SUB-LICENSE AGREEMENT

 

 

 

 

RECITALS

 

1.	Definitions.

2. Grant of License.

 

a. In consideration of the license fee and royalties to be paid by Licensee hereunder, and subject to the other terms and conditions set forth in this Agreement, Licensor hereby grants to Licensee as of the Effective Date the exclusive and non-terminable (except as otherwise expressly provided herein) license in the Field of Use in the Territory to use, exploit, develop and commercialize each and every element of the Intellectual Property, including without limitation (i) to make, have made, use, sell, offer for sale, license, sublicense, export and import Licensed Products, (ii) to practice Licensed Processes, and (iii) to derive all economic benefit from all activit ies undertaken by Licensee with respect to the Intellectual Property, subject to the payments to Licensor specified herein. Licensor further grants Licensee the non-exclusive license in the Territory to conduct research, develop and make modifications and enhancements to the Intellectual Property, and to improve the Intellectual Property.

 

b. Limitations. This grant of license rights is subject to the following limitations:

 

i. The rights granted herein are granted only with respect to the Territory;

 

ii. no right or license is granted or implied to the Licensee or any person claiming through the Licensee under any patent or patent application other than those specifically identified as the Patent Rights, as may be extended or modified from time-to-time during the term hereof;

 

iii. Licensor retains the right to use the Intellectual Property within the Territory for the purpose of exploiting or commercializing the Intellectual Property outside of the Territory, including without the limitation the right to maintain a web site hosted in the Territory which describes the Intellectual Property and to manufacture any materials or apparatus for sale or export outside of the Territory; this retained right shall include the right to perform research and development on the Intellectual Property within and without the territory and within and without the Field of Use at the expense of Licensor;

 

iv. Licensor reserves to itself all other intellectual property rights (including outside the Field of Use, and outside the Territory) that are not expressly granted to Licensee by this Agreement; and

 

v. except as provided in Section 2.c. below, nothing herein will be construed to grant the Licensee the right to register or claim any trademark or tradename confusingly similar in sound, appearance or meaning to those registered by Licensor as expressly disclosed in this Agreement.

 

c. Research and Development. During the Term, Licensee shall have the non-exclusive right (but not the obligation), to conduct research and development activities, and pursue regulatory approval, clinical trials, and all other work necessary to develop, improve, enhance and commercialize the Licensed Products and Licensed Processes within the Field of Use in the Territory. In connection with such potential efforts by Licensee, Licensee shall consult with Licensor, and Licensor shall make appropriate personnel available for reasonable telephone and other informal consultations, but shall not, among other things, obligate Licensor personnel to travel, spend a minimum number of hours or engage technical personnel in research or clinical projects, all of which services (“Additional Services”) may be requested by Licensee and shall be subject of further negotiation by the parties including provisions for appropriate consideration therefor.  Further, the parties shall keep each other informed as to any research and development activities, regulatory approvals, clinical trials, and other work undertaken to develop, improve, enhance and/or commercialize the Licensed Products and Licensed Processes. In the event that Licensee improves or enhances the Licensed Products and/or Licensed Processes in any way, such improvements and enhancements shall be deemed to be part of the Intellectual Property that is licensed to Licensee hereunder, and Licensee shall have the right to utilize, market, sell and otherwise benefit from such improvements and enhancements on the terms set forth herein as if such improvements and enhancements were part of the Intellectual Property on the Effective Date. Nothing in this paragraph shall be construed to limit Licensor’s rights to conducting research and development activities of the Intellectual Property, the Licensed Products, and/or the Licensed Products, or any of them, or any variations thereof, in any particular Field of Use in any portion of the Territory.

 

3. Royalty and Payments.  In consideration of the License granted to Licensee in Section 2.a, Licensee shall pay to Licensor each of the following royalties and payments:

 

a. Royalty. Commencing upon the Effective Date and during the Term of this Agreement, and subject to the terms of Section 3.c. below, Licensee shall pay to Licensor a portion of Licensee’s Net Sales Revenue as an ongoing royalty fee (the “Royalty”) at the rates and for the periods as more particularly specified on Exhibit "A" attached hereto. Each Royalty shall be paid in good and immediately collectible funds, and paid quarterly in arrear within thirty days after the e nd of each calendar quarter.

 

4. Sublicensing. Subject to the conditions and payment of fees set forth in this Section 4 below, Licensee may enter into agreements with third parties granting third parties any of the rights granted to Licensee pursuant to this Agreement within the Territory and Field of Use, including without limitation pre-license or product development agreements, or agreements to sublicense the Patent Rights within the Territory (each, a “Sublicense Agreement”). For each such Sublicense Agreement, Licensee shall pay to Licensor a portion of the income generated from such agreement, pursuant to Exh ibit A.

