_________________________________________________________________
_________________________________________________________________
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)
December 27, 1998
CONTROL DEVICES, INC.
(Exact name of registrant as specified in its charter)
Indiana 000-21345 01-0490335
(State of (Commission File (I.R.S. Employer
incorporation) Number) Identification
Number)
228 Northeast Road
Standish, Maine 04084
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (207) 642-4535
N/A
(Former name or former address, if changed since last report)
_________________________________________________________________
_________________________________________________________________
Item 5. Other Events
Effective December 27, 1998, Control Devices, Inc. (the
"Registrant") entered into a License Agreement with Dennis J. Hegyi
("Hegyi"), pursuant to which Hegyi granted to the Registrant a
worldwide, exclusive license to manufacture and sell an invention
known as a quadrant sensor and the know-how related to such
invention. The License Agreement provides for the Registrant to pay
a royalty of 1% of the net sales of the quadrant sensor, with a
minimum annual royalty of $5,000.00.
Effective December 28, 1998, the Registrant and Hegyi entered
into a Termination of Consultant's Agreement, which terminated a
Consultant's Agreement between the Registrant and Hegyi entered
into in April 1995.
Also effective December 28, 1998, the Registrant and Hegyi
entered into an Amendment and Termination Agreement, pursuant to
which: (i) the Agreement to Grant License entered into by the
Registrant and Hegyi in April 1995 was terminated; (ii) the
License Agreement (Rain Sensor and Fog Sensor) entered into by the
Registrant and Hegyi in April 1995 was amended (x) to reduce the
rate of royalties payable from 6% to 3%; (y) to eliminate
Registrant's obligation to pay $225,000 to Hegyi if certain rain
sensor sales levels were achieved and (z) to eliminate Registrant's
obligations to pay $225,000 to Hegyi if certain fog sensor sales
levels were achieved; and (iii) Registrant paid Hegyi $635,553.
Item 7. Financial Statements and Exhibits
Exhibit No. Description
99.0 Amendment and Termination Agreement by and
between Hegyi and Registrant, dated December
28, 1998.
99.1 Termination of Consultant's Agreement by and
between Hegyi and Registrant, dated December
28, 1998.
99.2 License Agreement between Registrant and
Hegyi, dated December 27, 1998.
Pursuant to the requirements of the Securities Exchange Act of
1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
CONTROL DEVICES, INC.
Date: January 8, 1999
By: /s/ Jeffrey G. Wood
----------------------------
Jeffrey G. Wood,
Chief Financial Officer
EXHIBIT INDEX
Exhibit Page
Number Description Number
------ -------------------- ------
99.0 Amendment and Termination Agreement by and
between Hegyi and Registrant, dated
December 28, 1998.
99.1 Termination of Consultant's Agreement by
and between Hegyi and Registrant, dated
December 28, 1998.
99.2 License Agreement between Registrant and
Hegyi, dated December 27, 1998.
AMENDMENT AND TERMINATION AGREEMENT
This Amendment and Termination Agreement (hereafter, the
"Agreement") is dated and effective as of the 28th day of December,
1998 and is entered into by and between Dennis J. Hegyi, an
individual residing at 1708 Morton Avenue, Ann Arbor, Michigan
48104 ("Hegyi") and Control Devices, Inc., an Indiana corporation
headquartered on Route 35, Standish, Maine 04084 ("CDI").
RECITALS:
A. In April, 1995, CDI and Hegyi entered into several agreements,
including a License Agreement, Rain Sensor and Fog Sensor (the
"Rain/Fog Sensor Agreement") and an Agreement to Grant License
(the "Agreement to Grant License").
B. CDI and Hegyi now wish also to enter into a License Agreement
with respect to a Quadrant Sensor pursuant to the Agreement to
Grant License.
C. CDI and Hegyi also wish to amend the Rain/Fog Sensor
Agreement, to terminate the Agreement to Grant License and to
evidence their understanding in connection therewith.
NOW, THEREFORE, based on these premises and in consideration
of the mutual covenants contained herein, and each act done
pursuant thereto, the parties hereby agree as follows:
1. Elimination of Payments and Decrease in Royalty Rates
under Rain/Fog Sensor Agreement. In consideration of the payment
set forth in Section 3 below, effective on the date hereof, the
Rain/Fog Sensor Agreement is hereby modified and amended as
follows:
(a) The words "six percent (6%)" in Section 3.1 and 3.2(a)(i)
shall be deleted and in lieu thereof, the words "three
percent (3%)" shall be added.
(b) Sections 3.5, 3.6 and Section 1.11(a) and (b) shall be
deleted in their entirety.
2. Termination of the Agreement to Grant License. Effective
on the date hereof, the Agreement to Grant License is hereby
terminated and shall hereafter be null and void and of no further
force or effect. Hegyi hereby represents and warrants to CDI that
he has not, as of the date hereof, discovered any "New Invention"
(as defined in the "Agreement to Grant License") that he has not
disclosed in writing to CDI other than inventions described in the
quadrant sensor patent application which is the subject of the
License Agreement identified in Recital B above.
3. Payment to Hegyi. In consideration of the agreements of
Hegyi set forth in Section 1 above, on the fourth (4th) business
day after the date hereof, CDI shall pay Hegyi Six Hundred
Thirty-five Thousand Five Hundred Fifty-Three Dollars
($635,553.00).
4. Rain Sensor License. In the event CDI terminates the
rain sensor license set forth in the Rain/Fog Sensor Agreement, CDI
shall grant Hegyi an irrevocable royalty-free license to, without
duty of accounting, make, use, sell, offer for sale and have made,
including the right to sublicense, any product or process which
utilizes any claim contained in any patent which (a) Hegyi and CDI
jointly hold on the rain sensor, and/or (b) can be licensed,
sublicensed or assigned by CDI (without CDI having to pay any
royalty) for a rain sensor or a combined rain and fog sensor.
