Exhibit 10.3
ProductivIT Sale Agreement
This agreement ("Agreement") is made and entered into in between DynTek
Services, Inc., a Delaware corporation, with offices at 00000 Xxx Xxxxxx Xxxxxx,
Xxxxx 000, Xxxxxx, XX 00000 ("DynTek") and Child Support Technologies, Inc., a
Mississippi corporation, having offices located at 000 Xxxx Xxxxxxx Xxxxxx,
Xxxxx 0000, Xxxxxxx, Xxxxxxxxxxx 00000 ("CST"), as of March 1, 2004 (the
"Effective Date").
WHEREAS, DynTek owns the ProductivIT product; and
WHEREAS, CST wishes to license ProductivIT for exclusive use in its or its
affiliates' provision of services to state and local government child support
services agencies (the "Business"); and
WHEREAS, the parties wish to memorialize the terms and conditions under
which CST is licensed and authorized to use ProductivIT in providing such
services;
NOW, THEREFORE, the parties agree as follows:
Terms and Conditions
1. Definitions. The definitions herein shall apply to any defined term,
whenever it appears in this document, with or without quotation marks and/or
capitalization, unless such definition would result in absurdity or contradict
the intent of this document, in which case the term shall be defined by the
plain meaning of the words.
a. ProductivIT shall mean the ProductivITTM products.
b. Territory shall mean the United States of America and U.S.
Territories.
c. Products shall mean those products identified in Section 2 of this
Agreement.
d. Purchase price shall mean the cost to CST of the licenses set forth
in Section 3 of this Agreement.
e. Third Party Clients shall mean those persons or organizations
receiving services from CST or its affiliates and shall be
interchangeable with Retail Customers.
f. The masculine pronouns used herein shall include the feminine and
the singular shall include the plural so that they fit the context
of this Agreement and reflect the intent of the parties.
2. Licenses. DynTek hereby grants to CST and CST hereby accepts unlimited
nonexclusive right to use licenses for ProductivIT (the " Product") in
connection with the Business, applying to those machines on which this Product
is installed, for internal use or in the provision of services to Third Party
Clients in the normal course of its and its affiliates' conduct of the Business
within the Territory. Such licenses are perpetual once transferred or installed
on hardware owned by or sold, leased or loaned to (or otherwise used by) CST or
its affiliates or Third Party Clients. CST and its affiliates will have the
exclusive right to
-2-
use and/or resell ProductivIT in connection with provision of services related
to governmental child support activities (the "Market") in the Territory.
3. Product Pricing and Payment Terms. CST shall pay DynTek a total license
fee for all of the Products subject to the use restrictions set forth in Section
2 in the amount of NINE HUNDRED THOUSAND NO/100 U.S. DOLLARS ($900,000.00 U.S.)
in the aggregate, payable in seven (7) installments as follows:
1. $200,000 on the date this Agreement is released from escrow;
2. $150,000 on May 1, 2004;
3. $150,000 on July 1, 2004;
4. $100,000 on September 1, 2004;
5. $100,000 on November 1, 2004;
6. $100,000 on January 1, 2005; and
7. $100,000 on March 1, 2005.
If any of the above payment dates is not a business day (a day on which banks in
Jackson, Mississippi are open for the transaction of business), such payment
date shall be the next succeeding business day. The Purchase Price is inclusive
of taxes that may be applicable to this sale, including, but not limited to
federal, state or local taxes, or sales, use, excise, ad valorem or other taxes
or duties. DynTek is solely responsible for the payment of all such taxes when
applicable and shall indemnify and hold CST harmless from the same.
4. Relationship of Parties. The parties agree that this Agreement is between
merchants and has been negotiated at arms length. No agency, partnership or
joint venture is intended or created hereby except to the extent that CST is
acting as an independent merchant, employing DynTek's products in the normal
flow of commerce. Neither party shall have any authority to bind the other
except as specifically provided herein. Nothing in this Agreement shall be
construed to (i) give either party the power to direct and control the
day-to-day activities of the other, (ii) constitute the parties as partners,
joint venturers, co-owners or otherwise as participants in a joint or common
undertaking, or (iii) allow either party to create or assume any obligation on
behalf of the other party for any purpose whatsoever. All financial obligations
associated with a party's business are the sole responsibility of such party.