 

5. License Term; Options to Extend Term; Early Termination. Subject to early termination pursuant to Section 10, the term of this Agreement (the “Term”) will expire on the the tenth (10th) anniversary of the Effective Date; provided that Licensee does not have any uncured Events of Default or Minimum Payment Defaults as of the date of each such extension notice, Licensee shall have the right, by written notice to Licensor, to extend the Term for six (6) additional periods of five (5) years each under the terms and conditions defined herein.  Notwithstanding anything to the contrary contained elsewhere in this Agreement, if at any time during the Term Licensee determines that continuation of this License will not be, or is no longer, economically viable, Licensee shall have the right to terminate this Agreement upon not less than ninety (90) days advance written notice to Licensor, in which case Licensee shall be responsible for the Royalty fee, Sublicense Fee, or Minimum Payment, as applicable, otherwise due hereunder through the expiration of the Term, with such amounts being prorated as appropriate for any partial quarter during which the Term ends, and Licensee shall have no further obligation hereunder.  Further, and notwithstanding anything to the contrary contained elsewhere in this Agreement, upon termination of this Agreement the Parties shall remain entitled to receive their respective compensation due hereunder through the date of such termination, whether or not such payments have yet been made or received, as applicable, and this Agreement shall remain in effect and be enforceable following such termination as necessary to ensure that any such unpaid compensation is received and paid as required hereunder.

 

6. Reporting.

 

a. Books and Records.  Licensee shall keep full and accurate books of account using generally accepted accounting principles (GAAP) showing the amount of Net Sales Revenue and resulting Royalties and Sublicense Fees due pursuant to this Agreement. These books of account shall be kept at Licensee’s place of business and shall be subject to audit pursuant to Section 5.d. below.

 

b. Royalty Report. Not later than thirty (30) days after the beginning of each calendar quarter of each year (a “Reporting Period”), Licensee shall deliver to Licensor a true and accurate report (a “Royalty Report”), giving particulars of the business conducted by Licensee during the preceding Reporting Period as are relevant to an accounting for Royalties and Sublicense Fees due under this Agreement. The Royalty Report shall include the following at a minimum: (i) the quantity of Licensed Products sold by Licensee; (ii) the revenues arising from sales of Licensed Products; (iii) the calculated Royalty due to Licensor; (iv) re venues generated by any Sublicense Agreements, identifying the sublicensee, the amount, and the basis of the calculations; and (v) any other revenues received from third parties.  Simultaneously with the delivery of each Royalty Report, Licensee shall pay to Licensor the applicable Royalty and Sublicense Fee due, as set forth in Paragraph 3 above.

 

c. Certified Net Sales Revenue.  Not later than sixty (60) days following the end of each fiscal year of Licensee, Licensee agrees to provide Licensor, at Licensee’s sole expense, a report from an independent certified public accountant which attests to the accuracy of Licensee’s information, computations and the Royalty and Sublicense Fee due for each Reporting Period during the previous fiscal year.

 

