EXHIBIT 10.13
AMENDMENT NO. 1 TO SUBLICENSE AGREEMENT
THIS AMENDMENT NO.1 TO SUBLICENSE AGREEMENT, (the "Amendment"), is made as of
the 5th day of March, 2004, by and between XXXXXX INTERNATIONAL, LTD., A
Delaware corporation, having its principal offices located at 0000 Xxxxxxx #00 &
Xxxxxxxxx Xxxx, Xxxx Xxxxxxxx, Xxx Xxxxxx 00000-0000 ( SUBLICENSOR") and XXXXXX
MOTORCYCLE COMPANY, LTD., having its principal offices located at Xxxxxxx
Xxxxxx, Xxxxxxxx 0 Xxxxxxxxxxx, Xxx Xxxxxx 00000 ( the " SUBLICENSEE").
BACKGROUND
WHEREAS, SUBLICENSOR owns the exclusive license (the "Exclusive License")
to make, use and sell combustion engines utilizing the CSRV Valve System as well
as the rights to franchise and sublicense certain Patent Rights* and Technical
Information* relating to Licensed Products* utilizing the CSRV Valve System*
throughout the countries, their territories and possessions, of Xxxxx Xxxxxxx,
Xxxxxxx Xxxxxxx xxx Xxxxx Xxxxxxx (the "Territory");
WHEREAS, pursuant to its rights under the Exclusive License, SUBLICENSOR
and SUBLICENSEE entered into a certain Sublicense Agreement, dated April 30,
2003 (the "Sublicense Agreement") pursuant to the general terms of which
SUBLICENSOR granted SUBLICENSEE an exclusive sublicense to make, use and sell
motorcycles utilizing the CSRV Valve System in all of the countries and their
territories and possessions comprising Xxxxx Xxxxxxx, Xxxxxxx Xxxxxxx xxx Xxxxx
Xxxxxxx (the "Territory"), for a period equal to the duration of the patents,
including the periods covering any continuations and reissuances thereof as well
as any additional patents that may be issued relating to the CSRV Valve System
as well as a certain "anti-dilution" right in order that the SUBLICENSOR have
the right at all times to maintain a fifty percent plus ownership and control
position over the SUBLICENSEE;
WHEREAS, SUBLICENSEE is engaged in the preparation of an initial public
offering of its securities and has determined that it would be in the best
interests of its present and future shareholders to amend the Sublicense
Agreement to terminate the "anti-dilution" rights granted by the SUBLICENSEE to
the SUBLICENSOR in the original Sublicense Agreement as well as to clarify
SUBLICENSEE'S rights to further sublicense and franchise its sublicense rights;
WHEREAS, SUBLICENSOR currently owns 2,558,000 shares of the common stock
of SUBLICENSEE and notwithstanding any dilution resulting from the contemplated
initial public offering of SUBLICENSEE's common shares, SUBLICENSOR acknowledges
that it will be a direct beneficiary and obtain material benefits as a result of
SUBLICENSEE's public offering, which may include but not be limited to enhanced
opportunities to earn royalties from licensed products sold by a
well-capitalized SUBLICENSEE as well as increased marketing awareness and brand
recognition for its technology and licensed products which could result from the
motorcycle sales, anticipated in part from the funds derived by SUBLICENSEE'S
contemplated initial public offering;
WHEREAS, SUBLICENSOR and SUBLICENSEE desire and intend to set forth in
this Amendment the express modifications to the Sublicense Agreement that shall
govern their business relationship.
NOW, THEREFORE, in consideration of the premises and covenants, and other
good and valuable consideration, and the mutual promises of the performance of
the undertakings set forth herein, it is agreed by and among the SUBLICENSOR and
SUBLICENSEE as follows:
I. AMENDMENT OF SUBLICENSE AGREEMENT.
Subject to the terms and conditions set forth herein, SUBLICENSOR and
SUBLICENSEE agree to amend the Sublicense Agreement in the following manner:
1. ARTICLE 1.14, SOLD UNIT, shall be amended by deleting Article 1.14 in
its entirety and substituting the following new Article 1.14 in lieu thereof:
1.14.(A) Manufactured Unit shall mean a Licensed Product that has
completed the manufacturing process by a permitted sublicensee or
franchisee of SUBLICENSEE under the terms of this Agreement and as a
result, is included in the determination of royalty payments due and owing
to SUBLICENSOR pursuant to the terms of this Agreement.
