EXHIBIT 10.7
LINK-US/PC AGREEMENT
This Agreement is entered into between COMMUNICATIONS SYSTEMS
INTERNATIONAL, INC., a Colorado corporation ("CSI"), and XXXX XXXXXXXXX
("Developer"), for the purpose of specifying the conditions under which
Developer will develop a computerized transparent callback switch to be used at
hotels and other large businesses for the exclusive use and ownership of CSI.
I. DEFINITIONS
1.1 "CPU" shall mean a single computer or central processing unit.
1.2 "CSI" shall mean and include CSI's divisions and departments within
CSI's organization, but shall not include wholly or partially owned subsidiaries
or affiliates (unless such subsidiaries or affiliates are directly involved in
the deployment or business of Link-Us/PC) or independent third parties.
1.3 "Link-Us/PC" shall mean the PC-based implementation of an automatic
dialback switch developed by Developer to be deployed at remote locations as
described in EXHIBIT A, as the same may be modified or improved from time to
time.
1.4 "Supporting Documentation" shall mean information that describes the
format, organization, and content of the computer-readable program to be
supplied to CSI under the terms of this Agreement.
1.5 "User's Manual" shall mean a written guide describing the use and
operation of the Link-Us/PC, together with any related Supporting Documentation.
II. TRANSFER OF LINK-US/PC
2.1 Developer hereby grants, conveys and transfers to CSI, and CSI hereby
accepts, subject to the terms and conditions set forth in this Agreement, the
ownership and all exclusive rights in and to the Link-Us/PC, the Supporting
Documentation, User's Manual, and all associated software, source code, tables,
and related items, data, and information, as each of such items may be modified
or improved from time to time. To the extent any of such items are not currently
available, such items shall be developed and delivered to CSI by Developer as
soon as reasonably possible. The term "exclusive rights" as used in this
Agreement shall mean and include all rights of ownership, and Developer shall
retain no rights in and to the Link-Us/PC except as may be specifically set
forth in this Agreement.
2.2 In transferring the Link-Us/PC, Developer agrees that he shall not:
a. Transfer or allow the transfer or delivery of any materials,
equipment, programs, or other information related to the Link-Us/PC to any party
other than CSI, unless requested by CSI;
b. Use or install the Link-Us/PC at locations other than those owned,
operated, under contract with, or controlled by CSI or any of CSI's designated
affiliates;
c. Make copies or make use of the Link-Us/PC or User's Manual except
as expressly set forth in this Agreement; or
d. Attempt to do anything that might adversely affect the operation
of the system or otherwise tamper with the program in such a way as to interfere
with the efficient operation of the system.
III. ITEMS PROVIDED BY DEVELOPER AND CSI
3.1 On or before October 1, 1996, Developer shall deliver to CSI a
completed fully operational Link-Us/PC system, Supporting Documentation, and
User's Manual which performs the functions set forth in Exhibit A.
3.2 CSI will pay the costs of installation of the Link-Us/PC in the field,
including all marketing costs, travel costs and costs of supplying and
installing hardware, including the delivery and installation of any
enhancements, which will utilize the system. Upon complete execution of this
Agreement, CSI agrees to purchase from Developer the NMS telephone switching
hardware suitable for development of the Link-Us/PC system at a cost of
approximately $5,100, which cost shall be substantiated by Developer delivering
copies of invoices or other reasonable evidence establishing the value of such
hardware.
IV. ROYALTY AND SUPPORT PAYMENTS
4.1 In consideration of the rights granted and conveyed by Developer and
the other services supplied by Developer pursuant hereto for the use of the
Link-Us/PC as set forth herein, CSI agrees to pay a royalty in accordance with
terms set forth herein:
a. CSI shall pay to Developer within forty-five days after the end of
each calendar month a royalty payment equal to four percent (4%) of the gross
revenues actually received by CSI in such calendar month from users utilizing
the entire three component Link-Us/PC system. The three components include the
Hotel Component Telephone Switch, the Trigger Sender, and the Trigger Receiver,
all as more particularly described in EXHIBIT B attached hereto. Notwithstanding
the foregoing, the obligation to pay such royalty shall remain in effect whether
the triggering
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mechanism is X.25 or any other suitable trigger delivery mechanism developed by
Developer. By way of example, the royalty shall not be paid with respect to the
Argentine-type situation in which the Xxxx boxes are providing the trigger
sending function. In the event a substantial modification or substantial
enhancement to the Link-Us/PC system is made by someone other than Developer, or
if enhancement or adaptation are deemed necessary or appropriate by CSI to keep
the Link-Us/PC system working satisfactorily, and the Developer is unwilling or
unable to make those changes, the royalty payment set forth in this subparagraph
shall be equitably adjusted by the parties. If the parties cannot agree on the
adjustment to the royalty, the parties may submit such issue to binding
arbitration pursuant to the rules of the American Arbitration Association.