5. Non-competition Agreement. The parties acknowledge that
there are currently four License Areements between Hegyi and CDI:
(1) the License Agreement dated November 6, 1989 originally
executed between Hegyi, as licensor, and GTE Products Corporation,
as licensee, subsequently assigned by licensee to GTE Control
Devices Incorporated in July 1992 and subsequently assigned to CDI
in July 1994 which provides for the license of a solar sensor
invention (the "Solar Sensor Agreement"); (2) the Rain/Fog Sensor
Agreement, which provides for the license of a rain sensor
invention and a fog sensor invention; (3) the License Agreement
(Twilight Sensor) between CDI and Hegyi dated April 3, 1995, which
provides for the license of a twilight sensor invention (the
"Twilight Sensor Agreement"); and (4) the License Agreement
(Quadrant Sensor) between CDI and Hegyi dated the date of this
Agreement, which provides for the license of a quadrant sensor
invention (the "Quadrant Sensor Agreement"). (These four License
Agreements shall be collectively referred to as the "License
Agreements".)
Until March 31, 2001, or until all of the License Agreements
between Hegyi and CDI shall have been terminated, whichever shall
first occur, Hegyi shall not (individually, or as any employer,
proprietor, partner, stockholder, director, consultant, agent or
otherwise) own, manage, operate, participate in, perform services
for or otherwise carry on a business which is engaged in the
design, manufacture or sale of any Royalty Product, as defined in
each such License Agreement, in the United States, Canada, Mexico,
Europe, Japan or anywhere else in the world; provided, however,
that the restrictions set forth in this Section 5 shall not apply
with respect to any product, know-how or invention discovered by
Hegyi and either offered to CDI for license, but declined by CDI or
for which CDI's license rights are validly terminated in accordance
with the provisions of such License Agreements.
Without limiting the right of CDI to pursue all other legal
and equitable rights available to it for violation of this Section
5 by Hegyi, it is agreed that monetary damages cannot fully
compensate CDI for such a violation or continuing violation
thereof. It is the intent and understanding of each party hereto
that if, in any action before any court or agency legally empowered
to enforce this Section 5, any term, restriction, covenant or
promise is found to be unreasonable and for that reason
unenforceable, then such term, restriction, covenant or promise
shall be deemed modified to the extent necessary to make it
enforceable by such court or agent.
6. Registration of Option Shares. The parties acknowledge
that Hegyi and his children currently hold an option to purchase
333,333 common shares of CDI granted under the Agreement to Grant
License, at a purchase price per share of $5.40 (the "Option
Shares").
(a) Upon the written request of Hegyi, CDI shall, as soon as
practicable, use its diligent best efforts to effect all
such registrations, qualifications and compliances
(including, without limitations, the execution of an
undertaking to file post-effective amendments,
appropriate qualifications under the applicable blue sky
or other state securities laws and appropriate compliance
with exemptive regulations issued under the Securities
Act of 1933, as amended (the "Act"), or any other
governmental requirements or regulations including,
without limitation, Rule 415 promulgated thereunder,) as
may be so requested and as would permit or facilitate the
sale and distribution of all or such portion of such
Option Shares as are specified in such request. CDI
shall be obligated to file a registration statement
covering the Option Shares on Form S-8, and if Form S-8
is not available, on Form S-3, or a successor form to one
of those, if available to CDI, as soon as practicable,
and on any other form if such forms, or their successors
are not available, but in any event within ninety days,
after receipt of the request of Hegyi; provided, however,
that if CDI shall furnish to Hegyi a certificate signed
by the CEO of CDI stating that in the good faith judgment
of the Board of Directors it would be materially
detrimental to CDI and its stockholders for such
registration statement to be filed at the date filing
would be required and it is therefore essential to defer
the filing of such registration statement, CDI shall have
an additional period of not more than ninety days within
which to file such registration statement; and
(b) All expenses incurred in connection with any
registration, qualification or compliance pursuant to
this Section 6, including without limitation, all
registration, filing and qualification fees, printing
expenses, fees and disbursements of counsel for CDI shall
be borne by CDI; provided, however, that CDI shall not be
required to pay fees of legal counsel of Hegyi or
underwriters' fees, discounts or commission relating to
the Option Shares included in the registration statement.
(c) In the case of a registration, qualification or
compliance effected by CDI pursuant to this Section 6,
CDI will keep Hegyi advised in writing as to the
initiation of each registration, qualification and
compliance and as to the completion thereof. At its
expense, CDI will:
(i) Keep such registration, qualification or compliance
effective (with a prospectus at all times meeting
the requirements of the Act) for a period of at
least 26 months or until Hegyi has completed the
distribution described in the registration
statement relating thereof, whichever first occurs;
(ii) Furnish such number of prospectuses and other
documents incident thereto as Hegyi from time to
time may reasonably request; and
(iii) Amend or supplement the prospectus whenever
necessary.
(d) Hegyi agrees to stop trading the Option Shares in any
period whenever Hegyi obtains possession of material
non-public information not disclosed in or incorporated
by reference in the prospectus.
(e) If the Option Shares issuable and deliverable upon the
exercise of options are listed on any national securities
exchange, CDI shall use its reasonable best efforts to
cause, from and after such time as the option becomes
exercisable, all Option Shares reserved for issuance to
be listed on such exchange upon official notice of
issuance of such exercise.
(f) The grant of such option for the Option Shares and the
sale of the Option Shares contemplated hereunder is in
consideration of the license granted pursuant to the
Agreement to Grant License, as set forth in the Quadrant
Sensor License Agreement, and the royalty rate reduction
pursuant to this Agreement.
(g) Upon Hegyi making deliveries to CDI pursuant to Section
7 of the "Option to Purchase 200,000 Class A Common
Shares of Control Devices" dated April 1, 1995 reflecting
such option to purchase Option Shares, CDI shall issue
and deliver to Hegyi, the certificate or certificates
pursuant to such section within one business day, if
possible, but in any case not more than three business
days of receipt of such deliverables.
