EXCLUSIVE DISTRIBUTION AND SUBLICENSE AGREEMENT
THIS EXCLUSIVE DISTRIBUTION AND SUBLICENSE AGREEMENT (this
"Sublicense") is made and entered into as of this 1st day of June, 1996, by and
between XXXXXXXX XXXXXX INTERNATIONAL, INC. ("RTI"), a Texas corporation with
offices at 000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxx 00000, and
TWINVISION Corp. Of North America, Inc.("Sublicensee"), a North Carolina
corporation and wholly-owned subsidiary of Digital Recorders, Inc. ("Digital")
with offices at 0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx Xxxxxxxx 00000.
WITNESSETH:
WHEREAS, RTI, by virtue of an Exclusive Distribution and License
Agreement dated April 19, 1996 (the "License Agreement") by and between RTI,
Lite Vision Corporation ("Lite Vision"), a Taiwan corporation, and UTM, Inc.
("UTM", and collectively with Lite Vision, "Grantor"), a Texas corporation, has
the exclusive license and right to use, market, distribute, sell and otherwise
transfer the Product and the Licensed Technology, and to sublicense the Licensed
Technology, in the Field of Use throughout the Territory; and
WHEREAS, Sublicensee desires to receive the sublicense and rights with
respect to the Product and Licensed Technology as set forth below, and RTI
desires to grant such sublicense and rights;
NOW, THEREFORE, in consideration of the premises, the mutual agreements
set forth herein and other good and valuable good consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:
ARTICLE I
DEFINITIONS
All capitalized terms used but not defined in this Sublicense shall
have the meanings given to them in the License Agreement, a copy of which is
attached hereto.
ARTICLE II
GRANT OF SUBLICENSE AND DISTRIBUTION RIGHTS
2.1 Exclusive Distribution Rights. RTI hereby grants to Sublicensee the
exclusive right to use, market, distribute, sell and otherwise transfer the
Product in the Field of Use throughout the Territory.
2.2 Sublicense. RTI hereby grants to Sublicensee an exclusive right and
sublicense in the Licensed Technology to use, market, distribute, sell and
otherwise transfer the Licensed Technology in the Field of Use, throughout the
Territory, in connection with the distribution rights with respect to the
Products granted in Section 2.1. Sublicensee shall not have the right to
sublicense any of its rights under this Sublicense without the prior written
consent of RTI and Grantor.
2.3 Included Sublicense Under Patent. RTI further grants to Sublicensee
the exclusive sublicense under any patents licensed to RTI by Grantor pursuant
to the License Agreement at any time during the term of this Sublicense to the
extent necessary for Sublicensee to exercise any right or sublicense granted to
Sublicensee hereunder.
2.4 Restrictions. During the period of time the rights granted to
Sublicensee in Section 2.1 are exclusive, RTI and its affiliates shall not (a)
market, sell, lease or otherwise distribute, or authorize or permit the
marketing, sale, lease or distribution of, the Product, or any technology,
product, system or device that embodies the Licensed Technology or that may be
competitive with the Product, or (b) sublicense the Licensed Technology to any
other person or entity, in either case in the Field of Use within the Territory
or to any person or entity that RTI or its affiliates knows or has reason to
know intends to distribute or use the Product or the Licensed Technology in the
Field of Use in the Territory.
2.5. Competing Products. During the period of time the rights granted
to Sublicensee in Section 2.1 are exclusive, neither Sublicensee nor any
affiliate of Sublicensee shall market, sell or otherwise distribute in the Field
of Use in the Territory any technology, product, system or device that performs
substantially the same functions as, or is competitive with, the Product or the
Licensed Technology, unless it is necessary to do so to meet a customer's
procurement specification that cannot be met with the Product without the
incurrence of unreasonable effort or expense. Subject to Section 2.4, RTI and
Grantor shall not be prohibited by this Sublicense from developing, acquiring,
marketing, selling or otherwise distributing the Product, or technology,
products, systems or devices that may be competitive with the Product, anywhere
in the world other than the Territory, for end use outside the Territory, or
within the Territory for end use other than in the Field of Use.