All sales and other agreements between CST and its customers are CST's exclusive
responsibility and shall have no effect on CST's obligations under this
Agreement. Each party shall be solely responsible for, and shall defend,
indemnify and hold the other party free and harmless from any and all claims,
damages or lawsuits (including such other party's reasonable attorneys' fees)
arising out of the acts of a party, its employees or its agents, which legal and
other proceedings for which indemnification is sought shall be conducted with
counsel reasonably satisfactory to the indemnified party.
5. Portal Support. In the event that DynTek ceases to provide ongoing access
to the portal supporting these licenses, CST is granted the perpetual right to
receive, use and operate the portal server application as necessary for the
limited purpose of operating the portal in support of the licenses purchased
herein.
-3-
6. Proprietary Rights and Confidentiality
a. Proprietary Rights. The Products offered herein and hereunder are
licensed to CST for its and its affiliates' internal use and in
providing services to Third Party Clients. The Third Party Clients
will acquire a limited sublicense in the Products on the hardware in
which it is installed for the purpose of registering warranties and
to request warranty and support services from CST. The license of
Products hereunder is subject to retention by DynTek of all right,
title and interest in the products and in all of DynTek's code,
methods, patents, trademarks, trade names, inventions, copyrights,
know how, and trade secrets relating to Products. The use by CST or
its affiliates of any of these proprietary rights is authorized only
for the purposes herein set forth, and upon termination of this
Agreement such authorization shall cease. The license of Products
hereunder conveys no right to manufacture duplicate, reproduce or
copy the Products, except for delivery of software as licensed under
this Agreement and for making back-up copies in the ordinary course,
and CST shall take all steps reasonably requested by DynTek to
assure compliance with this Agreement.
b. Confidentiality. Each party agrees that at all times during and
after the term of this Agreement it will not use in any way for its
own account or the account of any third party, nor disclose to any
third party any of the other party's confidential information with
respect to the technology and other technical information upon which
the Products and their operations are based, product sales and
marketing information, customer lists and pricing information. Each
party shall take every reasonable precaution to protect the
confidentiality of such information. CST shall not publish any
technical description of the Products beyond the description
published by DynTek without the express written consent of DynTek.
c. Trademarks and Trade Names. CST shall have the non-exclusive right
within the Territory during the term of this Agreement to represent
to the general public that it is an authorized licensor of the
Products under the trademarks, service marks, and trade names that
DynTek may adopt from time to time ("DynTek's Trademarks"). CST
shall not alter or remove any of DynTek's Trademark indicia from any
of the Products, packaging and/or advertising materials. All
representations of DynTek's Trademarks that CST intends to use shall
first be submitted to DynTek for approval (which shall not be
unreasonably withheld) or shall be exact copies of those used by
DynTek and shall be placed on the Products in exactly the same way
as used by DynTek at the time of such use (or on the date hereof
should DynTek not similarly use its Trademarks at such time).
d. Indemnification. DynTek will defend at its expense any action
brought against CST and/or any employee, partner, customer, agent
and/or affiliate of CST, including any parent corporation of CST, to
the extent based upon the claim that a Product or any part thereof
infringes any duly issued United States patent, copyright or other
intellectual property right of a third party ("intellectual property
right") and shall pay any settlements or judgments to
-4-
the extent based thereon; provided DynTek shall have had sole
control of the defense of any such action or settlement negotiations
with respect thereto, and no settlement of any such action occurred
without the consent of DynTek, and provided further that CST
notifies DynTek promptly in writing of such claim, suit or
proceeding and, at DynTek's expense (except the value of time of
CST's employees), gives DynTek adequate information to defend the
action and otherwise cooperates with DynTek.
