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ROYALTY AGREEMENT
XXXXX-XXXXX PARTNERSHIP
AND
CASINOVATIONS INCORPORATED
1. Parties
1.1 This Agreement is made by and between:
(a) Xxxxx-Xxxxx Partnership, a Nevada general partnership, having
partners Xxxxx X. Xxxxx and Xxxxxx X. Xxxxx, whose business address is 000
Xxxxxxxxx Xxxxxx Xxxxxxxxx, XX 00000, hereinafter referred to as "Assignor";
and
(b) Casinovations Incorporated, a Washington Corporation whose
address is 0000 X 00xx Xxx, Xxxxx 000, Xxxxxxx, XX 00000, hereinafter
referred to as "Assignee".
2. Background
2.1 Assignor has developed improved technology directed to gaming
methods and apparatus and devoted substantial time, effort and money to that
development.
2.2 Assignee is engaged in the development and distribution of equipment
in the gaming industry.
2.3 Pursuant to a Funding Agreement dated January 15, 1996, Assignor has
transferred, conveyed and assigned to Sharps International Limited
partnership all of the right, title and interest to all of Assignor's various
intellectual properties associated with the gaming in industry, Said
intellectual properties have previously been licensed to Sharps International
Limited Partnership, Assignee's predecessor, by an Exclusive License
Agreement dated June 6, 1994.
2.4 Additionally, pursuant to aforementioned Funding Agreement, a
reorganization of Sharps International Limited Partnership has taken place
and Casinovations Incorporated, Assignee, has succeeded to and assumed all of
the assets and liabilities of Sharps.
2.5 Additionally, pursuant to aforementioned Funding Agreement, an
agreement exists for Sharps International Limited Partnership, now assumed by
Assignee, to pay Assignor royalties generated from revenues received by
Assignee on certain Intellectual properties
2.6 In consideration of the premises, covenants and agreements contained
herein and intending to be legally bound hereby, the parties hereto have
agreed to the terms and conditions provided in this Agreement.
3. Definitions
3.1 Assignee is the owner of all right, title, and inventions described
in:
(a) U.S. Patent No. 5,403,015 issued on April 4, 1995, entitled
"Cards and Methods for Playing Casino 21 or Black-xxxx".
(b) U.S. Patent Application Serial No. 08/353,526; filed
December 8, 1994, entitled "Cards and Methods for Playing Blackjack".
(c) U.S. Design Patent No. Des 366,503 issued on January 23,
1996. entitled "Blackjack Card Deck".
(d) U.S. Patent Application Serial No. 08/228,609; filed April
18, 1944, entitled "Playing Card Shuffling Machines and Methods".
(e) U.S. Patent Application Serial No. 08/423,408, filed April
18, 1995. entitled "Playing Card Shuffling Machines and Methods",
(f) PCT Patent Application Serial No. PCT/US95/04713; filed
April 18, 1995, entitled "Playing Card Shuffling Machines and Methods".
(g) U.S. Patent Application Serial No. 08/242,229-3 filed May
13, 1994, entitled "Blackjack Game System and Methods"
(h) U.S. Patent Application Serial No. 08/439,687, filed May
12, 1995. entitled "Black-xxxx Game System and Methods" .
(i) PCT Patent Application Serial No, PCT/US95/06064, filed May
12, 1995, entitled "Blackjack Game System and Methods".
(j) PCT Patent Application Serial No. PCT/US95/12908; filed
October 13, 1995, entitled "Blackjack Game System and Methods".
3.2 The inventions, Initial Products, so described will be referred to
herein, as the "Product(s)". Products also include any inventions included
in any application filed on technology derived from above described
inventions, however, said Products are hear defined for the purposes of this
Agreement as follows, the "Safety Peek Cards", the "Random Ejection Shuffler"
(including future improvements thereto and variations thereto and the table
game version of "Fantasy 21 (but not any computer, home version or other
variation thereof Product Trademarks at the time of execution include:
Sharps, Sharps International Random Ejection Shuffler, Fantasy 21.
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4. Funding Agreement
Incorporated herein by reference as Exhibit 'A' is a Funding
Agreement dated January 15, 1996 by and among Xxxxxxx X. Xxxxx, an
individual, Sharps International Limited Partnership, a Nevada limited
partnership, Xxxxx X. Xxxxx, an individual, Xxxxxx X. Xxxxx, an individual,
Xxxxx-Xxxxx, a Nevada general partnership, and Xxxxxx X. Xxxxx, an
individual, which sets forth some of the terms and conditions of this Royalty
Agreement.
5. Exclusive License Agreement
Incorporated herein by reference as Exhibit "B" is an Exclusive
License Agreement dated June 6, 1994 by and between Xxxxx-Xxxxx Partnership,
a Nevada general partnership, and Sharps International Limited Partnership, a
Nevada Limited Partnership, now assumed by Assignee, which sets forth the
terms and conditions of this Royalty Agreement not otherwise stated herein.
