EXHIBIT 10.30
GATEWAY, INC.
TERRITORIAL RIGHTS AGREEMENT
THIS TERRITORIAL RIGHTS AGREEMENT ("Agreement") is made and entered into as of
June 30, 2000, by and between GATEWAY, INC., a corporation formed under the laws
of the State of Delaware, United States of America, with its principal office at
0000 Xxxxx Xxxxxx Xx., Xxx Xxxxx, XX 00000 (the "Company"), and Microtec
Sistemas Ind. E Com. S.A., a corporation formed under the laws of Brazil, with
its principal address at Xxxxxxx xx Xxxx, Xx. 000 0 andar, Torre B 04311-000 Sao
Paulo, SP Brazil ("Licensee").
RECITALS
WHEREAS, Vitech America, Inc. ("Vitech"), an Affiliate (as hereinafter defined)
of Licensee, entered into that certain Convertible Loan Agreement dated as of
September 16, 1999 by and between Vitech and Gateway Companies, Inc., pursuant
to which Vitech was granted the right, exercisable within 180 days following the
Closing Date (as defined in the Convertible Loan Agreement) to acquire certain
territorial rights in the License Area (as hereinafter defined), as defined in
the Convertible Loan Agreement; and
WHEREAS, Vitech exercised its right to enter into a Territorial Rights
Arrangement; and
WHEREAS, Vitech has assigned its right to enter into a Territorial Rights
Arrangement to Licensee; and
WHEREAS, COMPANY consents to such assignment by Vitech to Licensee;
WHEREAS, Licensee desires to license from COMPANY the right to brand
specifically identified products manufactured by Licensee in the Licensed Area
(as defined below) for the License Period (as defined below); and
WHEREAS, Licensee desires a technology license from COMPANY to use in the
License Area for the License Period the state-of-the-art manufacturing and
assembly techniques used by COMPANY in its own manufacturing and assembly
operations (including the right to access COMPANY's design and engineering
blueprints and technical assistance to permit Licensee to manufacture personal
computers that conform to COMPANY's designs and specifications); and
WHEREAS, Licensee and COMPANY desire to coordinate their sales and marketing
efforts to use the Licensee's distribution channels in the License Area to sell
COMPANY-branded Products in the License Area for the License Period; and
WHEREAS, Licensee desires to obtain from COMPANY procurement assistance to
permit
Licensee to benefit from favorable pricing, quality and other terms and
conditions that COMPANY may obtain from its suppliers and vendors; and
WHEREAS, COMPANY has agreed, subject to this Agreement, to grant such rights and
to provide such assistance;
NOW, THEREFORE, in consideration of the foregoing premises, and intending to be
legally bound, the parties do hereby agree as follows:
1. DEFINITIONS.
When used in this Agreement, the terms listed below have the meanings that
follow them. Other terms are defined and construed in the context in which they
occur in this Agreement.
Affiliate: Any person or entity that (a) directly or
indirectly owns or controls, (b) is directly
or indirectly owned or controlled by, or (c)
is under common control with COMPANY,
Licensee or a Principal Owner, as
applicable. For purposes of this definition,
"control" means holding a majority of the
equity or otherwise having the power to
direct or cause the direction of the
management and policies of an entity.
Approved Products: Items that have been approved by COMPANY
pursuant to Sec. 8.E of this Agreement.
Brand Book: The written policies and procedures
governing the use of the Marks in the
conduct of COMPANY'S business, as updated by
COMPANY from time to time. Licensee
acknowledges it has received a current copy
of the Brand Book
Competitive Business: A business or enterprise, other than
Licensee or its Affiliates, that: (a) offers
Products for rental, sale or other
distribution; or (b) grants or has granted
franchises or licenses or establishes or has
established joint ventures for the
development and/or operation of an
enterprise or business described in the
foregoing clause (a).
Copyrighted Works: Certain copyrighted or copyrightable works
that are created by or for COMPANY
[including, without limitation, the Brand
Book, the Operating Manuals (as defined
below) and, engineering blueprints], that
are licensed by COMPANY to Licensee from
time to time for use in the conduct of the
Licensed Business pursuant to the terms and
conditions of this Agreement.
Dollars or "$": The legal currency of the United States of
America.
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Effective Date: The date on which all governmental approvals
or registrations of the type described in
Section 2.B hereof, if any, are issued or
obtained; if no such approvals or
registrations are required with respect to
this Agreement, the Effective Date will be
the date shown on the first page of this
Agreement.
Gateway Country Store: A retail business that: (a)
offers Products (defined below) as well as
certain complementary products and services
as its primary business; (b) meets COMPANY's
standards and specifications; and (c) is
either operated by COMPANY or its Affiliates
or pursuant to a valid license from COMPANY
or its Affiliates.
Gross Revenue: All revenue from or other fees charged by
Licensee from the rental or sale of products
and services sold or performed by or for
Licensee through or by means of the business
conducted by Licensee by any means, and all
revenue from or other fees charged by
Affiliates of Licensee from the rental and
sale of Products (other than * ), whether
for cash or credit, including any assumed
gross revenue calculated for the purpose of
an insurance claim for lost profits to the
extent such claim is paid by the insurer,
exclusive of: (a) sales, service or value
added taxes collected from customers and
paid to the appropriate taxing authority;
and (b) customer refunds, adjustments and
credits. Notwithstanding the foregoing,
Gross Revenue shall not include revenue from
the occasional sale of excess components
supply to non-end users that are not in the
ordinary course of business. (With respect
to ITC-related revenue to which a royalty
attaches as set forth above, there will be
no "double-dipping" or duplicative royalties
payable to COMPANY as a result of Licensee
product sales to ITC and ITC's subsequent
sales to end users. The parties will develop
effective operational mechanisms to address
this matter and royalty accounting issues in
general.
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* The confidential portion has been so omitted and filed separately with the
commission.
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Know-how: A package of non-patented practical
information, processes and techniques
resulting from experience and testing by a
party hereunder that is secret, substantial
and identified and that is used by such
party in the design, engineering,
manufacture, assembly and marketing of such
party's Products, including, but not limited
to customers lists; provided, however, the
inclusion of a name on any such customer
list of a party shall not limit the other
party from marketing or selling to such name
so long as the identity of such name was
developed by such other party independent of
such customer list. For these purposes
"secret" means that the Know-how as a body
or in its precise configuration is not
generally known or easily accessible and
"substantial" means that the Know-how
includes information that is important and
useful to such party in marketing and
selling Products.
License: The license granted by COMPANY to Licensee
pursuant to Section 2(A) of this Agreement.
License Area: The geographic area(s) described in Exhibit
A, attached hereto.
License Term: The five-year period commencing on the
Effective Date, unless terminated sooner
pursuant to the terms and conditions hereof.
Licensed Business The development, manufacture, assembly,
marketing, sale and distribution of Products
by Licensee in the Licensed Area for the
License Period using the Licensed
Intellectual Property.
Licensed Intellectual Property: The Marks, Copyrighted Works, and Patents of
COMPANY licensed to Licensee pursuant to
Section 2A of this Agreement.
Marks: The trademarks, service marks and other
commercial symbols that COMPANY authorizes
Licensee to use to identify the products and
services offered by Licensee, including the
marks "Gateway" and "Gateway Country Store"
and such other marks as set forth in Exhibit
B hereto, and the Trade Dress (as
hereinafter defined).
Operating Manuals: Various written policies and procedures used
in the operating of COMPANY's business as
updated from time to time by COMPANY.
Patents: The patents (including pending patents) as
set forth in Exhibit B hereto that COMPANY
authorizes Licensee to use in the
manufacture or sale of Approved Products.
Products: Personal computer and Internet hardware and
software, personal computer and Internet
related peripherals and accessories, goods,
services and
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technologies, such as, by way of examples
and not limitation, software training and
hardware service and repair, and all such
similar additional, supplemental and
replacement products and services that may
result from advances in the technology from
which such products and services were
created.
Principal Owners: Each person or entity designated as a
Principal Owner in Exhibit E of this
Agreement.
Trade Dress: The interior and exterior store
design, decor, configuration, visual
appearance, and image which COMPANY licenses
in connection with the operation of Gateway
Country Stores, as it may be revised and
further developed by COMPANY or its
Affiliates from time to time and as further
described in (but not limited to) the
Operating Manual.
United States or USA: The United States of America.
2. GRANT OF LICENSE.
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X. XXXXX OF RIGHTS AND LICENSE; TERM.
---------------------------------
Subject to the provisions of this Agreement, and provided Licensee is not in
default of any of it obligations hereunder beyond any applicable cure periods,
COMPANY hereby grants to Licensee a license to access and use the Marks,
Copyrighted Works and Patents in the manufacture, assembly, marketing and sale
of Products approved by COMPANY during the License Period in the License Area
(and only in the License Area). The license granted hereby to Licensee is
nonexclusive, nontransferable and non-assignable, other than pursuant to the
terms of this Agreement.
B. GOVERNMENTAL APPROVALS.
----------------------
The foregoing grant is subject to any governmental approval or registration that
may be required under any applicable laws, and where under the applicable laws
the grant of the License may not lawfully come into effect until such approval
or registration has taken place the Effective Date shall be the date of such
registration or approval of this Agreement as required by applicable law. In the
event all required governmental approvals or registrations are not issued within
ninety (90) days of the date shown of the first page of this Agreement, the
parties shall, for the thirty (30) day period immediately following such ninety
(90) day period, use commercially reasonable efforts to attempt to resolve the
cause of such non-issuance. If all required governmental approvals or
registrations have still not been issued within such thirty (30) day period,
this Agreement shall be null and void and all sums paid by Licensee to COMPANY
hereunder shall be refunded, less any out-of-pocket expenses incurred by COMPANY
as of the date of the refund, including those incurred by COMPANY in connection
with its attempts to obtain any Agency approval, acceptance, clearance,
exemption, issue of comfort letter or registration relating to this Agreement.
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The parties agree from time to time and at any time during the term of this
Agreement to execute promptly any and all instruments and documents, render such
assistance and do all such acts and things reasonably necessary or desirable in
order to obtain all such approvals, clearances, exemptions, comfort letters and
registrations and to comply with all such procedures, registration and
notification requirements of any governmental or other authority that are
necessary or desirable in order to comply with all applicable laws, including,
without limitation, obtaining visas for COMPANY personnel as needed, which visas
shall be paid for by COMPANY. COMPANY shall have the right to submit this
Agreement to any governmental or other authority ("Agency") for registration or
approval or otherwise as COMPANY reasonably considers necessary or desirable.
COMPANY and Licensee agree that to the extent this Agreement must be submitted
to an Agency for registration or approval in order to allow Licensee to make the
payments to COMPANY required hereunder, the cost and expense (including, without
limitation, any fees, taxes, duties or other charges) of such submission,
registration or approval shall be for the account of Licensee.
If, prior to the commencement of operating the Licensed Business, an Agency
requires that any amendments be made to this Agreement as a condition to
approval, acceptance, clearance, exemption, issue of comfort letter or
registration and such amendments are acceptable to COMPANY, in its reasonable
discretion, COMPANY shall provide to Licensee for execution an addendum to this
Agreement or other appropriate document in form satisfactory to COMPANY to
reflect such amendment.
If, however, the effect of any amendment required by an Agency prior to
commencement of operating the Licensed Business, as a condition to approval,
acceptance, clearance, exemption, issue of comfort letter or registration would,
in the COMPANY's reasonable view, be detrimental to COMPANY's interests, COMPANY
and Licensee shall negotiate in good faith for a period not to exceed 30-days
from the date of receipt of notice of such Agency's requirement, toward
resolving COMPANY's objection to such Agency amendment, but in no event shall
such resolution alter the fee schedule provided in Section 3 hereof, or, in the
reasonable judgment of COMPANY, materially adversely affect COMPANY'S rights or
remedies under this Agreement. If COMPANY's objection to such Agency amendment
is not resolved within such 30-day period, COMPANY may thereafter terminate this
Agreement by delivering written notice thereof to Licensee and the provisions of
Section 12 shall then apply. In such event, COMPANY will refund to Licensee any
sums received by it from Licensee under this Agreement, less any reasonable
out-of-pocket expenses incurred by COMPANY as of the date of the refund,
including in connection with its attempts to obtain the Agency approval,
acceptance, clearance, exemption, issue of comfort letter or registration.
If on or after the commencement of operating the Licensed Business an Agency
requires that any amendments be made to this Agreement, the provisions of
Section 15(B) hereunder shall apply.
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C. EXCLUSIVE TERRITORIAL RIGHTS.
----------------------------
Except as provided in Paragraphs D and E below, and provided that Licensee is
not in default of its obligations under this Agreement beyond any applicable
cure periods, COMPANY and its Affiliates will not, during the License Term,
operate or license any other person or entity to operate a business to sell
Products within the License Area.
D. RIGHTS RETAINED BY COMPANY.
--------------------------
Except as expressly limited by Paragraph C above, COMPANY (on behalf of itself
and its Affiliates) retains all rights with respect to the Licensed Intellectual
Property, and, on a non-exclusive basis as between COMPANY and Licensee, the
assembly, manufacturing, marketing and selling of any other products and
services, anywhere in the World, including, without limitation: (1) the right to
operate, or grant others the right to operate, a business to develop,
manufacture, distribute, rent and/or sell Products anywhere in the world outside
the License Area through any channel of distribution, including, but not limited
to, the Internet and telephone sales, whether under or in association with the
Marks or any other trademark, regardless of its proximity to the License
Territory (and even if transactions are consummated with customers located
within the License Territory) on such terms and conditions as the COMPANY, in
its sole discretion, deems appropriate; and (2) the right to develop, market,
distribute, rent and/or sell any other products or services other than Products
under the Marks or any other trademark anywhere in the world, including the
License Area; and (3) subject to Paragraph E below, the right to acquire and
operate Competitive Businesses located or operating within the License Area.
E. ACQUISITION OF COMPETITIVE BUSINESSES.
-------------------------------------
Notwithstanding the provisions of Paragraph C above, COMPANY may, at its option,
acquire interests in one or more Competitive Businesses such that, after the
acquisition, COMPANY owns or operates one or more Competitive Businesses in the
License Area. In that event, COMPANY shall offer to sell such Competitive
Business to Licensee ("Optioned Business") for the price paid therefor by
COMPANY [including that portion of the direct and indirect costs and liabilities
incurred or assumed by COMPANY in making such acquisition allocated to the
Optioned Business whether paid or owed to the seller of such Optioned Business,
COMPANY, its Affiliates or third parties and other expenses incurred in the
operation of such Optioned Businesses (including losses), plus interest at the
COMPANY's cost of money on the balance of such amounts from time to time].
Licensee shall have 30 days from the date of such offer within which to either
accept or reject it. If Licensee accepts the offer, the closing shall take place
as soon as practicable thereafter but in no event longer than 90 days after
acceptance of the offer. On acquisition of the Optioned Businesses, such
acquired Optioned Businesses shall be subject to the terms and conditions of
this Agreement.
