Exhibit 6.05
LICENSE AGREEMENT
THIS AGREEMENT is made effective as of the 2nd day of February 1999
(the "Effective Date"), by and between ID Technologies Corporation., a North
Carolina corporation, having a place of business and address of 0000 Xxxx Xxxx
Xxxxxx, Xxxxx X, Xxxxxx, Xxxxx Xxxxxxxx 00000 (the "Licensor"), and Power^Up
Marketing Corporation, a corporation, having a place of business and address of
0000 Xxxxxxxx / Xxx. 000 Xxxxxxx, XX 00000 (the "Licensee") (together, the
"Parties").
WHEREAS, Licensor owns all right, title and interest in United States
Patent No. 5,623,552 (the '552 Patent), dated April 22, 1997, and entitled
"Self-Authenticating Identification Card With Fingerprint Identification".
WHEREAS, Information Resources Engineering, Inc. (IRE) located at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxxxxx 00000, has a strong background in
technologies relating to the design, development, and manufacture of products
which can incorporate and has incorporated in such products with the cooperation
of Licensor the self-authenticating fingerprint identification technology as
described and claimed in the '552 Patent of Licensor.
WHEREAS, the aforementioned IRE owns rights to inventions and patents
pertaining to the same technology as that described and claimed in the `552
patent, and may own future inventions and patents pertaining thereto.
WHEREAS, Licensor has entered into an agreement granting IRE a license
under the '552 patent in a defined exclusive field and has obtained from IRE an
exclusive license in the Field of License (defined below) to receive IRE
technology and use and practice IRE's present and future IRE inventions and
patent(s) (hereinafter referred to as "IRE Technology"), for the full terms
thereof to the full extent to which they pertain to the subject matter described
and claimed in the '552 Patent and has further obtained from IRE the exclusive
right to sublicense such IRE Technology in said Field of License to the
Licensee.
WHEREAS, Licensor and IRE recognize that because of the complexity and
extensive potential applications of the technology covered by the '552 Patent it
will be desirable and mutually beneficial to all the parties that Licensor
coordinate the transfer of technology related to application of the '552 Patent
technology and that there be established Technology Development Partners
(defined below) to assist in the development and application of the technology
covered by the '552 Patent and that both IRE and Licensee will usefully serve
the role of being such a Technology Development Partner.
WHEREAS, Licensor anticipates obtaining from time to time from
Technology Development Partners certain additional technology and intellectual
property rights associated with and supportive of the practice of the '552
Patent.
WHEREAS, Licensor desires to license to Licensee the '552 Patent and
also the IRE Technology, and Technology Development Partner Technology to
facilitate Licensee's application of the '552 Patent technology, and Licensee
desires to receive such license, technology and assistance pursuant to the terms
of this Agreement.
NOW, THEREFORE, the Parties agree that for and in consideration of the
mutual covenants contained herein, and in consideration of the Initial Payment
(hereinafter defined) and other good and valuable considerations each to the
other have paid, the receipt and sufficiency of which is acknowledged, the
Parties have covenanted and agreed, and do hereby covenant and agree as follows:
1.0 DEFINITIONS
1.1 "SYSTEM" means Licensor's fingerprint identification technology
described and claimed in the '552 Patent and Licensor's Technology
(defined below).
1.2 "LICENSED PATENTS" means the '552 Patent and other patents licensed to
Licensee hereunder.
1.3 "SUBSIDIARY" means a corporation, company or other entity more than
fifty percent of whose outstanding shares or securities (representing
the right, other than as affected by events of default, to vote for the
election of directors or other managing authority) are, now or
hereafter, owned or controlled directly by a corporation, company or
other entity which is a party to this Agreement (either by Licensee or
the Licensor), so long as such ownership or control exists.
1.4 "TECHNOLOGY DEVELOPMENT PARTNER" (hereinafter referred to as "TDP")
means any individual, corporation, association, or other entity, other
than Licensor or a Subsidiary thereof, with whom Licensor is now or
hereafter becomes associated and to whom Licensor grants a license
under the '552 patent and from whom the Licensor acquires or has the
right to acquire rights to certain of the TDP's intellectual property
for incorporation into the System.
1.5 "TDP Technology" means inventions, patents and other technology
developed by IRE or another TDP and licensed or otherwise transferred
to Licensor for incorporation into the System and with respect to which
Licensor has the right to license others.
1.6 "LICENSEE TECHNOLOGY" means presently existing or future developed
inventions, patents, and technology of Licensee relating to the subject
matter of the '552 patent and licensed or otherwise transferred to
Licensor pursuant to this Agreement.
1.7 "IRE" means Information Resource Engineering, Inc., who shall be
treated as a Technology Development Partner of Licensor.
1.8 "LICENSOR AFFILIATE" shall mean a Subsidiary or Technology Development
Partner of Licensor.
1.9 "LICENSOR TECHNOLOGY" means and includes the Licensed Patents as well
as all present and future intellectual property including rights in
inventions, patents, trade secrets, copyrights and other technology,
and any portion thereof, associated with or supportive of use of the
System, which Licensor owns or is authorized to license or otherwise
transfer to Licensee under this Agreement and which Licensee receives
either from Licensor, IRE or a TDF with Licensor's assistance, and
includes present and future IRE
Technology, TDP Technology and Licensor Affiliate Technology as well as
other technology acquired by Licensor with respect to which Licensor
has the right to license.
1.10 "FIELD OF LICENSE" means identification, access, and security cards,
associated system and equipment of whatever type used in the hotel
security industry, including hotel door locking devices, in-room safes,
mini-bars, and all associated security systems worldwide.
1.11 "LICENSED PRODUCT" means any product or component of a product which
incorporates some or all of Licensor's Technology, or whose
manufacture, sale or use would infringe directly, contributorally, or
by inducement any claim of the '552 Patent or any other patent licensed
hereunder.