7. Successors and Assigns. This Agreement is intended to be
binding upon the successors and assigns of CDI and Hegyi, and their
respective Affiliates. Neither CDI nor Hegyi may assign this
Agreement without the consent of the other, except that CDI may
assign this Agreement together with a sale of business
transaction. This Agreement shall inure to the benefit of Hegyi's
heirs, beneficiaries and permitted assigns.
8. Applicable Law. This Agreement shall be construed,
interpreted and governed by the laws of Michigan.
9. Waiver of Breach. The failure by either party to
exercise a right or enforce an obligation hereunder shall not be
construed to be waiver of same by either party with respect to
future performance.
10. Severability. If any portion of this Agreement shall be
declared void or unenforceable by any court or administrative body
of competent jurisdiction, to the extent such portion is not
material to the underlying intent of the agreement, such portion
shall be deemed severable from the remainder of this Agreement,
which remainder shall continue in all respects valid and
enforceable. The parties mutually agree to cooperate in any
revision of this contract which may be necessary to meet the
requirements of the law.
11. Force Majeure. Neither party shall be under any
liability hereunder to the other party on account of any loss,
damage or delay caused by the elements, embargoes, failures of
carriers, acts of God or the public enemy or compliance with any
law, regulation or other governmental order, whether or not valid,
as long as the delay in performance under this Agreement is not
greater than the period that the above-mentioned actions or events
cause disruption.
12. Notices. Any notice, request, report or payment required
or permitted to be given or made under this Agreement by either
party shall be given by sending such notice by registered or
certified United States mail, return receipt requested, postage
prepaid, or by a national overnight courier service to the address
set forth below or such other address as such party shall have
specified by written notice given in conformity herewith. Any
notice given in accordance with the provisions of this Section
shall be effective on the date received, as indicated on the postal
service's return receipt, or the overnight courier's records and
any notice not so given shall not be valid unless and until
actually received as evidenced by competent, written records kept
in the normal course of business.
To Hegyi: Dr. Dennis J. Hegyi
1708 Morton Avenue
Ann Arbor, Michigan 48104
To CDI: Control Devices, Inc.
228 Northeast Road
Standish, Maine 04084
Attn: Bruce D. Atkinson, CEO
13. Valid Authorization. CDI represents and warrants that it
has taken all necessary corporate action to authorize the
execution, delivery and performance of this Agreement, and that
this Agreement will not conflict with any agreement or instrument
to which CDI is a party. Further, CDI acknowledges and agrees that
with respect to performance of its obligations under Section 6
above, time is of the essence.
IN WITNESS WHEREOF, the parties have duly and properly
executed and delivered this Agreement as of the date first written
above.
CONTROL DEVICES, INC.
______________________________ By: _________________________
Dennis J. Hegyi Bruce D. Atkinson, CEO
Date:_______________, 1998 Date: ________________, 1998
ACKNOWLEDGMENT
STATE OF MAINE )
)
COUNTY OF )
Before me, _____________________ a notary public, the
______________________ day of ___________________, 199___,
appeared Bruce D. Atkinson, the chief executive officer of
Control Devices, Inc., who acknowledged the execution of the
foregoing agreement on behalf of such corporation.
______________________________
Signature
______________________________
Printed Name
My County of Residence:
_______________________
My Commission Expires:
_______________________
ACKNOWLEDGMENT
STATE OF MICHIGAN )
)
COUNTY OF )
Before me, _____________________ a notary public, the _____
day of _________________, 199___, appeared Dennis J. Hegyi, who
acknowledged the execution of the foregoing agreement in his
individual capacity.
______________________________
Signature
______________________________
Printed Name
My County of Residence:
_______________________
My Commission Expires:
_______________________
TERMINATION OF CONSULTANT'S AGREEMENT
This Termination of Consultant's Agreement (hereafter, the
"Termination Agreement") is dated and effective as of the 28th day
of December, 1998 and is entered into by and between Dennis J.
Hegyi, an individual residing at 1708 Morton Avenue, Ann Arbor,
Michigan 48104 ("Hegyi") and Control Devices, Inc., an Indiana
corporation headquartered on Route 35, Standish, Maine 04084
("CDI").
RECITALS:
A. In April, 1995, CDI and Hegyi entered into several agreements,
including a Consultant's Agreement (the "Consultant's
Agreement").
B. CDI and Hegyi now wish to terminate the Consultant's Agreement
and to evidence their understanding in connection with such
amendment.
NOW, THEREFORE, based on these premises, the mutual covenants
contained herein, and each act done pursuant thereto, the parties
hereby agree as follows:
1. Termination of Consulting Relationship. The Consultant's
Agreement is hereby terminated as of the date of this Termination
Agreement and, except for Section 12 which by its terms survives
any termination, shall hereafter be null and void and of no further
force or effect. The parties acknowledge that, as of the date
hereof, Hegyi is not obligated to perform any of the consulting
services set forth in Section 2 of the Consultant's Agreement and
CDI is not obligated to pay any of the compensation set forth in
Section 4 of the Consultant's Agreement. Notwithstanding anything
to the contrary contained herein, the various Secrecy and
Non-Disclosure Agreements previously executed between the parties
shall remain in full force and effect.
2. Succesors and Assigns. This Amendment is intended to be
binding upon the successors and assigns of CDI and Hegyi, and their
respective Affiliates. Neither CDI nor Hegyi may assign this
Amendment without the consent of the other, except that CDI may
assign this Amendment together with a sale of business transaction.
3. Applicable Law. This Amendment shall be construed,
interpreted and governed by the laws of Michigan.
4. Waiver of Breach. The failure by either party to
exercise a right or enforce an obligation hereunder shall not be
construed to be waiver of same by either party with respect to
future performance.
5. Severability. If any portion of this Amendment shall be
declared void or unenforceable by any court or administrative body
of competent jurisdiction, to the extent such portion is not
material to the underlying intent of this agreement, such portion
shall be deemed severable from the remainder of this Amendment,
which remainder shall continue in all respects valid and
enforceable. The parties mutually agree to cooperate in any
revision of this contract which may be necessary to meet the
requirements of the law.