d. Licensor’s Audit Rights. Licensor shall be entitled, upon not less than five (5) business days written notice to Licensee, and during business hours at Licensee’s office or such other place as Licensee shall designate within the state of California, to inspect and examine those books and records of Licensee relating to the determination of Royalty or Sublicense Fees set forth in any Royalty Report. The inspection of Licensee’s records shall be performed by a licensed public accounting firm (a “Qualified Firm”). The examination must be conducted within thirty (30) d ays of such books and records being made available to Licensor (“Examination Period”). The Qualified Firm shall prepare a report indicating the results of the review (the “Audit Report”) and the Qualified Firm shall provide the Audit Report to both Licensor and Licensee. If the Audit Report discloses that the amount of Royalties or Sublicense Fees reported to Licensor was less than the actual Royalties or Sublicense Fees owed, Licensee shall pay to Licensor the deficiency, unless Licensee disputes the Report within thirty (30) days after the receipt of the Report. Conversely, if the Audit Report discloses that the amount of Royalties or Sublicense Fees reported and paid to Licensor was greater than the actual Royalty fees owed, Licensor shall refund to Licensee the overpayment (and Licensee shall be entitled to offset such overpayment against the next Royalty fees due), unless Licensor disputes the Report within thirty (30) days after the receipt of the Report. If either Party dispute s the Report within this thirty (30) day period, Licensee and Licensor shall agree upon another accounting firm to review and verify the Royalties and Sublicense Fees, and provide the results thereof to Licensee and Licensor (the “Reconciliation Audit”) and the determination as set forth in the Reconciliation Audit shall be binding upon Licensee and Licensor. All costs and expenses of the auditor generating the Report shall be paid by Licensor unless the audit shows that Licensee understated Royalties and Sublicense Fees in the Royalty Report by more than five percent (5%), in which case Licensee shall pay the costs and expenses of such audit. Notwithstanding the foregoing, in the event the Reconciliation Audit is performed, Licensee and Licensor shall each pay one-half (1/2) of the cost of the Reconciliation Audit.  The exercise by Licensor of its audit rights hereunder shall not relieve Licensee of its obligations to pay prior to the request for and inspection and examination of Licensee’s books and records or permit Licensor the right to audit any other sums with the exception of the amounts set forth in this Royalty Report.  If Licensor does not elect to exercise its rights to audit during the Audit Period, and/or does not elect to examine the books and records during the Examination Period, then Licensee’s Royalty Report shall conclusively be deemed to be correct and Licensor shall be bound by Licensee's determination.  Additionally, Licensor agrees and acknowledges that the audit right as set forth herein and the review of books and records shall be confidential and, with the exception of Licensor’s auditors, Licensor may not disclose or discuss the audit or the results of the audit to any other parties.

 

7. Intellectual Property Ownership; Related Actions.

 

a. Improvements. Ownership of all inventions and discoveries relating to, deriving from, or enhancing or improving upon any technology or claims embodied in any of the Patent Rights, the Proprietary Rights, the Licensed Products or the Licensed Processes, discovered or developed by Licensee, or Licensee’s agents in connection with any of the research and development activities conducted, hereunder, or otherwise (each, a “New Invention”), shall remain with and become the sole property of Licensee.

 

b. Defense of Intellectual Property. Licensor shall be obligated to defend any actions or claims brought by third parties challenging (i) Licensor’s right and authority to license the Patent Rights and Intellectual Property, and/or (ii) Licensee’s right to utilize the Intellectual Property on the terms contained herein, except where Licensee alters commercial technology and such alteration causes infringement. Licensor shall have the sole discretion and control with respect to any defense against any litigation against the validity of the Patent Rights. Licensor shall bear all expenses of all actions that it takes pursuant to this section , including without limitation attorneys’ fees. Licensee shall have the right to be kept informed of the status and progress of all such actions, including Licensor providing Licensee with copies of all court filings and otherwise meeting with Licensee from time to time as Licensee may request to freely exchange information related to such matters.

 

c. Third Party Infringement. Licensor shall have exclusive right, sole discretion and absolute authority to assert Patent Rights against any third party (each, a “Third Party Infringement Action”), which Licensor shall have no obligation to do, and the sole and exclusive right to select counsel and control and direct the assertion of all rights and the prosecution of all such actions brought by Licensor. If Licensee desires to institute a Third Party Infringement Action with respect to any infringement or any attempted infringement of any part of the Intellectual Property within the Territory or any Field of Use (which Licensee shall have no obligation to do), Licensee may do so with Licensor’s prior written consent, which such consent shall not be unreasonably withheld. In any such action initiated by Licensee, (i) Licensee shall bear all the expenses of such actions including without limitation attorneys’ fees, (ii) Licensor shall reasonably cooperate with Licensee (including executing reasonably necessary documentation) in order to assist Licensee in such efforts so that Licensee can enjoy the benefits of this Agreement, and (iii) If a party to such action challenges the validity of the Intellectual Property Rights, Licensor shall have the exclusive right to control and direct the assertion of such defense of the Intellectual Property, including the selection of counsel.

 

d. If Licensee takes legal action to protect or preserve the Intellectual Property that Licensor is obligated to undertake under Section 6.b. above but which Licensor has refused to undertake or has not adequately undertaken, then, in addition to all other remedies available to Licensee as a result thereof, Licensee shall be permitted to offset against the next sums due to Licensor from Licensee hereunder the actual costs incurred by Licensee in the taking of such legal action, including, without limitation, actual attorneys fees, court and litigation costs, expert witness fees and costs of appeal, if any.  Licensor shall have the right to be kept informed of the status and progress of all such actions i nstituted by Licensee pursuant to this section.