2.6. Market Share Targets. Sublicensee shall use its best efforts to
cause the Market Share targets set forth in Section 2.6 of the License Agreement
to be met. If Sublicensee, individually, fails to achieve a Market Share of 30%
in 1999 or any subsequent calendar year, then the rights and sublicense granted
to Sublicensee with respect to the Product and the Licensed Technology shall,
upon six months' written notice by RTI to Sublicensee, revert to non-exclusive
rights and a non-exclusive sublicense, which rights and sublicense shall remain
subject to all the other terms and provisions of this Sublicense; PROVIDED,
HOWEVER, that such reversion shall not occur if Sublicensee, individually, shall
achieve a Market Share of 30% for any period of three months during the
six-month period following Sublicensee's receipt of such notice from RTI. Any
such reversion shall be independent of, and shall not be contingent upon, any
reversion of RTI's rights and license under the License Agreement.
If Sublicensee, individually, fails to achieve a Market Share of 15% in
1999 or any subsequent calendar year, then this Sublicense and the rights and
sublicense granted to Sublicensee hereunder with respect to the Product and the
Licensed Technology, upon six months' written notice by RTI to Sublicensee,
shall terminate; PROVIDED, HOWEVER, that such termination shall not
2
occur if Sublicensee, individually, shall achieve a Market Share of 15% for any
period of three months during the six-month period following Sublicensee's
receipt of such notice from RTI. Any such termination shall be independent of,
and shall not be contingent upon, any termination of RTI's rights and license
under the License Agreement.
Notwithstanding the foregoing, if Grantor does not fill all orders of
Sublicensee in full in any period, then the Market Share conditions for
continued exclusivity and continued effectiveness of this Sublicense set forth
in the preceding paragraphs of this Section 2.6 for such period shall be reduced
by multiplying the applicable percentage (i.e., 30% or 15%, respectively) by a
fraction, the numerator of which is the number of units of the Product actually
delivered by Grantor to Sublicensee during the period and the denominator of
which is the total number of units ordered by Sublicensee for such period.
ARTICLE III
PRICES AND PRODUCT PURCHASES
Products shall be purchased by Sublicensee directly from Grantor in
accordance with the provisions of, and at the prices contemplated in, Article
III of the License Agreement. Without limiting the foregoing, Sublicensee shall
participate in the quarterly meetings, and shall maintain the letter of credit,
contemplated by Section 3.1 of the License Agreement. Sublicensee acknowledges
that RTI is not a manufacturer of the Product and shall have no obligation to
supply Products to Sublicensee.
ARTICLE IV
MARKETING
4.1 Marketing Efforts. Sublicensee shall use its best efforts to
promote the sale of the Product in the Territory during the term of this
Sublicense. Subject to the terms and conditions of this Sublicense, Sublicensee
may promote, advertise, market and distribute the Product in such manner and on
such terms as Sublicensee, in its sole discretion, may deem advisable and
appropriate.
4.2 Advertising Materials. Print advertising materials, if any, used by
Sublicensee that refer to Grantor must be approved by Grantor prior to first
publication in accordance with Section 4.2 of the License Agreement.
Sublicensee, however, may market and distribute passenger information display
systems that contain the Product under its own name and, subject to Section 7.4,
shall have no obligation to use Grantor's or RTI's name in connection therewith.
3
ARTICLE V
MAINTENANCE AND SUPPORT
5.1 End User Support. Sublicensee shall supply to end users of display
systems containing the Product such training, maintenance and support services
as shall be reasonably necessary to enable such end users to properly install,
apply, use and maintain the Product and such display systems. Sublicensee may
charge commercially reasonable fees for providing such services, provided such
fees do not adversely impact the marketing, distribution and sale of display
systems containing the Product. RTI shall have no responsibilities or
obligations of any kind to such end users.
5.2 Discontinuance of the Product by Grantor. If at any time during the
term of this Sublicense, RTI is granted a license to manufacture, and does
manufacture, the Product pursuant to Section 5.5 of the License Agreement, it is
intended that Sublicensee shall thereafter have substantially the same rights
with respect to Products manufactured by RTI as it does under this Sublicense
with respect to Products manufactured by Grantor, and RTI and Sublicensee shall
negotiate in good faith any revisions or supplements to this Sublicense as may
be necessary to further evidence such rights. Without limiting the foregoing,
the prices at which RTI shall sell units of the Product to Sublicensee will be
established by agreement of the parties.
