Operating Agreement
Exhibit 10.15
This
Operating Agreement (this “Agreement’) is made effective as of September 7, 2001 by and
between Xxxxxxx Enterprises, Inc., a Nevada corporation (“Xxxxxxx”), and Crystal Magic,
Inc. a Florida corporation (“Crystal Magic”),
RECITALS
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A.
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Crystal
Magic has developed technology, software, equipment, know how,
intellectual property and systems to create “Laser Damage Products” in
transparent media (The “Crystal Magic
Technology”).
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B.
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Crystal
Magic distributes Laser Damage Products world wide through retail outlets
it owns, distributors who resell Crystal Magic’s products, authorized
dealers and the internet.
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C.
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Crystal
Magic desires to obtain the help and cooperation of Xxxxxxx to introduce
and sell its Laser Damage Products in the state of
Nevada.
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X.
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Xxxxxxx
and its Affiliates own and operate retail stores in the state of Nevada
that sell photographic products and services including but not limited to
custom images of customers on various media (“Video
Stores”),
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X.
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Xxxxxxx
and its Affiliates own and operate “Wedding Chapel photographic services
and concessions at major hotel and casino properties in the state of
Nevada (“Wedding Chapels”),
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X.
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Xxxxxxx
and its Affiliates have long standing relationships and current operating
agreements with major hotel, casino and entertainment complex properties
in the state of Nevada.
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X.
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Xxxxxxx
desires to sell Laser Damage
Products.
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H.
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Crystal
Magic desires Xxxxxxx to sell Laser Damage Products in the state of
Nevada.
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X.
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Xxxxxxx
represents that Xxxxxxx and it Affiliates have not less than two years of
prior management experience in this and similar businesses and the parties
in good faith anticipate sales arising from this Agreement will constitute
no more than 20% of Xxxxxxx’x and its Affiliates’ projected gross sales
revenues for at least one year after Xxxxxxx begins to sell the Laser
Damage Products.
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Therefore,
in consideration of their mutual covenants contained herein, the parties agree
as follows;
DEFINITIONS
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1.
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NET
SALES shall mean the total sales revenue, exclusive of sales tax, produced
by the sale, lease or other disposition of Laser Damage Products by
Xxxxxxx and/or its affiliates, reduced by any units of Laser Damage
Products returned to and accepted by Xxxxxxx and/or its Affiliates for
which the purchase price has been refunded. For sales of Laser Damage
Products to an Affiliate, the higher of the Affiliate’s purchase or sale
price for each item will be included in Net Sales; provided however that
the Net Sales to such Affiliate shall not be recognized for royalty
calculations until sold by the Affilate to a third party and shall then be
recognized as a sale at the higher of the Affiliated or third party’s
purchase or sale price. For purposes of calculating Net Sales, the revenue
attributed to any Laser Damage Products sold in promotional combinations
with other products sold by Xxxxxxx shall be the retail price established
on the Crystal Magic website or as otherwise agreed between the
parties.
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2.
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AFFILIATE shall mean,
with respect to any Person: (i) any Person directly or indirectly
controlling, controlled by, or under common control of such Person, (ii)
any Person owning or controlling 10% or more of the outstanding voting
interests of such Person, (iii) any officer, director, or general partner
of such Person, or (iv) any officer, director, general partner, trustee or
holder of 10% or more of the voting interests of any Person described in
clauses (i) through (iii) of this sentence. For purposes of this
definition: (a) Person means any individual or business entity, and the
heirs, executors, administrators, legal representatives, successors, and
assigns of such “Person” and (b) “controls”, “is controlled by”, or “is
under common control with” shall mean the possession, direct or indirect,
of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities,
by contract or otherwise.
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3.
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LASER DAMAGE PRODUCT
shall mean any object that contains internal decorative or indicative
images that have been created by a
Laser.
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4.
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LASER DAMAGE SYSTEMS
shall mean any laser marking device whose construction or method produces
a “Laser Damage Product”.
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5.
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KNOW-HOW
means any and all information of any kind whatsoever now possessed by or
known to, or hereafter developed or acquired by, relating to (1) the
manufacturing data, and technical specifications for the Crystal Magic
Technology, and/or marketing information of potential competitive value
(e.g. customer information, promotional plans, market data, etc.) (2)
specific techniques, software, algorithms and methods used in connection
with the production of the Laser Damage Products utilizing the Crystal
Magic Technology (3) the techniques and methods for installing and
servicing the equipment necessary in connection with the production of the
Laser Damage Products utilizing the Crystal Magic Technology, and (4) any
techniques and methods for creating the internal images in the Laser
Damage Products.
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6.
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IMPROVEMENTS shall mean
any technical information or know-how developed by Crystal Magic or
Xxxxxxx (or either of such parties’ Affiliates) after the date of the
initial transfer of the Know-How and during the term of this Agreement
that uses or relates to the
Know-How.