 

e. Any recoveries or settlement fees received from suits or settlements involving an action initiated pursuant to this section or agreed to shall be paid: (i) first, to Party that incurred the cost of such action as reimbursement for the expenses of such action, including without limitation attorneys’ fees; and (ii) the balance (if any) to the Party that initiated such action in accordance with this section, for such party’s own use and benefit (provided if both Licensor and Licensee are pursuing their respective claims in such an action and recovery is not separately awarded to each of them, such recovery shall, in the absence of an allocation agreed to by the Parties or determined by a cour t or arbiter, be allocated between the Parties on an equitable basis as appropriate in order to compensate each of them for their respective and proportionate loss).

 

8. Marking of Patent Rights. All Licensed Products, including those produced pursuant to the rights granted in any Sublicense Agreement, shall bear trademark(s) designated by Licensor, and appropriate patent marking, such as “Patent Pending” or reference to specific issued U.S. Patents covering the Licensed Products, pursuant to and in conformance with the guidelines issued from time to time by Licensor. Licensee shall consult with and obtain the written approval of Licensor with respect to any such patent marking. The Parties shall impose the patent marking obligations of this Section 8 on all Sublicense Agreements.

 

9. Insurance Requirements. Licensee shall maintain, at Licensee’s expense, during the period that any Licensed Product is made, used, sold or otherwise made available to others pursuant to this Agreement, Comprehensive Liability Insurance, including Product Liability Insurance, with a reputable and financially secure insurance carrier(s) to cover the activities of Licensee and its sublicensees, if any, contemplated by this Agreement for minimum limits of two million dollars ($2,000,000.00) per occurrence. Such insurance shall name Licensor as an additional insured.  Licensee shall f urnish a Certificate of Insurance, upon request, evidencing such coverage with thirty (30) days of written notice of cancellation or material change to Licensor.  Licensee’s insurance shall be written to cover claims incurred, discovered, manifested, or made during the Term, or after the expiration, of this Agreement.  Licensee shall at all times comply, through insurance or self-insurance, with all statutory workers’ compensation and employers’ liability requirements covering any and all employees with respect to activities performed under this Agreement. All such liability insurance policies shall be written as primary policies not contributing with and not in excess of coverage which Licensor may carry.

 

 

i. Licensee voluntarily files a petition, or has a involuntary petition filed against it, under the Bankruptcy Act; or enters into any voluntary assignment for the benefit of its creditors; or appoints, or has appointed on its behalf, a receiver, liquidator or trustee of or with respect to substantially all of its property or assets, which petition, assignment or appointment is not dismissed, terminated or resolved within ninety (90) days following the commencement thereof;

 

ii. The expiration of the Term (as may be extended from time-to-time in accordance with Section 4 above); or

 

iii. The termination of this Agreement due to an Event of Default as more particularly specified in this Section 10 below.

 

b.	The following shall be considered an “Event of Default” by Licensee:

 

i. Licensee’s third (3rd) failure to pay the Minimum Payment (to the extent applicable) due within 15 business days of the due date;

 

ii. Without regard to the Minimum Payment due for a particular Reporting Period, Licensee’s failure to pay to Licensor during a particular Reporting Period an amount equal to at least the sum of the Royalty fees due for such Reporting Period within fifteen (15) business days of the due date;

 

iii. Licensee’s failure to deliver to Licensor the Royalty Report due for a Reporting Period within 15 business days of the due date;

 

iv. Licensee’s assignment of this Agreement in violation of the terms set forth in Section 16.l below;

 

v. Licensee’s failure to maintain appropriate insurance pursuant to the terms set forth in Section 9;

 

vi. Licensee’s material breach of any other provision of this Agreement.

 

c.	The following shall be considered an “Event of Default” by Licensor:

 

i. Licensor’s grant of a license of the Intellectual Property to a third party in the Field of Use in the Territory during the Term;

 

ii. Licensor’s loss of Patent Rights under any litigation proceeding;

 

iii. The termination of the Ioteq Master License Agreement;

 

iv. Licensor’s failure to pay any necessary fees for the continuation of the Patent Rights, or any patents granted pursuant to the U.S. Patent Applications related to the Intellectual Property;

 

v. Licensor voluntarily files a petition, or has a involuntary petition filed against it, under the Bankruptcy Act; or enters into any voluntary assignment for the benefit of its creditors; or appoints, or has appointed on its behalf, a receiver, liquidator or trustee of or with respect to substantially all of its property or assets, which petition, assignment or appointment is not dismissed, terminated or resolved within ninety (90) days following the commencement thereof; and

 

vi. Licensor’s material breach of any other provision of this Agreement.

