Exhibit 10.3
[GRAPHIC OMITTED]
As of July 1, 2001
VR Yad Development Group, Ltd.
000-000 Xxxxxx Xxxxx Xxxxxxx
Xxxxxxxxxxx, XX X0X 0X0
Att: Xx. Xxxxxxxxx Xxxxxxx, CEO
Re: Development Agreement ("Agreement") by and between Essential Reality, LLC
("Essential") and VR Yad Development Group, Ltd. ("VR Yad" and,
together with Essential, THE "PARTIES") REGARDING THE P5(TM)
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Dear Sir:
This letter shall confirm our agreement with respect to the development
work you are performing for Essential in connection with the Product (as defined
in Exhibit "A", A/K/A the P5(TM)), the scope of which is more fully outlined on
Exhibit "B", as may be amended from time to time by the Parties.
Accordingly, the Parties agree as follows:
1. As full compensation for the services to be provided hereunder,
Essential shall pay VR Yad: (i) a development fee of $30,000 USD per month
beginning on July 1, 2001 and continuing on a monthly basis for two consecutive
months thereafter ("Development Fee"); and (ii) royalties equal to one percent
(1%) of Net Sales (as defined below) of the Product ("Royalties"). At the
expiration of the 2-month period during which VR Yad receives the Development
Fee, the terms of any subsequent agreement, including compensation, shall be
negotiated by VR Yad and Essential. Absent an agreement, in writing, as to any
changes, this letter agreement shall remain in force and effect unless
terminated pursuant to paragraph 12.
Moreover, VR Yad shall also receive an additional one half of
one percent (.5%) of Net Sales as an additional royalty ("Additional Royalty"),
provided that such Additional Royalty shall be forfeited by VR Yad if, as a
result of a determination by Essential, in its sole and absolute discretion,
that VR Yad has failed to timely complete any portion of the development work
outlined in Exhibit "B" Essential engages a third party to timely complete such
work.
For the purposes of this Agreement "Net Sales" is defined as
the gross invoice and/or sales price of shipments of production units of the
Product to unrelated third parties ("Gross Sales"), less returns actually
accepted and credited, cash and/or similar trade discounts and allowances
actually granted, customs duties and sales, excise, value added and similar
taxes, insurance and freight billed through to customers allocable to that
portion of the invoiced price that is attributable to the Product. If products
subject to Gross Sales include the Product and other products sold or licensed
with the Product in a package for a single price, the amount of the price
attributable to the Product shall be determined by prorating the receipts from
the package according to the suggested retail prices or, if there is no
suggested retail price, then the values established by Essential for the several
components contained in the package.
Notwithstanding the fact that VR Yad' Royalties are earned
when Essential's related revenues are earned, such Royalties are not payable to
VR Yad unless and until such revenues are collected by Essential and such
Royalties, if any, shall be paid to VR Yad within thirty (30) calendar days
after the close of each calendar quarter in which such revenue is received by
Essential.
Essential shall reimburse VR Yad for expenses and
disbursements reasonably incurred by VR Yad in respect of its performance of its
obligations arising from this Agreement, PROVIDED, HOWEVER, that any such
expenses and disbursements shall be approved by Essential, in writing, prior to
VR Yad's expenditure or disbursement.
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2. All information and materials relating to the Product given to you
are original, unique and proprietary to Essential and are owned and subject to
Intellectual Property ownership by Essential. Any copying, duplication or
manufacture or use of such Intellectual Property without the prior written
consent of Essential is strictly prohibited hereby and constitutes infringement
under the United States Laws and shall be enforced by Essential to the fullest
extent permitted by law.
3. Any specifications, drawings, sketches, models, technical or
business information or data, written, oral or otherwise, relating, in any way,
to the Product (hereinafter "Information") furnished to you under or in
contemplation of this Agreement shall remain Essential's property and shall not
be disclosed to any third party. All copies of such Information in written,
graphic or other tangible form shall be returned promptly to Essential at
Essential's request.
4. All non-public information regarding the Product that is furnished
or disclosed to VR Yad during the term of this Agreement, as well as the terms
of this Agreement and any Information provided hereunder, shall be considered
"Proprietary Information." Proprietary Information does not include information
that has been or is disclosed to the public other than as a result of a breach
of a confidentiality obligation owed to Essential or is otherwise independently
developed or furnished by a third party not subject to a contractual
restriction. Unless otherwise agreed to in writing by Essential or required by
law, VR Yad will: (a) keep Proprietary Information confidential and not disclose
or reveal any Proprietary Information to any persons or entities other than
those employed by VR Yad or on VR Yad' s behalf who are actively and directly
engaged in Essential's activities under this Agreement (which persons or
entities will be caused by Essential to observe the terms and conditions set
forth herein as though each such person or entity was bound hereby); and (b) not
use the Proprietary Information for any purpose other than in connection with
the services provided to Essential by VR Yad.
