit of the other Party as a bailee under applicable commercial
laws.  Each as the Supplying Party
confirms that this bailment relationship shall remain in effect until the other
Party has undisputed possession of all Other Party Materials, and the Supplying
Party promptly shall deliver all Other Party Materials to the other Party upon
such other Party’s request or any termination of the Agreement or applicable
Exhibits.  In the event the Other Party’s
Materials are located at a third party facility, the Supplying Party shall
obtain such third party’s written acknowledgment of such bailment relationship.

 

15

 

18.          AUDIT
RIGHTS.

 

18.1         Reciprocal
Audit Rights.  Either Party (as the
auditing Party) shall have the right during the Term and for two (2) years
after any expiration or termination of the Agreement (whether in whole or in
part), at its expense, to cause an independent chartered public accountant or
certified public account to audit all books and records of the other Party (as
the audited Party) for the purpose of verifying compliance with the financial
commitments and undertakings specified by the Agreement for any twelve (12)
month period; provided, however, no Party shall be able to
exercise such audit rights hereunder unless the financial commitments and
undertakings being audited during such twelve month period exceeds
$1,000,000.00 in value.  Such audits
shall occur during normal business hours on not less than five (5) days
prior written notice.  In preparation for
such audit, the audited Party shall make available all relevant records
requested in the auditor’s notice of audit. 
If such records are not available at the mutually agreed time, then the
audited Party shall pay the auditor’s travel expenses and daily rates for the
time involved in such delay.  The auditor
shall be under a duty of confidentiality, and shall sign a mutually acceptable
non-disclosure or confidentiality agreement. 
Such agreement shall enable the auditor to disclose the existence and
amount of any discrepancy.  The auditors
shall have access to all corporate records that they may, in their reasonable
discretion, deem necessary or relevant to the completion of their mission.  However, they may not make any copies of such
information or retain information in non-aggregated form that would reveal the
names of any Personnel, end users or customers, the price that any individual
customer or end user paid for any Deliverables, or other competitive
information, but they may retain such information in coded format that keys into
the database supplied by a Party hereto.

 

18.2         Cost
of Audit.  The Party initiating the
audit (auditing Party) shall bear the costs of the audit, unless the results of
the audit show that the other Party (as the audited Party) has overcharged the
auditing Party by more than ten percent (10.0%) in any twelve (12) month
period, in which case the audited Party shall reimburse the auditing Party for
the full cost of the audit.  Any
underpayment will be paid to the relevant Party upon written notification thereof
as part of an Invoice pursuant to the procedures set forth in Section 4.2.

 

18.3         Disputed
Audit Results.  If the audited Party
shall disagree with the conclusions of the auditor then the audited Party shall
have the right to appoint its own auditor to review the conclusions of the
first audit.  If the two auditors are not
able to agree within thirty (30) days after the delivery of the requested
information to the audited Party’s own independent auditor, then the dispute
shall be resolved pursuant to Sections 23.5 and 23.6 of this Master Services
Agreement.

 

19.          RIGHTS
UNDER BANKRUPTCY CODE.

 

Each
as the Supplying Party acknowledges and agrees that: (i) the licenses and
rights granted in the Agreement to the are licenses and rights to “intellectual
property” within the definition of Section 101(35A) of the U.S. Bankruptcy
Code (the “Code”); (ii) each as the
Purchasing Party shall have such rights, pursuant to the Agreement, as a
licensee as

 

16

 

set
forth in Section 365(n) of the Code; (iii) following an entry for an
order for relief under the Code, the Supplying Party (as debtor in possession)
or the bankruptcy trustee will not interfere with the rights of the Purchasing
Party as provided in the Agreement; and (iv) if the Agreement is rejected
whether by motion or by operation of law, then each as a Purchasing Party may
elect under Section 365(n) of the Code to retain its rights and licenses
pursuant to the Agreement.

