EXHIBIT 10.26
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into as of the 11th day of March
1998, by and between IRVINE SENSORS CORPORATION, a Delaware Corporation (the
"Company"), and ADVANCED TECHNOLOGY PRODUCTS, LLC, a California limited
liability company ("ATP"), with reference to the following facts:
A. The Company is the owner of certain intellectual property rights
(the "Technology") to two high technology products, the Real Time
Vector Image Processor ("VIP-20") and Electronic Film ("E-Film"). The
Technology is described in Exhibit A annexed hereto.
B. ATP desires to obtain the Technology for $400,000 and to license
the Technology back to the Company to develop the VIP-20 and E-Film
into commercially marketable products.
C. The parties desire to enter into this Agreement to define their
future rights to the Technology.
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto do hereby agree as
follows:
1. Purchase of Technology. ATP hereby agrees to purchase the Technology
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from the Company for the sum of Four Hundred Thousand Dollars ($400,000). The
parties shall use their best efforts to consummate the sale of the Technology by
December 31, 1997.
2. License. ATP hereby grants to the Company and the Company accepts a
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transferable, exclusive, worldwide license to use the Technology for the purpose
of developing and manufacturing products utilizing the Technology ("Licensed
Products"), to enter into and perform contracts that utilize the Technology with
any party, and to use, sell or otherwise dispose of Licensed Products in all
countries of the world.
3. Product Development Funding. ATP shall have the right, but not the
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obligation, to fund the research and development and manufacturing and marketing
activities to be carried out by the Company, in an amount not to exceed
$1,100,000. If ATP commences to fund such activities it shall have the right to
suspend such funding in its sole discretion.
4. Royalties.
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4.1 In consideration of the license granted in section 2 hereof and
its commitment to fund certain activities relating to the Products pursuant to
Section 3 hereof, the Company agrees that its direct sales of Licensed Products
covered by one or more claims of any of the patents or Technology listed in
Exhibit A shall be subject to royalty payments on the Gross Selling Price
thereof (as hereinafter defined). Such royalty shall be paid at the following
rates, subject to the election of investors in ATP's offering of limited
liability company interests (the "Offering"):
a. Royalty Program "A". For investors electing the Share redemption
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option provided for in Section 5.2 by January 31, 1998, royalties will be paid
at the rate of 1.0% of the Gross Selling Price of Licensed Products per $100,000
contributed by ATP to the Company on behalf of such investors pursuant to
Sections 1 and 3 hereof, up to a maximum royalty of 15% (for example, if ATP
investors selecting Royalty Program "A" contribute $400,000 to acquire the
Technology and an additional $600,000 pursuant to Section 3, then the royalty
shall be 10%).
b. Royalty Program "B". For investors not electing the Share
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redemption option provided for in Section 5.2, royalties will be paid at the
following rates for each $100,000 contributed by ATP on behalf of such investors
to the Company pursuant to Sections 1 and 3 hereof: (i) 1% of the Gross Selling
Price of Licensed Products for each $100,000 invested in the Company until
distributions equal $300,000 per $100,000 invested, thereafter (ii) 1/3% of the
Gross Selling Price of Licensed Products for each $100,000 invested in the
Company until distributions equal $1,000,000 per $100,000 invested, thereafter
(iii) 1/10% of the Gross Selling Price of Licensed Products for each $100,000
invested in the Company for the life of the Licensed Products.
4.2 The expression "Gross Selling Price" shall for the purpose of this
Agreement mean the invoice price for Licensed Products sold by the Company
during the term of this Agreement, such price not to include normal discounts
actually granted, insurance fees and packing and transportation charges as
invoiced separately to customers, and duties and sales taxes actually incurred
and paid by the Company in connection with delivery of such Licensed Products.
4.3 Within thirty (30) days after the close of each fiscal quarter of the
Company of each year during which this Agreement shall be in force, the Company
hereby undertakes to submit to ATP a statement in writing duly certified by an
officer of the Company, setting forth with respect to the Company for the
quarterly period concerned:
a) the Gross Selling Price of royalty-bearing Licensed Products sold by
the Company;
b) the royalties and other license fees received by the Company from
its sublicensees; and
c) the royalty accrued to ATP.