 

d. Upon an Event of Default by either Party, the non-breaching Party may, at its sole option, provide written notice to the breaching Party of such Event of Default (a "Default Notice"), which Default Notice shall specify in reasonable detail the nature of the alleged Event of Default and the actions that must be reasonably taken by the breaching Party to cure same. The breaching Party shall have a period of fifteen (15) business days’ following receipt of the Default Notice (the “Grace Period”) to cure such Event of Default, and no actions shall be taken, or remedies sought or obtained, by the non-breaching Party as a result of such Event of Default unless the Grace Period has expired without su ch Event of Default having been cured.  Notwithstanding the foregoing, if the Event of Default is of a nature that cannot be reasonably cured within fifteen (15) business days, then provided the defaulting Party commences such cure within said fifteen (15) business day period and thereafter diligently pursues such cure, the Grace Period shall be extended as reasonably necessary to allow such cure, provided that the Grace Period shall in no event be longer than thirty (30) days following receipt of the Default Notice.

 

e. In the case of an Event of Default by Licensee which is not cured within the applicable Grace Period, Licensor shall have the right, as its sole recourse and remedy against Licensee (but without limiting the indemnity provisions of Section 15 below), to terminate this Agreement by written notice to Licensee and to recover all Royalty fees (including the Minimum Payments, if applicable) due through the termination hereof, and Licensor shall be entitled to enforce the termination provisions of Section 11 below.

 

f. In the case of an Event of Default by Licensor which is not cured within the applicable Grace Period, Licensee shall have the right, as its sole recourse and remedies against Licensor (but without limiting the indemnity provisions of Section 15 below), to (i) terminate this Agreement by written notice to Licensor and to recover all damages incurred by Licensee as  result thereof, (ii) keep this Agreement in effect in accordance with its terms, recover damages incurred by Licensee as a result of Licensor's default, and seek and obtain injunctive and other equitable relief (including specific performance) as appropriate in order for Licensee to recei ve the benefits of this Agreement, and/or (iii) obtain an assignment from Licensor of the rights and benefits of the Ioteq Master License Agreement. The foregoing remedies shall, as applicable and appropriate, be cumulative and not exclusive.

 

11.	Obligations and Rights Upon Termination.

 

a. Upon termination of this Agreement for any reason, Licensee shall:

 

i. promptly return to Licensor all technical writings, business writings, materials, samples, data, drafts, proposals, sales information, business information and all other materials transferred and created during the term of this Agreement, retaining a confidential copy of this Agreement (and such materials shall be returned on an "AS-IS" basis without any representation or warranty as to the accuracy or usefulness thereof);

 

ii. immediately stop all business, sales, marketing, publication, public disclosure, research and development on technology within the Patent Rights;

 

iii. immediately terminate or assign to Licensor on an "AS-IS" basis without any representation or warranty all of Licensee’s right, title and interest in, to or under any agreements pursuant to which a third party is given rights relating to Licensed Products, the Licensed Processes or Patent Rights and Sublicense Agreements; and

 

iv. notwithstanding anything to the contrary contained elsewhere in this Agreement, have the right during the ninety (90) day period following termination of this Agreement to sell all remaining inventory owned or controlled by Licensee associated with the Intellectual Property in accordance with the terms of this Agreement as if this Agreement had not been terminated, with all proceeds thereof being deemed Net Sales Revenue and with Licensor being entitled to a Royalty fee therein in accordance with the terms of this Agreement.

 

b. Upon termination of this Agreement, Licensor shall have no obligation to refund any payment or fee made to it or received by it under any provision of this Agreement, regardless of purpose.

 

12. Representations, Warranties and Covenants of Licensor.  Licensor represents, warrants and covenants to Licensee as follows:

 

a. Licensor is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, is qualified to do business in all jurisdictions to which this License applies, and has all requisite power and authority to own, lease and operate its property and to carry on its business as now being conducted.

 

b. Licensor has full power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly authorized by all necessary corporate action of Licensor. This Agreement has been duly executed and delivered by Licensor and, assuming this Agreement is duly executed and delivered by Licensee, constitutes a valid and legally binding obligation of Licensor enforceable against Licensor in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally, or the availability of equitable remedies.

 

c. The execution and delivery by Licensor of this Agreement do not, and compliance by Licensor with the provisions of this Agreement will not, conflict with or result in a breach or default under any of the terms, conditions or provisions of any contract, agreement, arrangement or order of court to which Licensor is a party or otherwise bound or violate any provision of law to which Licensor is subject.

 

d. Licensor has obtained all authorizations, registrations, approvals and permits required by any governmental body or under any governmental legislation in connection with Licensor's entry into, and performance of, this Agreement.