In the event (i) Licensee rejects or fails to timely accept COMPANY's offer to
sell the Optioned Businesses, (ii) COMPANY is unable to extend such offer
because such sale will conflict with an existing legal obligation of COMPANY or
the acquired business, or (iii) closing on such sale does not occur within 90
days after acceptance of the offer by Licensee, COMPANY may continue to operate
the acquired Competitive Businesses. COMPANY agrees that, provided
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Licensee is not in default of its obligations under this Agreement beyond any
applicable cure periods, it will neither use nor authorize the use of any of the
Marks in the conduct of any such acquired Competitive Business in the License
Area (whether owned or licensed by COMPANY) for a period of two (2) years
following COMPANY's acquisition. For purposes of this Paragraph, all references
to COMPANY shall be deemed to include its Affiliates (other than shareholders of
Gateway, Inc.) and COMPANY shall assure that its Affiliates comply with the
terms of this Paragraph.
F. BUSINESS PLAN REVIEW.
--------------------
Forty-five (45) days prior to the beginning of each calendar year during the
License Term, Licensee shall submit to COMPANY for COMPANY's review an Annual
Business Plan that shall set forth the actions Licensee intends to undertake
during the next year of the License Term to maximize Gross Revenues for such
year. Such Annual Business Plan shall include, among other things, an annual
budget, an annual financial plan, an annual marketing plan, and annual real
estate development plan and an annual information systems plan, as applicable.
Licensee acknowledges and agrees that the Annual Business Plan shall contain
information as COMPANY may require from time to time (and that COMPANY may
change, modify or revise such requirements in its sole discretion).
LICENSEE ACKNOWLEDGES THAT COMPANY'S REVIEW OF AN ANNUAL BUSINESS PLAN DOES NOT
CONSTITUTE AN ASSURANCE, REPRESENTATION OR WARRANTY OF ANY KIND, EXPRESS OR
IMPLIED, AS TO THE FEASIBILITY OF THE ANNUAL BUSINESS PLAN OR FOR ANY OTHER
PURPOSE. COMPANY SHALL NOT BE RESPONSIBLE FOR THE FAILURE OF AN ANNUAL BUSINESS
PLAN REVIEWED BY COMPANY TO MEET LICENSEE'S EXPECTATIONS AS TO REVENUE OR
OPERATIONAL CRITERIA. LICENSEE FURTHER ACKNOWLEDGES AND AGREES THAT ITS
IMPLEMENTATION OF ANY ANNUAL BUSINESS PLAN WILL BE BASED SOLELY ON LICENSEE'S
OWN INDEPENDENT INVESTIGATION OF THE FEASIBILITY OF THE ANNUAL BUSINESS PLAN.
3. FEES.
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A. LICENSED INTELLECTUAL PROPERTY ROYALTY FEE.
------------------------------------------
In consideration of the Licensed Intellectual Property, including, but not
limited to, the Marks, licensed to Licensee by COMPANY pursuant to Section 2.A
of this Agreement, Licensee agrees to pay to COMPANY a continuing royalty fee on
the Gross Revenue of Licensee (the "Licensed Intellectual Property Royalty Fee")
in the amount set forth in Exhibit D. The Licensed Intellectual Property Royalty
Fee is payable on or before the 10th day of each month on the Gross Revenue of
Licensee for the preceding month.
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B. SERVICES FEE.
------------
In consideration of the guidance and assistance to be provided to Licensee by
COMPANY pursuant to Section 9. of the Agreement, Licensee agrees to pay to
COMPANY a continuing fee on the Gross Revenue of Licensee (the " Services Fee")
in the amount set forth in Exhibit D. The Services Fee is payable on or before
the 10th day of each month on the Gross Revenue of Licensee for the preceding
month.
C. LIMITATIONS ON FEES.
-------------------
The Licensed Intellectual Property Fee, the Exclusive Territorial Rights Royalty
Fee and the Services Fee are sometimes referred collectively herein as
"Royalties". No Royalties payable to COMPANY pursuant to this Section 3 shall be
payable on the first * of Gross Revenue of Licensee in each year of the License
Term. Notwithstanding the foregoing, if Gross Revenues for the first two years
of the License Term are not sufficient to generate Royalties payable thereon,
COMPANY may terminate this Agreement upon written notice to Licensee. Licensee
may nullify such termination upon written notice to COMPANY within twenty (20)
days of Licensee's receipt of COMPANY's notice of termination, upon which
nullification Royalties shall be due and payable as otherwise provided for in
this Section 3 commencing with the first month of the third year of the License
Term, without regard to the * threshold for Gross Revenues.
D. INTEREST ON LATE PAYMENTS.
-------------------------
All Fees, amounts due for purchases by Licensee from COMPANY or its Affiliates,
if any, and other amounts Licensee owes to COMPANY or its Affiliates, shall bear
interest after their due dates at a rate equal to the lesser of: (i) 1.5% per
month; or (ii) the highest legal rate permitted by applicable law. Licensee
acknowledges that this Paragraph shall not constitute COMPANY's agreement to
accept such payments after such payments are due or a commitment by COMPANY to
extend credit to, or otherwise finance Licensee's operations. Further, Licensee
acknowledges that failure to pay any or all such amounts when due shall
constitute grounds for termination of this Agreement, as provided herein,
notwithstanding the provisions of this Paragraph.
E. APPLICATION OF PAYMENTS.
-----------------------
Notwithstanding any designation by Licensee, COMPANY shall have sole discretion
to apply any payments received from Licensee or any indebtedness of COMPANY to
Licensee, to any past due indebtedness of Licensee for Royalty Fees, purchases
from COMPANY or its Affiliates, interest, or any other indebtedness of Licensee
to COMPANY or its Affiliates.
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* The confidential portion has been so omitted and filed separately with the
commission.
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F. WITHHOLDING TAXES.
-----------------
All payments due to COMPANY under this Agreement shall be net of any applicable
withholding taxes. In the event that any such amounts are subject to withholding
or other taxes that Licensee is required to deduct from such payments, Licensee
shall provide COMPANY a copy of the withholding tax remittance notice that it
proposes to file with the appropriate governmental agency at least 10 business
days prior to such filing and shall promptly deliver to COMPANY receipts of
applicable governmental authorities for all such taxes withheld and paid.
Licensee shall be responsible for and shall hold COMPANY and its Affiliates
harmless against any penalties, interest and expenses incurred by or assessed
against COMPANY or its Affiliates as a result of Licensee's failure to withhold
such taxes or remit them to the appropriate taxing authority. Licensee shall
fully and promptly cooperate with COMPANY to provide such information and
records as COMPANY may request in connection with any application by COMPANY to
any taxing authority with respect to tax credits, exemptions or refunds
available for any withholding or other taxes paid or payable by Licensee.
G. CURRENCY / EXCHANGE CONTROLS.
----------------------------
(1) Payments by Licensee to COMPANY hereunder shall be made in Dollars or
such other currency as may be reasonably specified by COMPANY in its
reasonable discretion from time to time. All payments hereunder that
are calculated in the local currency of the License Area but required
to be converted into Dollars (or other currency if specified by
COMPANY) for payment to COMPANY shall be converted at the spot currency
rate announced by the Central Bank of Brazil as of 11:00 a.m. Miami
time on the date payment is transmitted; provided, however, that in the
event a payment is transmitted after the date payment is due, the
currency exchange rate used shall be (i) the rate as of the date
payment was due or (ii) the rate as of the date payment is transmitted,
whichever rate produces the larger amount. All payments made hereunder
shall be made by telegraphic or electronic transfer to a bank of the
COMPANY's choosing, located in the United States, or elsewhere;
provided, however, that appropriate adjustments will be made in the due
date of such payments to the extent COMPANY chooses a location not
located in the United States and such choice results in Licensee having
to make a payment earlier than if such location were in the United
States. All bank fees and commissions shall be borne by Licensee.
(2) Licensee agrees that if at any time during the term of this Agreement
the inflation rate in the License Area during any particular month
shall exceed the annualized rate of * per year, then all periodic
payments to be made by Licensee to COMPANY hereunder (other than those
expressed in actual U.S. Dollar amounts in this Agreement) shall be
made weekly, until such time when such annualized rate of inflation
shall be less than * in a particular month. In particular, and without
limitation, Licensee agrees that the Royalty Fee set forth in Section
3(B) of this Agreement shall be paid on each Wednesday for the
immediately preceding calendar week (consisting of the period Monday
through Sunday).
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* The confidential portion has been so omitted and filed separately with the
commission.
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(3) Licensee shall use its best efforts (and at its own cost and expense)
to obtain any consents, registrations or authorizations which may be
necessary in order to permit timely payments in Dollars (or other
currency if specified by COMPANY pursuant to clause (G)(1) above) of
all amounts payable hereunder.
(4) If at any time, any legal restriction is imposed upon the purchase of
Dollars or the transfer to or credit of a non-resident entity with
payments in Dollars, Licensee shall notify COMPANY immediately. While
such restrictions are in effect, COMPANY may require payment in any
currency designated by COMPANY that is reasonably available to Licensee
or, at COMPANY's option, may require Licensee to deposit all amounts
due but unpaid as a result of such a restriction in any type of
account, in any bank or institution in the License Area as reasonably
designated by COMPANY. COMPANY shall be entitled to all interest earned
on such deposits.
(5) If the aggregate of (a) the legal restrictions described in Paragraph
(4) above, and (b) any withholding taxes or other taxes imposed upon
the payments (or currency conversions) made by Licensee to COMPANY
hereunder ((a) and (b) collectively, the "Limitations"), shall cause
COMPANY to actually receive in the United States for a period of six
(6) consecutive months or more less than * of the cumulative Gross
Dollar Obligation (as hereinafter defined) owed by Licensee to COMPANY
for such period of six (6) consecutive months or more, COMPANY, in its
sole and exclusive discretion, may suspend its performance of any or
all services under this Agreement until such restrictions have been
lifted, effective upon delivery of notice thereof to Licensee, without
any reduction of fees due hereunder by Licensee during such period of
suspension.
(6) In the event the Limitations cause COMPANY to actually receive in the
United States for a period of six (6) consecutive months or more less
than * of the cumulative Gross Dollar Obligation (as hereinafter
defined) owed by Licensee to COMPANY for such period of six (6)
consecutive months or more, COMPANY, in its sole and exclusive
discretion, may terminate this Agreement, effective upon delivery of
notice thereof to Licensee. In the event of a termination under this
Section, Licensee and its Principal Owners shall execute and deliver to
COMPANY a general release in form acceptable to COMPANY, releasing
COMPANY, its Affiliates and their respective shareholders, partners,
officers, directors, employees and agents from any and all claims
arising pursuant to this Agreement and any other agreement with COMPANY
or its Affiliates. In the event of such termination, Licensee shall
comply fully with the requirements of Section 13 of this Agreement.
(7) For purposes of this Paragraph G, the "Gross Dollar Obligation" shall
mean the sum of (i) all payments due hereunder which are denominated in
U.S. Dollars in this Agreement, and (ii) the Dollar amounts payable to
COMPANY with respect to the Royalty Fees (calculated in accordance with
the provisions of this Paragraph H), regardless of the actual currency
of payment hereunder. The Gross Dollar Obligation shall be calculated
prior to the imposition of any withholding taxes or other taxes or
levies imposed by any governmental agency.
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* The confidential portion has been so omitted and filed separately with the
commission.
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H. GOODWILL.
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Licensee acknowledges and agrees that the fees rates set forth in this Agreement
take into consideration, and compensate Licensee for, any and all goodwill in
the Licensed Intellectual Property generated by the activities of Licensee, and
that upon expiration or early termination of this Agreement, Licensee shall have
no claim against COMPANY with respect to or arising out of, any goodwill in the
Licensed Intellectual Property as a result of the activities of Licensee.
I. MAXIMIZING ROYALTIES.
--------------------
Licensee acknowledges and agrees that maximizing Royalty Fees in accordance with
this Agreement is of the essence of this Agreement. Licensee agrees that, during
the License Term, it will fully, faithfully, honestly, and diligently perform
its obligations hereunder and will continuously exert its best efforts to
promote, enhance and maximize the sales in order to maximize Gross Revenues.
Without limiting the foregoing obligation, Licensee covenants and agrees that
during the Term of this Agreement, Licensee shall realize an increase of not
less than * in the number of computer systems sold by Licensee (whether Licensor
branded or not) in the License Area in each year of the Term of this Agreement
over the number of computer systems sold by Licensee (whether Licensor branded
or not) in the 12-month period immediately prior to such Term year. For the
purposes of this Section 3.I, the first year of the Term shall not include any
partial month occurring at the beginning of the Term.
For the purpose of this Section I, a computer system shall be deemed sold by
Licensee upon the sale by Licensee or its Affiliates of an assembled computer
system that is (i) configured for use by a single user only (ii) is designed to
use a video display and keyboard, and (iii) contains at least a central
processing unit, monitor, motherboard, hard disk drive, operating software,
power supply and a case, and where the proceeds of such sale fall within the
definition of Gross Revenue.
THE RIGHTS GRANTED IN PARAGRAPH 2.A DO NOT CONSTITUTE AN ASSURANCE OR WARRANTY
BY COMPANY THAT THERE ARE BUSINESS OPPORTUNITIES IN THE LICENSE AREA FOR
LICENSEE TO SATISFY THE REQUIREMENTS OF THIS SECTION 3.I. THE RESPONSIBILITY TO
MEET THE REQUIREMENTS OF THIS SECTION 3.I IS SOLELY THAT OF LICENSEE, AND
COMPANY HAS NO OBLIGATION TO AUTHORIZE OR PROMOTE, OR OTHERWISE ASSIST IN
BUSINESS ACTIVITY OF LICENSEE IN ORDER TO ASSIST LICENSEE IN MEETING THE
REQUIREMENTS OF THIS SECTION 2.I EXCEPT AS OTHERWISE EXPRESSLY SET FORTH HEREIN.
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* The confidential portion has been so omitted and filed separately with the
commission.
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4. LICENSED INTELLECTUAL PROPERTY.
------------------------------
A. USE OF THE LICENSED INTELLECTUAL PROPERTY
-----------------------------------------
Licensee agrees that it will use the Licensed Intellectual Property strictly in
accordance with the following terms and conditions:
(1) Licensee shall promptly integrate or implement in the Licensed
Business, at its own expense, any modifications or additions to the
Licensed Intellectual Property upon receipt by Licensee of such
modifications or additions from COMPANY.
(2) Except with the prior written consent of COMPANY, the Licensed
Intellectual Property shall not be used by persons other than Licensee
and authorized employees of Licensee, and shall not be used in
conjunction with any business or activity of Licensee other than the
Licensed Business.
(3) Licensee shall not, and shall not allow its employees, agents or
independent contractors engaged by Licensee to: (a) sell, assign,
lease, sublicense, transfer, convey, pledge, or grant a security
interest with respect to the Licensed Intellectual Property or any
component thereof, or any data generated by the use of the Licensed
Intellectual Property; (b) copy or reproduce the Licensed Intellectual
Property or any component thereof, or any data generated by the use of
the Licensed Intellectual Property in any manner, except to the extent
necessary for normal operation of the Licensed Business or as necessary
in order to comply with applicable law; or (c) alter, modify, adapt,
decompile or reverse engineer the Licensed Intellectual Property, any
documentation relating thereto or any component thereof, including, but
not limited to, or creating derivative works thereof.