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7.
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OPERATING PRE TAX PROFIT
for the purposes of this Agreement shall be calculated by deduction from
Net Sales, the following direct operating costs; product, freight,
insurance manufacturing payroll, sales commissions, location percentage
rent, supplies, equipment repairs, maintenance, equipment depreciation,
interest, communications costs, training expenses
(including travel and hotel), artwork, promotional materials, F&F
Depreciation (e.g. Display F&F specific to Laser Damage Products) and
any other normal and ordinary business expense directly related to the
promotion and/or sale of Laser Damage Products. and license fees
(which shall include any royalties or other fees required to be paid to
any third party, if any, including, but not limited to fees for licensing
of logos, trademarks, characters, and Know-How or any Improvements
thereof). For the purposes of determining Operating Pre Tax Profits, the
following indirect costs shall not be deducted from Net Sales: allocations
of corporate overhead, depreciation of existing equipment and leasehold
improvements, existing payroll expenses and operating costs currently in
place for its retail stores and wedding chapel product offerings. In the
event of an indirect, unanticipated or existing expense that arises or
increases as a direct result of Xxxxxxx ‘s compliance or Implementation of
this Agreement, such expense shall be reasonably documented and a
reasonable pro-rata portion of such expense shall be “charged” as an
additional deduction from the “Net Sales” as agreed to by Crystal Magic
and Xxxxxxx.
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TERM
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8.
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This
Agreement shall commence on the effective date set forth above and shall
continue for a period of twenty (20) years unless sooner terminated as
provided herein.
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LICENSE
GRANT, EXCLUSIVE TERRITORY AND EQUIPMENT PURCHASE
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9.
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LICENSE
USE OF KNOW-HOW, TRADEMARKS AND OTHER PROPRIETARY
RIGHTS
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9.1.
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Know-How License.
Subject to Xxxxxxx’x compliance with all material terms of this Agreement,
Crystal Magic grants to Xxxxxxx an exclusive license, without the right to
sublicense to manufacture and sell Laser Damage Products within the State
of Nevada only (the “Territory”), using Know-How that Crystal Magic now
has or may subsequently acquire during the term of this Agreement. Except
as stated herein or by other written agreement, no further license is
implied or given. So long as this Agreement is in effect. Crystal Magic
will not manufacture or sell Laser Damage Products in the Territory and
will not enter into any agreement with nor sell, lease, rent or give its
materials, products. or Know How to any other company, person or entity
for the purpose of selling, either directly or indirectly, any Laser
Damage Product in the Territory. Notwithstanding anything herein to the
contrary. Crystal Magic shall not be prohibited from selling Laser Damage
Products within the Territory through sales generated by Crystal Magic
through web sites sales, internet sales, and the remarketing to Xxxxxxx’x
database of Customers who purchase Laser Damage
Products.
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9.2.
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Transfer of Know-How.
Crystal Magic shall provide Xxxxxxx with the Know How necessary to produce
the Laser Damage Products pursuant to this Agreement and provide initial
training to Xxxxxxx in the techniques and methods used in production of
the Laser Damage Products utilizing the Know How on the equipment
purchased from Crystal Magic pursuant to this Agreement. Crystal Magic
will update the Know How from time to time throughout the term of this
Agreement. Crystal Magic shall provide troubleshooting services and
general technical assistance, from time to time as agreed between the
parties, as well as routine checkups to verify the correctness of
Xxxxxxx’x procedures. All such services and assistance shall be provided
at the rates set forth in Exhibit A, as may be modified from time to time
by Crystal Magic.
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9.3.
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Trademark License.
Crystal Magic grants to Xxxxxxx a nonexclusive license, without the right
to sublicense, to use the trademark “CRYSTAL MAGIC” and related marks
developed by Crystal Magic from time to time in connection with Laser
Damage Products during the term of this Agreement (the “Trademarks”) in
the State of Nevada only, in the manner and form and subject to the
quality control requirements herein defined, during the term of this
Agreement, on Laser Damage Products produced utilizing the Crystal Magic
Technology under the Know-How license granted pursuant to this Agreement.
Crystal Magic shall supply Xxxxxxx with sample graphics for the use of the
Trademark in printed material.
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9.4.
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Product Name and
Quality: Xxxxxxx will use only approved Crystal Magic packaging and
all packaging will identify the product as a Crystal Magic product and
utilize the Trademarks, as agreed to herein. Crystal Magic will set
quality control standards for Laser Damage Products, which from time to
time it may modify and Xxxxxxx will implement such standards. Xxxxxxx will
display the Trademarks at all of Xxxxxxx’x Wedding Chapels and other non
Video Store locations that sell Laser Damage Products in the manner and
form required by Crystal Magic from time to time and consistent with the
latest sample graphics supplied by Crystal Magic and with all applicable
government requirements. Xxxxxxx will display the Trademarks at all of
Xxxxxxx’x Video Stores after one year from the signing of this agreement
unless otherwise agreed to in writing by Crystal Magic and Xxxxxxx.
