EXHIBIT 10.4
AGREEMENT
BETWEEN
DIAURAL L.L.C.
AND
EDGE AUDIO, LLC
--------------------------------------------------------------------------------
AGREEMENT
This Agreement is made and entered into this 5TH day of FEBRUARY, 2000
(herinafter "EFFECTIVE DATE") by and between DiAural L.L.C., a company organized
and existing under the laws of the State of Utah, and having an office at 0000
Xxxxx 0000 Xxxx, Xxxxx, Xxxx 00000, X.X.X. (hereinafter "LICENSOR"), and EDGE
AUDIO, LLC, a LIMITED LIABILITY Company organized and existing under the laws of
the State of Oregon, and having an office at 00000 XX Xxxxxx, Xxxxx X, Xxxx
Xxxxxx, XX, 00000 (hereinafter "LICENSEE"), all of which are collectively
referred to as the "Parties" and, individually, a "Party".
R E C I T A L S
WHEREAS, the LICENSOR has acquired certain rights, title and interest
in and to certain inventions, technology, know-how and patent applications
relating to loudspeaker interface (crossover) technology; and
WHEREAS, the LICENSOR is in the process of acquiring patent rights to
the aforesaid loudspeaker interface (crossover) technology and represents itself
to be the owner of all right, title and interest in and to the loudspeaker
interface (crossover) technology and to all pending patent applications,
inventions, technology and know-how requisite for the manufacture, use, sale and
assembly thereof; and
WHEREAS, LICENSEE desires to manufacture, use, market, offer for sale
and otherwise commercialize audio products that incorporate the loudspeaker
interface (crossover) technology and associated technology; and
WHEREAS, LICENSEE is also desirous of using in connection with his
manufacturing, use, marketing, offering for sale and other commercialization of
the loudspeaker interface (crossover) technology and associated technology
1
certain trademarks owned by LICENSOR and other trademarks developed hereafter
which relate to the loudspeaker interface (crossover) technology; and
WHEREAS, LICENSEE is desirous of acquiring from LICENSOR a nonexclusive
license to manufacture, market, sell and offer for sale audio products
incorporating the loudspeaker interface (crossover) technology, associated
technology and know-how, as needed to manufacture, market and sell such audio
products;
WHEREAS, LICENSEE is desirous of acquiring from LICENSOR a nonexclusive
license to use in connection with his manufacturing, use, marketing, offering
for sale and other commercialization of the loudspeaker interface (crossover)
technology and associated technology certain trademarks owned by LICENSOR and
other trademarks developed hereafter which relate to the loudspeaker interface
(crossover) technology; and
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, LICENSEE and LICENSOR intending to
be legally bound, agree as follows:
TERMS OF AGREEMENT
SECTION 1 - DEFINITIONS
1.1 The term "CROSSOVER TECHNOLOGY" shall mean the technology disclosed
in United States Patent applications Serial No. 09/121,753 filed on July 23,
1998, Serial No. 09/256,040 filed on February 23, 1999, and foreign patent
applications processed under the Patent Cooperation Treaty including
PCT/US98/20826 filed on October 2, 1998 and a PCT filing corresponding to U.S.
Serial No. 09/256,040 filed on May 6, 1999, which are represented by LICENSOR to
be owned and controlled by LICENSOR.
2
1.2 The term "LETTERS PATENT" shall mean United States Patent
applications Serial No. 09/121,753 filed on July 23, 1998, and Serial No.
09/256,040 filed on February 23, 1999, and foreign patent applications processed
under the Patent Cooperation Treaty including PCT/US98/20826 filed on October 2,
1998 and a PCT filing corresponding to U.S. Serial No. 09/256,040 filed on May
6, 1999, which are represented to be owned by LICENSOR, as well as any
corresponding United States or foreign Patent or Patents which issue therefrom,
along with any corresponding United States or foreign applications or patents,
including counterparts, continuation-in-parts, reissues, re-examinations,
substitutes thereof and any other patents or patent applications relating to the
CROSSOVER TECHNOLOGY or subsequent improvements thereto.
1.3 The term "TECHNICAL INFORMATION" as used in this Agreement shall
mean any technical or business information, any invention, equipment or
apparatus, methods or processes, technology, know-how, trade secret, drawing,
data, evaluation, specifications, quantity and inspection standards, sales
literature, report, business plan, memorandum, market study, customer lists,
training materials, computer programs or software, or any other documents which
are in whole or in part, whether confidential or proprietary, which relates to
the CROSSOVER TECHNOLOGY.
