PATENT AND TECHNICAL INFORMATION
LICENSE AGREEMENT
THIS AGREEMENT, dated September 21 , 1995, is entered into by Elcom
--
Technologies Corporation, a corporation of Pennsylvania, having its principal
place of business at 00 Xxxxx Xxxxxx Xxxxxxx, Xxxxxxx, XX 00000 (herein called
LICENSEE) and by Xxxx X. Xxxxxxx, of 000 Xxxxxxx Xxxxxx Xxxx, Xxxxxxxxxx, XX
00000 (herein CALLED LICENSOR).
I. BACKGROUND OF AGREEMENT
1.00 LICENSOR is the owner of certain PATENTS and TECHNICAL information
relating to powerline surge protection devices.
1.01 LICENSEE wishes to acquire the right to use such PATENTS and
TECHNICAL INFORMATION.
1.02 LICENSEE wishes to be granted a LICENSE in the LICENSED TERRITORY and
LICENSED MARKETS (Field Of Use) as described in PARAGRAPHS 2.03, 2.04, 2.05 and
2.06.
II. DEFINITIONS
As used herein, the following terms shall have the meanings set forth
below:
2.00 PATENT or PATENTS means the following United States and Canadian
patents, and all divisions, continuations, reissues, substitutes, and extensions
thereof:
Letters Patent
1) U.S. Patent NO. 4,870,528 Expiration Date: Sep.26, 2006
2) U.S. Patent No. 4,870,534 Expiration Date: SEP.26, 2006
3) Canadian Patent No. 1,332,439 Expiration Date: Oct.11, 2011
4) Canadian Patent Ser. NO. 609,983 Expiration Date: TBD (2011)
5) Patents or Patent Applications filed by LICENSOR that are in the field
of powerline surge protection.
1
2.01 TECHNICAL INFORMATION means unpublished research and development
information, unpatented inventions, know-how, trade secrets, and technical data
in the possession of LICENSOR at the effective date of this Agreement which are
needed to produce LICENSED PRODUCTS and which LICENSOR has the right to provide
to LICENSEE.
2.02 LICENSED TERRITORY means the United States, its territories, and
possessions, and Canada. Elcom will be granted the first right of refusal of
European and Far Eastern Markets at the appropriate time
2.03 LICENSED MARKETS (FIELD OF USE) means markets which LICENSOR grants
the right to LICENSEE to pursue via any means of advertising, promotion, direct
mail, and sales representatives which target the markets as defined in 2.04,
2.05 and 2.06.
2.04 CONSUMER LICENSED MARKET means all end user consumer sales through
retail distribution channels - including but not limited to retail electronics
stores, computer stores, resellers, systems integrators configuring and selling
products for use in the home, including home-based businesses.
2.05 HOME BUILDER LICENSED MARKET means sales to builders, contractors or
other vendors servicing the home building market.
2.06 GOVERNMENT LICENSED MARKET means Federal, State, and Local
Governmental Agencies, including the Military which includes the US Army, US
Navy, US Air Force, and US Marines.
2.07 PRIVATE LABELING means products manufactured by LICENSEE, for sale as
a brand name not identified directly with LICENSEE.
2.08 LICENSED PRODUCTS means products which in the absence of this
agreement would infringe at least one claim of a PATENT or products which are
made using a process or machine covered by a claim of a PATENT, or products
made, at least in part, using TECHNICAL INFORMATION.
2.09 SALES for the purpose of computing royalties, means shipment from any
inventory maintained at the manufacturing or warehousing facility used by
LICENSEE. Where products are not sold, but are otherwise disposed of, the
release for shipment of such products for the purposes of computing royalties
shall be the same as if the product were being sold at prevailing prices.