ARTICLE VI
COMPENSATION
6.1 Initial Compensation. For so long as that certain Services
Agreement dated as of April 19, 1996 (the "Services Agreement") between Digital
and RTI remains in full force and effect, the compensation that RTI receives
under the Services Agreement shall constitute full compensation for RTI's grant
to Sublicensee of the rights and sublicense with respect to the Product and the
Licensed Technology hereunder, and Sublicensee shall not be obligated to pay to
RTI any separate license or other fees for such rights and sublicense.
6.2 Royalty Payments Upon Termination of Services Agreement. From and
after the date on which the Services Agreement terminates, Sublicensee shall
make to RTI quarterly payments in the amounts specified below ("Royalty
Payments"), in consideration for the sublicense and rights granted hereunder, as
follows:
(a) If the Services Agreement is terminated (i) by Digital
upon 90 days' notice to RTI as contemplated in Section 7(a) of the
Services Agreement (an "Elective Termination") or (ii) by RTI upon 30
days' notice to Digital by reason of an event or circumstance described
in Section 7(b) or (c) of the Services Agreement (a "Substantive
Termination"), then Sublicensee shall be obligated to make the Royalty
Payments to RTI indefinitely, for so long as Sublicensee receives
revenues in connection with this Sublicense;
4
(b) If the Services Agreement is terminated (i) as a result of
an Elective Termination by RTI or (ii) as a result of a Substantive
Termination by Digital, then Sublicensee shall not be obligated to make
any Royalty Payments to RTI and the rights and sublicense granted to
Sublicensee hereunder shall be royalty free for so long as this
Sublicense thereafter remains in effect; or
(c) If the Services Agreement is terminated at the end of the
initial or any successive term thereof as a result of an election by
either party, given prior to the end of the second year of such term,
not to renew the Services Agreement, then Sublicensee shall be
obligated to make the Royalty Payments to RTI for a period of three
years after the date of termination of the Services Agreement;
following the end of such three-year period, the rights and sublicense
granted to Sublicensee hereunder shall be royalty free for so long as
this Sublicense thereafter remains in effect.
The Royalty Payments required to be paid by paragraph (a) above shall
be equal to 2% of the total Gross Sales of passenger information display systems
containing the Product by Sublicensee, which shall be payable with respect to
all revenues received by Sublicensee on or after the date of termination of the
Services Agreement, regardless of the date on which the related display systems
were ordered, contracted for or shipped. The Royalty Payments required to be
paid by paragraph (c) above shall be equal to 2% of Gross Sales, determined as
provided in the preceding sentence, for the first year of the three-year period
specified in paragraph (c), 1 1/2% of such Gross Sales for the second year of
such three-year period and 1% of such Gross Sales for the third year of such
three-year period. The Royalty Payments required to be paid by paragraph (c) for
each year in the three-year period shall be payable with respect to all revenues
received by Sublicensee relating to contracts and purchase orders, and contracts
and purchase orders resulting from proposals, dated prior to the end of such
year. "Gross Sales" means total gross revenues actually received by Sublicensee,
determined in accordance with generally accepted accounting principles,
consistently applied, without offset for any returns, allowances or any other
adjustments, costs or expenses. Payments required under this Section 6.2 shall
be in addition to, and not in lieu of, any payments required to be made by
Sublicensee to RTI under the Services Agreement for the same or any other
Products.
Within 15 days following the end of each calendar quarter, Sublicensee
shall pay to RTI the Royalty Payment required to be made to RTI for such
quarter, without further action by RTI to prompt or collect same, determined by
applying the specified percentage to Gross Sales received during such quarter.
Following any termination of this Sublicense, Sublicensee shall continue to make
Royalty Payments, to the extent required by this Section 6.2, on all Gross Sales
resulting from sales of passenger information display systems containing the
Product occurring before or after the date of such termination, as permitted
under Section 8.5 hereof or otherwise.
