EXHIBIT 10.2
FORM OF LICENSE AGREEMENT
THIS LICENSE AGREEMENT (this "Agreement") is entered into effective as
of the XX day of XXX , 2005 (the "Effective Date"), by and between The Bank of
New York, a New York banking corporation ("Licensor") and PADCO ADVISORS II,
INC., DBA RYDEX INVESTMENTS, A MARYLAND CORPORATION ("Licensee").
WHEREAS, Licenser and Licensee have entered into a Fee Letter Agreement
on even date herewith (the "Fee Letter Agreement") regarding the establishment
and maintenance of a certain Currency-Based Securities Product (defined below)
to be known as the Euro Currency Exchange Trust.
WHEREAS, in connection with such Euro Currency Exchange Trust, Licensee
wishes to obtain a license under certain of Licensors patent rights, and
Licenser wishes to grant such license subject to the terms and conditions of
this Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Licensor and Licensee (each a
"Party" and collectively, the "Parties") agree as follows:
1. CERTAIN DEFINITIONS.
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For the purposes of this Agreement, the following terms have the
following meanings:
"Affiliate" means any entity that directly or indirectly controls, is
controlled by or is under common control with a Party. In this context,
the term "control" means ownership of more than fifty percent (50%) of
the voting securities of such entity (or, in the case of a noncorporate
entity, equivalent interests). The term "controlled" has a corollary
meaning.
"Currency-Based Securities Products" means any investment product that
is based solely on the securitization of a single non-U.S. currency.
For the purposes of clarity, Currency-Based Securities Products do not
include any products involving the securitization, in whole or in part,
of any commodity other than non-U.S. currency.
"Licensed Product" means any Currency-Based Securities Product that is
sold, sponsored or issued by Licensee in the Territory that is covered
by or encompasses a claim contained in Licensor Patent Rights,
including, but not limited to the Euro Currency Exchange Trust.
"Licensee Improvements" means any improvement, enhancement,
modification, derivative work or upgrade to any of Licensor Patent
Rights made, conceived, reduced to practice, affixed or otherwise
developed by or on behalf of Licensee during the term of this Agreement
and solely as exercised under the License.
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"Licensor Patent Rights" means: (I) U.S. Patent Application No.
10/680,589, filed on October 6, 2003, entitled "Systems and Methods for
Securitizing a Commodity" (the "Patent Application"), (II) all foreign
and international counterparts filed by or on behalf of Licensor (III)
all continuations, continuations-in-part, divisionals, substitutes and
equivalents thereof relating to any of the foregoing patent
applications (IV) all letters patent that are or may be granted from
any of the foregoing patent applications, and (V) all know-how related
to any of the foregoing patents and patent applications.
"Territory" means the United States.
"Trust Agreement" means a definitive agreement entered into among
Licensee, Licensor and certain other parties that, among other things,
establishes a Licensed Product and sets forth the respective roles and
responsibilities of Licensee and Licensor with respect to such Licensed
Product.
"Trustee" means any entity designated to act in the capacity of any or
all of the following, as the context requires: trustee, custodian,
issuing agent, registrar, agent, administrator or the like for and on
behalf of (I) the sponsor, issuer or other entity offering shares in a
Currency-Based Securities Product and/or (II) any participant of such
Currency-Based Securities Product.
2. LICENSE.
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Subject to the terms and conditions of this Agreement, Licensor hereby
grants to Licensee a non-exclusive, personal and non-transferable
(except as provided in Article 12.1) license under Licensor Patent
Rights for the term of this Agreement solely for the purpose of
establishing, operating and marketing the Licensed Product in the
Territory (the "License").
The License includes the limited right of Licensee to grant sublicenses
to its Affiliates, partners, co-sponsors, joint venturers, trustees,
custodians and agents (each a "Sublicensee"), but solely in connection
with such Sublicensee's establishment, operation and marketing of the
Licensed Product and provided that Licensee shall have previously
entered into an enforceable, written agreement with each such
Sublicensee on terms no less protective of Licensor's rights in the
Licensor Patent Rights that the terms in this Agreement and shall
provide Licensor with copies of such agreements on request.
ALL RIGHTS NOT SPECIFICALLY AND EXPRESSLY GRANTED TO LICENSEE IN THIS
ARTICLE 2 ARE HEREBY RESERVED TO THE LICENSOR.