2.10 EFFECTIVE DATE means September 21 , 1995.
----
III. PATENT LICENSE
2
3.00 LICENSOR hereby grants to LICENSEE, to the extent of LICENSED
TERRITORY, an EXCLUSIVE LICENSE to LICENSED MARKET 2.04 (CONSUMER), and a NON-
EXCLUSIVE LICENSE to LICENSED MARKETS 2.05 (HOME BUILDER) and 2.06 (GOVERNMENT),
under PATENTS to make, use, sell LICENSED PRODUCTS with the exceptions noted in
Sections 3.01 and 3.02. Nothing in this Agreement is intended to preclude the
export or sale for export of products licensed in the Agreement to be sold or
otherwise disposed of and on which royalties shall have been paid as provided
for in Sections 5.01, 5.02, and 5.03 of this Agreement, subject, however, to the
understanding that no rights are granted or implied in respect to such exported
products under any patent of LICENSOR or any other person in any foreign
country.
3.01 It is acknowledged that LICENSOR is president of Zero Surge Inc.
(herein called ZSI), a New Jersey corporation, and that ZSI currently has a NON-
EXCLUSIVE LICENSE for the CONSUMER market as described in Section 2.04. It is
agreed that LICENSOR will execute a separate agreement with ZSI to permit them
to retain their existing customer base, including their existing dealers and
sales representatives, but that they will not be permitted to expand their
penetration of this LICENSED MARKET, and that they will refrain from active
pursuit of this LICENSED MARKET. ZSI sales in this CONSUMER LICENSED MARKET was
less than $1,000,000 in 1994 and in this CONSUMER LICENSED MARKET sales will be
capped at $1,000,000 per year during the term of this LICENSE AGREEMENT. The
LICENSOR will warrant to the LICENSEE that all sales for the CONSUMER LICENSE
MARKET beyond the sales cap of $1,000,000 will be referred to the LICENSEE who
will pay ZSI a sales commission of 5% of the referred sales, provided the
referred party is not already an existing customer of the LICENSEE. Terms for
payment are to be 60 days after delivery of product to the referred party.
In recognition of the potential buying power of LICENSEE, it is agreed that,
when parts and/or sub-assemblies are ordered by LICENSEE for use with LICENSED
PRODUCTS, LICENSEE will inform ZSI management of the impending order. ZSI
management will be offered the option to increase LICENSEES purchase quantity by
up to 10% (unless otherwise agreed), said 10% order increase quantity to be
purchased from LICENSEE by ZSI for 5% over the direct purchase plus delivery
charges, plus a $50.00 transaction fee. Terms for payment are to be net 60 days
after delivery to ZSI.
3.02 It is acknowledged that Price Xxxxxxx Corp. (herein called PWC), a
New Jersey corporation, formerly had a NON-EXCLUSIVE LICENSE for the CONSUMER
LICENSED MARKET as described in Section 2.04 which has expired and it will not
be renewed for this CONSUMER LICENSED MARKET and they will be required to
refrain from this CONSUMER LICENSED MARKET.
IV. TECHNICAL INFORMATION LICENSE
4.00 LICENSOR hereby grants to LICENSEE, to the extent of LICENSED
TERRITORY, and LICENSED MARKETS, a LICENSE to use the TECHNICAL
3
INFORMATION to make LICENSED PRODUCTS, with the exceptions noted in Sections
3.01 and 3.02.
4.01 LICENSOR shall within thirty (30) days of the EFFECTIVE DATE of this
agreement make available, or has heretofore made available, to LICENSEE for its
use TECHNICAL INFORMATION in LICENSOR'S possession used to make LICENSED
PRODUCTS. LICENSOR agrees to disclose to LICENSEE, upon execution of this
Agreement, any of LICENSOR'S pending United States Patent Applications
identified in Section 2.00 of this Agreement not previously disclosed to
LICENSEE.
4.02 LICENSEE shall not disclose any unpublished TECHNICAL INFORMATION
furnished by LICENSOR pursuant to Section 4.01 above to third parties during the
term of this Agreement, or any time thereafter, provided, however, that
disclosure may be made of any such TECHNICAL INFORMATION at any time: (1) with
the prior written consent of LICENSOR, or (2) to the extent necessary to
purchasers of LICENSEE'S products or services, or (3) after the same shall have
become public through no fault of LICENSEE or purchasers of LICENSEE'S products
or services.