6.3 Accounting. Sublicensee shall maintain records in sufficient detail
for purposes of determining the amount of each Royalty Payment required under
Section 6.2. Each quarterly Royalty Payment shall be accompanied by a written
accounting (which shall be in such detail as is reasonably satisfactory to RTI)
prepared by Sublicensee that sets forth the determination of such Royalty
Payment and of the Gross Sales on which it is based.
5
6.4 Right to Inspect. RTI, or RTI's agent, shall have the right to
inspect Sublicensee's records for the limited purpose of verifying calculation
of Royalty Payments, subject to such restrictions as Sublicensee may reasonably
impose to protect the confidentiality of those records. Such inspections shall
be made during normal business hours.
ARTICLE VII
INTELLECTUAL PROPERTY AND CONFIDENTIALITY
7.1 Intellectual Property Rights. Sublicensee acknowledges that, except
as may be expressly provided in this Sublicense, the Licensed Technology and all
intellectual property rights therein shall be and remain the property of Grantor
(or third parties who have granted Grantor the right to provide the Licensed
Technology, if applicable), and Sublicensee shall have no rights or interests
therein except as contemplated in this Sublicense and the License Agreement.
7.2 Confidentiality. All information relating to this Sublicense or the
License Agreement, specifically identified in writing as confidential and
proprietary, and transmitted by a party to the other party (or, with respect to
the License Agreement, by Grantor to Sublicensee) shall be maintained in
confidence by the receiving party and disclosed to employees or consultants of
the receiving party on a need-to-know basis under restrictions of
confidentiality, and the receiving party shall use such information only as
authorized by this Sublicense or the License Agreement and for no other purpose.
RTI and Sublicensee agree to take reasonable precautions to protect against
unauthorized disclosure of such information to third parties.
7.3 Exceptions to Confidentiality. No party shall be obligated to
maintain any information received from another party as confidential and refrain
from using it, if (a) the information was in the receiving party's possession or
was known to it prior to its receipt from the disclosing party; (b) the
information is independently developed or learned by the receiving party without
the utilization of such confidential or proprietary information provided by the
disclosing party; or (c) the information is or becomes public knowledge without
fault of the receiving party.
7.4 Proprietary Markings. Except as contemplated by this Sublicense,
Sublicensee shall not use any trademarks or trade names of Grantor or remove or
destroy any proprietary markings or proprietary legends of Grantor placed upon
the Products without Grantor's prior written consent.
ARTICLE VIII
TERM AND TERMINATION
8.1 Term. The term of this Sublicense shall commence on the date of its
execution and shall continue until this Sublicense is terminated in accordance
with the provisions hereof.
6
8.2 Termination Upon Default or Certain Events. Either RTI or
Sublicensee may terminate this Sublicense as follows:
(a) upon 120 days' written notice to the other party if the other party
commits any material default or breach of any of its agreements,
obligations, representations or warranties contained in this
Sublicense; or
(b) upon 120 days' written notice to the other party if the other party
is declared bankrupt or becomes insolvent or voluntarily institutes a
bankruptcy proceeding under the Bankruptcy Code, or a receiver is
appointed for the assets of such other party, or such other party makes
a general assignment for the benefit of creditors or admits in writing
its inability to pay its debts as they become due;
PROVIDED, HOWEVER, that this Sublicense will not be terminated as
provided in paragraph (a) or (b) if, within such 120-day period, such
other party cures such breach, default, act or circumstance giving rise
to the right of termination to the reasonable satisfaction of the party
delivering the notice.
