EXHIBIT 10.13
AMENDED & RESTATED LICENSE AGREEMENT
THIS AGREEMENT is made effective as of the __ day of February, 2001 (the
"Effective Date"), by and between ID Technologies Corporation, a North Carolina
corporation, having a place of business and address of NCSU Centennial Campus,
0000 Xxxx Xxxxxx Xx. Xxxxx 000 Xxxxxxx, XX 00000 ("the Licensor"), and
Protective Technologies, Inc 000 Xxxxx Xxxxxx Xxxxx Xxxxx 000 Xxxxx, Xxxxxxx
00000 (the "Licensee) (together, the "Parties").
WHEREAS, Licensor owns all right title and interest in United States Patent
No. 5,623,552 (the "552 Patent"), dated April 22, 1997, and entitled
"Self-Authenticating Identification Card With Fingerprint Identification".
WHEREAS, Information Resources Engineering, Inc. (IRE) located at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxx 00000, has a strong background in technologies
relating to the design, development, and manufacture of products which can
incorporate and has incorporated in such products with the cooperation of
Licensor the self-authenticating fingerprint identification technology as
described and claimed in the 552 Patent of Licensor.
WHEREAS, the aforementioned IRE owns rights to inventions and patents
pertaining to the same technology as that described and claimed in the 552
patent, and may own future inventions and patents pertaining thereto.
WHEREAS, Licensor has entered into an agreement granting IRE a license
under the 552 patent in a defined exclusive filed and has obtained from IRE an
exclusive license in the Filed of License (defined below) to receive IRE
technology and use and practice IRE as present and future IRE inventions and
patent(s) (hereinafter referred to as "IRE Technology") for the full terms
thereof to the full extent to which they pertain to the subject matter described
and claimed in the 552 Patent and has further obtained from IRE the exclusive
right to sublicense such IRE Technology in said Field of License to the
Licensee.
WHEREAS, Licensor and IRE recognize that because of the complexity and
extensive potential applications of the technology covered by the 552 Patent it
will be desirable and mutually beneficial to all parties that Licensor
coordinate the transfer of technology related to the application of the 552
Patent technology and that there be established Technology development Partners
(defined below) to assist in the development and application of the technology
covered by the 552 Patent and that bath IRE and Licensee will usefully serve the
role of being such a Technology Development Partner.
WHEREAS, Licensor anticipates obtaining from time to time from Technology
development Partners certain additional technology and intellectual property
rights associated with and supportive of the practice of the 552 Patent.
WHEREAS, Licensor desires to license the 552 Patent and also the IRE
Technology, and Technology Development Partner Technology to facilitate
Licensee's application of the 552 Patent Technology, and Licensee desires to
receive such a license, technology and assistance pursuant to terms of this
Agreement.
NOW, THEREFORE, the Parties agree that for and in consideration of the
mutual covenants contained herein, and in consideration of the Initial Payment
(hereinafter defined) and other good and valuable considerations each to the
other have paid, the receipt and sufficiency of which is acknowledged, the
Parties have covenanted and agreed, and do hereby covenant and agree as follows:
1.0 Definitions
1.1 "System" means Licensor's fingerprints identification technology
described and claimed in the 552 Patent and the Licensor Technology
(defined below).
1.2 "Licensed Patents" means the 552 Patent and other patents licensed
to Licensee hereunder.
1.3 "Subsidiary" means a corporation, company or other entity more than
fifty percent of whose outstanding shares or securities (representing
the right, other than as affected by events of default, to vote for the
election of directors of other managing authority) are, now or
hereafter, owned or controlled directly by a corporation, company of
other entity which is a party to this Agreement (either by Licensee of
the Licensor), as long as such ownership or control exists.
1.4 "Technology Development Partner" (hereinafter referred to as "TDP")
means any individual, corporation, association, or other entity, other
than Licensor or a Subsidiary thereof, with whom Licensor is now or
hereafter becomes associated and to whom Licensor grants a license under
the 552 patent and from whom the Licensor acquires or has the right to
acquire rights to certain of the TDP's intellectual property for
incorporation into the System.
1.5 "TDP Technology" means inventions, patents and other technology
developed by IRE or another TDP and licensed and otherwise transferred
to Licensor for incorporation into the System and with respect to
which Licensor has the right to license others.
1.6 "Licensee Technology" means presently existing or future developed
inventions, patents, and technology of Licensee relating to the subject
matter of the 552 patent and licensed or otherwise transferred to which
Licensor pursuant to this Agreement.
1.7 "IRE" means Information Resource Engineering, Inc., who shall be
treated as a Technology Development Partner pursuant to this Agreement.
1.8 "Licensor Affiliate" shall mean a Subsidiary of Technology
Development Partner of Licensor.
1.9 "Licensor Technology"
Means and includes the Licensed Patents as well as all present and future
intellectual property including rights in inventions, patents, trade secrets,
copyrights and other technology, and any portion thereof, associated with or
supportive of use of the System, which Licensor owns or is authorized to license
or otherwise transfer to Licensee under this Agreement and which Licensee
received either from Licensor, IRE, or TDP with Licensor's assistance, and
includes present and future IRE Technology, Technology and Licensor Affiliate
Technology as well as other technology acquired by Licensor with respect to
which Licensor has the right to license.
1.10 "Field of License" means identification, access and security cards,
associated systems and equipment of any and all types used by passenger's and
employee's worldwide in any location for mass-transit conveyances (including,
without limitation, tolls, tickets and electronic validations for daily, weekly,
monthly and annual passenger passes) issued by public, private, corporations and
government agencies.
1.11 "Licensed Product"
Means any product or component of a product which incorporate some or all of
Licensor's Technology of whose manufacture, sale or use would infringe directly,
contributory, or by inducement any claim of the 552 Patent or any other patent
licensed hereunder.