Xxxxxxx shall submit to Crystal Magic for its prior written approval
samples of all proposed material, copy and oral scripts, including
promotional, advertising, labeling and packaging material promoting Laser
Damage Products or displaying the
Trademarks
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9.5.
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Prohibited Activities.
Xxxxxxx shall not at any time adopt, or use, or attempt to register with
any governmental authority, without first obtaining Crystal Magic’s
written approval, any word or xxxx that is similar, or bears any
resemblance, to any Trademark or service xxxx owned or used by Crystal
Magic.
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9.6.
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Improvements to Know-How and
Third Party Licensing Arrangements. From time to time, Crystal
Magic may enter into third party licensing arrangements (with third
parties that are not Affiliates of Crystal Magic) related to the Know-How,
Patents, or Improvements thereof, or in connection with licensing of
additional brands, trademarks, logos, characters or other similar
promotional ventures (“Third Party Agreements”). Xxxxxxx hereby
acknowledges and agrees that any licensing fees or royalties for the use
of any rights under any such Third Party Agreements related to Laser
Damage Products manufactured, used, sold, licensed or otherwise disposed
of by Xxxxxxx shall be the responsibility of Xxxxxxx (whether paid
directly to such third party or paid to Crystal Magic for payment to such
third party) and shall be included by Xxxxxxx as a direct operating cost
deducted from Net Sales in accordance with this
Agreement.
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9.7.
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Ownership and
Improvements. Crystal Magic shall own all right, title, and
interest in the Know-How, the Trademarks and all other intellectual
property rights inherent therein, including all Improvements. Xxxxxxx
shall promptly notify Crystal Magic in writing upon its discovery of any
unauthorized use of the Know-How or infringement of Crystal Magic’s
proprietary rights therein and shall further cooperate with Crystal Magic
to protect its ownership and rights in and to the Know-How and any
Improvements,
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10.
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MINIMUM REQUIREMENTS TO
MAINTAIN EXCLUSIVITY. Within one hundred twenty days (120) of the
date of this Agreement, Xxxxxxx agrees to make all
reasonable efforts to obtain landlords permission to display and
sell Laser Damage Products from all of its Video Stores, including but not
limited to Video Stores located at the Venetian, New York-New York,
Aladin, MGM Grand, Forum Shops, Rio Hotel & Casinos. Within one
hundred twenty days (120) of this Agreement, Xxxxxxx agrees to make all
reasonable efforts to obtain landlords permission to display and
sell Laser Damage Products from its Wedding Chapels, including but not
limited to Treasure Island, Flamingo Hilton, Mandalay Bay, MGM Grand, and
Rio Hotel & Casino’s, Throughout the term of this Agreement, Xxxxxxx
shall continue to display and sell Laser Damage Products at each such
Video Store and Wedding Chapel so long as Xxxxxxx or its Affiliates
continues to operate such Video Stores and Wedding Chapels (the “Minimum
Sites”). Within one year from the date of this Agreement Xxxxxxx agrees to
maintain an annual Net Sales of not less than five hundred thousand
dollars ($500,000) or annual Royalty Payments of not less than twenty five
thousand dollars ($25,000) and for each subsequent calendar year
thereafter, Xxxxxxx agrees to maintain an annual Net Sales of not less
than one million dollars ($1,000,000) or annual Royalty Payments of not
less than fifty thousand dollars ($50,000) (the “Minimum Sales Volume”).
In the event Xxxxxxx fails to meet or maintain the Minimum Sites or
Minimum Sales Volume set forth herein, Crystal Magic may, on thirty (30)
days written notice, terminate the exclusive license for the Territory
granted herein and the license granted to Xxxxxxx shall become a
non-exclusive license for the
Territory.
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11.
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CUSTOMER DATABASE,
Xxxxxxx agrees to use Crystal Magic’s order entry system to process all
Laser Damage Products orders. On a monthly basis, Xxxxxxx will provide
Crystal Magic with a copy of the database generated by the Crystal Magic
order entry system. Crystal Magic may exclusively remarket sales of Laser
Damage Products to the Xxxxxxx database. Crystal Magic will pay to Xxxxxxx
twenty percent (20%) of the Net Sales generated from remarketing to the
Xxxxxxx database within fifteen days of the end of each month for the
preceding month.
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12.