1.4 The term "LICENSED PRODUCTS" means all products, equipment,
components, and devices relating to CROSSOVER TECHNOLOGY and TECHNICAL
INFORMATION which are within the scope of at least one pending or issued claim
of any of the LETTERS PATENTS, including any spare part or replacement part
thereof or any other component or subsystem which is not itself a LICENSED
PRODUCT, the sale of which part, component, or subsystem would, but for the
3
license extended herein, be a contributory or other indirect infringement of the
LETTERS PATENT or trade secrets.
1.5 The term "FINISHED PRODUCT" means a commercially marketable product
that incorporates LICENSED PRODUCTS into a form factor known by LICENSEE as the
final integration of LICENSED PRODUCTS and includes the final enclosure or
cabinet in the case of audio speakers.
1.6 The term "NET SALES PRICE" means the cumulative amounts (including
the receipt of non-cash items valued at fair market value) derived by LICENSEE
from the sale of a FINISHED PRODUCT in an arms-length transaction with an
independent third party, whether for cash, credit or otherwise.
1.7 The term "TERM OF THE AGREEMENT" means the duration between the
Effective Date of this Agreement and, unless terminated earlier in accordance
with other provisions of this Agreement, shall expire upon the date of the last
to expire LETTERS PATENT including through the pendency of any filed patent
applications as defined under LETTERS PATENT above.
1.8 The term "TERRITORY" means any countries of the world in which
patents have been applied for or issued from including the United States of
America.
SECTION 2 - GRANT OF TECHNOLOGY LICENSE
2.1 Subject to other terms and conditions set forth in this Agreement,
the LICENSOR hereby grants to LICENSEE a personal, nontransferable (except if
and as expressly provided below), nonexclusive right and license under the
LETTERS PATENT, whether pending patent applications for CROSSOVER TECHNOLOGY or
any Letter Patent that may issue therefrom, to manufacture, use, sell, offer for
4
sale and commercialize the LICENSED PRODUCTS throughout the TERRITORY for the
TERM OF THE AGREEMENT.
2.2 The right and license granted to LICENSEE under this Agreement does
not include the right, directly or indirectly by implication, estoppel or
otherwise, to sub-license another. The sale, lease or other disposition by
LICENSEE of a LICENSED PRODUCT will not convey, by implication, estoppel or
otherwise, to the party to which the LICENSED PRODUCT is sold, leased or
otherwise transferred, any license or right under the LICENSED PRODUCTS
including LETTERS PATENTS and TECHNICAL INFORMATION.
2.3 LICENSEE agrees that any written contract entered into by LICENSEE
for the sale, lease or other disposition of LICENSED PRODUCTS shall include a
statement in a form previously approved in writing by LICENSOR, such approval
not to be unreasonably withheld, advising the purchaser of (i) the proprietary
nature of the CROSSOVER TECHNOLOGY including identification of LETTERS PATENT
and any patent pending designation, (ii) and an express acknowledgment that no
right or license, by implication, estoppel or otherwise, in the LICENSED PRODUCT
is granted to the purchaser.
SECTION 3 - RIGHT AND OBLIGATION TO USE TRADEMARKS
3.1 The LICENSOR hereby grants to LICENSEE a nonexclusive right and
obligation to use the trademarks "DIAURAL" including related icons or other
trademarks and icons (hereinafter "TRADEMARKS") specified by LICENSOR for
designating use of the CROSSOVER TECHNOLOGY by LICENSEE in LICENSED PRODUCTS.
The form and substance of the use of TRADEMARKS to be previously approved in
writing by LICENSOR, such approval not to be unreasonably withheld.
5
SECTION 4 - REPRESENTATIONS, COVENANTS BY THE PARTIES AND TECHNICAL SUPPORT
4.1 The LICENSOR and LICENSEE each represent and warrant to the other
that they possess all the requisite power and authority to enter into this
Agreement and to perform each and every term, provision, and obligation of this
Agreement, and that neither the execution or delivery of this Agreement nor the
performance of the terms of this Agreement will conflict with or result in the
breach of any terms, provisions, or obligations of, or constitute a default
under any other agreement or instrument under which such Party is obligated.
