SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) June 11, 1996
NESTOR, INC.
(Exact name of registrant as specified in charter)
Delaware 0-12-965 13-3163744
(State of other jurisdiction (Commission IRS employer
of incorporation) file number) identification no.
One Richmond Square, Providence, Rhode Island 02906
(Address of principal executive offices)
Registrant's telephone number, including area code: 401-331-9640
N/A
(Former name or former address, if changed since last report)
Item 2. Acquisition or Disposition of Assets.
On June 11, 1996 the Registrant sold to National Computer
Systems, Inc. ("NCS") certain assets relating to its character
recognition business. The disposition and consideration received
and to be received is described in the exhibits annexed as part
of Item 7. The Asset Purchase Agreement and License Agreement
provide NCS with the exclusive use of the Registrant's character
recognition products and technology in the document management
field and use of the Registrant's neural network technology in
data analysis, non-character based document processing and voice
recognition applications.
Item 7. Exhibits.
EXHIBITS
The following exhibits are filed herewith:
Exhibit No. Description
10 Asset
Purchase Agreement dated
June 11,
1996 between the Registrant
and NCS
10 License
Agreement dated June 11, 1996
between
the Registrant and NCS
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: June 10, 1996 NESTOR, INC.
(Registrant)
By:
/s/ Herbert S. Meeker
Secretary
2
____________________________________________
ASSET PURCHASE AGREEMENT
between
NATIONAL COMPUTER SYSTEMS, INC.
and
NESTOR, INC.
dated as of
June 11, 1996
____________________________________________
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT (this "Agreement"), dated
as of June 11, 1996, is made and entered into by and between
National Computer Systems, Inc., a Minnesota corporation
("Purchaser"), on the one hand, and Nestor, Inc., a Delaware
corporation ("Seller"), on the other hand.
WHEREAS, Seller is engaged in the business, among
others, of developing, manufacturing and distributing software
and software related products for intelligent character
recognition ("ICR") and forms and document management, including,
without limitation, in the Exclusive Field (the "ICR Business").
WHEREAS, Purchaser has previously engaged Seller as a
consultant to assist in the development of functional
specifications for certain software for reading and processing
forms known as "ACCRA II."
WHEREAS, Seller desires to sell and assign to
Purchaser, and Purchaser desires to purchase and assume from
Seller, on the terms and subject to the conditions set forth in
this Agreement, certain of the assets that are currently being
used by Seller in the conduct of the ICR Business.
WHEREAS, in connection with and as a condition to such
sale and assignment, Seller desires to grant to Purchaser, and
Purchaser desires to obtain from Seller, a license of certain
technology relating to the ICR Business and the development of
ACCRA II (the "License Agreement"), and a license of the
NestorReader trademark (the "Trademark License Agreement"), on
the terms and subject to the conditions set forth in such license
agreements by and between Purchaser and Seller entered into
contemporaneously with this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants, representations, warranties and agreements and the
conditions set forth in this Agreement, the parties hereto hereby
agree as follows:
ARTICLE I
DEFINITIONS
1.01 "ACCRA II" shall have the meaning assigned to it
in the License Agreement.
1.02 "Exclusive Field" shall have the meaning assigned
to it in the License Agreement.
1.03 "Existing ICR Products" shall have the meaning
assigned to it in the License Agreement.
1.04 "ICR Trademarks" shall mean trade names,
trademarks, service marks, trade dress and product configurations
that are used in or held for use exclusively in connection with
the Existing ICR Products and the ICR Business (except for the
"NestorReader" trademark of Seller which is being licensed
pursuant to the Trademark License Agreement) and all (A) goodwill
and common law rights associated therewith, (B) registration
applications pending thereon in any state and in any country, and
(C) registrations issued thereon in any state and in any country.
All such trademarks are identified in the Disclosure Schedule
under the caption referencing Section 1.04 hereto.
ARTICLE II
TRANSFER OF ASSETS
2.01 Transfer of Assets. On the terms and subject to
the conditions set forth in this Agreement, Seller hereby agrees
to sell, transfer and assign to Purchaser on the Closing Date, as
designated below, and Purchaser hereby agrees to purchase and
acquire from Seller on the Closing Date, all right, title and
interest in and to all of the following assets of Seller
(collectively, except for the excluded assets set forth in
Section 2.02 hereof, the "Assets")(certain definitions applicable
to the Assets are set forth in Article I hereof):
(a) All ICR Trademarks specifically identified in the
Disclosure Schedule under the caption referencing Section
1.04 hereto;
(b) All of the equipment, machinery and other physical
assets owned by Seller and used by Seller in the design,
sales and support of the ICR Business and specifically
identified in Exhibit A;
(c) All of Seller's inventories of Existing ICR
Products, supplies, raw materials, parts, finished goods,
work-in-process, product labels and packaging materials used
in connection with the design, sales and support of the ICR
Business and Seller's interest in all orders or contracts
identified on Exhibit B for the purchase of supplies, raw
materials, parts, product labels and packaging materials,
all as used exclusively in connection with the design, sales
and support of the ICR Business, including such inventory
specifically identified in Exhibit A-1 (Seller shall be
permitted to retain a reasonable limited number of copies
solely for recordkeeping purposes);
(d) Seller's interest in certain specified agreements
with respect to the ICR Business to which Seller is a party
and which are specifically identified in Exhibit B and all
unfilled or uncompleted customer contracts, commitments or
purchase or sales orders received and accepted by Seller in
connection with the ICR Business in the ordinary course of
business and which are specifically identified in Exhibit B;
(e) Seller's interest in all personal property leases
to which Seller is a party that are used in connection with
the design, sales and support of the ICR Business, to which
Seller is a party and which are specifically identified in
Exhibit C;
(f) All of Seller's books, records and other documents
and information relating to the Assets or the ICR Business
(but excluding such records that are not necessary or useful
to Purchaser in its ongoing use of the Assets and exercise
of its rights under the License Agreement, e.g., copies of
purchases of toner for a copier machine used in the ICR
Business), including, without limitation, all customer,
prospect, dealer and distributor lists, sales literature,
inventory records, purchase orders and invoices, sales
orders and sales order log books, customer information,
commission records, correspondence, product data, material
safety data sheets, price lists, product demonstrations,
quotes and bids and all product catalogs and brochures;
provided that Seller shall have the right to retain the
originals and provide Purchaser with copies of such books
and records that are (i) used in common by the ICR Business
and Seller's other business activities (other than original
copies of any contracts to be assumed by Purchaser under
this Article II, all of which originals shall be provided to
Purchaser) or (ii) are necessary for Seller's recordkeeping
for audit purposes or to satisfy its other legal and tax
requirements. Seller shall use its best efforts to provide
all such books and records to Purchaser at the Closing.
From and after the Closing, Seller shall deliver to
Purchaser any additional books and records required to be
delivered to Purchaser under this Section 2.01(f) that it
becomes aware of or that are requested by Purchaser, and
such delivery obligation shall be Seller's sole continuing
obligation under this Section 2.01(f) after the Closing with
respect to such books and records; and
(g) Goodwill (including all goodwill associated with
and symbolized by the name or names identified in the ICR
Trademarks) and all rights to continue to use the Assets in
the conduct of a going business.
The parties hereto expressly agree that Purchaser is not assuming
any of the liabilities, obligations or undertakings relating to
the foregoing Assets, except for those liabilities and
obligations specifically assumed by Purchaser in Section 2.03
hereof.
2.02 Excluded Assets. Notwithstanding the terms of
Section 2.01, Seller is not selling to Purchaser any assets other
than the Assets set forth in Section 2.01, and Purchaser is not
purchasing any assets of Seller, other than the Assets. The
following assets, without limitation, shall be retained by Seller
and shall not be sold, transferred or assigned to Purchaser in
connection with the purchase of the Assets:
(a) All cash and bank accounts of Seller;
(b) All corporate certificates of authority and
corporate minute books and the corporate stock record or
register of Seller;
(c) All executory licenses, contracts or agreements or
leases not specifically identified in Exhibit B or Exhibit C
to this Agreement, including, without limitation, the third
party licenses identified in the portion of the Disclosure
Schedule referencing Section 4.06 as requiring the consent
of the licensor and identifying that such consent has not
been obtained;
(d) All of Seller's intellectual property rights
(including, without limitation, Seller's intellectual
property rights relating to the ICR Business and Nestor
Technology, as defined in the License Agreement, which
rights are being licensed to Purchaser under the License
Agreement) other than the ICR Trademarks; and
(e) All intra-company accounts or notes receivable.
2.03 Assumption of Liabilities. Purchaser shall
assume, pay, perform in accordance with their terms or otherwise
satisfy, from and after the Closing Date, Seller's executory
obligations to be performed after the Closing Date under the
licenses, contracts or agreements specifically identified in
Exhibit B and Exhibit C to this Agreement and assigned to
Purchaser pursuant to Section 2.01 hereof.
2.04 Excluded Liabilities. Other than as set forth in
Section 2.03 above, Seller shall retain, and Purchaser shall not
assume, and nothing contained in this Agreement shall be
construed as an assumption by Purchaser of, any liabilities,
obligations or undertakings of Seller of any nature whatsoever,
whether accrued, absolute, fixed or contingent, known or unknown,
due or to become due, unliquidated or otherwise. Seller shall be
responsible for all of the respective liabilities, obligations
and undertakings of Seller not assumed by Purchaser pursuant to
Section 2.03 hereof including, without limitation, all employment
obligations, taxes, royalties or license fees accrued prior to
the Closing Date that are due and payable to any party.
ARTICLE III
PURCHASE PRICE
3.01 Amount. The purchase price (the "Purchase Price")
for the Assets shall be:
(a) Three Hundred Thousand Dollars ($300,000.00),
plus,
(b) An amount of Twenty Thousand Two Hundred and Two
Dollars ($20,202.00) as full payment and satisfaction of any
and all outstanding obligations of Purchaser for any Phase 1
ACCRA II development undertaken by Seller, plus,
(c) The amount set forth on Exhibit D for certain
prepaid expenses of the ICR Business less the amount set
forth on Exhibit D for the cost of replacing software
necessary to operate the ICR Business. The parties also
shall make the post-closing adjustments set forth on Exhibit
E.
3.02 Royalties. Purchaser agrees to pay the royalty
payments set forth in the License Agreement.
3.03 Manner of Payment.
(a) Purchaser shall pay the Purchase Price for the
Assets provided for in Sections 3.01(a), 3.01(b) and Exhibit
D hereof to Seller on the Closing Date and simultaneously
with the Closing of the transactions contemplated by this
Agreement, by wire transfer to Seller at a bank account to
be specified by Seller not less than two business days prior
to the Closing Date.
(b) Purchaser shall have the right to offset the
amount of any claim it has for indemnification under this
Agreement or the License Agreement against any amounts owing
to Seller, including without limitation, any amounts owing
under the License Agreement.
3.04 Allocation of Purchase Price. The total purchase
price shall be allocated among the Assets in the manner described
on Exhibit F to this Agreement. Each of Purchaser and Seller
shall file, in accordance with the Internal Revenue Code of 1986,
as amended, an asset allocation statement on Form 8594 with its
federal income tax return for the tax year in which the Closing
Date occurs and shall contemporaneously provide the other party
with a copy of the Form 8594 being filed.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLER
As a material inducement to Purchaser to enter into
this Agreement and with the understanding that Purchaser will be
relying thereon in consummating the transactions contemplated
hereunder, Seller represents and warrants to Purchaser that,
except as otherwise disclosed to Purchaser in the Disclosure
Schedule (the "Disclosure Schedule") delivered by Seller to
Purchaser on the date hereof and attached to this Agreement
(which Disclosure Schedule lists certain of the Assets Defined in
Article I and the exceptions to the representations and
warranties contained in this Article IV under captions
referencing the Sections to which such exceptions apply):
4.01 Organization and Standing. Seller is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has all requisite
corporate power and authority to sell and transfer its interest
in the Assets to Purchaser pursuant to this Agreement and to
enter into and perform its commitments under each of the
agreements to be executed by Seller pursuant to this Agreement.
Seller is qualified and in good standing in each jurisdiction in
which its failure to so qualify could have a material adverse
effect on the Assets or the financial condition of the ICR
Business.
4.02 Corporate Authorization. The execution, delivery
and performance of this Agreement by Seller, and all other
agreements or instruments to be executed by Seller pursuant to
this Agreement, have been authorized by proper corporate action
and are within its corporate powers. This Agreement constitutes
and such other agreements or instruments will constitute, the
legal, valid and binding obligations of Seller, which are, or
will be, enforceable against Seller in accordance with their
respective terms.
4.03 No Liens or Encumbrances. Seller has, and on the
Closing Date will transfer and convey to Purchaser, good and
marketable title to the Assets, and on the Closing Date the
Assets shall be free and clear of all mortgages, liens, claims,
charges, encumbrances, leases, security interests, pledges, and
title retention agreements of any kind or nature.
4.04 Schedules.
(a) The Disclosure Schedule under the caption
referencing Section 4.04(a) lists all executory licenses,
contracts or agreements relating to the Assets or the ICR
Business between Seller and any third parties, including any
third party software licensed by Seller relating to the
Assets or the ICR Business.
(b) The Disclosure Schedule under the caption
referencing Section 4.04(b) lists all executory personal
property leases to which Seller is a party that are used in
connection with the design, sales and support of the ICR
Business between Seller and any third parties.
(c) The Disclosure Schedule under the caption
referencing Section 4.04(c) lists all distributors, dealers
and customers, and all potential distributors, dealers and
customers, of the ICR Existing Products as currently
contained on the Seller's customer database system or
similar system used by Seller in the operation of its
business.
(d) The Disclosure Schedule under the caption
referencing Section 1.04 lists all of the ICR Trademarks.
4.05 No Defaults. Each of the licenses, contracts and
agreements listed in the Disclosure Schedule under the captions
referencing Section 4.04(a) or Section 4.04(b) is freely
transferable to Purchaser and is in full force and effect on the
date hereof. Seller is not in material default or breach under
any of such licenses, contracts and/or agreements and, to
Seller's knowledge, no other party to such instruments is in
material default or breach thereunder. True and correct copies
of all documents listed in the Disclosure Schedule under the
captions referencing Section 4.04(a) or Section 4.04(b) have
heretofore been delivered to Purchaser.
4.06 No Breaches, etc. Seller is not in material
violation of, and the execution, delivery and performance of this
Agreement or the other agreements contemplated by this Agreement
and the consummation of the transactions contemplated hereby do
not and will not result in any material breach or acceleration
of, any of the terms or conditions of its certificate of
incorporation or bylaws, or of any mortgage, bond, indenture,
contract, agreement, license or other instrument or obligation to
which Seller is a party or by which the Assets are bound. The
execution, delivery and performance of this Agreement or the
other agreements contemplated by this agreement will not result
in the violation of any statute, regulation, judgment, writ,
injunction or decree of any court, threatened or entered in a
proceeding or action in which Seller is, was or may be bound or
to which the Assets are subject. Seller has obtained all
consents or waivers to the transactions contemplated by this
Agreement required under any of the agreements or commitments of
Seller being sold or assigned to, or assumed by Purchaser
hereunder, including, without limitation, the consent of Seller's
secured lenders with any interest in the Assets and the release
of all of the Assets from any security agreement and financing
statement.
4.07 Governmental Authorities; Consents. Except as set
forth in the Disclosure Schedule under the caption referencing
Section 4.07, Seller is not required to submit any notice, report
or other filing with any governmental authority in connection
with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. Except as
set forth in the Disclosure Schedule under the caption
referencing Section 4.07, no notice, report, or other filing and
no consent, approval or authorization of any governmental or
regulatory authority is required to be obtained by Seller in
connection with its execution, delivery and performance of this
Agreement.
4.08 Lawsuits, Proceedings, etc. Seller is not engaged
in any legal action or other proceedings before any court or
administrative agency which would or might prohibit the
transactions contemplated hereby or which would or might
adversely affect the Assets, nor is Seller a party to any action
or proceeding, nor has Seller been threatened with any such
action or proceeding, nor, to the Seller's knowledge, does there
exist any basis therefor, which will or could have a material
adverse effect on the condition, financial or otherwise, of the
Assets or the ICR Business, nor has any order, writ, injunction
or decree has been issued by, or requested of, any court or
governmental agency which does or may result in any material
adverse change in the Assets or the Business, nor is Seller
liable for damages to any employee or former employee of the ICR
Business as a result of violation of any foreign, state or
federal laws directly or indirectly relating to such employee or
former employee.
4.09 Compliance with Law. Seller is not currently
being charged with, nor has it operated the ICR Business in
violation of, any applicable foreign, federal, state or municipal
laws, regulations or ordinances including, without limitation,
the federal Foreign Corrupt Practices Act, environmental laws,
regulations ordinances, the federal Occupational Safety and
Health Act of 1970, or the regulations promulgated thereunder, or
any other applicable foreign, federal, state or municipal
statute, law, regulation or ordinance relating to occupational
health and safety, nor is Seller relying on any exemption from or
deferral of any such applicable statute, law, regulation or
ordinance that would not be available to Purchaser after it
acquires the Assets from Seller.
4.10 Intellectual Property Rights.
(a) As of the Closing Date, Seller owns the ICR
Trademarks and has taken all commercially reasonable action
to protect the ICR Trademarks.
(b) The ICR Trademarks and the "NestorReader"
trademark licensed to Purchaser under the Trademark License
Agreement, comprise all trademarks used or held for use
exclusively in the ICR Business as of the Closing Date.
(c) No claim by any third party contesting the
validity of any ICR Trademarks has been made, is currently
outstanding or, to the best knowledge of the Seller, is
threatened, and Seller has not received any notice and is
aware of no facts suggesting any infringement,
misappropriation or violation by others of any ICR
Trademarks.
(d) No infringement, illicit copying, misappropriation
or violation of any third party intellectual property rights
has or will occur with respect to Seller's use of the ICR
Trademarks as currently being used by Seller.
4.11 Financial Statements. Schedule 4.11 includes
copies of the pro forma statements of income and expenditures for
the ICR Business for the five most recent fiscal years of Seller
and for the nine month period ended March 31, 1996 (collectively
referred to as the "Financial Statements"). The Financial
Statements are in accordance with the books and records of Seller
and present fairly and accurately in all material respects the
financial condition of the ICR Business as of the dates of such
financial statements.
4.12 Disclosure. No representation or warranty in this
agreement or in any letter, certificate, schedule, statement or
other document furnished or to be furnished pursuant hereto or in
connection with the transactions contemplated hereby contains or
will contain any untrue statement of a material fact or omits or
will omit to state any material fact required to be stated herein
or therein or necessary to make the statements herein or therein
not misleading. Without limiting the scope of the foregoing,
Seller is not aware of any change, event or occurrence that has
taken place that has a material adverse effect on the ICR
Business.
4.13 No Brokers or Finders. No person, firm or
corporation has or will have, as a result of any act or omission
of Seller, any right, interest or valid claim against Purchaser
for any commission, fee or other compensation as a finder or
broker in connection with the transactions contemplated by this
Agreement.
4.14 Representations and Warranties. The
representations and warranties of Seller set forth in Article IV
have been made by Seller with the knowledge and expectation that
Purchaser is relying thereon, and such representations and
warranties shall survive the Closing and, subject to the
provisions of section 8.02, shall remain operative in full force
and effect following the Closing Date regardless of any
investigation at any time made by or on behalf of Purchaser and
shall not be deemed merged in any document or instruction
executed or delivered by Seller on the Closing Date.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER
As a material inducement to Seller to enter into this
Agreement and to consummate the purchase and sale contemplated
hereunder, Purchaser hereby represents and warrants to Seller as
follows:
5.01 Organization and Standing. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the state of Minnesota, and has all requisite
corporate power and authority to enter into this agreement and to
consummate the transactions contemplated by this Agreement.
5.02 Corporate Authorization. The execution, delivery
and performance of this Agreement by Purchaser and any other
agreements or instruments to be executed by Purchaser pursuant to
this Agreement have been duly authorized by proper corporate
action of Purchaser and are within its corporate powers. This
Agreement constitutes, and such other agreements and instruments
will constitute, the legal, valid and binding obligations of
Purchaser which are, or will be, enforceable against Purchaser in
accordance with their respective terms.
5.03 No Brokers or Finders. No person, firm or
corporation has or will have, as a result of any act or omission
of Purchaser, any right, interest or valid claim against Seller
for any commission, fee or other compensation as a finder or
broker in connection with the transactions contemplated by this
Agreement.
5.04 Representations and Warranties. The
representations and warranties of Purchaser set forth in Article
V have been made by Purchaser with the knowledge and expectation
that Seller is relying thereon, and such representations and
warranties shall survive the Closing and, subject to the
provisions of section 8.02, shall remain operative in full force
and effect following the Closing Date regardless of any
investigation at any time made by or on behalf of Purchaser and
shall not be deemed merged in any document or instruction
executed or delivered by Purchaser on the Closing Date.