4.03 LICENSEE shall not use any TECHNICAL INFORMATION furnished by
LICENSOR other than in the manufacture of LICENSED PRODUCTS and only during the
term of this Agreement, provided however, that other use of such TECHNICAL IN-
FORMATION may be made: (1) with the prior written consent of LICENSOR, or (2)
after the same shall have become public through no fault of LICENSEE or
purchasers of LICENSEE'S products or services.
4.04 LICENSOR represents that the material lists, drawings,
specifications, instructions, and other elements of TECHNICAL INFORMATION to be
supplied or already supplied by him under this Agreement have been used by him
in the manufacture of LICENSED PRODUCTS, but does not otherwise warrant the
accuracy of this information; nor does LICENSOR warrant that LICENSED PRODUCTS
produced in accordance with such information will be free from claims of
infringement of the patents, design rights, or copyrights of any third party.
LICENSOR shall not, except as provided in this Article IV, be under any
liability arising out of the supplying of information under, in connection with,
or as a result of this contract, whether on warranty, contract, negligence, or
otherwise.
4.05 LICENSOR agrees to advise LICENSEE of anticipated technical
improvements affecting the licensed products and to provide timely information
about such improvements.
V. ROYALTIES
5.00 LICENSEE shall pay as a license execution fee the sum of $50,000
which shall be non refundable and not creditable against the royalty called for
under Sections 5.01, 5.02, or 5.03.
4
5.01 LICENSEE shall pay to LICENSOR a continuing royalty of 5% of the
total collected dollar amount collected by LICENSEE for the sale of LICENSED
PRODUCTS as described in 2.08, or otherwise disposed of under the LICENSE to
PATENTS granted under Section 3.00.
5.02 LICENSEE shall pay LICENSOR a continuing royalty of 2.5% of the total
collected dollar amount collected by LICENSEE for the sale of LICENSED PRODUCTS
as described in 2.08, for the LICENSED PRODUCTS used, sold, or otherwise
disposed of under the TECHNICAL INFORMATION license granted under Article IV.
5.03 During the term of this Agreement the combined royalty of Section
5.01 and 5.02 for any given LICENSED PRODUCTS shall not exceed 5% of the total
collected dollar amount collected by LICENSEE for the sale of LICENSED PRODUCTS
for the LICENSED PRODUCTS used, sold, or otherwise disposed of.
VI. MINIMUM ROYALTIES
6.00 LICENSEE shall pay to LICENSOR royalties as stated in Section V, but
in no event shall royalties for a calendar year for practice of the PATENTS and
TECHNICAL INFORMATION in the LICENSED TERRITORY and LICENSED MARKETS be less
than the following minimum royalties during each of the calendar years
indicated, to maintain valid LICENSE status:
Minimum Royalty,
U.S. $ per Calendar Year
LICENSE in the
specified
territories and markets.
-------------------------------------------
Calendar Year License
===========================================
1996 $ 50,000 *
-------------------------------------------
1997 $ 50,000
-------------------------------------------
1998 $ 50,000
-------------------------------------------
1999 $ 50,000
-------------------------------------------
2000 **
-------------------------------------------
* $50,000 Payable to LICENSOR upon the earlier of the completion of the
consumer version of the surge suppression product, to be introduced at the
January 1996 CES trade show in Las Vegas, NV, or January 15, 1996.
** Year 2000, LICENSEE has the right of first refusal for a fee structure
and terms similar to this License Agreement.
5
6.01 LICENSOR may, by written notice to LICENSEE, terminate this Agreement
during any February subsequent to the year 1999, if LICENSEE has not used, sold,
or otherwise disposed of LICENSED PRODUCT sufficient to generate earned
royalties as provided by Sections 5.01, 5.02, and 5.03 of this Agreement in the
total amount of two hundred thousand dollars ($200,000) in the aggregate.
