EX-10.7
DEVELOPMENT AND SUPPLY AGREEMENT
THIS AGREEMENT is made as of July 9, 1999 by Xxxxx Xxxxx Data
Collection, Inc, a subsidiary of Xxxxx Xxxxx, Inc. having a place of business at
0000 Xxxxxx Xxxx, Xxxxxxxxxxx Xxxxx, XX 00000, and any subsidiaries ("WADC") and
INTELLI-CHECK, INC., a New York Corporation, having its place of business at 000
Xxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, XX 00000 ("ICI")
WHEREAS, ICI is a developer of age and identification verification
software and electronic products.
WHEREAS, WADC is a manufacturer of electronic products having
substantial experience and expertise in the manufacture of such products.
WHEREAS, ICI desires to contract with WADC for the manufacture
of its age and identification verification products;
WHEREAS, ICI and WADC further agree to provide a basis for requesting
proposals, bids and for ICI placing orders with WADC.
NOW, THEREFORE, in light of and in consideration of the mutual
covenants contained herein, ICI and SUPPLIER hereby agree as follows:
A. Definitions.
1. "Age Verification Marketplace" shall mean age verification
applications involving electronic products and/or software whose
functionality for the validation of age for compliance with laws
in the sale of age restricted products or services, including, but
not limited to sales of Alcohol, Tobacco, Lottery, Movie Tickets,
Gun Control and Pharmaceuticals.
2. "Age Verification Units" shall mean WADC's ST1400 as modified for
ICI pursuant to this Agreement and the agreed upon specifications.
3. "Background Technology" shall mean any and all information,
system, process, specification, software, or other materials of a
proprietary or confidential nature owned or controlled by a Party
prior to the signing of this letter or hereafter owned or
controlled by a Party which relates to or is used in the design,
development, testing, evaluation or manufacture of the Age
Verification Units and which is not included as Developed
Technology.
4. "Developed Technology" shall mean any and all information, system,
process, specification, software, or other materials of a
proprietary or confidential nature pertaining to the Age
Verification Units and any prototypes that are developed or
conceived after the signing of this letter pursuant to the course
of the project.
5. "NDA" shall mean the Proprietary Information and Exchange
Agreement between the parties dated December 9, 1997 as amended
February 12, 1999.
6. "Unique Material" shall mean those items listed in Schedule 1
which is attached and incorporated by reference and any volume
based commitments made by WADC based upon ICI's orders.
B. Phases of the Project.
1. Phase 0.
ICI shall pay WADC $* for non-recurring engineering ("NRE") as defined
in Schedule 2, to develop Age Verification Units in accordance
with the attached Phase 0 specification as defined in Schedule 4.
ICI shall place a non-cancelable purchase order for a minimum of
1,000 Age Verification Units, at a unit cost of $* with an
immediate release of 500 said units.
If ICI places an order for 5,000 Phase 1 Age Verification
Units, with an immediate release of no less than 1,000 Phase
1 Age Verification Units, prior to the delivery of the 500th
Phase 0 Age Verification Unit, then the remaining balance of
the Phase 0 Purchase Order would be immediately cancelled
with no further obligation to ICI.
b. ICI will place a non-cancelable purchase order for 25
prototype Age Verification Units at cost of $* per unit to
be delivered no later than July 23, 1999.
c. Payment terms for Phase 0 Age Verification Units are 50% of
the unit cost in advance, with the balance due 30 days after
the date of invoice, which shall be the date of shipment by
WADC. WADC acknowledges that it has received a check from
ICI dated June 18, 1999, in the amount of $* upon deposit by
WADC, said amount shall cover payment of the NRE and advance
payment amounts described in Sections B1a and B1b.
2. Phase 1.
a. Upon receipt of a purchase order from ICI for Phase 1 Age
Verification Units, WA will schedule Phase 1 development
work in the attached Phase 1 specification as defined in
Schedule 5, and deliver a specific time line to ICI.
b. NRE for Phase 1 shall be $*.
c. ICI shall pay 30% of the NRE in advance, with the balance
to be paid at agreed upon milestones.