ARTICLE VI
COVENANTS OF SELLER
6.01 Delivery of Assets. Seller shall deliver all
Assets, and such other documents as are being transferred under
Section 2.01(c) to Purchaser at the location set forth on the
facilities lease agreement to be entered into by Seller and
Purchaser at the Closing, in the form attached hereto as Exhibit
G.
6.02 Confidential Information. Seller acknowledges
that the value of the books and records relating to the ICR
Business transferred pursuant to this Agreement depends on all
confidential information relating thereto remaining confidential
and secret. Except as permitted or directed by the Purchaser,
following the effective date of this Agreement or at any time
thereafter Seller shall not divulge, furnish or make accessible
to anyone or use in any way (other than at the request of and for
the benefit of Purchaser) any confidential or secret knowledge
transferred to Purchaser pursuant to this Agreement. Seller
acknowledges that the agreement of Purchaser to keep the above-
described knowledge or information confidential will constitute a
unique and valuable asset of the Purchaser, and that any
disclosure or other use of such knowledge or information other
than on a confidential basis and as permitted under this
Agreement would be wrongful and would cause irreparable harm to
the Purchaser. Confidential information shall not include such
information that (i) is in the public domain at the time of the
disclosure; or (ii) after disclosure becomes a part of the public
domain by publication other than by any direct or indirect action
of Seller in violation of this Agreement; or (iii) is received by
Seller after the time of disclosure from a third party who did
not require such information to be held in confidence and who did
not acquire, directly or indirectly, such information from
Purchaser or Seller under any obligation of confidence; (iv) is
agreed to by the parties in writing in advance of publication; or
(v) is publicly disclosed (i.e., not under adequate protective
order) by the receiving party under an order of a court or
government agency, provided that the receiving party provides
prompt written notification to the disclosing party of such
order.
6.03 Consents. Seller shall have obtained, prior to the
Closing Date, all consents or waivers to the transactions
contemplated by this Agreement that may be required under any of
the agreements or commitments of Seller being sold or assigned
to, or assumed by Purchaser hereunder.
6.04 Access to Books and Records. Between February 22,
1996 and the Closing Date, Seller represents that it has afforded
to Purchaser and its authorized representatives (the "Purchaser's
Representatives") full access at all reasonable times and upon
reasonable notice to the offices, properties, books, records,
officers, employees and other items of the Business.
ARTICLE VII
CLOSING
7.01 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place
at the offices of Seller at 9:00 a.m. on June 11, 1996 or at such
other place and on such other date as is mutually agreeable to
the parties hereto. The date on which the Closing occurs is
referred to herein as the "Closing Date."
7.02 General Procedure. At the Closing, each party
shall deliver to the party entitled to receipt thereof the
documents required to be delivered pursuant to this Article VII
hereto and such other documents, instruments and materials (or
complete and accurate copies thereof, where appropriate) as may
be reasonably required in order to effectuate the intent and
provisions of this Agreement, and all such documents, instruments
and materials shall be satisfactory in form and substance to
counsel for the receiving party. The conveyance, transfer,
assignment and delivery of the Assets shall be effected by
Seller's execution and delivery to Purchaser of a bill of sale
substantially in the form attached hereto as Exhibit H (the "Bill
of Sale") and such other instruments of conveyance, transfer,
assignment and delivery as Purchaser shall reasonably request to
cause Seller to transfer, convey, assign and deliver all of the
Assets to Purchaser, at Seller's cost and expense on the Closing
Date, and the assignment and assumption of the liabilities of
Seller to be assumed by Purchaser pursuant to Section 2.03 hereof
shall be effected by Seller's and Purchaser's execution of an
assignment and assumption agreement substantially in the form
attached hereto as Exhibit I (the "Assignment and Assumption
Agreement").
7.03 Conditions to Purchaser's Obligations. The
obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction of
the following conditions on or before the Closing Date:
(a) The representations and warranties set forth in
Article IV hereof shall be true and correct in all material
respects at and as of the Closing Date with the same force
and effect as though such representations and warranties had
been made as of the Closing Date;
(b) All covenants which Seller is required to perform
or comply with on or before the Closing Date shall have been
fully complied with or performed in all material respects;
(c) Seller shall have assigned to Purchaser the
licenses, contracts and agreements listed in Exhibit B;
(d) Seller shall have assigned to Purchaser the
personal property leases listed in Exhibit C;
(e) Purchaser shall have entered into employment
agreements, in form and substance satisfactory (each an
"Employment Agreement"), to Purchaser, with the persons set
forth in Exhibit J hereto (the "ICR Employees");
(f) All actions, proceedings, instruments and
documents required to carry out this agreement by Seller, or
incidental thereto, and all other related legal matters
shall have been approved by counsel for Purchaser;
(g) No action, suit, proceeding or investigation
before any court or governmental body or authority, which
presents a substantial risk of restraining or prohibiting
the transactions contemplated by this agreement or of having
a material adverse impact on the Assets or the ICR Business,
shall have been instituted or threatened against Seller or
Purchaser on or before the Closing Date;
(h) Seller shall have obtained, or caused to be
obtained, each consent and approval necessary in order that
the transactions contemplated herein not constitute a breach
or violation of, or result in a right of termination or
acceleration of, or creation of any encumbrance on any of
the Assets pursuant to the provisions of, any agreement,
arrangement or undertaking of or affecting Seller or any
license, franchise or permit of or affecting Seller,
regardless of whether assigned to Seller pursuant to Section
7.03(d);
(i) all material governmental filings, authorizations
and approvals that are required for the consummation of the
transactions contemplated hereby will have been duly made
and obtained;
(j) Purchaser shall not have discovered any fact or
circumstance existing as of the date of this Agreement which
has not been disclosed to Purchaser as of the date of this
Agreement regarding the ICR Business or the Assets, which
is, individually or in the aggregate with other such facts
and circumstances, materially adverse to the value of the
Assets or the ICR Business, as determined by the Purchaser
in its reasonable discretion;
(k) There shall have been no damage, destruction or
loss of or to any of the Assets, or to any of the software
and technology to be licensed under the License Agreement,
whether or not covered by insurance, which, in the
aggregate, has, or would be reasonably likely to have, a
material adverse effect on the Assets or the ICR Business;
(l) On the Closing Date, Seller shall have delivered
to Purchaser all of the following:
(i) the Bill of Sale and such other instruments
of conveyance, transfer, assignment and delivery as
Purchaser shall have reasonably requested pursuant to
Section 7.02 hereof;
(ii) the Assignment, Assumption and Retention
Agreement;
(iii) the books, records and other documents
under Section 2.01(g);
(iv) an Assignment of Trademarks for all ICR
Trademarks in substantially the form of Exhibit K
hereto;
(v) a certificate of the President dated the
Closing Date, stating that the conditions precedent set
forth in subsections (a) and (b) above have been
satisfied;
(vi) copies of the third party and governmental
consents and approvals referred to in subsection (h)
above;
(vii) a copy of the text of the resolutions
adopted by the board of directors of Seller authorizing
the execution, delivery and performance of this
Agreement and the consummation of all of the
transactions contemplated by this Agreement; along with
a certificate executed on behalf of Seller, by its
corporate secretary certifying to Purchaser that such
copy is a true, correct and complete copy of such
resolutions, and that such resolutions were duly
adopted and have not been amended or rescinded;
(viii) an executed copy of each of the License
Agreement and the Trademark License Agreement;
(ix) an executed copy of the facilities lease
agreement in the form of Exhibit G hereto;
(x) an executed copy of a receipt acknowledging
delivery of all of the closing items delivered by
Purchaser under Section 7.04; and
(xi) such other certificates, documents and
instruments as Purchaser reasonably requests related to
the transactions contemplated hereby.
7.04 Conditions to Seller's Obligations. The
obligations of Seller to consummate the transactions contemplated
by this Agreement are subject to the satisfaction of the
following conditions on or before the Closing Date:
(a) The representations and warranties of Purchaser
set forth in Article IV hereof will be true and correct in
all material respects at and as of the Closing;
(b) No action, suit, proceeding or investigation
before any court or governmental body or authority, which
presents a substantial risk of restraining or prohibiting
the transactions contemplated by this agreement or of having
a material adverse impact on the Assets or the ICR Business,
shall have been instituted or threatened against Seller or
Purchaser on or before the Closing Date;
(c) On the Closing Date, Purchaser will have delivered
to Seller:
(i) a certificate of an appropriate officer of
Purchaser, dated the Closing Date, stating that the
conditions precedent set forth in subsection (a) above
have been satisfied;
(ii) a certificate, dated the Closing Date,
executed on behalf of Purchaser by its Corporate
Secretary, certifying to Seller that the transactions
contemplated by this Agreement have been fully and duly
authorized by all necessary corporate action;
(iii) an executed copy of each of the License
Agreement and the Trademark License Agreement;
(iv) the Assignment, Assumption and Retention
Agreement;
(v) an executed copy of a receipt acknowledging
delivery of all of the closing items delivered by
Seller under Section 7.03;
(vi) such other certificates, documents and
instruments as Seller reasonably requests related to
the transactions contemplated hereby; and
(vii) Purchaser shall have paid to Seller
simultaneously with the Closing, the Purchase Price
specified in Sections 3.01(a), 3.01(b) and 3.01(c) and
the Initial License Fee under Article IV.A. of the
License Agreement.
ARTICLE VIII
INDEMNIFICATION
8.01 General. The covenants, representations and
warranties contained in this Agreement shall survive the closing
for a period of five years. Subject to the limitations set forth
in Section 8.02, Seller agrees to indemnify Purchaser with
respect to, and hold Purchaser harmless from, any loss, liability
or expense (including, but not limited to, reasonable legal fees)
which Purchaser may incur or suffer by reason of, or which
results, arises out of or is based upon (a) the inaccuracy of any
representation or warranty made by Seller in this Agreement, (b)
the failure of Seller to comply with any covenants or other
commitments made by Seller in this Agreement, (c) the failure to
comply or the election of Seller or Purchaser not to comply with
the bulk transfer provisions of the Uniform Commercial Code, as
in effect in any state having jurisdiction over the transactions
contemplated by this Agreement, or (d) any claims arising from or
relating to any of the agreements assumed under Section 2.01(d)
and 2.01(e) (including any breach of warranty or indemnification
claim asserted against Seller and/or Purchaser), except to the
extent such claims arise from or relate to the performance by
Purchaser after the Closing of the executory obligations under
such agreements.
Subject to the limitations set forth in Section 8.02,
Purchaser agrees to indemnify Seller with respect to, and hold
Seller harmless from, any loss, liability or expense (including,
but not limited to, reasonable legal fees) which Seller may incur
or suffer by reason of, or which results, arises out of or is
based upon (i) the inaccuracy of any representation or warranty
made by Purchaser in this Agreement, (ii) the failure of
Purchaser to comply with any covenants or other commitments made
by Purchaser in this Agreement, or (iii) any claims arising from
or relating to the performance by Purchaser after the Closing of
the executory obligations under any of the agreements assumed by
Purchaser under Section 2.01(d) and 2.01(e)(but only to the
extent such claims arise from such executory obligations).
8.02 Limitations on Indemnification. The
indemnification obligations of Seller and Purchaser under Section
8.01 shall be subject to the following limitations:
(a) none of the parties shall have any obligations
under this Article VIII with respect to any matters that are
not brought to that party's attention within the five (5)
year period commencing on the date of this Agreement, except
for claims of fraud or intentional misrepresentation;
(b) the indemnification obligations of Seller under
Section 8.01 shall be subject to the limitations set forth
in Section VI.D. of the License Agreement;
(c) the indemnification obligations of Purchaser under
Section 8.01 shall be subject to the limitations set forth
in Section VI.D. of the License Agreement; and
(d) the indemnification obligations of Purchaser and
Seller under Section 8.01 shall include the payment of
reasonable legal fees only in connection with claims
asserted under Section 8.01 that arise out of or are based
upon third party claims against the party seeking
indemnification.
8.03 Legal Proceedings. In the event Purchaser or
Seller become involved in any legal, governmental or
administrative proceeding which may result in indemnification
claims hereunder, such party shall promptly notify the other
parties in writing and in full detail of the filing, and of the
nature of such proceeding. The other party may, at their option
and expense, defend any such proceeding if the proceeding could
give rise to an indemnification obligation hereunder. If any
party elects to defend any proceeding, it shall have full control
over the conduct of such proceeding, although the party being
indemnified shall have the right to retain legal counsel at its
own expense and shall have the right to approve any settlement of
any dispute giving rise to such proceeding, provided that such
approval may not be withheld unreasonably by the party being
indemnified. The party being indemnified shall reasonably
cooperate with the indemnifying party or parties in such
proceeding.
8.04 Indemnification Claims-Interest. Interest on any
claim for indemnification pursuant to this Article VIII shall
accrue at a rate equal to the reference rate as publicly
announced from time to time by the Norwest Bank Minnesota,
National Association, Minneapolis, Minnesota, from the date the
claim arose until the claim is satisfied by payment.
ARTICLE IX
OTHER AGREEMENTS
9.01 Employees of the Business. Purchaser shall be
under no duty whatsoever to offer to hire or to hire any employee
or group of employees of Seller. Purchaser may offer employment
to all employees of the ICR Business on or prior to the Closing.
All terms, including benefits, of each offer to such person shall
be determined by Purchaser in its sole discretion and nothing
herein shall constitute an agreement to assume or be bound by any
previous or existing collective bargaining agreement between
Seller and any representative of Seller's employees or a guaranty
that any employee of Seller, to whom an offer of employment may
be made, shall be entitled to remain in the employment of
Purchaser for a specified period of time. An employee of the ICR
Business entering into an employment agreement with Purchaser
shall become an employee of Purchaser on the Closing Date
provided that the employment agreement is executed by such
employee and Purchaser.
Seller shall remain solely responsible for all
salaries, wages, benefits (including accrued vacation), severance
arrangements and all other terms of employment for (a) each ICR
Employee or other employee of the ICR Business accruing prior to
the date such ICR Employee or other employee of the ICR Business
becomes an employee of Purchaser and (b) each employee of the ICR
Business who does not become an employee of Purchaser accruing at
any time.
9.02 Employee Benefits.
(a) Benefit Plans. Seller shall remain liable and
Purchaser shall not assume or otherwise have any liability
or obligation under any pension or other benefit plans of
Seller.
(b) Seller Benefit Plans. Benefits accrued on or
before the Closing Date with respect to all employees of
Seller who (a) are employees of Seller to be employed by
Purchaser and (b) are participants in Seller's retirement or
pension plans, if any, shall be "locked and frozen" as of
the Closing Date, and Seller shall retain sole liability for
the payment of such benefits as and when employees become
eligible therefor under such plan. For the purposes of this
section, the term "locked and frozen" means that employees
shall retain their accrued benefits under such retirement or
pension plans as of the Closing Date. All such employees
shall become fully vested in such accrued benefits as of the
Closing Date, and Seller will so amend such plan if
necessary to achieve this result.
9.03 Employee Release. The employees of Seller that
become employees of Purchaser shall not be subject to any
restriction in the use of the Nestor Technology in their capacity
as employees of Purchaser, other than such restrictions as are
set forth in the License Agreement, and Seller releases and
waives any such claims against Purchaser and such employees in
their capacity as employees of Purchaser arising from their use
of the Nestor Technology on behalf of Purchaser, except for any
claims arising from any breach of the License Agreement.
9.04 Use of Seller's Trade Name and Logos. Purchaser
shall have the right to use, on the product labels and packaging
materials existing at Closing Date, all of the trade names,
trademarks and logos owned by Seller and currently used in the
operation of the ICR Business until such existing and
additionally printed product labels and packing materials are
exhausted. No royalty or other fees shall be payable by
Purchaser for the right to use such trade names, trademarks and
logos.
9.05 Receivables.
(a) After the Closing Date, Purchaser shall undertake
to collect on Seller's behalf the accounts receivable of the
ICR Business for the period prior to the Closing Date other
than the excluded receivables identified in Section 9.05(b)
below ("Receivables") and during such period that Purchaser
is exercising its collection efforts, Seller shall not
undertake any collection efforts with respect to the
Receivables. Purchaser shall be entitled to retain from the
funds collected or to receive from Seller a payment of five
percent (5%) of each Receivable collected by Purchaser or
through Purchaser's efforts. Purchaser shall have no
liability to Seller in connection with its collection
efforts, but it shall use its good faith efforts to exercise
the same degree of diligence in collecting the Receivables
that it employs in the collection of its own accounts
receivable, except that Purchaser shall not institute any
legal proceedings with respect to the Receivables without
the consent of Seller. Purchaser and Seller shall follow
the specific collection procedures set forth below in
Section 9.05(b). Purchaser shall undertake such collection
efforts for a period of 180 days after the Closing Date and
from and after such period shall have no obligation to
engage in any collection efforts.
(b) Purchaser and Seller shall implement the following
procedures with respect to the Receivables:
(i) Seller will issue accounts receivable
confirmation letters to customers in a form approved by
Purchaser, such approval not to be unreasonably
withheld.
(ii) Seller and Purchaser will have, before the
Closing, reviewed the accounts receivable of the ICR
Business (which accounts receivable shall be identified
in Schedule 9.05(b)(ii)) for doubtful accounts and will
have identified such doubtful accounts on Schedule
9.05(b)(ii).
(iii) Purchaser will attempt to collect the
Receivables by the procedure outlined in Schedule
9.05(b)(iii).
(iv) All uncollected Receivables will be
considered disputed six (6) months after invoice date.
(v) Purchaser will apply its standard credit and
collection policies to the combined Purchaser/Seller
ICR Business related accounts receivable except for the
following disputed categories, which shall be excluded
from Receivables:
(aa). Seller performance issues
(bb). Inaccurate invoices
(cc). Doubtful accounts as identified in
Section 9.05(b)(ii) above
(dd). Invoices dated earlier than 12/10/95
(ee). Invoices that are disputed by a customer
in response to the reconciliation letter in
Section 9.05(b)(i) relating to Seller's
failure to perform or an error in the invoice
(ff). Disputed invoices as identified in Section 9.05(b)(iv)
(vi) Seller may, at its option, have disputed
invoices returned to it for collection.
(vii) Purchaser will apply cash payments received
from a customer with a Receivable in chronological
order of invoice date of the Receivables
9.06 Solicitation of Employees. For a period of twelve
(12) months after the Closing Date, Purchaser and Seller will not
directly solicit the employment of any employee of the other
party; provided that such restriction shall not restrict the
advertising of general employment openings or responding to
inquiries.
ARTICLE X
MISCELLANEOUS
10.01 Binding Effect. This Agreement shall be binding
upon and inure to the benefit of and be enforceable against the
parties hereto and their respective successors. This Agreement
shall not be assignable by either Seller or Purchaser; provided
that either party shall have the right to assign this Agreement
to any entity that purchases all or substantially all of the
assets of such party and succeed to the business of the assigning
party provided that the assigning party shall remain responsible
for the performance by such purchaser. In addition, Purchaser
may assign its interest in this Agreement to a corporation that
is affiliated with Purchaser so long as Purchaser remains
responsible for the performance by such affiliated corporation of
all of Purchaser's obligations and commitments hereunder.
10.02 Notices. All notices, consents, requests,
demands, instructions or other communications provided for herein
shall be in writing and shall be deemed validly given, made and
served when (a) delivered personally, (b) sent by certified or
registered mail, postage prepaid, (c) sent by reputable overnight
delivery service, or (d) sent by telephonic facsimile
transmission, and, pending the designation of another address,
addressed as follows:
Notices to Seller: Nestor, Inc.
One Richmond Square
Providence, RI 02906
Attention: President
Telephone: (401) 331-9640
Fax: (401) 331-7319
Notices to Purchaser: National Computer Systems, Inc.
11000 Prairie Lakes Drive
Eden Prairie, Minnesota 55344
Attention: General Counsel
Counsel
Telephone: (612) 829-3120
Fax: (612) 829-3066
10.03 Entire Agreement and Counterparts. This
Agreement, the exhibits attached hereto and the schedules
delivered pursuant hereto evidence the entire agreement between
Seller and Purchaser relating to the purchase and sale of the
Assets and supersede in all respects any and all prior oral or
written agreements or understandings. This Agreement shall be
amended or modified only by written instrument signed by both
Seller and Purchaser. This Agreement may be executed in
counterparts, each of which shall be deemed an original and all
of which, taken together, shall constitute one agreement.
10.04 Further Assurances. Seller agrees that, on
and after the Closing Date, it shall take all appropriate action
and execute any documents, instruments, copyright assignments or
conveyances of any kind which may be reasonably necessary or
advisable to carry out any of the provisions hereof, including,
without limitation, putting Purchaser in possession and operating
control of the Assets.
10.05 Headings. Section and article headings used
in this Agreement have no legal significance and are used solely
for convenience of reference.
10.06 Expenses. Except to the extent otherwise
provided in this Agreement, each party shall pay for its own
legal, accounting and other similar expenses incurred in
connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated.
10.07 Taxes. Purchaser and Seller shall share
equally the cost of any sales, transfer, use or excise taxes
payable in connection with the Purchase Price.