If a Product becomes, or in the opinion of DynTek may become,
subject to any claim of infringement of any intellectual property
right, DynTek may, at its option: (i) procure for CST the right to
use the Product; (ii) replace or modify the Product, or any part
thereof to make it non-infringing; or (iii) remove the Product, or
any part thereof, and refund the aggregate payments paid to DynTek
under this Agreement, less a reasonable sum for CST and its
affiliates' benefits received from prior use of the Product.
e. Limitation. DynTek assumes no liability for (a) any assembly,
circuit, combination, method or process of CST in which any Product
may be used; (b) any special modification of a Product by DynTek
that is necessary to comply with CST's specifications; or (c) the
modification of a Product or any part thereof by anyone other than
DynTek, unless such modification was made with the written approval
of DynTek.
f. Entire Liability. The foregoing provisions of this section state the
entire liability and obligation of DynTek and the exclusive remedy
of CST and its customers with respect to the alleged infringement of
any intellectual property right by the Products or any part thereof.
7. Limitation of Liability. DynTek's liability arising out of performance of
this Agreement (other than DynTek's liability and obligations under Section 6
hereof which shall not be subject to the limitations of this Section 7), the
termination of this Agreement, and/or sale of the Products by CST in accordance
with its rights hereunder shall be limited to the amount paid by the CST for the
licenses. Except as set forth in Section 6, in no event shall DynTek be liable
for cost of procurement of substitute goods by anyone. In no event shall DynTek
be liable to CST or any other entity for any special, consequential, incidental
or other damages, however caused, whether for breach of contract or otherwise,
and whether or not CST has been advised of the possibility of such damage. This
limitation shall apply notwithstanding any failure of essential purpose of any
limited remedy provided herein.
8. Default and Termination.
a. In the event CST fails to make any installment payment when due,
DynTek shall provide CST notice of default, and if CST has not fully
paid such past-due payment within ten (10) days after such default
notice (a "Payment Default"), DynTek shall have the right to
immediately accelerate the unpaid balance due under this Agreement
and may terminate the Agreement for cause. CST shall be liable to
DynTek for all reasonable costs and expenses for collection of the
amounts due, including reasonable attorneys' fees and disbursements
incurred subsequent to any payment default, whether within or
-5-
apart from any legal action or proceeding and whether or not suit is
actually instituted.
b. Other than for a Payment Default, this Agreement may be terminated
by the non-defaulting party if any of the following events of
default occur: (1) on thirty (30) days notice, unless cured by the
defaulting party, if a party materially fails to perform or comply
with this Agreement or any provision hereof; (2) on thirty (30) days
notice, unless cured by the defaulting party, if either party fails
to strictly comply with the provisions of Section 6.a. (Proprietary
Rights) or Section 6.b. (Confidentiality) ; (3) immediately by the
non-defaulting party, if a party becomes insolvent or admits in
writing its inability to pay its debts as they mature, or makes an
assignment for the benefit of creditors; (4) immediately by the
non-defaulting party, if a petition under any foreign, state, or
United States bankruptcy act, receivership statute, or the like, as
they now exist, or as they may be amended or instituted, is filed by
a party; or (5) immediately by the non-defaulting party, if such a
petition identified in (4) above is filed by any third party, or an
application for a receiver is made by anyone other than the affected
party, and such petition or application is not dismissed within
sixty (60) days.
c. Within ten (10) days after termination of this Agreement by DynTek
due to a default of CST, CST shall cease and desist all use of the
Products and related documentations and shall return to DynTek all
full or partial copies of the software and documentation in CST or
its affiliates' possession or control.
d. Upon termination of this Agreement by DynTek under the terms hereof
solely due to a Payment Default, DynTek may terminate any Related
Agreements (defined below). If DynTek or any of its affiliates
materially defaults in the performance of any Related Agreements,
after the expiration of any cure periods thereunder, if applicable,
CST may terminate this Agreement and shall have no further
obligations under this Agreement other than with respect to those
provisions of this Agreement which specifically survive the
termination hereof. For purposes of this paragraph, "Related
Agreements" shall mean any agreement (other than this Agreement)
between (i) CST or any of its parents or affiliates and (ii) DynTek
or any of its subsidiaries or affiliates. Upon a termination of the
Related Agreements as set forth in this paragraph, such Related
Agreements shall immediately terminate and shall be of no further
force and effect other than with respect to those provisions of any
Related Agreement which specifically survives the termination of
such respective Related Agreement.