(4) Licensee shall establish and maintain such security precautions as are
prescribed by COMPANY from time to time to prevent the unauthorized
use, accessibility, disclosure or copying of the Licensed Intellectual
Property or any data generated by the use thereof. Licensee shall cause
each of its employees, agents and independent contractors engaged by
Licensee who has or will have access to the Licensed Intellectual
Property to execute a written confidentiality agreement in a form
reasonably prescribed or approved in writing by COMPANY. At COMPANY's
request, a duplicate original of each such confidentiality agreement
shall be forwarded to COMPANY. Licensee shall obtain from each of its
employees, agents and independent contractors engaged by Licensee a
written undertaking that they will comply with all of the provisions of
this Section 4, including, without limitation, the obligation to assign
to COMPANY any and all rights and interests in modifications or
derivative works which those individuals may acquire by operation of
law or otherwise and to execute such documentation as may be necessary
or desirable for the purpose of such an assignment. Licensee shall
immediately inform the COMPANY in writing if an employee, agent or
independent contractor engaged by Licensee breaches the written
confidentiality agreement or otherwise violates the terms and
conditions of this Section, or if Licensee learns of any actual or
possible unauthorized disclosure or use of the Licensed Intellectual
Property or any data generated by the use of the Licensed Intellectual
Property, such as the loss or theft of any tangible medium (such as an
-13-
operating manual), documentation or other component thereof. Licensee
shall allow COMPANY reasonable access to Licensee's properties and all
computer equipment of Licensee for purposes of verifying compliance by
Licensee with this provision.
(5) Licensee agrees that the Licensed Intellectual Property and any data
generated by the use of the Licensed Intellectual Property are the
valuable and proprietary property of COMPANY or its Affiliates, and
agrees to use the utmost care to safeguard the Licensed Intellectual
Property and any data generated by the use thereof. Licensee shall not
undertake to patent, copyright or otherwise assert proprietary rights
to the Licensed Intellectual Property or any data generated by the use
of the Licensed Intellectual Property or any portion thereof. Licensee
recognizes that all or part of the Licensed Intellectual Property and
any data generated by the use of the Licensed Intellectual Property may
be copyrighted and agrees that this shall not be construed as causing
the copyrighted material to be public information. Licensee will ensure
that all copies of the Licensed Intellectual Property and any data
generated by the use of the Licensed Intellectual Property or any
components thereof in its possession contain such copyright notice or
other notice of proprietary rights specified by COMPANY.
(6) Licensee shall promptly disclose to COMPANY all ideas and suggestions
for modifications or enhancements of the Licensed Intellectual Property
conceived or developed by or for Licensee, and COMPANY and its
Affiliates shall have the right to use and license such ideas and
suggestions without any payment. All modifications and enhancements
actually made to the Licensed Intellectual Property together with the
copyright therein shall be the property of COMPANY without any payment,
without regard to the source of the modification or enhancement.
(7) COMPANY shall have the right at all times, and upon not less than
24-hour written notice, to access the premises of Licensee and to
retrieve and analyze the use of elements of the Licensed Intellectual
Property and all data generated in the use thereof.
(8) Licensee acknowledges and agrees that any violation by Licensee of the
provisions of this Section 4 would cause COMPANY and its Affiliates
irreparable injury for which they would have no adequate remedy at law
and that, in addition to any other remedies which they may have,
COMPANY and its Affiliates shall be entitled to preliminary and
permanent injunctive relief against any such violation without having
to post a bond.
B. WARRANTIES AND LIMITATION OF LIABILITY.
--------------------------------------
COMPANY represents and warrants to Licensee that: (a) COMPANY has all rights
necessary to license the Licensed Intellectual Property to Licensee; and (b) the
Licensed Intellectual Property does not, and as a result of any enhancements,
improvements or modifications provided by COMPANY will not, to the best of
COMPANY's knowledge, infringe upon any United States patent, United States
copyright or other United States proprietary right of any third party. In the
event Licensee's use of the Licensed Intellectual Property as provided by
COMPANY is enjoined as a result of a claim by a third party of patent, trademark
or copyright infringement or violation of proprietary rights, COMPANY shall, in
its sole discretion and at its sole expense, either
-14-
(i) procure for Licensee the right to continue use of the Licensed Intellectual
Property as contemplated hereunder, or (ii) replace the Licensed Intellectual
Property or modify it such that there is no infringement of the third party's
rights; and such action by COMPANY shall be Licensee's sole and exclusive remedy
against COMPANY in such event.
COMPANY does not warrant to Licensee, and expressly disclaims any such warranty,
that the Licensed Intellectual Property is error-free or that the operation and
use of the Licensed Intellectual Property in the conduct of the Licensed
Business will be uninterrupted or error-free. COMPANY shall have no obligation
or liability for any expense or loss incurred by Licensee arising from use of
the Licensed Intellectual Property in the conduct of the Licensed Business and
shall have no liability with respect to its obligations under this Section 4 for
consequential, exemplary, incidental or punitive damages.
EXCEPT AS PROVIDED ABOVE, COMPANY MAKES NO WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
C. INTELLECTUAL PROPERTY OF LICENSEE.
---------------------------------
COMPANY acknowledges that any trademarks, service marks, trade names, patents,
and copyrighted works owned by Licensee or its Affiliates ("Licensee's
Intellectual Property") and Licensee's Know-how is the sole and exclusive
property of Licensee and its Affiliates. Any unauthorized use of Licensee's
Intellectual Property by COMPANY or Know-how or any attempt by COMPANY to
appropriate or claim ownership of any of Licensee's Intellectual Property shall
constitute a breach of this Agreement and an infringement of the rights of
Licensee and its Affiliates. COMPANY acknowledges and agrees that all usage of
Licensee's Intellectual Property by COMPANY and any goodwill established thereby
shall inure to the exclusive benefit of Licensee and that this Agreement does
not confer any goodwill or other interest in Licensee's Intellectual Property
upon COMPANY. All provisions of this Agreement applicable to Licensee's
Intellectual Property shall apply to any other trademarks, service marks,
commercial symbols and copyrighted materials hereafter owned by Licensee or its
Affiliates. In the event COMPANY acquires rights in any Licensee's Intellectual
Property, COMPANY undertakes that it will execute all documents necessary or
desirable to vest ownership of such rights in Licensee or its Affiliates and
hereby grants to the Licensee a Power of Attorney to execute such documents in
the event COMPANY fails or refuses to do so, this Power of Attorney being
coupled with an interest and, therefore, irrevocable.
5. ADDITIONAL PROVISIONS RELATING TO THE LICENSED INTELLECTUAL PROPERTY.
--------------------------------------------------------------------
A. OWNERSHIP AND GOODWILL.
----------------------
Licensee acknowledges that the Licensed Intellectual Property is the sole and
exclusive property of COMPANY and its Affiliates. Licensee acknowledges that its
right to use the Licensed Intellectual Property is derived solely from this
Agreement and is limited to the operation of the
-15-
Licensed Business pursuant to and in compliance with this Agreement and all
applicable standards, specifications, and operating procedures prescribed by
COMPANY from time to time during the term of the License. Any unauthorized use
of the Licensed Intellectual Property or any attempt by Licensee to appropriate
or claim ownership of any other intellectual property used by COMPANY or its
Affiliates anywhere in the world or used by Licensee in connection with the
Licensed Business or the promotion thereof, whether or not registered or subject
to legal protection in the License Area, shall constitute a breach of this
Agreement and an infringement of the rights of COMPANY and its Affiliates.
Licensee acknowledges and agrees that all usage of the Licensed Intellectual
Property by Licensee and any goodwill established thereby shall inure to the
exclusive benefit of COMPANY and that this Agreement does not confer any
goodwill or other interest in the Licensed Intellectual Property upon Licensee
(other than the right to operate the Licensed Business in compliance with this
Agreement). All provisions of this Agreement applicable to Licensed Intellectual
Property shall apply to any other trademarks, service marks, commercial symbols
and copyrighted materials hereafter used by the COMPANY or its Affiliates in the
License Area or elsewhere or authorized for use by or licensed to Licensee by
the COMPANY whether or not registered or subject to legal protection in the
License Area. In the event Licensee acquires rights in any Licensed Intellectual
Property or other trademarks, service marks, commercial symbols and copyrighted
materials used in connection with the operation of the Licensed Business or the
promotion thereof in the License Area (other than those granted to Licensee by
Licensor in this Agreement), Licensee undertakes that it will execute all
documents necessary or desirable to vest ownership of such rights in the COMPANY
or its Affiliates and hereby grants to the COMPANY a Power of Attorney to
execute such documents in the event Licensee fails or refuses to do so, this
Power of Attorney being coupled with an interest and, therefore, irrevocable.
B. LIMITATIONS ON USE OF LICENSED INTELLECTUAL PROPERTY.
----------------------------------------------------
Licensee shall not use any Xxxx as part of any corporate or trade name or with
any prefix, suffix, or other modifying words, terms, designs, or symbols, or in
any modified form, nor may Licensee use any Licensed Intellectual Property in
connection with the performance or sale of any unauthorized services or products
or in any other manner not expressly authorized in writing by COMPANY. Licensee
agrees to display the Marks prominently in the manner prescribed by COMPANY in
the conduct of the Licensed Business and in connection with only those
advertising and marketing materials approved by COMPANY. Licensee agrees to give
such notices of trademark and service xxxx registrations and appropriate
copyright notices as COMPANY specifies and to obtain such business name
registrations as may be required under applicable law. Licensee shall not make
any unauthorized adaptation, publication, reproduction, preparation of
derivative works, distribution of copies (whether by sale or other transfer of
ownership, or by rental, lease or lending), public performance of the
Copyrighted Works or attempt to recreate all or a portion of such Copyrighted
Works. If COMPANY authorizes Licensee to prepare any adaptation, translation or
derivative work of the Copyrighted Works, Licensee hereby agrees that such
adaptation, translation or derivative work shall be produced as a collective
work by Licensee and shall be the property of COMPANY, and Licensee hereby
assigns all its right, title and interest therein to COMPANY. Licensee shall be
the sole author of such collective work and shall be solely responsible for any
claims arising from any third party
-16-
with respect to such third party's work on such collective work. Licensee agrees
to execute any documents, in recordable form, which COMPANY determines are
necessary to reflect ownership by COMPANY of such work. Licensee shall submit
all such adaptations, translations or derivative works to COMPANY for approval
prior to use.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
----------------------------------------
Licensee shall immediately notify COMPANY of any apparent infringement of or
challenge to Licensee's use of any Licensed Intellectual Property or other
industrial or intellectual property rights (including, without limitation,
Confidential Information) licensed under this Agreement, or claim by any person
of any rights in any Licensed Intellectual Property or other industrial or
intellectual property rights (including, without limitation, Confidential
Information) licensed under this Agreement, and Licensee shall not communicate
with any person other than COMPANY and its counsel in connection with any such
infringement, challenge or claim. COMPANY shall have sole discretion to take
such action as it deems appropriate in connection with the foregoing, and the
right to control exclusively any settlement, litigation or other proceeding
arising out of any such alleged infringement, challenge or claim or otherwise
relating to any Licensed Intellectual Property or other industrial or
intellectual property rights (including, without limitation, Confidential
Information) licensed under this Agreement, and to retain all proceeds of any
litigation or settlement; provided, however, that Licensee may pursue any
independent claim for damages that it may have against such person. Licensee
agrees to execute any and all instruments and documents, render such assistance,
and do such acts and things as may, in the opinion of COMPANY's counsel, be
necessary or advisable to protect and maintain the interests of COMPANY and its
Affiliates in any litigation or other proceeding or to otherwise protect and
maintain the interests of COMPANY and its Affiliates in the Licensed
Intellectual Property and other industrial or intellectual property rights
(including, without limitation, Confidential Information) licensed under this
Agreement. COMPANY will reimburse Licensee for the reasonable out-of-pocket
expenses incurred and paid by Licensee in complying with the requirements
imposed by this Paragraph; provided, however, if any action taken by COMPANY
results in any monetary recovery awarded to Licensee which exceeds Licensee's
costs, then Licensee must pay its own costs and share, pro-rata, in COMPANY's
costs thereof up to the amount of the monetary recovery. Licensee shall not be
otherwise entitled to share in any monetary recovery or settlement obtained by
COMPANY or its Affiliates in any litigation or dispute.
D. DISCONTINUANCE OF USE OF LICENSED INTELLECTUAL PROPERTY.
-------------------------------------------------------
If, because of a claim by a third party that COMPANY does not have the right to
license the Intellectual Property to Licensee in accordance with the terms and
conditions of this Agreement, it becomes advisable at any time in COMPANY's sole
judgment to modify or discontinue use of any Licensed Intellectual Property,
including, but not limited to, any Xxxx or Copyrighted Work and/or to use one or
more additional or substitute trademarks, service marks, copyrighted or
copyrightable works, Licensee agrees to immediately comply with COMPANY's
directions in that regard. Neither COMPANY nor its Affiliates shall have any
obligation to reimburse Licensee for any expenditures made by Licensee to modify
or discontinue the use of any
-17-
Licensed Intellectual Property or to adopt substitutes for a discontinued
Licensed Intellectual Property, including, without limitation, any expenditures
relating to advertising or promotional materials or to compensate Licensee for
any goodwill related to the discontinued Licensed Intellectual Property.
E RECORDAL OF LICENSES AND REGISTERED USER AGREEMENTS.
---------------------------------------------------
Licensee shall, at the request and expense of COMPANY, do all acts and execute
all documents necessary or desirable in COMPANY's opinion for establishing
Licensee as a user of the Marks hereunder and where required for the
registration of Licensee's permitted use with governmental agencies.
6. CONFIDENTIAL INFORMATION.
-------------------------
A. COMPANY and its Affiliates possess and will further develop and
acquire certain confidential and proprietary information and trade secrets
including but not limited to the following categories of information, methods,
techniques, procedures, and knowledge developed or to be developed by COMPANY,
its Affiliates, and licensees and not heretofore known by Licensee without any
obligation of confidentiality (the "Confidential Information"):
1. methods, techniques, equipment, specifications, standards, policies,
procedures, information, concepts, systems relating to and knowledge of
and experience in the development and operation of a business selling
Products, including (without limitation and without prejudice to the
generality of the foregoing) COMPANY's Know-how;
2. marketing and promotional programs;
3. knowledge concerning proprietary computer software programs and all
data generated by the use of such computer software programs, including
the structure of the data base file thereof, and all additions,
modifications, and enhancements thereto;
4. knowledge of costs, specifications for and suppliers of certain
materials, equipment and fixtures for Gateway Country Stores;
5. knowledge of specifications and costs for and suppliers of certain
components, materials, and software for Products;
6. data regarding Products and compilations and analyses of such data;
7. customer lists, historical data relating to the sale and marketing of
Products, knowledge of customer profiles, operating results and
financial performance;
8. any and all training materials used in the operation of or relating to
business of selling Products including, but not limited to, the
training materials described in Section 9A of the this Agreement; and
-18-
9. the Copyrighted Works and Patents to the extent not patented or
patentable in the License Area.
Confidential Information will not include information that:
1. is now, or hereafter becomes, through no act or failure to act on the
part of Licensee, generally known or available to the public other than
by a breach of this Section 6. by Licensee or its officers, directors,
employees, agents or contractors;
2. was acquired by Licensee before receiving such information from COMPANY
without restriction as to use or disclosure;
3. is hereafter rightfully furnished to Licensee without restriction as to
use or disclosure by a third party authorized to make such disclosure;
or
4. is information that Licensee can document was independently developed
by Licensee without reference to the Confidential Information.