10.08 Risk of Loss. The risk of loss shall remain
with Seller until the Closing, and Seller until such time will
continue in force any and all fire, casualty, theft or other
insurance policies relating to the Business and the Assets. In
the event of any destruction, damage to or theft of the Assets or
property related thereto prior to the Closing, Purchaser shall
have the right to either (a) deduct from the purchase price the
amount of such loss that is not covered by insurance proceeds
payable to Purchaser, or (b) elect not to proceed with the
transactions contemplated by this agreement.
10.09 Severability. Each and every provision of
this Agreement shall be deemed valid, legal and enforceable in
all jurisdictions to the fullest extent possible. Any provision
of this Agreement that is determined to be invalid, illegal or
unenforceable in any jurisdiction shall, as to that jurisdiction,
be adjusted and reformed rather than voided, if possible, in
order to achieve the intent of the parties. Any provision of
this Agreement that is determined to be invalid, illegal or
unenforceable in any jurisdiction which cannot be adjusted and
reformed shall for the purposes of that jurisdiction, be voided.
Any adjustment, reformation or voidance of any provision of this
Agreement shall only be effective in the jurisdiction requiring
such adjustment or voidance, without affecting in any way the
remaining provisions of this Agreement in such jurisdiction or
adjusting, reforming, voiding or rendering that provision or any
other provision of this Agreement invalid, illegal or
unenforceable in any other jurisdiction.
10.10 Governing Law; Venue. The internal law,
without regard to conflicts of laws principles, of the State of
New York will govern all questions concerning the construction,
validity and interpretation of this Agreement and the performance
of the obligations imposed by this Agreement.
IN WITNESS WHEREOF, Seller and Purchaser have executed
this Agreement for themselves or by their respective duly
authorized representatives as of the date first set forth above.
NESTOR, INC.
By
/s/David Fox
President and CEO
NATIONAL COMPUTER SYSTEMS, INC.
By Russell A. Gullotti
Chairman, President and CEO
By
/s/James D. Donoho, Vice President
By Power of Attorney
DISCLOSURE SCHEDULE
SCHEDULE TO SECTION 1.04
A. U.S. Registrations
Mark Reg. No. Reg. Date
Omnitools 1,942,624 12/19/95
B. U.S. Applications
Mark Appl. No. Filing Date
N'Route 74/689,201 6/13/95
OmniControls Not yet assigned 4/17/96
OmniReader 65/015,559 11/3/95
SCHEDULE TO SECTION 4.04(a)
See attached listing.
SCHEDULE TO SECTION 4.04(b)
Executory Personal Property Leases to which Seller is a Party
used in connection with the ICR Business
None.
SCHEDULE TO SECTION 4.04(c)
To be delivered in the form of a data base file at the Closing.
SCHEDULE TO SECTION 4.05
The third-party licenses listed in the Schedule to Section
4.04(a), and specifically identified in Schedule D of the License
Agreement are not assignable without the consent of the
respective licensors.
Certain licenses granted by Seller contain minimum performance
requirements by the licensee, some of which have not been met.
In the ordinary course of business, Seller and certain of such
licensees that have not met the minimum performance requirements
set forth in their license agreement have renegotiated such
minimums and the copies of the license agreements that Seller has
provided to Purchaser include the terms of any such
renegotiations.
SCHEDULE TO SECTION 4.06
See Attached listing.
SCHEDULE TO SECTION 4.07
Seller and Purchaser do not believe that the transactions
contemplated by this Agreement are subject to the Bulk Transfer
provisions of Article Six of the Uniform Commercial Code, as in
effect in any state having jurisdiction over the transactions
contemplated by this Agreement, including the Uniform Commercial
Code -- Bulk Transfers in effect under Chapter 6 of the laws of
the state of Rhode Island.
Seller will be required to file a Report on Form 8-K with the
U.S. Securities and Exchange Commission relating to the
transactions embodied in the Purchase Agreement and the License
Agreement.
SCHEDULE TO SECTION 4.09
Seller has relied upon various exemptions from Federal and State
laws and regulations based upon the size of the Seller's
business. Such exemptions may not be available to the Purchaser.
SCHEDULE TO SECTION 4.10
The registration status of trademarks used in the ICR Business is
set forth in the Schedule to Section 1.04.
SCHEDULE TO SECTION 4.11
See attached.
<TABLE>
Schedule to Section 4.04(a)
All Executory Licenses, Contracts Or Agreements Relating to The
Assets Or The ICR Business between Seller And Third Parties
<CAPTION>
Third Party Title of Agreement Date of Execution
<S> <C> <C>
ACAL Auriema Non-Exclusive Distributorship August 22, 1995
Agreement
Accu- NestorReader License and Development April 30, 1993
Automation Agreement
Corp.
Advantage Nestor Software License Agreement December 28, 1995
Technologies
Alcom Nestor, Inc. Software Beta Test March 23, 1995
Program Agreement
Alliance Data NestorReader Software License October 7, 1993
Systems Agreement
Alliance Data Source Code Addendum "N" September 24, 1993
Systems
Almedica Addendum to NR License and Dev. December 28, 1995
Agreement
Almedica NestorReader License and Development May 29, 1992
Agreement
Alta
Technology Amendment Letter to License Agreement January 5, 1995
Corporation dated Feb 16, 1994
Alta
Technology NestorReader Software License February 16, 1994
Corporation Agreement
Automated
Solutions Nestor, Inc. Software Beta Test March 17, 1995
Corp. Agreement
Automated
Business Nestor Software License Agreement June 30, 1995
Solutions.
Avalon Nestor, Inc. Software Beta Test February 1, 1995
Technology Agreement
Calera Special Purpose Object Code
Recognition Integrated Software Distribution November 1, 1994
Systems, Inc. License
Cardiff NestorReader License and Development December 13, 1991
Software Agreement
CDG Europe Nestor, Inc. Non-exclusive July 31, 1995
Distributorship Agreement
Cincinnati
Bell NestorReader License and Development January 27, 1993
Information Agreement
Systems
Cincinnatti
Bell NestorReader Run-Time License December 24, 1991
Information Agreement
Systems
Claimtronic NestorReader Run-Time License November 27, 1991
Agreement
Comspec Corp. NestorReader Software License March 17, 1994
Agreement
Comspec Corp. Optical Character Recognition Test July 7, 1995
Agreement
Corporate
Business NestorReader License and Development June 8, 1993
Systems Group Agreement
DataCap Addendum to License August 7, 1992
DataCap NestorReader License and Development May 27, 1992
Agreement
Dialog
Verwaltungs Non-Exclusive Distributorship January 6, 1996
Data AG Agreement
Diamond Head Letter Amendment January 1, 1995
Software
Diamond Head Letter Amendment September 21, 1995
Software
Diamond Head Letter Amendment November 1, 1995
Software
Diamond Head NestorReader Software License February 3,1994
Software Agreement
Diamond Head Addendum to NestorReader Software November 17, 1994
Software License Agreement
Diamond Head
Software, Developer Software License Agreement August 31, 1994
Inc.
Digital Image
Tech. Corp Nestor Reader License and Development December 6, 1993
Agreement
Document Image
Management NestorReader License Agreement October 6, 1993
Systems
Dun & Nestor, Inc. Software Beta Test March 3, 1995
Bradstreet Program Agreement
ELSAT
International, Nestor, Inc. Non-Exclusive Sept. 30, 1995
S.A. Distributorship Agreement
Executive NestorReader License and Development August 28, 1992
Technologies. Agreement
Gisys Nestor Software License Agreement July 27, 1995
Graphics
Development Licensing Agreement June 28, 1995
International
, Inc.
Grumman Data NestorReader Software License October 23, 1990
Systems Agreement
GSI Nestor, Inc. Software Beta Test January 31, 1995
Program Agreement
Handwriting
Imaging NestorReader License and Development June 25, 1993
Systems Agreement
Harvest Addendum to the schedule of NR November, 1993
Software License and Dev. Agrmnt. 6/25/92
Hayes Computer Nestor, Inc. Software Beta Test February 1, 1995
Systems Program Agreement
Hermes Precisa
Australia NestorReader License and Development June 24, 1993
Agreement
Howmedica. Time and Materials Agreement for August 31, 1995
Professional Services
I. Levy & NestorReader License and Development May 4, 1993
Assoc. Agreement
ILC Holding. NestorReader License & Development August 31, 1992
Agreement
Imagination Nestor Software License Agreement May 1995
Software
Intellec NestorReader Run-time License September 27, 1991
Technologies
Interfax. NestorReader License and Development June 25, 1992
Agreement
Itesoft Nestor Software License Agreement June 1, 1995
Judge Imaging Nestor, Inc. Software Beta Test January 31, 1995
Systems Program Agreement
Kelar Corp. Nestor, Inc. Software Beta Test February 1, 1995
Program Agreement
Martin Nestor, Inc. Software Beta Test January 17, 1995
Marietta Program Agreement
Medical
Information Letter Agreement Amending OT Software February 5, 1996
Management License
Systems
Medical
Information OmniTools Software License Agreement January 26, 1995
Management
Systems
Metafile
Information Nestor Software License Agreement September 15, 1995
Systems
Microsystems
Technology Letter Amendment to Aug. 31, 92 September 4, 1992
NR.Lic. & Dev.
Microsystems
Technology NestorReader License and Development August 31, 1992
Agreement
Midcontinent
Business NestorReader License and Development August 18, 1994
Systems Agreement
MoneyFax NestorReader License and Development February 16, 1993
Agreement
MoneyFax NestorReader Run-time License September 27, 1991
Agreement
Naval Air
Warfare Center Nestor, Inc. Software Beta Test February 9, 1995
Aircraft Program Agreement
Division
Optimum NestorReader License and Development April 14, 1993
Solutions Agreement
Paragraph License Agreement October 10, 1995
International
Pear Computing
Systems. NestorReader License and Development July 26, 1993
Agreement
Pericom Nestor, Inc. Non-xclusive April 23, 1996
Distributorship Agreement
Pixel Software License Agreement October 1, 1995
Translations,
Inc.
PRC, Inc. NestorReader Software License December 13, 1994
Agreement
Recognition NestorReader License Agreement October , 1991
Equipment
Response Nestor Software License Agreement January 8, 1996
Healthcare
RH + Media NestorReader Run-Time License August 20, 1991
Factors Agreement
Richmond June 6, 1985,
Square amended at various
Technology Agreement of Lease dates through
Park March 9, 1995
Associates
ScanOptics, NestorReader License & Development May 27, 1992
Inc Agreement
Simplify
Development Software Licensing Agreement February 15, 1995
Corporation
Solution
Technologies, NestorReader License and Development September 9, 1992
Inc. Agreement
STMS Nestor, Inc. Software Beta Test February 16, 1995
Program Agreement
Strategic
Technology NestorReader Run-Time License September 27, 1991
Institute, Agreement
Inc.
Synaxis Nestor, Inc. Software Beta Test January 20, 1995
Program Agreement
Team NestorReader License and Development July 1, 1992
Consultants Agreement
Textware Corp. NestorReader Software License April 1, 1995
TIS America NestorReader License Agreement July 24, 1992
Traffic Nestor Software License Agreement August 11, 1995
Software, USA
Traffic Nestor, Inc Software Beta Test March 23, 1995
Software, USA Program Agreement
Trip Data &
Safety NestorReader Licence and Development September 8, 1992
Management Agreement
TRW NestorReader Run-Time License October 22, 1991
Agreement
United States
Govt. Rock Nestor, Inc. Software Beta Test January 31, 1995
Island Arsenal Agreement
United
Stationers NestorReader RunTime License November 1, 1991
Supply Co Agreement
Vaugn Caudle
Associates Nestor, Inc. Software Beta Test February 1, 1995
Program Agreement
Westinghouse Nestor Software License and December 24, 1991
Development Agreement
Wheb Systems Nestor Software License Agreement June 1, 1995
Windak Company NestorReader Software License September 24, 1993
Agreement
Xerox Imaging Addendum to License & Non-Disclosure July 1, 1991
Agrmnt
Xerox Imaging License and Non-Disclosure Agreement March 21,1991
Yankee Consulting Agreement December 1, 1994
Software
</TABLE>
Schedule to Section 4.06
The following licenses of third-party software incorporated into
the Existing ICR Products require in each case the consent of the
licensor to assignment of the license in question, and such
consents have not been obtained by the Seller.
Licensor Description Used in ICR Product
Calera Recognition Special Purpose NestorReader and
Systems, Inc. Object Code OmniTools
Integrated Software
Distribution
License dated
November 1, 1994
Diamond Head Developer Software N'Route
Software, Inc. License Agreement
dated August 31,
1994
Graphics Licensing Agreement OmniTools
Development dated June 28, 1995
International, Inc.
Paragraph License Agreement Intended for
International dated October 10, N'Route but not yet
1995 incorporated
Pixel Translations, Software License NestorReader and
Inc. Agreement dated OmniTools
October 1, 1995
Simplify Software Licensing N'Route
Development Agreement dated
Corporation February 15, 1995
<TABLE>
Schedule to Section 4.11
<CAPTION>
Unaudited Pro-forma Statements of Income and Expenditures for The ICR
Business
9 Months Ended Fiscal Years Ended June 30
3/31/96 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Product 1,072,357 1,516,596 911,979 670,219 364,738 289,245
Engineering 270,750 81,500 24,087 220,000 543,000 465,080
Maintenance
& Use Fee 46,145 69,104 8,750 22,255 --- ---
Total
Revenues 1,389,252 1,667,200 944,816 912,474 907,738 754,325
Expenses:
Engineering 619,991 1,215,443 626,092 625,528 654,455 945,473
Marketing &
Sales 690,612 1,885,102 519,215 436,567 268,769 114,872
Customer
Support 196,781 184,427 54,412 61,875 8,793 16,980
Total
Expenses 1,507,384 3,284,972 1,199,719 1,123,970 932,017 1,077,325
Net Loss (118,132) (1,617,772) (254,903) (211,496) (24,279) (323,000)
</TABLE>
SCHEDULE 9.05(ii)
See attached list of Accounts Receivable and Doubtful Accounts
<TABLE>
Schedule to Section 9.5 (b)(ii)
<CAPTION>
Evaluation
Accounts: ----------Days Past Due----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue
Recog-
nized
31- 61- Over By
Currnt 1-30 60 90 90 TOTAL Seller
ACAL
Auriema
Nederland B.V.
IN 102577 1,100 0.00 0 0 0 1,100.00
o/o net 30 1,100.00
05/31/96
Total 1,100 0.00 0 0 0 1,100.00
APPROP
Appropriate
Technologies,
Inc.
IN 102585 3,525 0.00 0 0 0 3,525.00
o/o net 30 525.00
05/31/96
Total 3,525 0.00 0 0 0 3,525.00
QUESTC
Questech, Inc.
IN 102592 1,015 0.00 0 0 0 1,015.00
o/o net 30 -
06/07/96
Total 1,015 0.00 0 0 0 1,015.00
RGAACC RGA
Accessories
IN 102540 0 545.00 0 0 0 545.00
o/o net 30 525.00
04/19/96
IN 102541 0 44.25 0 0 0 44.25
o/o net 30 44.25
04/19/96
Total 0 589.25 0 0 0 589.25
SCNDIR
Scan-Direct
IN 102535 0 4,500.00 0 0 0 4,500.00
o/o net 30 675.00
04/15/96
Total 0 4,500.00 0 0 0 4,500.00
SWPOST
Software Post
IN 102586 3,520 0.00 0 0 0 3,520.00
o/o net 30 525.00
05/31/96
Total 3,520 0.00 0 0 0 3,520.00
Total Evaluation 9,160 5,089.25 0 0 0 14,249.25
Accounts 3,394.25
Note: The
Accounts
Receivable
amounts for the
customers listed
under the
heading
"Evaluation
Accounts" are
set forth under
the column
titled "Revenue
Recognized By
Seller."
Purchaser shall
be entitled to
all of the
revenues listed
under the column
titled "TOTAL"
less only the
amounts listed
under the column
titled "Revenue
Recognized by
Seller."
</TABLE>
<TABLE>
<CAPTION>
Regular Accounts:
-----------------Days Past Due-----------------
<S> <C> <C> <C> <C> <C> <C>
Current 1-30 31-60 61-90 Over 90 TOTAL
ALDATA
Alliance Data
Systems
IN 102374 0.00 0.00 0 0 3,760.00 3,760.00
Net 45 days
12/28/95
Total 0.00 0.00 0 0 3,760.00 3,760.00
AQUARI Aquarium
Technology
IN 102521 upon 0.00 0.00 0 2,000 0.00 2,000.00
receipt 04/05/96
Total 0.00 0.00 0 2,000 0.00 2,000.00
ASSUPP AS Support
IN 101541 0.00 0.00 0 0 7,701.50 7,701.50
o/o net 30
12/14/94
IN 102000 2/10 0.00 0.00 0 0 6,030.00 6,030.00
Net 30 06/30/95
Total 0.00 0.00 0 0 13,731.50 13,731.50
AUTOIN Automated
Information Mgmt
Inc
IN 102549 0.00 3,520.00 0 0 0.00 3,520.00
o/o net 30
04/24/96
Total 0.00 3,520.00 0 0 0.00 3,520.00
CDG
CDG Europe###
IN 102575 5,985.00 0.00 0 0 0.00 5,985.00
o/o net 30
05/29/96
Total 5,985.00 0.00 0 0 0.00 5,985.00
CITCAN
Citibank Canada
IN 102073 0.00 0.00 0 0 1,995.00 1,995.00
o/o net 30
08/02/95
Total 0.00 0.00 0 0 1,995.00 1,995.00
CLSGRP
CLS Group, Inc.
IN 102491 0.00 0.00 3,020 0 0.00 3,020.00
o/o net 30
03/26/96
Total 0.00 0.00 3,020 0 0.00 3,020.00
COGNIT
Cognitronics
IN 102336 0.00 0.00 0 0 1,770.00 1,770.00
o/o net 30
12/08/95
Total 0.00 0.00 0 0 1,770.00 1,770.00
COMPSY
Computer Systems
Concepts
IN 102571 1,015.00 0.00 0 0 0.00 1,015.00
o/o net 30
05/20/96
Total 1,015.00 0.00 0 0 0.00 1,015.00
CSI
Computer Sciences
Innovations
IN 102579 1,715.00 0.00 0 0 0.00 1,715.00
o/o net 30
05/31/96
Total 1,715.00 0.00 0 0 0.00 1,715.00
DATCAP
DataCap, Inc.
IN 102483 upon 0.00 0.00 0 16,505 0.00 16,505.00
receipt 03/20/96
IN 102515 upon 0.00 0.00 0 7,000 0.00 7,000.00
receipt 03/29/96
CM 000561 upon 0.00 0.00 0 -3,500 0.00 -3,500.00
receipt 05/20/96
Total 0.00 0.00 0 20,005 0.00 20,005.00
DIAMND
Diamond Head
Software
IN 101362 upon 0.00 0.00 0 0 200.00 200.00
receipt 07/20/94
IN 101617 0.00 0.00 0 0 1,520.00 1,520.00
o/o net 30
03/28/95
IN 102513 upon 0.00 0.00 0 31,700 0.00 31,700.00
receipt 03/29/96
IN 102514 upon 0.00 0.00 0 5,000 0.00 5,000.00
receipt 03/29/96
IN 102562 upon 0.00 0.00 5,000 0 0.00 5,000.00
receipt 04/30/96
IN 102589 upon 0.00 5,000.00 0 0 0.00 5,000.00
receipt 05/31/96
Total 0.00 5,000.00 5,000 36,700 1,720.00 48,420.00
DIS
Document Imaging
Systems Ltd.
IN 102543 0.00 9,000.00 0 0 0.00 9,000.00
o/o net 30
04/15/96
Total 0.00 9,000.00 0 0 0.00 9,000.00
DOCIMG
Document Imaging
Systems Ltd.
IN 102014 2/10 0.00 0.00 0 0 3,030.00 3,030.00
Net 30 06/30/95
Total 0.00 0.00 0 0 3,030.00 3,030.00
ELSAT
Elsat International
IN 102194 o/o net 0.00 0.00 0 0 4,235.00 4,235.00
30 09/29/95
Total 0.00 0.00 0 0 4,235.00 4,235.00
ETS
Educational
Testing Service
IN 102578 3,520.00 0.00 0 0 0.00 3,520.00
o/o net 30
05/31/96
Total 3,520.00 0.00 0 0 0.00 3,520.00
GPI
GPI A/S
IN 102558 0.00 981.75 0 0 0.00 981.75
o/o net 30
04/30/96
Total 0.00 981.75 0 0 0.00 981.75
HOWME
Howmedica,
Inc.*****
IN 102564 0.00 1,500.00 0 0 0.00 1,500.00
o/o net 30
04/30/96
Total 0.00 1,500.00 0 0 0.00 1,500.00
HUGVIT
Hugvit hf
IN 102230 0.00 0.00 0 0 560.00 560.00
o/o net 30
10/26/95
Total 0.00 0.00 0 0 560.00 560.00
IASYST
IA Systems
IN 102270 0.00 0.00 0 0 1,800.00 1,800.00
o/o net 30
11/17/95
Total 0.00 0.00 0 0 1,800.00 1,800.00
IMAGSO
Imagination
Software
IN 101687 0.00 0.00 0 0 4,000.00 4,000.00
o/o net 30
05/31/95
Total 0.00 0.00 0 0 4,000.00 4,000.00
IMNET
Imnet Systems, Inc.