6. Force Majeure. Neither party shall be under any
liability hereunder to the other party on account of any loss,
damage or delay caused by the elements, embargoes, failures of
carriers, acts of God or the public enemy or compliance with any
law, regulation or other governmental order, whether or not valid,
as long as the delay in performance under this Amendment is not
greater than the period that the above-mentioned actions or events
caused disruption.
7. Notices. Any notice, request, report or payment required
or permitted to be given or made under this Amendment by either
party shall be given by sending such notice by registered or
certified United States mail, return receipt requested, postage
prepaid, or by a national overnight courier service to the address
set forth below or such other address as such party shall have
specified by written notice given in conformity herewith. Any
notice given in accordance with the provisions of this Section
shall be effective on the date received, as indicated on the postal
service's return receipt or the overnight courier's records, and
any notice not so given shall not be valid unless and until
actually received as evidenced by competent, written records kept
in the normal course of business.
To Hegyi: Dr. Dennis J. Hegyi
1708 Morton Avenue
Ann Arbor, Michigan
To CDI: Control Devices, Inc.
228 Northeast Road
Standish, Maine 04084
Attn: Bruce D. Atkinson, CEO
IN WITNESS WHEREOF, the parties have duly and properly
executed and delivered this Termination Agreement as of the date
first written above.
CONTROL DEVICES, INC.
______________________________ By: _________________________
Dennis J. Hegyi Bruce D. Atkinson, CEO
Date: _____________, 1998 Date:______________, 1998
LICENSE AGREEMENT
(Quadrant Sensor)
between
CONTROL DEVICES, INC.
and
DENNIS J. HEGYI
This License Agreement, made and entered into as of the 27th
day of December, 1998 by and between DENNIS J. HEGYI (HEGYI), an
individual having a residence at 1708 Morton Avenue, Ann Arbor,
Michigan 48104, and CONTROL DEVICES, INC. (CONTROL DEVICES), an
Indiana corporation, having a place of business at Route 35,
Standish, Maine 04084.
Whereas HEGYI represents that he has the sole right to grant
licenses under the Invention (as hereinafter defined) and under
patents that might issue thereon; and
Whereas HEGYI is willing to grant an exclusive license of the
Invention to CONTROL DEVICES based on the conditions hereinafter
set forth; and
Whereas CONTROL DEVICES is willing to acquire an exclusive
worldwide license for such Invention; and
Whereas this License Agreement is entered into pursuant to the
terms of the Agreement to Grant License between the parties dated
April 1, 1995 (the "Agreement to Grant License") which is in effect
and not terminated prior to the execution and delivery hereof.
Now, therefore, in consideration of the foregoing and the
rights and obligations hereinafter set forth, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as
follows:
ARTICLE I. DEFINITIONS
Section 1. When used in this License Agreement, the
following terms shall have the following meanings for all purposes
of this License Agreement.
Section 1.1 "Invention" means the method and/or apparatus
which (i) was discovered by HEGYI, (ii) pertains to a sensor
comprising one or more photodiodes (or their equivalent) overlayed
by tower(s) having a hollow vertical tube above each photodiode,
wherein the interior surface of each tube has a controlled surface
roughness in order to increase the amount of light radiation
transmitted from one end of the tube to the other. Invention
further includes any methods, processes, electrical circuits,
devices, apparatuses, designs, equipment, and/or structures for
such a system or for use in connection therewith.
Section 1.2 "Licensed Patent(s)" means any and all letters
patent owned by HEGYI claiming the Invention that may issue or
have been issued including any and all renewals, divisions,
continuations, continuations-in-part, reissues, substitutions,
confirmations, registrations, revalidations, revisions, extensions,
or additions of or to any of the aforesaid patents and patent
applications.
Section 1.3 "Valid Claim(s)" means any claim(s) in an
unexpired patent included within the applicable Licensed Patents
which claim has not been held unenforceable, unpatentable or
invalid by a decision of a court or other governmental agency of
competent jurisdiction, unappealable or unappealed within the time
allowed for appeal, and which has not been admitted to be invalid
or unenforceable through reissue or disclaimer. If in any country
there should be two or more such decisions conflicting with respect
to the validity of the same claim, the decision of the higher or
highest tribunal shall thereafter control; however, should the
tribunals be of equal rank, then the decision or decisions
upholding the claim shall prevail.
Section 1.4 "Know-How" means and includes all discoveries,
inventions, improvements, technical information, trade secrets,
prototypes, models, experience, work products, documentation,
reports and data, and all results from experiments, testing
development and demonstrations, and any other data, written or
unwritten, including all such information and knowledge derived
from work and services performed prior to the date of this License
Agreement by HEGYI, all of which relate to the Invention, at least
some of such Know-How having been disclosed to CONTROL DEVICES
pursuant to written agreements of confidentiality.
Section 1.5 "Affiliate(s)" of CONTROL DEVICES means any
partnership, organization, association, company, corporation,
individual or other entity which is controlled, directly or
indirectly, by CONTROL DEVICES or wherein CONTROL DEVICES, directly
or indirectly, owns more than fifty percent (50%) of the equity or
voting stock. Except as the context may otherwise require, for the
purposes of this License Agreement, the term CONTROL DEVICES shall
mean and include the Affiliates of CONTROL DEVICES.
Section 1.6 "Royalty Product(s)" includes any process,
method, substance, equipment, mechanism, device or other property,
or combination thereof, the manufacture, use or sale of which would
but for this Agreement, infringe one or more Valid Claims, or any
process, method, substance, equipment, mechanism, device or other
property, or combination thereof, the manufacture, use or sale of
which utilizes Know-How.
Section 1.7 "Net Selling Price" means CONTROL DEVICES'
invoice price, being the price billed exclusive of taxes, such as
sales, use, or other added taxes less a documented deduction under
normal business practices for transportation, freight, insurance,
promotions, discounts, and duty if such deductions are applicable.