VII. SALES EFFORTS
7.0 LICENSEE agrees to promote their product(s) which use the PATENTS or
TECHNICAL INFORMATION in the following manner:
LICENSEE agrees to display the product at key trade shows and exhibitions,
regularly advertise at retail and in the trade press. By continuing exposure of
the product and its unique features through brochures, flyers, press releases
and articles aimed at the licensed areas as well as by ongoing sales training
and promotion in the channels selected for maximum distribution and sale.
VIII. SUBLICENSING
8.00 LICENSEE shall have the right to sublicense with written
authorization from LICENSOR. Any such sublicense shall include provisions
consistent with this agreement. Any disposition of products under any such
sublicense shall be subject to royalty payment and recording requirements to
LICENSOR under this Agreement.
IX. PRIVATE LABELING
9.00 PRIVATE LABELING is permitted provided the product so private labeled
is offered for sale in the LICENSED MARKETS and LICENSED TERRITORIES, and
complies with all other terms of this LICENSE.
X. PAYMENTS
10.00 Not later than 60 days after the close of the preceding month,
LICENSEE shall furnish to LICENSOR a written statement in such detail as
LICENSOR may reasonably require of all amounts due pursuant to Sections 5.01,
5.02, and 5.03 for the monthly periods ending on the last days of the preceding
months, and shall pay to LICENSOR all amounts due to LICENSOR at that time. No
Royalty payments are due in 1996 until the advance minimum royalty payment of
$50,000 for 1996 has been exceeded. In the event that the amounts due at the end
of any calendar year do not equal the minimum royalties specified in Section VI
for said calendar year, LICENSEE shall pay to LICENSOR on or before the last day
of the following January, the amount required to satisfy the minimum royalty
obligation for the preceding calendar year. Such amounts are due at the dates
the statements are due. If no amount is accrued during any month, a written
statement to that effect shall be furnished.
6
10.01 Payments provided for in this Agreement, when 45 days overdue, shall
bear interest at a rate per annum equal to one percent (1%) in excess of the
"PRIME RATE" published by "The Wall Street Journal" at the time such payment is
due, and for the time period until payment is received by LICENSOR.
10.02 If this Agreement is for any reason terminated before all of the
payments herein provided for have been made (including minimum royalties for the
year in which the agreement is terminated), LICENSEE shall immediately submit a
terminal report and pay to LICENSOR any remaining unpaid balance even though the
due date as above provided has not been reached.
XI. REPRESENTATIONS AND DISCLAIMER OF WARRANTIES
11.00 LICENSOR SHALL HAVE NO LIABILITY WHATSOEVER TO LICENSEE OR ANY
OTHER PERSON FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR DAMAGE, OF ANY KIND OR
NATURE, SUSTAINED BY, OR ANY DAMAGE ASSESSED OR ASSERTED AGAINST, OR ANY OTHER
LIABILITY INCURRED BY OR IMPOSED UPON LICENSEE OR ANY OTHER PERSON, ARISING OUT
OF OR IN CONNECTION WITH OR RESULTING FROM (a) THE PRODUCTION, USE, OR SALE OF
ANY APPARATUS OR PRODUCT, OR THE PRACTICE OF THE PATENTS' (b) THE USE OF ANY
TECHNICAL INFORMATION, TECHNIQUES, OR PRACTICES DISCLOSED BY LICENSOR; (c) ANY
ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO ANY OF THE
FOREGOING, AND LICENSEE SHALL HOLD LICENSOR, ITS OFFICERS, EMPLOYEES, OR AGENTS,
HARMLESS IN THE EVENT LICENSOR, OR ITS OFFICERS, EMPLOYEES, OR AGENTS, IS HELD
LIABLE.
XII. TERMINATION
12.00 LICENSEE'S obligations under this Agreement, including the
obligation to pay royalties for the practice of the invention under any of the
PATENTS licensed herein shall end upon the expiration of all of the PATENTS,
unless the Agreement is sooner terminated.