Moreover, Essential shall be able to issue press releases and
other marketing or other written materials and to publicize the relationship
outlined herein by both public written communication and verbal reference,
including, without limitation, references on Essential's web-site and in its
business plans and collateral materials. VR Yad shall not, except with the prior
written approval of Essential, issue press releases and/or other marketing or
other written materials, or communicate with any third party in any way, with
respect to the relationship outlined herein. VR Yad shall send Essential a final
copy of any such approved communication promptly following the release of such
information.
5. It is understood and agreed that all work performed by VR Yad for
or on behalf of Essential shall be considered "Work for Hire" as defined in the
United States Copyright Law, and VR Yad hereby assigns to Essential all right,
title and interest, including without limitation, the copyright (and all
renewals thereof), in any and all countries in the world, in and to all works
resulting from such services ("Work Product"). VR Yad agrees to cooperate with
Essential or its designees and to execute such documents of assignment, oaths,
declarations or other documents, prepared by or for Essential, to enable
Essential to perfect or enforce its proprietary rights in and to the Work
Product and such cooperation and execution shall be at no additional
compensation to VR Yad; PROVIDED, HOWEVER, that Essential agrees to reimburse VR
Yad for reasonable out-of-pocket expenses incurred by VR Yad at Essential's
specific request.
6. Any improvements used and/or useful in the development and/or
manufacture of the Product or any applications thereto, made, developed and/or
conceived by you, or based on the Information, shall belong solely to Essential;
shall be treated as Information under this Agreement and you shall have no
rights, title, interest in or to such improvements. Furthermore, you agree to
complete any document and cooperate with Essential in perfecting our rights to
such improvements.
7. During the period that Essential and you have a relationship, and
for two (2) years after termination of such relationship, you will not develop,
manufacture, market or sell applications for any similar Product, or for any
other product that you develop for or on behalf of Essential, other than for or
to Essential.
8. Notwithstanding any other clause herein, all source code owned by
the Parties prior to entering into this Agreement, which such Party can
demonstrate in writing was developed by or on behalf of such party prior to the
date hereof ("Preexisting Properties"), and all intellectual property rights
associated therewith shall remain the property of the respective party. Any
modifications, derivations, improvements or patches created by either party in
respect of the Product or Essential's pre-existing code shall be the property of
Essential. Any modifications, derivations, improvements or patches created by
either party in respect of VR Yad's pre-existing code shall be the property of
VR Yad. To the extent that VR Yad's Preexisting Properties are incorporated in
the Product or required, in Essential's sole discretion, to be used in the
manufacture, improvement, maintenance, sales, marketing, support or use of the
Product, Essential and its distributors, contractors, customers, licensees and
end users shall have the exclusive, world-wide, royalty free license with
respect to the same, including the right to sublicense VR Yad's Preexisting
Properties.
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9. You agree that your obligations, which by their nature should
survive the termination or expiration of this or any other agreement with
Essential, e.g. obligations respecting use and disclosure of Information and/or
Indemnification, shall survive such termination or expiration.
10. You further appreciate that any violation of this Agreement will
cause Essential irreparable harm for which money damages alone cannot provide an
adequate remedy. Therefore, you hereby consent in the event of a violation or
breach of this Agreement, to the issuance of a restraining order or injunction
without bond against such violations or breaches.
11. You agree to execute and provide such further documentation as
shall be necessary and consistent with the terms set as set forth herein.
Additionally, you agree to use your best efforts to cause your employees,
consultants, agents and/or subcontractors to execute such agreements or other
documents with respect to all matters, including, without limitation, the
matters referred to in Sections 2, 3, 4, 5, 6, 7 and 8 hereof as Essential may
request.
12. Either party shall have the right, exercisable in its sole
discretion, to cancel this Agreement on thirty (30) days prior written notice to
the other party whereupon the Parties shall have no further liability or
obligation to each other with respect to this Agreement, PROVIDED, HOWEVER, that
if, at the time of such termination, the Product meets all of the specifications
itemized in Schedule "B", then Essential's obligation to pay the Development
Fee, the Royalties and the Additional Royalty shall survive such termination and
the Development Fee, Royalties and Additional Royalty shall be paid to VR Yad as
provided for under this agreement. Upon termination of this Agreement VR Yad
shall forthwith turn over all applications, demos, software, enhancements,
modifications, hardware, prototypes, tools, models, dies, molds, test results,
or the like, made or generated during the course of its work on the Product,
together with all assignment documents as required hereunder, as directed by
Essential.
