LICENSE AGREEMENT
THIS AGREEMENT, effective as of the 11th day of August, 2000, is by and
between Interactive Digital Media Corporation ("IDM") a partially owned
subsidiary of 3DM International, Inc. ("3DMI"), being a corporation organized
and existing under the laws of the State of Arizona, and having its principal
offices at 7432 E. Terra Buena Lane, #101, Scottsdale, Arizona 85260 (together
to be known as "IDM Group"), and CompuSonics Video Corporation ("CPVD"), a
corporation organized and existing under the laws of Colorado and having its
principal offices at 32751 Middlebelt Road, Suite B, Farmington Hills, Michigan,
48334.
RECITALS
IDM Group desires to obtain a license under certain patents relating to a
process in which CPVD is licensing technology, to manufacture, have
manufactured, use, and sell products using these patented processes and CPVD is
willing to grant a license under certain terms and conditions.
NOW, THEREFORE, CPVD and IDM Group agree as follows:
ARTICLE 1. DEFINITIONS
1.1 LICENSED PATENTS shall mean U.S. Patent No. 4,472,747 (Audio Digital
Recording and Playback System), and Patent No. 4,755,889 (Audio
and Video Digital Recording and Playback System), copies of which
are included on Schedule A, and any patents that may issue from a
corresponding foreign Patent Cooperation Treaty, or other
regional type of patent application, or any continuations or
divisions of the above U.S. Patents.
1.2 LICENSED PRODUCTS shall mean an Audio Digital Recording and Playback
System and an Audio and Video Digital Recording and Playback System
or parts thereof and which are covered by one or more claims of the
LICENSED PATENTS.
1.3 IMPROVEMENTS shall mean any enhancement, modification, or
improvement to LICENSED PRODUCTS conceived or reduced to practice by
IDM Group and as to which IDM Group has the right to grant licenses
or sub licenses during the term of this Agreement.
1.4 CPVD Associate Companies shall mean any company in which CPVD owns,
directly or indirectly, now or in the future, 25% or more of the
capital or voting stock.
1.5 IDM Group shall mean 3DMI and any company in which 3DMI (or IDM)
owns, directly or indirectly, now or in the future, 50% or more of
the capital or voting stock.
ARTICLE 2. LICENSE GRANT
2.1 CPVD grants to IDM Group a nonexclusive, worldwide, royalty-bearing
license, under the LICENSED PATENTS, to manufacture, have
manufactured, use, and sell LICENSED PRODUCTS.
ARTICLE 3. ROYALTY
3.1 In consideration for the license hereby granted, IDM Group agrees to
pay to CPVD a royalty as follows:
3.1.1 A lump sum, non-refundable payment of One Hundred Thousand
U.S. Dollars ($100,000.00), Ten Thousand Dollars ($10,000.00)
in cash within twenty (20) days after the effective date
hereof, and Ninety Thousand Dollars ($90,000.00) on a
six-month ten percent (10%) note to CPVD. This amount shall be
credited against future royalties which become due under
3.1.2; and
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3.1.2 A royalty payment of five percent (5%) of IDM Group's "NET
SALES" (defined as gross selling price less deductions for
returns, rejections, price adjustments, credits, and similar
amounts) for each LICENSED PRODUCT, which is manufactured and
sold by IDM Group in transactions other than with CPVD or CPVD
ASSOCIATED COMPANIES, effective as of the date of the last
party to sign this Agreement.
3.2 In the event that any payments are made after the date payment is
due, such payment shall include interest for the number of days
beyond the due date that such payment is made with interest accrued
daily at an annual interest rate one percent (1%) over the highest
prime rate announced as such on the due date by Comerica Bank of
Detroit, Michigan.
3.3 In the event that any government or any subdivision thereof imposes any
taxes, including income taxes, withholding taxes, stamp taxes,
registration taxes, turnover taxes, value added taxes, or other
duties or government charges of any kind levied on this Agreement
by reason of execution or performance thereof, IDM Group shall
not set off against such fees any royalties due CPVD, except that
income taxes imposed by the such government(s) or any
subdivision(s) thereof on CPVD on the amounts payable under this
Agreement and paid by IDM Group on CPVD's behalf, shall be
deducted by IDM Group from any royalties payable by IDM Group to
CPVD. IDM Group shall file an Application Form For Income Tax
Convention to those such governments for the application of
applicable percent income tax rate, and IDM Group shall send CPVD
the official certificates of receipt for such income tax payments.
ARTICLE 4. RECORDS AND REPORTS
4.1 Except as provided in Article 4.6, IDM Group agrees to keep adequate
records to show the quantity and type of LICENSED PRODUCTS
manufactured and sold by IDM Group, and to keep records of such
other related information in sufficient detail to enable the
royalties payable under this Agreement to be determined by CPVD or
CPVD's designated agent.