1.12 (i) "Net Sales" means a) in the context of an arms-length transaction for
monetary consideration, the gross sums received by Licensee for the sale or
other transfer of Licensed Products or for the sublicense or other transfer of
the Licensor Technology, after applying credits for freight, taxes, refunds,
discounts, returns and bad debts but without any credit or deduction for
commissions of broker fees paid by Licensee, except as provided pursuant to
Article 1.12(i); b) in the context of an arms-length transaction for
non-monetary consideration, the fair market value of the consideration received
by Licensee in exchange for the sale or other transfer of Licensed Products or
for the sublicense or other transfer of the Licensor Technology; c) in the
context of an arms-length transaction in which the Licensee combines or includes
Licensed Products in a commercial offering whereby the pricing of the Licensed
Products is some part of a greater total price, the gross sums received by the
Licensee, after applying credits for freight, taxes, refunds, discounts,
returns, and bad debts, attributed to the sale or other transfer of Licensed
Products; (d)in the event that Licensed Products are disposed of in a manner
other than an arms-length transaction for money or other consideration, Net
Sales shall be measured by the price which sales or other transfers of similar
Licensed Products are sold at arms-length by the Licensee.
(ii) Where Net Sales is to be determined for the sublicense or other transfer of
the Licensor Technology, as opposed to the sale or other transfer of Licensed
Products, Net Sales shall be further reduced by the amount of fees Licensee pays
to independent, third-party brokers in such transactions.
(iii) Where Net Sales is to be determined pursuant to foregoing subparagraph
(i)(c) of this Article 1.12, that portion of the total price of the commercial
offering attributed to the sale or other transfer of the Licensed Products shall
be determined by agreement of the Parties, assisted by their accounting
professionals. Should the Parties not agree within thirty (30) days from their
initial discussion regarding a particular commercial offering, then the Parties
agree that the matter be decided by a panel of accounting professionals, whose
decision shall be binding on the Parties. The panel shall consist of one
accounting professional selected by each of the Parties. If within fifteen days
of submission to select a third accounting professional, acceptable to each
panel member, to assist in determine what portion of the total price should be
attributed to sale of the Licensed Products. The expanded panel shall decide the
issues by a simple majority, within fifteen (15) days of the addition of the
third panel member. Each party shall pay one-half the cost of forming the panel
and obtaining a final panel decision.
1.13 "Authorized Source"
Means a company selected by Licensor to manufacture the Licensed Product or a
company selected by Licensee with Licensor's written approval pursuant to
Article 4.2 below.
1.14 The Recitals
Set forth in the "Whereas" provisions on pages 1 and 2 of this Agreement are
incorporated herein by reference and are made a part of this Agreement herein.
2.0 Grant of Technology License
Licensor hereby grants and conveys to Licensee, subject to the express
limitations of this Agreement, a license to test, experiment with and use for
First Prototype referred to in Article 3.0 below and a worldwide exclusive
license to make, use, sell, sublicense, or otherwise transfer the System of any
component thereof in the Field of License but only in the Field of License, to
use such certification xxxx(s), trademark(s) and/or other marking(s) on Licensed
Products pursuant to Article 14, and to disclose the System to the Authorized
Sources and others necessary for its practice by Licensee and its sublicenses,
subject, however, to the confidentiality duty set forth in Article 22. Except as
provided by Article 8.4, Licensor acknowledges and agrees that it will not grant
any rights in the Field of License to any person other than Licensee, nor will
Licensor itself exercise any rights in the Fields of License with regard to the
System.
3.0 Development of First Prototype of System.
Licensee acknowledges a working prototype has been developed by IRE who is
currently manufacturing up to 100 / 8 chip biometric cards. That a 2/3 chip card
is planned for late 2000 / early 2001; that a magnetic swipe is being considered
for 2001; and that a one-chip card is being planned with a less than $20.00 cost
excluding NRI.
4.0 Authorized Source of Licensed Product
4.1 Authorized Source List.
Licensor shall provide Licensee within one (1) year from the Effective Date of
this Agreement the name and address of at least one Authorized Source with the
expertise, skill, and knowledge to manufacture and produce the Licensed Products
within Licensee's Field of License according to Licensee's specifications and
which Licensee is prepared to develop and market.
4.2 Additional Authorized Sources.
At any time during the term of this Agreement, the Licensee may request adding
to the list of Authorized Sources one or more manufacturers of Licensed Products
within Licensee's Field of License. Such request shall affirmatively state that
the Licensee has investigated the proposed source and has an adequate basis for
believing that the proposed source can manufacture the particular Licensed
Product of interest to the Licensee to such standards of quality and grade at
least equal to and in all respects not less reliable than the Authorized Source
identified in Article 4.1. Licensor, not more that thirty (30) days after it
received the proposed additional Authorized Source from Licensee, shall advise
Licensee with respect to such request, and shall not unreasonably reject such
proposed source. In the event that the Licensor shall fail to reply within said
30 days, the proposed additional source shall be deemed an Authorized Source.
4.3 Procurement.
Licensee shall procure the Licensed Product only from an Authorized Source.
4.4 Samples.
With regard to Authorized Sources selected by Licensee, the Licensee shall, at
any time requested by the Licensor, either provide to the Licensor random
samples of the Licensed Product from each such Authorized Source, or enable the
Licensor to enter the Licensee's premises, following reasonable notice, during
the Licensee's ordinary business hours and inspect the Licensed Product supplied
by such Authorized Source(s).
4.5 Licenses Not Obligated to Purchase from Persons Selected by Licensor. The
Licensee acknowledges that it is not required to obtain the product from any
person affiliated with the Licensor, and that is has a full and sufficient
opportunity to seek out alternative sources of the product and will take such
advantage of that opportunity as it independently elects, relying exclusively on
its own business judgment and not on the recommendation of the Licensor for that
purpose. The Licensee further warrants that it will conduct its own inspection
of any Authorized Source whose identity is provided to the Licensee by the
Licensor, will independently determine the capability and quality of such
Authorized Source to meet the requirements of the Licensee, and will not rely on
the judgment of the Licensor for that purpose. The Licensor makes no warranty or
representation whatsoever as to the capabilities of performance of any
Authorized Source, and expressly disclaims all such warranties and
representations.
5.0 Licensee's Rights to Proposed Specifications
The Licensee shall have the right to proposed modifying Licensed Product
specifications in a manner that would permit the Licensed Product to better
service customers in the Field of License. Licensor has the right to reject such
modifications, if such modified specifications call for a Licensed Product of a
lesser grade or quality than desired by Licensor or a Licensed Product likely to
impair consumer acceptance of the Licensed Products.