 

20.          EXPORT
CONTROL.

 

The Parties acknowledge
and understand that the Deliverables may be subject to regulation by agencies
of the U.S. Government, including the Department of State, Department of
Commerce and the Bureau of Export Administration, which prohibit export or
diversion of certain technical products, data or services (“controlled
technologies”) to certain individuals or countries.  This prohibition includes providing or giving
access to such controlled technologies (including without limitation such items
that have been identified by the Export Administration Regulations (“EAR”) and the International Traffic in Arms Regulations (“ITAR”)).  The Parties
acknowledge that providing controlled technologies to certain foreign nationals
located in the United States may be deemed by the U.S. Government as equivalent
to exporting that controlled technology to a foreign country, including
embargoed or restricted countries (“Prohibited Foreign
National(s)”).  The Parties shall comply with all export and
re-export restrictions applicable to the Deliverables.  Each Party as the Purchasing Party shall
obtain all necessary licenses to export, re-export, or import any information
received from the Supplying Party as may be required under Applicable Laws.  Neither Party will, directly or indirectly,
export or direct the Deliverables, any information provided by the other Party
(including Confidential Information) under the Agreement, or any other items
covered by the Agreement, or any products derived from such Deliverables, to
any embargoed or restricted country identified in the U.S. export laws.  Each Party shall ensure that its Personnel
are not included on any United States export exclusion lists and are not
Prohibited Foreign Nationals.  Neither
Party shall use the Deliverables, any information provided by the other Party
under the Agreement, or any other items covered by the Agreement, or any
products derived from such Deliverables, for nuclear, missile, or chemical or
biological weaponry end uses.  Each will
promptly notify the other Party if it learns of any violations of export laws
related in any way to the Agreement. 
Each Party may reasonably request from the other Party as the applicable
Supplying Party executed documents to support government requirements for
export or import licensing with regard to the Deliverables.  Each Party agrees to execute the same and to
otherwise cooperate in any reasonable manner to facilitate the other Party as
the Purchasing Party respective compliance with all applicable export and
import requirements.

 

21.          TERM.

 

The term of the Agreement shall be for five (5) years commencing
on the Commencement Date unless otherwise terminated as authorized pursuant to
the Agreement.  Unless terminated by a
Party by giving sixty (60) days written notice of non-renewal to the other
Party prior to the end of the then current term, the Agreement shall be
automatically renewed at the end of the initial five (5) year term and
each subsequent

 

17

 

term thereafter for an additional five (5) year period.  The initial five (5) year term and each
subsequent renewed term are collectively, the “Term.”

 

22.          TERMINATION.

 

22.1         Termination
for Cause.  If a Party to the
Agreement: (i) admits in writing its insolvency or inability to pay its
debts or perform its obligations as they mature; or (ii) becomes the
subject of any voluntary or involuntary proceeding in liquidation, dissolution,
receivership, attachment or composition or general assignment for the benefit
of creditors or pursues any other remedy under any other Applicable Law
relating to relief for debtors, then such Party (“Insolvent
Party”) will promptly provide reasonable assurances, as may be
requested from the other Party from time to time, that it as the Insolvent
Party can and will perform its obligations under the Agreement.  If such assurances are not timely received or
are not reasonably satisfactory to the Party requesting the assurances, then
such non-Insolvent Party may terminate the Agreement.

 

22.2         Termination
for Default.  Either Party may
terminate the Agreement, without cost or liability, if the other Party fails,
in any material respect, to perform its agreements, covenants, warranties or
other obligations under the Agreement upon delivery of sixty (60) days’ prior
written notice of such other Party’s failure or breach, describing in
reasonable detail the nature and extent of the alleged failure or breach (“Termination for Default”); provided, however,
the breaching Party may cure such Termination for Default by:

(a)           curing
the breach or failure within sixty (60) days of notice of Termination for
Default or such longer period as may be granted by the non-breaching Party; or

 

(b)           if
it is not possible to cure the breach or failure within sixty (60) days, (i) developing
and delivering to the non-breaching Party within thirty (30) days following
notice of Termination for Default a complete written plan for curing the breach
or failure, reasonably acceptable to the non-breaching Party; and (ii) proceeding
to promptly and diligently correct the breach or failure to the reasonable
satisfaction of the non-breaching Party within ninety (90) days following
notice of Termination for Default.