3. COVENANT TO LICENSOR.
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Licensee hereby covenants and agrees that it will not directly or
indirectly initiate or participate in any action of any kind against
Licensor, its successors and Affiliates, for their use of any Licensee
Improvements in connection with establishing, operating or marketing
investment products in the Territory based, in whole or in part, on the
securitization of any commodity, including currency. This covenant is
perpetual,
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personal, royalty-free and non-exclusive. This covenant shall survive
termination or expiration of this Agreement for any reason except
termination for Licensor's breach of this Agreement.
4. PAYMENT.
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The grant of the License hereunder is in consideration for the
engagement of Licensor to act as Trustee for each Licensed Product
under terms substantially as set forth in the Fee Letter Agreement, or
such other terms as the Parties may mutually agree in writing
hereafter. No additional payment of royalties to Licensor shall be
required as long as Licensor is so engaged.
In the event that Licensor is not engaged to act as Trustee for a
Licensed Product for any reason, then, to enjoy the benefit of the
License with respect to such Licensed Product, Licensee shall
thereafter pay Licensor a royalty as follows:
(a) The Licensee shall pay Licensor a running royalty that
will accrue daily at the annualized rate of [0.0500% (five (5)
basis points)] of the total gross adjusted assets of such
Licensed Product.
(b) The 5 basis point running royalties described in the
preceding subparagraph (a) shall be collectively identified
hereinafter as the "Royalty Fee." Such Royalty Fee shall be
due and payable within ten (10) days following the end of each
calendar month for which such Royalty Fee has accrued and
shall be subject to the Minimum Annual Royalty set forth the
following subparagraph (c).
(c) Notwithstanding subparagraph (a) above, for each year of
the Licensed Product (which year shall be measured from the
date that this six (6) months after the launch date of the
Licensed Product; each such year being defined hereinafter as
an "Annual Period"), Licensee shall pay Licensor not less than
[Two Hundred, Fifty Thousand Dollars ($250,000)] per Annual
Period for such Licensed Product (the "Minimum Annual
Royalty"). If the aggregate Royalty Fees payable to Licensee
over an Annual Period for such Licensed Product is less than
the Minimum Annual Royalty, then Licensee shall pay Licensor
the difference between the Minimum Annual Royalty and the
aggregate Royalty Fees payable to Licensee over such Annual
Period for such Licensed Product, which payment shall be due
and payable within thirty (30) days after the end of the
applicable Annual Period.
All payments to Licensor hereunder shall be made in United States
dollars either by corporate check to Licensor at the address specified
in Article 12 (or such other address as Licensor may hereafter
designate in writing) or by wire transfer to a bank account designated
by Licensor in writing. Payments to Licensor hereunder shall be deemed
made as of the day on which they are received by Licensor at such
address or bank account. Late payments shall accrue interest from the
date due at rate that is the lesser of 1.5% per month or the maximum
rate permitted by law.
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Except with respect to any taxes assessed directly upon Licensor's
income, all amounts payable by Licensee under this Agreement are
exclusive of any taxes that are or may be assessed or imposed by any
governmental authority in any jurisdiction in connection with
establishing, operating and marketing such Licensed Product, including
without limitation, any sales, use, excise, value-added, personal
property, export, import or withholding taxes, which taxes shall all be
assumed and paid by Licensee.
5. REPORTS, RECORDS AND AUDITS.
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During the term of this Agreement, for so long as Licensee has a
royalty obligation to Licensor under the terms hereof, Licensee shall
deliver to Licensor within ten (10) days of the end of each calendar
month a report setting forth in reasonable detail the Royalty Fee due
to Licensor for such calendar month and Licensee's calculation of the
same.
During the term of this Agreement, for so long as Licensee has a
royalty obligation to Licensor under the terms hereof and for three (3)
years thereafter, Licensee shall keep complete and accurate books and
records in sufficient detail to enable Licensor to verify the amounts
due to it hereunder.
During the term of this Agreement, for so long as Licensee has a
royalty obligation to Licensor under the terms hereof and for three (3)
years thereafter, Licensor shall have the right, through a qualified
independent auditor, to review and audit the books and records of
Licensee for the purpose of verifying the accuracy of royalty payments
made by Licensee under this Agreement. Such reviews and audits shall be
conducted with reasonable prior written notice to Licensee, at
Licensee's place of business and during Licensee's normal business
hours, and shall not be conducted more than once per calendar year.
Each review and audit hereunder shall be at Licensor's sole cost and
expense; provided, however, that Licensee shall promptly reimburse
Licensor for all costs and expenses actually incurred in connection
with a review and audit if the auditor determines that Licensee has
underpaid by five percent (5%) or more during the relevant period under
examination. Licensee will promptly pay Licensor the amount of any
underpayment revealed by a review and audit, plus interest at the rate
that is the lesser of 1.5% per month or the highest rate allowed by law
from the dates that any unpaid amounts were due.