1.12 (i) "NET SALES" means a) in the context of an arms-length transaction
for monetary consideration, the gross sums received by Licensee (or a
sublicensee) for the sale or other transfer of Licensed Products or for
the sublicense or other transfer of the Licensor Technology, after
applying credits for freight, taxes, refunds, discounts, returns, and
bad debts but without any credit or deduction for commissions or broker
fees paid by Licensee, except as provided pursuant to Article 1.12(ii);
b) in the context of an arms-length transaction for non-monetary
consideration, the fair market value of the consideration received by
Licensee in exchange for the sale or other transfer of Licensed
Products or for the sublicense or other transfer of the Licensor
Technology; c) in the context of an arms-length transaction in which
the Licensee combines or includes Licensed Products in a commercial
offering whereby the pricing of the Licensed Products is some part of a
greater total price, the gross sums received by the Licensee, after
applying credits for freight, taxes, refunds, discounts, returns, and
bad debts, attributed to the sale or other transfer of the Licensed
Products. In the event that Licensed Products are disposed of in a
manner other than an arms-length transaction for money or other
consideration, Net Sales shall be measured by the price at which sales
or other transfers of similar Licensed Products are sold at arms-length
by the Licensee.
(ii) Where Net Sales is to be determined for the sublicense or other
transfer of the Licensor Technology, as opposed to the sale or other
transfer of Licensed Products, Net Sales shall be further reduced by
the amount of fees Licensee pays to independent, third-party brokers in
such transactions.
(iii) Where Net Sales is to be determined pursuant to foregoing
subparagraph (i)(c) of this Article 1.12, that portion of the total
price of the commercial offering attributed to the sale or other
transfer of the Licensed Products shall be determined by agreement of
the Parties, assisted by their accounting professionals. Should the
Parties not agree within thirty (30) days from their initial
discussions regarding a particular commercial offering, then the
Parties agree that the matter shall be decided by a panel of accounting
professionals, whose decision shall be binding on the Parties. The
panel shall consist of one accounting professional selected by each of
the Parties. If, within fifteen days of submission of the dispute to
the panel, the panel cannot agree, the panel members are authorized to
select a third accounting professional, acceptable to each panel
member, to assist in determining what portion of the total price should
be attributed to sale of the Licensed Products. The expanded panel
shall decide the issue by a simple majority,
within fifteen (15) days of the addition of the third panel member.
Each party shall pay one-half the cost of forming the panel and
obtaining a final panel decision.
1.13 "AUTHORIZED SOURCE" means a company selected by Licensor to manufacture
the Licensed Product or a company selected by Licensee with Licensor's
written approval pursuant to Article 4.2 below.
1.14 THE RECITALS set forth in the "Whereas" provisions on pages 1 and 2 of
this Agreement are incorporated herein by reference and are made a part
of this Agreement herein.
2.0 GRANT OF TECHNOLOGY LICENSE
Licensor hereby grants and conveys to Licensee, subject to the express
limitations of this Agreement, a license to test, experiment with and use the
First Prototype referred to in Article 3.0 below and upon accepting said First
Prototype and making the Production Start-up Payment called for by Article 9.0,
a worldwide exclusive license to make, use, sell, sub-license, or otherwise
transfer the System or any component thereof in the Field of License but only in
the Field of License, to use such certification xxxx(s), trademark(s) and/or
other marking(s) on Licensed Products pursuant to Article 14, and to disclose
the System to its Authorized Sources and others necessary for its practice by
Licensee and its sublicensees, subject, however, to the confidentiality duty set
forth in Article 22.
3.0 DEVELOPMENT OF FIRST PROTOTYPE OF SYSTEM AND NINETY DAY ACCEPTANCE PERIOD
3.1.1 Immediately upon this Agreement coming into effect and receipt by
Licensor of the Initial Payment called for in Article 9.0, Licensor
shall use its best efforts to produce or have produced for Licensee and
deliver to Licensee within three (3) years of the effective date of
this Agreement a first prototype (First Prototype) of the System in the
form described below:
The First Prototype shall be a card which uses the System to function
as a self-contained verification process to enable and disable access
to information or data stored in a magnetic strip or smart chip on the
card. The First Prototype shall be of standard credit-card dimensions,
appearance and durability, and, specifically, shall have a thickness of
32 millimeters on all portions of the card except for that portion of
the card which constitutes the fingerprint reader panel, which portion
may have a thickness of up to 52 millimeters. The First Prototype shall
be functional in all standard swipe and Veri-Phone type readers and
shall be a card which could be made available to Licensee, at its
option, at up to $20.00 per card for orders of 100,000 cards or more.
Notwithstanding the foregoing, development of the First Prototype shall
not obligate Licensee to purchase cards in any minimum quantity.
3.2 Licensee shall have ninety (90) days from the date it receives the
First Prototype meeting the specification set forth in Article 3.1
above to accept such First Prototype. Acceptance
of the First Prototype by Licensee pursuant to Article 3.3 below shall
entitle Licensee to make the Production Start-Up Payment called for by
Article 9.1.2. In the event that Licensee fails to accept the First
Prototype and make the aforesaid Production Start-Up Payment within the
aforesaid ninety (90) day acceptance period, this License Agreement
shall automatically terminate, all rights granted to Licensee hereunder
shall revert to Licensor and Licensee shall be obligated to immediately
return to Licensor said First Prototype and all confidential
information received from Licensor or a TDP.
3.3 Acceptance of the First Prototype shall be effective upon Licensee
tendering to Licensor the Production Start-Up Payment described in
Article 9.1.2 in cash or certified funds.
3.4 If within three (3) years of the effective date of this Agreement
Licensor has not delivered the First Prototype to Licensee, this
License Agreement shall terminate.