 

22.3         Special
Right of Termination.  If Fiberstars
terminates the Equipment Purchase and Supply Agreement pursuant to the last
sentence of Section 5.1 (a) of such agreement, either Party may
terminate this Agreement immediately upon written notice to the other Party
delivered within 10 business days of such termination by Fiberstars.

 

22.4         Rights
and Obligations Upon Termination. 
The Party possessing the right to terminate this Agreement pursuant to
Sections 22.1, 22.2 or 22.3 (“Terminating Party”)
may elect to terminate the Agreement, or any or all Exhibits.  If the

 

18

 

Terminating Party
terminates some but not all Exhibits, then the terms of this Master Services
Agreement and the applicable portions of Purchase Orders, Statements of Work
and other Ancillary Documents associated with the continuing Exhibits shall
remain fully effective solely for the purposes of fulfilling performance, and
exercising rights, under such Exhibits, for the remaining term of such
Exhibits.  Upon expiration or termination
of the Agreement, each Party will immediately discontinue use of the other
Party’s Confidential Information provided to it under the Agreement, except
that each may retain any of the other Party’s applicable Confidential
Information to the extent that they relate to any continuing Exhibits.  Within ten (10) days of such
termination, each Party will destroy or deliver to the other Party all copies
of materials containing such Confidential Information and certify such
destruction or return in writing.

 

22.5         Survival.  Rights and obligations under the Agreement
which by their nature should survive (such as obligations of confidentiality,
warranties and indemnification) shall remain in effect after termination or
expiration of the Agreement.  In
addition, the following provisions of this Master Services Agreement shall
survive any termination or expiration of the Agreement, together with any
definitions or portions of Exhibits A through E necessary for their
proper interpretation: Sections 3, 10, 11, 12, 14, 15, 16, 18, 19, 22.4,
22.5, 23.2 through 23.17.  No termination
of the Agreement will relieve either Party from liability arising from any
breach of the Agreement on or prior to the date of termination.

 

23.          MISCELLANEOUS
PROVISIONS.

 

23.1         Assignment.  Neither Party shall assign or otherwise
transfer any of its rights or obligations hereunder without the prior written
consent of the other; provided that either Party may assign without the consent
of the other upon the merger, consolidation or transfer of all or substantially
all of the assets by such Party of the business to which the Agreement relates
or to a controlling parent or to a subsidiary in which such Party owns a
controlling interest.

 

23.2         Attorney’s
Fees.  In any judicial proceeding or
arbitration adjudicating a dispute relating to or arising out of the Agreement,
the prevailing Party is entitled to recover all reasonable expenses associated
with such proceeding (including without limitation reasonable costs and fees of
attorneys or other professionals).

 

23.3         Compliance
with Laws.  In the performance of the
Agreement, the Parties shall at all times comply with all Applicable Laws.

 

23.4         Limitation
of Liability; No Consequential Damages.

 

OTHER THAN LIABILITY
UNDER SECTIONS 12, 14, 16.1 AND 16.2, UNDER NO CIRCUMSTANCES WHATSOEVER SHALL
EITHER PARTY BE LIABLE TO THE OTHER FOR ANY SPECIAL, INDIRECT, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES ARISING IN

 

19

 

ANY WAY OUT OF OR IN
CONNECTION WITH THE AGREEMENT, HOWEVER CAUSED (WHETHER ARISING UNDER A THEORY
OF CONTRACT, TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE AND STRICT
LIABILITY) OR OTHERWISE), INCLUDING WITHOUT LIMITATION DAMAGES FOR LOST
PROFITS, LOSS OF DATA OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES.

 

23.5         Dispute.  If disagreements arise under the Agreement at
the working level, the senior management executive officers of both Parties
which shall have full immediate authority resolve such disagreements shall meet
in person at a mutually agreeable location within sixty (30) days of receipt of
notice of dispute from the other Party.