4.2 Except as provided in Article 4.6, IDM Group agrees to submit
semi-annual written reports to CPVD at the address provided in
Article 8 within thirty (30) days after June 30th and December 31st
of each year of the term of this Agreement. Each such report shall
state the number, selling price and type of LICENSED PRODUCTS
manufactured and sold by IDM Group during the immediate preceding
six (6) calendar months. IDM Group shall submit a final report
within sixty (60) days immediately following the expiration or
termination of this Agreement.
4.3 At the same time that each report is due hereunder as stated in Article
4.2, IDM Group shall pay to CPVD the royalties payable in
accordance with Article 3.1 for the immediately preceding six (6)
calendar months. Such payments shall be made to the account of
CPVD by wire transfer to Michigan National Bank, Farmington
Hills, Michigan 48334, upon instructions provided to IDM Group by
CPVD. All royalties are to be paid in U.S. currency, and to the
extent the sales transaction occurred outside the U.S., the
royalty obligation will be computed by making conversion to U.S.
currency as of the date the royalty comes due, based on
conversion rates published in the Wall Street Journal U.S.
Edition.
4.4 IDM Group shall permit its books and records relating to LICENSED
PRODUCTS to be examined upon reasonable advance written notice
during the term of this Agreement by CPVD or CPVD's authorized
representatives during usual business hours, to the extent
necessary to verify the reports and payments required
hereunder. CPVD agrees to maintain in confidence, and to cause
CPVD's designated representative engaged to conduct such
examination, to agree to maintain in confidence, information
obtained form IDM Group, and to use such information solely in
connection with CPVD's royalty rights hereunder.
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4.5 In the event CPVD's designated representative finds a discrepancy in
IDM Group's books and records, or in any report or statement
issued by IDM Group pursuant to this Article 4, the parties shall
endeavor to resolve such discrepancy through negotiation. If
they are unable to do so within thirty (30) days after notice of
any discrepancy has been provided to IDM Group, and the amount of
the claimed discrepancies, in the aggregate, is greater than 5%
of the amount of royalties reported by IDM Group, the parties
shall jointly engage the services of a nationally recognized firm
of certified public accountants (the "National CPA Firm") to
investigate. The parties agree to be bound by the final
determination of the National CPA Firm. CPVD will bear all of
the costs of the National CPA Firm if the claimed discrepancies,
in the aggregate, do not exceed 5% of the amount reported by IDM
Group; IDM Group will bear all such costs of the National CPA
Firm if the aggregate of the claimed discrepancies is 5% or more
of the amount reported by IDM Group. If the parties are unable
to agree on the selection of a National CPA Firm, they shall use
the services of the Center of Public Resources to make the
selection. Additional amounts found due and owing to CPVD
pursuant to this Article 4.5 shall be paid promptly by IDM Group
together with interest thereon from the original due date at the
same rate for late payments as provided for in Article 3.3 hereof.
4.6 IDM Group shall not be required to maintain records or submit
reports as required by Article 4.1 and 4.2 for any LICENSED PRODUCTS
manufactured for or sold to CPVD ASSOCIATED COMPANIES.
ARTICLE 5. GRANTBACKS.
5.1 IDM Group agrees to grant CPVD and CPVD ASSOCIATED COMPANIES a
worldwide, royalty-free, irrevocable license to manufacture, have
manufactured, use and sell products incorporated such IMPROVEMENTS
for products manufactured or sold by CPVD ASSODCIATED COMPANIES, or
for service/replacement parts on products manufactured for or sold
by CPVC ASSOCIATED COMPANIES.
5.2 IDM Group agrees to communicate to CPVD and CPVD parties provided
for in Article 8 in reasonable detail all IMPROVEMENTS, as they
become available. IDM Group shall not be obligated to disclose any
confidential or proprietary information of third parties as part of
the communication requirements of this Article 5.2.
ARTICLE 6. WARRANTY AND INDEMNIFICAITON
6.1 EXCEPT AS PROVIDED IN ARTICLE 6.1, CPVD MAKES NO REPRESENTATION OR
WARRANTY, EXPRESS, IMPLIED OR STATUTORY, WITH RESPECT TO THE
LICENSED PRODUCTS HEREUNER, INCLUDING, WITHOUT LIMITATION, ANY
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE. Without in any way limiting the generality of the
foregoing, CPVD makes no representation or warranty that the
manufacture, use, distribution or sale of the LICENSED PRODUCTS
(directly or indirectly) will not infringe upon any patent,
copyright or other intellectual property right of any third party,
and no representation or warranty as to the safety or suitability of
such LICENSED PRODUCTS or components or the subject matter of the
LICENSED PATENTS.