COMPANY may disclose to Licensee such parts of the Confidential Information as
COMPANY determines is required for the development of the Licensed Business.
Such disclosures may be made during training and in guidance and assistance
furnished to Licensee under this Agreement. Licensee may also learn or otherwise
obtain from COMPANY additional Confidential Information during the term hereof.
Licensee acknowledges and agrees that neither Licensee nor any other person or
entity will acquire any interest in or right to use the Confidential
Information, other than the right to use it in the development and operation of
the Licensed Business pursuant to this Agreement, and that the use or
duplication of the Confidential Information in any other business would
constitute an unfair method of competition with COMPANY and other licensees.
Licensee agrees to disclose the Confidential Information to its employees only
to the extent reasonably necessary for the development of the Licensed Business.
B. Licensee acknowledges and agrees that the Confidential Information
is confidential to and a valuable asset of COMPANY, is proprietary, includes
trade secrets of COMPANY and is disclosed to Licensee solely on the condition
that Licensee, its Principal Owners and employees who have access to
Confidential Information agree, and Licensee does hereby agree that, during and
after the term of this Agreement, Licensee, its Principal Owners and such
employees:
1. will not use the Confidential Information in any business or capacity
other than for the purpose of the development and operation of the
Licensed Business in the License Area pursuant to this Agreement;
2. will maintain the absolute confidentiality of the Confidential
Information and not disclose it to any third parties;
-19-
3. will not make unauthorized copies of any portion of the Confidential
Information disclosed in written or other tangible form; and
4. will adopt and implement all reasonable procedures prescribed from time
to time by COMPANY to prevent unauthorized use or disclosure of the
Confidential Information, including, without limitation, requiring
employees and Principal Owners who will have access to such information
to execute confidentiality agreements in form reasonably prescribed by
COMPANY. Licensee shall provide COMPANY, at its request, executed
originals of each such agreement.
C. Notwithstanding anything to the contrary contained in this
Agreement, the restrictions on Licensee's disclosure and use of the Confidential
Information shall not apply to the following:
1. information, methods, procedures, techniques and knowledge that are or
become generally known in the business of the sale and marketing of
Products within the License Area, other than through disclosure
(whether deliberate or inadvertent) by Licensee, its employees, agents
or Principal Owners or by third parties in violation of confidentiality
obligations to COMPANY; and
2. the disclosure of the Confidential Information in judicial or
administrative proceedings to the extent that Licensee is legally
compelled to disclose such information, provided Licensee has notified
COMPANY in writing prior to disclosure and shall have used its best
efforts to obtain, and shall have afforded COMPANY the reasonable
opportunity to obtain, an appropriate protective order or other
assurance reasonably satisfactory to COMPANY of confidential treatment
for the information required to be so disclosed.
D. Licensee agrees to disclose to COMPANY all ideas, concepts, methods,
techniques and products relating to the development and operation of the
Licensed Business conceived or developed by Licensee or its employees during the
term of this Agreement. Licensee hereby grants to COMPANY and agrees to procure
from its Affiliates, Principal Owners or employees a perpetual, royalty free,
non-exclusive and worldwide right to use same and license same for use in all
businesses operated by COMPANY, its Affiliates and their licensees. COMPANY, its
Affiliates and their licensees shall have no obligation to make any payment to
Licensee or its employees, Principal Owners or Affiliates with respect to any
such idea, concept, method, technique or product. Licensee agrees that it will
not use, nor will it allow any other person or entity to use, any such concept,
method, technique or product without obtaining COMPANY's prior written approval.
E. Licensee agrees to keep the terms and conditions of this Agreement
confidential and not to disclose the contents of this Agreement to any third
party (other than to Licensee's attorneys and accountants for purposes of their
rendering their professional services to Licensee) except as may otherwise be
required by law.
All rights and obligations under this Section 6 shall remain in full force and
effect notwithstanding any termination of this Agreement.
-20-
7. EXCLUSIVE RELATIONSHIP.
----------------------
Licensee acknowledges and agrees that COMPANY would be unable to protect the
Confidential Information against unauthorized use or disclosure and would be
unable to encourage a free exchange of ideas and information among COMPANY and
its licensees, if licensees and their owners were permitted to engage in, hold
interests in or perform services for a Competitive Business. Licensee further
acknowledges and agrees that the restrictions contained in this Section will not
hinder its activities or the activities of its Principal Owners under this
Agreement or in general. Licensee therefore agrees that, during the License
Term, neither Licensee nor any Principal Owner of Licensee, shall directly or
indirectly:
a. have any interest as a disclosed or beneficial owner in any Competitive
Business (this restriction shall not be applicable to (i) the ownership
of shares of a class of securities listed on a stock exchange or traded
on the over-the-counter market that represent less than three percent
(3%) of the number of shares of that class of securities issued and
outstanding, (ii) the ownership of shares in a Competitive Business
acquired by Licensee pursuant to Section 2.E of this Agreement, or
(iii) the ownership by Licensee's or by Principal Owner's of shares in
ITC as of date of this Agreement;
b. perform services as a director, officer, manager, employee, consultant,
representative, agent, or otherwise for any Competitive Business; or
c. employ or seek to employ any person who is employed by COMPANY, its
Affiliates or by any other Licensee of COMPANY, nor induce nor attempt
to induce any such person to leave said employment without the prior
written consent of such person's employer. COMPANY agrees that, during
the License Term, COMPANY shall not directly or indirectly employ or
seek to employ any person who is employed by Licensee or its
Affiliates, nor induce nor attempt to induce any such person to leave
said employment without the prior written consent of Licensee.
Furthermore, Licensee agrees that it will not engage in any business or other
activity, directly or indirectly, other than the marketing and sale of Products.
8. OBLIGATIONS OF LICENSEE.
-----------------------
A. FULL TIME SUPERVISION.
---------------------
Licensee and the Principal Owner(s) shall exert efforts necessary to the
fulfillment of its obligations hereunder and shall not engage in any other
business or other activity, directly or indirectly, that may otherwise conflict
with Licensee's obligations hereunder. Such Principal Owner(s) shall supervise
the development and operation of the Licensed Business.
-21-
B. EXECUTIVE AND MANAGEMENT PERSONNEL.
----------------------------------
Licensee shall hire and maintain the number and level of executive and
management personnel required for the conduct, adequate management and
supervision of all its business activities under this Agreement, and to meet its
obligations hereunder. Licensee shall keep COMPANY advised of the identities of
all such personnel and shall be responsible for ensuring that such personnel are
properly trained to perform their duties. Licensee shall require such management
personnel to reside in the License Area to the extent necessary to perform the
obligations of Licensee hereunder. Licensee acknowledges and agrees that its
decision to hire a particular individual for a senior management position with
Licensee will be based solely on Licensee's own independent investigation of the
suitability of such individual for such position.
C. INITIAL STRUCTURE AND FINANCIAL CAPACITY.
----------------------------------------
Licensee represents and warrants that the share structure and initial
capitalization of Vitech is as set forth in Vitech's most recent 10Q Quarterly
Report on file with the U.S. Securities and Exchange Commission. Licensee shall
at all times maintain sufficient financial resources to fulfill its obligations
under this Agreement.
D. PARTS AND COMPONENTS.
--------------------
Licensee may purchase parts and components to be assembled or incorporated into
Gateway branded Products only from suppliers approved by COMPANY in writing,
such approval not to be unreasonably withheld. If COMPANY fails to respond to
such request for approval within fifteen (15) days from the date of COMPANY's
receipt of such request, such request shall be deemed to have been approved.
Licensee shall provide COMPANY with any and all information requested by COMPANY
to allow COMPANY to make an informed decision regarding such suppliers.
E. APPROVED PRODUCTS.
-----------------
COMPANY may approve, from time to time, types, brands and models (including
parts, components, packaging materials and certain complementary products,
accessories and services relative thereto) of COMPANY-branded Products to be
marketed or distributed by Licensee or manufactured or assembled using the
Licensed Intellectual Property ("Approved Products"). Licensee agrees that the
Licensee will offer for rental or sale all types of Approved Products that
COMPANY from time to time may reasonably prescribe, after consultation with
Licensee. Licensee agrees that the Licensee will not, in conjunction with the
use of the Licensed Intellectual Property (including, but not limited to, the
Marks) advertise, offer for sale or sell any products or services other than
Approved Products. Licensee further acknowledges and agrees that it may not
market, sell or offer for sale any products or services in conjunction with the
use of the Licensed Intellectual Property (including, but not limited to, the
Marks) that COMPANY in its sole discretion deems unsuitable or inconsistent with
the value it has or intends to establish in its Marks or its present or intended
market position or business concept.
Other than with respect to Licensee's existing supply contracts and to
Licensee's existing inventory, Licensee shall notify COMPANY and shall, at its
expense, submit to COMPANY
-22-
such information, specifications, and samples as COMPANY requests if Licensee
proposes to purchase any type, brand or model of goods or services other than
Approved Products. If COMPANY fails to respond to such request for approval
within fifteen (15) days from the date of COMPANY's receipt of such request,
such request shall be deemed to have been approved. COMPANY shall notify
Licensee within a reasonable time whether Licensee is authorized to purchase the
proposed product. Notwithstanding anything to the contrary in this Agreement,
COMPANY reserves the right to review from time to time its approval of any
Approved Product or any other item or service and may revoke its approval of any
such Approved Product or any other item or service at any time and in its sole
discretion if, taking into account all relevant factors, including without
limitation, generally accepted tastes and standards in the License Area and the
image and reputation of COMPANY, COMPANY determines that any such Approved
Products, other item or service has, since its original approval, become so
controversial that the goodwill associated with the Marks may be adversely
affected thereby. Licensee agrees to promptly cease advertising, selling,
renting or providing, and remove from its inventory, any Approved Product or any
other such item subsequently disapproved by COMPANY. Licensee agrees to comply
promptly with COMPANY's notice of disapproval of any Approved Product or any
other item or service, at its own expense, provided that Licensee shall be free
to dispose of such disapproved Approved Product or any other item in any
commercially reasonable manner other than by sale connected in any way with the
Marks.
F. SPECIFICATIONS, STANDARDS AND PROCEDURES.
----------------------------------------
Licensee acknowledges that the operation of the Licensed Business in compliance
with COMPANY's high standards is important to the enhanced goodwill in the Marks
and Licensee agrees to maintain such high standards in the operation of the
Licensed Business. Licensee agrees, to the extent permitted by applicable law,
to comply with all mandatory specifications, standards, manufacturing processes
and operating procedures relating to the operation of the Licensed Business.
Licensee acknowledges and agrees that all such mandatory specifications,
standards, and procedures reasonably prescribed from time to time by COMPANY
shall constitute binding obligations on the part of Licensee, and any failure by
Licensee to adhere to such mandatory specifications, standards and operating
procedures shall constitute grounds for termination of this Agreement by
COMPANY, as provided for herein. All references herein to this Agreement shall
include all such mandatory specifications, standards, and operating procedures.
G. INSURANCE.
---------
During the License Term, Licensee shall maintain in force, under policies of
insurance issued by insurers approved by COMPANY sufficient insurance coverages,
including: (1) comprehensive general liability insurance against claims for
bodily and personal injury, death and property damage caused by or occurring in
conjunction with the operation of the Licensed Business or otherwise in
conjunction with the conduct of Licensed Business pursuant to this Agreement,
under one or more policies of insurance containing minimum liability coverage
reasonably prescribed by COMPANY from time to time; and (2) all risk property
and casualty insurance for the replacement value of Licensee's real and personal
property and its contents (including
-23-
leasehold improvements, furniture, fixtures, equipment, signs, inventory,
supplies, and materials). Licensee shall also maintain such insurance as is
necessary to comply with all legal requirements concerning insurance (including,
without limitation, worker's compensation requirements). COMPANY may
periodically increase the amounts of coverage required under such insurance
policies and require different or additional kinds of insurance at any time,
including excess liability insurance, to reflect inflation, identification of
new risks, changes in law or standards of liability, higher damage awards, or
other relevant changes in circumstances. Each insurance policy shall name
COMPANY and such other persons and entities as COMPANY may designate from time
to time as an additional named insureds, shall contain a waiver of all
subrogation rights against COMPANY, its Affiliates, and their successors and
assigns, and shall provide for 30 days' prior written notice to COMPANY of any
material modification, cancellation, or expiration of such policy.
Upon execution of this Agreement, Licensee shall provide COMPANY with evidence
of the insurance required hereunder. Thereafter, prior to the expiration of the
term of each insurance policy, Licensee shall furnish COMPANY with a copy of
each renewal or replacement insurance policy to be maintained by Licensee for
the immediately following term and evidence of the payment of the premium
therefor. If Licensee fails or refuses to maintain required insurance coverage,
or to furnish satisfactory evidence thereof and the payment of the premiums
therefor, COMPANY, at its option and in addition to its other rights and
remedies hereunder, may obtain such insurance coverage on behalf of Licensee and
Licensee shall fully cooperate with COMPANY in its effort to obtain such
insurance policies, promptly execute all forms or instruments required to obtain
or maintain any such insurance, allow any inspections of the Licensed Business
that are required to obtain or maintain such insurance, and pay to COMPANY, on
demand, any costs and premiums incurred by COMPANY.
Licensee's obligations to maintain insurance coverage as herein described shall
not be affected in any manner by reason of any separate insurance maintained by
COMPANY, nor shall the maintenance of such insurance relieve Licensee of any
indemnification obligations under this Agreement.
H. CREDIT CARDS AND OTHER METHODS OF PAYMENT.
-----------------------------------------
Licensee shall at all times have arrangements in existence with a full range of
credit and debit card issuers or sponsors, check verification services and
electronic fund transfer systems as COMPANY designates from time to time in
order that Licensee may accept customers' credit and debit cards, checks and
other methods of payment.
I. ACCOUNTING, REPORTS, FINANCIAL STATEMENTS AND PRODUCT REPORTS.
--------------------------------------------------------------
Licensee shall establish and maintain at its own expense a bookkeeping,
accounting, record keeping and records retention system consistent with
generally accepted accounting principles.
-24-
Licensee agrees, at its expense, to maintain and preserve at its principal
office, full, complete and accurate records and reports pertaining to the
development and operation of the Licensed Business and the performance by
Licensee of its obligations under this Agreement, including but not limited to
records and information relating to the following: records reflecting the
financial condition and performance of Licensee, production volumes and
inventory levels by week, and such other records and reports as may be
reasonably prescribed by COMPANY from time to time. To determine whether
Licensee is complying with this Agreement, COMPANY or its agents shall have the
right, at any reasonable time to inspect, audit and copy any books, records,
reports and documents pertaining to Licensee's obligations hereunder. Licensee
agrees to cooperate fully with COMPANY in connection with any such inspection or
audit.
