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Exhibit 10.1
LICENSE AGREEMENT
This License Agreement made as of the 1st day of September, 1993.
Between:
AIFE, AMERICAN INSTITUTE OF FORMATION EVALUATION LTD., a body
corporate, incorporated under the laws of the Province of
Alberta, Canada (hereinafter referred to as the "Grantor")
OF THE FIRST PART
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AIFE, AMERICAN INSTITUTE OF FORMATION EVALUATION CO., a body
corporate, incorporated under the laws of the State of Colorado,
of the United States of America (hereinafter referred to as the
"Licensee")
OF THE SECOND PART
WHEREAS the Grantor is the owner of the Licensed Products as
hereinafter defined and has agreed to grant a non-exclusive limited License for
the use of such Licensed Products for the Licensed Period and subject to the
terms and conditions hereinafter contained.
NOW THEREFORE THIS LICENSE WITNESSETH that in consideration of
the foregoing and the payment by the Licensee to the Grantor of the License Fee
as hereinafter defined the Grantor hereby grants unto the Licensee the
non-exclusive limited license and authority throughout the Continental United
States and for the term of Twenty (20) years commencing on the 1st day of
September, 1993 and expiring on the 31st day of August, 2013, (herein called the
"License Period") subject to the observance of and performance by the Licensee
of the following covenants and conditions and with the benefit of the covenants
of the Grantor to observe and perform that is to say:
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1. Definitions:
(a) "Continental United States" means those States of the United
States of America located contiguously to each other at the date
of this Agreement and specifically excluding the States of
Alaska and Hawaii;
(b) "Fiscal Year" means the 12 consecutive calendar months as chosen
by the Licensee for the purposes of calculating and reporting
its income;
(c) "License Fee" means, subject to the provisions of paragraph 5
hereof, a maximum annual payment of 10% of the annual net cash
flow profits of the Licensee to a maximum amount per annum to be
One Hundred and Fifty Thousand ($150,000.00) Dollars U.S. and
the total maximum cumulative License Fee payable over the term
of this license to be no more than One Million Five Hundred
Thousand ($1,500,000.00) Dollars U.S. The annual net cash flow
profits of the Licensee shall be defined as the positive number
represented by the sum of the net income or loss of the Licensee
(as indicated in its annual audited financial statements) and
any non-cash expenses as such depreciation and amortization; and
(d) "Licensed Products" means those drill stem test reports and
other oil and gas and water well information all as set out in
Schedule "A" to this Agreement.
2. Grant and Scope of the Licensee: Subject to the payment of royalties and
other conditions hereinafter contained, the Grantor grants to the
Licensee the non-exclusive and limited right for the License Period to
use the Licensed Products for the limited purpose of assisting it to
locate subterranean water in the Continental United States. Not so as to
limit the generality of the foregoing it is specifically understood and
agreed that the Licensee shall not use the Licensed Products for the
purpose of assisting it or others to locate or find or to obtain mines
and minerals or oil and gas and other hydrocarbons. However, should any
such items be found in the normal course of drilling for water, they are
the property of the Licensee.
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3. Confidentiality: The parties hereto mutually understand and agree and
acknowledge that the Licensed Products constitute valuable property rights
and trade secrets owned by the Grantor and the Licensee agrees:
(a) to hold the Licensed Products and all information contained therein
and obtained in using the Licensed Products or derived therefrom in
the strictest confidence;
(b) to disclose the contents of Licensed Products and the information
contained therein to its employees only on a need-to-know basis and
to require all such employees to maintain the secrecy of such
information;
(c) to use the Licensed Products and the information contained therein
only for the purposes contemplated by this Agreement; and
(d) to not disclose any of the Licensed Products or information contained
therein or obtained from them as outlined above to any third party
except when it is required by the Licensee in order to carry out is
business as outlined in paragraph 2 above and then only on the same
need-to-know basis as outlined above and to limit the amount of the
information given to any such third party to the minimum required in
order for them to properly carry out their tasks assigned to them by
the Licensee and then only after such third party has agreed in
writing by way of an enforceable contract to maintain the
confidentiality of the Licensed Products and information contained
therein including to return such information to the Licensee when it
is no longer required and to not keep copies of same.