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6.2 IDM Group agrees to indemnify and hold harmless CPVD and each CPVD
ASSOCIATED COMPANY with respect to any and all claims made
against any of them arising in connection with the manufacture or
sale by IDM Group of any LICENSED PRODUCTS (other than LICENSED
PRODUCTS sold to CPVD ASSOCIATED COMPANIES responsibility for
which is controlled by the terms of sale and purchase
agreement). IDM Group covenants that, at its own expense, at the
request of CPVD, it will investigate and resolve every such claim
made and defend every suit, action or proceeding that may be
brought against CPVD or any CPVD ASSOCIATED COMPANY based on any
claim, including, but not limited to, any suit, action or
proceeding brought based on tort or product liability claims.
IDM Group agrees to pay all costs, damages, expenses (including
reasonable outside attorney's fees incurred by CPVD or any CPVD
ASSOCIATED COMPANY), and judgments that CPVD or any CPVD
ASSOCIATED COMPANY may sustain by reason of any such claim, suit,
action or proceeding. CPVD shall, within a reasonable period of
time, give IDM Group written notice of any such claim,
counterclaim, suit, action, or proceeding. IDM Group shall
employ counsel acceptable to CPVD, in defense of same, and CPVD
shall provide reasonable cooperation and support in such defense.
ARTICLE 7. TERM AND TERMINATION
7.1 This Agreement shall continue until the expiration date of the
last-to-expire of the LICENSED PATENTS. IDM Group may terminate
this agreement upon ninety (90) days written notice to CPVD.
Such termination shall not affect royalty payment obligations
accrued pursuant to Article 3, recordings and reporting
obligations pursuant to Articles 4.2 and 4.3, or IDM Group's
indemnification obligations pursuant to Article 6.3.
7.2 CPVD may terminate this Agreement upon ninety (90) days written notice
to IDM Group for failure of IDM Group to fulfill any of its
obligations hereunder, provided, however, if during said ninety
(90) day period IDM Group shall have fulfilled such obligations,
this Agreement shall continue in full force and effect as if such
notice had not been given. IDM Group shall continue to be liable
for all royalties payable hereunder up to the date of such
termination. In the event of such termination, IDM Group shall
render a final report and payment by the next semi-annual
reporting and payment date in accordance with Articles 4.2 and
4.3, and shall permit a final examination of its books and
records pursuant to Article 4.4.
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ARTICLE 8. NOTICES.
8.1 any notice or other communication required or contemplated hereunder
shall be in writing and shall be deemed to have been duly given if
mailed by certified mail or registered mail to the respective
parties at the following addresses:
TO CPVD:
Director, Patent and Technology Licensing Office
CompuSonics Video Corporation
32751 Middlebelt Road, Suite B
Farmington Hills, MI 48334
TO IDM Group:
Vice President - Legal Department
Interactive Digital Media Corporation
7432 E. Terra Buena Lane, #101
Scottsdale, Arizona 85260
ARTICLE 9. PRESS RELEASES, PROMOTIONAL MATERIALS
9.1 IDM Group will not, without CPVD's prior review and express written
consent, issue any press release, or issue or make any other
public comment, or publish or broadcast any advertisement in any
media, or disseminate any sales promotional materials, regarding
this Agreement or the terms thereof or the use of the LICENSED
PRODUCTS by CPVD or any CPVD ASSOCIATED COMPANIES. If IDM Group
desires to issue a public statement, or publish or broadcast any
advertisement, or disseminate any sales promotion materials which
in any way refer to CPVD, or any CPVD ASSOCIATED COMPANY in
connection with this Agreement or the terms thereof, it shall
give CPVD reasonable notice, in advance, which notice shall set
forth verbatim the proposed text and the circumstances regarding
its proposed release. As soon as practicable after receiving
such notice, CPVD will either consent to the issuance of the
proposed statement, advertisement or sale promotion materials or
advise IDM Group of its objections thereto. CPVD will discuss
any such objections in good faith, it being understood that IDM
Group will not release the proposed materials for publication or
broadcast, or otherwise disseminate such promotional materials,
without CPVD's prior consent. CPVD may, at its option, issue a
press release on this matter and will notify IDM Group in advance
of doing so, although the approval of IDM Group is not required.
ARTICLE 10. GOVERNING LAW
10.1 This Agreement shall be construed and enforced in accordance with
the laws of the State of Michigan without regard to conflict of law
principles.
ARTICLE 11. DISPUTE RESOLUTION
11.1 Should any dispute or difference arise out of or in relation to this
Agreement, it shall be resolved in a spirit of good faith and on a
commercially realistic basis by mutual negotiation or by a dispute
resolution process as set forth in this Article.
