EXHIBIT 10.03
ROYALTY AGREEMENT
This Royalty "Agreement" is made and entered into as of the 18th day of
July, 1997 (the "Effective Date"), by and between Intercell Technologies
Corporation, a Colorado corporation, formerly known as "Secure Luggage Systems,
Inc." and "Emulation Products, Inc.," 0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000,
Xxxxxxxxxx, Xxxxxxx 00000 (the "Company"), and Intercell Corporation, a Colorado
corporation, 000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000
("Payee").
BACKGROUND
A. Payee developed certain intellectual property rights regarding antennas
for cellular telephones.
B. The Company purchased certain assets from Payee, including but not
limited to, the rights to (i) U.S. Patent Application No. 08/658,355; filing
date June 5, 1996; title: Portable Telephone with Dual Resonance Antenna (as
amended) and (ii) U.S. Patent Application No. 08/715,796; filing date 19
September 1996; title: Dual Resonance Antenna for Portable Telephone
(collectively, the "Patents").
C. As a portion of the consideration for the sale of these Patent rights
and other assets transferred from Payee to Company pursuant to that certain
Stock Purchase Agreement dated July 18, 1997, between the Company and Payee (the
"Stock Purchase Agreement"), Company has agreed to pay to Payee the royalty
defined below.
AGREEMENT
For valuable consideration received, the parties agree that:
1. INCORPORATION BY REFERENCE. The Background section of this Agreement and
all assignments and other documents regarding the Patents which were included as
Exhibits to the Stock Purchase Agreement are incorporated by reference into this
Agreement.
2. GOOD FAITH EFFORTS. The Company shall use its best and good faith
efforts to promote the commercialization and sale of the antenna technology
during the term of this Agreement.
3. TERM. The Company shall pay Payee the royalty specified below until
Payee has received a royalty payment equal to $5,000,000 at which time this
Agreement shall terminate; provided, however, that regardless of the dollar
amount of Royalty payments paid, this Agreement will terminate on July 30, 2007.
4. COMPUTATION OF ROYALTY. The amount of the royalty (the "Royalty") shall
be equal to 10% of the first $50,000,000 in gross revenues ("Gross Revenues"),
which phrase is defined to mean those revenues actually received by the Company
in good funds from sales of goods that use the technology contained in the
Patents, including, without limitation, hand-held cellular telephone antennas
that communicate through ground based cell cites (collectively, the "Product").
For purposes of this Agreement, Gross Revenues from the sale of the Product
shall include (i) gross revenues on Product sold separately to independent third
parties or affiliates of Company, (ii) gross revenues on Product not sold
separately, but which are incorporated into cellular phones or any other
communication equipment manufactured by the Company, its affiliates or
independent third parties and (iii) all moneys received by the Company as a
joint venturer, partner, licensee, or other participant with any company which
directly manufactures, markets or sells the Product; PROVIDED, HOWEVER, that
Gross Revenues shall only include revenues directly derived from the sale of the
Product or royalty or other fees directly relating to such sales. The price of
Product not sold separately shall equal the gross sales price of Product sold
separately. "Company" shall include its wholly owned subsidiaries and divisions,
whether domestic or foreign.
5. METHOD AND TIMING OF PAYMENT. The Royalty payments shall be payable
quarterly (the "Payment Period") and shall be due on the last day of the month
after the end of the Payment Period. The first payment, if any, shall be due on
the last day of October for the Payment Period ending September 30, 1997.
Thereafter such payment shall consist of an amount equal to Royalty payable with
respect to the Product for the just completed Payment Period. Any Royalty
payment not received within 5 business days of the date due shall be charged a
late payment fee equal to 5% of the Royalty payment past due from the date
originally due until paid.
6. TERMINATION. Failure to pay any Royalty payment due Payee by Company
within sixty (60) days after written notice from Payee that any Royalty payment
has not been paid when due shall constitute a breach of this Agreement and shall
give Payee the right to terminate this Agreement. Upon the termination of this
Agreement pursuant to the provisions of this Section 6, the Company shall
discontinue manufacturing and distributing the Product and shall reassign the
Patents to Payee.
7. ACCOUNTING REVIEW.
(a) The Company shall keep true and accurate records covering all
transactions relating to the right hereby granted, and Payee and its duly
authorized representatives shall have reasonable and customary rights of
inspection and audit to verify the accuracy of these results. If the
Royalty payments paid are inaccurate by more than 5%, then Company shall
pay the cost of audit. Otherwise the cost of any audit shall be borne by
Payee.
(b) During the term of this Agreement, Company agrees to furnish to
Payee simultaneously with its regular Royalty payment a statement showing
the number,
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description and gross sales price of the Product distributed or sold
by the Company during the preceding Payment Period, along with a statement
showing how the Royalty payment was computed.
8. SALE OF TECHNOLOGY. If the Company determines to sell, license or
otherwise dispose of the Patents or antenna technology, any consideration
received by the Company in connection with said transaction up to the first
$5,000,000 shall be paid, in full, in like kind, to Payee at the closing of such
transaction in accordance with the terms and conditions of the agreement
relating to the transaction. Payee shall have the right to require as a
condition of the closing of any such transaction that the party acquiring the
Patents or any rights thereunder shall, at a minimum, be required to
acknowledge, adopt and agree to be bound by all terms and conditions of this
Agreement.