6.0 Development of Prototypes of Licensed Products
Upon selection of an Authorized Source for the first selected Licensed Product
within Licensee's Field of License, which Licensee stands ready to procure,
develop and market in commercial quantities, Licensee shall promptly and
forthwith proceed to procure such selected Licensed Product in prototype form
from such an Authorized Source, and upon procurement thereof provide Licensor
with a sample thereof.
6.2 Licensor shall within twenty-one (21) days after receipt of a sample of
Licensee's first selected Licensed Product in a prototype form suitable for
reproduction in commercial quantities promptly notify Licensee of its approval
or disapproval thereof. In the event that the Licensor shall fail to reply
within said twenty-one (21) days, the proposed prototype form shall be deemed to
be approved by Licensor. In the event of approval, Licensee shall use its best
efforts to commence production, marketing and sale of such first selected
Licensed Product throughout the Field of License. In the event of disapproval,
Licensor shall inform Licensee of the reasons thereof and Licensee shall
promptly take steps to improve such prototype of the first selected Licensed
Product and shall again submit such prototype to Licensor for approval in
accordance with the terms of this Article 6.2.
6.3 After introduction and marketing of the first selected Licensed Product as
referred to above, Licensee shall proceed to select the next subsequent Licensed
Products in the same manner as set forth above and shall again submit such
prototype to Licensor for approval in accordance with the terms of this Article
6.2.
7.0 Warranties and Representations of the Parties
7.1 Licensors Warranties and Representations
7.1.1 Licensor Technology.
a. The Licensor warrants that it is the sole and exclusive owner of all
right, title and interest in Letters Patent of the United States, No.
5,623.552 dated April 22, 1997, and entitled "Self Authenticating
Identification Card With Fingerprint Identification," and has the sole
and exclusive right to grant licenses to others to manufacture, use, and
sell, products covered by the patent, and further warranties that it has
the right to license the System to Licensee pursuant to the terms of this
Agreement.
b. Licensor also warrants that it has obtained from IRE a non-exclusive
license in the Field of License to receive IRE Technology and use and
practice IRE's present and future IRE inventions and patent(s) for the
full terms thereof to the full extent to which they pertain to the
subject matter described and claimed in the 552 Patent and has further
obtained from IRE the right to sublicense such IRE Technology in said
Field of License to the Licensee, and that such IRE Technology is covered
by the royalty rate identified in Article 9.1.
c. Licensor fully warrants and shall warrant throughout the terms of this
Agreement that it has fully unrestricted right to grant to Licensee the
rights granted in Article 2.0, including without limitation the right to
grant a license to make, use, sell, sub-license, or otherwise transfer
the TDP Technology which is or shall be incorporated into the System.
7.1.2 Prosecution of Licensor Patents. Licensor shall maintain the 552 Patent
and any other presently or future existing United States or foreign
patents owned by Licensor and relating to the System, and shall provide
Licensee proof that all maintenance fee payments have been made by
Licensor prior to the imposition of penalties. In the event Licensor does
not make any maintenance fee payments required by the U.S. Patent Office:
(a) Licensee shall have the right to make such payments on Licensor's
behalf, and (b) the amount of such payments made by Licensee shall be
credited against the amount of royalty payments due to the Licensor
hereunder.
7.1.3 Licensor Best Efforts. Licensor shall use its best efforts to
develop, improve, enhance and commercialize the System through its
dealings with Subsidiaries, Licensees, and Technology Development
Partners.
7.1.4 Licensor Employees. Licensor represents and warrants that it shall
require its employees to assign to Licensor all intellectual property
rights to the inventions developed by its employees relating to the
System.
7.1.5 Defending Field of License. Licensor shall assist Licensee to defend
against any other of Licensor's Licensees of the of the System ("other
Licensees") from using, practicing, selling, or transferring the System
in Licensee's Field of License.
7.1.6 Due Organization, Good Standing, Authority of Licensor. Licensor is a
corporation duly organized, validly existing, and in good standing under
the laws of North Carolina. Licensor has full right, power, and authority
to own its properties and assets, and to carry on its business. To the
best of Licensor's knowledge, Licensor is duly licensed, qualified and
authorized to do business as a foreign corporation, and is in good
standing in each jurisdiction in which the properties and assets owned by
it or the nature of the business conducted by it makes such licensing,
qualification and authorization legally necessary.
7.1.7 License Not in Conflict with Other Instruments; Required Approvals
Obtained.
7.1.7.1To the best of Licensor's knowledge, the execution delivery, and
performance of this License by Licensor will not (a) violate or require
registration, qualification, or filing under, (i) any law, statute,
ordinance, rule or regulation (Laws) of any federal, state or local
government (Governments) or any agency, bureau, commission or
instrumentality of any Governments, or (ii) any judgment, injunction,
order, writ of decree or any court, arbitrator, or Government.
7.1.7.2The execution, delivery, and performance of this Licensor will not
conflict with, require any consent, approval, or filing under, result in
the breach or termination of any provision of, or constitute a default
under (i) any indenture, mortgage, deed of trust, license, permit,
approval, consent, franchise, lease contract, license or any instrument
or agreement to which the Licensor is a party or is bound, or (iii) any
judgment, injunction, order, writ, or decree of any court, arbitrator, or
government by which the Licensor or any of its assets or properties is
bound.
7.1.8 Legal Proceedings-Licensor. To the best of Licensor's knowledge, there is
no action, suit, proceeding, claim, arbitration, or investigation by any
Government or any person (i) pending to which the Licensor is a party,
(ii) threatened against or relating to the Licensor or any of the
Licensor's assets or businesses, (iii) challenging the Licensor's right
to execute, deliver, or perform under this License, or (iv) asserting any
right against Licensor with respect to the System, and there is no basis
for any such action, suit, proceeding claim, arbitration, or
investigation.