4. Delivery and Return of the Licensed Products: The Licensee acknowledges
that the Grantor has delivered to it on this date the Licensed Products
and on termination of this License Agreement the Licensee agrees to return
to the Grantor the Licensed Products and all
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additional information that it has obtained regarding or enhancing the
Licensed Products as outlined above and it agrees to keep no copies of the
Licensed Products, the improvements or enhancement thereof on its delivery
of same to the Grantor on termination of this Agreement.
5. Remuneration: The Licensee agrees to pay the Grantor, subject to the
ability to defer payment as set out below, the following sums of money on
account of the Licensee Fee annually on the following basis:
(a) within 180 days of the conclusion of each Fiscal Year end of the
License granted for the 20 years of the License Period and the year
immediately following the end of the License Period the Licensee shall
forward to the Grantor its audited financial statements including the
report thereon of its certified public accountant or similarly
qualified accountant as approved in writing by the Grantor, and if
approved by a resolution of the Directors of the Licensee, a bank
draft in U.S. funds for the amount of the Licensee Fee or any portion
thereof as approved by the Directors of the Licensee due for the
immediately previous Fiscal Year of the Licensee. All of or the
portion of the Licensee Fee for any year that payment is not approved
by the Directors of the Licensee shall be deferred, without interest
being accumulated thereon, to the following year and any deferred
payments may likewise be deferred from year to year. Any unpaid
deferred payments at the end of the Licensee shall become null and
void and non-payable at that date;
(b) it is understood and agreed that the License may not change its
Fiscal Year during the course of the 20 years in which this License
is in place without the consent in writing of the Grantor which
consent the Grantor agrees to not unreasonably withhold or delay. The
Licensee agrees that it will take no steps to divert to another
source any income or business opportunities which may result in less
income and/or profits being received by the Licensee or to
artificially increase its expenses (including but not limited to such
items as paying artificially high salaries) and will take all
reasonable
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steps to maximize its income so that the Grantor may receive, subject
to its absolute and unfettered right to defer payments as referred to
in sub-paragraph (a) above, the maximum amount of the License Fee as
referred to herein. The Licensee will enclose together with its
financial statements either a notice of deferment or its bank draft
and a letter signed by its chief executive officer and its chief
financial officer wherein they shall certify that the financial
statements enclosed and the calculation of the License Fee have been
done in accordance with the provisions and spirit of this License
Agreement. It is further understood and agreed that there shall be no
interest factor payable on the outstanding License Fee (unless it is
for overdue payments as set out elsewhere herein) and when the full
not deferred License Fee has been paid to the Grantor, no further
monies will be payable pursuant to this License Agreement but that the
License shall continue for its full 20 year period of time; and
(c) Interest on Late Payment: any portion of the not deferred License Fee
that is not paid in the time set out herein or deferred as set out
herein shall be subject to payment of an interest charge commencing
on the last day set out herein for the payment of such License Fee at
the rate of 3% per annum above the prime rate of interest charged by
the United Bank of Denver to its most favourite customers, as
announced by that bank from time-to-time. It is specifically agreed
between the parties hereto that this provision for late interest
payment does not waive the rights of the Grantor provided for
hereunder if any amounts are not paid when due.
6. Books and Records:
(a) records from which the License Fee may be readily and correctly
determined shall be kept by the Licensee. Such records shall be full,
true and accurate and kept in accordance with all the requirements of
this Agreement and otherwise in accordance with the generally
accepted accounting practices. Such records relating to each Fiscal
Year shall be kept by the Licensee until at least the third
anniversary of the end of such Fiscal Year. The Grantor or anyone
designated by the Grantor shall have
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access to the Licensee's records at any and all times during business
hours for the purpose of examining and reviewing all the records and
procedures adopted by the Licensee for the recording and control of
all transactions affecting the determination of the License Fee. The
Licensee covenants to comply with all reasonable directions, rules
and regulations issued to it by the Grantor from time to time
respecting such records and procedures to be adopted for the proper
and accurate recording and control of all transactions affecting the
determination of the License Fee;
(b) the Licensee shall furnish all such statements, information and other
supporting data respecting calculation of the License Fee as the
Grantor may reasonably require. The Grantor agrees not to disclose
any confidential information so obtained except to the extent that
disclosure is reasonable in the conduct of the Grantor's business.
