EXHIBIT 10.10
LICENSE AGREEMENT
THIS AGREEMENT is made effective as of the 24 day of October (the
"Effective Date"), by and between ID Technologies Corporation, a North Carolina
corporation, having a place of business and address of 00000 Xxxx Xxxx Xxxxxx,
Xxxxx X, Xxxxxx, Xxxxx Xxxxxxxx 00000 ("the Licensor"), and Protective
Technology, 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 both 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.
1.8 "Licensor Technology"
Means and includes the Licensed Partners 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.
"Field of License" means identification, access and security cards, associated
systems and equipment of whatever type used by passenger's and employee's
worldwide for Mass-Transit conveyances including; tolls, tickets and electronic
validations i.e. 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 and arms-length transaction in which the Licensee combines
or includes License 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. 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 of 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 of 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 port 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 upon accepting said First
Prototype and making the Production Start-up Payment called for by article 9.0,
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 its 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 company with the expertise,
skill, and knowledge to manufacture and produce Licensee's designated ones of
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
Produce 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 Sources 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 and License 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 License Product of a
lesser grade or quality than desired by Licensor or a Licensed Product likely to
impair consumer acceptance of the License 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 that Licensee stands ready to procure,
develop and market in commercial quantities. Licensee shall promptly and
forthwith proceed to procure such selected Licensed Produce 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 Produce 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 is 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 9.3.
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.
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 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.
7.1.7.1 To 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.
7.1.7.2 The 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
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.
Licensee represents and warrants in recognition of mutual benefits to
be derived by Licensee, Licensor and the TDP's that is shall grant to
the Licensor a nonexclusive, royalty free license, with the right to
sublicense, to make, use, and sell outside the Field of License any
License made improvement or enhancement to the fingerprint card that is
the Licensed product of this Agreement. With regard to technology
developed by Licensee, Licensee represents and warrants that it shall
have the sole and exclusive right to grant the license to manufacture,
use, sell, and otherwise transfer Licensee's Technology relating to the
System to Licensor. It is understood and agreed that the nonexclusive,
royalty free 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 he Licensed Product of this Agreement, and not to
technology developed by Licensee that is not incorporated into the
fingerprint card itself.
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 Undeserved 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 by
Licensor to be negotiated on a case-by-case basis, which Licensor s
agreed share should be remitted to Licensor.
b. Require the sublicensee to keep Licensor 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 both Licensee and Licensor 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 Unnerved and/or Undeserved Field of License.
a. At any time after the first year, following the delivery of the first
prototype to Licensee, should Licensor determine that some area or
areas within the Field of License are not being served or are being
undeserved by Licensee, Licensor may notify Licensee in writing of such
determination. 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 such unserved and/or undeserved
areas.
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 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 area to be
materially unserved or undeserved 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 area(s) to parties reasonably capable of and willing to
deliver such services and/or 2) allow the relicensing of these 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 attorney's 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.
Actual Royalties shall be computed at the rate of six percent (7%) of
Licensee's Net Sales during the applicable quarterly period (the
Royalty Rate).
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 first
quarter following acceptance of the First Prototype and continuing for
the duration of 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 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 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
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 Audit shall be at the expense of Licensor, unless a
variation of error 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 Audit.
e. If Licensor fails to request an Independent 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
Actual Royalties, and Licensor may not thereafter dispute the accuracy
of the Net Sales figure reported by Licensee and verified by Licensee's
Auditor.
9.5 Late Payment Interest. Any payment 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.
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 will be extended through
any additional Patents directly related to the original patent number
5,623,552. The Licensee shall have the right to extend in five-year
terms thereafter provided that for each renewal:
a. The Field of License is not then unserved or undeserved and
such unserved or undeserved 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 of 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. By Licensor upon Licensee failing to pay Licensor the Minimum
Royalty pursuant to Article 9.2, whereupon Licensee's failure to make
such payment, Licensor shall give notice to Licensee of such failure.
This License Agreement shall terminate 10 days from Licensee s receipt
of such notice unless Licensee, within said 10-day period, remedies
such default.
d. 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 any 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
undismissed or unstayed 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, except as
limited below: (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, except for the automatic termination rights
provided by Article 13.1c. above. 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 Licensor's 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.
(gg) By the Licensee upon giving Licensor thirty (30) days written notice of
Licensee's intent to terminate and paying all Actual Royalties owed to
the date of Termination of the Minimum Royalties, whichever is greater.
13.2 Upon termination of these Agreement any and all rights, which the
Licensee shall have or possess under this Agreement, including
sublicenses thereunder 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 Technology, Inc.
NCSU Centennial Campus, 000 Xxxxx Xxxxxx Xxxxx
0000 Xxxx Xxxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Suite 400 Attention: President
Xxxxxxx, XX 00000
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 Technology, Inc. (Licensee)
By: /s/P. Xxxxxx Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxxx
----------------------- ---------------------------------
P. Xxxxxx Xxxxxxxx Xxxxxx X. Xxxxxxx
Title: President & CEO Title: President & CEO
Date: 10 / 25 / 00 Date: 10/ 25 / 00