Licensee shall deliver to COMPANY in the form from time to time reasonably
prescribed by COMPANY:
1. by the 10th day of each month, a report of Licensee's Gross Revenue
during the immediately preceding calendar month;
2. as soon as practicable after the end of each fiscal year of the
Licensee, and in any event within ninety (90) days thereafter, the
Licensee will furnish the COMPANY with a consolidated balance sheet of
the Licensee, as at the end of such fiscal year, and a consolidated
statement of income and a consolidated statement of cash flows of the
Licensee, for such year, all prepared in accordance with generally
accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal
year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public
accountants of national standing selected by the Licensee Board of
Directors;
3. the Licensee will furnish the COMPANY, as soon as practicable after the
end of the first, second and third quarterly accounting periods in each
fiscal year of the Licensee, and in any event within forty-five (45)
days thereafter, a consolidated balance sheet of the Licensee as of the
end of each such quarterly period, and a consolidated statement of
income and a consolidated statement of cash flows of the Licensee for
such period and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles, with the
exception that no notes need be attached to such statements and normal
year-end audit adjustments may not have been made;
4. within 30 days after the end of every fiscal quarter of Licensee, a
report on all marketing, advertising and promotion activities
undertaken by Licensee in the License Area during such fiscal quarter,
such report to include such information as COMPANY shall reasonably
require from time to time, but in any event including, without
limitation, a detailed description of such activities, copies of all
materials used in such activities and an analysis by the marketing
manager of Licensee of the results of such activities;
5. Licensee will furnish the COMPANY (i) at least thirty (30) days prior
to the beginning of each fiscal year an annual budget and operating
plans for such fiscal year, prepared on a monthly basis, including
balance sheets, a statement of cash flows for such months, and,
-25-
as soon as available, any subsequent revisions thereto; and (ii) as
soon as practicable after the end of each month, and in any event
within twenty (20) days thereafter, a consolidated balance sheet of the
Licensee as of the end of each such month, and a consolidated statement
of income and a consolidated statement of cash flows of the Licensee
for such month and for the current fiscal year to date, prepared in
accordance with generally accepted accounting principles consistently
applied, with the exception that no notes need be attached to such
statements;
6. Licensee shall deliver to the COMPANY (or make available to the COMPANY
through publicly available sources) a complete and accurate copy of
each report, schedule, registration statement and definitive proxy
statement filed with the SEC by Licensee or any Affiliate of Licensee
on or after the date of this Agreement and all amendments and
supplements to each of the foregoing (collectively, the "Licensee SEC
Reports"). The Licensee SEC Reports (i) will include all the forms,
reports and documents required to be filed by the Licensee with the SEC
under the Securities Act of 1933, as amended (the "Securities Act), and
the Securities and Exchange Act of 1934 (the "Exchange Act"), as
amended, as applicable, and the rules and regulations promulgated
thereunder from and after the date of this Agreement, (ii) will comply
with the requirements of the Securities Act and the Exchange Act, as
the case may be, at and as of the times they are filed, and (iii) will
not at and as of the time they are filed contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading;
7. an immediate report of any events or developments known to Licensee
that may have a significant or material adverse impact on the operation
of the Licensed Business, the performance of Licensee under this
Agreement, or the goodwill associated with the Marks, including, but
not limited to, incidents of non-payment or late payment by Licensee of
sums due to any of its suppliers and any material dispute with any of
its suppliers;
8. monthly reports on unit production, inventory levels and a summary
level income statement and statement of cash flows with a budget vs.
actual comparison and a summary balance sheet; and
9. and such other data, reports, information and supporting records as
COMPANY may from time to time reasonably prescribe.
Each such report and financial statement submitted by Licensee shall be signed
by Licensee and verified as correct in the manner prescribed by COMPANY. All
such reports and financial statements shall be in the English language. Licensee
shall cause any sub-licensee or other authorized entity operating pursuant to an
agreement with Licensee to deliver with respect to such sub-licensee or
authorized entity each report described in clauses 1 through 9 above. The
preceding sentence shall not be construed in any manner as any form of
authorization, permission or consent for Licensee or to sub-license or transfer
any rights in this Agreement to any other entity.
-26-
Licensee and its senior management team shall make themselves reasonably
available to discuss from time to time with representatives of COMPANY (but in
any event at least quarterly) the items described in clauses 1 through 9 above.
Licensee agrees to maintain and to furnish to COMPANY upon filing complete
copies of all income, sales, value-added, use and service tax returns filed by
Licensee reflecting activities of Licensee.
Licensee shall furnish to COMPANY in the form reasonably prescribed by COMPANY
from time to time on or before the 10th day of each month a report of all parts
and component purchases of the Licensee for the preceding month. Such report
shall include such information as COMPANY shall reasonably designate from time
to time.
J. INSPECTIONS AND AUDITS.
----------------------
To determine whether Licensee is complying with this Agreement and with
specifications, standards and operating procedures prescribed by COMPANY for the
operation of the Licensed Business, COMPANY or its agents shall have the right,
at any reasonable time, and upon reasonable prior notice, to: (1) inspect the
various premises of Licensee, and any improvements, equipment, fixtures, signs,
operating materials and supplies located thereon; (2) observe, photograph and
video tape the operations of Licensee for such consecutive or intermittent
periods as COMPANY deems necessary; (3) remove samples of any products for
testing and analysis; (4) interview personnel of Licensee; (5) interview
customers of Licensee; (6) inspect the inventory of Licensee; and (7) inspect
and copy any books, records and documents relating to the operation of the
Licensed Business. Licensee agrees to cooperate fully with COMPANY in connection
with any such inspections, observations, photographing and video taping, product
removal and interviews. Licensee shall present to its customers such evaluation
forms as are periodically prescribed by COMPANY and shall participate and/or
request its customers to participate in any surveys performed by or on behalf of
COMPANY.
COMPANY shall have the right at any time during business hours, and with
reasonable notice to Licensee, to inspect and audit, or cause to be inspected
and audited, the business records, bookkeeping and accounting records, value
added, sales, use and service and income tax records and returns and other
records of Licensee. Licensee shall fully cooperate with representatives of
COMPANY and independent accountants hired by COMPANY to conduct any such
inspection or audit. In the event any such inspection or audit shall disclose an
understatement of the gross revenue of Licensee, Licensee shall pay to COMPANY,
within 15 days after receipt of the inspection or audit report, the Royalty Fees
and marketing fund contributions due on the amount of such understatement, plus
interest (at the rate and on the terms provided for herein) from the date
originally due until the date of payment. Further, in the event such inspection
or audit is made necessary by the failure of Licensee to furnish reports,
supporting records, other information or financial statements, as herein
required, or to furnish such reports, records, information or financial
statements on a timely basis, or if an understatement of gross revenue for
-27-
the period of any audit is determined by any such audit or inspection to be
greater than two percent (2%), Licensee shall reimburse COMPANY for the cost of
such inspection or audit, including, without limitation, reasonable legal fees
and accountants' fees, and the travel expenses, room and board and applicable
per diem charges for employees of COMPANY. The foregoing remedies shall be in
addition to all other remedies and rights of COMPANY hereunder or under
applicable law.
K. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
------------------------------------------------
Licensee shall secure and maintain in force in its name all required licenses,
permits, authorizations and certificates relating to the conduct of its business
pursuant to this Agreement. Licensee shall comply with all applicable laws,
ordinances and regulations, including, without limitation, laws relating to the
Licensed Business, and withholding and payment of all taxes. All advertising by
Licensee shall comply with all applicable laws, statutes, rules, regulations and
ordinances, be completely factual, in good taste in the reasonable judgment of
COMPANY, and shall conform to high standards of ethical advertising. Licensee
shall in all dealings with its customers, suppliers, COMPANY and public
officials, adhere to high standards of honesty, integrity, and fair dealing and
ethical conduct. Licensee agrees to refrain from any business or advertising
practice that may reasonably be expected to be injurious to the business of
COMPANY and the goodwill associated with the Marks. Licensee shall notify
COMPANY in writing within five (5) days of the commencement of any action, suit,
or proceeding, and of the issuance of any order, writ, injunction, award, or
decree of any court, agency, or other governmental instrumentality, which may
adversely affect the operation or financial condition of Licensee or the
Licensed Business in the License Area.
L. FOREIGN CORRUPT PRACTICES ACT.
-----------------------------
Licensee shall conform its practices, and shall compel its agents and employees
to conform their practices, so as to be in compliance at all times with the U.S.
Foreign Corrupt Practices Act, 15 USC Sec. 78-dd.
M. GENERAL OPERATIONAL REQUIREMENTS.
--------------------------------
Licensee agrees that it will at all times faithfully, honestly and diligently
perform its obligations hereunder and apply the commercial methods as devised by
COMPANY from time to time, and that it will continuously exert its best efforts
to promote and enhance the business of the Licensed Business and the goodwill of
the Marks.
N. PRINCIPAL OWNER'S UNDERTAKING
Licensee agrees to cause each Principal Owner to execute a Principal Owner's
Undertaking in the form attached as Exhibit E-1 to this Agreement.
-28-
9. COMPANY'S OBLIGATIONS.
---------------------
A. GUIDANCE AND ASSISTANCE.
-----------------------
(1) COMPANY will provide technical assistance and Know-How, in the form of
experienced manufacturing and quality control personnel, who will advise
and assist Licensee in its manufacturing and assembly operations, including
by way of example:
(a) incorporation of engineering and manufacturing core competencies into
Licensee's operations,
(b) inclusion of * requirements into standard COMPANY specifications to
suppliers,
(c) communicate * standards and requirements to COMPANY-sourced * to
Licensee, and
(d) sharing of * data (including * .
(e) incorporating COMPANY'S * test used in manufacturing and assembly
process * ,
(f) consultation on * improvements and * , and
(g) consultation on * optimization and processes.
(h) alignment of * infrastructures and sharing of certain information * ,
(i) establish * infrastructure, and
(j) establish communication alignment with * , Engineering Integration,
Marketing, Technical Support and Supply Management,
(k) training of Licensee * on use of COMPANY's * procedure and its content
for specific products,
(l) training Licensee's engineers on creating and maintaining custom * for
Licensee's manufacturing center, and
(m) sales force training for product specific requirements
(2) COMPANY will provide Licensee design and engineering blueprints and
technical assistance to permit Licensee to manufacture COMPANY-branded
computer products equivalent or identical to Licensee designs, including, by
way of example,
(a) providing of technical "road maps" for COMPANY developed personal
computer hardware,
(b) assistance in design and testing requirements to determine compliance
with COMPANY's design standards and specifications,
(c) assistance in conforming new or Products to requirements of License
Area market conditions, and
(d) assistance in compliance with technical requirements of vendors and
suppliers.
(3) COMPANY will undertake to provide procurement assistance to Licensee in
connection with Licensee's purchase of product parts and components so as to
permit Licensee to benefit from the favorable pricing, quality and other
terms and conditions that COMPANY may obtain from suppliers and vendors,
including, by way of example:
----------
* The confidential portion has been so omitted and filed separately with the
commission.
-29-
(a) requesting common suppliers to pass on benefits of COMPANY's terms and
conditions, including * , with such suppliers',
(b) establishing "virtual hub" in * from which Licensee may pull parts, and
(c) Incorporating supply management core competencies of COMPANY ( * ) into
operations of Licensee.
(4) COMPANY will furnish to Licensee guidance and assistance with respect to
sales and marketing, including, by way of example:
(a) sharing of Brand Book and trademark information,
(b) sharing of * strategies for business and consumer markets,
(c) sharing of * from prior advertising strategies in various media,
including introduction into the * environment and how to appeal to
various market segments,
(d) consultation regarding co-marketing with strategic partners,
(e) consultation on strategies for * sales and customer communications, and
sharing of * from opening Gateway Country retail stores and
consultation on opening retail stores in License Area.
The foregoing assistance may be provided in a variety of methods, in the
discretion of COMPANY, including, by way of example and not limitation,
COMPANY's Operating Manual (as defined in Paragraph C below), bulletins, written
reports and recommendations, other written materials, refresher training
programs and/or consultations via telephone, at the offices of COMPANY, or at
the offices of Licensee.
B. RETAIL STORE OPERATING MANUAL.
-----------------------------
COMPANY will lend to Licensee for Licensee's sole use in the conduct of the
Licensed Business during the License Term one (1) copy of an operating
procedures manual that is used by COMPANY in the United States, which may
consist of one or more handbooks or manuals as may be added, replaced or
supplemented by COMPANY from time to time in its sole discretion (collectively
the "Operating Manual"). The Operating Manual shall contain specifications,
standards, policies and procedures prescribed from time to time by COMPANY for
the sale and marketing of Products and information relative to other obligations
of Licensee hereunder. The Operating Manual may be modified from time to time to
reflect changes in specifications, standards, policies and procedures. Licensee
shall keep its copy of the Operating Manual current by immediately inserting all
modified pages furnished by COMPANY.
----------
* The confidential portion has been so omitted and filed separately with the
commission.
-30-
Licensee shall, within 90 days of the Effective Date, submit for review and
approval by COMPANY any modifications to the Operating Manual that Licensee
believes to be necessary to comply with legal requirements of the License Area
or for the commercial success of the Licensed Business. COMPANY agrees to
consider such proposed modifications in good faith and notify Licensee in
writing of COMPANY's acceptance or rejection of such modifications. The content
of the Operating Manual, the manual itself and the copyright therein shall at
all times be the property of COMPANY. In the event of a dispute about the
contents of the Operating Manual, the master copies maintained by COMPANY at its
principal office shall be controlling.
Licensee shall procure the services of a qualified professional translation
agency to translate the Operating Manual (and any future modifications or
additions) as well as any training into one or more of the languages of the
License Area as COMPANY shall deem necessary. Licensee shall be responsible for
the cost of such translations. Licensee shall not engage any such translation
agency without the prior written approval by COMPANY of such agency. Licensee
shall not sign any agreement with any such agency (or provide such agency with
any portion of the Operating Manual or such training materials) until COMPANY
has approved, in writing, the form and content of such agreement with such
agency. Licensee acknowledges and agrees that the copyright of the translated
Operating Manual and training materials shall be the property of COMPANY and its
Affiliates, and that neither Licensee, its Affiliates, their employees, agents
or representatives, nor the translation agency, its employees, agents or
representatives, shall have any copyright or other right or interest in such
translated materials. Licensee agrees to cause each and every individual or
entity that participates in such translation to execute agreements in form and
substance satisfactory to COMPANY to effect ownership of such translated works
in COMPANY.
Licensee shall provide COMPANY with each such translation, both in printed form
and on computer media. Licensee shall not make any reproductions of such
translations. COMPANY shall have the sole right and responsibility to reproduce
such translated Operating Manual and training materials. COMPANY shall lend
Licensee one copy of such translated Operating Manual pursuant to the provisions
of this Agreement. COMPANY acknowledges and agrees that it shall set the cost of
such training materials at a level to reimburse COMPANY for such costs of
reproduction and shipping.
C. BRAND BOOK
----------
COMPANY will lend to Licensee for Licensee's sole use in the conduct of the
Licensed Business during the License Term one (1) copy of a trademark usage and
procedures manual that is used by COMPANY in the United States, which may
consist of one or more handbooks or manuals as may be added, replaced or
supplemented by COMPANY from time to time in its sole discretion (collectively
the "Brand Book"). The Brand Book shall contain specifications, standards,
policies and procedures prescribed from time to time by COMPANY for using the
Marks in the operation of the Licensed Business. The Brand Book may be modified
from time to time to reflect changes in the Marks. Licensee shall keep its copy
of the Brand Book current by immediately inserting all modified pages furnished
by COMPANY.