7.2 Licensee's Warranties and Representations
7.2.1 Licensee's Best Efforts.
Licensee represents and warrants using its best efforts to proceed
diligently with its development, improvement, enhancement, manufacture
and sale of the Licensed Products and System throughout the Field of
License in accordance with the terms of this Agreement. Licensee shall at
its cost and expense use its best efforts and all due diligence to
energetically and aggressively develop the market for the Licensed
Products in the Field of License, to promote the sale, sublicense, and
use of the Licensed Products and to enhance the reputation and goodwill
associated with the Licensed Products. In connection with its obligations
under this Article 7.2.1, Licensee shall maintain facilities of a nature
and style suitable in the Field of License to facilitate the marketing,
distribution, sale, and sublicensing of the Licensed Products; shall
provide aggressive, dedicated, continuous representation throughout the
field of License by means of sales and support staff sufficient in
number, qualifications, and training to aggressively and effectively
promote, market, and service the Licensed Products.
7.2.2 Licensee Technology.
In the event Licensee obtains a patent or patents for inventions
pertaining to the subject matter claimed in the Licensed Patents,
Licensee agrees to grant to the Licensor a nonexclusive license to use
the invention or such patent or patents for the full term or terms
hereof. If Licensor desires to grant sublicenses to use the Licensee's
inventions(s) it will submit written requests to Licensee for its consent
and approval which will in Licensee's reasonable discretion be granted or
denied. Such nonexclusive license shall be subject to a running royalty
to be paid by Licensor to Licensee equal to 6.75% of all Net Sales made
by Licensor or any sub-licensee from Licensor. It is understood and
agreed that the nonexclusive license to Licensor under this Article 7.2.2
is intended to apply to only those improvements and enhancements to the
fingerprint card itself that is the Licensed Product of this Agreement,
and not to technology developed by Licensee that is not incorporated into
the fingerprint card itself. As used in this Article 7.2.2, "Net Sales"
shall have the meaning specified in Article 1.12 of this Agreement,
except that: all references to "Licensor" in Article 1.12 shall be deemed
to mean "Licensee"; all references to "Licensee" in Article 1.12 shall be
deemed to mean "Licensor"; and all references to "Licensor Technology" in
Article 1.12 shall be deemed to mean "Licensee Technology";
a. Licensor agrees that, within sixty (60) days after the end of
each quarter, in each and every calendar year, commencing with Licensee's
obligation to make royalty payments, Licensor will furnish to Licensee
written reports specifying the Licensor's Net Sales during the preceding
quarter (the "Licensor's Quarterly Reports"). Such reports shall provide
adequate details to allow Licensee to reasonably determine that its
business with Licensee has been accurately reported by Licensor's
financial system.
b. Licensor agrees to have its auditors verify in writing the
accuracy of the Licensor's Quarterly Reports for each calendar year,
which written verification is to be submitted to Licensee no later than
ninety (90) days after the end of each calendar year (the "Licensor's
Auditor's Verification").
c. Licensor agrees to allow an independent certified public
accountant or other audit professional selected by Licensee to audit and
analyze Licensor's accounting records during regular business hours to
determine the accuracy of Licensor's Quarterly Reports (an "Independent
Licensor Audit"). Such audits shall not be requested by Licensee more
than twice per calendar year, may be conducted only upon ten (10)
business dates written notice to Licensor, and must be conducted so as
not to interfere unreasonably with Licensor's business activities.
d. The Independent Licensor Audit shall be at the expense of
Licensee, unless a variation or error is revealed by the Independent
Licensor Audit that exceeds five percent (5%) of the Net Sales for the
quarter in which the error occurs, whereupon the Licensor shall pay all
costs of the Independent Licensor Audit.
e. If Licensee fails to request an Independent Licensor Audit
within two years after receipt of the Licensor's Auditor's Verification
then the Licensor's Auditor's Verification shall be conclusively
determinative of the Net Sales for that calendar year for the purposes of
calculating the royalties due Licensee pursuant to this Article 7.2.2,
and Licensee may not thereafter dispute the accuracy of the Net Sales
figure reported by Licensor and verified by Licensor's Auditor's
Verification.
f. Any royalty payment that is due Licensee pursuant to this
Article 7.2.2 that is not paid in full when due shall, as to that portion
thereof not paid when due, bear interest for each day late at the rate of
eighteen percent (18%) per annum, compounded monthly, or at the maximum
rate allowed by law if said maximum amount is less. The calculation of a
daily rate shall be made based upon a year of three hundred and sixty
(360) days and a month of thirty (30) days. Payments not made when due
because of a dispute as to the correct amount thereof shall nonetheless
be considered late if ultimately adjudged to be due, and interest shall
be paid therein as set out above.
7.2.3 Quality of Licensed Products. Licensee represents, warrants and
covenants that it shall diligently inspect goods delivered by
Authorized Sources to assure conformity with specifications, grade and
quality satisfactory to Licensor, and shall not procure goods from any
unauthorized source. Furthermore, Licensee shall not induce any
Authorized Source to engage in adulteration, substitution or other
practices that would constitute a variance from such specifications,
grade and quality and shall not knowingly countenance any such
practices.
7.2.4 License Not In Conflict with Other Instruments; Required Approvals
Obtained.
7.2.4.1 To the best of Licensee's knowledge, the execution, delivery
and performance of this License by Licensee will not (a) violate or
require registration, qualification, or filing under, (i) any law,
statute, ordinance, rule or regulation (Laws) of any federal, state or
local government (Governments) or any agency, bureau, commission or
instrumentality of ant Governments, or (ii) any judgment, injunction,
order, writ or decree or any court, arbitrator, or Government.
7.2.4.2
The execution delivery and performance of this License by Licensee will
not conflict with, require any consent, approval, or filing under, result
in the breach or termination of any provision of, or constitute a default
under (i) any indenture, mortgage, deed of trust, license, permit,
approval, consent, franchise. Lease, contract, license or any instrument
or agreement to which the Licensee is a party of is bound, or (iii) any
judgment, injunction, order, writ, or decree of any court, arbitrator, or
government by which the Licensee or any of its assets or properties is
bound.
7.2.5 Legal Proceedings-Licensee. To the best of Licensee's knowledge, there is
no action, suit, proceeding, claim, arbitration, or investigation by any
Government or any person (i) pending to which the Licensee is a party,
(ii) threatened against or relating to the Licensee or any of the
Licensee's assets or businesses, (iii) challenging the Licensee's right
to execute, deliver, or perform under this License, or (iv) asserting any
right against Licensee with respect to the System, and there is no basis
for any such action, suit, proceeding claim, arbitration, or
investigation.
