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EXHIBIT 10.11
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AGREEMENT FOR THE SALE OF GOODS AND SERVICES
This Agreement for the Sale of Goods and Services ("Agreement") made
and effective this March 31, 1999, by and between DNA Technologies, Inc., a
Delaware Corporation ("DTI") and Collectors Universe Inc., a Delaware
Corporation ("CU").
DTI desires to sell to CU, and CU desires to purchase from DTI, certain
Goods and Services of DTI.
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties hereto agree as follows:
1. SALE
DTI agrees to sell, transfer and convey to CU, and CU agrees to
purchase the following goods and services (collectively the "Products"): The
Goods shall include DNA encoded ink for covert collectible memorabilia markings
as well as two (2) detectors or lasers. The services shall include definitive
authentication of any and all products bearing DTI's DNA encoded ink. Two inks
will be provided as follows: Green optical taggants and DNA to be used for
"Signed in the presence" collectibles; and Red optical taggants and DNA to be
used for vintage authentication.
2. PRICE
CU shall pay DTI for Goods the sum of $[*] for each item marked by CU
that uses DTI's DNA authentication technology. DTI shall provide CU with copies
of its current price list for authentication service, its delivery schedule, and
its standard terms and conditions of sale, as established and as may be modified
from time to time. The price of the "Goods" may be adjusted during the course of
this contract, due to the changes in the cost of goods, however the sales price
will not be increased by more than [*]% in any one year period, nor will the
price be adjusted prior to March 31, 2001. Each order for authentication
service(s) shall cost CU $[*] and will involve a wet laboratory test. Additional
detectors will be provided as required by PCGS at a cost of $[*] per detector
and $[*] per laser.
In the event the "Products" are used for authentication of manufactured
collectibles, volume discounts will be negotiated and authorized by mutual
consent, which will not be unnecessarily withheld.
In the event DTI reaches a Property Asset Management agreement with
Disney Studios or Xxxxxx Xxxxx Productions, pricing for these two agreements
will be determined independently of the above stated pricing policy.
In the event that CU sub-licenses the technology to a third party, DTI
and CU will each receive [*] percent of the sales price per item. Both parties
will determine the sales price for the sub-licensee by mutual consent which will
not be unreasonably withheld.
[*] Confidential portions omitted and filed separately with the Securities and
Exchange Commission
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3. EXCLUSIVITY
For good and valuable consideration articulated below, DNA Technologies
Inc. agrees not to sell, assign, create or produce similar DNA ink product for
any other person or entity engaged in, or seeking to be engaged in collectible
memorabilia authentication in the United States. This agreement specifically
excludes any Movie Studio Property Asset Management Programs and Fine Art. This
agreement also excludes relationships currently under discussion namely Disney,
Xxxxxx Xxxxx Productions and Warner Bros. In the event DTI reaches an agreement
with Disney Studios or Xxxxxx Xxxxx Productions, DTI will attempt to structure
the agreements to fall within the scope of the PSA/DNA license.
Exclusivity does not apply to the manufacture of new products. For the
purpose of this Agreement a collectible will be defined as an item that is at
least one year old or has certain added significance due to its actual use or
provenance. By mutual consent, items manufactured for the purpose of being a
collectible, may from time to time be included in this Agreement.
As consideration for this exclusivity, CU, and DTI agree that CU shall
pay DTI the sum of $[*] in 12 equal monthly payments and will grant DTI 50,000
warrants at a strike price of $5.00/share, uniform vesting over 2 years, for the
licensing rights to the "Products" in the collectible market which will include,
but not be limited to the following: all types of memorabilia including music
memorabilia, movie memorabilia, celebrity memorabilia, presidential memorabilia,
limited edition collectibles, sports memorabilia, etc.
CU & DTI further agree that in order to maintain exclusivity CU will
have to ensure that DTI receives the following minimum annual payments under
this Agreement:
05/01/1999 - 04/31/2000 $120,000.00
05/01/2000 - 04/31/2001 $150,000.00
05/01/2001 - 04/31/2002 $200,000.00
05/01/2002 - 04/31/2003 $250,000.00
05/01/2003 - 04/31/2004 $300,000.00
05/01/2004 - 04/31/2005 $350,000.00
The prescribed minimums will continue to increase at a rate of $50,000
per annum for the term of this Agreement.