8.3 Termination Upon Change in Control. During the initial or any
successive term of the Services Agreement, RTI may terminate this Sublicense by
written notice to Sublicensee immediately upon, or at any time after, the
occurrence of any Change in Control. A "Change in Control" shall be deemed to
have taken place upon the occurrence of any of the following:
(a) Digital ceases to own all of the outstanding Voting
Shares of Sublicensee;
(b) Digital acquires actual knowledge that any Person other
than Digital, a subsidiary of Digital or any employee benefit plan(s)
sponsored by Digital has acquired the Beneficial Ownership, directly or
indirectly, of securities of Digital entitling such Person to 50% or
more of the Voting Power of Digital;
(c)(i) A Tender Offer is made to acquire securities of Digital
entitling the holders thereof to 50% or more of the Voting Power of
Digital; or (ii) Voting Shares are first purchased pursuant to any
other Tender Offer;
(d) At any time less than 30% of the members of the Board of
Directors of Digital shall be individuals who were either (i) directors
on the effective date of this Sublicensee or (ii) individuals whose
election, or nomination for election, was approved by a vote (including
a vote approving a merger or other agreement providing for the
membership of such individuals on the Board of Directors) of a least
two-thirds of the directors then still in office who were directors on
the effective date of this Sublicensee or who were so approved;
(e) The Board of Directors or stockholders of Digital or
Sublicensee shall approve an agreement or plan providing for Digital or
Sublicensee to be merged, consolidated or otherwise combined with, or
for all or substantially all its assets or stock to
7
be acquired by, another entity, as a consequence of which the former
stockholders of Digital or Sublicensee will own, immediately after such
merger, consolidation, combination or acquisition, (i) in the case of
Digital, less than a majority of the Voting Power of such surviving or
acquiring entity or the parent thereof or (ii) in the case of
Sublicensee, less than all of the Voting Power of such surviving or
acquiring entity or the 100% parent thereof; or
(f) The Board of Directors or stockholders of Digital or
Sublicensee shall approve any liquidation of all or substantially all
of the assets of Digital or Sublicensee or any distribution to security
holders of assets of Digital or Sublicensee having a value equal to 30%
or more or the total value of all the assets of Digital or Sublicensee.
For purposes of this Section 8.3, the following terms shall have the
following meanings:
(1) The term "Person" shall be used as that term is used in Section
13(d) and 14(d) of the United States Securities Exchange Act of 1934 (the "1934
Act")(and shall include a "group," as used therein).
(2) "Beneficial Ownership" shall be determined as provided in Rule
13d-3 under the 1934 Act as in effect on the effective date of the Plan.
(3) "Voting Shares" shall mean all securities of a company entitling
the holders thereof to vote in an annual election of directors (without
consideration of the rights of any class of stock other than the Common Stock to
elect directors by a separate class vote); and a specified percentage of "Voting
Power" of a company shall mean such number of the Voting Shares as shall enable
the holders thereof to cast such percentage of all the votes which could be cast
in an annual election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect directors by a separate
class vote).
(4) "Tender Offer" shall mean a tender offer or exchange offer to
acquire securities of Digital (other than such an offer made by Digital or any
wholly-owned subsidiary of Digital), whether or not such offer is approved or
opposed by the Board.
8.4 Termination Upon Termination of License Agreement. This
Sublicense shall automatically terminate upon any termination of RTI's
license and rights under the License Agreement.
8.5 Survival of Certain Rights. The right of Sublicensee to continue to
use, copy, market, distribute, sell and otherwise transfer units of the Product
in its existing inventory or that are subject to outstanding purchase orders and
the Licensed Technology in existence as of the date of any termination of this
Sublicense shall survive any termination of this Sublicense, and Sublicensee
shall have an irrevocable, non-exclusive sublicense to continue to use, copy,
market, distribute, sell and otherwise transfer such Products and Licensed
Technology indefinitely, subject to the payment of Royalties as provided in
Article VI. Termination of this Sublicense shall not relieve Sublicensee of its
obligations under any outstanding purchase orders previously accepted by Grantor
that have not been fulfilled at the time of termination.
8
ARTICLE IX
MISCELLANEOUS
9.1 Notices. Any notice required or permitted to be given by one party
to the other under the terms hereof shall be given in writing by certified mail,
return receipt requested, or by personal delivery or guaranteed overnight
courier, at the following address or to any other address hereafter specified by
either party by written notice to the other:
IF TO RTI:
Xxxxxxxx Xxxxxx International, Inc.
000 Xxxx Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxx, Principal
IF TO SUBLICENSEE:
TWINVISION Corp. Of North America, Inc.
c/o DIGITAL RECORDERS, Inc.
0000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx Xxxxxxxx 00000
Attention: X. Xxxxxxxx X. Xxxxxxxx, Chairman
Each notice shall be deemed to have been given upon deposit in the
United States mail, postage pre-paid, in accordance with this Section, upon
personal delivery or upon delivery to a courier service that guarantees
overnight delivery to the recipient.