b. The royalty provided in this Section shall be paid with respect to
all telephone call receipts for calls utilizing the Link-Us/PC system during the
term of this Agreement.
c. The parties agree that the royalty payment set forth in this
Section is the sole means of compensation for Developer's services, and no
salary or other compensation shall be payable, except as provided in
subparagraph e below.
d. Developer will provide support, as needed, in connection with the
deployment of the Link-Us/PC system, and for each installation Developer will be
paid a flat fee of $1,500 if such installation produces gross revenues of
between $10,000 and $20,000 in its first full calendar month of operation, and a
flat fee of $3,000 if such installation produces gross revenues of more than
$20,000 in its first full calendar month of operation. Developer agrees that
once a site is selected by CSI, Developer will work diligently to install or
assist in the installation of such system at the earliest possible time. Such
installation fee shall be paid forty-five days after CSI has determined, in its
reasonable discretion, that the system has operated accurately and efficiently
in accordance with its projected specifications for one full calendar month
after deployment. Developer shall install, with the assistance of CSI personnel,
the first five systems, and CSI shall thereafter supply support personnel to
assist Developer in subsequent installations.
e. Developer will provide on-going maintenance, support and
consulting services to CSI, including, without limiting the generality of the
foregoing, general supervision of CSI's maintenance and support personnel to the
extent they are involved in the Link-Us/PC operation, to assure the successful
operation of the Link-Us/PC systems, and shall be paid for such services for so
long as such systems are in operation for CSI at the rate of $4,000 per month
through September 1, 1997, and $5,200 per month thereafter until the earlier of
(i) the end of the term
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of this Agreement; or (ii) the date upon which Developer no longer provides on-
going consulting services on a day-to-day basis in accordance with the
specifications set forth on EXHIBIT C attached hereto and incorporated herein by
this reference.
f. CSI shall have the right, at its sole election to buy out all
future royalty obligations to Developer on the following terms:
(1) at any time from the effective date hereof through and
including the last day of the 12th calendar month following such effective date
for the sum of $1,500,000.
(2) at any time from and after the first day of the 13th calendar
month following such effective date for a cash buyout price of an amount equal
to three times the total royalties paid and payable to Developer during the
twelve month period immediately preceding the date of notice of the buyout,
which amount shall in no event be less than $2,500,000.
4.2 Effective immediately upon the closing of a royalty buyout pursuant to
this section and payment of the required cash consideration to Developer,
Developer shall be released from any further obligations or requirements with
respect to installation or maintenance, operation or upgrade of any existing or
future deployment of the System and CSI shall be released from any further
obligations or requirements under this Agreement, including any monetary
obligations hereunder.
4.3 Developer understands and agrees that the royalty rights set forth
above shall provide the sole royalty compensation to be paid to Developer for
work performed for CSI. In the event that during the term of this Agreement
Developer develops computer systems and technology which are unrelated to the
Link-US/PC system and for which CSI is willing to negotiate a compensation
package for Developer, such compensation shall be based upon stock option
incentives rather than royalty or commission-type compensation. At the option of
CSI, in order to assist in the determination of a compensation structure for
such additional systems or technology, a committee composed of designated
persons within the technology department of CSI may be formed to make
recommendations to CSI with regard to such compensation. CSI may consider the
recommendations made by such committee, but shall not be bound by any such
proposals. Throughout the term of this Agreement, Developer agrees to work and
cooperate with the other technical development employees of CSI to develop new
technology for the benefit of CSI which is unrelated to the Link-US/PC system.
It is the intent of the parties that each shall endeavor to promote a spirit of
cooperation and teamwork among the technical development persons to help enhance
the possibility of developing creative and beneficial technologies for the
benefit of
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CSI.
V. ENHANCEMENTS AND SUPPORT
5.1 Developer shall make available and transfer, assign, and convey to CSI
all updates and enhancements to the Link-Us/PC as the same become available. The
ownership and use of all such updates and enhancements by CSI shall be
exclusively reserved to CSI and shall be subject to the terms and conditions of
this Agreement.
