NON-EXCLUSIVE LICENSE AGREEMENT
This
agreement entered into this 2nd
day of
January 2007, by and between x-00.xxx,
LLC (B-50)
(hereinafter, “Licensor”) and XFormity, Inc. (“XFormity”), a Texas corporation
located in Dallas, Texas (hereinafter, “Licensee”);
RECITALS
Whereas
Licensee is in the business of providing above-store reporting systems and
related services to customers in the restaurant industry. The above-store
reports are based on restaurant point-of-sale (POS) data;
Whereas
Licensor is the owner of United
States Patent No. 6,633,851 B1 (“the ‘851 Patent”), which issued October 14,
2003, and, as the owner, is authorized
to issue licenses under;
Whereas
Licensee intends to develop, sell, install, and service certain above-store
reporting products (“the Applicable Products”) that fall within the claims of
the ‘851 Patent;
It
is
hereby agreed that Licensor does grant a non-exclusive
license
to the Licensee subject to the following terms and conditions:
TERMS
OF
THE NON-EXCLUSIVE LICENSE
1.
Licensee shall be allowed to develop, sell, install, and service certain
above-store reporting products (“the Applicable Products”).
“Applicable
Products” is defined for purposes of this License Agreement as: those XFormity
products and / or services for the restaurant industry that are dependent on
the
methods defined within the ‘851 patent; products and /or services used to
provide the XFormity products and/or services for the restaurant industry that
are dependent on methods defined within the ‘851 patent; or products and / or
services that are used in conjunction with other products and / or services
that
are dependent on the methods defined within the ‘851 Patent. The Applicable
Products would include but not be limited to: uses of the QSRx above-store
reporting product; any new versions, derivatives or additions to this product
that fall within the scope of the 851 patent; Accounting Integrations Services
for the restaurant industry; and any other products or services that incorporate
QSRx within the restaurant industry. Applicable Products shall not include
any
XFormity products or services outside of the scope of the ‘851 patent. For
example, Applicable Products shall not include the following XFormity services:
DSL provisioning and installation; Background Checks and reporting (as it does
not relate to POS data); Hosted Accounting Packages and services such as Great
Plains and/or Dynamics; licensing of XFormity’s core data integration suite
currently marketed under the trademark “Qube” where (a) the originating source
of the data is not a restaurant, or (b) no reporting related services are
involved; and all uses of the QSRx reporting product and/or XFormity Business
Intelligence solution for any industry or industry segment where the originating
source of the data is not a restaurant.
2.
The
financial terms of the License Agreement are as follows:
a)
XFormity
will pay monthly royalty fees to B-50 based on the Gross Revenues of Applicable
Products.
b)
“Gross
Revenues” shall be defined as all revenues collected by XFormity for the
provision of products and / or services utilizing the Applicable Products.
However, “Gross Revenues” shall not include the sales taxes associated with the
acquisition or use of the Applicable Products.
c)
The
Royalty Fees will be based on the monthly Gross Revenue for Applicable Products
according to the following schedule:
1.
0 to
$210,000 is 6% of gross monthly revenue for Applicable Products;
2.
$210,000 to $420,000 is 6.5% of gross monthly revenue for Applicable
Products;
3.
$420,000 to $625,000 is 7.0% of gross monthly revenue for Applicable
Products;
4.
over
$625,000 is 7.5% of gross monthly revenue for Applicable Products.
d)
Any
location which utilized B-50 services after January 1st
2006 and
subsequently utilizes Xformity’s Applicable Products will be a Transfer
Location. The royalty percentage for all Transfer Locations will be doubled
when
calculating the monthly royalty for Applicable Products as described in
paragraph 1 (above).
e) This
License Agreement doesn’t include the licensing of the ‘851 patent for YUM
Corporate Restaurant Locations since the royalty for YUM Corporate Restaurant
Locations is undefined at this time. Nothing in this License Agreement shall
prevent b-50 or XFormity from doing future business with any YUM Corporate
Restaurant Location once the royalty for YUM Corporate Restaurant Locations
has
been defined. Nothing in this License Agreement shall prevent b-50 or XFormity
from submitting bids, or otherwise competing to provide services to any YUM
Corporate Restaurant Location.