IN 102566 1,520.00 0.00 0 0 0.00 1,520.00
o/o net 30
05/09/96
Total 1,520.00 0.00 0 0 0.00 1,520.00
IMS
Image Management
Systems 1*****
IN 102103 0.00 0.00 0 0 2,520.00 2,520.00
o/o net 30
08/18/95
IN 102139 0.00 0.00 0 0 5,000.00 5,000.00
o/o net 30
09/14/95
IN 102206 0.00 0.00 0 0 4,462.50 4,462.50
o/o net 30
10/03/95
Total 0.00 0.00 0 0 11,982.50 11,982.50
IMSUAI
Image
Management
Systems 2*****
IN 102306 0.00 0.00 0 0 5,020.00 5,020.00
o/o net 30
11/30/95
Total 0.00 0.00 0 0 5,020.00 5,020.00
INTDEC
Intelligent
Decision Systems
IN 102553 0.00 520.00 0 0 0.00 520.00
o/o net 30
04/24/96
Total 0.00 520.00 0 0 0.00 520.00
ITECA
Itesoft
IN 102401 0.00 0.00 0 0 25,000.00 25,000.00
o/o net 30
01/20/96
Total 0.00 0.00 0 0 25,000.00 25,000.00
KINISH Kanishka
Systems Pte
Ltd.*****
IN 102397 0.00 0.00 0 0 25,000.00 25,000.00
o/o net 30
01/01/96
Total 0.00 0.00 0 0 25,000.00 25,000.00
LEGINF
Legal Information
Technology
IN 102565 0.00 1,520.00 0 0 0.00 1,520.00
o/o net 30
05/08/96
Total 0.00 1,520.00 0 0 0.00 1,520.00
METALI
Metafile
Information
Systems
IN 102570 1,020.00 0.00 0 0 0.00 1,020.00
o/o net 30
05/14/96
Total 1,020.00 0.00 0 0 0.00 1,020.00
MHURLY
M. Hurley &
Associates
IN 102567 315.00 0.00 0 0 0.00 315.00
o/o net 30
05/09/96
IN 102574 upon 0.00 10,000.00 0 0 0.00 10,000.00
receipt 05/14/96
IN 102584 upon 0.00 18,000.00 0 0 0.00 18,000.00
receipt 05/31/96
Total 315.00 28,000.00 0 0 0.00 28,315.00
NATWST
NatWest Markets
IN 102495 upon 0.00 0.00 0 550 0.00 550.00
receipt 03/27/96
Total 0.00 0.00 0 550 0.00 550.00
NCS
National Computer
Systems
IN 102590 upon 0.00 14,770.00 0 0 0.00 14,770.00
receipt 05/31/96
Total 0.00 14,770.00 0 0 0.00 14,770.00
PAPLIN
Paperlink
IN 102587 upon 0.00 4,230.00 0 0 0.00 4,230.00
receipt 05/31/96
Total 0.00 4,230.00 0 0 0.00 4,230.00
PERICM
Pericom Graphics
IN 102588 4,200.00 0.00 0 0 0.00 4,200.00
o/o net 30
05/31/96
Total 4,200.00 0.00 0 0 0.00 4,200.00
SCANOP
Scan-Optics, Inc.
IN 101492 0.00 0.00 0 0 20.00 20.00
o/o net 30
11/07/94
IN 102125 0.00 0.00 0 0 1,020.00 1,020.00
o/o net 30
08/23/95
CM 128 0.00 0.00 0 0 -87.19 -87.19
o/o net 30
10/14/92
Total 0.00 0.00 0 0 952.81 952.81
SHL SHL
IN 102504 0.00 0.00 55,035 0 0.00 55,035.00
o/o net 30
03/29/96
Total 0.00 0.00 55,035 0 0.00 55,035.00
TRIPDA
Trip Data & Safety
Management
IN 102576 2,100.00 0.00 0 0 0.00 2,100.00
o/o net 30
05/31/96
Total 2,100.00 0.00 0 0 0.00 2,100.00
TXTWAR
Textware Corp.
IN 102509 0.00 0.00 15,000 0 0.00 15,000.00
o/o net 30
03/29/96
Total 0.00 0.00 15,000 0 0.00 15,000.00
WHEB
Wheb Systems, Inc.
IN 102472 0.00 0.00 0 5,000 0.00 5,000.00
o/o net 30
02/29/96
Total 0.00 0.00 0 5,000 0.00 5,000.00
Subtotal Regular 21,390.00 69,041.75 78,055 64,255 104,556.81 337,298.56
Accounts
*****Accounts to be
retained and
collected by
Seller:
Howmedica, Inc. -1,500.00 -1,500.00
Image Management -11,982.50 -11,982.50
Systems 1
Image Management -5,020.00 -5,020.00
Systems 2
Kanishka Systems -25,000.00 -25,000.00
Pte. Ltd.
Subtotal Regular 21,390.00 67,541.75 78,055 64,255 62,554.31 293,796.06
Accounts
Less:
###CDG Europe - -5,985.00 -5,985.00
invoice to be
cancelled
Total Regular Acct 15,405.00 67,541.75 78,055 64,255 62,554.31 287,811.06
</TABLE>
<TABLE>
<CAPTION>
Reserved Accounts:
-----------------Days Past Due-----------------
<S> <C> <C> <C> <C> <C> <C>
Current 1 to 30 31 to 60 61 to 90 Over 90 TOTAL
APPFUN
Applied Functional
Technology
IN 101253 0.00 0.00 0 0 10,000.00 10,000.00
o/o net 30
04/29/94
Total 0.00 0.00 0 0 10,000.00 10,000.00
APPLIN
Applied Information
Services
IN 102039 o/o net 0.00 0.00 0 0 520.00 520.00
30 07/21/95
Total 0.00 0.00 0 0 520.00 520.00
C.C.S.
C.C.S.
IN 101689 0.00 0.00 0 0 5,000.00 5,000.00
o/o net 30
05/31/95
Total 0.00 0.00 0 0 5,000.00 5,000.00
CCSARP
Arpa Data Gmbh
IN 101698 0.00 0.00 0 0 2,520.00 2,520.00
o/o net 30
06/02/95
Total 0.00 0.00 0 0 2,520.00 2,520.00
CFCTEC
CFC Technology
Services, Inc.
IN 101278 0.00 0.00 0 0 1,520.00 1,520.00
o/o net 30
05/31/94
Total 0.00 0.00 0 0 1,520.00 1,520.00
CLAIM Claimtronic
IN 101332 o/o net 0.00 0.00 0 0 1,535.00 1,535.00
30 06/30/94
Total 0.00 0.00 0 0 1,535.00 1,535.00
COMCON The
Computer Connection
IN 101682 0.00 0.00 0 0 1,785.00 1,785.00
o/o net 30
05/30/95
Total 0.00 0.00 0 0 1,785.00 1,785.00
DATACP Data
Capture Systems,
Inc.
IN 101182 0.00 0.00 0 0 11,686.00 11,686.00
o/o net 30
01/31/94
IN 101298 0.00 0.00 0 0 613.91 613.91
o/o net 30
06/17/94
Total 0.00 0.00 0 0 12,299.91 12,299.91
DATALX
DataLex
IN 102002 2/10 0.00 0.00 0 0 1,015.00 1,015.00
Net 30 06/30/95
Total 0.00 0.00 0 0 1,015.00 1,015.00
EDS
Electronic Docu.
Sys. PTE LTD
IN 100924 0.00 0.00 0 0 1,550.00 1,550.00
o/o net 30
02/23/93
Total 0.00 0.00 0 0 1,550.00 1,550.00
FEC
FEC
IN 101781 2/10 0.00 0.00 0 0 7,530.00 7,530.00
Net 30 06/26/95
Total 0.00 0.00 0 0 7,530.00 7,530.00
IMAX
Imax Sistemas S.A.
DE C.V.
IN 102130 0.00 0.00 0 0 1,000.00 1,000.00
o/o net 30
08/31/95
Total 0.00 0.00 0 0 1,000.00 1,000.00
INTHIN
The Interthink
Consulting Group
IN 101586 Net 15 0.00 0.00 0 0 250.00 250.00
02/28/95
Total 0.00 0.00 0 0 250.00 250.00
LANMIC
Lan Microsystems
IN 102245 0.00 0.00 0 0 1,020.00 1,020.00
o/o net 30
11/06/95
Total 0.00 0.00 0 0 1,020.00 1,020.00
LASHOL
Laser Holdings Ltd.
IN 101271 0.00 0.00 0 0 3,030.00 3,030.00
o/o net 30
05/31/94
Total 0.00 0.00 0 0 3,030.00 3,030.00
LORAY
Loray Systems, Inc.
IN 101261 0.00 0.00 0 0 2,530.00 2,530.00
o/o net 30
05/11/94
Total 0.00 0.00 0 0 2,530.00 2,530.00
PRISOF Prisma
Office Limited
IN 101607 0.00 0.00 0 0 1,781.50 1,781.50
o/o net 30
03/15/95
IN 102001 Net 60 0.00 0.00 0 0 9,907.50 9,907.50
06/30/95
Total 0.00 0.00 0 0 11,689.00 11,689.00
QUANT
Quantitative
Technology Corp.
IN 100773 0.00 0.00 0 0 750.00 750.00
o/o net 30
07/20/92
Total 0.00 0.00 0 0 750.00 750.00
SATELL
Satellite Image
Systems, Inc.
IN 100778 0.00 0.00 0 0 400.00 400.00
o/o net 30
07/27/92
Total 0.00 0.00 0 0 400.00 400.00
SOLTEC
Solution
Technology, Inc.
IN 102180 0.00 0.00 0 0 515.00 515.00
o/o net 30
09/27/95
Total 0.00 0.00 0 0 515.00 515.00
SYSCOM
Syscom, Inc.
PA 2040 -7.50 0.00 0 0 0.00 -7.50
01/29/96
Total -7.50 0.00 0 0 0.00 -7.50
TELWAR
Tele-Ware Services,
Inc.
IN 101469 0.00 0.00 0 0 114.00 114.00
o/o net 30
10/31/94
IN 101485 0.00 0.00 0 0 3,025.00 3,025.00
o/o net 30
11/14/94
Total 0.00 0.00 0 0 3,139.00 3,139.00
Total Reserved -7.50 0.00 0 0 69,597.91 69,590.41
Accounts
Subtotal Accounts 30,542.50 74,131.00 78,055 64,255 174,154.72 421,138.22
Receivable
Less: Accounts to
be retained and
collected by Seller 0.00 -1,500.00 0 0 -42,002.50 -43,502.50
CDG Europe invoice -5,985.00 -5,985.00
to be cancelled
Total Accounts 30,542.50 72,631.00 78,055 64,255 132,152.22 377,635.72
Receivable
</TABLE>
SCHEDULE 9.05(iii)
COLLECTION PROCEDURES
- - NCS prepare a collection letter to be mailed to each account.
Letter to include:
1. Explanation of NCS/Nestor relationship (clarify reason
for letter on
NCS letterhead).
2. Reminder charges are due and payable
3. Make checks payable to NCS, PO Box 9365,
Minneapolis, Minnesota
4. Signatures of both NCS and Nestor officials
(reinforce the two companies are working together).
- - Payments
1. Use existing NCS account for deposit
2. NCS prepare monthly check to Nestor to
reimburse for collections net of collection fee.
- - Payments to Nestor
1. Nestor deposit and forward notification of same to NCS
2. Nestor prepare monthly check to NCS to reimburse
for collection fees.
- - Nestor forward a copy of each invoice and collection file, if
any, to NCS
- - NCS enforce its credit policy in the course of collecting
Receivables. A summary of NCS' collection program previously
provided to Nestor is attached to this Schedule.
- - NCS return the balance of the unpaid items to Nestor for
resolution at the end of the program
FORMS DIVISION
POLICY MANUAL
SUBJECT: Collections Program
POLICY:
10 DAYS LATE (40 days from invoice date)
- - First collection letter is sent to all amounts $25,000 and
under that remain open.
- Letter is inquiry to keep account current, etc.
- - Personal contact by phone for amounts over $25,000.
- Contact is friendly inquiry to see if they have received
invoice, any problems with order, etc.
40 DAYS LATE (70 days from invoice date)
- - Second collection letter is sent to all amounts $15,00 and
under that remain open.
- Letter is firm i.e., send copy of canceled check, your
account is past due, etc.
- - Personal contact by phone to all amounts over $15,000.
- Contact is more demanding i.e., when can be expect payment,
etc.
55 DAYS LATE (85 days from invoice date)
- - Personal contact by phone to all amounts over $1,000.
- Contact is very strong, i.e., please give our invoice your
full attention, when will the paper work be complete on the
purchase order modification, what is the check number, we may
have to put you on credit hold (prepayment status) in the
future, etc.
70 DAYS LATE (100 days from invoice date)
- - Third collection letter is sent to all amounts under $1,000.
- Final demand letter i.e., appropriate collection action
will be taken if we do not receive payment within 15 days.
85 DAYS LATE (115 days from invoice date)
- - Personal contact by phone to all amounts under $1,000.
- Contact is very demanding i.e., customer is put on credit
hold or prepayment status.
- Collectability is determined i.e., referred to collection
agency, or written off to allowance for doubtful accounts.
PERSONAL CONTACT PROCESS
- - If the customer does not meet the commitment given in the
first phone contact and the second phone contact is required,
the account will be notified that it is on credit hold until
payment is received. The second phone call will be followed
by a letter.
- - If the customer does not respond to the second phone call, the
third phone call is made. . . final demand is made and
followed up with a certified letter.
- - If the customer does not respond to the third phone
call/certified letter, the account is placed with a collection
agency. The account balance is written off at this time and
the account is reported to Dun and Bradstreet.
EXHIBIT A
List of equipment and other physical assets as specified in
Section 2.01(b)
Exhibit A is set forth on the attached list.
<TABLE>
Exhibit A
<CAPTION>
List of equipment and other physical assets as specified in
Section 2.01(b)
<S <C> <C> <C> <C>
>
In Nestor
ven- ID # User System Serial #
tory
Tag#
1 1140 David Wright Toshiba T4700CT 08423795
2 1081A Ezzio, David Compudyne 2250540012
486/50 14
3 1153 APS 1.7Gb ext A280663
4 1105 Fontaine, Sharon Ambra 486/66 3409A01318
5 1123 Greichen, Kathy Dell 450SV 40252
6 Hendrickson, Dorothy Dell325D 0AFV6
7 1101 Hull, Fauss (at home) MCS 486/66
8 1163 Gateway P90 3211402
9 1132 Sun Hard disk A252108
(loaner3)
10 1137 Kenton, Lannie Dell DimP90 46VW7
11 1106 APS 1Gb 4544278304
53
12 NC APC UPS
13 Sun Sun SLC 110G1882
14 Fuji 250 1094
15 NC APS 345Mb SCSI A178379
ext
16 1110 Lazieh, Joanne Dell 466V 3M11L
17 1111 Lenihan, David Dell 466V 3M11J
18 1148 Nabutovsky, Yulia DAC P90
19 1099A Parrillo, Arthur Ambra 486/66 3342A00223
20 1103 Parrillo, Arthur - Ambra 486/66 3403A01431
config testing
21 1142 Puchala, Ron Dell DimP90 49KJ4
22 1075 Puchala, Ron - NT Dell 486/50 1P3YC
Porting Machine
23 NC SCSI cdrom 35021055C
24 1070 SCSI hard C20G6YAS
disk/controller
25 1166 (new hire) Gateway P90
26 1164 Rezendes, Tracie Gateway P90 3211401
27 1145 APS hard disk A304588
28 1190 APS Hard Disk AK0301
2Gb
29 1191 CDROM recorder Z554265TV
30 1157 Testing machine Gateway P90 3101745
31 1135 Todd/Stone, Mary Toshiba T1960CT 02560034
32 1170 (to be assigned) Toshiba T1960CS
33 1099B QA Dept Ambra 486/66 3342A00222
34 1109 QA Dept. Ambra 486/100 3422A00585
35 1174 QA Dept. TP P90
36 1162 QA Dept. TP P90
37 NC Brother Fax L41048579
38 1175 HP ScanJet IIcx 3414A55709
39 1126A Yulia NEC Monitor 4882568LA
40 1126B Fauss(at home) NEC Monitor
41 Sun Sparc SLC 109G0591
42 1153 Sun (arnold2) APS hard disk A326741
43 1064 IBM RS/6000 MS70122628
466
44 1078 External hard J1827
disk 2Gb
45 1139 Printer HP 4si/MX USGB525544
46 NC Okidata printer 511A103263
3
47 NC Scan Partner Jr. 4070010SPT
48 Sun 908F0075
49 Factory Dell 310 2875
50 1116 Disk Copier 3300 Genesis
Loader
51 Bulletin Board CUI386 90123969
</TABLE>
EXHIBIT A-1
List of inventory as specified in Section 2.01(b)
Exhibit A-1 is set forth on the attached list.
Exhibit A-1
List of Inventory As Specified in Section 2.01(b)
Inventory as of June 7, 1996:
Quantity Value Location
OmniTools:
Empty packages 48 $150 Storeroom
Developers Guide 32 615 Storeroom
OmniReader Doco 63 1,213 Storeroom
OmniControls Doco 430 6,073 Storeroom
Labels 750 300 Mfg. table top
NestorReader:
Empty packages 263 $823 Storeroom
Developers Guide 20 385 Storeroom
Labels 450 182 Mfg. table top
Miscellaneous:
License envelopes 535 $268 Mfg. table bottom
License Labels 400 260 Mfg. table top
Disk Mailers 116 87 Mfg. table bottom
N'Route:
Empty packages 144 $5,760 Storeroom
Users Guide 371 1,417 Storeroom
MailRoom Guide 373 1,425 Storeroom
Professional Guide 468 1,787 Storeroom
Label Sets 380 1,026 Mfg. table bottom
License Envelopes 880 440 Mfg. table bottom
Viewer insert 220 109 Mfg. table top
Professional insert 9 5 Mfg. table top
Standard insert 67 33 Mfg. table top
OmniTools Gold:
CDs and cases 174 1,797 Storeroom
Inserts 475 1,568 Storeroom
Labels 475 451 Storeroom
Total Value $26,174
EXHIBIT B
List of licenses, contracts and agreements, as specified in
Section 2.01(d), with respect to the ICR Business to which Seller
is a party and which are agreed to by Purchaser and specifically
identified below:
Exhibit B is set forth on the attached list.
<TABLE>
Exhibit B
<CAPTION>
List of licenses, contracts and agreements, as specified in Section
2.01(d), with respect to the ICR Business to which Seller is a party and
which are agreed to by Purchaser and specifically identified below:
Third Party Title of Agreement Date of Execution
<S> <C> <C>
ACAL Auriema Non-Exclusive Distributorship August 22, 1995
Agreement
Accu-Automation NestorReader License and April 30, 1993
Corp. Development Agreement
Advantage Nestor Software License December 28, 1995
Technologies Agreement
Alcom Nestor, Inc. Software Beta March 23, 1995
Test Program Agreement
Alliance Data NestorReader Software License October 7, 1993
Systems Agreement
Alliance Data Source Code Addendum "N" September 24, 1993
Systems
Almedica Addendum to NR License and December 28, 1995
Dev. Agreement
Almedica NestorReader License and May 29, 1992
Development Agreement
Alta Technology Amendment Letter to License January 5, 1995
Corporation Agreement dated Feb 16, 1994
Alta Technology NestorReader Software License February 16, 1994
Corporation Agreement
Automated Nestor, Inc. Software Beta March 17, 1995
Solutions Corp. Test Agreement
Automated Business
Solutions. Nestor Software License June 30, 1995
Agreement
Avalon Technology Nestor, Inc. Software Beta February 1, 1995
Test Agreement
Cardiff Software NestorReader License and December 13, 1991
Development Agreement
CDG Europe Nestor, Inc. Non-exclusive July 31, 1995
Distributorship Agreement
Cincinnati Bell
Information NestorReader License and January 27, 1993
Systems Development Agreement
Cincinnatti Bell
Information NestorReader Run-Time License December 24, 1991
Systems Agreement
Claimtronic NestorReader Run-Time License November 27, 1991
Agreement
Comspec Corp. NestorReader Software License March 17, 1994
Agreement
Comspec Corp. Optical Character Recognition July 7, 1995
Test Agreement
Corporate Business
Systems Group NestorReader License and June 8, 1993
Development Agreement
DataCap Addendum to License August 7, 1992
DataCap NestorReader License and May 27, 1992
Development Agreement
Dialog Verwaltungs Non-Exclusive Distributorship January 6, 1996
Data AG Agreement
Diamond Head Letter Amendment January 1, 1995
Software
Diamond Head Letter Amendment September 21, 1995
Software
Diamond Head Letter Amendment November 1, 1995
Software
Diamond Head NestorReader Software License February 3, 1994
Software Agreement
Diamond Head Addendum to NestorReader November 17, 1994
Software Software License
Digital Image Nestor Reader License and December 6, 1993
Tech. Corp Development Agreement
Document Image
Management Systems NestorReader License Agreement October 6, 1993
Dun & Bradstreet Nestor, Inc. Software Beta March 3, 1995
Test Program Agreement
ELSAT Nestor, Inc. Non-Exclusive Sept. 30, 1995
International, Distributorship Agreement
S.A.