7.2.6 Due Organization, Good Standing, Authority of Licensee. Licensee is a
corporation duly organized, validly existing, and in good standing under
the laws of Colorado Licensee have full right, power, and authority to
own its properties and assets, and to carry on its business. To the best
of Licensee's knowledge, Licensee is duly licensed, qualified and
authorized to do business as a foreign corporation, and is in good
standing in each jurisdiction in which the properties and assets owned by
at or the nature of the business conducted by it makes such licensing,
qualification and authorization legally necessary.
8.0 Sublicensing and the Under-served Field of License
8.1 Assignment. Either party without the consent of the non-assigning party
may assign this Agreement, provided the assignee is an affiliate of the
assigning party. Otherwise, neither this Agreement nor any rights
conveyed to Licensee of Licensor hereunder shall be assigned by either
party except with the prior written consent of the other party, such
consent not to be unreasonably withheld. An affiliate for purposes of
this Article 8.1, means any person or entity directly or indirectly
controlled by or under common control with the assigning party.
8.2 Sublicensing. Licensee may sub-license all or any portion of the System
to any individual, corporation, or other entity for development, use
manufacture, sale, or further sub-license of the System solely in the
Field of License. Licensee shall have the same responsibility for the
activities of a sublicensee under any such arrangements as of the
activities were directly those of the Licensee. For example, and not by
way of limitation, royalties shall be paid to Licensor by Licensee with
regard to the activities of such sublicense as of those activities were
the Licensee's, and each sublicense shall be restricted to using,
manufacturing, selling, and further sublicensing the System to the Field
of License defined in Article 1.10 above.
8.3 Sublicensing Conditions. In the event that Licensee desires to exercise
its rights to sublicense its rights as granted herein, Licensee shall,
unless otherwise agreed by Licensor and Licensee, negotiate an agreement
on terms, which insofar as practical are substantially consistent with
the terms of this Agreement, and shall also:
a. Require royalty payment to Licensee of no less than the royalty payment
due Licensor pursuant to Article 9 of this Agreement.
b. Require the sublicensee to keep Licensee informed concerning infringement
by outside parties of the properties transferred, any potential product
fault, improper use and the like.
c. Require the sublicensee to give the Licensee the right to audit the
sublicensee's books and records.
d. Include a confidentiality provision in the sublicensee agreement
comparable to that contained in this Agreement.
e. Require that sublicense not reverse engineer or disassemble the Licensed
Product.
8.4 Unserved and/or Under-served Field of License.
a. Licensor acknowledges that Licensee will market the Licensed Product
in stages across various geographic locations, subject to product,
manufacturing and distribution availability and support; as such, all
determinations made pursuant to this Article 8.4 as to whether an area
is unserved or under-served shall be made within this context. At any
time after the first anniversary of the date of Licensor's delivery
of the First Prototype to Licensee, should Licensor determine that
some geographic area or areas of application specified in Article 1.10
of this Agreement within the Field of License are not being served or
are being under-served by Licensee, Licensor may notify Licensee in
writing of such determination. For purposes of this Article 8.4, a
geographic area or areas of application specified in Article 1.10 of
this Agreement within the Field of Use will be deemed unserved or
under-served if Licensee is not fulfilling its best efforts
responsibilities under Article 7.2.1 of this Agreement. This notification
shall clearly reference this Article 8.4 of the Agreement as its basis
and give reasonable evidence in support of Licensor's determination
of Licensee's failure to use its best efforts to serve a geographic
areas of application specified in Article 1.10 of this Agreement.
b. Licensee shall acknowledge this notice in writing within ten (10)
business days and respond to this same notice in writing within ninety
(90) days setting forth Licensee's plans to serve or better serve the
subject geographical area. Should Licensor and Licensee agree on plan(s)
proposed by Licensee or Licensor, no further action under this provision
of this Article 8.4 will be necessary. Should Licensor and Licensee fail
to agree on such plan(s) within thirty (30) days of Licensor's receipt of
such plan(s), and should Licensor believe the subject geographical area
to be materially unserved or under-served to the detriment of all parties
then the matter will be submitted to arbitration under Article 22 of this
Agreement.
c. Should such arbitration process result in the determination that
Licensor's position is correct Licensee shall 1) sublicense the unserved
geographical area(s) to parties reasonably capable of and willing to
deliver such services and/or 2) allow the relicensing of these
geographical areas, splitting all revenues there from between Licensor
and Licensee on a fifty/fifty (50/50) basis. Should such arbitration
process result in the determination that Licensor's position is correct,
and then Licensee shall also pay Licensor's costs and expenses (including
reasonable attorneys fees) incurred in such arbitration process. However,
should such arbitration process result in the determination that
Licensee's position is correct, then Licensor shall pay Licensee's costs
and expenses including reasonable attorneys fees incurred in such
arbitration process.
9.0 Payments, Royalties and Compensation
9.1 Royalty Rate.
Royalties shall be computed at the rate of six percent (6%) of
Licensee's Net Sales during the applicable quarterly period.
9.2 Reports and Audits of Licensee's Net Sales.
a. Licensee agrees that, within sixty (60) days after the end of each
quarter, in each and every calendar year, commencing with the Licensee's
obligation to make royalty payments, Licensee will furnish to Licensor
written reports specifying the Licensee's Net Sales during the preceding
quarter (the "Licensee Quarterly Reports"). Such reports shall provide
adequate details to allow Licensor to reasonably determine that its
business with Licensee has been accurately reported by Licensee's
financial system.
b. Licensee agrees to have its auditors verify in writing the accuracy of
the Licensee's Quarterly Reports for each calendar year, which written
verification is to be submitted to Licensor no later than ninety (90)
days after the end of each calendar year (the "Licensee's Auditor's
Verification").
c. Licensee agrees to allow an independent certified public accountant or
other audit professional selected by Licensor to audit and analyze
Licensee's accounting records during regular business hours to determine
the accuracy of Licensee's Quarterly Reports (an "Independent Licensee
Audit"). Such audits shall not be requested by Licensor more than twice
per calendar year, may be conducted only upon ten (10) business dates
written notice to Licensee, and must be conducted so as not to interfere
unreasonably with Licensee's business activities.
d. The Independent Licensee Audit shall be at the expense of Licensor,
unless a variation or error is revealed by the Independent Licensee Audit
that exceeds five percent (5%) of the Net Sales for the quarter in which
the error occurs, whereupon the Licensee shall pay all costs of the
Independent Licensee Audit.
e. If Licensor fails to request an Independent Licensee Audit within two
years after receipt of the Licensee's Auditor's Verification then the
Licensee's Auditor's Verification shall be conclusively determinative of
the Net Sales for that calendar year for the purposes of calculating
royalties due Licensor pursuant to this Article 9, and Licensor may not
thereafter dispute the accuracy of the Net Sales figure reported by
Licensee and verified by Licensee's Auditor's Verification.