(c) as the bona fide reporting of the net cash flow from profits and the
due payment of License Fee or giving notice that such payment is
deferred is essential to the proper business relationship of the
parties, the Grantor, in addition to its rights specified above shall
be entitled at any time and from time to time to have all or any of
the records and procedures of the Licensee affecting the
determination of its net cash flow specially audited or examined by a
licensed, chartered or other public accountant designated by the
Grantor and who may be required by the Grantor to report to the
Grantor its opinion as to any matters arising under that this
Agreement including:
(i) the adequacy of the Licensee's accounting records and
procedures, and recommendations in regard thereto;
(ii) whether the Licensee has complied with this Agreement and any
directions, rules and regulations of the Grantor; and
(iii) whether the Licensee has accurately reported the amount of any
payment of the License Fee.
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(d) if such accountant shall report to the Grantor that, as at the date
of his or her audit or examination, that in his or her opinion:
(i) the Licensee's records and procedures were inadequate or the
Licensee was not complying with this Agreement;
(ii) the Licensee's records and procedures were sufficient to
permit a determination of License Fee for any period and such
report shall therein set out his or her determination of the
portion of License Fee accrued for such period and the amount
of any overpayment or underpayment of the License Fee; or
(iii) the Licensee's records and procedures which it was able to
inspect were not sufficient to permit a reasonably accurate
determination of the portion of the License Fee payable for
any relevant period;
and if the Grantor delivers a copy of such accountant's report to
the Licensee, then the Licensee shall forthwith and for the
remainder of the License Period take such steps as may be
recommended, necessary or advisable to remedy any reported default;
and the Grantor shall forthwith repay to the Licensee any amount
therein set out as an over-payment of the License Fee (subject to
the deduction of any monies then owed by the Licensee to the
Grantor) or the Licensee shall forthwith pay to the Grantor any
amount therein set out as an under-payment of the License Fee, as
the case may be using such records of the Licensee as have been
made available having regard to the possibility of errors,
omissions or inaccuracies therein). Every such estimate shall be
binding upon the Licensee until and except to the extent the
Licensee proves it to be inaccurate, and shall not be contestable
by the Licensee after one year after the date the Licensee receives
such report;
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(e) all costs of any special audit, examination or report under this
Agreement shall be payable by the Licensee to the Grantor on demand
if such accountant shall report that in his or her opinion the
Licensee's records and procedures were inadequate or the Licensee
was not complying with this Agreement, or if the License Fee for
any reporting period as determined by such accountant is greater
than Two (2%) percent more than the amount reported by the Licensee;
(f) the acceptance by the Grantor of any statement of the License Fee
delivered by the Licensee or any payment on the Licensee Fee based
thereon or any accountant's determination thereof, shall not be
deemed to relieve the Licensee from its obligations to comply with
this Agreement or from the consequences of any default thereunder,
nor be a waiver by the Grantor of any of the obligations of the
Licensee or any rights of the Grantor under this License and,
without limiting the generality of the foregoing, the Grantor shall
be entitled to all its remedies under this License and in any event
shall have the remedy of termination and forfeiture if there shall
be any substantial or continuing breach of such obligations by the
Licensee, or there shall have been any refusal or omission by the
Licensee to report or to maintain or produce records affecting the
determination of the annual portion of the License Fee, or to
maintain procedures recommended by an auditor appointed by the
Grantor; and provided that if any such License Period commences or
terminates on date other than the beginning or end of the Fiscal
Year the License Fee shall be adjusted pro rata and shall be paid
for the time such License Period commences to the date it ceases.