Payment of the above-described royalties shall be made within thirty (30) days
after the end of each fiscal quarter of the Company.
5. Reversion of Technology to the Company/Share Redemption Provision
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5.1 At such time as the Company has paid to ATP 315% of the gross capital
contributions contributed by ATP to the Company all of ATP's right, title and
interest in and to the Technology shall forthwith be transferred to the Company,
without any further action on the part of ATP or the Company. This Agreement
shall not terminate, however, and the Company's obligation to pay royalties to
ATP pursuant to Section 4.1 shall continue if there were any investors in the
Offering electing Royalty Program "B." If there were none then this Agreement
shall thereupon terminate.
5.2 Each ATP investor electing Royalty Program "A" as set forth in Section
4.1 above shall have the right to cause the Company to redeem such contributions
by giving notice to ATP within five years after such contribution date, but
prior to such investor receiving an amount of distributions equal to 100% of
said capital contributions. Such redemption shall be in the form of restricted
shares of common stock of ISC to be issued at
the greater of: (a) the discounted rate of 20% less than the market price of
the Company's common stock at the time of redemption, or (b) $1.00 per share,
for each dollar invested. Notwithstanding the foregoing, if such shares of
common stock of ISC issued pursuant to this redemption provision are
"registered" and "free trading" then they shall be issued at the market price of
the Company with no discount. (For example, if the Company's common stock were
trading at $2.00 per share at the time of redemption then the conversion price,
assuming the shares to be issued were "restricted" and not "free trading," would
be $1.60 per share; however, if the common stock were trading at $.875 at the
time of redemption, then the conversion price would be $1.00). Such redemption
provision shall automatically be triggered if any termination event pursuant to
section 8.1(b) herein shall occur. Any such capital contributions redeemed
pursuant to this section shall reduce, dollar for dollar, the amount of the
Company's obligation set forth in section 5.1 herein.
6. Term of Agreement.
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6.1 Unless terminated earlier in accordance with the provisions of section
5 or section 9 hereof, this Agreement shall continue in force and effect until
June 30, 2025.
6.2 In the event that this Agreement is terminated in accordance with
section 9 hereof, all rights of the Company under this Agreement shall
terminate, but the accrued obligations of the Company set forth in section 2
shall continue.
7. Warranties of ATP and the Company.
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7.1 ATP represents and warrants to the Company that it has legal power to
enter into this Agreement and to extend the rights granted to the Company in
this Agreement, that subject to payment of the purchase price as set forth in
section 1 hereof, it owns the Technology and has the right to transfer the same
to the Company, and that it has not made any commitments to others inconsistent
with or in derogation of such rights. ATP makes no representations, extends no
warranty of any kind, either expressed or implied, and assumes no
responsibilities whatever with respect to the adequacy, accuracy or utility of
any information obtained by the Company under this Agreement; and ATP assumes no
responsibilities whatever with respect to use by the Company or any third party
of any information obtained by the Company under this Agreement or with respect
to any use, sale or other disposition by the Company or its vendees or other
transferees of any Licensed Products.
7.2 The Company represents and warrants to ATP that it will use its best
efforts to perform all reasonable and customary research and development
activities necessary to bring the Products to market. The Company further
represents and warrants to ATP that it will use its best efforts to manufacture
and market the Products either directly or through third parties.
7.3 The Company represents and warrants to ATP that it is not presently
subject to an material pending or threatened litigation that could affect its
ability to perform under this Agreement.
7.4 Nothing contained in this Agreement shall be construed as a warranty
or representation that the Company will be able to successfully manufacture,
sell or use any Licensed Products or that the manufacture, sale, use or other
disposition of Licensed Products hereunder will be free from infringement of
patents, utility models, copyrights, trademarks and/or design patents of third
parties.
8. Sublicenses.
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8.1 The Company shall have the right, throughout the term of this
Agreement, to enter into sublicense agreements with third parties for the use of
the Technology. The Company agrees to negotiate all such sublicense agreements
at arms/ length and in good faith, so as to maximize the return to it under each
such sublicense agreement, and, in turn, the return to ATP under this Agreement.
8.2 In the event of the valid termination of the Company's license under
this Agreement for any reason, any existing sublicensee shall have the option
for 90 days from the date of notice of termination by ATP to covert to a direct
license from ATP on comparable terms as contained herein, as nearly as may be
practicable.