4.0 AUTHORIZED SOURCE OF LICENSED PRODUCT
4.1 AUTHORIZED SOURCE LIST. Licensor shall provide Licensee within six (6)
months from the Effective Date of this Agreement the name and address
of at least one company with the expertise, skill, and knowledge to
manufacture and produce Licensee's designated ones of the Licensed
Products within Licensee's Field of License according to Licensee's
specifications and which Licensee is prepared to develop and market.
4.2 ADDITIONAL AUTHORIZED SOURCES. At any time during the term of this
Agreement, the Licensee may request adding to the list of Authorized
Sources one or more manufacturers of Licensed Products within
Licensee's Field of License. Such request shall affirmatively state
that the Licensee has investigated the proposed source and has an
adequate basis for believing that the proposed source can manufacture
the particular Licensed Product of interest to the Licensee to such
standards of quality and grade at least equal to and in all respects
not less reliable than the Authorized Sources identified in Article
4.1. Licensor, not more than thirty (30) days after it receives the
proposed Additional Authorized Sources from Licensee, shall advise
Licensee with respect to such request, and shall not unreasonably
reject such proposed source. In the event that the Licensor shall fail
to reply within said 30 days, the proposed additional source shall be
deemed an Authorized Source.
4.3 PROCUREMENT. Licensee shall procure the Licensed Product only from an
Authorized Source.
4.4 SAMPLES. With regard to Authorized Sources selected by Licensee, the
Licensee shall, at any time requested by the Licensor, either provide
to the Licensor random samples of the Licensed Product from each such
Authorized Source, or enable the Licensor to enter the Licensee's
premises, without notice, during the Licensee's ordinary business hours
and inspect the Licensed Product supplied by such Authorized Source(s).
4.5 LICENSEE NOT OBLIGATED TO PURCHASE FROM PERSONS SELECTED BY LICENSOR.
The Licensee acknowledges that it is not required to obtain the product
from any person affiliated with the Licensor, and that it has a full
and sufficient opportunity to seek out alternative sources of the
product and will take such advantage of that opportunity as it
independently elects, relying exclusively on its own business judgment
and not on the recommendation of the Licensor for that purpose. The
Licensee further warrants that it will conduct its own inspection of
any Authorized Source whose identity is provided to the Licensee by the
Licensor, will independently determine the capability and quality of
such Authorized Source to meet the requirements of the Licensee, and
will not rely on the judgment of the Licensor for that purpose. The
Licensor makes no warranty or representation whatsoever as to the
capabilities or performance of any Authorized Source, and expressly
disclaims all such warranties and representations.
5.0 LICENSEE'S RIGHT TO PROPOSE SPECIFICATIONS
The Licensee shall have the right to propose modifying Licensed Product
specifications in a manner that would permit the Licensed Product to better
service customers in the Field of License. Licensor has the right to reject such
modifications, if such modified specifications call for a Licensed Product of a
lesser grade or quality than desired by Licensor or a Licensed Product likely to
impair consumer acceptance of the Licensed Products.
6.0 DEVELOPMENT OF PROTOTYPES OF LICENSED PRODUCTS
6.1 Upon selection of an Authorized Source for the first selected Licensed
Product within Licensee's Field of License which Licensee stands ready
to procure, develop and market in commercial quantities, Licensee shall
promptly and forthwith proceed to procure such selected Licensed
Product in prototype form from such Authorized Source, and upon
procurement thereof provide Licensor with a sample thereof.
6.2 Licensor shall upon receipt of a sample of Licensee's first selected
Licensed Product in a prototype form suitable for reproduction in
commercial quantities promptly notify Licensee of its approval or
disapproval thereof. In the event of approval, Licensee shall use its
best efforts to commence production, marketing and sale of such first
selected Licensed Product throughout the Field of License. In the event
of disapproval, Licensor shall inform Licensee of the reasons therefore
and Licensee shall promptly take steps to improve such prototype of the
first selected Licensed Product.
6.3 After introduction and marketing of the first selected Licensed Product
as referred to above, Licensee shall proceed to select the next and
subsequent Licensed Products in the same manner as set forth above.
7.0 WARRANTIES AND REPRESENTATIONS OF THE PARTIES
7.1 LICENSORS WARRANTIES AND REPRESENTATIONS
7.1.1 LICENSOR TECHNOLOGY.
(a) The Licensor warrants that it is the sole and exclusive owner
of all right, title and interest in Letters Patent of the
United States, No. 5,623,552 dated April 22, 1997, and
entitled Self Authenticating Identification Card With
Fingerprint Identification," and has the sole and exclusive
right to grant licenses to others to manufacture, use, and
sell, products covered by the patent, and further warrants
that it has the right to license the System to Licensee
pursuant to the terms of this Agreement.
(b) Licensor also warrants that it has obtained from IRE a
non-exclusive license in the Field of License to receive IRE
Technology and use and practice IRE's present and future IRE
inventions and patent(s) for the full terms thereof to the
full extent to which they pertain to the subject matter
described and claimed in the '552 Patent and has further
obtained from IRE the right to sublicense such IRE Technology
in said Field of License to the Licensee, and that such IRE
Technology is covered by the royalty rate identified in
Article 9.3.
7.1.2 PROSECUTION OF LICENSOR PATENTS. Licensor shall use its best
efforts to maintain the '552 Patent and any other presently or
future existing United States or foreign patents owned by
Licensor and relating to the System.
7.1.3 LICENSOR BEST EFFORTS. Licensor shall use its best efforts to
develop, improve, enhance and commercialize the System through
its dealings with Subsidiaries, Licensees, and Technology
Development Partners.
7.1.4 LICENSOR EMPLOYEES. Licensor represents and warrants that it
shall require its employees to assign to Licensor all
intellectual property rights to the inventions developed by
its employees relating to the System.