9. Waiver of Certain Rights; Parties. This Agreement extends certain rights
not only to CST but also to affiliates of CST. Notwithstanding the above, DynTek
and its successors and assigns agree to look solely to CST and its assets for
the performance of CST's obligations hereunder, including, but not limited to,
the payment of the Purchase Price. Under no circumstances shall DynTek or its
successors or assigns hold or attempt to hold any officer, director,
incorporator, shareholder (including, but not necessarily limited to, Young
Xxxxxxxx, P.C.) or employee liable or responsible for the performance of CST's
obligations hereunder, under any legal or equitable theory of any nature, their
recourse being limited solely to CST and its assets.
-6-
10. General Provisions
a) Governing Law and Jurisdiction. Subject to the parties' agreement to
arbitrate, any action or proceeding seeking to enforce any provision
of, or based on any right arising out of, this Agreement shall be
brought against any of the parties only within the courts of the
State of Mississippi, County of Xxxxx, and each of the parties
consents to the jurisdiction of such courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any
objection to venue laid therein.
b) Binding Arbitration.
i) Any controversy or claim arising out of or relating to this
Agreement for the breach hereof which cannot be settled by the
parties shall be settled by arbitration in accordance with the
commercial arbitration rules of the American Arbitration
Association ("AAA") as set forth herein.
ii) Each party may select one arbitrator. Selection shall be
completed within ten (10) days of the receipt of a demand for
arbitration. If either party fails to select an arbitrator
within such ten- (10) day period, the one selected shall act
as sole arbitrator. If two arbitrators have been selected, the
two arbitrators selected shall select a third within fifteen
(15) days after their selection. If they fail to do so, the
AAA shall select the third arbitrator. The arbitrators shall
set a date of hearing no later than sixty (60) days from the
date all arbitrators have been selected. If the amount in
controversy is less than $10,000.00, the parties shall
mutually agree on one arbitrator to conduct the binding
arbitration as mutually agreed by the parties outside of the
AAA process. If the parties are unable to mutually agree upon
one arbitrator or the alternative arbitration process within
(10) days of the receipt of a demand for arbitration, the
arbitration shall be conducted by the AAA as described above.
iii) The arbitration shall take place in Dallas, Texas.
iv) The award of any arbitration shall be final, conclusive and
binding on the parties hereto.
v) The arbitrators may award any legal or equitable remedy.
Judgment upon any arbitration award may be entered and
enforced in any court of competent jurisdiction.
vi) Either party to arbitration hereunder may bring an action for
injunctive relief against the other party if such action is
necessary to preserve jurisdiction of the arbitrators or to
maintain status quo pending the arbitrators' decision. Any
such action called pursuant to this paragraph shall be
discontinued upon assumption of jurisdiction by the
arbitrators and their opportunity to consider the request for
equitable relief pending final decision in the arbitration.
c) Survival of Certain Terms. The provisions herein relating to the
obligations to protect the other's trade secrets, copyrights,
trademarks and proprietary and property rights and relating to
enforcement of this Agreement, indemnity and warranties shall
survive the termination or expiration of this Agreement for any
reason. All other right and obligations of the parties shall cease
upon termination or expiration of this Agreement.
d) Entire Agreement. This Agreement, (including the Exhibits and
Attachments which are attached hereto and referenced on the cover
page, if any), constitutes the entire
-7-
agreement of the parties with respect to the licensed use of
ProductivIT and supercedes all prior agreements and understandings
between them. Separate agreements shall be entered into for
maintenance and for ongoing services. No modification of this
Agreement, nor any waiver of any rights under this Agreement, shall
be effective unless in writing and signed by both parties.
e) Independent Review. Each party declares that, prior to the execution
of this Agreement, they apprised themselves of sufficient relevant
data, through their legal counsel or through other sources of their
own selection, in order that they might intelligently exercise their
own judgment in deciding whether to execute, and deciding on, the
contents of this Agreement. They further declare that, except as may
be set forth herein, their decision was not based on or influenced
by any declarations or representations of the other party hereto, or
of the agents or employees of such other party.