If in any transaction a Royalty Product is Sold without a
separately identifiable Net Selling Price (either because such sale
is part of a larger transaction including additional equipment
and/or services, or for any other reason), then for purposes of
this License Agreement, the Selling Price shall mean the
established current Net Selling Price for equivalent quantities of
Royalty Products when Sold and invoiced separately, but if no Net
Selling Price has been established, the Net Selling Price shall be
deemed to be the fair market price.
Section 1.8 "Sold" (together with conjugate terms "Sell,"
"Sale," "Sales," "Selling," etc.) means generally transferred by
CONTROL DEVICES or any Affiliate or sublicensee of CONTROL DEVICES
for value in an arm's length transaction to a transferee other than
an Affiliate or sublicensee of CONTROL DEVICES, and shall include
without limitation, Royalty Products which are rented, leased,
consigned or given, except salesperson samples provided without
charge. Royalty Products shall be considered Sold when billed out;
or, if not billed out, then when shipped, mailed, or otherwise
delivered, or when paid for before delivery. However, upon
expiration or termination of this License Agreement, all Royalty
Products shipped or otherwise delivered on or prior to the date of
such expiration or termination, which have not been billed out or
otherwise disposed of, shall be considered Sold and therefore
subject to royalties hereunder. A lease, a consignment, a transfer
to a place of use or a delivery to another, regardless of the basis
of compensation, if any, is an example of a disposition to be
treated as a Sale and subject to royalties. The scrapping as junk
so as not to be used for the normal contemplated or intended
purpose thereof, or the mere routine manufacturing and testing
thereof, is an example of a disposition which, in itself, is not
subject to royalties. Royalties paid hereunder on License Products
returned to CONTROL DEVICES for which credit is allowed by CONTROL
DEVICES shall be entitled to be deducted from royalties due for the
period in which credit is allowed.
Section 1.9 "Solar Sensor License Agreement" means the
License Agreement dated November 6, 1989 originally executed
between HEGYI, as licensor, and GTE Products Corporation, as
licensee, subsequently assigned by licensee to GTE Control Devices
Incorporated in July 1992 and subsequently assigned to CONTROL
DEVICES in July 1994 which provides for the license of a solar
sensor invention.
ARTICLE II. LICENSE GRANT
Section 2.1 Pursuant to the Agreement to Grant License,
HEGYI grants CONTROL DEVICES a worldwide exclusive license under
the Licensed Patents and/or Know-How to make, use, Sell or
otherwise dispose of Royalty Product(s).
Section 2.2 The exclusive license granted herein includes
the right to sublicense provided that CONTROL DEVICES notifies
HEGYI regarding any sublicense, reports to HEGYI regarding any
sublicense, reports to HEGYI the Sales made under such sublicense,
accounts for royalties on such Sales and pays royalties thereon to
HEGYI in the same manner as provided herein for Sales by CONTROL
DEVICES, as though such Sales were made by CONTROL DEVICES itself.
Section 2.3 Except as provided in Article VII herein, the
exclusive license granted to CONTROL DEVICES precludes HEGYI from
making, having made, using, selling or otherwise disposing of
Royalty Products.
ARTICLE III. PAYMENTS
Section 3.1 Pursuant to the Agreement to Grant License and
in order to achieve a lower royalty rate, CONTROL DEVICES elects
and agrees to pay HEGYI royalties on Sales by CONTROL DEVICES,
Affiliates and sublicensees anywhere in the world at a rate equal
to one percent (1%) of the Net Selling Price: (i) of Royalty
Products the making, using or selling of which are covered by one
or more Valid Claims; and (ii) of all other Royalty Products
whether or not such products are covered by one or more Valid
Claims from and after the date hereof and continuing until the
twentieth anniversary of this License Agreement. Further, CONTROL
DEVICES acknowledges that these royalty rates are at its suggestion
and election and do not represent a basis for any claim of patent
misuse.
Section 3.2 The obligation to pay HEGYI a royalty under
this Article III is imposed only once with respect to the Net
Selling Price of any individual unit of Royalty Product regardless
of the number of Valid Claims or Licensed Patents or the amount of
Know-How covering the same or the number of sensors included in the
same. Notwithstanding anything to the contrary contained in the
Solar Sensor License Agreement, CONTROL DEVICES shall not be
obligated to pay any royalties to HEGYI pursuant to the Solar
Sensor License Agreement for the Sale of Royalty Products (as
defined herein) which may also be covered by the definition of
Royalty Products in the Solar Sensor License Agreement.
Notwithstanding anything to the contrary contained in this License
Agreement, CDI shall be obligated to pay any royalties to HEGYI
pursuant to the Twilight Sensor License Agreement executed between
HEGYI and CDI (the "Twilight Sensor License Agreement") for the
sale of Royalty Products (as defined herein) which may also be
covered by the definition of Royalty Products in the Twilight
Sensor License Agreement, and such royalties shall be in lieu of
any royalties which would otherwise be paid under this License
Agreement for such Royalty Products, and any modification,
amendment or enhancement of the Invention (as defined in the
Twilight Sensor License
Agreement) which is contained in the Valid Claims or Know How under
this License Agreement shall be treated as an Improvement under the
Twilight Sensor License Agreement.
Section 3.3 CONTROL DEVICES agrees to pay HEGYI an annual
minimum royalty of five thousand dollars ($5,000) in calendar year
1999 and each year thereafter during the life of this License
Agreement. These monies are to be paid on or before January 3rd of
each year, with the monies so paid acting as an advance against
royalties based on the Sale of Royalty Product(s) which royalties
are otherwise to be paid to HEGYI under Sections 3.1 and 3.2 above
during the calendar year only in which said minimum royalty payment
is paid and applicable; so that CONTROL DEVICES shall be allowed to
credit the full amount of each such minimum royalty payment against
the royalties which are based on the Sale of Royalty Product(s)
which would otherwise be paid to HEGYI under Sections 3.1 and 3.2
of this License Agreement during the calendar year in which such
minimum royalty payment is made, with no carryforward of excess
credit against royalties to be paid in other years; and any
royalties to be paid to HEGYI during any calendar year which are in
excess of that year's minimum royalty payment shall be paid as
otherwise required under this License Agreement.