7.2 LICENSEE'S WARRANTIES AND REPRESENTATIONS
7.2.1 LICENSEE'S BEST EFFORTS. Licensee represents and warrants to
use its best efforts to proceed diligently with its
development, improvement, enhancement, manufacture and sale of
the Licensed Products and System throughout the Field of
License in accordance with the terms of this Agreement.
Licensee shall at its cost and expense use its best efforts
and all due diligence to energetically and aggressively
develop the market for the Licensed Products in the Field of
License, to promote the sale, sublicense, and use of the
Licensed Products and to enhance the reputation and goodwill
associated with the Licensed Products. In connection with its
obligations under this Article 7.2.1, Licensee shall maintain
facilities of a nature and style suitable in the Field of
License to facilitate the marketing, distribution, sale, and
sublicensing of the Licensed Products; shall provide
aggressive, dedicated, continuous representation throughout
the Field of License by means of sales and support staff
sufficient in number, qualifications, and training to
aggressively and effectively promote, market, and service the
Licensed Products.
7.2.2 LICENSEE'S TECHNOLOGY. Licensee represents and warrants in
recognition of mutual benefits to be derived by Licensee,
Licensor and the TDPs that it shall grant to the Licensor a
nonexclusive, royalty free license, with the right to
sublicense, to make, use, and sell outside the Field of
License any Licensee made improvement or enhancement to the
System or Licensee Technology. With regard to technology
developed by Licensee, Licensee represents and warrants that
it
shall have the sole and exclusive right to grant the license
to manufacture, use, sell, and otherwise transfer Licensee's
Technology to Licensor.
7.2.3 QUALITY OF LICENSED PRODUCTS. Licensee represents, warrants
and covenants that it shall diligently inspect goods delivered
by Authorized Sources to assure conformity with
specifications, grade and quality satisfactory to Licensor,
and shall not procure goods from any unauthorized source.
Furthermore, Licensee shall not induce any Authorized Source
to engage in adulteration, substitution or other practices
that would constitute a variance from such specifications,
grade and quality and shall not knowingly countenance any such
practices.
7.3 MUTUAL WARRANTIES AND REPRESENTATIONS. The Parties recognize that the
exchange and cross-licensing of TDP Technology is intended for their
mutual benefit and that neither party, at the time of this Agreement,
is able to determine the legal status of the TDP Technology subject to
licensing under this Agreement. Accordingly, neither party represents
or warrants that TDP Technology, other than the technology developed by
the Parties themselves, is patented or patentable, copyrighted or
copyrightable, or subject to protection under the law of trade secrets,
and do not represent or warrant that such technology is free of any
third-party claims of infringement or misappropriation. Notwithstanding
the absence of representations and warranties with respect to any such
Technology that one party may furnish to the other, the furnishing
party shall make reasonable inquiry and by delivering the Technology to
the other Party shall be deemed to then represent and warrant that it
knows of no infringement or misappropriation claims actual or likely
with respect to such Technology. Such inquiry shall not include the
duty to conduct a patent infringement searches or like level of
investigation.
8.0 SUBLICENSING AND THE UNDERSERVED FIELD OF LICENSE
8.1 ASSIGNMENT. Neither this Agreement nor any rights conveyed to Licensee
hereunder shall be assigned by Licensee except with the prior written
consent of Licensor, such consent not to be unreasonably withheld
8.2 SUBLICENSING. Licensee may sub-license all or any portion of the System
to any individual, corporation, or other entity for development, use,
manufacture, sale, or further sub-license of the System solely in the
Field of License. Licensee shall have the same responsibility for the
activities of a sublicensee under any such arrangement as if the
activities were directly those of the Licensee. For example, and not by
way of limitation, royalties shall be paid to Licensor by Licensee with
regard to the activities of such sublicensees as if those activities
were the Licensee's, and each sublicensee shall be restricted to using,
manufacturing, selling, and further sublicensing the System to the
Field of License defined in Article 1.10 above.
8.3 SUBLICENSING CONDITIONS. In the event that Licensee desires to
exercises its right to sublicense its rights as granted herein,
Licensee shall, unless otherwise agreed by Licensor and Licensee,
negotiate an agreement on terms, which insofar as practical are
substantially consistent with the terms of this Agreement, and shall
also:
(a) Advise Licensor of the possible intent to sublicense, identify
the potential sublicensee, prepare a proposed written
sublicensee Agreement, submit a copy of the proposed
sublicense agreement to Licensor for its review and obtain
Licensor's written permission to enter into said sublicensee
Agreement which permission shall not be unreasonably withheld,
and shall be granted no more than thirty (30) days from the
date Licensor receives such proposed sublicensee Agreement
until such permission is denied for reasonable cause.
(b) Require royalty payment to Licensee of no less than the
royalty required by Licensor to be negotiated on a case by
case basis, which Licensor's agreed share shall be remitted to
Licensor.
(c) Require quarterly reporting and payment of royalties.
(d) Require the sublicensee to keep Licensor informed concerning
infringement by outside parties of the properties transferred,
any potential product fault, improper use and the like.
(e) Require the sublicensee to give both Licensee and Licensor the
right to audit the sublicensee's books and records.
(f) Require that the sublicensee not assign any rights licensed to
the sublicensee except with written permission of Licensor.
(g) Include a confidentiality provision in the sublicensee
Agreement comparable to that contained in this Agreement.
(h) Provide to Licensor at least once in a calendar year a written
report indicating the extent of its promotional and sales
activities with each actual or prospective sublicensee.
(i) Require that sublicensee not reverse engineer or disassemble
the Licensed Product.
8.4 UNSERVED AND/OR UNDERSERVED FIELD OF LICENSE.
(a) At any time after the first year during the term of this
License (or any extensions thereof) should Licensor determine
that some area or areas within the "Field of License" are not
being served or are being underserved by Licensee, Licensor
may notify Licensee in writing of such determination. This
notification shall clearly reference this Article 8.4 of the
Agreement as its basis and give reasonable evidence in support
of Licensor's determination of such unserved and/or
underserved areas.