4.2 The LICENSOR hereby warrants that it is the owner of the LETTERS
PATENT and said TRADEMARKS and that it possesses the right to grant the
nonexclusive license, as provided herein, to the LICENSED PRODUCTS.
4.3 There are no other warranties of any kind, express or implied,
including, without limitation, implied warranties of fitness for a particular
purpose, merchantability or title, except for the warranties expressly set out
in this Agreement. For example, LICENSOR does not warrant or represent: (i) that
any LETTERS PATENT is valid or enforceable; (ii) that any LICENSED PRODUCT, or
that the incorporation of an invention covered by a LETTERS PATENT into a
LICENSED PRODUCT, or that the use of any invention or process covered by a
LETTERS PATENT, will not infringe any patent or other property or proprietary
right of any third party; or (iii) that LICENSOR will continue to prosecute any
application constituting LETTERS PATENT, or maintain any patent constituting a
LETTERS PATENT, or enforce any LETTERS PATENT against any third party.
4.4 LICENSEE represents that it is technically proficient, able to
evaluate the purchase value of the CROSSOVER TECHNOLOGY and TECHNICAL
INFORMATION, and that LICENSEE is able to competently apply the use of CROSSOVER
TECHNOLOGY in the development of LICENSED PRODUCTS.
6
SECTION 5 - LICENSE FEE AND ROYALTIES
5.1 LICENSEE agrees to pay LICENSOR during the term of this Agreement
fees and royalties as set forth below.
5.2 LICENSEE agrees to pay LICENSOR:
5.2.1 A yearly license fee (hereinafter "YEARLY LICENSE FEE")
of fifty thousand U.S. Dollars ($50,000.00) initially due on the EFFECTIVE DATE
of this Agreement, and at each annual anniversary of the EFFECTIVE DATE through
the TERM OF THE AGREEMENT, which shall be nonrefundable, except:
5.2.1.1 At the sole discretion of the LICENSOR, if
both (i) this Agreement is executed and the YEARLY LICENSE FEE is paid and
received at least 60 days before manufacture of LICENSED PRODUCTS by LICENSOR
and (ii) LICENSEE in the previous 12 months of business had a total gross
revenue of:
5.2.1.1.1 Less than or equal to two million U.S.
Dollars ($2,000,000.00), then for that annual payment only of the YEARLY LICENSE
FEE, LICENSEE may take a prepaid discount of forty-nine thousand U.S. Dollars
($49,000.00) against the YEARLY LICENSE FEE; or
5.2.1.1.2 More than two million U.S. Dollars
($2,000,000.00) and less than or equal to four million U.S. Dollars
($4,000,000.00), then for that annual payment only of the YEARLY LICENSE FEE,
LICENSEE may take a prepaid discount of forty-seven thousand U.S. Dollars
($47,000.00) against the YEARLY LICENSE FEE; or
5.2.1.1.3 More than four million U.S. Dollars
($4,000,000.00) and less than or equal to six million U.S. Dollars
($6,000,000.00), then for that annual payment only of the YEARLY LICENSE FEE,
LICENSEE may take a prepaid discount of forty-six thousand U.S. Dollars
($46,000.00) against the YEARLY LICENSE FEE; or
7
5.2.1.1.4 More than six million U.S. Dollars
($6,000,000.00) and less than or equal to ten million U.S. Dollars
($10,000,000.00), then for that annual payment only of the YEARLY LICENSE FEE,
LICENSEE may take a prepaid discount of forty-four thousand U.S. Dollars
($44,000.00) against the YEARLY LICENSE FEE; or
5.2.1.1.5 More than ten million U.S. Dollars
($10,000,000.00) and less than or equal to fifteen million U.S. Dollars
($15,000,000.00), then for that annual payment only of the YEARLY LICENSE FEE,
LICENSEE may take a prepaid discount of forty-two thousand U.S. Dollars
($42,000.00) against the YEARLY LICENSE FEE; or
5.2.1.1.6 More than fifteen million U.S. Dollars
($15,000,000.00), then for that annual payment only of the YEARLY LICENSE FEE,
LICENSEE may take a prepaid discount of forty thousand U.S. Dollars ($40,000.00)
against the YEARLY LICENSE FEE.
5.2.2 A Royalty on each and every FINISHED PRODUCT integrating
LICENSED PRODUCT that is manufactured, used, sold, or otherwise commercialized,
said Royalty being either:
5.2.2.1 The greater of either (i) twenty-five percent
(25%) of the NET SALES PRICE of a FINISHED PRODUCT or (ii) two hundred U.S.