ARTICLE IV. RECORDS AND ACCOUNTING
Section 4.1 CONTROL DEVICES shall maintain accurate records
in sufficient detail and form to enable the royalties hereunder to
be determined. CONTROL DEVICES shall require all Affiliates and
sublicensees, regardless of tier, to keep true and accurate records
and books of account containing data reasonably required for the
computation and verification of royalty payments. Such records
shall include such other accounting and business documents as may,
under recognized accounting practices, contain information bearing
on the amount of royalties payable hereunder, and shall show all
Royalty Products manufactured, sold, put into use, or otherwise
disposed of by CONTROL DEVICES on which royalties are payable under
Article III hereof. CONTROL DEVICES shall be required to keep such
records for a period of six (6) years after each respective
quarterly reporting period referred to in Section 4.2.
Section 4.2 CONTROL DEVICES shall render to HEGYI quarterly
reports or abstracts from such records (in detail showing products
Sold, prices at which Sold and royalty due) together with copies of
customer invoices sent during each quarter within forty-five (45)
days after each March 31, June 30, September 30, and December 31 of
each calendar year, irrespective of whether any Royalty Products
are manufactured, Sold, put into use, or otherwise disposed of by
CONTROL DEVICES, or any of its Affiliates, or sublicensees. Each
quarterly report shall state the amount of royalties due. Such
quarterly reports shall specifically identify all taxes or other
deductions which are excluded from said Net Selling Price and which
are not itemized in an invoice. HEGYI shall keep information from
such reports or abstracts confidential and shall disclose such
information only to the extent required for tax or other similar
purposes or as may be required by law.
Section 4.3 Simultaneously with the making of each such
report, CONTROL DEVICES agrees to pay HEGYI the royalty or minimum
payment specified under Article III hereof, which is shown to be
due and payable by such report.
Section 4.4 Payments for any and all royalties and fees
described in this License Agreement shall be in United States
currency and shall be made by check payable to "Dennis J. Hegyi"
and forwarded to the following address:
Dennis J. Hegyi
1708 Morton Avenue
Ann Arbor, MI 48104
or to such other address that HEGYI may designate by notice in
writing in conformity with Article XVIII below. Quarterly reports
shall be mailed to the same address. It is contemplated hereby
that payments due under this License Agreement for Sales in foreign
countries may be treated differently than payments for Sales in the
United States in that HEGYI shall have the right to elect to
receive royalties in either U.S. dollars or the currency in which
the Sale is made and to receive such royalties in an account in the
United States or in the country in which the Sale is made.
Monetary conversions, from a currency in which a Sale is made into
another currency, shall be made at the official exchange rate for
royalty remittances in force in the country involved on the last
business date of the quarterly period. If there is no official
exchange rate, the conversion shall be made at the rate for such
remittance on that date as certified by Chase Manhattan Bank of New
York (or its successor).
Section 4.5 In the event that no Royalty Products are Sold
during any period for which a report is required hereunder, a
report to that effect shall nevertheless be rendered to HEGYI for
such period.
Section 4.6 CONTROL DEVICES covenants that it will employ
a system of product identification that will permit royalty
calculations to be verified upon subsequent review by HEGYI or his
auditors.
Section 4.7 CONTROL DEVICES agrees to permit its relevant
records to be examined upon reasonable notice during business hours
by an independent certified public accountant at HEGYI's expense,
provided that (i) such accountant agrees to maintain the
confidentiality of such information and to sign an agreement with
CONTROL DEVICES to that effect if so requested by CONTROL DEVICES,
and (ii) CONTROL DEVICES has agreed to the auditor or auditors in
advance of the audit. If the audit reveals that CONTROL DEVICES
payments to HEGYI have been less than ninety-seven percent (97%) of
the amount owed to HEGYI during the period of audit, CONTROL
DEVICES shall pay the costs of the audit up to a maximum limit of
five thousand dollars ($5,000).
ARTICLE V. CONSTRUCTION
Section 5.1 Nothing in this License Agreement shall be
construed as:
(a) A warranty or representation by HEGYI as to the
validity or scope of any patent rights;
(b) An agreement to bring or prosecute actions or suit
against third parties for patent infringements; or
(c) An agreement by HEGYI to indemnify CONTROL DEVICES or
otherwise hold CONTROL DEVICES harmless, for any liability incurred
regarding the manufacture, use, or sale of the Royalty Products,
including, without limitation, attorneys' fees and costs incurred
in defending claims based on warranty, product liability,
infringement of the proprietary or intellectual property rights of
others, or any other claim.
ARTICLE VI. TERMINATION
Section 6.1 In the event CONTROL DEVICES fails to perform
any of its obligations hereunder, and such failure to perform
constitutes a material breach of its obligations, HEGYI may notify
CONTROL DEVICES in writing of such default and HEGYI shall have the
option of treating this License Agreement as in full force and
effect and of taking proper steps to enforce compliance and to
recover any royalties and other sums due and payable hereunder, or
of terminating this License Agreement and the license granted
hereunder; provided, that in the case where HEGYI elects to
terminate this License Agreement, he shall first send CONTROL
DEVICES notice of his election to terminate this License Agreement
together with a statement as to the grounds upon which the
termination is based. If within a period of thirty (30) days after
such notice CONTROL DEVICES shall have cured such failure to
perform in accordance with the provisions of this License
Agreement, then the notice shall become null and void and of no
effect; otherwise, the notice shall remain effective and this
License Agreement shall cease and terminate at the expiration of
such period.
Section 6.2 Unless otherwise terminated as herein provided,
CONTROL DEVICES' obligation to pay royalties on Royalty Products
shall end when the last such obligation under Article III herein
expires.