NRE paid in Phase 1 of the project would be recouped by ICI on a
per unit basis, as follows:
$* credited to ICI on the first 5,000 Age
Verification Units purchased after
commencement of Phase 1
$* on the next 5,000 Age Verification Units
purchased by ICI.
e. Minimum orders shall be 5,000 units per order
with a minimum shipment release quantity of 500
unit per release. Payment terms shall be
determined by agreement of the parties at the
time of order placement for Phase 1. Prices net
of the credit described in Section B2d are set
forth in the following Table:
Unit Price
Quantity Unit Price (Net of Credit)
* REDACTED PURSUANT TO RULE 406 UNDER THE SECURITIES ACT. FILED SEPARATELY
IN UNREDACTED FORM SUBJECT TO A REQUEST FOR CONFIDENTIAL INFORMATION UNDER
RULE 406.
f. In the event of a cancellation by ICI of any Phase 1
purchase order, or in the event WADC accumulates more than a
120-day supply of any Unique Material, or in the event of
termination of this Agreement (except for breach by WADC),
ICI agrees to remit payment to WADC for said Unique
Materials and for any work in progress at the time of
termination within 30 days of the date of invoice by WADC.
During the term of this Agreement, and contingent upon ICI
purchasing the minimum quantities of Age Verification Units
set forth in this Section, WADC agrees that it will not
market, sell, manufacture, or distribute products which have
age verification functionality for the Age Verification
Marketplace as its primary function, and WADC shall not add
age verification as a feature to its ST-1400. WADC further
agrees that it will not provide age verification products to
Xxxxx Xxxxx, Inc. for the Age Verification Marketplace. The
minimum quantities are as follows:
For the one-year period commencing on first shipment
of Phase 1 Age Verification Units, the minimum
purchase requirement is 5,000 Age Verification
Units.
For the succeeding year, the minimum purchase
requirement is 7,500 Age Verification Units.
If ICI purchases a greater number of Age Verification Units
than the minimum required number during a given year, then
any excess units purchased in a given year shall be counted
toward the minimum number of Age Verification Units required
to be purchased in the subsequent year. If ICI fails to meet
any minimum purchase requirement, then WADC shall have no
obligations under this Section.
h. The parties will meet every 6-months to review each party's
performance hereunder for the previous 6-months.
Changes.
ICI may at any time, by written notice, request changes in the
specifications for the Age Verification Units. The process to be used
for changes is as follows:
1. ICI requests change in sufficient detail to allow WADC to
understand the cost and/or schedule impacts of requested
change.
2. WADC responds to request for change by providing a written
quotation to ICI communicating the impact of the requested
change.
3. Upon receipt of ICI's written confirmation of acceptance of
the quotation, WADC will act on the change request.
If any such change causes an increase or decrease in the cost of, or
the time required for, the performance of any part of the work under an
existing order, whether or not modified by any such change, an
equitable adjustment shall be made in the price or delivery schedule,
or both, and the order modified in writing accordingly.
D. Limitations.
If WADC desires to add age verification as a feature to one of its
other products, then WADC agrees to provide ICI with 90-days prior
written notice of its intent to add such feature. WADC
further agrees that it will not give ICI any such notice during the
first 90-days after delivery of the 500 released Phase 0 Age
Verification Units to ICI. In no event however, shall supplier be
entitled to utilize any Intellectual Property of ICI, which exists or
has been previously provided or obtained by Supplier.
E. Intellectual Property Rights.
1. All Background Technology shall remain the exclusive property of
the Party from whom such Background Technology is derived.
2. Any Developed Technology that is developed solely by one party
shall remain the sole property of the developing party. All rights to
sell products using such solely owned Developed Technology remain with
the developing party. Developed Technology of WADC is listed in
Schedule 3 as Generic Improvements to the ST-1400.
3. Developed Technology that is customized for ICI is listed in
Schedule 2 as Customizations. ICI shall have the exclusive rights to
purchase, use and sell said Customizations. In addition, upon payment
of all NRE described in this Agreement, ICI shall own any tooling for
the Customizations. Once ICI has paid for and accepted delivery of the
12,500 Age Verification Units described in B2, then ICI shall have the
right, at its option, to give WADC 30 days notice that it desires to
remove said tooling. Upon the expiration of such notice, WADC shall
permit removal of such tooling at ICI's expense.
4. There is currently no jointly Developed Technology.
Indemnity Against Claims.
The parties shall each be responsible for all damages resulting from
its own negligence and shall maintain liability insurance coverage that
will indemnify itself and the other party for any losses resulting from
its negligence.
Infringement Indemnification.