9.3 Late Payment Interest. Any royalty payment that is due Licensor pursuant
to this Article 9 that is not paid in full when due shall, as to that
portion thereof not paid when due, bear interest for each day late at the
rate of eighteen percent (18%) per annum, compounded monthly, or at the
maximum rate allowed by law if said maximum amount is less. The
calculation of a daily rate shall be made based upon a year of three
hundred and sixty (360) days and a month of thirty (30) days. Payments
not made when due because of a dispute as to the correct amount thereof
shall nonetheless be considered late if ultimately adjudged to be due,
and interest shall be paid therein as set out above.
10.0 Infringement and Indemnification
10.1 Infringement Claimed by Third Parties.
10.1.1 If the Licensee shall be sued for infringement by reason of the
Licensee's activities under the license granted in this Agreement, the
Licensee shall immediately notify the Licensor and the Licensor shall
defend, indemnify, and hold the Licensee harmless against any such
claims, which, if proven, would constitute a breach of any of the
Licensor s representations or warranties of Article 7.1 above. Provided,
however, that the Licensor shall not have a duty to defend if the claim
of infringement is based upon acts of the Licensee which go beyond the
scope of the Licenses granted, such as by reason of combination of
practice under the license and authorized practices, with additional
activity, which combined license and unlicensed activity shall be the
subject matter of the infringement action. Without admitting the
foregoing, the Licensor shall have the control of any such defense and
the right to enter into any settlement and compromise of any such claim
or action provided, however, that the Licensee shall assume no further
royalty or other obligation, whether to the Licensor or to any third
party, by reason of such settlement. The Licensee shall, if requested by
Licensor, make such reasonable modifications in the practice of the
license granted under this Agreement such as would enable the parties to
avoid or mitigate any third-party claims of infringement or
misappropriation.
10.1.2 If the Licensor shall be sued for infringement by reason of the
Licensor's activities under the license granted in this Agreement, the
Licensor shall immediately notify the Licensee and the Licensee shall
defend, indemnify, and hold the Licensor harmless against any such
claims, which, if proven, would constitute a breach of any of the
Licensee's representations or warranties of Article 7.2 above. Provided,
however, that the Licensee shall not have a duty to defend if the claim
of infringement is based upon acts of the Licensor which go beyond the
scope of the Licenses granted, such as by reason of combination of
practice under the license and authorized practices, with additional
activity, which combined license and unlicensed activity shall be the
subject matter of the infringement action. Without admitting the
foregoing, the Licensee shall have the control of any such defense and
the right to enter into any settlement and compromise of any such claim
or action provided, however, that the Licensor shall assume no further
royalty or other obligation, whether to the Licensee or to any third
party, by reason of such settlement. The Licensor shall, if requested by
Licensee, make such reasonable modifications in the practice of the
license granted under this Agreement such as would enable the parties to
avoid or mitigate any third-party claims of infringement or
misappropriation.
10.2 Infringement by Third Parties.
10.2.1 Licensee shall have the right, but not the obligation, to institute and
prosecute any and all suits to enjoin any and all infringes of the
Licensed Patents, where such infringements affects the Licensee's use of
the Technology in the Field of License; and from time to time during the
continuance of this Agreement, and at its own expense, may institute any
suit or suits which it may deem necessary. Licensee shall be entitled to
retain any and all money damages it receives in connection with such suit
or suits.
The Licensee shall have the right to institute and prosecute such suits,
and to employ its own counsel for such suits; and Licensee shall pay for
all services rendered by counsel so retained, and for all incidental
costs and expenses. Licensee agrees that Licensor may join as a party
plaintiff in any suit initiated by Licensee regarding the System, at
Licensor's sole expense, where Licensor deems that joining as a party
plaintiff is necessary and in Licensor's best interests.
10.2.2 Except to the extent that Licensee has instituted or plans to institute a
suit under Article 10.2.1, Licensor shall have the right, but not the
obligation, to institute and prosecute any and all infringes of the 552
Patent where such infringement affects Licensor's use, sale, or rights to
the System, and from time to time during the continuance of this
Agreement, and at its own expense, may institute any suit or suits it may
deem necessary. The Licensor shall have the right to institute and
prosecute such suits, and to employ its own counsel for such suits; and
Licensor shall pay for all services rendered by counsel so retained, and
for all incidental costs and expenses. Licensor agrees that Licensee may
join as a party plaintiff in any suit initiated by Licensor pertaining to
infringement in the Field of License regarding the System, at Licensee's
sole expense, where Licensee deems that joining as a party plaintiff is
necessary and in Licensee's best interests.
11.0 Limitations of Liability and Consequential Damages
In no event, whether based on contract indemnity, warranty, tort
(including negligence), strict liability or otherwise, shall Licensor or
Licensee or their subcontractors or suppliers, or any of their respective
directors, officers, employees or agents, be liable for (i) special,
exemplary, or punitive damages; or (ii) any losses or damages arising out
of, connected with, or resulting from (A) the performance of any third
party not hired by Licensor or Licensee, (B) an software, hardware or
other product or component provided by any third party, or (C) the
reliance by Licensor or Licensee on any statement or representation made
by Licensee or Licensor on any statement or representation made by
Licensee of Licensor regarding a third party vendor.