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EQUIPMENT AND SUPPLIES
PURCHASE. Xxxxxxx agrees to purchase from Crystal Magic at least
two (2) Crystal Magic Laser Damage System, as more fully described in
Exhibit A attached hereto (the “Initial System”) for the purchase price of
$80.000.00 for each Initial System. Such purchase price shall be paid as
follows: Within seven (7) days of effective date of this agreement,
Xxxxxxx will pay to Crystal Magic one hundred thousand ($100,000) towards
the purchase price of the initial Crystal Magic Laser Damage Systems,
Equipment and Supplies, Xxxxxxx will pay Crystal Magic the remaining
invoice amount for all Crystal Magic Laser Damage Systems, equipment and
supplies upon delivery and installation of the Crystal Magic Laser Damage
Systems.. Subject to payment of such purchase price. Crystal Magic shall
deliver and install the Initial Systems on or about August 30, 2001, Durme
the term of this Agreement, Xxxxxxx may but shall not be required to,
purchase additional Laser Damage Systems, equipment and supplies from
Crystal Magic, or approved Crystal Magic suppliers, according to the terms
and conditions as set forth in “EXHIBIT A” attached hereto and made a part
of this Agreement by reference. Xxxxxxx acknowledges that the costs set
forth in EXHIBIT A are current costs and subject to change by Crystal
magic from time to time.
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13.
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ROYALTY PAYMENTS,
Crystal Magic and Xxxxxxx will “split” the Operating Pre Tax Profits from
the sale of Laser Damage Products sold by Xxxxxxx or its Affiliates on a
ratio of 33.33% to Crystal Magic and 66-66% to Xxxxxxx. Through the first
full three months of the Agreement, Xxxxxxx shall provide a monthly
statement of Net Sales and shall pay ten percent (10%) of said Net Sales
it has received from the sale of Laser Damage Products by the fifteenth
(15th)
of each month for the immediately previous month to Crystal Magic (the
“Monthly Payment”). By the end of each quarter and based on GAAP and the
Operating Pre Tax Profit definitions as set forth in this Agreement.
Xxxxxxx will provide a “Profit and Loss” statement for the Laser Damage
Products operations for the immediately previous quarter to Crystal Magic.
If said statement shows that the Royalty payments previously made do not
reflect the 33.33% / 66.66% split, the monthly payment percentage will be
adjusted accordingly for future payments (the “Adjusted Percentage”).
Thereafter, Xxxxxxx shall continue to provide a monthly statement of Net
Sales and shall pay a percentage of Net Sales from the sale of Laser
Damage Products based on the Adjusted Percentage. All Monthly Payments
shall be due to Crystal Magic by the fifteenth (15th)
of the each month for the immediately previous month. Further. Xxxxxxx’x
Laser Damage Products operations will be reviewed, reconciled and analyzed
on an annual basis concurrent with and as part of Xxxxxxx’x fiscal year.
If an over or under payment situation is found, either Xxxxxxx or Xxxxxxx
Magic shall, within thirty days, issue a check for the difference and, the
percent of Net Sales Royalty Payment shall be adjusted accordingly for all
future Royalty payments., In no event shall the Royalty payment paid to
Crystal Magic be less than five percent (5%) of Net
Sales.
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INSURANCE
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14.
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Xxxxxxx
and Xxxxxxx Magic shall, throughout the term of this Agreement, maintain
general and product liability insurance of no less than one million
dollars ($1,000,000.00), Because of the public perception of Laser Beam
technology, each party shall produce copies of certificates for the
aforementioned insurance within thirty days of the execution of this
Agreement and again, within thirty days of each renewal of said insurance.
Each party agrees that its failure to maintain such insurance will be
considered a material breach of this
Agreement,
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REPORTS;
INSPECTIONS AND EXAMINATION OF RECORDS-AUDITS
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15.
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Xxxxxxx
will maintain accurate records of amounts and kinds of Laser Damage
Products manufactured and sold and will submit monthly reports reflecting
its operations under this Agreement and all reports to be provided by
Xxxxxxx to Xxxxxxx Magic in connection with the Royalty Payments due
pursuant to this Agreement shall be in such form as Crytal Magic shall
require from time to time.
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16.
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Crystal
Magic shall have the right at all times to inspect the premises of Xxxxxxx
(including all materials and supplies used by Xxxxxxx in its operations
under this Agreement) and to audit Xxxxxxx’x records for the purpose of
determining compliance with any or all portions of this
Agreement.
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17.
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Because
Royalty Payments by Xxxxxxx to Crystal Magic will be based on Xxxxxxx’x
books and records, Xxxxxxx agrees to maintain such books and records for a
period of four (4) years after the reporting due date and, further, grants
Crystal Magic the right to formally audit said books and records on an
annual basis at Xxxxxxx’x corporate offices or at such other place as may
be mutually agreed upon. Crystal Magic may, at its sole cost and expense,
perform said audits utilizing its own employees or a Certified Public
Accounting firm licensed to practice within the State of Nevada. If any
audit shows that Xxxxxxx has underpaid Crystal Magic, Xxxxxxx shall issue
a check for the amount underpaid to Crystal Magic within thirty days of
receiving the result of the audit. If any audit shows that Xxxxxxx has
overpaid Crystal Magic, Crystal Magic shall issue a check for the amount
overpaid to Xxxxxxx within thirty days of receiving the result of the
audit.