4. SUBLICENSING
CU has the right to sub-license within the memorabilia/collectible
market. In the event of such an agreement the licensing cost structure will be
as described in Paragraph 2 of this Agreement with the exception of high volume
sub-licensees for which it may be necessary to provide discount manufacturing
pricing. Such pricing to be determined by mutual consent by both parties which
will not be unreasonably withheld.
5. PAYMENT
CU shall pay all charges due hereunder within thirty (30) days after
the date of DTI's invoice which shall be generated on shipment of the goods,
subject to CU's right of inspection as set forth in Section 7 below. Payment
shall be made as shown on the invoice. In the event that the purchase
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price is not paid in a timely manner, in addition to its other remedies, DTI may
impose, and CU shall pay, a late payment charge equal to one percent (1%) per
month on overdue amounts.
(a) Amounts owed to DTI shall be computed on the number of
Products bearing DTI's DNA encoded ink as marked by CU during each calendar
month.
(b) CU shall submit to DTI monthly statements of amounts due
and payable to DTI under the terms of this Agreement, with reference to the
specific invoices on which the amounts are being paid within fifteen (15) days
after the end of the calendar quarter.
(c) DTI shall have the right, at its own expense and not more
than once in any four (4) month period to verify the accuracy of amounts paid by
CU under the terms of this Agreement. CU shall maintain and make available to
DTI accurate books, records, and accounts relating to the business of CU with
respect to the Products. If the audit correctly reveals that CU has underpaid
DTI by ten percent (10%) or more, then CU shall reimburse DTI for the cost of
the audit, in addition to the amount of underpayment.
6. SHIPPING
DTI shall deliver the Goods to CU at its address herein. DTI shall be
solely responsible for the expenses associated with shipping. The risk of loss
from any casualty to the Goods, regardless of the cause, shall rest with DTI
until the delivery of the Goods to CU as set forth herein. DTI will use its
discretion in selecting an appropriate transportation method. Risk of loss due
to damage or destruction of Products shall be borne by CU after delivery to CU.
7. RIGHT OF INSPECTION
CU shall have the right to inspect the goods on arrival at CU's
facility. Within fifteen (15) business days after delivery, CU must give notice
to DTI of any claim with respect to the condition, quality or grade of the Goods
or non-conformance to this Agreement, specifying the basis of the claim in
detail. DTI may, at its option inspect the Goods at CU's facilities to confirm
that the Goods do not conform. Failure of CU to comply with these conditions
within the time set forth herein shall constitute irrevocable acceptance of the
Goods by CU. In the event the Goods do not conform to this Agreement, CU's sole
remedy and DTI's sole obligation, shall be at DTI's option to replace the Goods
at DTI's expense or credit CU the amount of the purchase price for the
non-conforming goods. Return shipping shall be the responsibility of DTI.
8. PRODUCT AVAILABILITY
Under no circumstances shall DTI be responsible to CU or anyone else
for its failure to fill accepted orders, or for its delay in filling accepted
orders, when such failure or delay is due to strike, accident, labor trouble,
acts of nature, freight embargo, civil disturbance, vendor problems or any cause
beyond DTI's reasonable control.
9. WARRANTY
DTI warrants that the Goods shall be free of material defects for a
period of ninety day inventory period after delivery to CU and items marked with
the Products will be warrantied for the
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life of the product provided the item is handled in a manner consistent with the
normal standards associated with valuable collectibles. If any of the Goods sold
hereunder do not conform to this limited warranty, CU shall notify DTI not more
than five days following the end of the warranty period and for any Goods that
do not conform to this warranty, CU's sole remedy, and DTI's sole obligation,
shall be to replace the defective Goods at DTI's expense or to refund the
purchase price. EXCEPT AS SET FORTH HEREIN, DTI MAKES NO WARRANTY TO CU WITH
RESPECT TO THE GOODS, AND CU DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
FITNESS FOR A PARTICULAR PURPOSE.