(b) Licensee shall acknowledge this notice in writing within ten
(10) business days and respond to this same notice in writing
within ninety (90) days setting forth Licensee's plans to
serve or better serve the subject area. Should Licensor and
Licensee agree on plan(s) proposed by Licensee or Licensor, no
further action
under this provision of this Article 8.4 will be necessary.
Should Licensor and Licensee fail to agree on such plan(s)
within thirty (30) days of Licensor's receipt of such plan(s);
and should Licensor believe the subject area to be materially
unserved or underserved to the detriment of all parties, then
the matter will be submitted to arbitration under Article 22
of this Agreement.
(c) Should such arbitration process result in the determination
that Licensor's position is correct Licensee shall 1)
sublicense the unserved area(s) to parties reasonably capable
of and willing to deliver such services and/or 2) allow the
relicensing of these areas, splitting all revenues therefrom
between Licensor and Licensee on a fifty/fifty (50/50) basis.
9.0 PAYMENTS, ROYALTIES AND COMPENSATION
9.1 INITIAL PAYMENT
9.1.1 Licensee shall pay Licensor within 90 days of the execution of
this Agreement and as an Initial Payment and in order to make
this Agreement effective, the non-refundable amount of
twenty-five thousand dollars ($ 25,000).
9.1.2 Upon delivery and acceptance by Licensee of the First
Prototype in accordance with Article 3.0, Licensee shall pay
Licensor the Production Start-Up Payment of three hundred
fifty thousand ($350,000) for Licensee to have the right to
start commercial production under the license granted by
Article 2.0 and represents Licensee's payment for the
worldwide exclusive license granted thereunder, which
Production Start-Up Payment shall be made subject to the terms
of Article 3.0.
9.2 ROYALTY PAYMENTS.
(a) Licensee shall pay to Licensor royalties, after acceptance of
the First Prototype, at the Royalty Rate provided in Article
9.3 below for the term of this Agreement according to Article
12 below.
(b) Licensee shall determine and pay actual royalties, computed
pursuant to the Royalty Rates set forth below, to Licensor on
a quarterly basis within sixty (60) days after the end of each
quarter. ("Actual Royalties") In addition, within sixty (60)
days of the last day of each calendar year, Licensee shall pay
to Licensor the difference, if any, between the total Actual
Royalties paid by Licensee to Licensor during the course of
the most-recently concluded calendar year and $120,000, which
the Parties hereby agree shall be the minimum royalty amount
payable by Licensee during each calendar year of the term
hereof. ("Minimum Royalties"). Minimum Royalties for the
calendar year 1999 (the first year of this Agreement) shall be
pro-rated accordingly. Notwithstanding the foregoing. Licensee
shall not be required to pay Minimum Royalties for the period
beginning upon acceptance of the First Prototype and ending
ninety (90) days thereafter. Also notwithstanding the
foregoing, if Licensor has separately agreed to supply
Licensee with Licensed Products, Licensee shall not be
responsible for paying
Minimum Royalties for any period during a calendar year in
which Licensed Products reasonably necessary to fill orders to
Licensee's customers are not available from Licensor for use
by Licensee when such period extends for a period of at least
one hundred and twenty (120) days after placing such orders.
The Minimum Royalties amount due for any calendar year shall
be prorated to exclude said time period in which Licensed
Products were unavailable to Licensee.
9.3 ROYALTY RATE. Actual Royalties shall be computed at the rate of six
percent (6%) of Licensee's Net Sales during the applicable quarterly
period (the "Royalty Rate").
9.4 REPORTS AND AUDITS OF LICENSEE'S NET SALES.
(a) Licensee agrees that, within sixty (60) days after the end of
each quarter, in each and every calendar year, commencing with
the first quarter following acceptance of the First Prototype
and continuing for the duration of Licensee's obligation to
make Royalty payments, Licensee will furnish to Licensor
written reports specifying the Licensee's Net Sales during the
preceding quarter (the "Quarterly Reports"). Such reports
shall provide adequate details to allow Licensor to reasonably
determine that its business with Licensee has been accurately
reported by Licensee's financial system.
(b) Licensee agrees to have its auditors verify in writing the
accuracy of the Quarterly Reports for each calendar year,
which written verification is to be submitted to Licensor no
later than ninety (90) days after the end of each calendar
year (the "Licensee's Auditor's Verification").
(c) Licensee agrees to allow an independent certified public
accountant or other audit professional selected by Licensor to
audit and analyze Licensee's accounting records during regular
business hours to determine the accuracy of Licensee's
Quarterly Reports (an "Independent Audit"). Such audits shall
not be requested by Licensor more than twice per calendar
year, may be conducted only upon ten (10) business' days
written notice to Licensee, and must be conducted so as not to
interfere unreasonably with Licensee's business activities.
(d) The Independent Audit shall be at the expense of Licensor,
unless a variation or error exceeds five percent (5%) of the
Net Sales for the Quarter in which the error occurs, whereupon
all costs of the Independent Audit shall be paid by Licensee.
(e) If Licensor fails to request an Independent Audit within two
years after receipt of the Licensee's Auditor's Verification,
then the Licensee's Auditor's Verification shall be
conclusively determinative of the Net Sales for that calendar
year for the purposes of calculating Actual Royalties, and
Licensor may not thereafter dispute the accuracy of the Net
Sales figure reported by Licensee and verified by Licensee's
Auditor.
9.5 LATE PAYMENT INTEREST. Any payment not paid in full when due shall, as
to that portion thereof not paid when due, bear interest for each day
late at the rate of eighteen percent
(18%) per annum, compounded monthly, or at the maximum rate allowed by
law, if said maximum amount is less. The calculation of a daily rate
shall be made based upon a year of three hundred and sixty (360) days
and a month of thirty (30) days. Payments not made when due because of
a dispute as to the correct amount thereof shall nonetheless be
considered late if ultimately adjudged to be due, and interest shall be
paid thereon as set out above.