 

23.6         Arbitration.  In the event that the Parties are unable to
resolve the dispute as provided in Section 23.5 above, then either Party
may submit the dispute to arbitration in accordance with the rules of the
American Arbitration Association (the “AAA”).  Such arbitration shall be conducted within
the metropolitan area of Cuyahoga County, Ohio. 
Each party shall bear its own expenses and one-half of the arbitrator’s
fees, provided that the arbitrator shall be entitled, as part of the award, to
allocate the costs of the arbitration, including attorneys’ fees, between the
parties as the arbitrator sees fit.  The
arbitrator shall prepare and circulate to the parties findings of fact and
conclusions of law, and allow the parties a reasonable comment period, prior to
issuance of the final arbitral award. 
The award in any such arbitration shall be final, binding and
conclusive, subject only to such rights of appeal as are provided for under the
AAA rules.  When final, the award may be
entered as a judgment in any court having jurisdiction.  Notwithstanding the foregoing, either party
may seek injunctive relief from any federal or state court located the Cuyahoga
County, Ohio having jurisdiction over the subject matter, and each Party hereby
submits to the personal jurisdiction of such courts.

 

23.7         Force
Majeure.

 

(a)         Neither
Party shall be liable for a failure to perform any of its obligations under the
Agreement, other than the payment of money, where such failure arises from
circumstances beyond its reasonable control including, without limitation,
strikes, lockouts, acts of God, acts of any government or instrumentality
thereof, war, unavailability of raw materials or breakdown of equipment not
attributable to the act or omission of the Party claiming force majeure, and
any similar causes (not including change in business conditions or lack of
economic feasibility), and without the fault or negligence of the Party that
fails to perform (collectively, a “Force Majeure Event”).

 

20

 

(b)         No
such failure shall be considered a breach of the Agreement, provided that the
Party affected by such circumstances shall use best efforts to: (i) 
promptly notify the other Party of their existence; (ii) minimize
potential cost, loss or damage to the other Party due to such non-performance
or failure; (iii) perform or continue all other duties and obligations
unaffected by such Force Majeure; and (iv) resume and complete performance
immediately upon the termination of the Force Majeure Event or as soon as the
Force Majeure Event may be alleviated. 
Whenever either Party is reasonably certain that such an event is likely
to occur, as soon as practicable it shall notify in writing and consult with
the other Party.  Provided the affected
Party has given timely notice of the above delay, the Agreement schedule shall
be extended for the number of calendar days equal to the delay.  If a Force Majeure Event shall continue
cumulatively for more that sixty (60) days (whether or not continuously) during
any 365-day period during the Term of the Agreement or any extensions thereof,
either Party shall have the right to terminate the Agreement upon thirty (30 )
days prior written notice.

 

23.8         Governing
Law.  The Agreement will be governed
and construed in all respects by the laws of the State of Ohio, U.S.A. without
regard to conflict of laws considerations. 
Implementation, jurisdiction and venue of any mediation, arbitration,
litigation or other dispute resolution modality between the Parties arising out
of or relating to the Agreement, the Deliverables or the Services provided will
lay exclusively within the boundaries of Cuyahoga County, Ohio, and Fiberstars
and ADLT each expressly submits and consents in advance to such implementation,
jurisdiction and venue.  The United
Nations Convention on Contracts for the International Sale of Goods will not
apply.

 

23.9         Notices;
Consents.

 

(a)           All
notices shall be in writing and shall be deemed given on the date of personal
delivery; the date of confirmed telex or fax; or, if given by mail, three
business days after the date deposited in the United States malls, postage
prepaid, registered or certified, with return receipt requested.  Any form of confirmed actual delivery is
sufficient and shall in no event be deemed given later than written
confirmation thereof.  Notices shall be
addressed to ADLT and Fiberstars at their respective addresses appearing in the
signature block of the Agreement, but each Party may change its address by
written notice.

 

(b)           Each
of the Parties agree to use their best efforts in providing the other Party
with timely responses where its consent is required under the Agreement.