(B) Sold Unit shall mean a Licensed Product that has been sold by
SUBLICENSEE under the terms of this Agreement and the sales price from
such sale has been received or collected by the SUBLICENSEE and as a
result, is included in the DETERMINATION OF ROYALTY PAYMENTS DUE AND OWING
TO SUBLICENSOR pursuant to the terms of this Agreement.
2. ARTICLE 2.1, LICENSES GRANTED TO LICENSEE, shall be amended by deleting
Article 2.1 in its entirety and substituting the following new Article 2.1 in
lieu thereof:
2.1 SUBLICENSES GRANTED TO SUBLICENSEE Subject to the terms and conditions
set forth herein, for a sublicense period equal to the duration of the
Patents commencing upon the Payment Date, as defined in Section 5.1 (the
"Sublicense Period"), unless terminated pursuant to Article VIII,
SUBLICENSOR hereby grants to SUBLICENSEE:
(a) Engines. An exclusive sublicense, with the right to grant further
sublicenses and franchises to make, use or sell to others, throughout the
Territory within the Field of Use under the Patent Rights and Technical
Information subject to the payment of royalties as provided herein, to
make or retrofit motorcycle engines that incorporate the CSRV Valve System
in accordance with the Technical Specifications, and to sell, lease or
otherwise dispose of such motorcycle engines; and
(b) CSRV Valve Seals. Within the limitations set forth in subsections
2.1(a), a non-exclusive sublicense to use CSRV Valve Seals solely in the
manufacture of CSRV Valve Systems for incorporation into motorcycle
engines throughout the Territory within the Field of Use under the Patent
Rights and Technical Information subject to the payment of royalties as
provided herein.
3. ARTICLE 5.1, Licensing Fee, 5.2, Royalties, 5.3, and 5.7 Books and
Records, shall be amended by deleting Articles 5.1, 5.2, 5.3 and 5.7 in their
entirety and substituting the following new Articles 5.1, 5.2, 5.3 and 5.7 in
lieu thereof:
5.1 - Sublicensing Fee and Undertakings.
In consideration of the rights granted under the Sublicense Agreement,
SUBLICENSEE paid to SUBLICENSOR a Sublicensing Fee of 2,550,000 shares of
SUBLICENSEE'S common stock and granted to SUBLICENSOR an antidilution
right to maintain a 50%+ ownership position in SUBLICENSEE'S securities.
SUBLICENSOR and SUBLICENSEE hereby agree to terminate the antidilution
rights granted to SUBLICENSOR in the Sublicense Agreement, effective
immediately. As consideration for the expansion of its sublicense rights
granted to it by SUBLICENSOR in this Amendment, SUBLICENSEE and
SUBLICENSOR agree as follows:
(a) SUBLICENSEE hereby agrees to issue to SUBLICENSOR an additional
1,000,000 shares of its common stock as partial consideration for the
expanded sublicense rights granted to it in this Amendment;
(b) SUBLICENSEE further agrees to utilize its best efforts to register
1,000,000 shares of its common stock transferred and paid to SUBLICENSOR
and to include such shares in the Form SB-2 registration statement
SUBLICENSEE has filed with the U.S. Securities and Exchange Commission and
which is currently under review;
(c) SUBLICENSEE acknowledges that it is the intent of SUBLICENSOR to
distribute the subject 1,000,000 shares to its shareholders of record as a
stock dividend following their registration under the Securities Act of
1933, provided, that the subject registration statement, including the
subject 1,000,000 shares, is declared effective by the Securities and
Exchange Commission and its intended distribution to SUBLICENSOR'S
shareholders is in compliance with applicable state securities laws;
(d) In the event the SUBLICENSEE'S registration statement, including the
1,000,000 common shares, is not declared effective by the Securities and
Exchange Commission on or before June 1, 2004, SUBLICENSEE'S obligations
to continue its efforts to register said shares under the Securities Act
of 1933 shall terminate, unless such obligation is extended by mutual
agreement of SUBLICENSOR and SUBLICENSEE;
(e) SUBLICENSEE agrees to take all necessary corporate action in order to
register the 1,000,000 shares of its common stock under the Securities Act
of 1933 on behalf of SUBLICENSOR in order to permit the lawful
distribution of these shares to the shareholders of SUBLICENSOR;
(f) SUBLICENSOR shall utilize its best efforts to cooperate and assist
SUBLICENSEE in the preparation of any documents necessary in order to
facilitate the registration and distribution of the subject 1,000,000
common shares pursuant to the Securities Act of 1933 and applicable state
securities laws.