10.0 INFRINGEMENT AND INDEMNIFICATION
10.1 INFRINGEMENT CLAIMED BY THIRD PARTIES.
10.1.1 If the Licensee shall be sued for infringement by reason of
the Licensee's activities under the license granted in this
Agreement, the Licensee shall immediately notify the Licensor
and the Licensor shall defend, indemnify, and hold the
Licensee harmless against any such claims, which, if proven,
would constitute a breach of any of the Licensor's
representations or warranties of Article 7.1 above. Provided,
however, that the Licensor shall not have a duty to defend if
the claim of infringement is based upon acts of the Licensee
which go beyond the scope of the Licenses granted, such as by
reason of combination of practice under the license and
authorized practices, with additional activity, which combined
licensed and unlicensed activity shall be the subject matter
of the infringement action. Without limiting the foregoing,
the Licensor shall have the control of any such defense and
the right to enter into any settlement and compromise of any
such claim or action provided, however, that the Licensee
shall assume no further royalty or other obligation, whether
to the Licensor or to any third party, by reason of such
settlement. The Licensee shall, if requested by Licensor, make
such reasonable modifications in the practice of the license
granted under this Agreement such as would enable the parties
to avoid or mitigate any third-party claims of infringement or
misappropriation.
10.1.2 If Licensor shall be sued for infringement by reason of the
Licensor's activities under any cross-license anticipated by
this Agreement, the Licensor shall immediately notify the
Licensee and the Licensee shall defend, indemnify, and hold
the Licensor harmless against any such claims, which, if
proven, would constitute a breach of any of the Licensee's
representations or warranties of Article 7.2 above. Provided,
however, that the Licensee shall not have a duty to defend if
the claim of infringement is based upon acts of the Licensor
which go beyond the scope of the Licenses granted, such as by
reason of combination of practice under the license and
authorized practices, with additional activity, which combined
licensed and unlicensed activity shall be the subject matter
of the infringement action. Without limiting the foregoing,
the Licensee shall have the control of any such defense and
the right to enter into any settlement and compromise of any
such claim or action provided, however, that the Licensor
shall assume no further royalty or other obligation, whether
to the Licensee or to any third party, by reason of such
settlement. The Licensor shall, if requested by Licensee, make
such reasonable modifications in the practice of the license
granted under this Agreement such as would enable the parties
to avoid or mitigate any third-party claims of infringement or
misappropriation.
10.2 INFRINGEMENT BY THIRD PARTIES.
10.2.1 Licensee shall have the right, but not the obligation, to
institute and prosecute any and all suits to enjoin any and
all infringers of the licensed patents, where such
infringements affects the Licensee's use of the Technology in
the Field of License; and from time to time during the
continuance of this Agreement, and at its own expense, may
institute any suit or suits which it may deem necessary. The
Licensee shall have the right to institute and prosecute such
suits, and to employ its own counsel for such suits; and
Licensee shall pay for all services rendered by counsel so
retained, and for all incidental costs and expenses. Licensee
agrees that Licensor may join as a party plaintiff in any suit
initiated by Licensee regarding the System, at Licensor's sole
expense, where Licensor deems that joining as a party
plaintiff is necessary and in Licensor's best interests.
10.2.2 Except to the extent that Licensee has instituted or plans to
institute a suit under Article 10.2.1, Licensor shall have the
right, but not the obligation, to institute and prosecute any
and all suits to enjoin any and all infringers of the '552
Patent where such infringement affects Licensor's use, sale,
or rights to the System, and from time to time during the
continuance of this Agreement, and at its own expense, may
institute any suit or suits it may deem necessary. The
Licensor shall have the right to institute and prosecute such
suits, and to employ its own counsel for such suits; and
Licensor shall pay for all services rendered by counsel so
retained, and for all incidental costs and expenses. Licensor
agrees that Licensee may join as a party plaintiff in any suit
initiated by Licensor pertaining to infringement in the Field
of License regarding the System, at Licensee's sole expense,
where Licensee deems that joining as a party plaintiff is
necessary and in Licensee's best interests.
11.0 LIMITATIONS OF LIABILITY AND CONSEQUENTIAL DAMAGES
In no event, whether based on contract, indemnity, warranty, tort
(including negligence), strict liability or otherwise, shall Licensor or
Licensee or their subcontractors or suppliers, or any of their respective
directors, officers, employees or agents, be liable for (i) special, exemplary,
or punitive damages; or (ii) any losses or damages arising out of, connected
with, or resulting from (A) the performance of any third party not hired by
Licensor or Licensee, (B) any software, hardware or other product or component
provided by any third party, or (C) the reliance by Licensor or Licensee on any
statement or representation made by Licensee or Licensor regarding a third party
vendor.
12.0 TERM OF AGREEMENT AND RENEWAL
The term of this Agreement shall be twenty (20) years from the
Effective Date, with the right of Licensee to renew for subsequent periods of
five (5) years thereafter, provided that for each renewal:
(a) the Field of License is not then unserved or underserved and
such unserved or underserved Field of License has not been
cured or is not being cured in accordance with Article 8.4;
(b) there is no uncured Licensee breach of this Agreement; and
(c) Licensee shall pay Licensor one hundred twenty thousand
dollars ($ 120,000)
13.0 TERMINATION
13.1 This Agreement may be terminated as follows:
(a) By mutual Agreement of the Parties.
(b) By Licensee if Licensor fails to deliver the First Prototype
within three (3) years following the effective date of this
Agreement or if the First Prototype delivered by Licensor to
Licensee is not satisfactory to Licensee.