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11.2 If a dispute arises between the parties relating to this Agreement,
the following procedure shall be implemented before either party
pursues other available remedies except that either party may seek
injunctive relief from a court where appropriate in order to
maintain the status quo while this procedure is being followed:
11.2.1 The parties shall hold a meeting promptly in Farmington Hills,
Michigan, attended by persons with decision-making
authority regarding the dispute, to attempt in good faith
to negotiate a resolution of the dispute; provided,
however, that no such meeting shall be deemed to vitiate or
reduce the obligations and liabilities of the parties
hereunder or be deemed a waiver by a party hereto of any
remedies to which such party would otherwise be entitled
hereunder.
11.2.2 If, within thirty (30) days after such meeting, the parties
have not succeeded in negotiating a resolution of the dispute,
they agree to have any and all outstanding disputes between
the parties be finally settled by arbitration, pursuant to the
then-current Rules for Non-Administered Arbitration of
Business Disputes of the Center for Public Resources.
11.2.3 The place of dispute resolution shall be, unless otherwise agreed
between the parties, the State of Michigan. The
substantive and procedural law of the State of Michigan
shall apply to the proceedings. Equitable remedies shall
be available in the arbitration. Punitive damages shall
not be awarded. Judgment upon the award rendered in any
arbitration shall be entered in any court having
jurisdiction thereof, or application may be made to such
court for a judicial acceptance of the award and
enforcement thereof, as the law of such jurisdiction may
require or allow. This Article is subject to the Federal
Arbitration Act, 9 U.S.C.A. sec. 1 et seq.
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ARTICLE 12. ENTIRE AGREEMENT
This Agreement, constitutes the entire agreement of the parties with
respect to the licenses granted herein and supersedes all prior and
contemporaneous agreements, understandings, negotiations and discussions between
the parties, oral and written, with respect to such license.
ARTICLE 13. INDEPENDENT CONTRACTORS
The parties agree that, in the performance of this Agreement, they are and
shall remain independent contractors. Nothing contained in this Agreement shall
constitute either party as the agent, partner or representative of the other
party for any purpose or in any sense whatsoever, and neither shall bind the
other party to the contract or any obligation or represent to any person or
entity that it has the right to enter into any binding obligation in the other
party's behalf.
ARTICLE 14. MODIFICAITONS
No alteration, amendment, modification, waiver or termination of this
Agreement shall be valid or binding unless made pursuant to an instrument in
writing signed by each of the parties.
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ARTICLE 15. WAIVERS AND EXTENSIONS
Any term or condition of this Agreement may be waived at any time by the
party which is entitled to the benefit thereof, but only if such waiver is
evidenced by a writing signed by such party that makes specific reference to
this Agreement. No failure on the part of any party hereto to exercise, and no
delay in exercising, any right, power or remedy created hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or remedy by any party preclude any other or further exercise thereof or
the exercise of any other right, power or remedy. No waiver by any party hereto
of any breach of or default in any term or condition of this Agreement shall
constitute a waiver of or sent to any succeeding breach of or default in the
same or any other term or condition hereof.
ARTICLE 16. INVALID PROVISIONS
All of the provisions in this Agreement shall be applicable and binding
only to the extent that they do not violate any applicable laws and are intended
to be limited to the extent necessary to render this Agreement legal, valid and
enforceable. If any term of this Agreement, or part thereof, not essential to
the commercial purpose of this Agreement shall be held to be illegal, invalid or
unenforceable by a court of competent jurisdiction, it is the intention of the
parties that the remaining terms hereof shall constitute their agreement with
respect to the subject matter hereof, and all such remaining terms shall remain
in full force and effect. To the extent legally permissible, any illegal,
invalid or unenforceable provision s of this Agreement shall be replaced by a
valid provision, which will implement the commercial purpose of the illegal,
invalid or unenforceable provision.
ARTICLE 17. SUCCESSORS AND ASSIGNS
This Agreement and the provisions hereof shall be binding upon and shall
inure to the benefit of each of the parties and their respective successors and
permitted assignees.
ARTICLE 18. ASSIGNMENT
This Agreement and the rights, duties and obligations hereunder may not be
assigned or delegated by IDM Group without the prior written consent of CPVD.
However, if substantially all of the assets of IDM Group are acquired by a third
party, consent for assignment and delegation to that third party shall not
unreasonably be withheld by CPVD.
ARTICLE 19. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same instrument.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
in duplicate originals by their duly authorized representatives.
COMPUSONICS VIDEO INTERACTIVE DIGITAL MEDIA
CORPORATION CORPORATION
By: /s/Robert R. Hebard By: /s/Panfilo DiNello
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Printed Name: Robert R. Hebard Printed Name: Panfilo DiNello
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Its: President Its: Agent
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Date Signed: August 11, 2000 Date Signed: August 11, 2000
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