5.2 Developer shall supply maintenance and support of the Link-Us/PC
system pursuant to the terms and conditions of the attached Maintenance
Agreement, including, without limitation, correcting any technical defects in
order to ensure that the system works in accordance with the specifications set
forth on Exhibit A attached hereto. During the term of this Agreement, if CSI
notifies Developer of program or system errors or defects, Developer shall use
his best efforts to verify and correct the problems within three days. Developer
shall promptly notify CSI if a problem cannot be corrected within the time
specified in this Section. If such a problem materially and adversely affects
the operation of the system, CSI shall have the right to terminate this
Agreement by delivering written notice thereof to Developer.
5.3 For the duration of this Agreement, Developer shall supply, as
developed and at no additional charge to CSI, program enhancements that improve
performance or utility of the systems, including all appropriate updates and
revisions to the User Manual and Supporting Documentation which shall be
delivered promptly upon the development of any such enhancements. Delivery of
updated User Manuals and Supporting Documentation promptly is a material factor
in Developer's performance under this Agreement.
5.4 CSI currently anticipates that it will develop a support staff to
assist in the deployment, maintenance and support of the Link-Us/PC system. The
timing and structure of the development of such support personnel shall be at
the sole discretion of CSI. Developer agrees to train such support personnel in
all aspects of the system, and will provide such assistance until the staff is
adequately trained, as determined by CSI.
VI. TERM OF AGREEMENT
6.1 The term of this Agreement shall commence as of the last date this
Agreement is executed by CSI and Developer and shall continue for the period
during which the Link-Us/PC is in active operation by CSI, until no later than
September 1, 2006, unless earlier terminated as provided below.
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VII. TERMINATION OF AGREEMENT
7.1 In the event of a material default by either party or such party's
agent or representative, of any provision of this Agreement, the other party may
terminate this Agreement upon thirty (30) days written notice, except that the
defaulting party shall have thirty (30) days from receipt of notice of
termination in which to cure any such defaults, and upon any such cure, this
Agreement will continue in full force and effect. If this Agreement is
terminated by CSI due to a default by Developer, Developer shall not have any
rights with respect to the Link-Us/PC system. This restriction shall survive the
termination of this Agreement. This Agreement shall also terminate upon the
death of Developer, with the exception that the royalty payment provided in
Section 4.1 above shall continue until the end of the term of this Agreement so
long as the Link US/PC system continues to be utilized in the format developed
by Developer.
7.2 In the event of any violation or threatened violation of this
Agreement CSI shall be entitled to injunctive and other equitable relief on the
grounds that such conduct, if not restrained and/or other equitable relief not
granted, would result in irreparable and serious harm for which damages would be
an inadequate remedy.
7.3 Unless agreed otherwise by the parties, if this Agreement is
terminated for any reason other than (i) CSI's buyout pursuant to Section 4.1f
of this Agreement; (ii) the material default of Developer under this Agreement;
or (iii) the expiration of the term of this Agreement, the royalty payments
shall continue to be paid for those sites which are operational and providing
revenue for CSI through the use of the Link-Us/PC system.
VIII. COPYRIGHT AND PROPRIETARY INFORMATION
8.1 Developer acknowledges that the Link-Us/PC system and all User's
Manuals and other Supporting Documentation constitute valuable property of CSI
and that all title and ownership rights in the Link-Us/PC and related materials
remain exclusively with CSI.
8.2 CSI reserves all rights with respect to the Link-Us/PC, User's
Manual, and all Supporting Documentation under all applicable laws for the
protection of proprietary information, including, but not limited to, trade
secrets, copyrights, trademarks and patents.
8.3 Except as otherwise provided in this Agreement, Developer shall not
cause or permit unauthorized copying, reproduction or disclosure of any portion
of the program, or any
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instructions, manuals, or other documentation in any way related to the Link-
US/PC system or any other technology, information, or data relating to the
operations of CSI, or the delivery or distribution of any part thereof to any
third person or entity, for any purpose whatsoever, without the prior written
permission of CSI. This restriction shall continue to bind Developer and his
agents and representatives for a period of ten years beyond the termination of
this Agreement.