 

21

 

23.10       Public
Disclosures.  Neither Party shall use
any trademarks, service marks, visual product representations, trade names,
logos or other commercial or product designations of the other.  Unless required in performance or exercise of
rights under the Agreement, or disclosure is required under applicable
securities laws, neither Party will disclose to any third party the existence
of the Agreement or its relationship with the other, without the other Party’s
express prior written consent.  In
particular, neither Party shall identify or make reference to the other in any
advertising or other promotional modality regardless of its form without
explicit prior written consent. 
Notwithstanding anything herein to the contrary, ADLT acknowledges that
Fiberstars will, in connection with the Offering, describe and disclose the
Agreement and the transactions contemplated under the Agreement (including
disclosures made as part of the registration statement related to the
Offering), and ADLT hereby consents to accurate disclosure in connection with
the offering.  In addition, either or
both Parties may be obligated to describe and disclose the Agreement and the
related transactions in other filings made pursuant to the Securities Exchange
Act of 1934 and the Securities Act of 1933, each as amended (as well as
pursuant to applicable state “blue sky” laws, and each party hereby consents to
the accurate disclosure thereof.

 

23.11       Relationship
of the Parties.  The Agreement is not
to be construed as creating an agency, partnership, joint venture or any other
form of legal association between the Parties.

 

23.12       Severability.  If any provision of the Agreement, or the
application thereof, shall for any reason and to any extent be determined by an
arbitrator or court of competent jurisdiction to be invalid or unenforceable
under Applicable Law, the remaining provisions of the Agreement shall remain in
effect and be interpreted so as best to reasonably effectuate the intent of the
Parties.

 

23.13       Solicitation.  During the term of the Agreement neither
Party shall solicit for employment purposes Personnel of the other Party
without the other Party’s written consent.

 

23.14       Successors.  The rights and liabilities of the Parties
under the Agreement shall bind and inure to the benefit of the Parties’
respective successors and permitted assignees.

 

23.15       Waiver.  The failure of either Party to the Agreement
to object to or to take affirmative action with respect to any conduct of the
other Party that is in violation of the terms of the Agreement shall not be
construed as a waiver thereof, or as a waiver of any future breach or
subsequent wrongful conduct.  The Parties
have had an opportunity to consult their respective attorneys with respect to
the Agreement.

 

23.16       Interpretation.  Accordingly, the language of the Agreement
shall not be construed for or against either Party.  The section headings contained in the
Agreement are for convenience of reference only and shall not be considered as

 

22

 

substantive parts of the
Agreement.  The use of the singular or
plural form shall include the other form.

 

23.17       Counterparts.  The Agreement may be executed in
counterparts, each of which shall be
deemed an original, but both of which together shall constitute one and the
same instrument.  If the Agreement is
executed in counterparts, no signatory shall be bound until both Parties named
below have duly executed or caused to be duly executed a counterpart.

 

IN WITNESS WHEREOF, the Parties have caused the Agreement to be
executed by their duly authorized representatives as of the dates adjacent to
each of their signatures.

 

	
   

  	
   

  	
  ADVANCED LIGHTING

  
	
  FIBERSTARS, INC.

  	
   

  	
  TECHNOLOGIES, INC.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ John M. Davenport

  	
   

  	
  By:

  	
  /s/ Wayne Vespoli

  
	
   

  	
  [signature]

  	
   

  	
   

  	
  [signature]

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   John M.
  Davenport

  	
   

  	
  Name:

  	
  Wayne Vespoli

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   CEO

  	
   

  	
  Title:

  	
   

  	
  EVP

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   September 19, 2005

  	
   

  	
  Date:

  	
  September 19, 2005

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Address:

  	
  Fiberstars, Inc.

  	
   

  	
  Address:

  	
  Advanced Lighting Technologies, Inc.

  
	
   

  	
  32000 Aurora
  Road

  	
   

  	
   

  	
  32000 Aurora Road

  
	
   

  	
  Solon, OH 44139

  	
   

  	
   

  	
  Solon, OH 44139

  
	
   

  	
  Attention: John M. Davenport,

  	
   

  	
   

  	
  Attention: Wayne J. Vespoli

  
	
   

  	
  Chief
  Executive Officer

  	
   

  	
   

  	
  Fax:  (440) 519 0503

  
	
   

  	
  Fax: 440
  519-1038

  	
   

  	
   

  	
   

  
											

 

23

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