Executive NestorReader License and August 28, 1992
Technologies. Development Agreement
Gisys Nestor Software License July 27, 1995
Agreement
Grumman Data NestorReader Software License October 23, 1990
Systems Agreement
GSI Nestor, Inc. Software Beta January 31, 1995
Test Program Agreement
Handwriting
Imaging Systems NestorReader License and June 25, 1993
Development Agreement
Harvest Software Addendum to the schedule of NR
License and Dev. Agrmnt. November, 1993
6/25/92
Hayes Computer Nestor, Inc. Software Beta February 1, 1995
Systems Test Program Agreement
Hermes Precisa NestorReader License and June 24, 1993
Australia Development Agreement
I. Levy & Assoc. NestorReader License and May 4, 1993
Development Agreement
ILC Holding. NestorReader License & August 31, 1992
Development Agreement
Imagination Nestor Software License May 23, 1995
Software Agreement
Intellec NestorReader Run-time License September 27, 1991
Technologies
Interfax. NestorReader License and June 25, 1992
Development Agreement
Itesoft Nestor Software License June 1, 1995
Agreement
Judge Imaging Nestor, Inc. Software Beta January 31, 1995
Systems Test Program Agreement
Kelar Corp. Nestor, Inc. Software Beta February 1, 1995
Test Program Agreement
Martin Marietta Nestor, Inc. Software Beta January 17, 1995
Test Program Agreement
Medical
Information Letter Agreement Amending OT February 5, 1996
Management Systems Software License
Medical
Information OmniTools Software License January 26, 1995
Management Systems Agreement
Metafile
Information Nestor Software License September 15, 1995
Systems. Agreement
Microsystems Letter Amendment to Aug. 31, September 4, 1992
Technology 92 NR.Lic. & Dev.
Microsystems NestorReader License and August 31, 1992
Technology Development Agreement
Midcontinent
Business Systems NestorReader License and August 18, 1994
Development Agreement
MoneyFax NestorReader License and February 16, 1993
Development Agreement
MoneyFax NestorReader Run-time License September 27, 1991
Agreement
Naval Air Warfare
Center Aircraft Nestor, Inc. Software Beta February 9, 1995
Division Test Program Agreement
Optimum Solutions NestorReader License and April 14, 1993
Development Agreement
Pear Computing NestorReader License and July 26, 1993
Systems. Development Agreement
Pericom Nestor, Inc. Non-Exclusive
Distributorship Agreement April 23, 1996
PRC, Inc. NestorReader Software License December 13, 1994
Agreement
Recognition NestorReader License Agreement October , 1991
Equipment
Response Nestor Software License January 8, 1996
Healthcare Agreement
RH + Media Factors NestorReader Run-Time License August 20, 1991
Agreement
ScanOptics, Inc NestorReader License & May 27, 1992
Development Agreement
Solution NestorReader License and September 9, 1992
Technologies, Inc. Development Agreement
STMS Nestor, Inc. Software Beta February 16, 1995
Test Program Agreement
Strategic
Technology NestorReader Run-Time License September 27, 1991
Institute, Inc. Agreement
Synaxis Nestor, Inc. Software Beta January 20, 1995
Test Program Agreement
Team Consultants NestorReader License and July 1, 1992
Development Agreement
Textware Corp. NestorReader Software License April 1, 1995
TIS America NestorReader License Agreement July 24, 1992
Traffic Software, Nestor Software License August 11, 1995
USA Agreement
Traffic Software, Nestor, Inc Software Beta Test March 23, 1995
USA Program Agreement
Trip Data & Safety
Management NestorReader Licence and September 8, 1992
Development Agreement
TRW NestorReader Run-Time License October 22, 1991
Agreement
United States
Govt. Rock Island Nestor, Inc. Software Beta January 31, 1995
Arsenal Test Agreement
United Stationers NestorReader RunTime License November 1, 1991
Supply Co Agreement
Vaugn Caudle Nestor, Inc. Software Beta February 1, 1995
Associates Test Program Agreement
Westinghouse Nestor Software License and
Development Agreement December 24, 1991
Wheb Systems Nestor Software License June 1, 1995
Agreement
Windak Company NestorReader Software License September 24, 1993
Agreement
</TABLE>
EXHIBIT C
List of Personal Property Leases as specified in Section 2.01(e)
NONE
EXHIBIT D
PREPAID EXPENSES AND SOFTWARE COSTS
Prepaid Expenses total: $ 33,836.00
Less Software
replacement costs: 25,525.00
Total Adjustment
to Purchase Price: $ 8,311.00
Exhibit E
Post-Closing Adjustments
Rent: June 1 through June 30, 1996 $ 8,750.00
25% of June minimum OEM revenues
Microsystems Technology, Inc. 2,187.50
Diamond Head Software 1,250.00
Total Post-Closing Adjustments $ 12,187.50
EXHIBIT F
PURCHASE PRICE ALLOCATION
Office Equipment: $40,000.00
R&D Equipment: 45,000.00
Intangibles: 215,000.00
Prepaid Expense: 8,311.00
Section 3.01(b)
ACCRA II Costs: 20,202.00
$328,513.00
EXHIBIT G
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT (this "Sublease") is made and
entered into as of the 11th day of June 1996, by and between
NESTOR, INC. ("Landlord") and NATIONAL COMPUTER SYSTEMS, INC., a
Minnesota Corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant have entered into an
acquisition agreement dated as of the date of this sublease; and
WHEREAS, Landlord is the lessee of certain premises at One
Richmond Square, Providence, RI, by virtue of that certain Lease
dated June 6, 1985, by and between Richmond Square Technology
Park Association ("Prime Landlord") as lessor and Landlord as
lessee; and
WHEREAS, Landlord desires to sublease to Tenant and Tenant
desires to sublease from Landlord a portion of the premises
demised by the Prime Lease;
NOW THEREFORE, for good and valuable consideration, Landlord
and Tenant agree as follows:
1. DEMISE. Landlord does hereby sublease to Tenant that portion
of Landlord's premises demised by the Prime Lease more
particularly depicted on Exhibit "1" attached hereto and by this
reference made a part hereof (the "Subpremises"), and Tenant does
hereby lease and rent the Subpremises from Landlord. The
Subpremises are located on the second floor of the Building, and
are deemed to contain 3,333 rentable square feet.
2. TERMS AND CONDITIONS. This Sublease shall be upon all of the
terms and conditions of the Prime Lease, except as set forth
below:
a. Term. The term of this Sublease shall be a month to
month tenancy. Tenant shall give Landlord a 30 day prior
written notice to terminate this sublease.
b. Landlord may terminate this sublease upon ninety
days prior written notice to tenant except that such notice
shall not be given prior to August 1, 1996.
c. Condition of Premises. Tenant accepts the
Subpremises in their "as is" condition and shall return the
premises to Landlord at the expiration of the sublease term
in substantially the same condition, normal wear and tear
excepted.
d. Rent. Tenant shall pay the sum of $12,500 per month
for each month of tenancy during the term of this sublease.
If the commencement date of the term is other than the first
day of the month the rent shall be prorated based upon a 30
day month. It is agreed by the parties that this rental
rate is the full and complete sum to be paid monthly by
tenant and no other costs or charges shall be paid by
tenant. (See Exhibit 1)
e. OTHER. The following sections of the Prime Lease shall
not apply: 2, 3, 4, 6, 7, 8, 9 (except as related to office
hours and available access),10, 11, 12, 13 and 18.
3. Additional Covenants. Landlord covenants and agrees to fully
perform all of its obligations under the Prime Lease. Landlord
agrees not to modify, amend or terminate the Prime Lease without
the Tenant's consent, which consent shall not be withheld if
there is no adverse effect upon Tenant's occupancy of the
Subpremises pursuant to this Sublease. Tenant covenants that it
will not take any action, or fail to take any action, that would
cause Landlord to be in breach of its Lease to the premises.
4. Notices. Notices hereunder shall be given in the manner
provided in the Prime Lease, to the following addresses:
Landlord: Nestor, Inc.
One Richmond Square
Providence, RI 02906
Attn: V.P., Finance & Administration
Tenant: National Computer Systems, Inc.
11000 Prairie Lakes Drive
Eden Prairie, MN 55344
Attn: Director, Administrative Services
5. Entire Agreement. This Sublease constitutes the entire
agreement of the parties and supersedes all previous agreements,
oral or written.
6. Effectiveness. This Sublease shall only become effective when
the consent of the Prime Landlord under the Prime Lease has been
obtained in writing. Both parties agree to execute such consent
upon its execution by the Prime Landlord, if required by Prime
Landlord.
IN WITNESS WHEREOF, Landlord and Tenant have executed this
Sublease as of the day and year first written above.
LANDLORD: TENANT:
NESTOR, INC. NATIONAL COMPUTER SYSTEMS, INC.
By: By:
Title Title
Witness: Witness:
Exhibit 1
The services to be provided by landlord under Section 2(d) are:
Office space:
NCS will occupy approximately 33% of the available office space
for its employees substantially in the areas currently occupied
by the employees of the ICR Business (as that terms is defined in
the Asset Purchase Agreement dated June 11, 1996 by and between
Landlord and Tenant). Additionally, NCS will have complete
access to Nestor's common areas including reception, lunchroom,
conference, etc. Note: Nestor currently leases approximately
10,000 square feet at One Richmond Square, Providence, RI.
Electricity and local and long distance telephone services:
Included in the services being leased are electricity
requirements and the cost of local telephone access and long
distance telephone usage costs.
Equipment use:
NCS will have complete use of Nestor's telephones, fax machines,
photocopy machines, E-mail, and computer networks.
Staff support:
Nestor will provide staff support in the area of telephone
answering, receptionist, and hardware and software technical
support.
EXHIBIT H
BILL OF SALE
This Bill of Sale is from Nestor, Inc., a Delaware
corporation ("Seller"), to National Computer Systems, Inc., a
Minnesota corporation ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser and Seller have entered into that
certain Asset Purchase Agreement, dated as of June 11, 1996 (the
"Agreement"). All capitalized terms used herein which are not
otherwise defined shall have the meanings ascribed to them in the
Agreement; and
WHEREAS, on the terms and subject to the conditions set
forth in the Agreement, Seller desires to sell, transfer, convey
and assign to Purchaser, and Purchaser desires to purchase and
acquire from Seller, certain of the assets of Seller being used
by Seller in the conduct of the ICR Business.
NOW, THEREFORE, Seller, for the consideration set forth
in the Agreement and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged,
does hereby, on the terms and subject to the conditions set forth
in the Agreement, sell, transfer, convey and assign or cause to
be sold, transferred, conveyed and assigned to Purchaser, all of
Seller's right, title and interest in and to the Assets (as
defined in Section 2.01 of the Agreement), but specifically
excluding (i) all cash and bank accounts of Seller, (ii) all
corporate certificates of authority and corporate minute books
and the corporate stock record or register of Seller, (c) all
executory licenses, contracts or agreements or leases not
specifically identified in Exhibit B or Exhibit C to the
Agreement, (iv) all of Seller's intellectual property rights
(including, without limitation, Seller's intellectual property
rights relating to the ICR Business and Nestor Technology, as
defined in the License Agreement, which rights are being licensed
to Purchaser under the License Agreement) other than the ICR
Trademarks; and (v) all intra-company accounts or notes
receivable. The foregoing sale, transfer, conveyance and
assignment is, and the Assets thereby sold, transferred, conveyed
or assigned are, subject to the terms and conditions of the
Agreement, including, without limitation, the representations and
warranties of Seller therein.
From and after the date hereof, at the request of
Purchaser, Seller shall execute and deliver, or cause to be
executed and delivered, such other instruments of conveyance and
transfer as Purchaser reasonably may request in order to vest
more effectively in Purchaser title to any of the Assets.
This Bill of Sale shall be governed by and construed in
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale
to be executed and delivered this 11th day of June, 1996.
NESTOR, INC.
By:
Name:
Title:
EXHIBIT I
ASSIGNMENT, ASSUMPTION AND RETENTION AGREEMENT
ASSIGNMENT, ASSUMPTION AND RETENTION AGREEMENT, dated
June 11, 1996, between NESTOR, INC., a Delaware corporation
("Seller"), and National Computer Systems, Inc., a Minnesota
corporation ("Purchaser").
WITNESSETH:
WHEREAS, Purchaser and Seller have entered into that
certain Asset Purchase Agreement (the "Agreement") and that
certain License Agreement, both dated as of June 11, 1996. All
capitalized terms used herein which are not otherwise defined
shall have the meanings ascribed to them in the Agreement or in
the License Agreement;
WHEREAS, Seller has executed a Bill of Sale of even
date herewith (the "Bill of Sale") providing for the transfer to
Purchaser of certain assets of Seller (the "Assets"); and
WHEREAS, this Assignment, Assumption and Retention
Agreement is being executed and delivered in order to effect (i)
the assignment to Purchaser of certain liabilities and
obligations relating to the Assets and the assumption of such
liabilities and obligations by Purchaser or (ii) certain
procedures regarding certain liabilities and obligations retained
by Seller.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth in the Agreement:
1. Assumption of Liabilities by Purchaser. Pursuant
to Section 2.03 of the Agreement and subject to the exceptions
contained in Section 2 hereof and the exclusions contained in
Section 4 hereof, Seller does hereby sell, assign, convey,
transfer and deliver to Purchaser and Purchaser hereby agrees to
assume and/or pay or perform, in accordance with their terms on
the date hereof, or otherwise satisfy, from the date hereof,
Seller's executory obligations to be performed after the date
hereof under the licenses, contracts or agreements specifically
identified in Exhibit B to the Agreement and assigned to
Purchaser pursuant to Section 2.01 of the Agreement and the Bill
of Sale (the "Assigned Agreements").
2. Exceptions to Assumptions of Liabilities.
Notwithstanding Section 1 hereof:
(a) With respect to the intellectual property
licensed by Seller under the Assigned Agreements as such
intellectual property exists as of the date hereof, Purchaser
does not assume or have any obligation to enforce any breach by
the licensee or other party to the agreement ("Receiving Party")
of any obligations related to the use or disclosure of any
confidential Nestor Technology under any Assigned Agreement, and
Seller retains the right to enforce any and all of the disclosing
or owning party's rights and remedies related thereto.
(b) With respect to the intellectual property
licensed by Seller under the Assigned Agreements as such
intellectual property exists as of the date hereof, Purchaser
does not assume or have any executory obligation with respect to
the obligations of Seller under the Assigned Agreements to
indemnify the licensee against infringement claims by third
parties (or the rights associated therewith) (such obligations
and rights generally being hereinafter referred to as "Indemnity
Obligations and Rights").
(c) Seller shall retain the Indemnity Obligations
and Rights arising under the Assigned Agreements in the form
existing on the date hereof with respect to any violations of any
third party's intellectual property rights to the extent arising
from the Nestor Technology, standing alone.
(d) Seller retains and agrees to perform, to
which performance Purchaser hereby consents, any obligations
existing on the date hereof under the Assigned Agreements to
escrow or otherwise provide any source code to a licensee, but
only to the extent such obligations relate to a version of such
source code existing on the date hereof.
Notwithstanding anything in the foregoing part of this Section 2,
Purchaser shall have Indemnity Obligations and Rights to a
customer under the Assigned Agreements from and after the date on
which Purchaser (a) amends any Indemnity Obligation and Right or
(b) delivers a revision of the intellectual property licensed
thereunder to such customer with respect to any violations of any
third party's intellectual property rights to the extent arising
from (i), in whole or in part, any revisions by Purchaser of the
Existing ICR Products or the intellectual property rights
licensed by the licensors under such agreements or (ii) any use
of the Nestor Technology in combination with any other technology
or product.
To the maximum extent permitted by law, any and all rights under
the Assigned Agreements that Seller had prior to the date hereof
to be indemnified by the other party to such Assigned Agreement
shall be deemed on and after the date hereof to be for the
benefit of both Seller and Purchaser and either of them may
exercise any and all of such rights.
3. Source Code Licenses. Notwithstanding anything to
the contrary in the License Agreement and solely to the extent
necessary to permit Purchaser to meet its obligations under the
Assumed Agreements as they exist as of the date hereof, Purchaser
may, subject to Seller's advance written permission, which
permission shall not be unreasonably withheld, escrow or
otherwise provide source code to a licensee but only to the
extent that such obligation to escrow or provide source code was
assumed by Purchaser hereunder as of the date hereof.
4. Excluded Liabilities. Other than as set forth
above in Sections 1 and 2, Seller shall retain, and Purchaser
shall not assume, and nothing contained in this Assignment,
Assumption and Retention Agreement shall be construed as an
assumption by Purchaser of, any liabilities, obligations or
undertakings of Seller of any nature whatsoever, whether accrued,
absolute, fixed or contingent, known or unknown, due or to become
due, unliquidated or otherwise. Seller shall be responsible for
all of the liabilities, obligations and undertakings of Seller
not assumed by Purchaser pursuant to Section 1 hereof including,
without limitation, all employment obligations, taxes, royalties
or license fees accrued prior to the date hereof that are due and
payable to any party. Notwithstanding the foregoing, Seller
shall use its best efforts to obtain from the third-party
contract counterparts consents to the assignment of the licenses,
contracts or agreements listed in the Exhibit to this Assignment,
Assumption and Retention Agreement. In the event Seller is able
to obtain any of such consents, the respective license, contract
or agreement shall be deemed assigned by Seller to Purchaser as
of the date of such consent on the terms and conditions of this
Assignment, Assumption and Retention Agreement, except that all
references to the date hereof shall be deemed to be references to
the date of such consent and any accounts receivable existing
with respect thereto on the date of such consent shall be deemed
included in the Accounts Receivable to be collected by Purchaser
for Seller under and in accordance with the terms and conditions
of the Agreement. In the event Seller is not able to obtain any
of such consents, Purchaser hereby agrees and consents to
Seller's performance of any and all executory obligations under
the respective license, contract or agreement and Purchaser shall
not assume, or have any liability under, such licenses, contracts
or agreements.
5. Counterparts. This Assignment, Assumption and
Retention Agreement is executed pursuant to the Agreement and may
be simultaneously executed in two or more counterparts, each of
which as so executed shall be deemed to be an original and such
counterparts together shall constitute one and the same
instrument.
IN WITNESS WHEREOF, Seller and Purchaser have caused
this Assignment and Assumption Agreement to be executed in their
respective corporate names by their respective proper officers
thereunto duly authorized on and as of the day and year first
above written.
NESTOR, INC.
By
David Fox
President and CEO
NATIONAL COMPUTER SYSTEMS, INC.
By Russell A. Gullotti
Chairman, President and CEO
By
James D. Donoho, Vice President
By Power of Attorney
<TABLE>
<CAPTION>
Exhibit To The Asignment, Assumpton and Retention Agreement
Third Party Title of Agreement Date of Execution
<S> <C> <C>
Calera Recognition Special Purpose Object November 1, 1994
Systems, Inc. Code Integrated
Software Distribution
Agreement
Diamond Head Software, Developer Software August 31, 1994
Inc. License Agreement
Graphics Development Licensing Agreement June 28, 1995
International, Inc.
Howmedica Time and Materials August 31, 1995
Agreement for
Professional Services
Paragraph International License Agreement October 10, 1995
Pixel Translations, Software License October 1, 1995
Inc. Agreement
Simplify Development Software Licensing February 15, 1995
Corporation Agreement
</TABLE>
EXHIBIT J
ICR EMPLOYEES LIST
Lannie S. Kenton
Ronald F. Puchala
Peter "Fauss" Hull
David J. Ward
Tracie A. Rezendes
Sharon Fontaine
Arthur Parrillo
Yulia Nabutovsky
David P. Wright
Mary Stone
David M. Lenihan
Gianna J. Lazieh
Dorothy A. Hendrickson
Corrine Fioravanti
Kurt Fretz
EXHIBIT K
ASSIGNMENT OF TRADEMARKS
WHEREAS, Nestor, Inc., a corporation organized and existing
under the laws of the State of Delaware, having its principal
place of business at One Richmond Square, Providence, RI 02906
("Assignor"), has adopted and used the marks identified in the
attached Schedule 1 (the "Marks");
WHEREAS, National Computer Systems, Inc., a corporation
organized and existing under the laws of the State of Minnesota,
having its principal place of business at 11000 Prairie Lakes
Drive, Eden Prairie, MN 55344 ("Assignee"), desires to acquire
the Marks and enjoy the protection of the registrations of the
Marks;
NOW, THEREFORE, for good and valuable consideration, receipt
of which is hereby acknowledged, Assignor does hereby assign,
transfer and sell unto Assignee all right, title and interest in
and to the Marks, together with the good will of the business
symbolized by the Marks, the registrations of the Marks and any
applications for registration, together with the right to apply
for any corresponding registrations in other countries.