12.0 Term of Agreement and Renewal
The term of this Agreement shall be for the life of the Patent, Number
5,623,552 effective April 22, 1997. The term of this Agreement may be
extended at Licensee's option via written agreement through any
additional Patents directly related to the original patent number
5,623,552 provided that for each renewal:
a. The Field of License is not then unserved or under-served and
such unserved or under-served Field of License has not been cured or
is not being cured in accordance with Article 8.4;
b. There is no uncured Licensee breach of this Agreement; and
c. Licensee shall pay Licensor One Hundred Twenty-Five Thousand
Dollars ($125,000).
13.0 Termination
13.1 This Agreement may be terminated as follows:
a. By mutual Agreement of the Parties.
b. By Licensee if Licensor fails to deliver the First Prototype within
one (1) year following the Effective Date of this Agreement or if the
First Prototype delivered by Licensor to Licensee is not satisfactory to
Licensee.
c. If Licensee fails to pay Licensor royalties in the amount specified
in Article 9.1 of this Agreement, Licensor shall give Licensee prompt
written notice of such failure. If Licensee does not pay Licensor such
royalties within 10 days from Licensee's receipt of such written ,
Licensor shall have the right to terminate this Agreement.
d. If Licensor fails to pay Licensee royalties in the amount specified
in Article 7.2.2 of this Agreement, Licensee shall give Licensor prompt
written notice of such failure. If Licensor does not pay Licensee such
royalties within 10 days from Licensee's receipt of such written notice,
Licensee shall have the right to terminate the license granted to
Licensor pursuant to Article 7.2.2 of this Agreement.
e. If the Licensee shall (i) commence a voluntary case under the
federal or state bankruptcy laws, (ii) file a petition seeking to take
advantage of ant other laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding up or composition for adjustment of
debts, (iii) consent to or fail to contest in a timely and appropriate
manner any petition filed against it in a voluntary case under such
bankruptcy laws or other laws, (iv) apply for or consent to, or fail to
contest in a timely and appropriate manner, the appointment of, or the
taking of possession by, a receiver, custodian, trustee, or liquidator of
itself or of a substantial part of its property, domestic or foreign, (v)
admit in writing its inability to pay its debts as they become due, (vi)
make a general assignment for the benefit of creditors, (vii) take any
corporate action authorizing any of the foregoing, (viii) become the
subject of a case or other proceeding in any court of competent
jurisdiction seeking relief under the federal bankruptcy laws or under
any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or composition for adjustment of debts, which
proceeding shall continue un-dismissed or unstrayed for a period of sixty
consecutive calendar days, or an order granting the relief requested
shall be entered, or (ix) become the subject of the appointment of
trustee, receiver, custodian, liquidator or the like, which appointment
shall continue undismissed or unstayed for a period of sixty consecutive
calendar days.
e. If Licensee, without having first terminated this Agreement and
ceased obtaining any of the benefits of this Agreement challenges the
validity of any patent purported to be licensed by the Licensee under
this Agreement.
f. By either party due to the other party s material breach of its
obligation under this Agreement, upon giving written notice to the other.
(i) Where the breach relates solely to Licensee's non-payment of
royalties, the Licensor's right to terminate this Agreement is limited as
follows:
(aa) Before the Licensor may terminate this Agreement solely for Licensee's
non-payment of royalties, Licensor must give Licensee written notice of
default and make a demand for immediate payment, describing the time
period at issue, the amount due, and how the Licensor determined that the
amount demanded is due (the "Licensor's Demand"). To avoid termination of
this Agreement for non-payment of the royalties demanded, Licensee must
within ten days either: 1) pay to Licensor the full amount demanded as
due; or 2) respond to Licensor's Demand with an explanation of why no
additional amount is due (the "Licensee's Response").(bb) If, within
thirty (30) days of Licensor's receipt of the Licensee's Response, the
Parties cannot resolve their dispute, then the Licensor shall submit to
Licensee a list of five (5) independent certified public accountants
acceptable to the Licensor and, within five (5) days thereafter, Licensee
shall select one independent certified public accountant from said list,
and upon agreement of said accountant to serve, that accountant shall
serve as the "Royalties Arbitrator".
(cc) Within five (5) days of selection of the Royalties Arbitrator, each party
shall forward to the Royalties Arbitrator copies of this Agreement, the
Licensor's Demand, the Licensee's Response, and any other supporting
documentation and shall jointly request that the Royalties Arbitrator
conduct an expedited review of the documents submitted to resolve the
dispute and to provide a written determination as to royalties due, if
any.
(dd) The Parties hereby agree to abide by the Royalties Arbitrators written
decision as to the amount of royalties due, if any. Upon written
determination of the Arbitrator that some amount of royalties is due,
Licensee shall pay that amount to Licensor within three (3) days of
receipt of the Royalties Arbitrator written decision and shall be
responsible for any fees charged or costs incurred by the Royalties
Arbitrator in resolving the dispute. Each party shall otherwise bear its
own fees and costs.
(ee) The Licensor shall be released from its obligation to follow the
foregoing procedure upon a) after a single determination by the Royalties
Arbitrator that the Licensee's Response was groundless and wholly without
justification or b) upon receipt from the Royalties Arbitrator its
written decisions in two royalties disputes that the amount demanded in
the Licensors Demand was in fact the amount of Royalties due.
(ff) Where the breach of relates, in whole or in part, to obligations other
than Licensee's non-payment of royalties, then prior to terminating this
Agreement, the non-breaching party must provide written notice of the
breach and must permit the other party thirty (30) days from the date of
the written notice to cure such breach. The other party shall release
each party from this obligation of notice and cure after that party has
complied with this provision with respect to the first two breaches
within any successive five-year period.
g. By the Licensee upon giving Licensor thirty (30) days written notice
of Licensees intent to terminate the payment of royalties owed to
the date of termination.
13.2 Upon termination of these Agreement any and all rights, which the
Licensee shall have or possess under this Agreement, including
sublicenses there under shall permanently cease and be by it relinquished
and surrendered to the Licensor. If such termination is not due to a
License breach of this Agreement, Licensee shall have the right to sell
all Licensed Products already manufactured and in its possession for a
period of three (3) months following the termination date, upon which
royalties will be paid as provided above. Should termination of this
Agreement be due to a Licensee Breach, then Licensee shall, upon
termination, transfer all Licensed Products to Licensor and pay all
royalties it owes its Licensor.