(c) By Licensor upon Licensee failing pay Licensor the Minimum
Royalty within sixty (60) days after each calendar year,
whereupon Licensee's failure to make such payment, Licensor
shall give notice to Licensee of such failure. This License
Agreement shall terminate 10 days from Licensee's receipt of
such notice unless Licensee, within said 10 day period, remedy
such default.
(d) If the Licensee shall (i) commence a voluntary case under the
federal or state bankruptcy laws, (ii) file a petition seeking
to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up
or composition for adjustment of debts, (iii) consent to or
fail to contest in a timely and appropriate manner any
petition filed against it in an involuntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to,
or fail to contest in a timely and appropriate manner, the
appointment of, or the taking of possession by, a receiver,
custodian, trustee, or liquidator of itself or of a
substantial part of its property, domestic or foreign, (v)
admit in writing its inability to pay its debts as they become
due, (vi) make a general assignment for the benefit of
creditors, (vii) take any corporate action authorizing any of
the foregoing, (viii) become the subject of a case or other
proceeding in any court of competent jurisdiction seeking
relief under the federal bankruptcy laws or under any other
laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, which
proceeding shall continue undismissed or unstayed for a period
of sixty consecutive calendar days, or an order granting the
relief requested shall be entered, or (ix) become the subject
of the appointment of a trustee, receiver, custodian,
liquidator or the like, which appointment shall continue
undismissed or unstayed for a period of sixty consecutive
calendar days.
(e) If Licensee, without having first terminated this Agreement
and ceased obtaining any of the benefits of this Agreement
challenges the validity of any patent purported to be licensed
by the Licensee under this Agreement.
(f) By either party due to the other party's material breach of
its obligations under this Agreement, upon giving written
notice, except as limited below:
(ii) Where the breach relates solely to Licensee's non-payment
of Royalties, the Licensor's right to terminate this Agreement
is limited as follows:
(aa) Before the Licensor may terminate this Agreement
solely for Licensee's non-payment of Royalties, except for the
automatic termination rights provided by Article 13.1(c)
above, Licensor must give Licensee written notice of default
and make a demand for immediate payment, describing the time
period at issue, the amount due, and how the Licensor
determined that the amount demanded is due (the "Licensor's
Demand"). To avoid termination of this Agreement for
non-payment of the Royalties demanded, Licensee must within
ten days either: 1) pay to Licensor the full amount demanded
as due; or 2) respond to Licensor's Demand with an explanation
of why no additional amount is due (the "Licensee's
Response").
(bb) If, within thirty (30) days of Licensor's
receipt of the Licensee's Response, the Parties cannot resolve
their dispute, then the Licensor shall submit to Licensee a
list of five (5) independent certified public accountants
acceptable to the Licensor and, within five (5) days
thereafter, Licensee shall select one independent certified
public accountant from said list, and upon agreement of said
accountant to serve, that accountant shall serve as the
Royalties Arbitrator.
(cc) Within five (5) days of selection of the
Royalties Arbitrator, each party shall forward to the
Royalties Arbitrator copies of this Agreement, the Licensor's
Demand, the Licensee's Response, and any other supporting
documentation and shall jointly request that the Royalties
Arbitrator conduct an expedited review of the documents
submitted to resolve the dispute and to provide a written
determination as to Royalties due, if any.
(dd) The Parties hereby agree to abide by the
Royalties Arbitrator's written decision as to the amount of
Royalties due, if any. Upon a written determination by the
Royalties Arbitrator that some amount of Royalties is due,
Licensee shall pay that amount to Licensor within three (3)
days of receipt of the Royalties Arbitrator's written decision
and shall be responsible for any fees charged or costs
incurred by the Royalties Arbitrator in resolving the dispute.
Upon a written determination by the Royalties Arbitrator that
no Royalties are due, Licensor shall be responsible for any
fees charged or costs incurred by the Royalties Arbitrator in
resolving the dispute. Each party shall otherwise bear its own
fees and costs.
(ee) The Licensor shall be released from its
obligation to follow the foregoing procedure upon a) after a
single determination by the Royalties Arbitrator that the
Licensee's Response was groundless and wholly without
justification or b) upon receipt from the Royalties Arbitrator
its written decisions in two Royalties disputes that the
amount demanded in the Licensor's Demand was in fact the
amount of Royalties due.
(iii) Where the breach relates, in whole or in part, to
obligations other than Licensee's nonpayment of Royalties,
then prior to terminating this agreement, the non-breaching
party must provide written notice of the breach and must
permit the other party thirty days from the date of the
written notice to cure such breach. Each party shall be
released from this obligation of notice and cure after that
party has complied with this provision with respect to the
first two breaches within any successive five year period by
the other party.
(g) By the Licensee in the event that Licensee has been required
to pay Licensor Minimum Royalty payments, in any amount, over
a period of two consecutive years, upon giving Licensor thirty
(30) days written notice of Licensee's intent to terminate.
13.2 Upon termination of this Agreement, any and all rights which the
Licensee shall have or possess under this Agreement, including
sublicenses thereunder, shall permanently cease and be by it
relinquished and surrendered to the Licensor. If such termination is
not due to a Licensee breach of this Agreement, Licensee shall have the
right to sell all Licensed Products already manufactured and in its
possession for a period of three (3) months following the termination
date, upon which royalties will be paid as provided above. Should
termination of this Agreement be due to a Licensee breach, then
Licensee shall, upon termination, transfer all Licensed Products to
Licensor, and pay all royalties it owes Licensor.
14.0 MARKING
The Licensee shall use such certification xxxx(s), trademark(s), and/or
other marking(s) as may from time to time be adopted by the Licensor to indicate
to the public that the Licensed Products are genuine licensed products, and/or
to indicate the patent protection applicable thereto. The Licensee shall in any
event when requested by Licensor xxxx the patent number of each patent covering
the Licensed Products, on each licensed product manufactured, sold or otherwise
distributed by the Licensee in a manner satisfactory to Licensor; and shall use
the trademark registration symbol adjacent any registered trademark to the
extent permitted by law.