 

e. The Ioteq Master License Agreement is valid and in full force and effect and there are no defaults by any party thereunder. The copy thereof which is attached hereto is a true, complete and accurate copy of the original. The Ioteq Master License Agreement is the only agreement and arrangement in place governing the use of the Intellectual Property in the Territory and there are no parties except as disclosed in those agreements that have any rights to the Intellectual Property or the use or benefits thereof in the Territory.

 

f. The Patent Rights are properly filed with the US Patent Office and are valid and enforceable. Licensor has the exclusive good, valid and marketable title to the Intellectual Property sufficient to convey and grant the License hereunder and to convey the rights and benefits of the Intellectual Property to Licensee on the terms contained herein without the need for further consent or approval of any party.

 

g. There are no actual, outstanding or threatened claims against, claims of infringement with respect to, or challenges to, the Patent Rights or the right of Licensor to use or to license the Intellectual Property to Licensee by any third parties, and to the best knowledge of Licensor there are no facts or circumstances existing as of the Effective Date that would give rise to any such claim or challenge in the future.

 

h. The exercise by Licensee of the rights granted hereunder will not infringe upon any intellectual property rights of any person, including, without limitation, patent rights, trademarks or service marks, nor give rise to the obligation of Licensee to pay any sums to any third party.

 

i. There is no pending or, to the best knowledge of Licensor, threatened action (or basis for any action) to which Licensor is a party or involving any of the Intellectual Property or which could materially affect Licensor's ability to execute and deliver this Agreement, to perform its obligations contemplated hereby, or which would have a material affect upon Licensee's ability to enjoy and retain the benefits of this Agreement during the Term.

 

j. Licensor shall immediately notify Licensee in writing as to any circumstance that could result in the impairment, invalidation or termination of the Patent Rights or the ability of Licensee to utilize the Intellectual Property as contemplated in this Agreement, including, without limitation, any claims that the Intellectual Property or any use thereof infringes upon the intellectual property rights of others.  Licensor shall not voluntary undertake, consent to, or permit any actions or course of conduct by any party that would result in the impairment, invalidation or termination of the Intellectual Property rights licensed to Licensee hereunder.

 

k. EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, LICENSOR, ITS  DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS, AGENTS, CONSULTANTS AND AFFILIATES MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND VALIDITY OF THE CLAIMS OF ANY PATENTS ON THE TECHNOLOGY ISSUED OR PENDING, OR FREEDOM OF A PRODUCT THAT EMBODIES TECHNOLOGY FROM INFRINGEMENT OF THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS, THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE. IN NO EVENT SHALL LICENSOR, ITS TRUSTEES, DIRECTORS, OFFICE RS, EMPLOYEES, AND AFFILIATES BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING BUT NOT LIMITED TO ECONOMIC DAMAGE OR INJURY TO PROPERTY AND LOST PROFITS, WHETHER LICENSOR SHALL BE ADVISED, SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY OF THE FOREGOING. LICENSOR REPRESENTS AND WARRANTS IN RESPECT TO THE PATENT RIGHTS THAT IT HAS LEGAL RIGHT TO EXTEND THE RIGHTS TO LICENSEE, AND THAT IT HAS NOT MADE AND WILL NOT MAKE ANY COMMITMENTS TO OTHERS INCONSISTENT WITH OR IN DEROGATION OF SUCH RIGHTS.

 

13. Representations and Warranties of Licensee. Licensee represents and warrants to Licensor as follows:

 

a. Licensee is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power and authority to own, lease and operate its property and to carry on its business as now being conducted.

 

b. Licensee has full power and authority to enter into, execute and deliver this Agreement and perform its obligations hereunder. This Agreement has been duly authorized by all necessary corporate action of Licensee. This Agreement has been duly executed and delivered by Licensee and, assuming this Agreement is duly executed and delivered by Licensor, constitutes a valid and legally binding obligation of Licensee enforceable against Licensee in accordance with its terms, subject to the effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to or affecting creditors’ rights generally, or the availability of equitable remedies.

 

c. The execution and delivery by Licensee of this Agreement do not, and compliance by Licensee with the provisions of this Agreement will not, conflict with or result in a breach or default under any of the terms, conditions or provisions of any contract, agreement, arrangement or order of court to which Licensee is a party or otherwise bound.

 

14. Confidentiality. From time to time, so long as this Agreement should be in force or effect, Licensor and Licensee shall execute such non-disclosure agreements as the other Party may reasonably request from time-to-time in a form and substance reasonably desired by the requesting Party and in all cases on terms consistent with this Agreement.