Assignor covenants that it or its representatives will, upon
request but at no cost to Assignor, do all other lawful acts
necessary to enable Assignee to obtain, maintain and enforce full
benefits from the rights and interests herein assigned.
This assignment shall be binding on the successors and
assigns of Assignor and shall inure to the benefit of the
successors and assigns of Assignee.
NESTOR, INC.
By
Title _________________________
STATE OF )
) ss
COUNTY OF )
On , 1996 before me, a Notary Public,
personally appeared________________,the President and
CEO of Nestor, Inc., a Delaware
corporation, personally known to me (or proved to me on the
basis of satisfactory evidence) to be the person whose name
is subscribed to the within instrument and acknowledged to me
that he/she executed the same in his/her authorized capacity,
and that by his/her signature on the instrument, the
person, or the entity upon behalf of which the person acted,
executed the instrument.
WITNESS my hand and official seal.
Notary Public
My Commission Expires:
SCHEDULE 1
A.U.S. Registrations
Mark Reg. No. Reg. Date
Omnitools 1,942,624 12/19/95
B.U.S. Applications
Mark Appl. No. Filing Date
N'Route 74/689,201 6/13/95
OmniControls Not yet assigned 4/17/96
OmniReader 65/015,559 11/3/95
31
LICENSE AGREEMENT
Agreement made as of the eleventh day of June 1996 by and
between Nestor, Inc., a Delaware corporation having a place of
business at One Richmond Square, Providence, RI 02906 ("the
Licensor") and National Computer Systems, Inc., a Minnesota
corporation having a principal place of business at 11000 Prairie
Lakes Drive, Eden Prairie, MN 55344 ("the Licensee" and together
with the Licensor, the "Parties" and each individually, a
"Party"):
WHEREAS, the Licensor has developed and acquired certain
technology (the "Nestor Technology") as more fully described in
this Agreement, some of which is the subject of United States and
foreign patents; and
WHEREAS the Licensee wishes to acquire from the Licensor
certain rights relating to the development and marketing of
certain software products in the field of intelligent character
recognition ("ICR") for document processing (defined below in
this Agreement as "the Existing ICR Products") and has acquired
from the Licensor certain trademarks and other assets pertaining
thereto, as more fully set forth in an Asset Purchase Agreement
dated June 11, 1996 between the Licensor and the Licensee ("the
Purchase Agreement"); and
WHEREAS the Licensor has developed for the benefit of the
Licensee a design, based in part on the Nestor Technology, of
certain products in the field of ICR for document processing
known as Accra II, and certain software to be incorporated
therein, all at the request and expense of the Licensee; and
WHEREAS, the Licensee wishes to obtain an exclusive license
to the Nestor Technology for the purposes of making, using and
selling and carrying on product research and development using
the Existing ICR Products and Accra II, and a non-exclusive
license to the Nestor Technology for the purpose of making, using
and selling certain other products in specified fields of use
("New Products") as hereinafter more fully provided;
NOW, THEREFORE, in consideration of the premises, the mutual
covenants and agreements herein contained and other valuable
consideration, the receipt, adequacy and sufficiency of which is
hereby acknowledged, the Parties covenant and agree as follows:
I. Definitions.
"Accra II" shall mean: (1) the system design, computer
software specifications, related documentation, and program
designs (a) developed by the Licensor at the request of the
Licensee pursuant to a Consulting and Services Agreement dated
September 15, 1995, including without limitation the designs
contained in a Product Requirements Document dated September 27,
1995 and Functional Specification dated October 31, 1995, or (b)
otherwise made by the Licensor prior to the date of this
Agreement and delivered by Licensor to Licensee and (2) any
product based upon or derived from such program designs or system
design, or incorporating all or any part of such programs or
program designs, and (3) any future modification of such
products.
"Accra II License" shall mean the license granted in
paragraph II. A. (ii) of this Agreement.
"Accra II Royalty" shall mean the royalty described in
paragraph IV.B.(ii) of this Agreement.
"Accra II Royalty Base" shall mean the amounts actually
received by the Licensee in connection with the sale, lease,
sublicensing or other transfer or delivery of any kind of Accra
II, less the Excluded Royalty Base. If Accra II is used
internally by Licensee for Licensee's own use or for
incorporation into another product not subject to any royalty
under this Agreement, the Accra II Royalty Base shall be the then
published list price of each unit of Accra II times the number of
units so used. If any version of Accra II is used by the
Licensee to deliver services to third parties, the Accra II
Royalty Base on such use shall be equal to the price of twenty
(20) units of such version of Accra II. The Accra II Royalty
Base on internal use or delivery of services to third parties
shall be deemed to have been received by Licensee upon the first
use of the version in question of Accra II for such purpose.
"Deliverables" shall mean those records, design documents,
software and other tangible materials provided to the Licensee
under this Agreement containing any expression of the Nestor
Technology, the Existing ICR Products or Accra II.
"Document Processing and Management" shall mean the
processing and management of digitized images of documents
containing human-readable characters (hand-print or machine
print), with or without one or more of optical marks, bar codes,
symbols used to delineate the location of data fields on
documents, and symbols used to uniquely identify such documents,
all capable of reproduction on paper, regardless of whether such
documents are stored or originated on paper or in electronic or
other media from which such characters, optical marks, bar-codes
and symbols can be perceived. Document Processing and Management
shall include the recognition and identification of such
characters, optical marks, bar-codes and symbols and shall
specifically exclude the analysis of such characters, optical
marks, bar-codes and symbols as data elements for any purpose
other than recognizing and identifying such characters, optical
marks, bar-codes and symbols.
"Earned ICR Royalty" shall mean the earned royalty described
in paragraph IV.B(i). of this Agreement.
"Earned New Product Royalty" shall mean the earned royalty
described in paragraph IV.B.(iii). of this Agreement.
"Excluded Royalty Base" shall mean refunds for returned
goods; separately itemized charges (if any) for value-added or
sales taxes, customs duties, freight, insurance, and special
packaging; the Licensee's reasonable and customary charges for
any of the following: the sale of forms; hardware that does not
contain any part of the Nestor Technology or that is made by a
third party under a license of Nestor Technology; third-party
software that is sold separately and is separately priced;
consulting, support or other professional services; and
customization. As used herein, the term "reasonable and customary
charges" shall mean charges consistent with those made for
similar goods or services sold by the Licensee to its customers
other than in connection with the sale or delivery of a product
made under The License.
"Exclusive Field" shall mean the field of Intelligent
Character Recognition for Document Processing and Management.
"Existing ICR Products" shall mean (i) the products
NestorReader, OmniTools, N'Route, N'Form, OmniControls,
OmniReader and NiReader (including all related user or other
documentation) as existing on the date of execution of this
Agreement and included among the computer files identified in
the attached Schedule A, and (ii) any modification, enhancement,
or future version of such products, and (iii) any product
containing any substantial portion of the foregoing, made by or
for the Licensee.
"ICR License" shall mean the license granted in paragraph
II. A. (i) of this Agreement.
"ICR Royalty Base" shall mean the amounts actually received
by the Licensee in connection with the sale, lease, sublicensing
or other transfer or delivery of any kind of Existing ICR
Products, less the Excluded Royalty Base. If any of the Existing
ICR Products is used internally by Licensee for Licensee's own
use or for incorporation into another product not subject to any
royalty under this Agreement, the ICR Royalty Base shall be the
then published list price of each unit of Existing ICR Products
times the number of units so used. If any version of any existing
ICR Product is used by the Licensee to deliver services to third
parties, the ICR Royalty base for such use shall be equal to the
price of twenty (20) units of such version of the Existing ICR
Product. The ICR Royalty Base on internal use or delivery of
services to third parties shall be deemed to have been received
by Licensee upon the first use of the version in question of an
Existing ICR Product for such purpose.
"Intelligent Character Recognition" shall mean any method of
recognizing characters and other symbols that is based upon
comparison with a set of features derived from adaptive or
statistical analysis of a representative set of characters or
symbols (rather than a set of rules that describe such features),
and that typically extends the range of recognition to characters
and symbols that are not reliably recognizable by rule-based
methods of optical character recognition.
"Minimum Annual Field of Use Royalty" shall mean the minimum
annual royalty payable by the Licensee to the Licensor with
respect to each field of use of New Products necessary to
maintain the license in such field of use, as more fully set
forth in paragraph IV.B.(iii) of this Agreement.
"Minimum Annual Exclusive ICR Royalty" shall mean the
minimum annual royalty payable by the Licensee to the Licensor
under the ICR License necessary to maintain the exclusivity of
the license, as more fully set forth in paragraph IV.B.(i). of
this Agreement.
"Minimum Annual Non-Exclusive ICR Royalty" shall mean the
minimum annual royalty payable by the Licensee to the Licensor
under the ICR License necessary to maintain the existence of such
ICR License on a non-exclusive basis, as more fully set forth in
paragraph VIII.A. of this Agreement.
"Nestor Copyrights" shall mean all copyrights (registered or
unregistered) owned or controlled by the Licensor on the date
hereof and relating to the Exclusive Field, the Existing ICR
Products, Accra II or New Products, except for applications of
the Nestor Technology used exclusively outside the Exclusive
Field.
"Nestor Know-how" shall mean all unpublished proprietary
information owned or controlled by the Licensor on the date
hereof and relating to (i) the practice of the Nestor Patent
Rights, (ii) the Existing ICR Products, (iii) Accra II, (iv) the
Exclusive Field, and (v) the fields of use of the New Product
License, but excluding in each case all published subject-matter
of the Nestor Patent Rights and of the Nestor Copyrights. Nestor
Know-how shall include, without thereby limiting: (i) all such
unpublished know-how received by the Licensee directly or
indirectly from the Licensor or the Licensor's present or former
employees, officers, or agents (including any former employee,
officer or agent of the Licensor engaged by the Licensee) and
consisting of programs, source code, algorithms, designs,
procedures, processes or methods relating to the use of items (i)
through (v), above, in any application or field of use
whatsoever, and (ii) all such unpublished proprietary information
contained in the Deliverables.
"Nestor Patent Rights" shall mean (i) the subject-matter of
the claims of those United States patents and patent applications
owned by the Licensor that are listed in Schedule B to this
Agreement, and (ii) foreign patents and patent applications owned
by the Licensor corresponding to such United States patents and
patent applications.
"Nestor Technology" shall mean the Nestor Patent Rights, the
Nestor Copyrights and the Nestor Know-how.
"New Product" shall mean any product containing any part of
the Nestor Technology and sold, leased, sublicensed or otherwise
transferred or delivered for use in any of the following fields
of use; (a) non-character-based document processing; (b) speech-
recognition for data collection; and (c) data analysis applied
only to education, health-care, psychological testing, attitude
surveys, manufacturing controls, product registration, order
processing and employee benefits, all subject to the limitations
on use set forth in the ultimate subparagraph of paragraph II. A.
"New Product License" shall mean the license granted
pursuant to paragraph II. A. (iii) of this Agreement.
"New Product Royalty Base" shall mean the amounts actually
received by the Licensee in connection with the sale, lease,
sublicensing or other transfer or delivery of any kind of New
Products, less the Excluded Royalty Base. If any New Product is
used internally by Licensee for Licensee's own use or for
incorporation into another product not subject to any royalty
under this Agreement, the New Product Royalty Base shall be the
then published list price of each unit of New Product times the
number of units so used. If any version of any New Product is
used by the Licensee to deliver services to third parties, the
New Product Royalty base for such use shall be equal to the price
of twenty (20) units of such version of the New Product. The New
Product Royalty Base on internal use or delivery of services to
third parties shall be deemed to have been received by Licensee
upon the first use of the version in question of a New Product
for such purpose.
"Patent Improvement" shall mean any development or any
modification, extension or improvement of the Nestor Technology
claimed in a patent or patent application owned or controlled by
the Licensee (whether or not patented) that would read on the
claims, or prevent or impair the practice, in whole or in part,
of any invention claimed and disclosed in any of the Nestor
Patent Rights or in any future patent owned or controlled by the
Licensor, including without limitation foreign patents.
"The License" shall mean, collectively, the licenses granted
by the Licensor to the Licensee pursuant to paragraph II. A. of
this Agreement.
"Year of This Agreement" shall mean a twelve-month period
commencing on July 1 and ending on the next subsequent June 30;
except that the first Year of This Agreement shall commence on
the date of execution of this Agreement and end on June 30, 1997.
II. Grant of License.
A. Subject to the terms and conditions of this Agreement,
and further subject to licenses of Existing ICR Products and to
certain other licenses granted by the Licensor to third parties
prior to the date of this Agreement (including without limitation
the licenses of the Nestor Technology identified in Schedule C
attached hereto), the Licensor hereby grants to the Licensee,
and the Licensee accepts,
(i) an exclusive, non-transferable, world-wide license
(the "ICR License") to use the Nestor Technology for the
sole purpose of making, using and selling and carrying on
product research and development using the Existing ICR
Products in the field of Document Processing and Management;
(ii) an exclusive, non-transferable, world-wide license
("the Accra II License") to use the Nestor Technology for
the purposes of making, using and selling and carrying on
product research and development using Accra II in the field
of use of Document Processing and Management, including the
right to make copies and to make derivative works therefrom;
(iii) a non-exclusive, non-transferable, world-wide
license ("the New Product License") to use the Nestor
Technology for the purpose of making, using and selling the
New Products, but only in and for the respective fields of
use set forth in the definition of New Products in paragraph
I. of this Agreement,
all of which licenses are hereinafter collectively referred to as
"The License". It is expressly understood and agreed that The
License does not include any sublicense to the Licensee of that
third-party software incorporated into the Existing ICR Products,
which is identified in Schedule D attached hereto; provided,
however, that Licensor will, at Licensee's request, sublicense to
Licensee for a period not to exceed ninety (90) days after the
date of this Agreement, any such third-party software for which
Licensee has not obtained a license and for which Licensor has
not obtained a required consent to the assignment to Licensee of
such third-party software license. The Licensee shall pay to
Licensor any royalties or other amounts due from Licensor to the
licensors of such third-party software arising from Licensee's
practice of any such sublicense.
Except in the event that the ICR License becomes non-
exclusive as provided herein, and subject to the terms of the
licenses listed in Schedule C attached hereto, the Licensee shall
have exclusive rights to use the Nestor Technology in the
Exclusive Field. Notwithstanding the foregoing, the Licensor
shall have the right to sell, without restriction as to their
application to any particular field of use, semiconductor pattern-
recognition devices together with related development software,
including without limitation, Licensor's Ni1000 Recognition
Accelerator, Ni1000 Development System, and future versions
thereof. Licensor agrees that, for a term of 180 days after the
execution of this Agreement and for such additional term as may
be provided for in a development contract between the parties,
Licensor will forbear from assisting any third party in
developing any application of such semiconductor devices in the
Exclusive Field. Notwithstanding the foregoing, the Licensee
shall have the right, in lieu of such development contract
between the Parties, to extend the term of the Licensor's
forbearance with respect to the development of NiReader, or of
any product similar to NiReader, for a maximum of two additional
periods of 180 days each by paying to Licensor in advance of each
such period, an option fee in the amount of $25,000. Such option
fee shall not be included in the computation of any minimum
royalty provided for under this Agreement.
All fields of use not expressly included in The License are
specifically excluded from the scope of The License. Without
limiting the foregoing exclusion, the following fields are
specifically excluded from the scope of The License: (i) making
or having made semiconductor devices; (ii) vehicular and railway
traffic monitoring, management and control; (iii) data analysis
for the purpose of application to fraud detection, financial risk
assessment, optimization of marketing campaigns and
profitability, and (iv) that certain product of Licensor known as
NestorWriter. Use of the Nestor Technology in making or selling
products other than (i) Existing ICR Products, (ii) Accra II and
(iii) New Products in and for their respective fields of use, is
not within the scope of The License, and any such unlicensed use
of the Nestor Technology, if not cured as permitted herein, shall
be a material breach of this Agreement. Except as provided in
subparagraph D. of this paragraph II., the Licensee shall not
have the right to grant sublicenses of the rights licensed under
The License. The Licensee shall not have the right to sublicense
the Nestor Patent Rights standing alone, but only as part of
Accra II, the Existing ICR Products, or as part of a New Product
containing substantial technology in addition to the Nestor
Patent Rights. All rights not expressly granted in this
Agreement to the Licensee are reserved by the Licensor.
B. The ICR License shall become non-exclusive if the
Licensor shall fail to pay to the Licensee, when due, royalties
on Existing ICR Products that in each Year of This Agreement
equal or exceed the relevant Minimum Annual Exclusive ICR
Royalties set forth in paragraph IV.B. of this Agreement. The
ICR License shall irrevocably terminate if the Licensee shall
fail to pay to the Licensor, when due, royalties under the ICR
License equal to or greater than $25,000 in any Year of This
Agreement. Notwithstanding anything else contained in this
Agreement, the ICR License with respect to the Existing ICR
Products known as N'Form and NiReader shall terminate,
respectively, 180 days after the date of this Agreement unless
the Parties shall have entered into an agreement relating to the
further development of such product, and all rights relating to
such products shall revert to Licensor. Upon termination of the
license of N'Form, the Licensor shall have all rights to N'Form,
including without limitation those rights granted to the Licensee
under this Agreement and the right, alone or with third parties,
to develop and market N'Form or any similar product whose
intended purpose is to identify a form and not to recognize the
contents of any data field on such form.
C. The New Product License with respect to any field
of use shall irrevocably terminate if the Licensee fails to pay
to the Licensor, when due, Minimum Annual Field of Use Royalties
and Earned New Product Royalties that, taken together, equal or
exceed the Minimum Annual Field of Use Royalty for such field of
use for the relevant Year of This Agreement. If the New Product
License shall be terminated with respect to any field of use
pursuant to this paragraph II. C., such termination shall not
affect the rights of the Licensee under the New Product License
with respect to any other field of use.
D. The Licensee will only deliver the Nestor
Technology to licensees of the Existing ICR Products, of Accra
II, or of New Products (i) with the sole exception of
OmniReader, in the form of "object code" or access to object code
and not in the form of "source code"; and (ii) subject to an end-
user license (which may be a shrink-wrap license) or reseller
license that prohibits, to the maximum extent permitted by law,
disassembling, decompiling or otherwise reverse-engineering of
the Nestor Technology. For the purposes of this subparagraph II.
D., the term "object code" shall mean an executable computer
program restricted in its entirety to machine-readable
instructions or data; and the term "source code" shall mean a
computer program or any part thereof in human-readable form. Each
such license shall contain warranty limitations and limitations
of liability for damages substantially similar to those contained
in paragraphs VI. B., C., and D. of this Agreement or in licenses
of commercially distributed software products of substantial
value, and provisions for export control substantially similar to
those contained in paragraph VI. E. (i) of this Agreement. Within
thirty (30) days after the first distribution of any Existing ICR
Product, Accra II or New Product by the Licensee, the Licensee
will furnish the Licensor with one specimen of (i) each
commercially available Existing ICR Product, (ii) each
commercially available New Product, and (iii) each form of
license agreement between the Licensee and its sublicensees, all
solely for the purpose of record-keeping and ascertaining
Licensee's compliance with the terms of the License.
E. If the Licensee or any of the Licensee's
employees, agents or consultants should develop any Patent
Improvement, the Licensee will promptly notify the Licensor of
such development. The Licensee agrees, upon request of the
Licensor, to assign and transfer to the Licensor the entire
right, title and interest in and to such Patent Improvement and
all proprietary rights therein and thereto. The Licensee will,
upon the Licensor's request and at the Licensor's sole expense,
execute all instruments and documents necessary to secure for the
Licensor any form of protection or property right with respect to
such Patent Improvement. Such Patent Improvement shall become
part of the Nestor Technology and is hereby licensed to the
Licensee pursuant to the terms and conditions of this Agreement,
including those terms relating to exclusivity.
If the Licensee or any of the Licensee's employees,
agents or consultants should develop any improvement,
modification or enhancement to the ICR Products or to Accra II
that is not a Patent Improvement, such improvement, modification
or enhancement shall be and remain the property of the Licensee,
and the Licensor shall not have any rights in or to such
development.
All of the provisions of this paragraph II. E. shall
survive any termination of this Agreement, other than by
expiration at its term, or of The License.
F. If the Licensor shall acquire ownership or control
of any patent right after the date of this Agreement, the
Licensor agrees not to assert such right against the Licensee,
but only to the extent that such assertion by the Licensor would
prevent the Licensee's use of a then existing right granted in
The License to use (i) the Nestor Technology as it existed on the
date of this Agreement, or (ii) any Patent Improvement assigned
to the Licensor.