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18.
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Because
Crystal Magic will supply Xxxxxxx with equipment as listed in Exhibit A at
its manufacturing cost and supplies and materials at its “cost”,
therefore, Crystal Magic agrees to maintain its relevant books and records
for a period of four (4) years after the date such items were sold to
Xxxxxxx and, further, grants Xxxxxxx the right to formally audit said
books and records on an annual basis at Crystal Magic’s corporate offices
or at such other place as may be mutually agreed upon. Xxxxxxx may, at its
sole cost and expense, perform said audits utilizing its own employees or
a Certified Public Accounting firm licensed to practice within the State
of Florida, If any audit shows that Xxxxxxx has underpaid Crystal Magic,
Xxxxxxx shall issue a check for the amount underpaid to Crystal Magic
within thirty days of receiving the result of the audit. If any audit
shows that Xxxxxxx has overpaid Crystal Magic, Crystal Magic shall issue a
check for the amount overpaid to Xxxxxxx within thirty days of receiving
the result of the audit.
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LATE
PAYMENTS AND COLLECTION COSTS
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19.
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Each
party agrees to pay the other interest at the rate of one percent (1%) per
month on any past due amounts owed. Such interest shall accrue if any
payment is more than thirty (30) days overdue and shall continue until the
balance is paid in full.
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20.
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In
the event either party retains an attorney to collect an overdue amount,
the attorney’s fees and reasonable collection costs will be added to the
amount owed and paid by the offending
party.
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WARRANTY
AND INDEMNIFICATION
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21.
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WARRANTIES. Crystal
Magic represents and warrants that (i) it has the right to grant the
license for the Know-How and Crystal Magic Technology pursuant to this
Agreement and is the owner of the rights, title and interest in the
Know-How and Crystal Magic Technology; and (ii) it has not granted any
license for the Know-How and Crystal Magic Technology in the Territory
except to Xxxxxxx pursuant to this Agreement and is under no obligation to
grant any such license.
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22.
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WARRANTY DISCLAIMER.
Nothing in this Agreement is or shall be construed
as;
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(i) A
warranty or representation by Crystal Magic as to the validity or scope of any
patents licensed as part of the Know-How transferred pursuant to this
Agreement;
(ii) A
warranty or representation that anything made, used, sold or otherwise disposed
of under any license granted in this Agreement is or will be free from
infringement of patents, copyrights and other rights of third
parties;
(iii) An
obligation to bring or prosecute actions or suits against third parties for
infringement of any license granted pursuant to this Agreement, or
(iv) Granting
by implication, estoppel, or otherwise any licenses under patents of Crystal
Magic or other persons other than the license in the Know-How granted pursuant
to this Agreement.
23. NO
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR USE
EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, CRYSTAL MAGIC MAKES NO REPRESENTATION AND
EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, OR ANY WARRANTIES
OF MERCHANTABILITY OR FITNESS FORA PARTICULAR PURPOSE.
24.
LIMITATION OF LIABILITY
NOTWITHSTANDING
ANYTHING TO THE CONTRARY, CRYSTAL MAGIC SHALL NOT BE LIABLE WITH RESPECT TO ANY
SUBJECT MATTER OF THIS AGREEMENT UNDER ANY CONTRACT, NEGLIGENCE, STRICT
LIABILITYOR OTHER LEGAL OR EQUITABLE THEORY FOR (i) ANY SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES; OR (ii) COST OF PROCUREMENT OF SUBSTITUTE GOODS.
TECHNOLOGY OR SERVICES. THIS LIMITATION WILL APPLY NOTWITHSTANDING ANY FAILURE
OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY PROVIDED HEREIN.
25. INDEMNITY
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25.1.
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Crystal
Magic shall indemnify, hold harmless and defend Xxxxxxx (and its
directors, officers, employees, and agents) from and against any and all
claims, demands, or actions and any losses, expenses, and damages
resulting directly therefrom: (i) based on a claim against Xxxxxxx that
the Know-How and Crystal Magic Technology infringe or abridge a
third-party right in the United States in a validly issued patent,
copyright, or trade secret and (ii) based on an error in the
representations made pursuant to paragraph 21. Any such indemnification by
Crystal Magic pursuant to section (i) above shall be contingent upon
Xxxxxxx giving Crystal Magic prompt written notice of the claim for which
indemnification is sought, Xxxxxxx allowing Crystal Magic to control the
defense and/or settlement of such claim, and Xxxxxxx cooperating with
Crystal Magic in such defense and/or settlement and provided, that, in the
event any such settlement by Crystal Magic includes an agreement to pay an
ongoing license fee to such third party, Xxxxxxx agrees that such ongoing
license fee related to Laser Damage Products manufactured, used, sold or
otherwise disposed of by Xxxxxxx shall be the responsibility of Xxxxxxx
and shall be included by Xxxxxxx as a direct operating cost deducted from
Net Sales in accordance with this Agreement and shall not be subject to
indemnification by Crystal Magic.