Dollars ($200.00) for the first two (2) electroacoustic transducers within a
FINISHED PRODUCT and an additional fifty U.S. Dollars ($50.00) for each
additional electroacoustic transducer in the same FINISHED PRODUCT;
5.2.2.2 If Royalty is paid at least sixty (60) days
in advance of manufacture of FINISHED PRODUCTS via purchase of special prepaid
8
royalty stickers in one-thousand U.S. Dollar ($1,000.00) minimum lots, then
Royalty for each FINISHED PRODUCT (one single cabinet or enclosure) is:
5.2.2.2.1 Two and one-half U.S. Dollars
($2.50) if the FINISHED PRODUCT does not exceed twenty-five (25) pounds in
weight; or
5.2.2.2.2 Ten U.S. Cents ($0.10) for each
and every pound if the FINISHED PRODUCT does exceed twenty-five (25) pounds in
weight.
5.2.2.3 For vehicular applications of LICENSED
PRODUCTS, if Royalty is paid, at least sixty (60) days in advance of manufacture
or integration of LICENSED PRODUCTS into the vehicle, via purchase of special
prepaid royalty stickers, the Royalty for private cars, trucks, planes, boats,
and RVs is one hundred-fifty U.S. Dollars ($150.00) for the first two (2)
electroacoustic transducers in the vehicle and an additional twenty U.S. Dollars
($20.00) for each additional electroacoustic transducer in the same vehicle.
Special prepaid royalty stickers shall be issued by LICENSOR with the serial
number of the vehicle and LICENSEE shall visibly affix the special prepaid
royalty stickers to the driver's/pilot's door jamb, or adjacent to the vehicle
serial number, or another location determined and specified in writing at time
of purchase of special prepaid royalty stickers.
5.3 The Parties have agreed to the Royalty on LICENSED PRODUCTS as
stated herein as a mutually acceptable, convenient and practical measure of an
appropriate royalty for the use of the LICENSED PRODUCTS throughout the
TERRITORY. In order to ensure that the NET SALES PRICE of FINISHED PRODUCTS sold
by LICENSEE is readily ascertainable, LICENSEE agrees that all FINISHED PRODUCTS
sold or otherwise disposed of by LICENSEE shall be separately invoiced for no
less than fair market value.
9
SECTION 6 - SAMPLES AND QUALITY CONTROL
6.1 LICENSEE shall prior to initial sale of LICENSED PRODUCT, and at
any time requested by LICENSOR provide, at no charge to LICENSOR, up to three
(3) pairs/sets of any product including FINISHED PRODUCTS (hereinafter
"SAMPLES") requested by LICENSOR that incorporate LICENSED PRODUCTS. LICENSEE
shall have the SAMPLES delivered to LICENSOR within thirty (30) days of the
request, at no charge and freight prepaid. The SAMPLES thereafter become the
sole property of LICENSOR.
6.2 Before LICENSEE offers for sale or sells any of the LICENSED
PRODUCTS, the Parties shall agree upon and reduce to writing quality standards
for the LICENSED PRODUCTS to ensure a technically satisfactory exploitation of
the LICENSED PRODUCTS and the CROSSOVER TECHNOLOGY embodied herein and to ensure
that the LICENSED PRODUCTS made by LICENSEE conform to the quality standards
that are expected by LICENSOR. LICENSEE agrees that all units of the LICENSED
PRODUCTS and FINISHED PRODUCTS sold under this Agreement shall meet such quality
standards. LICENSEE shall not commence the sale of the LICENSED PRODUCTS unless
and until LICENSEE has first provided LICENSOR with SAMPLES for inspection.
SECTION 7 - PAYMENTS, RECORDS AND REPORTS
7.1 The obligation of LICENSEE to pay the Royalty with respect to a
LICENSED PRODUCT shall arise at the time the LICENSED PRODUCT is first sold,
leased or otherwise disposed of by LICENSEE. A LICENSED PRODUCT shall be deemed
to have been sold, leased or otherwise disposed of when it is first invoiced or
shipped to a customer by LICENSEE, whichever comes first.