7. General Matters:
(a) Early Termination for Breach. Upon a material breach of this
Agreement by the Licensee, the Grantor may at its option terminate
this Agreement. Any termination of this Agreement for a material
breach shall require 30 days' prior written notice by the Grantor
to the Licensee setting out the nature of the breach and, if the
material breach is cured within the 30 day notice period, the
termination notice shall not be
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effective. Any such termination shall be without prejudice
to any other rights available to either party in law or
equity. Notwithstanding the generality of the foregoing the
parties hereto stipulate and agree that the Licensee's
failure to make proper payments of the License Fee shall
constitute a material breach of this Agreement.
(b) Termination Due to Certain Events. In addition to any other
remedies Grantor may have, Grantor may terminate this
Agreement, effective immediately upon receipt by Licensee of
written notice of termination, in the event of the following
occurrences:
(i) Licensee enters into voluntary or involuntary
bankruptcy, receivership, liquidation, or winding up
proceedings, or any arrangement or composition with
creditors provided however that this right shall be
stayed, for involuntary third party proceedings
brought against the Licensee which it forthwith and
diligently defends;
(ii) the business, assets or shares of stock or other
participations in the capital of Licensee are
confiscated, expropriated, seized, taken over,
nationalized, or otherwise controlled, directly or
indirectly, by any government, governmental unit, or
government controlled agency or enterprise; or
(iii) Licensee purports to assign any of its rights under
this or to circumvent the obligations to pay a full
and proper License Fee in contravention of the terms
hereof.
(c) No Assignment of Licensee. The Licensee shall not assign,
sublicense or otherwise dispose of any of the rights herein
granted;
(d) Notices. All notices, requests, demands and other
communications required or; permitted to be given under this
Agreement shall be in writing and shall be deemed
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to have been duly given, and received only when personally
delivered, or mailed by prepaid certified or registered mail
addressed:
To Grantor: AIFE, American Institute of Formation
Evaluation Ltd.
c\o 0000 Xxxxx Xxxxxxxx Xxxxx
000 XxxXxxx Xxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
To Licensee AIFE, American Institute of Formation
Evaluation Co.
c\o 0000 Xxxxx Xxxxxxxx Xxxxx
000 XxxXxxx Xxxxx X.X.
Xxxxxxx, Xxxxxxx
X0X 0X0
Any notices so sent shall be deemed to have been given to and
received by the addressee at the time and on the date of receipt at such
address.
Either party may change its address specified above upon giving
written notice to the other party to that effect.
(e) Negation of Partnership It is not the intent of the parties
hereto to create a relationship of partnership, joint venture,
employer and employee, principal and agent. Instead, it is the
intent of the parties that their obligations shall be limited to
their respective obligations set forth in this Agreement.
(f) Non-Waiver of Rights No failure or delay on the part of any
party in exercising any right under this Agreement will impair or
operate as a waiver of any such right. No single or partial
exercise of any such right shall preclude any other or further
exercise thereof or the exercise of any other right. No waiver of
any such right shall be effective unless given in a signed
writing and no such waiver of any right shall be deemed a waiver
of any other right hereunder.
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(g) Entire Agreement; Amendments. This Agreement constitutes
the entire agreement, and supersede any prior or
contemporaneous understanding or written or oral agreement,
between the parties regarding the subject matter of this
Agreement. This Agreement may not be amended or modified
except by a written instrument executed by the party against
which such amendment or modification is sought to be
enforced.
(h) Enurement. This license shall enure to the benefit of and
be binding upon the Grantor and the Licensee and their
respective permitted successors and assigns.
(i) Severability. If any provisions of this License becomes or
is rendered illegal or unenforceable, it will be considered
severable and the remaining provisions will remain in force.
(j) Governing Law: this license shall be construed in all
respects according to the laws of the Province of Alberta,
Canada.
IN WITNESS WHEREOF the parties have duly executed this
License as of the day and year first above written.
AIFE, AMERICAN INSTITUTE OF FORMATION
EVALUATION LTD.
Per: /s/ XXXXXXX X. XXXXXXXXXX
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AIFE, AMERICAN INSTITUTE OF FORMATION
EVALUATION CO.
Per: /s/ XXXXXX X. XXXXXX
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