-31-
Licensee shall, within 90 days of the Effective Date, submit for review and
approval by COMPANY any modifications to the Brand Book that Licensee believes
to be necessary to comply with legal requirements of the License Area or for the
commercial success of the Licensed Business. COMPANY agrees to consider such
proposed modifications in good faith and notify Licensee in writing of COMPANY's
acceptance or rejection of such modifications. The content of the Brand Book,
the manual itself and the copyright therein shall at all times be the property
of COMPANY. In the event of a dispute about the contents of the Brand Book, the
master copies maintained by COMPANY at its principal office shall be
controlling.
Licensee shall procure the services of a qualified professional translation
agency to translate the Brand Book (and any future modifications or additions)
as well as any training into one or more of the languages of the License Area as
COMPANY shall deem necessary. Licensee shall be responsible for the cost of such
translations. Licensee shall not engage any such translation agency without the
prior written approval by COMPANY of such agency. Licensee shall not sign any
agreement with any such agency (or provide such agency with any portion of the
Brand Book or such training materials) until COMPANY has approved, in writing,
the form and content of such agreement with such agency. Licensee acknowledges
and agrees that the copyright of the translated Brand Book and training
materials shall be the property of COMPANY and its Affiliates, and that neither
Licensee, its Affiliates, their employees, agents or representatives, nor the
translation agency, its employees, agents or representatives, shall have any
copyright or other right or interest in such translated materials. Licensee
agrees to cause each and every individual or entity that participates in such
translation to execute agreements in form and substance satisfactory to COMPANY
to effect ownership of such translated works in COMPANY.
Licensee shall provide COMPANY with each such translation, both in printed form
and on computer media. Licensee shall not make any reproductions of such
translations. COMPANY shall have the sole right and responsibility to reproduce
such translated Brand Book and training materials. COMPANY shall lend Licensee
one copy of such translated Brand Book pursuant to the provisions of this
Agreement. COMPANY acknowledges and agrees that it shall set the cost of such
training materials at a level to reimburse COMPANY for such costs of
reproduction and shipping.
-32-
10. ADVERTISING.
------------
During each consecutive twelve (12) calendar month period during the License
Period, Licensee shall spend for local advertising, marketing and promotion of
its Products (excluding discounts, coupon redemptions, the cost of products or
services given without charge and overhead) not less than * of the Gross Revenue
of Licensee for such period. As part of such * , Licensee shall spend for local
advertising, marketing and promotion of Licensee-branded products and services
(excluding discounts, coupon redemptions, the cost of products or services given
without charge and overhead) not less than * of the Gross Revenue of Licensee
derived from the sale of Licensee-banded Products for such period. Amounts spent
by Licensee to advertise Grand Openings of Gateway Country Stores in the License
Area, if any, shall not be credited toward the local advertising, marketing and
promotion obligations of Licensee under this Section 10. Licensee shall submit,
in form and frequency prescribed by COMPANY, verification of its expenditures
for advertising, marketing and promotion for the previous quarter and for the
then-current twelve (12) month period. Amounts spent for local advertising,
marketing and promotion of the Licensed Business shall not be credited toward
Licensee's local advertising expenditure obligations hereunder to the extent
that Licensee is reimbursed for such expenditures or such expenditures are made
by a supplier of Licensee.
Prior to their use by Licensee, samples of all advertising, marketing and
promotional materials using the Marks and not prepared or previously approved by
COMPANY shall be submitted to COMPANY for approval, in the form and manner
prescribed by COMPANY from time to time. If written COMPANY does not grant
approval within 15 days from the date of receipt by COMPANY of such materials,
COMPANY shall be deemed to have approved the materials. Licensee shall not use
any advertising, marketing or promotional materials using the Marks that COMPANY
has not approved, has disapproved or that do not include the copyright and
trademark, ownership and registration notices designated by COMPANY.
Licensee shall consult with COMPANY prior to engaging any advertising, marketing
or public relations agency.
11. TRANSFER.
--------
A. BY COMPANY.
----------
COMPANY may not assign this Agreement without the consent of Licensee, which
consent Licensee may not unreasonably withhold. Notwithstanding the foregoing,
COMPANY shall have the right to assign this Agreement to any parent or operating
subsidiary of COMPANY. This Agreement is fully transferable by COMPANY and shall
inure to the benefit of any assignee or other legal successor to the interests
of COMPANY herein. Licensee acknowledges and agrees that COMPANY may delegate
any or all of its obligations under this Agreement to an Affiliate or an
unaffiliated third party; provided, however in no event shall such delegation
release COMPANY from its obligations hereunder.
----------
* The confidential portion has been so omitted and filed separately with the
commission.
-33-
B. BY LICENSEE.
------------
Licensee understands and acknowledges that the rights and duties created by this
Agreement are personal to Licensee and that COMPANY has granted the rights
hereunder in reliance upon the individual or collective character, skill,
aptitude, attitude, business ability, and financial capacity of Licensee.
Accordingly, except as explicitly permitted under this Agreement, neither (1)
this Agreement nor (2) any interest in Licensee (direct or indirect, legal or
beneficial) or in the assets of Licensee (other than inventory items in the
ordinary course of business) may be transferred. Any such transfer shall
constitute a breach hereof and shall convey to the transferee no rights to or
interests in this Agreement or Licensee or the assets of Licensee. COMPANY
acknowledges and agrees that Licensee may delegate any or all of its obligations
under this Agreement to a non-United States Affiliate; provided, however in no
event shall such delegation release COMPANY from its obligations hereunder; and
provided further that such delegation will not result in any requirement for
governmental approval or registration unacceptable to COMPANY in its reasonable
discretion.
Licensee shall not recognize on its books any transfer of interests in the
equity of Licensee. Licensee shall take all actions including, without
limitation, all corporate actions and changes to corporate organizational
documents, necessary or desirable in order to implement and enforce under
relevant law the restrictions on transfer of interests in Licensee contained in
this Agreement.
As used in this Agreement, the term "transfer" shall mean and include the
voluntary, involuntary, conditional, direct or indirect assignment, sale, gift
or other transfer by Licensee of any interest in the thing concerned or grant of
any security interest.
As used above, an assignment, sale or other transfer shall include, without
limitation, the issuance of voting shares or any security convertible to voting
shares of Licensee that, when taken together with all prior issuances of voting
shares or securities convertible to voting shares of Licensee, results in Vitech
America, Inc. owning less than 51% of all of the issued and outstanding voting
shares of Licensee.
E. EFFECT OF CONSENT TO TRANSFER.
-----------------------------
COMPANY's consent to a transfer of this Agreement or any interest subject to the
restrictions of this Section shall not constitute a waiver of any claims it may
have against Licensee (or its Principal Owners), nor shall it be deemed a waiver
of COMPANY's right to demand exact compliance with any of the terms or
conditions of this Agreement by the transferee.
12. TERMINATION OF AGREEMENT.
------------------------
A. BY LICENSEE.
-----------
If Licensee is not in default of its obligations under this Agreement beyond any
applicable cure
-34-
periods, and COMPANY materially breaches this Agreement, Licensee may terminate
this Agreement effective 30 days after delivery of written notice of termination
if Licensee gives written notice of such breach to COMPANY and COMPANY does not:
1. correct such breach within 30 days after delivery of such notice of
material breach; or
2. if such breach cannot reasonably be cured within 30 days after delivery of
such notice, undertake within 10 days after delivery of such notice, and
continue until completion, efforts to cure such breach.
B. BY COMPANY.
----------
COMPANY may terminate this Agreement, effective upon delivery of notice of
termination to Licensee or, if applicable, upon failure to cure to COMPANY's
satisfaction any breach of this Agreement before the expiration of any period of
time within which such breach may be cured in accordance with the provisions set
forth below, if:
1. Licensee fails to satisfy the development obligations set forth in
Paragraph I of Section 3 hereof; or Licensee or a Principal Owner makes
an assignment or transfer in violation of this Agreement or such
Principal Owner's Principal Owner's Undertaking;
2. Licensee or any Principal Owner abandons, surrenders or transfers
control of the operation the Licensee without the prior written
approval of COMPANY;
3. Licensee or any Principal Owner has made any material misrepresentation
or omission to COMPANY in securing the rights granted under this
Agreement or is convicted by a court of or pleads guilty or no contest
to a felony, or to any other crime or offense that may adversely affect
the reputation of COMPANY or the goodwill associated with the Marks, or
engages in any misconduct which materially adversely affects the
reputation of COMPANY or the goodwill associated with the Marks;
4. Licensee or any of its Principal Owners breaches its obligations under
Sections 4, 5 or 6 of this Agreement.
5. Licensee or any of its Principal Owners challenges or seeks to claim
rights in or to challenge the validity of (a) Licensed Intellectual
Property, including, but not limited to, the Marks or the COMPANY's
rights in any other names, marks or commercial symbols used by the
COMPANY or its Affiliates anywhere in the world or used by Licensee in
connection with the operation or promotion of the Licensed Business,
whether registered or unregistered, (b) the Confidential Information
(including, without limitation, the Copyrighted Works or (c) any other
industrial or intellectual property rights licensed under this
Agreement;
6. Licensee or any of its Principal Owners violates the restrictions of
Section 7 hereof;
-35-
7. Licensee fails to report accurately the gross revenue of Licensee
(provided that COMPANY may not exercise its rights under this Section
12.B for any report by Licensee of gross revenue that is within 98% of
the actual gross revenue, unless such report is the second inaccurate
report of gross revenue by Licensee in the immediately prior 12 month
period) or fails to make payments of any amounts due COMPANY for
Royalty Fees, purchases from COMPANY or its Affiliates, or any other
amounts due to COMPANY or its Affiliates, and does not correct such
failure within ten (10) days after written notice thereof;
8. Licensee fails to comply with any other material provision of this
Agreement or any mandatory specification, standard, or operating
procedure prescribed by COMPANY, and does not correct such failure
within 30 days after written notice of such failure to comply is
delivered to Licensee or, if such breach cannot reasonably be cured
within 30 days after delivery of such notice, undertake within 10 days
after delivery of such notice, and continue until completion, efforts
to cure such breach; or Licensee fails on two (2) or more separate
occasions within any period of 12 consecutive months to comply with
this Agreement, irrespective of materiality, and whether or not such
failures to comply are corrected after notice thereof is delivered to
Licensee;
9. Licensee is in default under any other agreement with COMPANY or with
any of COMPANY'S affiliates beyond applicable cure periods.
10. Licensee becomes insolvent in the sense that Licensee is unable to pay
its bills as they become due; or
11. Licensee shall enter into a composition with creditors, make a
declaration of bankruptcy, go into liquidation, or has a receiver or an
administrator appointed over any or all of its assets or undertakings.
12. Licensee loses the right to possession of any Gateway Country Store and
does not relocate such Gateway Country Store to another site in
accordance with this Agreement within six months.
13. Licensee causes or permits to exist a default under the lease or
sublease for any Gateway County Store and fails to cure such default
within the applicable cure period set forth in the lease or sublease;
13. RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THIS
-------------------------------------------------------------
AGREEMENT.
----------
Upon termination or expiration of this Agreement or the License Period, Licensee
shall:
1. immediately pay any amounts owed by Licensee to COMPANY or its
Affiliates which are then unpaid plus interest due on any of the
foregoing without offset or deduction;
2. not thereafter directly or indirectly at any time or in any manner
identify itself as a current or former licensee of or as otherwise
associated with COMPANY, or use any Xxxx, any colorable imitation
thereof or any xxxx substantially identical or similar to any Xxxx in
any
-36-
manner or for any purpose, or utilize for any purpose any trade name,
trademark or service xxxx, or other commercial symbol or trade dress
used by COMPANY or its Affiliates or that suggests or indicates a
connection or association with COMPANY whether registered or
unregistered and whether or not subject to legal protection within the
License Area, and immediately assign to the COMPANY or its Affiliate
any rights therein which Licensee may have acquired by operation of law
or otherwise.
All obligations of COMPANY and Licensee under this Agreement which expressly or
by their nature survive or are intended to survive the expiration or termination
of this Agreement or the License Term shall continue in full force and effect
subsequent to and notwithstanding its expiration or termination and until they
are satisfied in full or by their nature expire.
Licensee shall not at any time after expiration or termination of this Agreement
or the License Period License Term, adopt, use or claim rights adverse to those
of COMPANY or its Affiliates in or to any company name, trade name, trademark,
service xxxx, logo, trade dress component, commercial symbol, design or device
(including, without limitation, the Marks, the Trade Dress and the Copyrighted
Works used by COMPANY or its Affiliates anywhere in the world or used by
Licensee in connection with the operation or promotion the Licensed Business).
This undertaking and agreement shall survive the termination or expiration of
this Agreement and shall be binding on Licensee, its officers, Principal Owners,
directors, agents, employees, heirs, successors and assigns.
14. INDEPENDENT CONTRACTORS/INDEMNIFICATION.
---------------------------------------
A. INDEPENDENT CONTRACTORS.
-----------------------
COMPANY and Licensee are independent contractors. This Agreement does not, nor
shall any course of conduct between the parties, create a fiduciary relationship
between the parties. Nothing in this Agreement is intended to make either party
a general or special agent, joint venturer, partner or employee of the other for
any purpose and neither party shall have any authority to enter into any
contract, assume or create any obligation, express or implied, or otherwise bind
the other party. Licensee shall conspicuously identify itself in all dealings
with customers, suppliers, public officials, Licensee's personnel and others as
an independent undertaking of the Licensee under a license granted by COMPANY.
Licensee shall conspicuously and prominently place such other notices of
independent Principal Ownership on such forms, business cards, stationery,
advertising and other materials, and at any Gateway Country Store owned or
operated by Licensee as COMPANY may reasonably require from time to time.
B. NO LIABILITY FOR ACTS OF OTHER PARTY.
------------------------------------
Neither COMPANY nor Licensee shall be obligated by or have any liability under
any agreements, representations, or warranties made by the other that are not
expressly authorized hereunder, nor shall COMPANY be obligated for any damages
to any person or property directly or indirectly arising out of the operation of
Licensee's business conducted pursuant to this
-37-
Agreement or otherwise, whether or not caused by Licensee's negligent or willful
action or failure to act. COMPANY shall have no liability for any value added,
sales, service, use, excise, income, gross receipts, property, or other taxes
levied upon Licensee or its assets or upon COMPANY in connection with the
business conducted by Licensee, or any payments made by Licensee to COMPANY
pursuant to this Agreement.
C. TAXES.
-----
COMPANY shall have no liability for any sales, value added, use, service,
occupation, excise, stamp, gross receipts, income, property, payroll or other
taxes, whether levied upon this Agreement, Licensee, Licensee's property, or
upon COMPANY, in connection with the sales made or business conducted by
Licensee (except any taxes COMPANY is required by law to collect from Licensee
with respect to purchases from COMPANY, if any). Payment of all such taxes shall
be the responsibility of Licensee.