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Operating
Agreement
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25.2.
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Xxxxxxx
agrees to indemnify, hold harmless, and defend Crystal Magic (and its
directors, officers, employees, and agents) from and against any and all
claims, demands, or actions and any losses, expenses, and damages arising
out of the manufacture, use, sale, or other disposition of Laser Damage
Products by Xxxxxxx or its Affiliates or otherwise related to Xxxxxxx’x
performance of this Agreement, However, the foregoing undertaking by
Xxxxxxx shall not apply to any claims resulting from Crystal Magic’s
willful misconduct or gross
negligence.
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26. CONFIDENTIALITY
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26.1.
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Except
as required by law or by order of any court that has legal jurisdiction,
each party agrees not to disclose the terms of this Agreement to any third
party without the other’s written consent. If either party is required to
disclose any of the terms of this Agreement, said party shall immediately
inform the other and each party shall provide the other reasonable
cooperation and assistance in seeking confidential treatment of such terms
with the proceedings for which the information is
sought.
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26.2.
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Xxxxxxx
agrees to safeguard all Know-How covered by this Agreement and will not
disclose or provide any Know-How to any third party without Crystal
Magic’s prior written consent.
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26.3.
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Xxxxxxx
acknowledges (i) that the Know-How obtained from Crystal Magic hereunder
is commercially valuable proprietary information of Crystal Magic or
others, the design and development of which has involved the expenditure
of substantial amounts of money and the use of skilled development experts
over a long period of time and which affords Crystal Magic a commercial
advantage over its competitors: (ii) that such Know-How constitutes trade
secrets and confidential business information that is disclosed to Xxxxxxx
for use on the basis of the confidential relationship between Crystal
Magic and Xxxxxxx under this Agreement and is to be used only as may be
expressly permitted by the terms and conditions of this Agreement; (iii)
that the loss of this competitive advantage due to unauthorized disclosure
of such proprietary information would cause great injury and
harm.
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26.4.
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Xxxxxxx
covenants that it will not divulge, or publish to others, other than as
herein provided, any Know-How obtained from Crystal Magic hereunder, or
any information about the Crystal Magic’s commercial practices, policies,
or plans, and that it shall divulge the same only to employees of Xxxxxxx
who require it for the purpose of distribution of Laser Damage Products
hereunder and only if such employees are
subject
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Operating
Agreement
to
restrictions on use and disclosure at least as restrictive as those assumed by
Xxxxxxx hereunder.
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26.5.
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Xxxxxxx
shall take reasonable action, by instruction, agreement or otherwise. with
respect to independent contractors employed by Xxxxxxx’x employees or
other persons who have not entered into the aforesaid restrictive
engagements in order to prevent the unauthorized disclosure or use of such
Know-How
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26.6.
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Know-How
does not include information that shall become generally known in the
trade through no fault of Xxxxxxx, (ii) any Know-How or information that
shall be disclosed to Xxxxxxx by a party having legitimate possession
thereof and the unrestricted right to make such disclosure, or (iii) any
Know-How or information that Xxxxxxx can demonstrate was within its
possession prior to the disclosure by Crystal Magic, and was provided by a
party having legitimate possession thereof and the unrestricted right to
make such disclosure
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26.7.
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Xxxxxxx
and Xxxxxxx Magic agree to not solicit or employ any employee who works
for the other entity during the term of such employee’s employment or for
a period of eighteen months (18) after the termination of any such
employee’s employment for whatever
reason.
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TERMINATION;
CONSEQUENCES OF TERMINATION
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27.
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TERMINATION. If either
party should commit or cause to occur a material breach, default or
noncompliance of or with any term or condition of this Agreement, said
party shall have thirty (30) days after written notification to cure such
breach, default or noncompliance, otherwise, in addition to any other
remedy available in law or equity, the non-defaulting party may, at its
election, terminate this agreement by written notice to the other.
Included, without limitation, in the types of breach for which such notice
of termination may be sent are: (i) failure to employ the Trademark to the
extent or in the manner required under this Agreement; (ii) failure to
clear trademark copy in advance as required under this Agreement; (iii)
disclosure of the Know-How by Xxxxxxx, its affiliates or its employees or
former employees to another party; (iv) violation of quality control
standards or specifications on Laser Damage Products utilizing the Crystal
Magic Technology; (v) denial of visitation or inspection rights granted
pursuant to this Agreement; (vi) failure to pay Royalty Payments or
provide the required reports under this Agreement; (vii) an assignment is
made of either party’s business for the benefit of creditors; or (viii) if
a receiver, trustee in bankruptcy, or like official is appointed to take
all or part of a party’s business or if either party ceases doing business
in the ordinary course.
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28. CONSEQUENCES
OF TERMINATION.
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28.1.