Notwithstanding the foregoing, DTI expressly warrants that:
(a) The goods supplied to CU by DTI contain DNA exclusively
produced for CU.
10. ADVERTISING AND PROMOTION POLICY
In exchange for a price discount given to CU by DTI in this Agreement,
CU shall, at its own expense, vigorously advertise and promote the use of DNA
authentication technology in its sports memorabilia products. In no event shall
CU make any representation, guarantee or warranty concerning the Products except
as expressly described or authorized in writing by DTI. During the term of this
Agreement, CU shall state to the public in all communications that mention DNA
in connection with its sports memorabilia or authentication protection that the
DNA authentication technology is provided by DNA Technologies, Inc., and to
advertise such Products under the trademarks, marks, and trade names that DTI
may adopt from time to time ("DTI's Trademarks"). All such statements shall be
in the same font and size, and in the main body of advertising text. All
presentations of DTI's Trademarks that CU intends to use shall first be
submitted to DTI for approval (which shall not be unreasonably withheld) of
design, color, and other details or shall be exact copies of those used by DTI.
Nothing herein shall grant CU any right, title, or interest in DTI's Trademarks.
At no time during or after the term of this Agreement shall CU challenge or
assist others to challenge DTI's Trademarks or the registration thereof or
attempt to register any trademarks, marks or trade names confusingly similar to
those of DTI. DTI hereby grants to CU a limited right and non exclusive license
to use DTI's name, logo, and trademarks (the "Marks") associated with the
Product to perform CU's obligations in this Agreement. CU's license in the Marks
shall terminate upon the conclusion of the Agreement. CU shall provide DTI with
reasonable proof that advertising and promotion has been completed on a
reasonable basis including, but not limited to the following evidence: a copy of
the advertisement, catalog, product literature, or electronic media, etc.,
showing the dates of the distribution and a tear sheet to confirm that the
advertisement was run, or in the case of TV and radio stations, a copy of the
affidavit or certificate as provided by the station that an advertisement was
aired.
11. PRESS RELEASES
Within thirty days of the date of this Agreement, the parties shall
jointly prepare and issue a press release announcing the use of DNA by CU for
authentication of Sports Memorabilia and generally promoting the Products. Any
later press release which refers to the other party or its products must be
approved by the other party prior to release.
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12. LIMITATION OF LIABILITY
In no event shall DTI be liable for any special, indirect, incidental
or consequential damages arising out of or connected with this Agreement or the
Goods, regardless of whether a claim is based on contract, tort, strict
liability or otherwise, nor shall CU's damages pursuant to any claim hereunder
exceed the amount of the purchase price of the Goods which are the subject of
this claim.
13. TAXES
CU shall pay or reimburse DTI as appropriate for any sales, use, excise
or other tax imposed or levied with respect to the payment of the purchase price
for the Goods. In no event shall CU be responsible for any tax imposed upon
DTI's income or for the privilege of doing business.
14. TERM AND TERMINATION
Unless earlier terminated as provided below, the term of this Agreement
shall commence April 16,1999 and shall continue until April 16, 2005.
Thereafter, provided both parties have met all the terms prescribed in this
Agreement, the contract shall be renewable for additional three year periods.
(a) CU may terminate this Agreement upon written notice to
DTI, upon any of the following events:
(i) failure of DTI to fulfill or perform any one of
the duties, obligations or responsibilities of DTI in this Agreement,
other than paragraph 3, which failure is not cured with twenty (20)
days notice from CU;
(ii) any assignment or attempted assignment by DTI of
any interest in this Agreement or delegation of DTI's obligations
without CU's written consent, which shall not be unnecessarily
withheld;
(iii) failure of DTI for any reason to function in
the ordinary course of business; or
(iv) conviction in a court of competent jurisdiction
of DTI, or a manager, partner, principal officer or major stockholder
of DTI for any violation of law tending, in CU's opinion, to affect
adversely the operation or business of DTI or the good name, goodwill,
or reputation of CU or DTI.