f) For
the
first two years of the License Agreement, B-50 will accept Xformity common
stock
in payment of Royalty Fees. The shares will be “restricted securities” within
the meaning of Rule 144 of the Securities Act of 1933, as amended. The stock
will be issued by the Issue Date to B-50 on a quarterly basis. The amount of
XFormity common stock issued will be based on the sum of the calculated royalty
fees for each of the previous three months using the schedule in Paragraph
2 (c)
above divided by the average daily close of the common stock on the
over-the-counter market and quoted on the OTC Bulletin Board for the three
month
period for which royalties are being paid. The Issue Date will be no later
than
30 days after the end of the quarter. If at the end of the first
6
months
of this
Agreement XFormity does not provide common stock in payment of the Royalty
Fees
that has been registered for sale under the Securities Act of 1933, as amended,
then beginning with the 7th
month,
XFormity shall pay the Royalty Fees in cash.
g)
Royalty payments shall
be
due every three months commencing the date hereof and shall be payable 30 days
after the end of three month period for which they are due.
h)
Royalty payments which are made more than 30 days past the due date set forth
in
Paragraph 2(g) above shall be subject to a one and one half percent (1 ½%) per
month finance charge. Failure of the Licensor to exercise the right to collect
late fees under this paragraph shall not constitute a waiver of the right to
collect late fees.
3.
Conditions of Default: The following acts or events shall constitute a material
breach of this License Agreement and also a default under this License
Agreement, which will give the Licensor the immediate right to terminate the
agreement:
a)
Late
payment of royalties, which default is not cured after 30 days’ written notice;
b)
If the
Licensee challenges the validity of the License Agreement, or supports,
encourages, or assists others to challenge the validity of the license agreement
for the duration of the license term. However, Licensee shall not be in default
under this provision if Licensee is legally obligated to comply with a court
order or subpoena;
c)
If the
Licensee fails to comply with any obligation set forth in this Agreement, which
default is not cured after 30 days’ written notice.
If
Licensor terminates the agreement for any reason described in Paragraph 3,
Licensee shall no longer have any rights under this Agreement or the ‘851
Patent. If Licensor terminates the agreement for any reason described in
Paragraph 3, Licensor will retain all rights in the ‘851 Patent, including the
right to enjoin Licensee from infringing the ‘851 Patent.
4.
To
enable the Licensor to verify the accuracy of the royalty amounts, Licensee
shall provide the name(s) of its customers to whom it has sold any Applicable
Products to an independent third party selected by Licensor and approved by
Licensee, (the “Reporting Agent”). All costs and expenses charged or incurred by
virtue of the engagement of such Reporting Agent shall be borne by Licensor,
unless the Reporting Agent determines after an audit that royalty payments
made
by Licensee are deficient by more than 6.5% of all royalty payments due to
Licensor. If the Reporting Agent determines a shortfall of greater than 6.5%
in
the royalty payments, Licensee shall be responsible for any shortfall determined
by the Reporting Agent, and shall also pay 50 percent of the Reporting Agent’s
fees and expenses. The Reporting Agent shall not disclose to Licensor the
identity of Licensee’s customers, but shall disclose all other information
necessary to verify the accuracy of the royalty payments. Licensee
shall provide and shall
authorize
the customers to provide the Reporting Agent with documentation of the
“Applicable Products” that have been sold. The failure to comply with this term
of the agreement is a material breach and shall give the Licensor the right
to
terminate the agreement. Notwithstanding the foregoing, Licensee shall have
no
liability and shall not be in default under this License if one or more of
its
end-users fails or refuses to provide the requested information to the Reporting
Agent.
5.
XFormity agrees that it shall not challenge the validity of the ‘851 patent, or
support, encourage, or assist others to challenge the validity of the license
agreement for the duration of the license term. However, Licensee shall not
be
in default under this provision if Licensee is legally obligated to comply
with
a court order or subpoena. Licensor represents and warrants to Licensee that
it
is the sole and exclusive owner of the ‘851 patent. Licensor also represents and
warrants that the exercise by Licensee of the right to utilize the ‘851 patent
granted herein will not violate or infringe upon the patent rights of any third
party.