D. INDEMNIFICATION.
---------------
Licensee agrees to defend and hold COMPANY, its Affiliates and their respective
shareholders, directors, officers, employees, agents and assignees harmless
against and to reimburse them for:
1. all claims, losses, obligations and damages described in this Section,
any and all claims and liabilities directly or indirectly arising out
of this Agreement, the conduct of the Licensed Business pursuant to
this Agreement or otherwise and the use of the Licensed Intellectual
Property to the extent that such claims, obligations, damages, losses
or liabilities do not arise from the negligence or wrongful conduct of
COMPANY; and
2. all value added, sales, use, service, occupation, excise, gross
receipts, income, property or other taxes, whether levied upon Licensee
or Licensee's property or upon COMPANY in connection with the sales
made or business conducted by Licensee (except any income taxes of
COMPANY or any taxes COMPANY is required by law to collect from
Licensee with respect to purchases from COMPANY).
For purposes of this indemnification, "claims" shall mean and include all
obligations, actual and consequential damages and costs reasonably incurred in
the defense of any such claim, including without limitation reasonable
accountants', attorneys', attorney assistants', arbitrators' and expert witness
fees, cost of investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses, incurred by COMPANY in any dispute,
action or proceeding between COMPANY and Licensee, or between COMPANY and third
parties or otherwise. This indemnity shall continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.
COMPANY agrees to defend and hold Licensee, its Affiliates and their respective
shareholders, directors, officers, employees, agents and approved assignees
harmless against and to reimburse them for all claims, losses, obligations and
damages directly or indirectly arising out of COMPANY'S breach of this Agreement
to the extent that such claims, obligations, damages, losses or liabilities do
not arise from the negligence or wrongful conduct of Licensee; and
-38-
For purposes of this indemnification, "claims" shall mean and include all
obligations, actual and consequential damages and costs reasonably incurred in
the defense of any such claim, including without limitation reasonable
accountants', attorneys', attorney assistants', arbitrators' and expert witness
fees, cost of investigation and proof of facts, court costs, other litigation
expenses, and travel and living expenses, incurred by Licensee in any dispute,
action or proceeding between COMPANY and Licensee, or between Licensee and third
parties or otherwise. This indemnity shall continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.
15. ENFORCEMENT.
-----------
A. INJUNCTIVE RELIEF.
-----------------
Nothing in this Agreement shall bar COMPANY's or Licensee's right to
seek specific performance of the provisions of this Agreement and injunctive
relief against threatened conduct that will cause it loss or damages under
customary equity rules, including applicable rules for obtaining restraining
orders and preliminary injunctions, in addition to such further or other relief
as may be available at equity or law. No bond shall be required to be posted to
obtain any injunctive relief and that an enjoined party's only remedy if an
injunction is entered will be the dissolution of that injunction, if warranted,
upon due hearing (all claims for damages by reason of the wrongful issuance of
such injunction being expressly waived hereby).
B. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
-------------------------------------------------
If at any time during the License Term,
(1) any governmental or other authority ("Agency") on or after the
Effective Date requires any amendment to be made to this Agreement as a
condition to the approval, acceptance, clearance, exemption, issue of
comfort letter or registration of this Agreement;
(2) either party, acting in good faith, at any time notifies the other that
such notifying party considers that amendments to this Agreement or any
related document are required to comply with or otherwise to take into
account (a) applicable law, (b) changes in applicable law (including,
without limitation, the enactment, amendment, expiry or repeal of any
law, statute, rule or regulation), or (c) notices, decisions or
judgments of any court or Agency; or
(3) any court or Agency decides that all or any part of this Agreement is
or may be void, invalid or unenforceable,
then COMPANY, if it reasonably believes that continuation of this Agreement
would not be in its best interests, may terminate this Agreement on giving sixty
(60) days written notice to Licensee and the provisions of Section 12 shall
apply to any such termination. During such sixty (60) day period, COMPANY and
Licensee shall negotiate in good faith toward resolving
-39-
COMPANY's objection to the continuance of this Agreement, but in no event shall
such resolution alter the fee schedule provided in Section 3 hereof, or, in the
reasonable judgment of COMPANY, materially adversely affect COMPANY'S rights or
remedies under this Agreement. If COMPANY chooses not to exercise its option to
so terminate this Agreement, then the following provisions shall apply:
(1) COMPANY may provide to Licensee and Licensee shall then promptly
execute and deliver back to COMPANY an addendum to this Agreement or
other appropriate document in form satisfactory to COMPANY (a) in order
to give effect to the amendment required by the Agency as referred to
in clause (i) above, or (b) considered by COMPANY as required as
referred to in (ii) above, or (c) considered by COMPANY as a valid and
enforceable replacement of as similar legal and economic effect as is
permitted by applicable law of any term which is or may be void,
invalid or unenforceable as referred to in (iii) above; and/or
(2) any provision of this Agreement that is void, invalid or unenforceable
shall be severed from this Agreement to the extent that it is void,
invalid or unenforceable (except that to the extent such provision can
be modified as set forth in the second paragraph of this clause (2)
below, such provision shall be so modified and not severed), and the
remainder of this Agreement, including, without limitation, any
partially valid provisions, shall be enforced to the extent valid and
enforceable.
To the extent the exclusive dealing covenants, post-transfer restrictive
covenants or post-termination restrictive covenants contained in this Agreement
are deemed unenforceable by virtue of their scope in terms of geographic area,
business activity prohibited and/or length of time, but may be made enforceable
by reductions of either or any thereof, Licensee and COMPANY agree that the same
shall be enforced to the fullest extent permissible under the laws and public
policies applied in the jurisdiction in which enforcement is sought. If any
applicable and binding law or rule of any jurisdiction requires a greater prior
notice of the termination of this than is required hereunder, or the taking of
some other action not required hereunder, or if under any applicable and binding
law or rule of any jurisdiction, any provision of this Agreement or any
specification, standard or operating procedure prescribed by COMPANY is invalid
or unenforceable, the prior notice and/or other action required by such law or
rule shall be substituted for the comparable provisions hereof, and COMPANY
shall have the right, in its sole discretion, to modify such invalid or
unenforceable provision, specification, standard, or operating procedure to the
extent required to be valid and enforceable. Such modifications to this
Agreement shall be effective only in such jurisdiction and this Agreement shall
be enforced as originally made and entered into in all other jurisdictions.
C. WAIVER OF OBLIGATIONS AND PERMITTED NON-PERFORMANCE.
---------------------------------------------------
COMPANY and Licensee may, only by written instrument, unilaterally waive or
reduce any obligation of or restriction upon the other under this Agreement,
effective upon delivery of written notice thereof to the other or such other
effective date stated in the notice of waiver. Any such waiver shall be without
prejudice to any other rights the waiving party may have, will be subject to
continuing review by the waiving party, and may be revoked for any reason, on 10
days' prior written notice.
-40-
EXCEPT AS MAY BE SET FORTH IN THIS AGREEMENT, INCLUDING THE EXHIBITS THERETO,
NEITHER PARTY MAKES ANY WARRANTIES OR GUARANTEES UPON WHICH THE OTHER PARTY MAY
RELY, AND ASSUMES NO LIABILITY OR OBLIGATION TO THE OTHER PARTY, BY GRANTING ANY
WAIVER, APPROVAL, OR CONSENT TO THE OTHER PARTY, OR BY REASON OF ANY NEGLECT,
DELAY, OR DENIAL OF ANY REQUEST THEREFOR.
COMPANY and Licensee shall not be deemed to have waived or impaired any right,
power or option reserved by this Agreement (including, without limitation, the
right to demand exact compliance with every term, condition and covenant herein,
or to declare any breach thereof to be a default and to terminate this Agreement
prior to the expiration of its term), by virtue of any (1) custom or practice of
the parties at variance with the terms hereof; (2) failure, refusal, or neglect
of COMPANY or Licensee to exercise any right under this Agreement or to insist
upon exact compliance by the other with its obligations hereunder, including,
without limitation, any mandatory specification, standard or operating
procedure; (3) waiver, forbearance, delay, failure, or omission by COMPANY to
exercise any right, power, or option, whether of the same, similar or different
nature, with respect to any other license agreement; or (4) the acceptance by
COMPANY of any payment from Licensee and by Licensee of any payment from COMPANY
after any breach of this Agreement.
Neither COMPANY nor Licensee shall be liable for loss or damage or deemed to be
in breach of this Agreement if its failure to perform its obligations results
from any of the following and is not caused or exacerbated by the non-performing
party: (1) transportation shortages, inadequate supply of equipment,
merchandise, supplies, labor, material, or energy, or the voluntary forgoing of
the right to acquire or use any of the foregoing in order to accommodate or
comply with the orders, requests, regulations, recommendations, or instructions
of any federal, state, or municipal government or any department or agency
thereof; (2) compliance with any law, ruling, order, regulation, requirement, or
instruction of any federal, state, or municipal government or any department or
agency thereof; (3) acts of God; (4) acts of war or insurrection; (5) strikes,
lockouts, boycotts, fire and other casualties; or (6) any other similar event or
cause. Any delay resulting from any of said causes shall extend performance
accordingly or excuse performance, in whole or in part, as may be reasonable,
except that such causes shall not excuse payment of amounts owed at the time of
such occurrence or payment of any fees thereafter and as soon as performance is
possible the non-performing party shall immediately resume performance nor shall
such period of excused non-performance exceed six (6) months.
D. RIGHTS OF PARTIES ARE CUMULATIVE.
--------------------------------
The rights of COMPANY and Licensee hereunder are cumulative and no exercise or
enforcement by COMPANY or Licensee of any right or remedy hereunder shall
preclude the exercise or enforcement of any other right or remedy under this
Agreement or applicable law.
-41-
E. LIMITATIONS OF CLAIMS.
---------------------
Except with regard to Licensee's obligations to make payments to COMPANY
pursuant to this Agreement, any and all claims arising out of or relating to
this Agreement or the relationship of Licensee and COMPANY pursuant hereto shall
be barred unless an action or proceeding is commenced within one (1) year from
the date on which Licensee or COMPANY knew or should have known, in the exercise
of reasonable diligence, of the facts giving rise to such claims.
F. COSTS AND LEGAL FEES.
--------------------
If COMPANY or Licensee is required to enforce this Agreement in a judicial
proceeding, the party prevailing in such proceeding shall be reimbursed by the
other party for its costs and expenses, including, without limitation,
reasonable accountants', attorneys', attorneys assistants', expert witness fees,
cost of investigation and proof of facts, court costs, other litigation expenses
and travel and living expenses, whether incurred prior to, in preparation for or
in contemplation of the filing of any such proceeding.
G. GOVERNING LAW/CONSENT TO JURISDICTION.
-------------------------------------
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (XXXXXX
ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), OR OTHER FEDERAL LAW, THIS AGREEMENT AND
THE RELATIONSHIP BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF DELAWARE, USA EXCEPT THAT ITS CHOICE OF LAW AND CONFLICT OF
LAW RULES AND THE PROVISIONS OF THE DELAWARE DECEPTIVE AND UNFAIR PRACTICES ACT
AND THE REGULATIONS THEREUNDER SHALL NOT APPLY. LICENSEE AGREES THAT IT SHALL
AND COMPANY MAY INSTITUTE ANY ACTION ARISING OUT OF OR RELATING TO THIS
AGREEMENT IN ANY STATE OR FEDERAL COURT OF GENERAL JURISDICTION IN THE UNITED
STATES HAVING VENUE. LICENSEE IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH
COURTS AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE
OF SUCH COURT. COMPANY MAY BRING ANY MATTER RELATING TO THIS AGREEMENT BEFORE A
COMPETENT COURT IN THE LICENSE AREA AND LICENSEE AGREES THAT IF COMPANY SO
CHOOSES THEN SUCH COMPETENT COURT IN THE LICENSE AREA WILL HAVE JURISDICTION IN
SUCH MATTER, AND LICENSEE IRREVOCABLY SUBMITS TO THE JURISDICTION OF SUCH COURT
AND WAIVES ANY OBJECTION IT MAY HAVE TO EITHER THE JURISDICTION OR VENUE OF SUCH
COURT.
H. BINDING EFFECT.
--------------
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns, and successors in interest, and shall
not be modified except by written agreement signed by both Licensee and COMPANY.
-42-
I. WAIVER OF JURY TRIAL/LIMITATION OF LIABILITY.
--------------------------------------------
COMPANY and Licensee hereby waive to the fullest extent permitted by law, any
right to or claim for any punitive or exemplary damages against the other and
agree that in the event of a dispute between them, except as otherwise provided
herein, each shall be limited to the recovery of actual damages sustained by it.
COMPANY and Licensee hereby irrevocably waive trial by jury on any action,
proceeding or counterclaim, whether at law or equity, brought by either of them.
ANY LIABILITY OF COMPANY AND ITS AFFILIATES UNDER THIS AGREEMENT IS EXPRESSLY
LIMITED TO THE INITIAL LICENSE FEE AND LICENSEE'S SOLE REMEDY AGAINST THEM IN
ANY DISPUTE UNDER THIS AGREEMENT SHALL BE TO SEEK RECOVERY OF SUCH AMOUNT, UPON
THE PAYMENT OF WHICH THEY SHALL BE RELEASED FROM AND DISCHARGED OF ALL FURTHER
OBLIGATIONS AND LIABILITY.
J. CONSTRUCTION.
------------
The preambles and exhibits are a part of this Agreement, which constitutes the
entire agreement of the parties, and there are no other oral or written
understandings or agreements between COMPANY and Licensee relating to the
subject matter of this Agreement. Nothing in this Agreement is intended, nor
shall be deemed, to confer any rights or remedies upon any person or legal
entity not a party hereto. The headings of the several sections and paragraphs
hereof are for convenience only and do not define, limit, or construe the
contents of such sections or paragraphs. The singular usage includes the plural
and the masculine and neuter usages include each other and the feminine.
References to "Principal Ownership interests" shall include: (a) in relation to
a corporation, the Principal Ownership of shares (either directly or indirectly,
legally or beneficially) in the corporation; (b) in relation to a partnership,
the Principal Ownership of a general or limited partnership interest; or (c) in
relation to a trust, the Principal Ownership of the beneficial interest of such
trust. References to "immediate family" as used herein shall mean parents,
spouses, natural and adopted children and siblings and their spouses, and the
parents, children and siblings of spouses. References to a "controlling
interest" in Licensee shall mean, if Licensee is a corporation, 33-1/3% or more
of the voting shares of Licensee if Licensee is owned by three (3) or more
persons or entities, otherwise fifty percent (50%) or more of the voting control
of Licensee, and, if Licensee is a partnership, 33-1/3% of the general
partnership interest in Licensee if Licensee has three (3) or more general
partners, otherwise fifty percent (50%) or more of the general partnership
interest. If two or more persons are at any time Licensee hereunder, whether or
not as partners or joint venturers, their obligations and liabilities to COMPANY
shall be joint and several. This Agreement shall be executed in multiple copies,
each of which shall be deemed an original.
K. REASONABLENESS.
--------------
COMPANY and Licensee agree to act reasonably in all dealings with each other
pursuant to this Agreement. Whenever the consent or approval of either party is
required or contemplated hereunder, the party whose consent is required agrees
not to unreasonably withhold the same, unless otherwise permitted in this
Agreement to do so.
-43-
L. GOVERNING LANGUAGE.
------------------
This Agreement and all documents contemplated hereby
originally will be written in the English language, and all questions of
interpretation shall be resolved by reference to the same as written in English.