8.3 The Company agrees to give ATP (i) notice of any agreement in
principle to enter into any such sublicense, within 10 days of the date of said
agreement, and (ii) a copy of the fully executed agreement promptly upon
execution thereof.
8.4 ATP shall give notice promptly to every sublicensee of any notice of
default sent to the Company hereunder, to enable such sublicensee to utilize the
option provided for in section 8.2. above.
9. Termination.
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9.1 Notwithstanding the provisions of section 4 hereof, this Agreement
may be terminated:
a) by ATP giving notice by registered mail or telegram to the Company in
the event of the Company being in breach of or in default under any duty or
obligation of this Agreement and the Company having failed to remedy such breach
or default within thirty (30) days of ATP having served written notice to remedy
such breach or default, with the date of service deemed to be the date of
mailing or the date of the telegram; or
b) by ATP upon written or telegraphic notice to the Company in the event
of (i) the bankruptcy of ISC, (ii) cessation of operations by ISC, (iii) the
seizure or attachment of all or a substantial part of ISC's assets, or (iv) the
termination of ISC's research and development or manufacturing and marketing
activities relating to the Products. In any of the foregoing events ATP shall
also have the right to elect to not terminate this Agreement, but to treat the
Company as a non-exclusive licensee and ATP will be entitled to contract with
other third parties to further develop and market the Products.
9.2 In the event that a dispute shall arise as to the validity of any
notice of default sent by ATP to the Company hereunder, the parties agree to
submit the same to arbitration in Orange County, California, in accordance with
the then current rules of the American Arbitration Association.
10. Waiver/Severability.
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10.1 The waiver by either party of a breach or default in any of the
provisions of this Agreement by the other party shall not be construed as a
waiver by such party of any succeeding breach of the same or other provisions
nor shall any delay or omission on the part of either party to exercise or avail
itself of any right, power or privilege that it has or may have hereunder
operate as a waiver of any right, power or privilege by such party.
10.2 If any term, clause or provision of this Agreement shall be judged
to be invalid, the validity of any other term, clause or provision shall not be
thereby affected and such invalid term, clause or provision shall be deemed
deleted from this Agreement.
11. Applicable Law. This Agreement shall be governed by and construed, and
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any claim or controversy arising with respect thereto shall be determined, in
accordance with the laws and in the competent courts of the State of California.
12. Miscellaneous.
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12.1 This Agreement embodies the entire understanding of the parties as
it relates to their respective rights in and to the Technology, and this
Agreement supersedes any prior agreement or understanding between the parties
with respect to such subject matter. No amendment or modification of this
Agreement shall be valid or binding upon the parties unless signed by their
respective, duly authorized, officers.
12.2 Nothing contained in this Agreement shall be construed as conferring
by implication, estoppel or otherwise upon either party hereunder any license or
other right expect the licenses and rights expressly granted hereunder to a
party hereto.
12.3 This Agreement cannot be assigned by any party without the written
consent of the other party hereto and should any assignment be made by the one
party without the written consent of the other party such assignment will be
null and void.
12.4 Any notice or statement hereunder shall be deemed to be sufficiently
given or rendered when sent by registered mail, postage prepaid, and if given or
rendered to ATP, addressed to:
Advanced Technology Products, LLC
0000 Xxxxxxx Xxxxxx
Xxxxxxxx XXX, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxx
or, if given or rendered to the Company, addressed to:
Irvine Sensors Corporation
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxx, President
or in any case to such changed address or person as ATP or the Company shall
have specified to the other by written notice.
IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be signed
as of the date first above written.
IRVINE SENSORS CORPORATION
a Delaware corporation
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx, President
ADVANCED TECHNOLOGY PRODUCTS, LLC
a California limited liability company
By: /s/ Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, Managing Member
EXHIBIT A TO LICENSE AGREEMENT
For purposes of establishing the Company's rights, "Technology" shall be defined
as any and all technology conceived and/or developed by the Company for the
Products defined as "VIP-20" and "Electronic Film" in ATP's Private Placement
Memorandum dated August 1, 1997, including any technology covered by any of the
U.S. Patents secured by the Company through applications made on behalf of the
Products.