10
7.2 During the TERM OF THE AGREEMENT, within thirty (30) days after the
end of each calendar quarter following the Effective Date of this Agreement,
LICENSEE shall send to LICENSOR a written statement identifying the LICENSED
PRODUCTS including FINISHED PRODUCTS for which royalties are payable for such
period and showing the total number of such LICENSED PRODUCTS sold, leased or
otherwise disposed of by LICENSEE during such period and the amount of Royalties
due and payable thereon, including the calculations used by LICENSEE to
determine the amount. The written statements furnished to LICENSOR by LICENSEE
shall be maintained in confidence by LICENSOR.
7.3 Concurrent with the written statement to be furnished to LICENSOR,
LICENSEE shall pay to LICENSOR the full amount of Royalties shown thereon, the
payment to also include any due and unpaid YEARLY LICENSE FEE. In the event of
LICENSEE's failure to make any required payment on or before the required date,
a supplemental royalty equal to five percent (5%) of the amount otherwise due,
or the maximum amount permitted by law, whichever is less, shall be paid by
LICENSEE for each month or portion thereof that the payment is late by more than
five (5) days.
7.4 The royalty report shall be certified by an authorized
representative of LICENSEE and shall state the number of LICENSED PRODUCTS and
FINISHED PRODUCTS sold, leased or otherwise disposed of. In the event a LICENSED
PRODUCT is sold at varying NET SALES PRICES, then the report shall indicate the
number of LICENSED PRODUCTS sold at each NETS SALES PRICE. Further, LICENSEE
shall furnish whatever additional information LICENSOR may reasonably request
from time to time to enable LICENSOR to verify the calculation of Royalties due
pursuant to this Agreement.
11
7.5 All monies payable hereunder shall be tendered in United States
Dollars in such locations in the United States as LICENSOR may from time to time
designate by written notice. All payments under this Agreement shall be made
payable to LICENSOR and shall initially until further notice be delivered to the
LICENSOR's address as specified above.
7.6 It is expressly understood and agreed by the Parties hereto that
all computations relating to determination of the amounts of Royalties due and
payable pursuant to this Agreement shall be made in accordance with
internationally recognized and generally accepted accounting principles as
reflected in the practice of certified independent public accountants of
international reputation.
7.7 LICENSEE shall keep proper books of account regarding all sales and
manufacturing of LICENSED PRODUCTS. Upon reasonable request by the LICENSOR,
such books of account shall be made available at reasonable times and places
provided by the LICENSOR (including the right to inspect, copy, and make
abstracts therefrom) for the purpose of verifying the royalties due or paid, or
for the purpose of determining compliance of other provisions of this Agreement.
SECTION 8 - PATENTS AND TRADEMARKS
8.1 LICENSEE is not obligated to pay any costs, fees, and expenses
incurred in obtaining patent protection or trademark protection in the United
States related to the CROSSOVER TECHNOLOGY and TRADEMARKS or other related
trademarks including related icons or other trademarks and icons specified by
LICENSOR for designating use of the CROSSOVER TECHNOLOGY by LICENSEE in LICENSED
PRODUCTS.
8.2 LICENSOR shall have the sole right to direct the continuing
prosecution of the LETTERS PATENT including pending patent applications directed
12
to the CROSSOVER TECHNOLOGY and/or related TECHNICAL INFORMATION, including any
and all improvements thereto.
8.3 During the TERM OF THE AGREEMENT, the LICENSEE shall disclose to
LICENSOR any improvements or modifications relating to the LICENSED PRODUCTS
which are developed by the LICENSEE or the LICENSEE's employees, contractors or
agents. All improvements shall be the exclusive property of LICENSOR and shall
be subject to the license granted in Agreement to LICENSEE. LICENSEE shall
promptly assign to LICENSOR, in perpetuity and throughout the world, all rights
in and to all improvements to CROSSOVER TECHNOLOGY and LICENSED PRODUCTS and
LICENSOR shall have the sole and exclusive right, but not the obligation, to
prepare, file and prosecute, in the name of LICENSOR and at LICENSOR's expense,
application for patents in the United States and throughout the world for all
such improvements. LICENSEE shall provide LICENSOR with all documents,
information and assistance as may be required by LICENSOR in connection with
such applications.