15.0 NO BUSINESS OPPORTUNITY OR FRANCHISE
This Agreement is not intended to be, and shall not be construed to be,
the granting of a business opportunity or of a franchise under the laws of the
United States or any state or territory thereof. The Licensee warrants to
the-Licensor that the Licensee possesses business expertise relevant to the
field in which it will engage pursuant to the license granted herein. The
Licensee acknowledges that the Licensor is not obligated by this Agreement to
provide any business advice or business assistance of any kind or nature
whatsoever, including but not limited to the provision of a prescribed marketing
plan or system, and warrants that the Licensee has not received, and does not
expect to receive, any business advice or assistance from Licensor on which it
has relied or intends to rely in any manner whatsoever. The Licensee further
acknowledges that the Licensee, in evaluating the propriety of entering into
this Agreement, has relied exclusively on its own advisors and not on any
representations made by the Licensor except such representations as are
expressly stated in the words of this Agreement.
16.0 NO INVESTMENT OR SECURITIES OFFERING
The Licensee represents and warrants that the Licensor shall not, by
reason of entering into this license with the Licensee, be or become obligated
to file a registration statement with the Securities and Exchange Commission to
qualify the License to fall under the blue sky laws of any state. Furthermore,
notwithstanding any other provision of this Agreement, the Licensee shall not
enter into any transaction regarding the License that would require the Licensor
to file a registration statement with the Securities and Exchange Commission to
qualify the License to fall under the blue sky laws of any state. Any violation
of this Article 16.0 is a material default that shall entitle the Licensor to
terminate this Agreement.
17.0 CONSENT TO ADVERTISING AND PUBLICITY
The Licensor may issue and disseminate to the public information
describing the license entered into with the Licensee, including the name and
address of the Licensee, the general terms of the agreement, and a general
description of the Licensee's business.
18.0 GOVERNING LAW
This Agreement shall be interpreted and construed in accordance with
the laws of the United States and the laws of the State of North Carolina.
19.0 INDEPENDENT CONTRACTORS
The Parties to this Agreement are independent contractors. Nothing in
this Agreement is to be construed as making either party an agent of or joint
venturer with the other.
20.0 COMPLETE AGREEMENT AND MODIFICATION
This Agreement represents the entire agreement, both written and oral
of the Parties, and supersedes and replaces any prior written or oral agreements
between Licensee and Licensor. This Agreement may be amended- only in a writing
stating that it is an amendment or modification of this Agreement, and signed by
an authorized representative of each of the Parties hereto.
21.0 NOTICES
Any notice required to be given under this Agreement shall be properly
given if delivered by first-class mail as follows:
ID Technologies Corporation. Power^Up Marketing Corporation
0000 Xxxx Xxxx Xxxxxx, Xxxxx X 0000 Xxxxxxxx / Xxx. 000
Xxxxxx, Xxxxx Xxxxxxxx 00000 Xxxxxxx, XX 00000
Attention: President Attention: President
22.0 CONFIDENTIALITY
The Parties acknowledge that in order to carry out the License granted
hereunder, it may be necessary for either Parties to transfer or disclose
certain trade secrets that have been developed by Licensor and/or a TDP at great
expense and that have required considerable effort of skilled professionals. The
Parties acknowledge and agree that in no event shall either Party disclose any
such trade secrets to any third party. In the event that it is necessary to
transfer or otherwise disclose such trade secret and confidential information to
either Party, an Authorized Source, or sublicensee of Licensee then the party
disclosing such trade secrets or confidential information shall require the
party to which the information is being disclosed to sign a confidentiality
agreement, requiring that in no event shall the receiving party disclose any
such trade secrets and confidential information to a third party. Confidential
information shall be that information disclosed or transferred to either Party
that is marked "Confidential," or information disclosed or transferred to either
party that at the time of such disclosure or transfer the party receiving such
disclosure was informed that the information must be treated by the receiving
Party as confidential.
23.0 ARBITRATION
Any dispute under this Agreement not resolved within thirty (30) days
of notice to the other party shall be submitted to binding arbitration under the
rules of the American Arbitration Associated then in effect. There shall be no
appeal from the decision other than for gross violation of due process or fraud
in the conduct of the arbitration. Judgment upon the decision may be entered in
a state or federal court, as may be appropriate, selected by the party of whom
arbitration was requested, or, if that party declines to promptly select such a
court, in a court selected by the party who had requested arbitration. The
parties irrevocably agree, for this purpose only, to submit to the jurisdiction
of such a court, or application may be made to such court for confirmation of
the decision, for judicial acceptance thereof, for an order of enforcement, or
for any other legal remedies that may be necessary to effectuate the decision.
The expense of the arbitration and/or arbitrators shall be shared equally by the
Parties. Each of the Parties shall bear its own arbitration costs, including
without limitation its own costs of preparation, attorneys' fees, and witness
fees and expenses. In the event of litigation between the Parties, arbitration
may be so requested at any time prior to the beginning of a trial. Any required
arbitration shall be held in Research Triangle Park, North Carolina.
24.0 SEVERABILITY
If any provisions of this Agreement shall be construed to be illegal or
invalid, the legality of the validity of any other provisions hereof shall not
be affected hereby. Any illegal or invalid provision of this Agreement shall be
severable, and all provisions shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have through a duly authorized
officer thereof duly executed this Agreement on the dates indicated below to be
effective as of the day first indicated above.
ID Technologies Corporation (Licensor) Power^Up Marketing Corporation (Licensee)
By: /s/ Xxxxxxx X. Xxxx By: /s/ Xxxxx X. Xxxx
-------------------- ------------------
Xxxxxxx X. Xxxx Xxxxx X. Xxxx
Title: President Title: President
Date: February 28, 1999 Date: February 28, 1999
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