III. Confidentiality.
A. The Licensee shall hold in strict confidence and not
disclose or, except as provided in this Agreement, use the Nestor
Know-how with the exception of such information that (i) is in
the public domain at the time of disclosure; or (ii) after
disclosure becomes a part of the public domain by publication
other than by any direct or indirect action of the Licensee in
violation of this Agreement; or (iii) is received by the Licensee
after the time of disclosure from a third party who did not
require such information to be held in confidence and who did not
acquire, directly or indirectly, such information from the
Licensor under any obligation of confidence; or (iv) is publicly
disclosed (i.e., not under adequate protective order) by the
Licensee under an order of a court or government agency, provided
that the Licensee shall have given to the Licensor notice of such
order promptly upon the Licensee's receipt thereof and prior to
any submission in response thereto; and further provided that the
Licensee shall have taken no action to prevent or interfere with
any effort that the Licensor may take to intervene in any such
proceeding or to otherwise prevent such public disclosure; or (v)
is agreed to by the Parties in writing in advance of publication.
Notwithstanding the foregoing, the Licensee shall have the right
to communicate information constituting all or part of the
Nestor Know-how to those of its employees having a need to know,
to the extent necessary for purposes permitted by this Agreement,
but shall, as a condition of such communications, require such
persons to whom such information is communicated to execute a
written secrecy and non-disclosure agreement, together with an
assignment to the Licensee of such employee's intellectual
property rights to the extent necessary to enable the Licensee to
fulfill the Licensee's obligations under paragraph II. E. of this
Agreement.
All of the provisions of this paragraph III. A. shall
survive any termination of this Agreement or of The License.
B. For so long as the ICR License shall remain exclusive,
Licensor will not disclose, except under conditions of
confidentiality, any portion of the Nestor Know-how existing on
the date of this Agreement that is used exclusively in the
Exclusive Field.
IV. Initial License Fee, Royalty Rate, Payment and Related
Matters.
A. Initial License Fee. The Licensee shall pay to the
Licensor an "Initial License Fee" in the amount of $1,400,000.
The Initial License Fee shall be payable in addition to the
royalties set forth in paragraph IV.B., and shall not constitute
a pre-payment thereof.
B. Royalty Rate. The Licensee shall pay (in U.S. dollars)
to the Licensor during the term of this Agreement the earned
royalties and minimum royalties set forth below; provided,
however, that no product shall be included in more than one
royalty base, even though such product might fall under more than
one license granted pursuant to this Agreement. The royalty base
in which such product shall be included shall be determined by
the Licensee's permanent, commercially reasonable classification
of such product prior to the first sale of such product. If the
ICR Royalty Base, the Accra II Royalty Base or any New Product
Royalty Base shall include receipts by the Licensee of payment in
currency other than U. S. dollar, such payment shall be converted
into U. S. dollars at the rate published in The Wall Street
Journal on the first business day after the end of the Calendar
Quarter (as that term is defined in paragraph V. B., below) in
which such payments were received.
(i) Existing ICR Products. The Licensee shall pay to
the Licensor royalties equal to the greater of (a) an ICR
Earned Royalty equal to ten percent (10%) of the ICR Royalty
Base, or (b) the Minimum Annual Exclusive ICR Royalty set
forth below:
Minimum Annual
Year of This Agreement Exclusive
ICR Royalty
1 $ 160,000
2 $ 200,000
3 $ 200,000
4 $ 200,000
5 and thereafter $ 200,000
(ii) Accra II:
The Licensee shall pay to the Licensor an Accra II
Royalty equal to ten percent (10%) of the Accra II Royalty
Base until such time as cumulative royalties paid on sales
of Accra II shall aggregate ten million dollars
($10,000,000); and thereafter the Licensee shall pay to the
Licensor an earned royalty equal to five percent (5%) of the
Accra II Royalty Base. There shall be no minimum royalty
with respect to Accra II.
(iii) New Products:
With respect to each of the fields of use described in
the New Product License, the Licensee shall pay to the
Licensor the greater of (a) the New Product Earned Royalty
or (b) the Minimum Annual Royalty set forth, respectively,
below:
Minimum Annual
Royalty
Year of This Agreement for Each of The
Three New Product
Fields of Use
1 $ 0
2 $ 0
3 $ 50,000
4 $100,000
5 and thereafter $150,000
For the purpose of determining whether Minimum Annual
Royalty requirements have been satisfied, royalties paid
upon New Products in any of the three fields of use ((a),
(b) or (c) in the definition of New Products) shall not be
aggregated with royalties paid upon New Products in any
other field of use or with any other royalty paid by the
Licensee to the Licensor.
In each field of use ((a), (b) or (c) in the definition
of New Products) in the definition of New Products, the New
Product Earned Royalty shall be equal to ten per cent (10%)
of the New Product Royalty Base applicable to such field of
use until the sum of Minimum Annual Royalties and New
Product Earned Royalties paid by the Licensee to the
Licensor on the New Product Royalty Base in such field of
use shall aggregate five million dollars ($5,000,000),
whereupon the New Product Earned Royalty payable in such
field of use shall be reduced to five per cent (5%) of the
New Product Royalty Base in such field of use.
C. Payment.
(i) The Initial License Fee shall be payable upon
execution of this Agreement by wire transfer to the Licensor
at a bank account to be specified by the Licensor not less
than two business days prior to the execution of this
Agreement.
(ii) Earned royalties payable on the ICR Royalty
Base, the Accra II Royalty Base, and the New Product Royalty
Base shall be payable quarterly within 60 days after the end
of the calendar quarter of this Agreement in which payment
constituting such royalty base was received by the Licensee.
For the purposes of this paragraph, a "calendar quarter"
shall mean the three-month periods ending on September 30,
December 31, March 31, and June 30 of any Year of This
Agreement.
(iii) So long as the Licensee has not given notice to
the Licensor, at least sixty (60) days prior to the end of
any Year of This Agreement, of the Licensee's intention to
terminate the exclusiveness of the ICR License, then the
Licensee shall pay to the Licensor the Minimum Annual
Exclusive ICR Royalty for such year. Such payment shall be
due within sixty (60) days after the end of the relevant
Year of This Agreement, and the amount of such Minimum
Annual Exclusive ICR Royalty shall be reduced by Earned ICR
Royalties paid and to be paid with respect to such Year of
This Agreement.
(iv) Minimum Annual Field of Use Royalties on New
Products in each of the three fields of use for which the
New Product License is in effect shall be paid annually in
advance of the Year of This Agreement to which they apply,
and shall be credited against New Product Earned Royalties
due and payable in such field of use until the New Product
Earned Royalties for such year and field of use equal such
Minimum Annual Field of Use Royalty for such year and field
of use, after which such New Product Earned Royalties shall
be due and payable quarterly sixty (60) days after the end
of the calendar quarter in which payment for the New Product
in question was received by the Licensee. If the Minimum
Annual Field of Use Royalty in any field of use exceeds the
New Product Earned Royalties due and payable for such year,
such excess shall neither be refunded by the Licensor nor
carried over to the following or subsequent years.
D. Except as otherwise expressly provided in this
Agreement, no payment shall be subject to a refund.
Notwithstanding the foregoing, any overpayment of royalties
discovered or confirmed by an audit as provided in subparagraph F
of this paragraph IV shall be credited toward and applied against
the next succeeding royalty payment or payments due and payable
on the royalty base on which such overpayment of royalties was
made. In the event the Licensor, after such audit , is required
to institute an action to collect any shortfall in any payment
due under this Agreement, which shortfall has been identified by
such audit as being an accounting adjustment not involving issues
of interpretation of the terms and conditions of this Agreement,
and the Licensor prevails in such action, the Licensor will be
entitled to reimbursement by the Licensee of its reasonable
expenses so incurred (including reasonable attorneys' fees).
E. The Licensee shall be liable and responsible for the
reporting and payment of all taxes and duties (except income
taxes accrued against the Licensor) arising from this Agreement
and shall indemnify and hold the Licensor harmless from any
failure of the Licensee to do so. Nevertheless, the Licensor
shall have the right to report and pay to the collecting
authority, and collect from the Licensee, any of such taxes
and/or duties.
F. Notwithstanding the provisions of this Agreement
relating to the payment terms of earned royalties, within thirty
(30) days after the end of each calendar quarter during the term
of this Agreement, the Licensee shall deliver to the Licensor a
certificate of a duly authorized and responsible employee of the
Licensee setting forth each Royalty Base during such calendar
quarter and any and all other information necessary for the
determination of royalties under this Agreement.
The Licensee will keep such records as will enable the
royalties payable hereunder to be accurately determined by the
Licensor. Such records will be retained by the Licensee and made
available to auditors selected by the Licensor for examination at
the request and at the expense of the Licensor during reasonable
business hours at the offices of the Licensee set forth in the
preamble to this Agreement for a period of at least five (5)
years after the date of the transactions to which the records
relate. Any confidential information obtained by such auditors
regarding the business of the Licensee shall be held in strict
confidence by such auditors and the Licensor, except as may be
necessary to prosecute an action to collect royalties. The
Licensee shall reimburse the Licensor for the costs of such audit
if the audit determines that the royalty due as stated in any
such certificate is understated by more than five percent (5%).
V. Certain Claims and Actions; Infringement and Unauthorized
Use.
A. Provided that (i) the Licensee has notified the
Licensor in writing of any claim or action against the Licensee
by a third party in which it is alleged that any part of the
Nestor Technology contained in the Deliverables, or of the
Existing ICR Products, standing alone infringes a United States
copyright, trademark or issued patent or a copyright, trademark
or issued patent in a foreign jurisdiction that corresponds to
such United States intellectual-property right, within ten (10)
days of the date on which the Licensee received notice of such
claim or action (but in any event prior to ten (10) days before
the first answer or other responsive pleading therein is due),
and (ii) the Licensee, at no cost to the Licensor (except for
reasonable out-of-pocket expenses), fully cooperates with the
Licensor in the settlement or defense of such claim or action,
the Licensor shall take sole control of the settlement of such
claim and the defense of any litigation resulting solely
therefrom and shall be responsible for the costs thereof,
including without limitation any judgment for damages. If, as a
final result thereof, the use by the Licensee of any part of the
Nestor Technology is enjoined, the Licensor shall, at its sole
option (i) replace such parts of the Nestor Technology as have
been enjoined, provided that such replacement shall not cause a
material loss of functionality to the Licensee, or (ii) procure a
license for the Licensee to use same and reduce the royalties
payable by the Licensee under this Agreement by an amount equal
to any royalty or license fee to be paid by the Licensee in
connection with such license; or (iii), if Licensor has failed to
effectuate (i) or (ii) after reasonable good faith efforts to do
so, reimburse to the Licensee such part of the royalty therefor
previously paid pursuant to this Agreement as may be fair and
equitable under the circumstances. Notwithstanding the
foregoing, the Licensor assumes no obligation or liability for
any claim or action arising from or relating to (i) the breach by
the Licensee of any of its agreements, warranties or duties
contained in this Agreement, (ii) the use of the Existing ICR
Products, of Accra II, of the New Products, or of any other
product made by or for the Licensee and incorporating any part of
the Nestor Technology, except as provided above in this paragraph
V. A., for claims of the violation of the intellectual property
rights of a third party, (iii) the violation of the intellectual
property rights of a third party caused by or alleged to be
caused by the use of the Nestor Technology in combination with
any other technology or product, (iv) the Licensor's compliance
with the Licensee's design, specifications, or instructions, (v)
any actions or claims of trademark infringement involving any
marking or branding, other than the trademark "NestorReader" or
any mark sold to Licensee pursuant to the Purchase Agreement, not
applied or approved in advance by the Licensor, (vi) in whole or
in part arising out of or relating to any modification of the
Nestor Technology made by or for the Licensee, or (vii) the
direct or contributory infringement of any process patent using
any Nestor Technology, except for uses practiced in their
entirety by Licensor on or before the date hereof (all of the
foregoing (i) through (vii) being hereinafter referred to as
"Excluded Claims"). This paragraph V. A. states the entire
liability and obligation of the Licensor and the exclusive remedy
of the Licensee and its sublicensees with respect to any action
or claim described in this paragraph V. A.
B. Provided that (i) the Licensor has notified the Licensee
in writing of any claim or action against the Licensor by a third
party in which any Excluded Claim is alleged within ten (10) days
of the date on which the Licensor received notice of such claim
or action (but in any event prior to ten (10) days before the
first answer or other responsive pleading therein is due), and
(ii) the Licensor, at no cost to the Licensee (except for
reasonable out-of-pocket expenses), fully cooperates with the
Licensee in the settlement or defense of such claim or action,
the Licensee shall take sole control of the settlement of such
claim and the defense of any litigation resulting solely
therefrom and shall be responsible for the costs thereof,
including without limitation any judgment for damages.
Notwithstanding the foregoing, the Licensee assumes no obligation
or liability for any claim or action arising from or relating to
(i) the breach by the Licensor of any of its agreements,
warranties or duties contained in this Agreement, (ii) any defect
in the Existing ICR Products as they existed on the date of this
Agreement or (iii) any claim within the Licensor's liability or
obligations under paragraph V.A. Except for Licensor's right, as
provided in this Agreement, to terminate this Agreement, The
License, or any license granted hereunder, this paragraph V. B.
states the entire liability and obligation of Licensee and the
exclusive remedy of Licensor and/or its assignees with respect to
such third-party claims.
C. The Licensee shall immediately notify the Licensor,
with full particulars, of any infringer or unauthorized user of
the Nestor Technology of which the Licensee obtains knowledge.
The Licensor, in its sole discretion, shall determine what steps,
if any, are to be taken with respect to any infringement or
unauthorized use of the Nestor Technology and any damages
recovered shall be payable solely to the Licensor. The Licensee
agrees to fully cooperate with the Licensor, at no cost to the
Licensor (except for reasonable out-of-pocket expenses), in all
stages of any such action. In no event shall the Licensor be
obligated hereunder to commence legal proceedings.
Notwithstanding the foregoing, the Licensee may request that the
Licensor commence such action, at the Licensee's expense,
against an alleged infringer in any field of use in which the
Licensee then has an exclusive license. If the Licensor should
fail to comply with such request by the Licensee, then the
minimum annual royalty in such field of use shall no longer be in
effect. The Licensee shall not undertake any legal action or
other steps of any kind to prevent or restrain any such
infringement or unauthorized use or collect damages resulting
therefrom without the Licensor's advance written permission.
VI. Warranties and Covenants.
A. Each Party does hereby warrant that this Agreement has
been duly and validly authorized and executed by it and is its
valid and binding obligation. Each party further warrants that
the execution of this Agreement does not, and with the passage of
time, will not, materially conflict with or constitute a breach
under any other agreement, judgment of instrument to which it is
currently a party or by which it is currently bound.
B. EXCEPT AS STATED HEREIN, THE NESTOR TECHNOLOGY IS
LICENSED AS-IS. LICENSOR DOES NOT WARRANT THAT THE NESTOR
TECHNOLOGY IS CAPABLE OF INDUSTRIAL REALIZATION OR COMMERCIAL
EXPLOITATION, THE RISKS OF WHICH ARE BEING ASSUMED SOLELY BY
LICENSEE, AND LICENSOR SHALL HAVE NO RESPONSIBILITY FOR THE
CONSEQUENCES OF ANY SUCH FAILURE OF INDUSTRIAL REALIZATION OR
COMMERCIAL EXPLOITATION. IT IS UNDERSTOOD THAT LICENSOR IS NOT
MAKING AND EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES
THAT THE MANUFACTURE, USE, OR SALE OF ACCRA II, THE NEW PRODUCTS,
OR ANY OTHER PRODUCT MADE BY OR FOR LICENSEE, EXCEPT "THE
EXISTING ICR PRODUCTS" AND THE NESTOR TECHNOLOGY AS CONTAINED IN
THE DELIVERABLES AND STANDING ALONE, WILL NOT INFRINGE THE
PATENTS, COPYRIGHTS, TRADEMARKS OR OTHER PROPRIETARY PROPERTY
RIGHTS OF ANY THIRD PARTY.
C. EXCEPT AS STATED HEREIN, LICENSOR EXPRESSLY DISCLAIMS
ANY AND ALL WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER,
EITHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
D. REGARDLESS OF WHETHER ANY REMEDY HEREIN FAILS OF ITS
ESSENTIAL PURPOSE, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR
ANY INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT OR
CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING IN ANY WAY TO
THIS AGREEMENT, THE NESTOR TECHNOLOGY OR THE USE OF THE SAME
(INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST INFORMATION,
LOST SAVINGS, LOST PROFITS OR BUSINESS INTERRUPTION), EVEN IF
SUCH PARTY HAS BEEN INFORMED, IS AWARE, OR SHOULD BE OR HAS BEEN
AWARE, OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER,
THAT LICENSEE SHALL REMAIN LIABLE FOR UP TO ONE MILLION DOLLARS
($1,000,000) OF CONSEQUENTIAL DAMAGES IN THE EVENT OF A BREACH OF
ANY OF PARAGRAPHS III, VI. E (i), OR VI. E. (ii) . THE MAXIMUM
LIABILITY OF EACH PARTY UNDER THIS AGREEMENT IN DAMAGES OR
OTHERWISE SHALL BE AN AMOUNT EQUAL TO THE SUM OF (1) THE INITIAL
LICENSE FEE, (2) ROYALTIES PAID OR DUE UNDER THIS AGREEMENT, (3)
THE PURCHASE PRICE, INCLUDING ALL ADJUSTMENTS, PAID UNDER THE
PURCHASE AGREEMENT AND (4) CONSEQUENTIAL DAMAGES, IF ANY, AS
PROVIDED IN THE PRECEDING SENTENCE; PROVIDED, HOWEVER, THAT THE
FOREGOING SHALL NOT PREVENT LICENSOR'S COLLECTING FROM LICENSEE,
IN ADDITION TO SUCH DAMAGES, ANY AND ALL ROYALTIES DUE
HEREUNDER.
E. The Licensee further understands, agrees and warrants
that:
(i) it does not intend to and will not use, market,
disseminate or transfer in any way the Nestor Technology
or any Existing ICR Product, Accra II, or New Product in
violation of any applicable law, rule or regulation of
the United States or any State of the United States or
any foreign country of applicable jurisdiction (including
without limitation any United States law, rule or
regulation relating to technology export or transfer),
and it will obtain at its own cost any required export
licenses;
(ii) it will not accept any purchase order or
contract (including without limitation any United States
or foreign government contract) that by its terms or by
the operation of law will abridge or otherwise diminish
the Licensor's rights in or to the Nestor Technology (and
any such order or contract with any government or
governmental agency will include "restricted" or
"limited" rights provisions or be on no less favorable
terms to the Licensor);
(iii) it has all legal right and authority to
conduct its activities as contemplated by this Agreement,
including but not limited to making and selling the
Existing ICR Products, Accra II and the New Products, but
the preceding shall not be construed as a warranty of the
Nestor Technology;
(iv) it will not knowingly infringe the patent,
copyright or other proprietary rights in the Nestor
Technology nor knowingly assist others in doing so;
(v) it will be solely responsible for all steps it
deems necessary or desirable to market, and to adequately
support and maintain, the Existing ICR Products, Accra II
and the New Products, but with respect to prior licenses
entered into by Licensor, Licensee shall have only the
responsibilities explicitly assumed in the Purchase
Agreement;
(vi) it assumes all responsibility and liability for
the selection of the Nestor Technology to achieve the
results intended and for the installation of, use of and
results obtained from the Nestor Technology or any
Existing ICR Product, Accra II, or any New Product;
(vii) it is solely responsible for any future
warranty to third parties for the Existing ICR Products,
Accra II and the New Products and liable for any warranty
claims therefor (whether express, implied or otherwise)
and for all existing warranties of the Existing ICR
Products to the extent that such warranties are assumed
by the Licensee in the Purchase Agreement; and
(viii) it is solely responsible for all expenses
incurred by it in its performance of this Agreement.
F. The Licensor represents and warrants that:
(i) it has the right to grant The License and has
the right to disclose all of the Nestor Know-how without
the Licensee directly or indirectly being required to pay
a royalty to any third party;
(ii) to the best of the Licensor's knowledge,
practice of the rights granted under The License do not
infringe upon or violate the intellectual-property rights
of any third party;
(iii) no claim by any third party contesting the
validity of any intellectual property rights in the
Nestor Technology has been made, is currently outstanding
or, to the best knowledge of the Licensor, is threatened,
and the Licensor has not received any notice of and is
not aware of any fact indicating any infringement,
misappropriation or violation by others of any
intellectual property rights in the Nestor Technology;
(iv) the Licensor believes that the Nestor Know-how
has been of substantial value in the conduct of its
business prior to the date of this Agreement;
(v) except for software licensed from third parties
and incorporated into the Existing ICR Products (which
software is identified in the Schedule D, hereto), there
is no code, text or other subject matter not owned or
lawfully used by the Licensor and incorporated into the
Nestor Technology as contained in the Deliverables or in
the Existing ICR Products or Accra II;
(vi) Schedule E lists all unexpired United States
patents and all foreign patents owned or controlled by
the Licensor on the date hereof, except for patents
registered in the name of a third party for which no
assignment has been filed;
(vii) all software delivered as part of the
Nestor Technology, Existing ICR Products and Accra II
shall be free from viruses, worms, bombs or traps
designed to interrupt normal processing or to render such
software unusable, and shall be provided to the Licensee
on media that are free from defects in materials and
workmanship;
(viii) Schedule C constitutes a complete list of
all previously granted (i) unexpired source-code licenses
in the Exclusive Field, including such licenses for the
Existing ICR Products, (ii) fully paid licenses to make
unlimited copies of any product in the Exclusive Field,
and (iii) exclusive licenses, if any, that may restrict
the fields of use of the non-exclusive New Product
license), the Licensor hereby grants to the Licensee, and
the Licensee accepts; and
(ix) it has the right to sublicense the third-party
software incorporated into the Existing ICR Products as
they exist on the date hereof, as provided in paragraph
II. A., subject the terms and conditions of the third-
party licenses thereof.