8.4 If during the TERM OF THE AGREEMENT, LICENSEE shall file a patent
application or be granted a patent, or be granted the right to grant others a
license under any patent application or patent, anywhere in the world, with
respect to derivatives of CROSSOVER TECHNOLOGY or any other aspect of LICENSOR's
technology, LICENSEE agrees to, and hereby does, grant to LICENSOR an
irrevocable, non-exclusive, royalty-free, worldwide license (with the right to
sub-license only to a parent or subsidiary of LICENSOR) in perpetuity to make,
have made, use, sell lease or otherwise dispose of, and import items, devices
and products covered by any such patent or patent application, and practice any
methods covered by any such patent or patent application.
13
8.5 LICENSE agrees to xxxx LICENSED PRODUCTS, or in the event their
size or configuration makes such marking impractical, their containers or
labels, as well as all literature describing the LICENSED PRODUCTS with the
respective patent numbers of LETTERS PATENT and any corresponding "Patent
Pending" designators for any pending patent applications.
8.6 In all literature originated by LICENSEE that relates to CROSSOVER
TECHNOLOGY, LICENSEE agrees to prominently print the legend "DiAural(TM)
Technology" or other descriptive legend as LICENSOR may from time to time
designate. Except for advertising and marketing materials, said legend shall be
in print no less distinct and in size than the accompanying text.
8.7 On all LICENSED PRODUCTS and FINISHED PRODUCTS, LICENSEE agrees to
prominently display legends, trademarks or other identifying icons denoting the
use of CROSSOVER TECHNOLOGY and the identity of LICENSOR as mutually agreed upon
by the Parties in view of LICENSEE's specific LICENSED PRODUCTS and FINISHED
PRODUCTS.
SECTION 9 - CONFIDENTIAL DISCLOSURE
9.1 LICENSEE recognizes that LICENSOR has related to LICENSEE certain
technology, know-how and other trade secrets and knowledge ("CONFIDENTIAL
INFORMATION") which may be proprietary to LICENSOR. LICENSEE agrees to take all
reasonable steps to maintain the confidentiality of any CONFIDENTIAL INFORMATION
provided to LICENSEE by LICENSOR in the furtherance of this Agreement and to
protect all such CONFIDENTIAL INFORMATION with at least the same diligence, care
and precaution that the LICENSEE uses to protect its own confidential and trade
secret information, but in no event less than reasonable care. LICENSEE agrees
14
to not disclose any CONFIDENTIAL INFORMATION to any person not a Party to this
Agreement without the express written consent of LICENSOR.
9.2 The LICENSOR recognizes that LICENSEE also possesses like
information that has great value to LICENSEE. The LICENSOR also agrees to take
all reasonable steps and precautions necessary to maintain the propriety nature
of such information.
9.3 The Parties' obligations with respect to maintaining
confidentiality shall remain effective, notwithstanding the expiration or
termination of this Agreement.
9.4 With respect to any of LICENSOR'S CONFIDENTIAL INFORMATION
disclosed by LICENSEE to a third party, the LICENSEE shall be directly liable to
the LICENSOR for any damages incurred as a result of unauthorized use or
disclosure of CONFIDENTIAL INFORMATION including, without limitation, damages in
the form of attorney's fees and costs incurred by the LICENSOR in any action or
proceeding against a third party seeking redress for such unauthorized use of
CONFIDENTIAL INFORMATION.
9.5 Except as otherwise provided for in this Agreement relating to the
utilization of CROSSOVER TECHNOLOGY in LICENSED PRODUCTS, LICENSEE shall not
attempt to reverse engineer or otherwise attempt to reconstruct or discover any
underlying ideas relating to the CROSSOVER TECHNOLOGY.
SECTION 10 - INFRINGEMENT OF PATENT RIGHTS
10.1 In the event that LICENSEE suspects or becomes aware of
unauthorized or improper use or infringement of any LETTERS PATENTS, TECHNICAL
INFORMATION or TRADEMARKS, LICENSEE shall immediately notify LICENSOR. LICENSOR
may, at its option, elect to undertake and control the prosecution, defense or
settlement of any legal action in connection with such alleged improper use or
infringement, and LICENSEE shall have no right to initiate, prosecute, defend or
15
settle any claim, suit or action against or by any such third party without
LICENSOR's prior written consent. LICENSOR shall have the first right to enforce
the LETTERS PATENT and TECHNICAL INFORMATION bearing all costs, expenses, and
attorneys' fees but also maintaining for itself all damages awarded in the
litigation.