Section 6.3 In the event of any termination of this License
Agreement, and except as provided herein to the contrary, all
rights and obligations of the parties hereunder shall cease with
respect thereto, and (i) CONTROL DEVICES shall continue to be
liable for all royalties and other sums accruing hereunder up to
the day of such termination; and (ii) CONTROL DEVICES shall render
a final report and royalty payment and permit a final audit in
accordance with Article IV.
Section 6.4 Upon early termination in accordance with
Section 6.1 of this License Agreement for any cause, (i) HEGYI may
purchase, with CONTROL DEVICES' consent at an agreed upon fair
market price, any CONTROL DEVICE'S rights related to the Invention
that were developed in the commercialization of the Invention up to
the date of such termination, (ii) upon HEGYI's request, CONTROL
DEVICES shall transfer to HEGYI all HEGYI owned drawings, plans,
models, prototypes and other material related to the Invention, and
(iii) CONTROL DEVICES shall be permitted to complete any
contractual or other legal obligations to third parties regarding
the supply of product or spare parts until such time as HEGYI or
another person has effectively assumed such obligations.
Section 6.5 In the event HEGYI fails to perform any of his
obligations hereunder, CONTROL DEVICES may notify HEGYI in writing
of such default, including a notice of termination and a statement
of reasons for such termination. The notice of termination shall
be served upon HEGYI at least thirty (30) days before a termination
date established by CONTROL DEVICES. Immediately upon service of
such notice of termination, HEGYI shall have the right to begin
negotiations with others for the manufacture, sale, and use of the
Royalty Products. If within a period of thirty (30) days after
such notice, HEGYI shall have cured such failure to perform in
accordance with the provisions of this License Agreement, then the
notice shall become null and void and of no effect; otherwise, the
notice shall remain effective and this License Agreement shall
cease and terminate at the expiration of such period.
Section 6.6 CONTROL DEVICES may terminate the License
Agreement for any reason by providing HEGYI with thirty (30) days
advanced written notice, in which case this License Agreement shall
be null and void and of no further force or effect.
ARTICLE VII. PROSECUTION OF PATENT APPLICATIONS
Section 7.1 HEGYI shall diligently prosecute any and all
patent applications claiming Inventions which he elects to file
and shall pay all fees due to prosecute and prevent such
applications or any issued patents from being abandoned or
forfeited. Within thirty (30) days of its receipt of an invoice
from HEGYI, CONTROL DEVICES shall pay for all such reasonable costs
but only in the following countries, and such additional countries
agreed upon in writing: USA, France, Sweden and Germany.
Section 7.2 In the event CONTROL DEVICES requests that
HEGYI file any patent application claiming Inventions in any
country and HEGYI elects not to file, HEGYI agrees to do so at
CONTROL DEVICES' expense. Should HEGYI decide he wishes to
terminate prosecution or otherwise intends to abandon any patent
applications claiming Inventions, HEGYI shall notify CONTROL
DEVICES of such intention to abandon or forfeit at least sixty (60)
days prior to the time at which the application or patent would
become abandoned or forfeited. In such event, CONTROL DEVICES
shall have the option to continue prosecution or take whatever
action is necessary to prevent the application or patent from
becoming abandoned or forfeited, and CONTROL DEVICES shall have all
rights of ownership to such application or patent.
ARTICLE VIII. INFRINGEMENT
Section 8.1 CONTROL DEVICES is empowered, at its sole
option:
(a) To bring suit in its own name or, if required by law,
jointly with HEGYI, at CONTROL DEVICES' own expense and on CONTROL
DEVICES' own behalf, for infringement of the Licensed Patents;
(b) In any such suit, to enjoin infringement and to collect
for CONTROL DEVICES' benefit all damages, profits, and awards of
whatever nature recoverable for such infringement; and
(c) To settle any claim or suit for infringement of the
Licensed Patents.
Notwithstanding any other provision of this License Agreement,
in any such suit CONTROL DEVICES is entitled to recover CONTROL
DEVICES' expenses before HEGYI is entitled to any royalty payments.
HEGYI shall be entitled to royalty payments for such infringement
but such payments shall be limited to twenty-five percent (25%) of
any excess of CONTROL DEVICES' recoveries over CONTROL DEVICES'
expenses.
Section 8.2 In the event HEGYI shall bring to the attention
of CONTROL DEVICES any unlicensed infringement of the Licensed
Patents and shall furnish CONTROL DEVICES with a written opinion by
a registered patent attorney that such infringement exists, and
CONTROL DEVICES shall not, within three (3) months:
(a) secure cessation of the infringement; or
(b) enter suit against the infringer; or
(c) provide evidence of the pendency of a bona fide
negotiation for the acceptance by the infringer of a sublicense
under the Licensed Patents;
then HEGYI shall thereafter have the right, at his sole option, to
terminate the exclusive license granted herein by notifying CONTROL
DEVICES of such termination in writing; provided, however, that
CONTROL DEVICES shall not be obligated to enter suit against more
than one infringer at a time. Upon termination of CONTROL DEVICES'
exclusive license, CONTROL DEVICES shall retain a license on the
same terms as set forth in this License Agreement except that (1)
the license shall be non-exclusive and HEGYI shall have the right
to license third parties under the Licensed Patents, (2) CONTROL
DEVICES' license shall be limited to making and selling Royalty
Products for customers to whom CONTROL DEVICES is contractually
obligated to sell Royalty Products as of the date of termination or
to whom CONTROL DEVICES has previously Sold commercial quantities
of Royalty Products, and (3) CONTROL DEVICES shall not thereafter
be able to grant any further sublicenses.