SUBLICENSOR acknowledges its receipt of the Sublicensing Fee payment of
2,550,000 shares of SUBLICENSEE'S common stock pursuant to the Sublicense
Agreement, and the additional 1,000,000 shares pursuant to this Amendment;
SUBLICENSOR further agrees that such stock issuances to it represents the
only payment and consideration that constitutes the Sublicensing Fee due
and payable under the Sublicense Agreement and this Amendment.
Accordingly, SUBLICENSOR further acknowledges that its equity ownership
position in the SUBLICENSEE'S common stock shall be subject to further
dilution for proper corporate purposes and that the common shares issuable
to SUBLICENSOR under the Sublicense Agreement and this Amendment do not
bear any pre- emptive or similar rights.
5.2 - Royalties.
(a) In further consideration for the grant of the Sublicense described in
Article II of the Sublicense Agreement, SUBLICENSEE and its further
sublicensees and franchisees shall pay SUBICENSOR royalties as follows: in
the case of the SUBLICENSEE, it shall pay a royalty to SUBLICENSOR for
each Sold Unit in the amount of $25.00 per each 1,000 cc. within the
Territory, and; in the case of a sublicensee or franchisee of SUBLICENSEE,
it shall pay a royalty to SUBLICENSOR for each Manufactured Unit that has
completed the manufacturing process in the Territory in the amount of
$25.00 per each 1,000 cc. and shall accrue when a Licensed Product becomes
a Manufactured Unit produced by a further sublicensee or franchisee of the
SUBLICENSEE. The royalties provided for in this Section 5.2 shall be
payable with respect to each Sold Unit by SUBLICENSEE sold within the
Territory and with respect to each Manufactured Unit produced by a further
sublicensee or franchisee of the SUBLICENSEE within the Territory.
(b) Except as otherwise specified, the royalty payments required by
Section 5.2 shall accrue, in the case of the SUBLICENSEE when a Licensed
Product becomes a Sold Unit and, in the case of a further sublicensee or
franchisee of SUBLICENSEE, shall accrue when a Licensed Product becomes a
Manufactured Unit.
5.3 - SUBLICENSEE or a further sublicensee or franchisee of SUBLICENSEE,
as the case may be, shall pay the royalties accruing during each Payment
Computation Period (consisting of each day during each calendar month for
each calendar year, including the first and the last day of each calendar
month), ten (10) days after the end of such Payment Computation Period and
such payment shall be accompanied by a royalty report stating the
following:
(a) in the case of the SUBLICENSEE, the number of Sold Units of each
Licensed Product type sold during such Payment Computation Period, and in
the case of a further SUBLICENSEE or franchisee of the SUBLICENSEE, the
number of Manufactured Units of each Licensed Product type manufactured
during such Payment Computation Period; and
(b) the amount of the royalty payment due for each such Licensed Product
during each such Payment Computation Period, broken down to reflect the
derivation of such amount.
5.7 - BOOKS AND RECORDS.
Until five (5) years after the termination of the Sublicense Period,
SUBLICENSEE shall keep full and accurate books and records setting forth
the sales records and the amount of compensation payable with respect to
the Sold Units of each Licensed Product. In the case of a further
sublicensee or franchisee of SUBLICENSEE, SUBLICENSEE shall cause each
such further sublicensee and franchisee to keep full and accurate books
and records setting forth the manufacturing records and the amount of
compensation payable with respect to the Manufactured Units of each
Licensed Product. SUBLICENSEE and its further sublicensees and franchisees
shall permit an independent certified public accountant selected by
SUBLICENSOR to examine such books and records, upon reasonable notice
during working hours, at any time, but not later than two (2) years
following the payment in question, for the purpose of verifying the
reports, accounting and payments required by this Sublicense Agreement.
II. RATIFICATION AND CONFIRMATION OF BALANCE OF TERMS AND PROVISIONS OF
SUBLICENSE AGREEMENT
SUBLICENSOR and SUBLICENSEE hereby ratify and confirm all of the terms and
provisions of the Sublicense Agreement not expressly modified by this Amendment
and incorporate by reference all of such terms and provisions into this
Amendment as if set forth herein in their entirety.
IN WITNESS WHEREOF, the SUBLICENSOR and SUBLICENSEE have executed this
Amendment as of the day, month and year first above written.
SUBLICENSOR:
XXXXXX INTERNATIONAL, LTD.
By: /s/ Xxxxxx X.Xxxxxx
-----------------------------
Xxxxxx X. Xxxxxx, President
SUBLICENSEE:
XXXXXX MOTORCYCLE COMPANY, LTD.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Xxxxxxx X. Xxxxxx, President
AMENDMENT NO. 1 to Sublicense and License Agr 04-05-04 no sigs