(b) DTI may terminate this Agreement upon written notice to CU
upon any of the following events:
(i) failure of CU to fulfill or perform any one of
the duties, obligations or responsibilities of CU in this Agreement,
which failure is not cured with twenty (20) days notice from DTI;
(ii) any assignment or attempted assignment by CU of
any interest in this Agreement without DTI's written consent, which
shall not be unnecessarily withheld;
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(iii) failure of CU for any reason to function in the
ordinary course of business, including filing bankruptcy;
(iv) conviction in a court of competent jurisdiction
of CU, or a manager, partner, principal officer or major stockholder of
CU for any violation of law tending, in DTI's opinion, to affect
adversely the operation or business of CU or the good name, goodwill,
or reputation of DTI, Products of DTI, or CU; or
(v) submission by CU to DTI of false or fraudulent
reports or statements, including, without limitation, monthly
statements of amounts due and payable to DTI under the terms of this
Agreement, or claims for any refund, credit, rebate, incentive,
allowance, discount, reimbursement or other payment by DTI.
15. OBLIGATIONS UPON TERMINATION
Immediately upon termination of this Agreement:
(a) All amounts owing by CU to DTI shall, notwithstanding
prior terms of sale, become immediately due and payable;
(b) All unshipped orders shall be canceled without liability
of either party to the other;
(c) Neither party shall be liable to the other because of such
termination for compensation, reimbursement or damages on account of the loss of
prospective profits or anticipated sales, or on account of expenditures,
investments, lease or commitments in connection with the business or goodwill of
DTI or CU or for any other reason whatsoever growing out of such termination;
(d) CU will remove and not thereafter use any sign containing
any trade name, logo or trademark of DTI including, but not limited to "DNA" or
"DNA Technologies, Inc.," and will immediately destroy all stationery,
advertising matter and other printed matter in its possession or under its
control containing such name, or any of DTI's trademark, trade names or logos.
CU will not at any time after such termination use or permit any such trademark,
trade names or logo to be used in any manner in connection with any business
conducted by it or in which it may have an interest or otherwise whatsoever as
descriptive of or referring to anything other than merchandise or Products of
DTI. Regardless of the cause of termination, CU will immediately take all
appropriate steps to remove and cancel its listings in telephone books, and
other directories, and public records, or elsewhere that contain the DTI's name,
logo or trademark. If CU fails to obtain such removals or cancellations
promptly, DTI may make application for such removals or cancellations on behalf
of PCGS and in CU's name and in such event CU will render every assistance. All
of DTI's trademarks, trade names, patents, copyrights, designs, drawings,
formulas or other data, photographs, demonstrators, literature, and sales aid of
every kind shall remain the property of DTI. Within thirty (30) days after the
termination of this Agreement, CU shall return all such items to DTI at CU's
expense. CU shall not make or retain any copies of any confidential items or
information that may have been entrusted to it.
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16. INSOLVENCY
In the event that DTI enters insolvency or bankruptcy proceedings, DTI
Company will appoint Xxxx Ink and Supply Company, a security ink printer in Los
Angeles, as an escrow agent, to administer the "Products" and to ensure that
there is sufficient product on hand to meet the needs of CU. In addition, Xxxx
Ink and Supply Company will also be provided with the source information for the
DTI's products in order to ensure that CU will not be adversely affected by any
proceedings against DTI and that there will be a continuous source for the
product.
17. CONFLICT OF INTEREST
CU warrants to DTI that it does not currently use or promote any lines
or products incorporating DNA in the sports celebrity, sports memorabilia
authentication and celebrity market that compete with the Products. During the
term of this Agreement and for a period of three (3) years following termination
of the Agreement, CU shall not use, promote or otherwise try to sell any
products incorporating DNA in the sports celebrity and sports memorabilia
authentication market that compete with the Products covered by this Agreement.