6. Royalties for Products
Assignor shall receive from Assignee (a) a quarterly royalty fee of
3% of the "Net Revenues" (as defined below) earned by Assignee with respect
to the Products, and (b) an option to purchase from Assignee 40,000 shares of
Assignee's Common Stock at a price of $1.00 per share. Royalties owed
in a give period shall not be a credit toward any royalties owed for a past
for future royalty period. The term "Net Revenues" means gross cash revenues
received by Assignee for the relevant quarter attributable to the Products,
minus Assignees' cost of such goods sold for such quarter. Unless otherwise
agreed, the determination of the cost of goods sold shall be made in
accordance with generally accepted accounting principles, consistently
applied.
6.1 Royalties on Leased Products. If Assignee leases Product instead
of selling or having others sell on their behalf or if lease of Product
otherwise occurs under this Agreement, the, Assignee shall be obligated to
pay royalties as described hereinabove on the same terms as if the lease
payments are considered to be Net Revenues on sold Products as specified
herein. Such treatment of leasing for determination of royalties shall not
apply where a third party pays Assignee and Acts as a financial leasing
agent, or where Assignee actually receives payments on a basis other than the
actual lease payments. In such cases royalties are determined based on the
amount and timing of payments received by Assignee and not those received by
any financing and leasing organization.
6.2 Assignee shall be entitled to a deduction for the amount of
royalties otherwise payable or paid for:
(a) Product sold rendered by Assignee under the Agreement but for which
full credit is granted to a customer due to defect in the Product and
(b) Products that are lost or damaged in transit and for which Assignor
is not reimbursed by insurance payments or otherwise.
6.3 Royalties and any other payments owed under this Agreement will be
paid four times a year unless specified Otherwise herein. Payment will be
made by January 31 for amounts, owed which accrued during the previous
period, including October, November and December (last quarter). Payment
will be made April 30 for amounts owed which accrued during the previous
period including January, February and March (first quarter). Payment will
be made by July 31 for amounts owed which accrued during the previous period
including April, May and June (second quarter). Payment will be made by
October 31 for amounts owed which accrued during the previous period
including July, August and September (third quarter)
6.4 All monetary amounts specified in this Agreement are in United
States Dollars.
6.5 Assignee bears all risk of exchange rate changes with any invoices
made in foreign currencies considered converted at the average of buy and
sell rates specified in the Wall Street Journal for the invoiced date.
6.6 All payments by Assignee hereunder shall be made to Assignor at
Assignor's address indicated herein, or at such place as shall be designated
by Assignor from time to time.
6.7 Any royalties, payments or other compensation not paid by the due
date shall bear interest at the rate of one and one-half (1 1/2%) per month
or any part of any month overdue, unless a smaller rate applies by law in
which case the legal rate nearest thereto shall apply.
6.8 The royal obligation under part 6 above shall apply to Net Revenues
earned by Assignee in the U.S. and
all foreign countries.
6.9 Assignee is only obligated to pay royalties as provided for in parts
6-6.8 so long as any Patent on Product remains unexpired or so long as any
Trademark or Copyright on Products is still in use. If no Patent on Products
issues, then royalties shall be paid for seventeen (17) years from the filing
date of the last filed Patent on Products for so long as any Trademark or
Copyrights on Products is still in use.
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7. Licensing
7.1 Assignee shall notify Assignor of any license granted hereunder.
7.2 If Assignee grants any license hereunder from which Assignee
receives monetary or other remuneration or value, the Assignee shall report
such grant of licensed rights and 3% of all value shall be paid to
Assignor, so long as any such revenues are being received by Assignee.
8. Improvements and Developments in Products
8.1 Improvements by Assignee - Improvements, enhancements and additional
inventions relating to the Products by employees of Assignee (hereinafter
"Assignee Improvements"), shall be disclosed to Assignor within one (1) month
of discovery.
8.2 Improvements by Licensees or Sublicensees - Improvements,
enhancements and additional inventions relating to the Products by employees
of any licenses or sublicensees (hereinafter "Licensee Improvements"), shall
be governed by the license under which the licensee or sublicensee is
licensed. Licensees must agree to disclose all such Licensee Improvements to
Assignee within one (1) month of discovery. Assignee agrees to disclose any
such Licensee Improvements to Assignor within one (1) month of disclosure by
a Licensee to Assignee.
9. Employee Invention Agreements
Assignee agrees that all employees, agents and consultants given
access to the Products shall sign a confidentiality agreement and invention
assignment agreement whereby any improvements, enhancements and new
inventions relating to the Products are required to be disclosed and assigned
to the Assignee.