8.4 Within ten days after any twelve month period in which Developer has
been paid a minimum of $500,000 by CSI whether in the form of compensation,
salary, bonuses, royalties, benefits realized from the exercise of stock options
(which benefits are equal to the difference between the option price of the
stock and the bid price of the stock on the date the options were exercised), or
other payments by CSI, and thereafter promptly upon their creation, Developer
shall completely disclose in writing, to such person as the Board of Directors
of CSI may designate, all developments, codes, inventions and improvements
heretofore or hereafter made, developed, perfected, devised, conceived or
acquired by Developer, either solely or in collaboration with others, during the
period in which Developer has provided consulting services to CSI commencing
February 1, 1994, and throughout the term of this Agreement, whether or not made
during regular working hours or made with facilities, funds, or equipment of
CSI, relating in any way to the business, developments, products, or potential
products of CSI; and if so requested by CSI, shall assign, transfer and convey
to CSI all right, title and interest in and to all such developments, inventions
and improvements. CSI shall have the right to designate an individual to study,
test, and analyze the Link-US/PC system and any other development, invention, or
improvement to be conveyed to CSI pursuant to this Agreement, to ensure that the
system will be fully operational without the presence or involvement of
Developer, and Developer shall provide complete cooperation with such
individual. All information pertaining to the operating and programming of the
Link-Us PC system and related systems and technology shall be maintained in a
lock-box or other secured area pursuant to CSI's technical policy in order to
preserve the confidentiality of such information. Such repository shall include
such information and instructions as would permit a competent technical person
to fully operate the Link-Us/PC system and all aspects of such system.
8.5 Developer agrees at the request and expense of CSI to make, execute
and deliver any and all application papers, assignments or instruments, and to
perform or cause to be performed such other lawful acts as CSI may deem
desirable or necessary in making or prosecuting applications, domestic or
foreign, for patents, copyright and re-issues and extensions thereof, and to
assist and cooperate (without expense to
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Developer) with CSI or its representative in any controversy or legal
proceedings relating to said developments, inventions and improvements and the
patents or copyrights which may be procured thereon.
8.6 Developer agrees that he will not directly or indirectly use or
disclose to others at any time any of CSI's designs, devices, methods of
production, systems, technology, dealings or the like or information relating
thereto, knowledge of which he may acquire directly or indirectly during the
period of his consulting work with CSI.
8.7 At all times hereafter, both during and after the term of this
Agreement, and whether or not this Agreement is terminated for cause, Developer
shall treat as confidential all information, in any media or form (referred to
in this Agreement as "Information") that may be disclosed to him or which he may
acquire as a result of or through his consulting arrangement with CSI (unless
the same has clearly come into the public domain) concerning the operations,
business or financial affairs, know-how, process, techniques, trade secrets,
products, services, properties, research and development, plans or projections
of CSI or any of its affiliated companies, or of any entity including, without
limit, any actual or potential customer, dealer, distributor, supplier, joint
venturer or licensor. Toward the objective of maintaining such confidentiality,
Developer shall keep the information secret, neither directly nor indirectly
using, divulging or furnishing it nor making it available either to or for the
benefit of any person or entity (other than to or for CSI exclusively) or to any
employee or officer of CSI with the exception of any person designated in
writing by the Board of Directors of CSI.
IX. WARRANTIES
9.1 Developer warrants that the Link-Us/PC will be fully functional,
that it will reliably perform its intended functions, and that the system will
perform in accordance with Exhibit A. In the event such system is not operating
in accordance with its intended functions or Exhibit A, and such system problems
are not remedied within thirty days of the date notice of such problems is given
by CSI to Developer, the royalty payments will cease and CSI will be entitled to
exercise such other remedies as may be permitted by applicable law. If CSI in
good faith determines that the Link-Us/PC system does not meet the
specifications set forth in Exhibit A, CSI will have the right to terminate this
Agreement upon written notice to Developer. If CSI elects to not deploy any
additional Link-US/PC systems for a continuous period of one year, then CSI's
exclusive rights to the Link-Us/PC system will terminate and thereafter the
royalty payment required by Section
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4.1 of this Agreement shall be reduced to two percent (2%) of the gross revenues
actually received by CSI.
9.2 Developer warrants that Developer has the legal right to grant CSI
the rights conveyed under this Agreement, and such grant does not infringe any
third parties' property or rights.
9.3 CSI warrants as follows:
a. That it has the full legal right and power to enter into this
Agreement and that all requisite corporate approvals have been obtained;
b. CSI shall supply funds to permit the installation of two average
Link-Us/PC installations in any month, provided that such installations have
been authorized by CSI in advance. In the event CSI fails to supply such funds
and as a result an installation is prevented or delayed by more than sixty days,
Developer's royalty payment pursuant to Section 4.1 above shall be increased to
six percent of gross revenues until such time as the funds are made available
for the additional installation. Such increase in the royalty payment shall be
Developer's sole remedy in the event of CSI's failure to maintain the required
funds.
X. INDEMNIFICATION
10.1 CSI agrees to indemnify and hold Developer harmless from claims by
third parties which arise out of CSI's use or operation of the Link-Us/PC
system, except to the extent any of such claims result from the actions or
inactions of Developer.