ICI agrees to indemnify and hold harmless WADC from and against any
claim, liability, loss, damage, cost or expense (including reasonable
attorneys' fees), made by any third party that the use or sale of any
Age Verification Unit constitutes an infringement of any US patent,
copyright or other intellectual property right. ICI will assume the
defense of any action or suit against WADC relating thereto provided
that:
WADCpromptly notifies ICI of the commencement of any action
or suit, or threats thereof, and furnishes ICI with copies
of all documents in WADC's possession relating thereto
The manner in which such action or suit shall be handled or
otherwise disposed shall be at ICI's sole discretion
WADCagrees not to take any action or incur any cost with
respect to such claim or proceeding without ICI's
direction, unless ICI fails to respond to such claim or
proceeding, or any part thereof, in a timely manner,
thereby jeopardizing WADC.
Warranty.
WADC warrants the Age Verification Units to be functional and free from
manufacturing defects at the time of delivery. WADC warrants that it
will replace or repair, at its option, any Age Verification Unit that
fails to perform according to its published specifications during a
period of one (1) year from the date of end-user registration, but not
longer than 24-months after shipment by WADC to ICI.
The warranty does not apply if, in the sole opinion of WADC,
the Age Verification Unit has been damaged by accident, misuse,
neglect, improper shipping and handling. The warranty is valid only if
the Age Verification Unit has not been tampered with, disassembled, or
serviced by any party unauthorized by WADC as a repair facility.
No Age Verification Units will be accepted by WADC without a
Return Materials Authorization, which may be obtained by contacting
WADC.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY LOSS, INCONVENIENCE
OR DAMAGE WHETHER DIRECT, INCIDENTAL, CONSEQUENTIAL OR OTHERWISE.
Confidentiality.
The parties agree that the term of the NDA shall be extended to
coincide with the term of this Agreement, and that all obligations of
confidentiality are set forth therein. In addition, WADC may use, if
required, ICI Confidential Information, as defined in the NDA, for the
purpose of developing and manufacturing Age Verification Units for ICI.
J. Term and Termination.
1. Subject to being terminated as provided below, this Agreement
shall be valid for an initial term of two (2) years, and will be
automatically renewed for additional one (1) year periods, unless
either party terminates this Agreement by giving written notice to
the other as follows:
a. The other party fails to perform or satisfy any of the
conditions, covenants or obligations of this Agreement and
such failure continues for more than thirty (30) days after
written notice of the failure is given; or
b. The other party files or has filed against it, a petition
seeking relief under any bankruptcy, insolvency,
reorganization, moratorium, liquidation or other similar law
affecting creditors' rights; or
c. Upon 90 days written notice prior to the end of the term or
any automatic extension thereof.
Termination of this Agreement, for any reason, shall not relieve either
party hereto of any obligations arising prior to said termination.
All copies of information that constitutes Confidential Information
pursuant to Section I hereto and has been disclosed by either
party hereunder, that are in the hands of or control of the other
party, shall be returned to the owner within ten (10) days of the
effective date of such termination. Those copies that cannot be
returned to the owner shall be erased, eliminated, or otherwise
destroyed, and a certification thereof shall be delivered upon
request of the owner.
1.
Licensing (Right of First Refusal). If WADC ceases to manufacture the ST-1400 or
any updated version thereof, then WADC agrees that ICI shall have a right of
first refusal to license and/or purchase the rights needed for ICI to make or
have made the ST-1400 or the latest updated version thereof.
Entire Agreement. This Agreement, and the NDA are the entire understanding
between the parties. Except for the NDA, this Agreement supersedes any prior
written or oral agreements or understandings and can only be amended by written
agreement of the parties. If there is any conflict between this Agreement and
the terms of any purchase order or quotation, then this Agreement shall control.
No additions, modifications, or deletions to this Agreement shall be binding
unless signed by both parties.
Facsimile Signature. If this Agreement is transmitted by facsimile, the signed
facsimile version of this, as received, shall constitute the original, and shall
be binding on the parties as if it were manually signed. The parties agree that
they may treat and rely upon any signed facsimile version hereof as the signed
original.
Understood and Agreed to:
Intelli-Check, Inc. Xxxxx Xxxxx Data Collection, Inc.
By:______________________________ By:__________________________________
Xxxxx Xxxxxxxxxx Xxxxx X. Xxxx
CEO President/COO
Date:_____________________ Date:________________________
Schedule 1*
(Unique Items Listing)
Schedule 2
(NRE Outline)
$* Non-recurring engineering, tooling, documentation conversion, editing
and setup charges to produce the Phase 0 Age Verification Unit.
Non-recurring Engineering Charges
*
Production Tooling Charges
*
Schedule 3
Developed Technology
Generic Improvements to WADC ST-1400
*
Customizations
Schedule 4
(WA Phase 0 Specification No XXXXX)
Schedule 5
(WA Phase 1 Specification No XXXXX)