6. ENFORCEMENT.
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Licensee shall promptly (I) notify Licensor of any potential or actual
infringement by a third party of Licensor Patent Rights of which
Licensee becomes aware, and (II) provide to Licensor all evidence of
such infringement in Licensee's possession, custody or control.
Licensor shall have the sole right, but not the obligation, to initiate
any legal action at its own expense against such infringement and to
recover damages and enforce any injunction granted as a result of any
judgment in Licensor's favor. Licensor shall have sole control over any
such action including, without limitation, the sole right to settle and
compromise such action. In the event of a dispute between Licensor and
any third party regarding the infringement, validity or enforceability
of Licensor Patent
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Rights, Licensee agrees, at Licensor's expense, to do all things
reasonably requested by Licensor to assist Licensor in connection with
such dispute.
7. TERM AND TERMINATION.
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This Agreement shall commence on the Effective Date and, unless earlier
terminated according to the terms of this Agreement, shall expire upon
the expiration or lapse of the last-to-expire or lapse of the Licensor
Patent Rights (or, if earlier, upon the entry of a final order by a
court of competent jurisdiction, which order is not appealable or
regarding which appeal is not taken, effectively holding that there is
no valid claim included in the Licensor Patent Rights).
During the term of this Agreement, Licensor shall diligently prosecute
and/or maintain Licensor Patent Rights. If no letters patent are
granted on the applications specified in Licensor Patent Rights or if
all such applications are finally rejected without appeal being taken
or are abandoned, withdrawn or otherwise lapse, then the License
granted pursuant to this Agreement shall terminate immediately.
Licensor shall notify Licensee promptly in writing if the foregoing
events shall occur.
The License granted pursuant to this Agreement will terminate
immediately, without any requirement for Licensor to provide notice,
with respect to any Licensed Product that is terminated.
In addition, either Party may terminate this Agreement by written
notice at any time if the other Party materially breaches this
Agreement and fails to cure such breach with thirty (30) days following
written notice thereof from the non-breaching Party. Upon any
termination or expiration of this Agreement, all rights and obligations
under this Agreement (including Licensee's rights under the License)
will immediately terminate; provided, however, that the provisions of
Articles 1, 8 (the second paragraph only), 10 (solely with respect
Licensee's Losses based on or arising from Licensee's exercise of its
rights in accordance with this Agreement while the License was in
effect), 11 and 12, and any other provision that survives by its
express terms, shall survive any termination or expiration of this
Agreement.
8. ACKNOWLEDGMENT OF RIGHTS.
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Licensee hereby acknowledges and agrees that, as between Licensor and
Licensee, Licensor is the exclusive owner of all right, title and
interest in and to the Licensor Patent Rights. During the term of this
Agreement, Licensee will not directly or indirectly: (I) initiate or
participate in any proceeding of any kind opposing the grant of any
patent, or challenging any patent application, within the Licensor
Patent Rights, (II) dispute the validity or enforceability of any
patent within the Licensor Patent Rights or any of the claims thereof,
or (III) assist any other Person to do any of the foregoing (except if
required by court order or subpoena); provided, however, the foregoing
shall in no way limit Licensee's ability to defend against or to
mitigate any claim brought by Licensor against Licensee.
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During the term of this Agreement and thereafter, Licensee shall not
directly or indirectly interfere improperly with Licensor's ability to
negotiate with any potential licensee under, or any potential purchaser
of, the Licensor Patent Rights, or assist any other Person to do the
foregoing (except if required by court order or subpoena). This
paragraph shall survive termination or expiration of this Agreement for
any reason.
Any violation of this Article 8 will constitute a material breach of
this Agreement.
9. REPRESENTATIONS AND WARRANTIES.
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Each Party hereby represents and warrants that (I) it has the power and
authority to enter into this Agreement and perform its obligations
hereunder; (II) the execution and delivery of this Agreement have been
duly authorized and all necessary actions have been taken to make this
Agreement a legal, valid and binding obligation of such Party
enforceable in accordance with its terms; and (III) the execution and
delivery of this Agreement and the performance by such Party of its
obligations hereunder will not contravene or result in any breach of
the Certificate of Incorporation or Bylaws of such Party or of any
agreement, contract, indenture, license, instrument or understanding
or, to the best of its knowledge, result in any violation of law, rule,
regulation, statute, order or decree to which such Party is bound or by
which they or any of their property is subject.