12.01 LICENSEE'S obligations under certain Sections of this Agreement
relating to the TECHNICAL INFORMATION including the obligation to pay royalties
for the use of the TECHNICAL INFORMATION as specified in Section 5.02 shall
terminate with this License Agreement, but obligations under Sections 4.03,
4.04, and 4.05 of this Agreement shall survive termination and continue until
such time that LICENSOR elects to abandon such terms. LICENSEE shall notify
LICENSOR of the date of first commercial use or sale promptly thereafter.
12.02 Termination of part of this Agreement in accordance with Section
12.01 above, or otherwise, shall not excuse LICENSEE from the payment of a
royalty in accordance with the royalty provisions of Article 5 applicable to the
surviving part. Minimum royalty payments due under article 6 shall be pro-
rated. Survival of this Agreement in part shall not
7
deprive LICENSOR of the right to enforce its proprietary rights against LICENSEE
that are applicable to the terminated part of the agreement.
12.03 If either party shall be in default of any obligation hereunder, or
shall be adjudged bankrupt, or become insolvent, or make an assignment for the
benefit of creditors, or file a petition in bankruptcy, or be placed in the
hands of a receiver or a trustee in bankruptcy, then the other party may
terminate this Agreement by giving sixty (60) days' notice by Registered Mail to
the other party, specifying the basis for termination. If within sixty (60) days
after the receipt of such notice, the party who received notice shall remedy the
condition forming the basis for termination, such notice shall cease to be
operative, and this Agreement shall continue in full force.
12.04 Notwithstanding the provisions of Section 4.03 and 4.04, in the
event this Agreement terminates prior to ten (10) years from the date of the
first commercial use or sale of products or services utilizing the TECHNICAL
INFORMATION, LICENSEE agrees: (1) that it will not use or sell LICENSED PRODUCT
incorporating or made using TECHNICAL INFORMATION for a period of ten (10) years
subsequent to the date of first commercial use of TECHNICAL INFORMATION if such
use has occurred, or the EFFECTIVE DATE of this agreement; and (2) that it will
promptly transfer to LICENSOR all written copies of unpublished TECHNICAL
INFORMATION in its possession and delete all TECHNICAL INFORMATION from all
computer data bases.
12.05 Termination of this agreement may be made by LICENSEE with sixty
(60) days written notice. Unpaid annual minimum Royalty payments are to be pro-
rated to the termination date.
XIII. LITIGATION
13.00 LICENSEE shall notify LICENSOR of any suspected infringement of the
PATENTS in the LICENSED TERRITORY. The sole right to institute a suit for
infringement rests with LICENSOR. LICENSEE agrees to cooperate with LICENSOR in
all respects, to have any of LICENSEE'S employees testify when requested by
LICENSOR, and to make available any records, papers, information, specimens, and
the like. Any recovery received pursuant to such suit shall be retained by
LICENSOR.
13.01 In the event LICENSEE agrees to underwrite all costs pursuant to
any infringement suit, LICENSEE shall be entitled first to payment of all legal
expenses and costs of suit from any proceeds of the settlement. In addition,
LICENSEE shall be entitled to 50% of the balance of any judgment less the legal
expenses and costs, with LICENSOR being entitled to the balance. Licensor shall
cooperate and assist with the prosecution of such case at no additional charge
to LICENSEE.
13.02 During the term of this Agreement, LICENSEE shall bring to
LICENSOR'S attention any prior art or other information known to LICENSEE which
is relevant to the patentability or validity of any of the PATENTS and which
might cause a court to deem any
8
of the PATENTS wholly or partly inoperative or invalid. LICENSEE shall
particularly specify such prior art or other information to LICENSOR at the time
it learns thereof and not less than ninety (90) days prior to bringing any
action against LICENSOR asserting the invalidity of any of the PATENTS.
XIV. Patents
14.00 LICENSOR shall have the sole right to file, prosecute, and maintain
all of the PATENTS covering the INVENTIONS that are the property of LICENSOR and
shall have the right to determine whether or not, and WHERE, to file a patent
application, to abandon the prosecution of any patent or patent applications, or
to discontinue the maintenance of any patent or patent applications.