9. TIME. If the time for performance of any obligation under this Agreement
expires on a Saturday, Sunday or legal holiday, the time for performance shall
be extended to the next succeeding day which is not a Saturday, Sunday or legal
holiday. For computation of time periods the phrase "a day" means a calendar day
which is not a legal holiday. Time is of the essence with respect to the
performance of all the terms, conditions, and provisions of this Agreement.
10. LAWS. This Agreement shall be construed and interpreted under, governed
and enforced according to the laws of the State of Colorado.
11. LEGAL FEES. If either party finds it necessary to employ legal counsel
or to bring an action at law, at equity, or other proceeding against the other
party to enforce any of the terms, covenants or conditions, the prevailing party
shall be paid its costs and actual attorney's fees by the losing party. If
judgment is secured by the prevailing party, then all costs and fees shall be
included in that judgment which judgment shall bear interest at twelve percent
per annum until paid in full.
12. SUCCESSORS/ASSIGNS. This Agreement shall inure to the benefit of and be
binding upon the heirs, executors, personal representatives, successors and
assigns of the parties. The rights under this Agreement may be assigned or
sublicensed by the Payee. This Agreement may not be assigned by the Company,
whether by operation of law or through a change in control, sale of assets,
consideration or similar transaction without the prior written consent of Payee.
13. ENFORCEABILITY. If any provision of this Agreement is held to be
invalid, illegal or unenforceable, then the invalidity, illegality or
enforceability shall not alter the remaining provisions, as each provision of
this Agreement shall be deemed severable from all other provisions.
14. WAIVER OF RIGHT. The waiver of either party to any right granted to it
in this Agreement shall not be deemed to be a waiver of any other right granted
herein, nor shall the
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same be deemed to be a waiver of a subsequent right obtained by reason of the
continuation of any matter previously waived.
15. GENDER. All words used in singular shall include the plural; the
masculine gender includes the feminine and neuter; the feminine gender includes
the masculine and feminine; and the neuter gender includes the masculine and
feminine; all as required by the context.
16. FURTHER DOCUMENTATION. Each party agrees in good faith to execute such
further or additional documents as become necessary or appropriate to carry out
the intent and purpose of this Agreement.
17. INTERPRETATION. This Agreement is the result of negotiations between
the parties and, accordingly, shall not be construed for or against either party
solely because one party drafted this Agreement.
18. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which together shall
constitute one and the same instrument.
19. HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretations of this
Agreement.
20. SEVERABILITY. The invalidity of any provision of this Agreement or
portion of a provision shall not affect the validity or any other provision of
this Agreement or the remaining portion of the applicable provision.
21. NOTICES. All notices, consents, approvals, waivers or other items given
or required to be given by one party to the other shall be in writing; these
"Notices" shall be delivered by one of these methods:
(a) if personally delivered, then notice is effective upon receipt;
(b) if delivered by mail, Notice is deemed given and delivered 48
hours after being deposited in any duly authorized United States mail
depository, postage prepaid, registered or certified, return receipt
requested;
(c) if sent by a reputable overnight courier service (e.g., Federal
Express), addressed as set forth below, the Notice shall be deemed
effective upon receipt, as evidenced by the receipt obtained by the courier
service;
(d) if sent by telecopier to the phone number listed below, then
Notice shall be deemed delivered upon receipt, as evidenced by a successful
transmission report; or
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(e) Notice to an attorney is not complete until actual receipt;
addresses and fax numbers for an attorney should be confirmed by checking
with the Arizona State Bar Association in Phoenix, Arizona. Notice
addresses shall be changed by providing the new address to all of the other
parties in conformance with these provisions. All Notices shall be
addressed to:
If to Payee: Intercell Corporation
c/o Xxxx X. Xxxxxxxxx, Esq.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Telecopier: (000) 000-0000
If to Company: Intercell Technologies Corporation
c/o Xxxxx Xxxxx
0000 X. Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Telecopier: (000) 000-0000
22. ENTIRE AGREEMENT. This Agreement contains the entire understanding
among the parties with respect to this transaction. All prior or contemporaneous
agreements, understandings, representations, and statements, oral or written,
are merged into this Agreement. No provision of this Agreement may be waived,
modified, amended, discharged or terminated except by an instrument in writing,
signed by the party against which the enforcement of the waiver, modification,
amendment, discharge or termination is sought and then only to the extent set
forth in that instrument.
PAYEE:
INTERCELL CORPORATION, a Colorado corporation
By /s/ Xxxx X. Xxxxxxxxx
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Name: Xxxx X. Xxxxxxxxx
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Title: President and Chief Executive Officer
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INTERCELL TECHNOLOGIES CORPORATION,
a Colorado corporation
By /s/ Xxxxx X. Xxxxx
------------------------------------------
Name: Xxxxx X. Xxxxx
----------------------------------------
Title: President and Chief Executive Officer
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