EXCEPT AS EXPRESSLY SET FORTH IN THE FOREGOING, LICENSOR DOES NOT MAKE
AND HEREBY EXPRESSLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, STATUTORY OR OTHERWISE, REGARDING THE SUBJECT MATTER OF THIS
AGREEMENT INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF
MERCHANTABILITY, TITLE, FITNESS FOR A PARTICULAR PURPOSE, OR
NON-INFRINGEMENT.
10. INDEMNITY.
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Each Party shall defend, indemnify and hold harmless the other Party
and such other Party's Affiliates, employees, officers, directors, and
agents from and against any liabilities, losses, damages, costs or
expenses (including, without limitation, reasonable attorneys'
fees)(collectively, "Losses") resulting from or arising in connection
with the breach by the indemnifying Party of any of its
representations, warranties, covenants or obligations contained in this
Agreement.
Licensor shall indemnify, defend and hold harmless Licensee and its
permitted sublicensees and assigns, Affiliates, employees, officers,
directors, and agents from and against any Losses resulting or arising
from any claim by the World Gold Council and/or World Gold Trust
Services, LLC that Licensee establishing, operating or marketing
Licensed Products in accordance with the terms of this Agreement
infringes or otherwise violates any intellectual property rights of the
World Gold Council and/or World Gold Trust Services, LLC.
If any action, suit, proceeding (including, but not limited to, any
governmental investigation), claim or dispute (collectively, a
"Proceeding") is brought or asserted
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against a Party for which indemnification is sought under this
Agreement, the Party seeking indemnification (the "Indemnified Party")
shall promptly (and in no event more than seven (7) days after receipt
of notice of such Proceeding) notify the Party obligated to provide
such indemnification (the "Indemnifying Party") of such Proceeding. The
failure of the Indemnified Party to so notify the Indemnifying Party
shall not impair the Indemnified Party's ability to obtain
indemnification from the Indemnifying Party (but only for costs,
expenses and liabilities incurred after such notice) unless such
failure adversely affects the Indemnifying Party's ability to
adequately oppose or defend such Proceeding. Upon receipt of such
notice from the Indemnified Party, the Indemnifying Party shall be
entitled to participate in such Proceeding at its own expense. Provided
no conflict of interest exists as specified in clause (ii) below and
there are no other defenses available to Indemnified Party as specified
in clause (iv) below, the Indemnifying Party, to the extent that it
shall so desire, shall be entitled to assume the defense of the
Proceeding with counsel reasonably satisfactory to the Indemnified
Party, in which case all attorney's fees and expenses shall be borne by
the Indemnifying Party (except as specified below) and the Indemnifying
Party shall in good faith defend the Indemnified Party. After receiving
written notice from the Indemnifying Party of its election to assume
the defense of the Proceeding, the Indemnified Party shall have the
right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, provided that the fees and expenses
of such counsel shall be borne entirely by the Indemnified Party unless
(I) the Indemnifying Party expressly agrees in writing to pay such fees
and expenses, (II) there is such a conflict of interest between the
Indemnifying Party and the Indemnified Party as would preclude, in
compliance with the ethical rules in effect in the jurisdiction in
which the Proceeding was brought, one lawyer from representing both
parties simultaneously, (III) the Indemnifying Party fails, within the
earlier of (x) twenty (20) days following receipt of notice of the
Proceeding from the Indemnified Party or (y) seven (7) days prior to
the date the first response or appearance is required to be made in
such Proceeding, to assume the defense of such Proceeding with counsel
reasonably satisfactory to the Indemnified Party or (IV) there are
legal defenses available to the Indemnified Party that are different
from or are in addition to those available to the Indemnifying Party.
In each of cases (i) through (iv), the fees and expenses of counsel
shall be borne by the Indemnifying Party. No compromise or settlement
of such Proceeding may be effected by either Party without the other
Party's consent unless (m) there is no finding or admission of any
violation of law and no effect on any other claims that may be made
against such other Party and (n) the sole relief provided is monetary
damages that are paid in full by the Party seeking the settlement.
Neither Party shall have any liability with respect to any compromise
or settlement effected without its consent, which shall not be
unreasonably withheld. The Indemnifying Party shall have no obligation
to indemnify and hold harmless the Indemnified Party from any loss,
expense or liability incurred by the Indemnified Party as a result of a
default judgment entered against the Indemnified Party unless such
judgment was entered after the Indemnifying Party agreed, in writing,
to assume the defense of such Proceeding.