Notwithstanding the representations of the Licensor in
subparagraphs (i), (ii) and (v) of this paragraph VI. F., the
Licensor makes no representations or warranties regarding
intellectual property rights of third parties except in the
United States or in other jurisdictions in which such third
parties hold intellectual-property rights corresponding to those
held in the United States.
VII. Delivery.
A. Delivery of the Nestor Technology shall occur by
Licensee hiring those persons listed in Exhibit I to the Purchase
Agreement ("Hired Employees") and by such Hired Employees taking
with them as Deliverables at least one (1) copy (among all of the
Hired Employees) of all software and documentation identified by
such Hired Employees as necessary to practice The License or as
having been used by the Licensor in connection with the Existing
ICR Products, and consisting of (i) those computer files listed
in Schedule A annexed hereto, which Licensor represents include
at least one copy of all source-code and object-code embodiments
of the Existing ICR Products and Accra II, and development tools
used in the ICR Business (as that term is defined in the Purchase
Agreement), together with documentation therefor (other than such
tools licensed from third parties), all as existing on the date
hereof, and (ii) technical data in any form relating to The
Existing ICR Products or to Accra II.
B. For a period of six (6) months following the date of
this Agreement, Licensee shall have the right to request
additional Nestor Know-how existing as of the date of this
Agreement but not included in the Nestor Technology delivered
pursuant to paragraph VII. A. All such requests shall be made by
written notice directed to the President of the Licensor and
shall describe with reasonable specificity the Nestor Know-how
requested and the reason or reasons why the Licensee believes
that such Know-how should have been delivered under this
Agreement. Within thirty (30) days after the date upon which the
Licensor receives any such request, the Licensor shall either
provide the requested material or provide written notice stating
why it believes the material or information requested should not
have been delivered under this Agreement. ALL MATERIAL OR
INFORMATION RECEIVED BY THE LICENSEE PURSUANT TO THIS REQUEST
PROCEDURE SHALL BE PROVIDED "AS IS" AND SHALL NOT BE SUBJECT TO
ANY WARRANTY OR INDEMNIFICATION STATED IN THIS AGREEMENT. IN
ADDITION, ALL DISCLAIMERS OF WARRANTY STATED IN THIS AGREEMENT
SHALL APPLY TO SUCH MATERIAL OR INFORMATION.
C. The Hired Employees shall be entitled to use for the
benefit of Licensee, solely within the scope of The License and
as necessary for its enjoyment, any knowledge or experience
relating to the Nestor Technology and contained in their memories
or recollections or in materials brought with them as provided
above.
VIII. Term and Termination.
A. This Agreement and The License shall terminate if the
Licensee liquidates, dissolves, shall be adjudicated insolvent,
files or has filed against it a petition in bankruptcy or for
reorganization (unless such petition is removed within 120 days
of its filing), takes advantage of any insolvency act or
proceeding, including an assignment for the benefit of creditors,
or commits any other act of bankruptcy.
Either Party may terminate this Agreement and The License by
written notice to the other Party, if such other Party shall
materially breach any provision of this Agreement and such breach
continues for at least thirty (30) days after notice thereof.
Without limiting the foregoing, the Licensor may, at the
Licensor's option and at any time and from time to time,
terminate The License in whole or in part if the Licensee shall
fail to pay any royalty payment due hereunder and such failure
continues uncured for at least (30) days after notice thereof.
If the Licensee shall fail to pay when due royalties on
Existing ICR Products at least equal to the Minimum Annual
Exclusive ICR Royalty for any Year of This Agreement, the
exclusiveness of the ICR License shall thereupon irrevocably
terminate, and such license shall become non-exclusive for the
succeeding and subsequent Years of This Agreement. If the
Licensee shall fail to pay to the Licensor for any Year of This
Agreement earned royalties on Existing ICR products equal to or
greater than $25,000, the ICR License shall forthwith terminate.
Notwithstanding the foregoing, Licensee may continue to use the
subject matter of the ICR License for the sole purpose of
supporting its sublicensees existing as such on the date of
termination, subject to Licensee's payment to Licensor of the sum
of $25,000 per Year of This Agreement in consideration of such
use.
If the Licensee shall fail to pay when due any Minimum
Annual Royalty with respect to New Products in any field of use,
The New Product License with respect to such field of use will
automatically and irrevocably terminate.
B. Unless terminated in accordance with paragraph VIII.
A., this Agreement and The License shall expire twenty-five (25)
years from the date hereof; provided, however, that no license
granted hereunder with respect to the Nestor Patent Rights in any
territory shall extend beyond the expiration of the last patent
to expire in such territory. Upon such expiration, the Licensee
shall have the right to continue to use the Nestor Technology.
C. Notwithstanding any termination of this Agreement, The
License and any sublicense shall continue in effect with respect
to any Existing ICR Product, Accra II, or New Product
manufactured by the Licensee prior to termination; and the
Licensee shall remain liable to the Licensor for royalties
accruing with respect to such Existing ICR Product, Accra II, or
New Product, whether such royalties accrue prior to or following
such termination. Termination of this Agreement and The License
shall not release either Party from any of its obligations or
liabilities accrued or incurred under this Agreement, or rescind
or give rise to any right to rescind any payment made or other
consideration given hereunder, except that a termination by the
Licensor for a breach of This Agreement by the Licensee shall
release the Licensor from any obligation or liability accrued or
incurred after the date of such breach.
Upon termination of this Agreement or, in whole or in part,
The License:
(i) Except as provided in paragraph VIII. C. (ii),
below, the Licensee shall cease manufacture and sale of all
products, and the providing of all services other than to
support then existing customers of the Licensee as permitted
by paragraph VIII. C. (iii), below, under such part or parts
of The License as shall have been terminated; provided,
however, that the Licensee (and any of its sublicensees who
are not end users) shall have six (6) months from the
effective date of termination to sell any products in
inventory and to complete delivery of then contracted-for-
services, all subject to the provisions of this Agreement
relating to earned royalties and to all other executory
provisions of this Agreement;
(ii) If the termination in part of The License is due
to the Licensee's failure to pay when due Minimum Annual
Field of Use Royalties, then the termination provisions of
the preceding paragraph VIII.C.(i) shall apply only to New
Products in the relevant field or fields of use, and all
other provisions of this Agreement shall remain in full
force and effect.
(iii) If The License shall be terminated in whole or in
part, and provided that such termination has not been caused
by the Licensee's material breach of this Agreement, the
Licensee shall be permitted to retain, for the Licensee's
use only, no more than three (3) copies of the Nestor
Technology or the Existing ICR Products, Accra II or New
Product if such shall be necessary to enable the Licensee to
provide maintenance support to its then existing customers,
and such copies shall be maintained in strict confidence as
provided in paragraph III of this Agreement and shall be
otherwise subject to this Agreement.
(iv) Any termination hereunder shall not prejudice the
right of the Licensor to recover any royalty or other sums
due at the time of such termination or that become due
thereafter.
(v) Termination shall have no effect on any end-user
sublicense complying with the terms of this Agreement and
existing as of the date of termination, nor shall it affect
either Party's rights with respect to Patent Improvements.
(vi) Except as provided in subparagraph IV.C.(iii), above,
upon termination of this Agreement and of The License, the
Licensee shall (a) immediately deliver to the Licensor or
irretrievably destroy, or cause to be so delivered or
destroyed, any and all copies of the Nestor Technology in
whatever form and any written or other materials relating to
the Nestor Technology in the Licensee's possession, custody
or control, and (b) within thirty (30) days deliver to the
Licensor a certification thereof.
D. Provided that Licensee shall have paid to Licensor all
amounts due and payable under this Agreement (other than amounts
subject to a good-faith dispute), any failure by Licensee to
assert its rights to "retain its benefits" to any intellectual-
property rights pursuant to Sec. 365(n)(1)(B) of the Chapter 11
of the United States Code, under an executory contract rejected
by the trustee in bankruptcy for Licensor, or by the Licensor,
shall not be construed by the courts as a termination of this
Agreement by Licensee under Section 365(n)(1)(A) of the
Bankruptcy Code; and the Licensor, in its own capacity or in its
capacity as a debtor in possession, trustee or otherwise,
together with the Licensee, shall not seek and shall oppose such
construction. The Parties agree that the Nestor Technology is
"intellectual property" as used in Section 365(n) of the
Bankruptcy Code and that the Licensee is entitled to and shall
receive all of the protections and benefits of such Section.
IX. Miscellaneous.
A. The Licensee will cause any and all Existing ICR
Products, Accra II and New Products and all advertising or other
marketing material of any kind, documentation and packaging
therefor to be marked and labeled with and/or to reference the
Licensor's patent rights and copyrights in the form and style
furnished from time to time by the Licensor and reasonably
acceptable to the Licensee. The Licensee shall permit the
Licensor, upon reasonable prior notice, to make reasonable
inspections of the Existing ICR Products, Accra II and New
Products solely for the purpose of checking quality, marking and
labels, but the Licensor shall not be liable to the Licensee, the
Licensee's customers, or others for its failure to do so or for
any defects which it discovers or would or could have discovered
by so doing. The Licensee shall not otherwise use such marks of
the Licensor without the advance written permission of the
Licensor.
Any breach or default under a certain Trademark License, of
even date herewith, entered into by the Parties for the trademark
"NestorReader" shall be a breach or default, as the case may be,
under this Agreement if such breach or default shall be material
to the transactions contemplated by this Agreement and by the
Trademark License, taken as a whole, or shall be materially
adverse to the Licensor's business or to its use of any of its
trademarks or trade names.
B. Notwithstanding the restrictions on transfer in Section
II.A., the Licensee may assign this Agreement in connection with
the sale, merger or reorganization of the Licensee or the sale or
other disposition by the Licensee of all or substantially all of
the assets of the Licensee, provided that (i) any such assignee
agrees in writing with the Licensor to assume and comply with the
obligations of the Licensee under this Agreement, and (ii) in the
case of an assignment in which the Licensee survives, the
Licensee remains subject to all of its obligations under this
Agreement. Any other assignment by the Licensee requires the
written consent of the Licensor. Any transfer by the Licensor of
the rights licensed in this Agreement shall be subject to all
provisions of the present Agreement and the Licensor shall so
notify the Licensee.
C. The headings and captions used in this Agreement are
for convenience only and are not to be used in the interpretation
of this Agreement.
D. The failure of either Party to require performance of
any provision of this Agreement shall not affect the right to
subsequently require the performance of such or any other
provision of this Agreement. The waiver of either Party of a
breach of any provision shall not be deemed to be a waiver of any
subsequent breach of that provision or any subsequent breach of
any other provision of this Agreement.
E. The Parties are independent contractors and engage in
the operation of their own respective businesses. Neither Party
is the agent or employee of the other Party for any purpose
whatsoever. Nothing in this Agreement shall be construed to
establish a relationship of co-partners or joint venturers
between the two Parties. Neither Party has the authority to enter
into any contract or to assume any obligation for the other Party
or to make any warranties or representations on behalf of the
other Party.
F. If any provision of this Agreement is, or is determined
to be, invalid, illegal or unenforceable, all remaining
provisions of this Agreement shall nevertheless remain in full
force and effect, and no provision of this Agreement shall be
deemed to be dependent upon any provision so determined to be
invalid, illegal or unenforceable unless otherwise expressly
provided for herein. Should any provision of this Agreement be
found or held to be invalid, illegal or unenforceable, in whole
or in part, such provision shall be deemed amended to render it
enforceable in accordance with the spirit and intent of this
Agreement.
G. This Agreement has been entered into, delivered and is
to be governed by, construed, interpreted and enforced in
accordance with the laws of the State of New York (without giving
reference to choice-of-law provisions) from time to time in
effect. The Parties agree that the United Nations Convention on
Contracts for the International Sale of Goods shall not apply to
any of the transactions which are contemplated by this Agreement.
H. If a dispute arises out of or relates to this
Agreement, The License, a breach thereof or the Licensee's use of
any right granted under The License, and if said dispute cannot
be settled through direct discussions, the Parties agree to first
endeavor to settle the dispute in an amicable manner by non-
binding mediation in New York City administered by the American
Arbitration Association under its Commercial Mediation Rules. The
Parties hereby consent to the non-exclusive jurisdiction of the
courts of the State of New York or to any Federal Court located
within the State of New York for any action arising out of,
relating to, or in connection with, this Agreement, The License,
or Licensee's use of the Nestor Technology, and to service of
process in any such action by registered mail, return receipt
requested, or by any other means provided by law.
I. Except for the Purchase Agreement and a certain License
Agreement for the trademark "NestorReader", of even date
herewith, this Agreement contains the entire and exclusive
agreement of the Parties with respect to its subject matter. This
Agreement supersedes any agreements and understandings, whether
written or oral, entered into by the Parties prior to its
effective date and relating to its subject matter. No
modification or amendment of this Agreement shall be effective
unless it is stated in writing, specifically refers hereto and is
executed on behalf of each Party.
J. Except as otherwise specified, all notices, payments,
certificates and reports hereunder shall be deemed given and in
effect as of the date of mailing, when sent by express mail (or
other overnight delivery service), postage prepaid, addressed to
the Parties as set forth in the preamble to this Agreement
directed in each case to the President of the Party receiving the
notice or to such other addresses as the Parties may from time to
time give written notice.
K. Except for failures to make any payment when due,
neither Party hereto shall be liable to the other for failure or
delay in meeting any obligations hereunder as the result of
strikes, lockouts, war, Acts of God, fire, flood or acts of
government, if beyond the control of such Party.
L. The term "the Licensee" as used in this Agreement shall
mean National Computer Systems, Inc. ("NCS"). NCS shall have the
right to sublicense this Agreement to any subsidiary of NCS under
its control, provided that NCS shall be liable for the full
compliance of all of the terms and conditions of this Agreement
by any such subsidiary, and further provided that any such
subsidiary of NCS shall continue to enjoy the benefits of a
sublicense of this Agreement only so long as it continues to be
under the control of NCS. As used in this paragraph, a
subsidiary shall be deemed to be under the control of NCS only if
NCS owns or controls a majority of the voting stock of such
subsidiary without restriction as to its voting rights. The
Licensor agrees that, except for the Licensor's right to seek
equitable relief from any such subsidiary, its sole remedy for
breach of this Agreement by any such subsidiary shall be provided
exclusively by NCS on behalf of itself and its subsidiaries.
IN WITNESS WHEREOF, the Parties hereto have set their hands
by their duly authorized representatives as of the day and year
first above written.
National Computer Systems, Inc. Nestor, Inc.
By : Russell A. Gullotti:
Chairman, President and CEO
By /s/ James D. Donoho By: /s/David Fox
Vice President President
and CEO
By Power of Attorney
Schedule A to License Agreement
List of Computer Files Delivered by Licensor to Licensee
<TABLE>
Schedule B to License Agreement
<CAPTION>
United States Patents and Patent Applications of Licensor That, Together
with Corresponding Foreign Patents, Constitute "Nestor Patent Rights"
<S> <C> <C> <C>
Patent Number Title Date of Issue Year of
Expiration
4,254,474 An Information Processing March 3, 1981 1998
System Using Threshold
Passive Modification
4,326,259 Self-organizing General April 20, 1982 1999
Pattern Class Separator
and Identifier
4,760,604 Parallel, Multi-unit, July 26, 1988 2005
Adaptive, Nonlinear
Pattern Class Separator
and Identifier
4,897,811 N-Dimensional Coulomb January 30, 1990 2007
Neural Network Which
Provides for Cumulative
Learning of Internal
Representations
4,958,375 Parallel, Multi-unit, September 18, 1991 2008
Adaptive Pattern
Classification System
Using Inter-unit
Correlations And An Intra-
class Separator
Methodology
5,054,093 Parallel, Multi-unit, October 1, 1991 2008
Adaptive, Nonlinear
Pattern Class Separator
and Identifier
</TABLE>
<TABLE>
Schedule C to License Agreement
<CAPTION>
(Referred to in Paragraphs II. A. and VI. F. (viii) of The
License Agreement)
(i) Source-code Licenses in the Exclusive Field:
<S> <C> <C>
Licensee Title of Agreement Date of Execution
Alliance Data NestorReader Software License October 7, 1993
Systems Agreement
Alliance Data Source Code Addendum "N" September 24, 1993
Systems
Alta Technology NestorReader Software License February 16, 1994
Corporation Agreement
Alta Technology Amendment Letter to License January 5, 1995
Corporation Agreement
Cincinnati Bell
Information Systems NestorReader License and January 27, 1993
Development Agreement
Intel Corporation Intel/Nestor License Agreement October 15, 1993
PRC, Inc. NestorReader Software License December 13, 1994
Agreement
</TABLE>
(ii) Fully Paid Licenses to Make Unlimited Copies of Any Product
in The Exclusive Field:
None
(iii) Exclusive Licenses That May Restrict The Fields of Use
of The Non-Exclusive New Product License:
None
(iv) In addition to the foregoing, the exclusive license granted
in paragraph II is subject to certain other licenses, including
without limitation the licenses listed in Schedule 4.04(a) to the
Purchase Agreement and the following:
(a) Source-code Licenses of The Nestor Technology Not
Expressly Precluded from Use in The Exclusive Field:
Licensee Title of Agreement Date of Execution
IBM Corporation Non-Exclusive License January 30, 1996
Agreement
Intel Technology Development June 11, 1990
Corporation Agreement
Telmat License Agreement October 15, 1991
Informatique
b) Unrestricted Object-Code Licenses And Semiconductor
Devices:
Object-code licenses that are unrestricted as to field of use
include a license of Licensor's Research and Development Software
Environment to Dassault Electronique, and numerous licenses of
Licensor's Nestor Development System. In addition, licensees of
Licensor's Ni1000 Development System and purchasers of Licensor's
Ni1000 Recognition Accelerator are unrestricted with respect to
field of use.
Schedule D to License Agreement
License Agreements Relating to Third-party Software Incorporated
into ICR Products
Licensor Description Used in ICR Product
Calera Recognition Special Purpose NestorReader and
Systems, Inc. Object Code OmniTools
Integrated Software
Distribution
License dated
November 1, 1994
Diamond Head Developer Software N'Route
Software, Inc. License Agreement
dated August 31,
1994
Graphics Licensing Agreement OmniTools
Development dated June 28, 1995
International, Inc.
Paragraph License Agreement Intended for
International dated October 10, N'Route but not yet
1995 incorporated
Pixel Translations, Software License NestorReader and
Inc. Agreement dated OmniTools
October 1, 1995
Simplify Software Licensing N'Route
Development Agreement dated
Corporation February 15, 1995
Schedule E to License Agreement
All Unexpired U.S. Patents and Patent Applications And All
Foreign Patents
Owned by Licensor
DATE OF ISSUE PATENT NO. DATE OF ISSUE PATENT NO.
United States Germany
December 26, 1995(1) 5,479,574 January 8,
1981 2,524,734
October 1, 1991 5,054,093
September 18, 1990 4,958,375
January 30, 1990 4,897,811
July 26, 1988 4,760,604 Great Britain
April 20, 1982 4,326,259 March 30, 1977 1,457,338
March 9, 1982(2) 4,319,331
March 3, 1981 4,254,474
France
July 27, 1981 7,705,803
June 5, 1975 7,517,627
Canada
November 15, 1988 1,244,946 Italy
March 26, 1985 1,184,661 October 30, 1979 1,036,906
November 15, 1983 1,157,159
November 7, 1978 1,042,109
Spain
September 7, 1987 548,992
Netherlands November 10, 1981 500,677
February 19, 1985 176,313 October 29, 1977 453,378
September 13, 1977 453,377
December 9, 1976 436,945
Mexico
January 7, 1993 166,402
January 25, 1985 151,653 Europe
April 13, 1981 143,269 September 24, 1986 037,164
September 9, 1993 0,328,861
Japan
July 13, 1989 1,506,188 Switzerland
July 14, 1987 1,389,124 November 24, 1980 620,307
APPLICATIONS
DATE FILED SERIAL NO
July 1, 1994(1) 08/269,848 (Adaptive Classifier Having
Multiple Subnetworks)
(1) Relates to semiconductor device: not included in license
grant.
(2) Relates to curve follower: not included in license grant.