 

15. Indemnification.

 

a. Licensor Indemnification. Licensor shall defend, indemnify (with counsel reasonably acceptable to Licensee) and hold Licensee harmless from and against any damages, claims, lawsuits, causes of action, liabilities, costs, obligations and expenses (including reasonable attorneys’ fees and court costs) arising solely out of any claim or allegation (whether or not proven) by any third party that Licensee’s use of the Intellectual Property pursuant to this Agreement, including the marketing, sale and/or distribution of the Licensed Processes and the Licensed Products in any Field of Use in the Territory, infringes upon or violates a valid intellectual property right or represents a misappropriation of a trade secret of a third party; provided, however, that: (1) Licensee shall have promptly provided Licensor with written notice thereof and reasonable cooperation, information, and assistance in connection therewith; (2) Licensor shall have sole control and authority with respect to the defense, settlement, or compromise thereof (provided in all cases Licensor shall act reasonably in good faith and in the best interests of Licensee, and Licensor shall not take any actions or enter into any settlements or other arrangements that impose any obligations or liabilities, financial or otherwise, upon Licensee without Licensee's prior written consent); (3) this indemnity shall not apply if such damage, liability, cost or expense results solely from, or is c aused solely by, an intentional tortuous act or the gross negligence of Licensee; and (4) this indemnity shall not apply if such forgoing, Licensor’s indemnity obligations set forth in this paragraph shall not apply if such damage, liability, cost or expense results solely from any Licensee modifications to the Intellectual Property, Licensed Products, and/or Licensed Processes. Licensee shall have the right to be kept informed of the status and progress of all such actions undertaken by Licensor pursuant to this section.

 

b. Licensee Indemnification. Licensee shall indemnify, save and hold harmless  Licensor and each of its officers, directors, employees, agents and affiliates, and each of their successors and assigns (collectively, the “Licensor Indemnified Parties”) from and against any and all costs, losses, claims, liabilities, fines, penalties, consequential damages (other than lost profits) whatsoever, including but not limited to death or injury to person or damage to property, and expenses (including interest which may be imposed in connection therewith, court costs and actual attorneys’ and expert witness fees and disbursements of counsel) (collectively, “Damages”) incurred in connection with, arising directly or indirectly out of, resulting from or incident to (i) Licensee’s exercise of any of its rights or conduct of any activities granted hereunder, (ii) the commercial sale and/or use, clinical or otherwise, of Patent Rights, Licensed Products or Licensed Processes by Licensee, its sublicensees, or any customers of any of them in any manner whatsoever; (iii) the performance, non-performance, or harmful effects of the sale, manufacture, or use of the Licensed Products, including without limitation product liability claims; or (iv) third party patent infringement claims stemming from Licensee’s use of any Patent Rights, Licensed Products or Licensed Processes.

 

c. If a claim for Damages (a “Claim”) is to be made by a Party entitled to indemnification hereunder (an “Indemnified Party”) against the indemnifying Party (the “Indemnifying Party”), the Indemnified Party shall give written notice (a “Claim Notice”) to the Indemnifying Party, which notice shall specify whether the Claim arises as a result of a claim by a person against the Indemnified Party (a “Third Party Claim”) or whether the Claim does not so arise (a “Direct Claim”), and shall also specify (to the extent that the information is available) the factual basis for the Claim and the amount of the Damages, if known.  If the Claim is a Third Party Claim, the Indemnified Party shall provide the Claim Notice as soon as practicable after such Party becomes aware of any fact, condition or event which may give rise to Damages for which indemnification may be sought under this Section 15.  If any lawsuit or enforcement action governed by this indemnity is filed against any Indemnified Party, written notice thereof shall be given to the Indemnifying Party as promptly as practicable (and in any event within 15 calendar days after the service of the citation or summons). The failure of any Indemnified Party to give timely notice hereunder shall not affect rights to indemnification hereunder, except to the extent that the Indemnifying Party has been damaged by such failure.

 

16.	General Provisions.

 

a. Notices. All Notices, requests and other communications that a Party is required or elects to deliver shall be in writing and shall be delivered personally, or by facsimile, or by a recognized overnight courier service, to the other Party at its address set forth below or to such other address as such Party may designate by notice given pursuant to this Section:

 

If to Licensee:           BioLargo, Inc.

16333 Phoebe

La Mirada, CA 90638

Facsimile: (949) 625-9819

If to Licensor:            Ioteq Inc.