16. NOTICES AND PAYMENTS.
--------------------
All written notices and reports permitted or required to be delivered under this
Agreement shall be deemed so delivered (a) at the time delivered by hand, (b)
one (1) business day after successful transmission by telegraph or telex or (c)
three (3) business days after being placed in the hands of a commercial courier
service for overnight delivery, postage prepaid and addressed to COMPANY at
_________________________, USA, to the attention of ______________________, or
its most current principal business address of which Licensee has been notified,
or to Licensee at Licensee's most current principal business address of which
COMPANY has been notified, as applicable. All payments required by this
Agreement shall be wire transferred to an account designated by COMPANY from
time to time. Any required payment or report not actually received by COMPANY
during regular business hours on the date due shall be deemed delinquent.
17. ACKNOWLEDGMENTS, REPRESENTATIONS AND COVENANTS.
----------------------------------------------
Licensee acknowledges, agrees, represents and warrants that:
a. it has read this Agreement and understands and accepts the terms,
conditions and covenants contained in this Agreement as being
reasonably necessary to maintain COMPANY's high standards of quality
and service and the uniformity of those standards in order to protect
and preserve the goodwill of the Marks;
b. IT HAS CONDUCTED AN INDEPENDENT INVESTIGATION OF THE BUSINESS
CONTEMPLATED BY THIS AGREEMENT AND RECOGNIZES THAT, LIKE ANY OTHER
BUSINESS, THE NATURE OF THE BUSINESS CONTEMPLATED BY THIS AGREEMENT MAY
EVOLVE AND CHANGE OVER TIME, THAT AN INVESTMENT IN THE BUSINESS
INVOLVES BUSINESS RISKS, AND THAT THE SUCCESS OF THE VENTURE IS LARGELY
DEPENDENT UPON THE BUSINESS ABILITIES AND EFFORTS OF LICENSEE;
c. NO REPRESENTATIONS OR STATEMENTS OF ACTUAL, AVERAGE, PROJECTED OR
FORECASTED SALES, PROFITS OR EARNINGS HAVE BEEN MADE WITH RESPECT TO
THE BUSINESS CONTEMPLATED BY THIS AGREEMENT; COMPANY RECOMMENDS THAT
LICENSEE MAKE ITS OWN INVESTIGATION AND DETERMINE WHETHER OR NOT THE
BUSINESS CONTEMPLATED BY THIS AGREEMENT WOULD BE PROFITABLE; LICENSEE
HAS NOT RECEIVED OR RELIED ON ANY REPRESENTATIONS ABOUT THE RIGHTS
HEREIN GRANTED BY COMPANY, OR ITS OFFICERS, DIRECTORS, EMPLOYEES OR
AGENTS, THAT ARE CONTRARY TO THE STATEMENTS MADE ABOVE OR IN THIS
AGREEMENT;
-44-
d. Licensee is duly organized and validly existing in good standing under
the laws of the jurisdiction of its creation and each jurisdiction
included in the License Area, is qualified to do business in all
jurisdictions in which its business activities or the nature of
properties owned by Licensee requires such qualification, and has the
authority to execute, deliver and carry out all of the terms of this
Agreement;
e. all certificates representing Principal Ownership interests of Licensee
now outstanding or hereafter issued will be endorsed with a legend in
form approved by COMPANY reciting that the transfer of Principal
Ownership interests in Licensee is subject to restrictions contained in
this Agreement. A similar legend shall be inserted in all relevant
places of registry of stockholders of Licensee;
f. all Principal Owners of Licensee and their interests therein are
completely and accurately listed in Exhibit E of this Agreement and
that Licensee will execute a revised Exhibit E-1 as may be necessary
during the term of this Agreement to reflect any changes in the
information contained therein.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement on the day and year first above written.
GATEWAY, INC. MICROTEC SISTEMAS IND. X.XXX.
S.A.
By: /s/ Xxx Xxxxx By: /s/ Xxxxxxx St. Laurent
------------------------------ ------------------------------
Title: Senior Vice President Title: President
-45-
EXHIBIT A
TO THE TERRITORIAL RIGHTS AGREEMENT
BY AND BETWEEN GATEWAY, INC.
AND MICROTEC SISTEMAS INC. E COM. S.A.
1. The License Area referred to in Section 2 of the captioned agreement
shall be:
The Country of Brazil, South America, excluding extra-territorial
possessions, commonwealths and territories, if any
GATEWAY, INC. LICENSEE:
By: By:
--------------------------- ----------------------------
Title: Title:
------------------------ -------------------------
EXHIBIT B
TO THE TERRITORIAL RIGHTS AGREEMENT
BY AND BETWEEN GATEWAY, INC.
AND MICROTEC SISTEMAS INC. E COM. S.A.
1. The Marks: See attached Exhibit B-1
2. Patents: See Attached Exhibit B-2
GATEWAY, INC. LICENSEE:
By: By:
--------------------------- ----------------------------
Title: Title:
------------------------ -------------------------
-2-
EXHIBIT C
TO THE TERRITORIAL RIGHTS AGREEMENT
BY AND BETWEEN GATEWAY, INC.
AND MICROTEC SISTEMAS INC. E COM. S.A.
Intentionally deleted.
-3-
EXHIBIT D
TO THE TERRITORIAL RIGHTS AGREEMENT
BY AND BETWEEN GATEWAY, INC.
AND MICROTEC SISTEMAS INC. E COM. S.A.
FEES
1. The Licensed Intellectual Property Royalty Fee shall be:
* of Gross Revenue
2. The Services Fee shall be:
Months 1-12 after the Effective Date: * of Gross Revenue
Months 13-24 after the Effective Date: * of Gross Revenue
Thereafter: * of Gross Revenue
GATEWAY, INC. LICENSEE:
By: By:
--------------------------- ----------------------------
Title: Title:
------------------------ -------------------------
----------
* The confidential portion has been so omitted and filed separately with the
commission.
-4-
EXHIBIT E
TO THE TERRITORIAL RIGHTS AGREEMENT
BY AND BETWEEN GATEWAY, INC.
AND MICROTEC SISTEMAS INC. E COM. S.A.
1. Principal Owners:
----------------
Name: Xxxxxxx X. St. Laurent, III
Address:
----------------------------
Name: Xxxxxxx X. St. Laurent
Address:
----------------------------
GATEWAY, INC. LICENSEE:
By: By:
--------------------------- ----------------------------
Title: Title:
------------------------ -------------------------
EXHIBIT E-1
PRINCIPAL OWNER'S UNDERTAKING
TERRITORIAL RIGHTS AGREEMENT
This Undertaking is made and executed by the undersigned as of the day of ,
2000. As of the date hereof, Principal Owner owns the number of shares of Common
Stock, no par value, (Vitech Common Stock) of Vitech America, Inc., a
corporation ("Vitech") set forth below the Principal Owner's name on the
signature page hereto (all such shares, together with any shares of Vitech
Common Stock or other share of capital stock of Vitech that may hereafter be
acquired by Principal Owner being referred to hereafter as the "Subject
Shares"). Vitech owns all of the issued and outstanding shares of Microtec
Sistemas Ind. E Com.S.A., a corporation formed under the laws of Brazil
("Licensee"). Licensee is the licensee under that certain Territorial Rights
Agreement dated as of , 2000 (the "TRA") with GATEWAY, INC., a Delaware
corporation ("COMPANY"). This Undertaking will be attached thereto. Terms
capitalized herein and not otherwise defined shall be given the meaning ascribed
to them in the TRA.
1. Acknowledgments. PRINCIPAL OWNER acknowledges and agrees that COMPANY
has entered into the TRA on the condition that each Principal Owner
agree to certain restrictions with respect to Confidential Information
(defined below), interests in Competitive Businesses (defined below),
and the transferability of the Subject Shares.
2. Protection of Confidential Information. PRINCIPAL OWNER acknowledges
and agrees that the use or duplication of the Confidential Information
in any other business would be detrimental to COMPANY and Licensee and
would constitute an unfair method of competition with COMPANY and its
licensees. PRINCIPAL OWNER acknowledges and agrees that the
Confidential Information is a valuable asset of COMPANY, is
proprietary, includes trade secrets of COMPANY and will be disclosed to
Licensee solely on the condition that PRINCIPAL OWNER agrees, and
PRINCIPAL OWNER hereby does agree, that PRINCIPAL OWNER: (1) will not
use the Confidential Information in any other business or capacity; (2)
will maintain the absolute confidentiality of the Confidential
Information; (3) will not make unauthorized copies of any portion of
the Confidential Information disclosed in written or other tangible
form; and (4) will follow all reasonable procedures prescribed from
time to time by COMPANY and Licensee to prevent unauthorized use or
disclosure of or access to the Confidential Information.
Notwithstanding the foregoing, nothing herein shall prevent PRINCIPAL
OWNER from continuing to use, after termination of this Agreement, any
portion of the Confidential Information that has become generally known
or easily accessible, other than by a breach of any obligation of
confidentiality to COMPANY or Licensee.
-2-
3. Restrictive Covenant During the Term of the TRA. PRINCIPAL OWNER
acknowledges and agrees that COMPANY would be unable to protect the
Confidential Information against unauthorized use or disclosure and
would be unable to encourage a free exchange of ideas and information
among its Licensees if persons or entities authorized to use the
Confidential Information were permitted to engage in, hold interests in
(other than passive interests) or perform services for a Competitive
Business. Except as expressly permitted in the TRA, PRINCIPAL OWNER
agrees that during the term of the TRA and so long as PRINCIPAL OWNER
is either a Principal Owner, employee, officer or director of Licensee,
PRINCIPAL OWNER shall not directly or indirectly:
a. have any interest as a disclosed or beneficial owner in any
Competitive Business (this restriction shall not be applicable
to the ownership of shares of a class of securities listed on
the stock exchange or traded on the over-the-counter market
that represents less than three percent (3%) of the number of
shares of that class of securities issued and outstanding);
b. perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for any
Competitive Business; or
c. employ or seek to employ any person who is employed by
COMPANY, its Affiliates or by any other licensee of Company,
nor induce nor attempt to induce any such person to leave said
employment without the prior written consent of such person's
employer.
Nothing in this Undertaking shall preclude PRINCIPAL OWNER from
acquiring ownership of shares in a business, which is not a Competitive
Business.
4. Restrictions on Transfer: Principal Owner hereby covenants and agrees
that, during the term of the TRA, Principal Owner will not, directly or
indirectly, except pursuant to agreements existing as of the date of
this Undertaking (including, but not limited to that certain Voting
Agreement dated September 16, 1999), , sell, contract to sell, pledge,
grant any option to purchase or otherwise transfer any of the Subject
Shares to any party other than COMPANYwithout the prior written consent
of COMPANY in each instance; provided, however, that the number of
Subject Shares beneficially held by all of the Principal Owners and the
COMPANY (the "Aggregate Subject Shares") can be reduced through the
transactions described above as long as (1) the sum of the Aggregate
Subject Shares outstanding always exceeds 50% of the total number of
shares of capital stock of Vitech outstanding, and (2) the sum of the
Aggregate Subject Shares outstanding on a fully-diluted basis
(including the number of shares of capital stock which could be
obtained through the exercise or conversion of all rights, options and
convertible securities that are outstanding or exercisable) always
exceeds 50% of the total number of shares of capital stock of Vitech
outstanding on a fully-diluted basis (including the number of shares of
capital stock which could be obtained through the exercise or
conversion of all rights, options and
-3-
convertible securities issued by Vitech that are outstanding or
exercisable). Any transfer of Subject Shares that requires the consent
of COMPANY, or any transfer of Subject Shares occurring upon or as a
result of, the death or incapacity of the Principal Owner, shall be
subject to the following terms and conditions:
a. The proposed transferee and its principal owners must be of
good moral character and otherwise meet COMPANY's then
applicable standards and if the proposed transferee, its
principal owners, or its affiliates have any other agreements
with COMPANY, they must be in full compliance with any such
agreements and comply with subparagraph (e) below;
b. The transferee's name and relevant information shall be added
to Exhibit E to the TRA and the transferee shall immediately
be bound by all provisions of the TRA to Principal Owners;
c. the transferee must have sufficient business experience,
aptitude, and financial resources to perform the transferring
Principal Owner's obligations under this Agreement and neither
transferee nor its principal owners may be engaged in or
intend to engage in a Competitive Business;
d. all obligations of the Principal Owner incurred in connection
with the TRA shall be assumed by the transferee, in a manner
reasonably satisfactory to COMPANY, and the transferee must
execute a Principal Owner's Undertaking in the form attached
hereto;
e. Licensee and the transferee (if it is then a Licensee of
COMPANY) shall have paid all amounts then due and owing to
COMPANY or its Affiliates that are then due and unpaid;
f. COMPANY must approve the material terms and conditions of such
transfer, including, without limitation, that, in COMPANY's
reasonable opinion, the price and terms of payment are not so
burdensome as to adversely affect COMPANY's rights and
interests under this Undertaking or the TRA;
g. if the transferring Principal Owner finances any part of the
sale price of the transferred interest, the transferring
Principal Owner must agree, in a manner reasonably
satisfactory to COMPANY, that all obligations of the
transferee under or pursuant to any promissory notes,
agreements or security interests reserved by the transferring
Principal Owner in the assets of Licensee and transferee shall
be subordinate to the obligations of the transferee to pay all
amounts due to COMPANY and its Affiliates pursuant to this
Agreement, and otherwise to comply with this Agreement; and
h. the transfer must be made in compliance with all applicable
laws.
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COMPANY's consent to a transfer of Subject Shares shall not constitute a waiver
of any claims it may have against Licensee (or its Principal Owners), nor shall
it be deemed a waiver of COMPANY's right to demand exact compliance with any of
the terms or conditions of this Agreement by the transferee.
8. Definitions. All capitalized terms used but not defined herein shall
have the meanings ascribed to them in the TRA.
9. Surrender of Documents. PRINCIPAL OWNER agrees that, as of the
effective date on which PRINCIPAL OWNER ceases to be a Principal Owner
of Licensee, PRINCIPAL OWNER shall immediately cease to use the
Confidential Information disclosed to or otherwise learned or acquired
by PRINCIPAL OWNER, and will promptly return to Licensee (or COMPANY if
directed by COMPANY) all copies of the Confidential Information loaned
or made available to PRINCIPAL OWNER.
10. Benefit. This Agreement is executed for the expressed benefit of
COMPANY and Licensee and shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns.
11. Interpretation and Enforcement. PRINCIPAL OWNER agrees and acknowledges
that the interpretation and enforcement of this Undertaking shall be
governed by the provisions of Sections 15 and 16 the TRA.
12. Limitation of Liability. Notwithstanding anything in this Undertaking
to the contrary, the Principal Owner shall have no personal liability
hereunder beyond the Principal Owner's equity interests in the
Licensee.
IN WITNESS WHEREOF, the parties have executed this Principal Owner's Undertaking
as of the day and year first above written.
Signature of PRINCIPAL OWNER:
-----------------------------
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Name:
---------------------------
Number of Shares of Vitech Common
Stock owned of record as of the date
of the Undertaking:
--------------------------------
GATEWAY, INC.
By:
-------------------------------
Title:
----------------------------
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