XV. Records
15.00 LICENSEE shall keep accurate records of all operations affecting
payment hereunder, and shall permit LICENSOR or its duly authorized agent to
inspect all such records and to make copies of or extracts from such records
during regular business hours throughout the term of this Agreement and for a
reasonable period of not less than one (1) year thereafter.
XVI. Nonassignability
16.00 This agreement imposes personal obligations on LICENSEE. LICENSEE
shall not assign any rights under this Agreement not specifically transferable
by its terms without the written consent of LICENSOR. LICENSOR may assign its
rights hereunder with written authorization from LICENSEE.
XVII. Severabillty
17.00 The parties agree that if any part, term, or provision of this
Agreement shall be found illegal or in conflict with any valid controlling law,
the validity of the remaining provisions shall not be affected thereby.
17.01 In the event the legality of any provision of this Agreement is
brought into question because of a decision by a court of competent jurisdiction
of any country in which this Agreement applies, LICENSOR, by written notice to
LICENSEE, may revise the provision in question or may delete it entirely so as
to comply with the decision of said court.
XVIII. Publicity
18.00 In publicizing anything made, used, or sold under this Agreement,
LICENSEE shall not use the name of LICENSOR or otherwise refer to any
organization related to LICENSOR, except with the written approval of LICENSOR.
References to the patents and
9
technology may be used, with reference to "Series Mode", and "Adaptive Filter",
descriptions of the technology, being encouraged.
XIX. WAIVER, INTEGRATION, ALTERATION
19.00 The waiver of a breach hereunder may be effected only by a writing
signed by the waiving party and shall not constitute a waiver of any other
breach.
19.01 This License Agreement, Employment Agreement and Stock Option
Agreement dated September 21, 1995 represents the entire understandings between
the parties, and supersedes all other agreements, express or implied, between
the parties. The License Agreement represents the entire understandings between
the parties concerning the PATENTS and TECHNICAL INFORMATION as defined in
Article 2.
19.02 A provision of this Agreement may be altered only by a writing
signed by both parties, except as provided in Section 17.01, above.
XX. MARKING
20.00 LICENSEE shall place in a conspicuous location on any product made
or sold under any PATENT, a patent notice in accordance with 35 U.S.C. 287.
LICENSEE agrees to xxxx any products made using a process covered by any PATENT
with the number of each such patent and, with respect to PATENTS, to respond to
any request for disclosure under 35 U.S.C. 287(b)(4)(B) by only notifying
LICENSOR of the request for disclosure.
XXI. COOPERATION
21.00 Each party shall execute any instruments reasonably believed by the
other party to be necessary to implement the provisions of this Agreement.
XXII. CONSTRUCTION
22.00 This Agreement shall be construed in accordance with the substantive
laws of the State of New Jersey of the United States of America.
XXIII. EXPORTATION OF TECHNICAL INFORMATION
23.00 LICENSEE agrees to comply with the laws and rules of the United
States Government regarding prohibition of exportation of TECHNICAL INFORMATION
furnished to LICENSEE either directly or indirectly by LICENSOR.
10
XXIV. NOTICES UNDER THE AGREEMENT
24.00 For the purpose of all written communications and notices BETWEEN
the parties, their addresses shall be:
LICENSOR: J. Xxxx Xxxxxxx
000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
and
LICENSEE: Elcom Technologies Corp.
00 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxx, XX 00000
or any other addresses of which either party shall notify the other party in
writing.
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized officers on the respective dates and at the respective
places herein set forth.
LICENSEE
ELCOM TECHNOLOGIES CORPORATION
By: /s/ Xxxxxx Xxxx Date: Sept. 21, 1995
--------------------------------- --------
Xxxxxx Xxxx
Title: President
LICENSOR
Xxxx X. Xxxxxxx
By: /s/ Xxxx X. Xxxxxxx Date: Sept. 21, 1995
--------------------------------- --------
Xxxx X. Xxxxxxx
/s/ [SIGNATURE IS NOT LEGIBLE].9.21.95
----------------------------------
WITNESS
11