14.0 Marketing
The Licensee shall use such certification xxxx(s), trademark(s), and/or
other marking(s) as may from time to time to be adopted by the Licensor
to indicate the patent protection applicable thereto. The Licensee shall
in any event when requested by Licensor xxxx the patent number of each
patent covering the Licensed Product, on each licensed product
manufactured, sold or otherwise distributed by the Licensee in a manner
satisfactory to Licensor; and shall use the trademark registration symbol
adjacent ant registered trademark to the extend permitted by law.
15.0 No Business Opportunity or Franchise
This Agreement is not intended to be, and shall not be constructed to
be, the granting of a business opportunity or of a franchise under the
laws of the United States or any state or territory thereof. The Licensee
warrants to the Licensor that the Licensee possesses business expertise
relevant to the field in which it will engage pursuant to the license
granted herein. The Licensee acknowledges that the Licensor is not
obligated by this Agreement to provide any business advice or business
assistance of any kind or nature whatsoever, including but not limited to
the provision of a prescribed marketing plan or system, and warrants that
the Licensee has not received, and does not expect to receive, any
business advice or assistance from Licensor on which it has relied or
intends to rely in any manner whatsoever. The Licensee further
acknowledges that the Licensee, in evaluating the propriety of entering
into this Agreement has relied exclusively in its own advisors and not on
any representations made by the Licensor except such representations as
are expressly stated in the words of this Agreement.
16.0 No Investment or Securities Offering
The Licensee represents and warrants that the Licensor shall not, by
reason of entering into this license with the Licensee, be or become
obligated to file a registration statement with the Securities and
Exchange Commission to qualify the License to fall under the blue-sky
laws of a state. Furthermore, notwithstanding any other provision of this
Agreement, the Licensee shall not enter into a transaction regarding the
License that would require the Licensor to file a registration statement
with the Securities and Exchange Commission to qualify the License to
fall under blue-sky laws of any state. Any violation of this Article 16.0
is a material default that shall entitle the Licensor to terminate this
Agreement.
17.0 Consent to Advertising and Publicity
The Licensor may issue and disseminate to the public information
describing the license entered into with the Licensee, including the name
and address of the Licensee, the general terms of the Agreement, and a
general description of the Licensee's business.
18.0 Governing Law
This Agreement shall be interpreted and construed in accordance with
the laws of the United States and the laws of the State of North
Carolina.
19.0 Independent Contractors
The Parties to this Agreement are independent contractors. Nothing in
this Agreement is to be construed as making either party and agent of or
joint venture with the other.
20.0 Complete Agreement and Modification
This Agreement represents the entire agreement, both written and oral of
the Parties, and supersedes and replaces any prior written or oral
agreements between Licensee and Licensor. This Agreement may be amended
only in a writing stating that it is an amendment or modification of this
Agreement, and signed by an authorized representative of each of the
Parties hereto.
21.0 Notices
Any Notice required to be given under this Agreement shall be properly
given of delivered by first-class mail as follows:
ID Technologies Corporation Protective Technologies, Inc.
NCSU Centennial Campus, 000 Xxxxx Xxxxxx Xxxxx
0000 Xxxx Xxxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Xxxxx 000 Xxxxxxx, XX 00000 Attention: President
Attention: President
22.0 Confidentiality
The Parties acknowledge that in order to carry out the License granted
hereunder it may be necessary for either Parties to transfer or disclose
certain secrets that have been developed by Licensor and/or a TDP at
great expense and that have required considerable effort of skilled
professionals. The Parties acknowledge and agree that in no event shall
either Party disclose any such trade secrets to any third party. In the
event that it is necessary to transfer or otherwise disclose such trade
secret and confidential information shall require a party to which the
information is being disclosed to sign a confidentiality agreement,
requiring that in no event shall the receiving party disclose any such
information disclosed or transferred to either party that is marked
Confidential, or information disclosed or transferred to either party at
the time of such disclosure or transfer the party receiving such
disclosure was informed that the information must be treated by the
receiving Party as confidential.
23.0 Arbitration
Any dispute under this Agreement not resolved within thirty (30) days
of notice to the other party shall be submitted to binding arbitration
under the rules of the American Arbitration Association then in effect.
There shall be no appeal from the decision other than for gross violation
of due process or fraud in the conduct of the arbitration. Judgment upon
the decision may be entered in a state or federal court, as may be
appropriate, selected by the party of whom arbitration was requested, or,
if that party declines to promptly select such a court, in a court
selected by the party who had requested the arbitration. The parties
irrevocably agree for this purpose only, to submit to the jurisdiction of
such a court, or application may be made to such court for confirmation
of the decision, for judicial acceptance thereof, for an order of
enforcement, or for any other legal remedies that may be necessary to
effectuate the decision. Except as otherwise specified in Article 8.4.c.,
the expenses of the arbitration and/or the Parties shall share
arbitrators equally. Except as otherwise specified in Article 8.4.c.,
each of the Parties shall bear its own arbitration costs including
without limitation its own costs of preparation, attorneys feed, and
witness fees and expenses. In the event of litigation between the
Parties, arbitration may be so requested at any time prior at the
beginning of a trial. Any required arbitration shall be held in Research
Triangle, North Carolina.
24.0 Severability
If any provisions of this Agreement shall be constructed to be illegal
or invalid, the legality of the validity of any other provisions hereof
shall not be affected hereby. Any illegal or invalid provision of this
Agreement shall be severable, and all provisions shall remain in full
force and effect.
25.0 Survival of Representations and Warranties
All of the representation and warranties of the parties contained in
this Agreement, the indemnification provisions of Article 10.0, and the
Limitations of Liability and Consequential Damages provisions of Article
11 shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties hereto have through a duly authorized
officer thereof duly executed this Agreement in the dates indicated below to be
effective as of the day first indicated above.
ID Technologies Corporation (Licensor) Protective Technologies, Inc.
(Licensee)
By: /s/ J. Xxxxxx Xxxxxxxx By: /s/Xxxxxx X. Xxxxxxx
---------------------- --------------------
J. Xxxxxx Xxxxxxxx Xxxxxx X. Xxxxxxx
Title: President & CEO Title: President & CEO
Date: 10/25/00 Date: 10/25/00