SECTION 11 - TERM AND TERMINATION
11.1 The original term of Agreement shall commence upon the signing
hereof and continue in full force and effect through the TERM OF THE AGREEMENT
except as otherwise provided herein.
11.2 LICENSOR shall have the right to terminate this Agreement during
the TERM OF THE AGREEMENT if LICENSEE is in arrears for ninety (90) days after
the due date of any payments including Royalties and YEARLY LICENSE FEES or if
LICENSEE is declared bankrupt and a distribution to creditors is ordered.
11.3 The LICENSOR shall also have the right to terminate this Agreement
during the TERM OF THE AGREEMENT if LICENSEE generates less than ten-thousand
U.S. Dollars ($10,000.00) in Royalties in any twelve (12) consecutive month
period beginning with the twenty-fourth (24) month following the Effective Date
of the Agreement and continuing thereafter through the TERM OF THE AGREEMENT.
11.4.1 The LICENSOR shall also have the right to terminate this
Agreement during the TERM OF THE AGREEMENT at LICENSOR'S sole discretion upon
written notification to the LICENSEE at least ninety days (90) prior to the
annual anniversary of the EFFECTIVE DATE of this Agreement, thereby stating
LICENSOR'S intent not to renew LICENSEE'S licenses to LICENSOR'S CROSSOVER
TECHNOLOGY.
16
11.4.2 The LICENSEE shall have the right to terminate this Agreement
during the TERM OF THE AGREEMENT at LICENSEE'S sole discretion upon written
notification to the LICENSOR at least ninety days (90) prior to the annual
anniversary of the EFFECTIVE DATE of this Agreement, thereby stating LICENSEE'S
intent not to renew LICENSEE'S licenses to LICENSOR'S CROSSOVER TECHNOLOGY
11.5 In the event that either Party has the right to terminate,
termination shall first be noticed in writing to the other Party. Except for the
right to terminate under section 11.4, both Parties recognize that before this
Agreement can be terminated, a one-hundred twenty (120) day period in which the
defaulting Party may cure after notice of termination is granted to each Party.
If the defaulting Party's outstanding obligations or capabilities are corrected
so as to meet the obligations under this Agreement, and this occurs within the
one hundred twenty (120) day period, this Agreement shall not be terminated.
However, if the defaulting Party is unable to cure during the one hundred twenty
(120) day period, this Agreement shall be terminated sixty (60) days after the
conclusion of the one hundred twenty (120) day period.
SECTION 12 - INDEMNIFICATION
12.1 LICENSEE hereby indemnifies, holds harmless and agrees to defend
LICENSOR from and against all claims, damages, expenses (including, without
limitation, attorney's fees and reasonable investigative and discovery costs),
liabilities and judgments on account of injury to persons, loss of life, or
damage to property occurring from LICENSEE's sale, marketing and
commercialization of the LICENSED PRODUCTS; provided, LICENSEE does not
indemnify LICENSOR against any injury, loss of life, or damage which is caused
by the active or passive negligence of LICENSOR, their agents, servants or
employees.
17
12.2 The Parties' obligations with respect to indemnification herein
shall remain effective, notwithstanding the expiration or termination of the
Agreement, as to claims accruing prior to the expiration or termination of this
Agreement.
SECTION 13 - INDEPENDENCE OF THE PARTIES
13.1 This Agreement shall not constitute the designation of either
Party as a representative or agent of the other or as a joint venture or
partnership between the Parties, nor shall either Party by this Agreement have
the right or opportunity to make any promise, guarantee, warranty or
representation, or to assume, create or incur any liability or other obligation
of any kind, express or implied, against or in the name of, or on behalf of, the
other.
SECTION 14 - ASSIGNMENT
14.1 LICENSEE shall not have the right to assign or otherwise transfer
this Agreement, without the prior written consent of LICENSOR.
14.2 LICENSOR shall have the right to assign their right to receive
royalty and other payments to any third party, without the prior written consent
of LICENSEE. Such assignments shall not be deemed effective until LICENSEE is
given notice of such assignment in writing as provided herein.
SECTION 15 - NOTICE
15.1 All notices, demands, and other communications under this
Agreement shall be in writing and deemed to have been duly given and delivered
one day after being sent by telefax, or five (5) days after posting by certified
mail, return receipt requested, postage prepaid to the Parties at the above
addresses.
18
15.2 The Parties hereto may at any time give written notice of changes
of address, and after such notices have been received, any notice of request
shall thereafter be given to such Party at the changed address.