6.
During
the term of the License Agreement, XFormity’s customers shall have the right to
use the Applicable Products in
accordance with the terms of this License Agreement without
accusations of patent infringement by B-50. The license granted hereunder is
not
subject to sub-license, unless the parties hereto otherwise agree in writing.
Notwithstanding the preceding sentence, the license is transferable without
the
consent of B-50 to a third party if XFormity or all of its assets to which
this
license applies are acquired by that third party, provided that the third party
agrees to be bound by the license and assumes XFormity’s obligations thereunder;
or if XFormity sells, transfers or assigns to a third party its rights to an
Applicable Product provided that in each instance the third party agrees to
assume all of XFormity’s obligations under the license with respect to the
Applicable Product so transferred.
If
a
third party attempts to acquire XFormity or all of its assets to which this
license applies, or if XFormity attempts to sell, transfer or assign to a third
party XFormity’s rights to an Applicable Product, B-50 retains a right of first
refusal to acquire XFormity or any of the Applicable Products on the same terms
and conditions offered by the third party to prevent the license from being
transferred to a competitor of B-50, or any other entity whose business
interests are adverse to B-50. If B-50 declines or fails to exercise the right
of first refusal within 15 days of receipt of notice, or if it exercises the
right and fails to close within 30 days XFormity shall be free to complete
the
transfer upon the terms and conditions contained in the offer.
7.
The
License Agreement will be in effect for the duration of the patent term, and
any
renewal or extension thereof.. The parties agree that the license agreement
will
terminate if any portion of the ‘851 Patent (with the exception of Claim 5) is
determined to be invalid or unenforceable by any federal court during the patent
term, in a non-appealable order. In the event that Claim 5 and Claim 5 only
is
found to be invalid or unenforceable the license agreement shall not terminate.
The obligation of Licensee to pay royalties shall be suspended in the event
Licensor and/or Licensee is enjoined by a court of competent jurisdiction from
utilizing the ‘851 patent. During the period of any such suspension, Licensee
shall continue to accrue royalty obligations to the extent that Licensee
continues to use the Applicable Products in accordance with this License
Agreement. During the period of any such suspension, Licensee shall not pay
the
accrued royalties to B-50. Licensee’s obligation to pay all royalties, including
all royalty obligations accrued during the period of suspension, shall resume
immediately if the injunction is dissolved or removed. If the license is
terminated for any reason described in this Paragraph, such termination shall
not impair or restrict Licensee’s right or ability to commercially utilize any
Applicable Products.
8.
Licensor makes no representations or warranties of merchantability or fitness
for a particular purpose.
9.
Licensee shall hold the Licensor harmless for and agrees to defend it in any
claims, demands, suits, or actions brought by Licensee's customers or third
parties against Licensee and/or Licensor as a result of the purchase and/use
of
the Applicable Products that were developed, sold, installed, and serviced
by
Licensee. The indemnity contained herein shall not include a claim or cause
of
action made by a third party asserting the invalidity of the ‘851 patent, or a
claim that the ‘851 patent infringes upon the rights of a third
party.
10.
During
the Term of this Agreement Licensor shall use commercially reasonable efforts
at
its own cost and expense to maintain in full force and effect and to otherwise
protect the ‘851
patent. Licensor will at all times have the right to take whatever steps it
deems necessary or desirable, in its sole discretion, to defend all claims
that
the use of the ‘851 patent infringes the rights of a third party. Licensor will
at all times have the right to take whatever steps it deems necessary or
desirable, in its sole discretion, to protect the ‘851 patent from all
infringement, or other harmful or wrongful activities of third
parties.
(i) Licensee
will cooperate
fully with Licensor, at Licensor’s request
and at
Licensor’s expense,
in the
defense and protection of the ‘851 patent. Licensor will be responsible for all
reasonable direct out-of-pocket costs and expenses, including reasonable
attorneys’
fees,
incurred by
Licensee. Licensee agrees to execute, at Licensor’s reasonable request, any and
all truthful and accurate instruments or documents as may be reasonably
necessary or advisable to protect and maintain the interest of Licensor in
the
‘851 patent; provided,
that
the expense of preparing or filing such instruments or documents will be
borne
by Licensor. Except as described elsewhere in this agreement, Licensee shall
have no obligations to clear, register, protect or maintain the ‘851 patent,
including, without limitation, ‘851 patent owned by Licensor.