13. Within thirty (30) calendar days after the close of each calendar
quarter beginning with the first calendar quarter in which any Royalties are due
hereunder, Essential shall provide VR Yad with a written statement showing the
gross sales for such calendar quarter, an itemization of all amounts deducted
therefrom in arriving at Net Sales, a calculation of the Royalties payable to VR
Yad in respect of such period, an itemized statement of any amounts deducted,
withheld or offset from such Royalties and an itemized statement of any amounts
deemed to have become non-collectible or collection of which has been foregone
by Essential. Each such statement shall be accompanied by payment of the amount
of Royalties due and shall be sent to VR Yad at the address set forth above.
14. VR Yad hereby indemnifies Essential and its affiliates, its and
their respective successors and assigns, and its and their respective officers,
directors, members, employees, and agents, and agrees to defend them and hold
them harmless, from and against (i) any and all loss arising out of, based upon
or resulting from any claim or injury proximately caused by infringement by VR
Yad of third party intellectual property rights in the design of the Product or
claims based upon inherent design defects in the Product created by VR Yad,
except for such claim or injury related to infringement of third-party
Intellectual Property rights as could not reasonably have been avoided through
the exercise of due diligence (but not excluding claim or injury resulting from
the intentional, reckless or negligent acts of VR Yad's employees and
contractors, whether or not VR Yad's own due diligence could have discovered
such claim or injury); and (ii) claims for compensation by any of VR Yad's
employees, consultants and/or subcontractors for services performed by such
subcontractors at VR Yad's direction or request with respect to the development
of the Product.
15. Except as provided in Paragraph 14, neither party shall be liable
to the other for special, incidental, consequential or punitive damages of any
nature, for any reason, including, without limitation, the breach of this
Agreement or any termination of this Agreement (unless such breach was willfully
improper), whether such liability is asserted on the basis of contract, tort
(including negligence or strict liability) or otherwise, even if the other party
has been warned of the possibility of such damages. All remedies, including,
without limitation, the termination of this Agreement and all of the remedies
provided by law (and not excluded pursuant to the foregoing sentence), shall be
deemed cumulative and not exclusive.
16. The Parties acknowledge that they are independent contractors and
that no employer/employee or joint venture relationship is created by this
Agreement an and that neither party has any right to act on behalf of the other
party or to represent that it has such right or authority, unless expressly
provided by prior written agreement signed by such party.
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17. VR Yad may not assign its rights or obligations under this
Agreement without the prior written consent of Essential. The rights and
obligations of Essential hereunder may, in whole or in part, be sold,
transferred or assigned by Essential to any parent, subsidiary, affiliated or
successor entity.
18. The Parties hereto consent to the exclusive personal and subject
matter jurisdiction and venue of the Supreme Court of the State of New York,
County of New York, and of the United States District Court for the Southern
District of New York, and further consent that any process or notice of motion
or other application to the Court or a Judge thereof may be served outside the
State of New York by registered or certified mail or by personal service,
provided a reasonable time for appearance is allowed and waive any objection to
jurisdiction on grounds of venue or forum non conveniens, or any similar
grounds. Any notice or service of process may be made to the address of the
Parties listed above. This Agreement shall be governed, interpreted and
construed in accordance with the laws of the State of New York without giving
effect to its laws governing the conflicts of laws.
19. This Agreement, sets forth the entire understanding of the parties
with respect to the subject matter hereof, and supersedes all existing
agreements between them concerning such subject matter. No amendment to or
modification of this Agreement shall be valid or binding unless made in writing
and signed by the party against whom enforcement thereof is sought. Each party
has taken all corporate action necessary for the authorization, execution and
delivery of this Agreement and this Agreement constitutes the legal, valid and
binding obligation of both Parties, enforceable against each other in accordance
with its terms except as enforcement may be limited by any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally and except as enforcement may be limited by general principles
of equity.
Please acknowledge your agreement to the foregoing by executing a copy
of this Agreement and returning a copy to us.
Very truly yours,
ESSENTIAL REALITY, LLC
By:
------------------------------------
Name:
Title:
Read and Agreed to as of the
1st day of July, 2001
VR YAD DEVELOPMENT GROUP, LTD.
By:
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Name:
Title:
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EXHIBIT "A"
A computer PC and/or microprocessor I/O device that measures the
finger bend and/or orientation of the user's hand for use in the manufacturing,
sale, adaptation, improvement, maintenance, support or use of a glove device
which may also include sensors that receive and/or transmit additional
information, as it may be revised or enhanced from time to time hereafter.
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EXHIBIT "B"
SEE ATTACHED
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