Upon such termination, HEGYI may at his option file suit for
the infringement, and any such suit shall be HEGYI's own expense,
and HEGYI shall collect for his benefit all damages, profits, and
awards of whatever nature which are recoverable for such
infringement. Provided that CONTROL DEVICES has no legitimate
reason to refrain from cooperation, CONTROL DEVICES agrees to
cooperate with HEGYI in such suit by (1) assigning to HEGYI CONTROL
DEVICES' damage claim for past damages incurred up to the time of
termination, (2) providing HEGYI with information and documents
reasonably needed by HEGYI to prosecute such lawsuit, and (3)
making CONTROL DEVICES employees reasonably available to HEGYI as
witnesses (or other similar uses) up to a maximum of fifteen (15)
workdays. CONTROL DEVICES shall participate in any settlement,
verdict, or finding in favor of HEGYI as follows:
(1) actual costs other than legal fees incurred by HEGYI and
CONTROL DEVICES shall be returned to both parties in full, or
prorated equally if costs cannot be reimbursed in full, then
(2) the remainder shall be divided in proportion to the time
spent by each party, except that HEGYI's time shall be multiplied
by two (2) to reflect the higher cost for his time.
ARTICLE IX. SUCCESSORS AND ASSIGNS
Section 9.1 This License Agreement is intended to be
binding upon the successors and assigns of CONTROL DEVICES and
HEGYI, and their respective Affiliates. Neither CONTROL DEVICES
nor HEGYI may assign this License Agreement without the consent of
the other, except that CONTROL DEVICES may assign this License
Agreement together with the sale or transfer of the business to
which this License Agreement relates. This License Agreement
shall inure to the benefit of HEGYI's heirs, beneficiaries and
permitted assigns.
ARTICLE X. APPLICABLE LAW
Section 10.1 This License Agreement shall be constructed,
interpreted, and governed by the laws of Michigan.
ARTICLE XI. EFFECT OF PRIOR AGREEMENTS
Section 11.1 This License Agreement embodies all
understandings and agreements between the parties concerning the
subject matter hereof and the license granted, and supersedes and
takes precedence over any previous or contemporaneous
understandings or agreements, oral or written, between the parties
hereto.
ARTICLE XII. WAIVER OF BREACH
Section 12.1 The failure by either party to exercise a right
or enforce an obligation hereunder shall not be construed to be a
waiver of same by either party with respect to future performance.
ARTICLE XIII. SEVERABILITY
Section 13.1 If any portion of this License Agreement shall
be declared void or unenforceable by any court or administrative
body of competent jurisdiction, to the extent that such portion is
not material to the underlying intent of the agreement, such
portion shall be deemed severable from the remainder of this
License Agreement, which remainder shall continue in all respects
valid and enforceable. The parties mutually agree to cooperate in
any revision of this contract which may be necessary to meet the
requirements of the law.
ARTICLE XIV. FORCE MAJEURE
Section 14.1 Neither party shall be under any liability
hereunder to the other party on account of any loss, damage, or
delay caused by the elements, embargoes, failures of carriers, acts
of God or the public enemy, or compliance with any law, regulation
or other governmental order, whether or not valid, as long as the
delay in performance under this License Agreement is not greater
than the period that the above-mentioned actions or events cause
disruption.
ARTICLE XV. INDEMNITY
Section 15.1 CONTROL DEVICES hereby indemnifies and agrees
to require all Affiliates and sublicensees to indemnify HEGYI
against any and all claims in the nature of product liability,
warranty, and infringement of proprietary or intellectual property
rights of others, related to Royalty Products Sold, used or
disposed of by CONTROL DEVICES, its Affiliates or sublicensees.
Said indemnification includes, but is not limited to, claims for
damages, attorneys' fees, or costs. Said indemnification shall not
include claims based on any warranty provided by HEGYI. If any
claim within the scope of CONTROL DEVICES' indemnification
obligation shall be made against HEGYI involving Royalty Products,
HEGYI shall inform CONTROL DEVICES thereof and HEGYI shall
cooperate with CONTROL DEVICES and its attorneys or insurer in a
disposition of any such matters whenever reasonably requested to do
so. CONTROL DEVICES shall assume full responsibility for defense
of any such action for the benefit of itself and HEGYI.
ARTICLE XVI. PRODUCT MARKING
Section 16.1 CONTROL DEVICES agrees to mark its products
with appropriate patent notice.
ARTICLE XVII. ENTIRE AGREEMENT AND AMENDMENTS
Section 17.1 This License Agreement contains the entire
understanding of the parties with respect to the matter contained
herein. The parties hereto may, from time to time during the
continuance of this License Agreement, modify, vary or alter any of
the provisions of this License Agreement, but only by an instrument
duly executed by both parties hereto.
ARTICLE XVIII. NOTICES
Section 18.1 Any notice, request, report or payment
required or permitted to be given or made under this
License Agreement by either Party shall be given by sending
such notice by registered or certified United States mail,
return receipt requested, postage prepaid, or by a national
overnight courier service to the address set forth below or
such other address as such Party shall have specified by
written notice given in conformity herewith. Any notice
given in accordance with the provisions of this Section
shall be effective on the date received, as indicated on
the postal service's return receipt, or the overnight
courier's records and any notice not so given shall not be
valid unless and until actually received as evidenced by
competent, written records kept in the normal course of
business.
To HEGYI: Dr. Dennis J. Hegyi
1708 Morton Avenue
Ann Arbor, Michigan 48104
To CONTROL DEVICES: Control Devices, Inc.
228 Northeast Road
Standish, Maine 04084
ATTN: Bruce Atkinson, CEO
ARTICLE XIX. BANKRUPTCY
Section 19.1 If during the term of this Agreement,
CONTROL DEVICES shall make an assignment for the benefit of
creditors, or if proceedings in voluntary or involuntary
bankruptcy shall be instituted on behalf of or against CONTROL
DEVICES, or if a receiver or trustee shall be appointed for
the property of CONTROL DEVICES, HEGYI may, at his option,
terminate this Agreement and revoke the license herein granted
by written notice to CONTROL DEVICES.
IN WITNESS WHEREOF, the parties, by their duly authorized
representatives, have executed and delivered this Agreement as
of the date first written above.
CONTROL DEVICES, INC.
________________________________ By:_______________________________
DENNIS J. HEGYI Bruce D. Atkinson, CEO
Date: ______________________ Date: ___________________