9.2 Entire Agreement. This Sublicense constitutes the entire agreement
between the parties with respect to the subject matter hereof and
supersedes all other agreements between the parties with respect thereto.
9.3 Severability. If any provision herein is held by a court of
competent jurisdiction to be invalid under the laws of any jurisdiction, such
provision shall be deemed modified to eliminate the invalid element and, as so
modified, shall be deemed a part of this Sublicense as though originally
included herein. The remaining provisions of this Sublicense shall not be
affected by the invalidity or modification of any other provision.
9.4 Independent Contractor. It is understood and agreed that no
partnership is created by this Sublicense. During the term of this Sublicense,
Sublicensee shall be an independent contractor and shall in no way be considered
a partner or employee of RTI. Sublicensee may refer to itself as RTI's or
Grantor's authorized dealer, distributor or reseller with respect to the
Product.
9.5 Assignment. Neither party may assign its rights or obligations
under this Sublicense
9
unless the other party, in its sole discretion, gives its prior written consent
thereto.
9.6 Binding Effect. This Sublicense shall inure to the benefit of and
be enforceable by and against any permitted assignee, transferee or legal
successor-in-interest of the parties hereto. Unless the context clearly requires
otherwise, each reference to a party in this Sublicense shall be deemed to
include a reference to such party's permitted assignees, transferees and legal
successors-in-interest.
9.7 Governing Law. This agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
9.8 No Continuing Waiver. No waiver of any condition or covenant
contained in this Sublicense or failure to exercise any right or remedy shall be
deemed to constitute a continuing waiver of such condition, covenant, right or
remedy or a waiver of any other condition, covenant, right or remedy.
9.9 Expenses. Except as otherwise expressly provided in this
Sublicense, each party shall bear its own expenses incurred in connection with
or as a result of this Sublicense and the performance hereof.
9.10 Survival. The provisions of Sections 8.5, 9.1, 9.9, 9.11 and 9.12
and Articles VI and VII shall survive any termination of this Sublicense.
9.11 Arbitration. In the event of any dispute or difference arising out
of or relating to this Sublicense or the performance or failure of performance
hereunder, such dispute or difference shall, at the written request of either
party, be arbitrated in Dallas, Texas pursuant to the expedited procedures of
and in accordance with the rules of the American Arbitration Association.
The arbitrator shall be mutually selected by the parties or, if they
cannot agree on such selection, RTI and Sublicensee each shall designate one
arbitrator to represent it in the selection process and the two arbitrators
shall appoint a third arbitrator who shall arbitrate such dispute or difference.
Such selection process shall be completed within 30 days from the date on which
arbitration is requested by either party. The arbitrator selected shall, if
reasonably possible, be one who is familiar with the commercial and
manufacturing practices of the passenger information display industry.
The arbitrator's award shall be final and binding on the parties hereto
and enforceable by either party in any court of competent jurisdiction. As part
of its decision, the arbitrator shall apportion the costs and expenses of the
arbitration, including the fees and expenses of the arbitrator and the
reasonable fees and expenses of the parties (including reasonable attorneys'
fees and expenses), among the parties.
9.12 Limitations and Disclaimers. No sublicense or right is granted
hereunder except as expressly set forth herein. The sublicense and rights
granted to Sublicensee hereunder are derived by RTI under the License Agreement
and, accordingly, no such sublicense or right shall in any
10
event be broader than or exceed in any respect the license and rights granted to
RTI by Grantor under the License Agreement. Nothing herein shall be construed by
Sublicensee as a guarantee or warranty on the part of RTI with respect to the
quality or performance of the Product, the revenues to be obtained through the
sale and distribution of the Product, the validity of Grantor's patent or other
rights in the Product and the Licensed Technology, the freedom from Infringement
of the Product and the Licensed Technology or any other matter.
IN WITNESS WHEREOF, the parties hereto have executed this Sublicense as
of the date first written above.
XXXXXXXX XXXXXX INTERNATIONAL, INC.
By:
Xxxxx X. Xxxxxx, Principal
TWINVISION Corp. Of North America, Inc.
By:
X. Xxxxxxxx X. Xxxxxxxx, Chairman
11