SECTION 16 - APPLICABLE LAW
16.1 This Agreement is entered into pursuant to the laws of the State
of Utah, and the validity and interpretation of this Agreement shall be governed
by and in accordance with the laws of the State of Utah as such law shall from
time to time be in effect, excluding the choice of law provisions of any other
state or jurisdiction. The Parties agree that any action for relief based in
whole or in part on this Agreement (or the breach thereof) or otherwise relating
in whole or in part to this Agreement shall be filed in, and the Parties consent
to personal jurisdiction and venue in, the Federal and State Courts closest to
the above-identified place of business of LICENSOR in Ogden, Utah having subject
matter jurisdiction over such action. In any such action between the Parties,
the prevailing Party shall be entitled to recover (in addition to any other
relief awarded or granted) its reasonable costs and expenses (including
attorneys' fees) incurred in the proceeding.
SECTION 17 - ATTORNEYS' FEES
17.1 In the event either Party brings or commences a legal proceeding
to enforce any of the terms of this Agreement or it becomes necessary for any
Party to employ the services of any attorney, either to enforce or to terminate
this Agreement, each Party shall bear his own costs, expenses and attorneys'
fees incurred thereby with respect to the resolution of such matter.
19
SECTION 18 - GENERAL PROVISIONS
18.1 The Parties agree that this Agreement and the terms of this
Agreement are to be strictly confidential, and neither Party shall disclose this
Agreement or anything with respect to the terms of this Agreement to any third
party except: (i) to legal counsel; (ii) auditors; (iii) to the extent, if any,
required by law; (iv) in accordance with the terms of a protective or other
order duly entered in a legal proceeding; or (v) with the prior written consent
of the other Party.
18.2 The Parties hereto have read this Agreement and agree to be bound
by the terms herein. The Parties further agree that this Agreement shall
constitute the complete and exclusive statement of the agreement between them
and that this Agreement supersedes all proposals, written or oral, or any other
communications, warranties, representations or agreements between the Parties
relating to the LICENSED PRODUCTS.
18.3 No agreement changing, modifying, amending, extending,
superseding, discharging or terminating this Agreement or any provisions thereof
shall be valid unless it is in writing and is dated and signed by a duly
authorized representative of the Party or Parties to be charged.
18.4 The provisions of this Agreement are severable in the event that
any provisions of this Agreement shall be held to be invalid, illegal or
unenforceable. The validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
18.5 Failure of any Party hereto to enforce any provision of this
Agreement or rights with respect thereto or to exercise any election provided
for herein, shall in no way be considered as a waiver of such right to enforce
any other provisions or any other elections under this Agreement. Such failure
of any Party hereto to enforce any provision of this Agreement or rights with
respect thereto or to exercise any election provided for herein, shall in no way
20
be considered as a waiver to enforce the same provision of this Agreement or
rights with respect thereto or to exercise the election provided for herein at
any time in the future.
18.6 All the provisions contained in this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the respective successors
and assigns of the Parties to the same extent as if each such successor and
assign were named as party to this Agreement.
18.7 The headings of the Sections contained herein are for convenience
only and do not define, limit or construe the contents of such Sections.
18.8 This Agreement shall be interpreted and construed only by the
contents hereof, and there shall be no presumption or standard of construction
in favor or against either Party.
18.9 When required by context, the singular shall include the plural,
and the neuter gender shall include a person, corporation, firm or association.
18.10 There shall be no liability on either Party on account of any
loss, damage or delay occasioned, or caused by strikes, riots, fires,
insurrection or the elements, embargoes, failure of carriers, acts of God or of
the public enemy, compliance with any law, regulation, or other governmental
order, or any other causes beyond the control of either Party, whether or not
similar to the foregoing.
18.11 This Agreement may be executed in any number of original
counterparts, each of which shall be deemed to be an original, all of which
constitute one and the same agreement.
21
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
/s/ Xxx X. Xxxxxx FOR: EDGE AUDIO, LLC
------------------------------- --------------------------------------------
DIAURAL L.L.C. By: /s/ Xxxxxxxx Xxxxxxxxx
--------------------------------------------
Xxx X. Xxxxxx, President [handwritten] Xxxxxxxx Xxxxxxxxx, President
--------------------------------------------
"LICENSOR" "LICENSEE"
22