f) Notices. All notices or other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly
given upon receipt) by delivery in person, one day after delivery
for next day service to a nationally recognized overnight courier,
by facsimile transmission (with confirmation back of receipt), or
five (5) days after being mailed by registered or certified mail
(return receipt requested), postage prepaid, with an acknowledgment
of receipt signed by the addressee or an authorized representative
thereof, addressed as follows (or to such other address for a party
as shall be specified by like notice; provided that notice of a
change of address shall be effective only upon receipt thereof:
To DynTek: To CST:
DynTek Services, Inc. Child Support Technologies, Inc.
Attn: Xxxxx Xxxxxx P. O. Box 23059
00000 Xxx Xxxxxx Xxx. Xxxxxxx, XX 00000-0000
Suite 250 ATTN: Xx. Xxxxxx X. Xxxxx, President
Xxxxxx, XX 00000 (mail)
000 Xxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
(street)
Phone: 000-000-0000 Phone: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
-8-
With a copy to: With a copy to:
DynTek Services, Inc. Young, Williams, Xxxxxxxxx &
Xxxxxxxx, P.A.
00000 X. 00 Xxxx, Xxxxx 000 P. O. Xxx 00000
Xxxxxxxxxx Xxxxx, XX 00000 Attn: Xxxx Xxxxxxx, XX
00000-0000
Xxxxxxxxx, XX Finance ATTN: Xxxxx X. Xxxxx, XX, Esq.
Phone: 000-000-0000 Phone: 000-000-0000
Fax: 000-000-0000 Fax: 000-000-0000
And
Xxxxx X. Xxxxxxxx, Esq.
Xxxxx Peabody LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Phone: 000-000-0000
Fax: 000-000-0000
g) Force Majeure. Nonperformance of either party shall be excused to
the extent that performance is rendered impossible by strike, fire,
flood, governmental acts or orders or restrictions, failure of
suppliers, or any other reason where failure to perform is beyond
the control and not caused by the negligence of the non-performing
party.
h) Non-assignability and Binding Effect. A mutually agreed
consideration for DynTek entering into this Agreement is the
reputation, business standing, and goodwill already honored and
enjoyed by CST and its affiliates under its present ownership, and
accordingly, CST agrees that it's rights and obligations under this
Agreement may not be transferred or assigned directly or indirectly,
or by operation of law, to anyone other than its current affiliates
without the prior written consent of DynTek. Subject to the
foregoing sentence, this Agreement shall be binding upon and inure
to the benefit of the parties hereto, their successors and assigns.
i) Partial Invalidity. If any provision of this Agreement other than
Section 9 is held to be invalid by a court of competent
jurisdiction, then the remaining provisions shall nevertheless
remain in full force and effect. The parties agree to negotiate in
good faith any term held invalid (other than Section 9) and to be
bound by the mutually agreed substitute provision. If Section 9 is
held to be invalid by a court of competent jurisdiction, this entire
Agreement shall be null and void; provided, however, DynTek and its
successors and assigns still shall be deemed to have waived any and
all rights to recover any damages from any person or entity other
than CST, whether under quantum meruit, any other equitable theory
or otherwise.
j) Legal Expenses. The prevailing party in any legal action arising out
of this Agreement shall be entitled, in addition to any other rights
and remedies it may have,
-9-
to reimbursement for its expenses, including court costs and
reasonable attorney's fees.
k) Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and which together shall
constitute one instrument.
l) Waiver. The failure of either party to exercise any right created
hereby shall not be deemed a waiver of that right.
m) Headings. The headings contained herein are not definitions, but
rather are intended as topical finding aids and shall have no legal
effect whatsoever.
IN WITNESS WHEREOF, the parties hereto have, through duly authorized officials,
executed this Agreement as of the Effective Date.
DYNTEK SERVICES, INC. Child Support Technologies, INC.
By: By:
----------------------------- ------------------------------------
Name: Name: Xxxxxx X. Xxxxx
---------------------------
Title: Title: President
---------------------------
Date: Date:
--------------------------- ----------------------------------