10. Reports and Accounting
10.1 Reports - Assignee shall provide to Assignor quarter-yearly reports
indicating the total quantity of Product sold, rented, or leased by Assignee,
any licensees, sublicensees, or others who have been authorized by Assignee
or Assignee's licensees. Such reports shall indicate the total number of
such Product categorized by each organization and the total value of the Net
Revenue associated with the total number of such Product. The reports shall
further indicate the royalties and any other payments owed by Assignee. The
reports shall be made to Assignor by the same due date as any royalty
payments which are due or would be due. Reports shall be made even if no
royalties are believed owed.
10.2 Accounting - Assignor shall have the right to inspect the records
of Assignee and all licensees and sublicensees which are relevant to indicate
the amount of royalties or other compensation owed to paid in connection with
this Agreement. Assignor shall also have the right to inspect the records
of Assignee and all licensees and sublicensees which are relevant to the
quantity of Product produced by or for Assignee and all licenses. The
rights to inspect indicated herein include the right to have an audit
conducted by an appropriate auditing or accounting firm. If an audit
indicates that an amount in excess of Five Thousand Dollars is owed to
Assignor which should have been previously paid under the provisions of the
Agreement, then the cost of the audit shall be fully paid by Assignee, the
licensee or the sublicensee who owes such amount Assignee agrees that
aforementioned rights for inspection and audit by Assignor or Assignee will
be included in any licensing agreement Assignee may enter into regarding
Product.
11. Assignment of Rights and Obligations
11.1 Because of the nature of rights and obligations granted hereunder,
neither Assignor nor Assignee can assign any rights or obligations under this
Agreement unless the proposing assignor has received written authorization
from the other party.
11.2 In the event Assignee finds a bonafide and unrelated third party
purchaser willing to purchase the Product rights at fair market value, then
Assignee is empowered to terminate all rights of Assignor hereunder and to
sell the Product rights to such third party purchaser. In such an event
Assignee shall receive 97% of the proceeds from such sale, and Assignor will
receive 3% of proceeds from such sale.
12. Liability Risk
12.1 Assignee agrees to assume all risk of legal liability which may
arise from Assignee's activities, including without limitation, providing
services, leasing, licensing, designing, manufacturing, transporting,
distributing and selling Products licensed under this Agreement. Assignee
further warrants and agrees to hold harmless, defend and indemnify Assignor
against claims arising from Assignee's activities.
13. Best Efforts and Diligence
13.1 Assignee shall use its best efforts to diligently market Products.
A determination of best efforts and diligence under this part may consider
various relevant factors.
14. Warranties of Assignor
14.1 Assignor makes only the warranties expressly made below
(a) Assignor has no information indicating that the subject matter of
the Product patents infringes any U.S. or foreign patents
(b) Licensor makes no other warranties.
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15. Disclaimer of Warranties by Assignor
15.1 Assignor hereby disclaims all warranties not expressly made
herein and further specifically disclaims as set forth below.
(a) No warranty or representation is made that practice of the
Products by Assignee or its licensees or sublicensees as allowed under this
Agreement will not infringe upon patent or trademark rights of a third party.
(b) No warranty or representation is made that additional patent
protection will necessarily be obtained on the Products.
(c) No warranty is made to indemnify Assignee for any claims arising
from Assignee's activities under this Agreement.
16. Enforcement of Patent Rights
Assignee shall be primarily responsible for enforcing any U.S. patents
against infringers thereof. Assignee shall not be obligated to institute
legal proceedings for infringement. If Assignee refuses to institute legal
action, than Assignor may at its election xxx for infringement or other
cause. Any recovery under such legal actions shall be first used to pay
attorney fees, court costs and all other litigation expenses, and second be
used to pay Assignor for any payments which are due under this Agreement.
The remainder shall be divided between the parties based upon their relative
payment of the total litigation costs. Assignor agrees to allow Assignee to
take legal action solely in Assignee's name and to additionally include or
join Assignor as a party, if necessary.
17. Notification of Infringement
Assignor and Assignee both agree to notify the other within ten (10)
days of any infringement of Product by third parties.
18. Interchange of Technical and Market Information
Assignor and Assignee agree to interchange all technical and market
information which relates to the Product in the marketing, manufacture, sale,
distribution, design, production and other aspects of development,
manufacture and marketing of the Product.
19. Termination by Assignee
19.1 Assignee shall have the right to terminate this Agreement only as
provided for in part 11.2 of this Agreement.
20. Effect of Termination by Assignee
Assignee's obligation to make payments under this Agreement shall end
after termination except with respect to future sales or other events for
which payments are still owed at or after the time of termination.
21. Modification of Agreement
No modification of this Agreement shall be valid or binding unless the
modification is executed in writing signed by all parties to this Agreement.