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11. LIMITATION OF LIABILITY.
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IN NO EVENT SHALL LICENSOR BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR OTHER INDIRECT DAMAGES, HOWSOEVER
CAUSED, WHETHER ARISING IN CONTRACT, TORT OR OTHERWISE, EVEN IF IT HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
12. MISCELLANEOUS PROVISIONS.
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12.1. ASSIGNMENT. Licensee may not assign or otherwise transfer
(whether by operation of law or otherwise) any right or
obligation under this Agreement without the prior written
consent of Licensor. Such consent shall be deemed given with
respect to an assignment or transfer (whether by operation of
law or otherwise) of the entire Agreement, including all
rights and obligations hereunder, to a successor in interest
or assignee of substantially all of the assets of Licensee,
provided that Licensee has given prompt written notice thereof
to Licensor. This Agreement is binding on and inures to the
benefit of the Parties and their permitted successors and
assigns. Any attempted assignment or other transfer of rights
under this Agreement in violation of this Article 12.1 will be
void.
12.2. INJUNCTIVE RELIEF. Licensee agrees and acknowledges that money
damages may not be an adequate remedy for any breach by
Licensee of the provisions of this Agreement and that the
Licensor may, in its sole discretion, apply to any court of
law or equity of competent jurisdiction for temporary
preliminary relief (specific performance and/or injunctive
relief), without posting a bond or other security, in order to
enforce or prevent any violation of the provisions of this
Agreement..
12.3. GOVERNING LAW. This Agreement will be governed by and
construed under the laws of the State of New York, without
reference to any choice of law rules (except that questions
affecting the construction and effect of any patent will be
determined by the law of the country in which the patent was
granted).
12.4. EXCLUSIVE JURISDICTION AND VENUE; NO JURY. Any action brought
by either Party that arises out of or relates to this
Agreement will be filed only in the state or federal courts
located in New York County, New York. Each Party irrevocably
submits to the jurisdiction of those courts. FURTHERMORE, EACH
PARTY (I) WAIVES ANY OBJECTIONS THAT IT MAY HAVE NOW OR IN THE
FUTURE TO THE JURISDICTION OF THOSE COURTS, (II) WAIVES ANY
CLAIM THAT IT MAY HAVE NOW OR IN THE FUTURE THAT LITIGATION
BROUGHT IN THOSE COURTS HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM AND (III) WAIVES ANY RIGHT TO A JURY TRIAL.
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12.5. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the Parties as to its subject matter and
supercedes all prior agreements, negotiations,
representations, and promises between them with respect to its
subject matter.
12.6. UNENFORCEABLE PROVISIONS. If any provision of this Agreement
is held unenforceable by a court of competent jurisdiction,
the other provisions will remain in full force and effect. If
legally permitted, the unenforceable provision will be
replaced with an enforceable provision that as nearly as
possible gives effect to the Parties' intent.
12.7. RELATIONSHIP OF THE PARTIES. Each Party is an independent
contractor of the other Party. Nothing in this Agreement
creates a partnership, joint venture or agency relationship
between the Parties.
12.8. NOTICES. A notice under this Agreement is not sufficient
unless it is: (I) in writing; (II) addressed using the contact
information listed below for the Party to which the notice is
being given (or using updated contact information which that
Party has specified by written notice in accordance with this
Article); and (III) sent by hand delivery, facsimile
transmission, registered or certified mail (return receipt
requested), or reputable express delivery service with
tracking capabilities (such as Federal Express).
<TABLE>
Contact Information for Licensor: Contact Information for Licensee:
The Bank of New York [PADCO ADVISORS II, INC., SIGNATORY]
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Xxx Xxxx Xxxxxx __________________________________
Xxx Xxxx, XX 00000 __________________________________
Attn: Xxxxxxxxxxx Sturdy __________________________________
</TABLE>
12.9. AMENDMENTS. This Agreement may not be amended unless the
amendment is in writing and signed by authorized
representatives of both Parties.
12.10. WAIVERS. A waiver of rights under this Agreement will not be
effective unless it is in writing and signed by an authorized
representative of the Party that is waiving the rights.
12.11. COUNTERPARTS. The Parties may execute this Agreement by
signing separate copies of the signature page. A facsimile
copy of the signature page will have the same effect as the
original.
(signature page follows)
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by
their duly authorized representatives.
THE BANK OF NEW YORK
By:
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Name:
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Title:
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Date:
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PADCO ADVISORS II, INC., SIGNATORY
By:
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Name:
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Title:
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Date:
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