(ii) In
the
event of institution of any suit against Licensee alleging infringement of
any
patent of a third party by reason of the use of the ‘851 patent, Licensor
agrees, upon written request of Licensee made after institution thereof, to
undertake and diligently conduct, at Licensor’s expense, defense of such suit,
and to hold Licensee harmless against any judgment or award of damages which
result therefrom. Licensee shall render all reasonable assistance to Licensor
in
connection with any suit to be defended by Licensor under this provision.
Licensee shall have the right to be represented therein by advisory counsel
of
its own choice and at its own expense. Licensor shall have full control of
the
defense of any such suit, but shall not be free to settle the same without
the
consent of Licensee if by settlement, Licensee would be obligated to make
payments, or if the settlement would impair Licensee's ability to continue
its
operations in the manner previously conducted.
(iii) If
Licensee in good faith believes that Licensor has failed to take any action
that, in the exercise of its reasonable business judgment, is necessary to
maintain, enforce or protect the ‘851 patent (including, but not limited to,
pursuing infringers), then Licensee shall give Licensor Written Notice
describing such alleged failure.
(iv) Decisions
regarding the conduct of actions involving the protection and defense
of the ‘851 patent will be solely in the discretion of Licensor at Licensor’s
sole cost and expense; provided, however, that this paragraph 10(iv) shall
not
be construed to in any way limit or contravene the affirmative covenants of
Licensor under paragraphs 10(i) and (ii).
(v). Notice
of
Infringement.
In the event that Licensee learns of an actual or suspected infringement or
misuse of the ‘851 patent, or any action disputing Licensor’s ownership of the
‘851 Patent, it shall promptly provide Licensor with a written statement of
the
facts of the infringement, misuse, opposition or cancellation to the extent
known.
11.
Licensee agrees that laws of the State of Minnesota shall apply to this License
Agreement and that the venue for any legal action arising out of this agreement
shall be Hennepin County in Minnesota.
12.
Any
changes to this License Agreement must be in writing.
13.
Licensee shall hold Licensor harmless from any liability or expense in
connection with Licensee's manufacture, sale and installation of devices covered
by the ‘851 Patent.
14.
By
granting this license, Licensor is not conveying or selling ownership rights
in
the ‘851 patent. Licensee acknowledges that it has no ownership rights in the
‘851 patent.
15. Any
controversy or claim arising out of or relating to this Agreement, or the breach
of the same, shall be settled through consultation and negotiation in good
faith
and a spirit of mutual cooperation. However, if those attempts fail, each of
the
parties agrees that any dispute or controversy arising out of or in connection
with this Agreement or any alleged breach hereof shall be settled by mandatory
binding arbitration in, Minneapolis, Minnesota pursuant to the Commercial
Arbitration Rules of the AAA. If the parties cannot jointly select a single
arbitrator to determine the matter, one arbitrator shall be chosen by each
of
b-50 and XFormity (or, if a party fails to make a choice, by the AAA on behalf
of such party) and the two arbitrators so chosen will select a third (or, if
they fail to make a choice, by the AAA). The decision of the single arbitrator
jointly selected by b-50 and XFormity, or, if three arbitrators are selected,
the decision of any two of them will be final and binding upon the parties
and
the judgment of a court of competent jurisdiction may be entered thereon. The
arbitrator or arbitrators shall award the costs and expenses of the arbitration,
including reasonable attorneys' fees, disbursements, arbitration expenses,
arbitrators' fees and the administrative fee of the AAA, to the prevailing
party
as shall be determined by the arbitrator or arbitrators.”
Dated:
January 2, 2007 ______/s/
Xxxxx Clark___________
Xxxxx
Xxxxx
x-00.xxx,
LLC, Licensor
Dated:
January 2, 2007 ______/s/
Xxxxx
Xxxx
Xxxxx
Xxxx
XFormity,
Inc., Licensee