22. No Waiver
No waiver by either party of a breach or a default hereunder shall be
deemed a waiver by such party of a subsequent breach or default of a like or
similar nature.
23. Severability
In the event that any term or provision of this Agreement shall for
any reason be held to be invalid, illegal, or unenforceable in any respect,
such invalidity, illegality, or unenforceability shall not affect any other
term or provision of this Agreement and shall be interpreted and construed as
if such term or provision, to the extent the same shall have been held to be
invalid, illegal, or unenforceable, had never been contained herein.
This Agreement shall be construed and governed in accordance with the laws of
the State of Washington.
24. Applicable Law
This Agreement shall be construed and governed in accordance with the laws of
the State of Washington.
25. Headings
The headings, titles and subtitles in this Agreement are inserted for
convenience of reference only, and do not limit the terms and provisions of
this Agreement.
26. Notices
All notices required to be sent to either party shall be in writing and sent
by registered or certified mail, postage prepaid, return receipt requested,
or by telex or telegram, charges prepaid to the parties at the addresses
given hereinabove, or such future addresses as the parties shall designate
in writing. Notices can also be communicated by fax but are not considered
effective unless the party being notified confirms receipt of the fax in
writing or by a return fax indicating receipt of the notice previously sent
by fax. Payments can be sent by first class mail.
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27. Relationship of the Parties
This Agreement does not create a partnership or joint venture between the
parties and the Assignee shall have no power to obligate or bind the Assignor
in any manner whatsoever, except as may be specifically expressed in this
Agreement.
28 Attorney's Fees
If either of the parties to this Agreement institute arbitration or legal
proceedings to enforce the terms of this Agreement, the parties agree that
the unsuccessful party to such arbitration or legal proceedings shall pay the
reasonable attorney's fees and legal costs of both parties, as the same may
be approved by the arbitrator or court having jurisdiction over such
proceedings.
29. Integration, Entire Agreement
This instrument constitutes the entire agreement between the parties.
Neither party shall be bound by any terms, conditions, understandings,
warranties, statements or representations, oral or written, not contained in
this Agreement. Both parties hereby acknowledge that the execution of
this Agreement was not induced or motivated by any promise or representation
made by any other party, other than the promises and representations
expressly set forth in this Agreement. All previous negotiations,
statements, and preliminary instruments by the parties or their
representatives are merged into this Agreement, except as expressly provided
herein.
30. Counterpart Original Agreements
This Agreement shall be executed in multiple original counterparts
with each party retaining one copy thereof.
31. Effective Date of Agreement and Term of Agreement
31.1 The effective date of this Agreement is April 1, 1996.
31.2 This Agreement shall terminate when terminated by Assignee as
provided in this Agreement. If Assignee does not terminate this
Agreement as provided herein, then appropriate provisions of this Agreement
shall be applied until complete cessation of all use of the Product
Trademarks, Product Copyrights, and Product by Assignee, any licensee or
sublicensee, or until no further payments are due hereunder, whichever is
longer.
32. Arbitration
32.1 Any controversy or claim arising out of or relating to this
Agreement or the breach of any representation, warranty, covenant or
agreement contained herein, shall be decided by arbitration in accordance
with the Commercial Arbitration Rules ("C.A.R.") of the American Arbitration
Association ("A.A.A.") then obtaining, unless the parties otherwise, mutually
agree in writing. The dispute shall be decided by a panel of three
arbitrators (each an "Arbitrator" and collectively, the "Arbitrators") one
arbitrator chosen by each of the Assignor and Assignee, and the third by the
two selected arbitrators in accordance with C.A.R. and A.A.A. The decision
and the award of damages tendered by a majority of the Arbitrators shall be
final and binding and judgment may be entered upon it in any court having
jurisdiction thereof .
32.2 The arbitration shall be held as promptly as practicable after
actual receipt of notice that the other party has filed a notice for
arbitration with the A.A.A. (the "Notice") on such a date, and at such a
place and time convenient to the parties and to the Arbitrators, except that
if the parties cannot agree, the Arbitrators shall decide such date, place
and time. The Arbitrators shall make their decision promptly and any award
of damages shall be made, unless otherwise mutually agreed by the parties in
writing, no later than fifteen (15) days from the date of closing of the
hearings or if oral hearings have been waived, from the date of transmitting
the final statements and proofs to the Arbitrators.
IN WITNESS OF. the parties hereto have caused this Agreement to be duty
executed as of the day and year first above written.
CASINOVATIONS INCORPORATED
By: Xxxxx X. Xxxxx, President 6/15/96
Xxxxx-Xxxxx Partnership, a Nevada general partnership
By: Xxxxx X. Xxxxx, Partner 6/15/96
By: Xxxxxx X. Xxxxx, Partner 9/12/96