10.2 Developer agrees to indemnify and hold CSI harmless from claims by
third parties arising out of any breach by Developer of its warranties or
obligations set forth in this Agreement.
10.3 The indemnifying party shall pay all costs and attorneys' fees
incurred in connection with any claim for which such party is required to
indemnify the other party under this Article X.
XI. NON-COMPETITION
11.1 Developer agrees not to develop or market programs in the subject
area of computerized transparent callback service at hotel and large business
sites or which in any way might compete with the Link-Us/PC system or other
business in which CSI is involved or has contemplated becoming involved with for
a period of ten years, or during any period in which CSI is utilizing the
technology, whichever is longer, except with respect to enhancements or
modifications to the system obtained for the exclusive use of CSI pursuant to
this Agreement, or except as may be approved in writing by CSI.
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XII. ASSIGNMENT
12.1 This Agreement shall be binding upon the parties hereto and their
respective successors and assigns. CSI shall have the right to assign and
delegate its rights and obligations under this Agreement to any third party
which may acquire or control all or part of CSI or its business or which is
otherwise affiliated with CSI. With the exception of an assignment of his right
to receive royalties hereunder, Developer may not assign or delegate his rights
or duties under this Agreement without the prior written consent of CSI.
XIII. GENERAL PROVISIONS
13.1 All warranty and indemnification obligations set forth in this
Agreement shall survive the termination of this Agreement.
13.2 This Agreement may be modified or amended only by means of a
writing executed by both parties to this Agreement.
13.3 This Agreement shall be governed and construed in accordance with
the laws of the State of Colorado.
13.4 In the event of any legal action concerning the terms of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and costs from the other party.
13.5 This Agreement sets forth the entire agreement between the parties
concerning the subject matter hereof.
13.6 Any written notice from one party to the other required by this
Agreement shall be deemed made on the earlier of the date actually received or
three days after such notice was sent by certified mail, return receipt
requested, and addressed as follows:
Communication Systems International, Inc
000 Xxxx Xxxxx Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx Xxxxxxx, Xxxxxxxx
Attention: Xxxxxx X. Xxxxx 80903
with a copy to:
Xxxxxxx X. Xxxxxx, Esq.
Bright, Xxxxxx & Xxxxxx, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx 00000
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Xxxx Xxxxxxxxx
X.X. Xxx 0000
000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxxx Xxxx, Xxxxxxxx 00000
13.7 Developer acknowledges that he has consulted legal counsel with
respect to this Agreement and that this Agreement
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shall be construed as if both parties equally participated in the creation of
this Agreement.
COMMUNICATIONS SYSTEMS
INTERNATIONAL, INC., a Colorado corporation
By:_____________________________________
Its:____________________________________
DEVELOPER
________________________________________
XXXX XXXXXXXXX
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AMENDMENT NO. 1 TO LINK-US/PC AGREEMENT
This Amendment No. 1 to Link-Us/PC Agreement is entered into as of the ___
day of April, 1997 between Communications Systems International, Inc. ("CSI")
and Xxxx Xxxxxxxxx ("Developer").
WHEREAS, Developer and CSI have entered into that certain Link-Us/PC
Agreement ("Agreement") which concerns Developer's development of certain
technology ("Technology") for use by CSI; and
WHEREAS, Developer has developed an enhancement to the Technology and
desires to ensure that this enhancement is covered by the terms of the
Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and conditions contained herein, the parties agree as follows:
1. DEVELOPMENT OF CABO. Developer has developed a software enhancement
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which will allow the use of the entire Link-Us/PC system with an operator
assisted call, which technology is know as the calls assisted by operator or
"CABO" system. The parties agree that this CABO system is an enhancement to the
Link-US/PC system and, as a result, is and will be assigned, transferred, and
conveyed to CSI for the exclusive use of CSI, as is more particularly described
in the Agreement.
2. CABO INCLUDED IN AGREEMENT. Since CABO is acknowledged to be an
--------------------------
enhancement to the Link-US/PC System and utilizes all aspects of the Link-US/PC
system, the terms and conditions of the Agreement shall be fully applicable to
such technology, including, without limiting the generality of the foregoing,
Developer's right to royalty payments for use of the Link-US/PC system.
3. AGREEMENT IN FULL FORCE AND EFFECT. Except as specifically amended
----------------------------------
hereby, the parties acknowledge that the Agreement shall remain in full force
and effect.
COMMUNICATIONS SYSTEMS INTERNATIONAL, INC.
BY:___________________________
XXXXXX X. XXXXX, PRESIDENT
______________________________
XXXX XXXXXXXXX