18. CONFIDENTIALITY
During this Agreement, each party may disclose to the other information
that is confidential and proprietary to the disclosing party ("Confidential
Information"). Confidential Information may include, but is not limited to,
business plans, marketing plans, financial statements, competitive analysis,
market research, product development plans, computer programs, designs, and
models, communicated orally, in writing, or by electronic media. Confidential
Information disclosed orally or electronically shall be identified as such
within five (5) days of disclosure. Confidential Information disclosed in
writing shall be marked "Confidential." Each party agrees that it will maintain
the Confidential Information of the other party in confidence and shall use such
information only for the purposes of this Agreement. Confidential Information
may be disclosed by a receiving party within its organization only to specific
employees who have a need to know such information for the purposes of this
Agreement and who have agreed in writing not to disclose it. Upon expiration or
termination of this Agreement, or sooner if demanded by a party, a receiving
party shall return to a disclosing party any of the disclosing party's
Confidential Information including all copies thereof. The obligations of each
party in this section shall continue for a period of five (5) years following
the expiration or termination of the Agreement. The obligations of this section
shall not apply to any Confidential Information that:
(a) Is or becomes public through no act of a receiving party;
(b) Is rightfully received from a third party without
obligations of confidentiality; or
(c) Is independently developed by a receiving party without
reference to the other party's Confidential Information.
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19. NOTICES
Any notice required by this Agreement, or given in connection with it,
shall be in writing and shall be given to the appropriate party by personal
delivery or by certified mail, postage prepaid, or recognized overnight delivery
services.
If to DTI:
DNA Technologies, Inc.
0000 X. Xxxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
If to CU:
CU, Inc.
X.X. Xxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
20. GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the
laws of the State of California.
21. FINAL AGREEMENT
This Agreement terminates and supersedes all prior understandings or
Agreements including the Agreement for the Sale of Goods and Services dated July
22, 1998 on the subject matter hereof. This Agreement may be modified only by a
further writing that is duly executed by both parties.
22. SEVERABILITY
If any term of this Agreement is held by a court of competent
jurisdiction to be invalid or unenforceable, then this Agreement, including all
of the remaining terms, will remain in full force and effect as if such invalid
or unenforceable term had never been included.
23. HEADINGS
Headings used in this Agreement are provided for convenience only and
shall not be used to construe meaning or intent.
24. JURISDICTION AND VENUE
Jurisdiction and Venue. The courts of Los Angeles County, California
shall have exclusive jurisdiction and venue of any controversy or claim arising
out of or relating to this agreement, and THE PARTIES IRREVOCABLY WAIVE THEIR
RIGHTS TO A TRIAL BY JURY WITH RESPECT TO ANY SUCH CONTROVERSY OR CLAIM. The
court shall award to the prevailing
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party, in addition to any other relief deemed appropriate, the prevailing
party's attorney's fees and costs of litigation, whether or not those are
otherwise available to the prevailing party by statute.
25. PREVAILING PARTY CLAUSE
In the event a dispute arises with respect to this Agreement, the party
prevailing in such dispute shall be entitled to recover all expenses incurred in
connection with, including, without limitation, reasonable attorney's fees and
expenses incurred.
26. REPRESENTATION AND WARRANTY
DTI represents and warrants to CU that it is the owner of all right,
title and interest in, and to, or otherwise has the right to use, the DNA
authentication technology referred to herein, that such DNA authentication
technology is covered by patents in the name of DTI, and that this Agreement
will grant CU, subject to maintaining the minimum payment schedule set forth
herein and to the other terms and conditions of this Agreement, the exclusivity
provided in Section 4 hereof.
DTI has the full right and authority to enter into this Agreement
without anyone else's consent or concurrence. DTI will, at DTI's sole cost,
defend DTI's right, title and interest in the technology, and its right to enter
into this Agreement, against any adverse rights or claims, and will fully
indemnify and hold harmless CU, its principals, employees and agents and any
affiliated or related business entity of CU against all such claims and costs,
including attorney's fees.
IN WITNESS WHEREOF, the parties hereto are duly authorized and have
caused this Agreement to be executed as of the date first above written.
DNA TECHNOLOGIES, INC. COLLECTORS UNIVERSE, INC. COLLECTORS UNIVERSE, INC.
By: /s/ Xxxxxxx Xxxxx By: /s/ Xxxxx Xxxx By: /s/ Xxxxx Xxxxx
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Xxxxxxx Xxxxx Xxxxx Xxxx Xxxxx Xxxxx
VP President Chairman C.E.O.
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