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On
termination of this Agreement, for any reason, or due to the expiration of
the term of the Agreement, all rights and obligations of the parties shall
forthwith cease, except the obligations of Xxxxxxx to make payments
pursuant to this Agreement, to provide reports, and to maintain the
confidential nature of the Know-How and the obligations of the parties
regarding solicitation of employees, Further, Crystal Magic shall retain
the right to inspect the books, records, and facilities of Xxxxxxx
following termination of this Agreement for purposes of ensuring that all
surviving obligations are met by
Xxxxxxx.
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28.2.
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The
provision for Royalty Payments due to Crystal Magic shall survive the
expiration or termination of this Agreement, for any reason,, for a period
of five (5) years (the “Post Termination Period”) and Xxxxxxx shall
continue to make Royalty Payments on all Laser Damage Products sold by
Xxxxxxx in accordance with this Agreement so long as Xxxxxxx continues to
manufacture and sell Laser Damage Products during the Post Termination
Period.
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GENERAL
TERMS
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29.
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NO
ASSIGNMENT. Xxxxxxx shall not assign or otherwise transfer, by
contract, operation of law, or otherwise, without the express written
consent of Crystal Magic, which consent shall not be unreasonably
withheld, this Agreement, the Know How, or any license right granted
hereunder or any interest herein, and any such unauthorized assignment,
transfer or sublicense shall be null and
void
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30.
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TAXES. Xxxxxxx shall pay
all taxes and other charges that may be imposed by any Governmental agency
as a result of the performance of this Agreement, including but not
limited to capital, property, turnover, excise, use, sales and income
taxes or other charges imposed by such Government agency provided,
however, that Xxxxxxx shall not be held liable for any taxes imposed on
Crystal Magic for Royalties or other payments made by Xxxxxxx to Xxxxxxx
Magic or for any other taxes or charges imposed on Crystal Magic by any
Government agency for the normal operation of Crystal Magic’s business,
income, equity, ownership or for any other
reason,
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31.
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INDEPENDENT CONTRACTOR,
The parties hereby agree that no agency, joint venture or partnership is
created by this Agreement, and that Xxxxxxx shall incur no obligation in
the name of Crystal Magic without Crystal Magic’s prior written
consent.
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32.
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SEVERABILITY. If any
provision of this Agreement shall be held to be invalid or unenforceable
for any reason, the remaining provisions shall continue to be valid and
enforceable. If a court finds that any provision of this Agreement is
invalid or unenforceable, but that by limiting such provision it would
become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so
limited.
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33.
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WAIVER OF CONTRACTUAL
RIGHT, The failure of either party to enforce any provision of this
Agreement shall not be construed as a waiver or limitation of that party’s
right to subsequently enforce and compel strict compliance with every
provision of this Agreement.
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34.
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ATTORNEYS’ FEES. In the
event that any legal action or arbitration becomes necessary to enforce or
interpret the terms of this Agreement, the prevailing party shall be
entitled, in addition to its court costs or arbitration fees, to such
reasonable attorneys’ fees as shall be determined by a court or
arbitrator.
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35.
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ENTIRE AGREEMENT. This
Agreement contains the entire agreement of the parties and there are no
other promises or conditions in any other agreement whether oral or
written, This Agreement supersedes any prior written or oral agreements
between the parties.
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36.
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AMENDMENT, This
Agreement may be modified or amended, if the amendment is made in writing
and is signed by both parties or their duly authorized
representatives.
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37.
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APPLICABLE LAW. This
Agreement shall be governed by the laws of the State of Florida and venue
for any legal action must be filed in Orange County Circuit
Court.
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38.
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NOTICES, All notices
shall be delivered in writing via the United States Postal Service,
certified mail or by other commercial carrier to each party as
follows;
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Xxxxxxx: Xxxxxxx
Enterprises, Inc.
Attn: Xxxxxx Xxxxxxx, Secretary /
Treasurer
0000 Xxxxxx Xxxx
Xxx Xxxxx, XX
00000-0000
Crystal
Magic; Crystal
Magic, Inc.
Attn: Xxxxxx X. Xxxxxx, President
0000 Xxxxxx Xxxx Xxxx
Xxxxxx, XX 00000
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The
undersigned confirm that they have read and agree with the terms and conditions
appearing above and that they are authorized to sign on behalf of their
respective entities. This agreement shall become effective upon acceptance by
Xxxxxxx at its corporate offices.
IN WITNESS THEREOF, the
parties have executed this Agreement.
CRYSTAL
MAGIC, INC.
By: XXXXXX
X. XXXXXX
Its: President
and Chief Executive Officer
XXXXXXX
ENTERPRISES, INC.
By: XXXXXX
XXXXXXX
Its: Secretary
/ Treasurer
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EXHIBIT
A
EQUIPMENT
AND SUPPLIES PURCHASE
Crystal
Magic initially agrees to sell to Xxxxxxx, Laser Damage Systems at the following
manufacturing costs:
Crystal
Magic’s Laser Damage
System $80,000
each
Laser
safety provisions:
ANSI
Class IV laser system
Interlocked
and labeled enclosure per ANSI Z136.1
Keyswitch
and emergency stop
Safety
features documented in instruction manual
Product
registration with CDRH
Laser
Subsystem
Ultra GRM
1064, standard specifications
Wavelength;
10G4 nm (Nd: YAG fundamental)
Energy
per pulse: variable by manual external attenuator
Repetition
rate: externally fired at approximately 30 Hz maximum.
Transverse
mode: Low-order unstable resonator mode
Far field
spatial profile: > 90% Gaussian
Divergence:<0.5
mr after external expander
System
control functions: over RS-232 interface and fast trigger inputs Positioner
Subsystem
Stepper-driven
3-axis positioning system with motors, drives, and indexer
Load
capacity: > 2 Ibs, axial
Travel;
100 mm (“4”) all axes
Acceleration;
~ Ig
Max.
speed: - 0.5 m/s
Minimum
position increment: ~5 um
Position
accuracy: -12 urn
Position
repeatability: ~5 um
Control
interface options: RS-232, fast network
System
Controller
PC-platform
including, but not limited to
Intel
PI1-350 MHz or better processor
128 MB
RAM
10 GB
internal mass storage (hard drive)
1.44MB
removable mass storage (floppy drive)
Multi-protocol
network card
color
monitor
Keyboard
RS-232
serial interface
Operating
system: Windows 98
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Crystal
Magic agrees to sell future Laser Damage Systems to Xxxxxxx at its procurement
and manufacturing costs. Upon Xxxxxxx’x order of additional Laser Damage
Systems, Crystal Magic will provide Xxxxxxx with an estimate of the total cost
to procure and manufacture the number of Laser Damage Systems ordered by
Xxxxxxx, Upon written acceptance of orders for Laser Damage Systems by both
parties, Xxxxxxx will provide Crystal Magic with fifty percent (50%) of the
estimated procurement and manufacturing costs. Xxxxxxx will provide Crystal
Magic with twenty five percent (25%) of the estimated procurement and
manufacturing costs within sixty days (60) of acceptance of the order, Xxxxxxx
will pay Crystal Magic any balance due of the procurement and manufacturing
costs of the Laser Damage Systems at the time of delivery.
During
the term of this agreement, Crystal Magic agrees to sell the following items at
its procurement and manufacturing cost. Current Manufacturing and procurement
costs are as follows and are subject to change with written notice to
Xxxxxxx.
Two Sets
of Fixtures (3 each of 5 different
sizes) $18,000
each
Backup
Laser head and cooling
unit $15,000
each
6K4
Controller $ 2,500
each
Energy
Meter & Protective
Glasses
$ 3,500 each
Flash
lamps
$ 300.each
Limit
Switches
$ 50 each
Xxxxxxx
agrees to purchase all optical crystal used for creating Laser Damage Products
from approved Crystal Magic suppliers. Crystal Magic and Xxxxxxx may develop
other possible suppliers for its products taking into account, price, quality,
and buying terms and conditions. Current supplier pricing from Topmost Designs
for optical crystal is as follows, FOB suppliers warehouse.
Current Supplier
Items:
Small
Paperweight 60mm
x 60mm x
19mm
$ 6.00 each
Large
Paperweight 120mm
x 60mm x
19mm
$11.00 each
Small
Cube 50mm
x 50mm x
75mm $12.00
each
Medium
Cube 90mm
x 65mm x
65mm $26.80
each
Large
Cube 115mm
x 65mm x
75mm $30.85each
Light
Base N/A
$10.00 each
System
Installation:
Xxxxxxx
will pay for all Labor, Travel, Accommodations, Shipping and other required
costs for the installation, service and repair of any Laser Damage Systems
purchased from Crystal Magic or other training services provided by Crystal
Magic. Crystal Magic has included estimated installation and training costs of
$30.000 in the overall invoice provided to Xxxxxxx upon the execution of this
agreement. Any unused installation and training costs will be applied against
royalty amounts due Crystal Magic, and any charges in excess of the initial
deposit will be paid by Xxxxxxx to Xxxxxxx Magic within fifteen (15) days of
invoice by Crystal Magic. All future installation, training and service costs
will be paid to Crystal Magic within fifteen (15) days of invoice by Crystal
Magic. Crystal Magic’s current labor costs are listed below. Crystal
Magic
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may from
time to time modify it labor costs and will notify Xxxxxxx in writing of any
modifications.
Crystal Magic Current Labor
Rates:
Engineers $369.23
per day
Manager
Trainers $230.77
per day
Crystal
Magic will pass on to Xxxxxxx all component parts manufactures warranty or
actual out of warranty repairs at costs to Crystal Magic.
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