100 Smith Ranch Road, Suite 124

San Rafael, CA 94903

All such notices, requests and other communications will: (i) if delivered personally to the address as provided in this Section 16.a, be deemed given upon delivery; (ii) if delivered by facsimile transmission to the facsimile number as provided for in this Section 16.a, be deemed given upon facsimile confirmation; and (iii) if delivered by messenger or courier to the address as provided in this Section 16.a, be deemed given on the earlier of the first business day following the date sent by such messenger or courier upon receipt (in each case regardless of whether such notice, request or other communication is received by any other Person to whom a copy of such notice is to be delivered pursuant to this Section 16.a. A Party from time to time may change its address, facsimile number or other information for the pur pose of notices to that Party by giving notice specifying such change to the other Parties hereto.

 

b. Publicity. Neither Party shall issue any public announcement regarding this Agreement, or which contains the name of the other Party, without giving prior reasonable notice to the other Party, and receiving written approval thereon; provided, however, that (i) Licensee may withhold its approval in its sole and absolute discretion and (ii) written approval from Licensor shall not be required for any disclosures that are required or which counsel advises Licensee are required by applicable law, including without limitation Federal securities laws, in which instance, Licensee shall so notify Licen sor as reasonably promptly as commercially possible.

 

c. Entire Agreement. This Agreement contains the sole and entire agreement and understanding of the Parties with respect to the entire subject matter of this Agreement, and any and all prior discussions, negotiations, commitments and understandings, whether oral or otherwise, related to the subject matter of this Agreement are hereby merged herein and shall be of no further force or effect.

 

d. Waiver and Amendment. No provision of this Agreement may be waived unless in writing signed by all the Parties to this Agreement, and waiver of any one provision of this Agreement shall not be deemed to be a waiver of any other provision. This Agreement may be amended only by a written agreement executed by all  the Parties to this Agreement.

 

e. Governing Law. This Agreement has been made and entered into in the State of California and shall be construed in accordance with the laws of the State of California without giving effect to the principles of conflicts of law thereof, and except to the extent superseded by the laws of the United States.

 

f. Severability. Whenever possible each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be or become prohibited or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.

 

g. Captions. The various captions of this Agreement are for reference only and shall not be considered or referred to in resolving questions of interpretation of this Agreement.

 

h. Costs and Attorneys Fees. If any action, suit, arbitration or other proceeding is instituted to remedy, prevent or obtain relief from a default in the performance by any Party to this Agreement of its obligations under this Agreement, the prevailing Party shall recover all of such Party’s reasonable attorneys’ fees incurred in each and every such action, suit, arbitration or other proceeding, including any and all appeals or petitions therefrom. 

 

i. Rights Cumulative.  Except as expressly provided to the contrary elsewhere in this Agreement, no right granted to the Parties under this Agreement on default or breach is intended to be in full or complete satisfaction of any damages arising out of such default or breach, and each and every right under this Agreement, or under any other document or instrument delivered hereunder, or allowed by law or equity, shall be cumulative and may be exercised from time to time.

 

j. Judicial Interpretation. Should any provision of this Agreement require judicial interpretation, it is agreed that a court interpreting or construing the same shall not apply a presumption that the terms hereof shall be more strictly construed against any person by reason of the rule of construction that a document is to be construed more strictly against the person who itself or through its agent prepared the same, it being agreed that all Parties have participated in the preparation of this Agreement.

 

k. Force Majeure. If any Party to this Agreement is delayed in the performance of any of its obligations under this Agreement or is prevented from performing any such obligations due to causes or events beyond its control (financial inability excepted), including, without limitation, acts of God, fire, flood, war, terrorism, earthquake, strike or other labor problem, injunction or other legal restraint, present or future law, governmental order, rule or regulation, then such delay or nonperformance shall be excused and the time for performance thereof shall be extended to include the period of suc h delay or nonperformance.

 

l. Assignment and Transfers. Except as otherwise expressly provided herein, Licensee may not assign or delegate either this Agreement or any of its rights, interests, or obligations hereunder without the prior written approval of Licensor. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and permitted assigns.

 

m. Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the Parties and delivered to the other Party, it being understood that all Parties need not sign the same counterpart.

 

n. Time Period Computations.  All periods of time referred to in this Agreement shall include all Saturdays, Sundays and California state or national holidays unless the reference is to business days, in which event such weekends and holidays shall be excluded in the computation of time and provide that if the last date to perform any act or give any notice with respect to this Agreement shall fall on a Saturday, Sunday or California state or national holiday, such act or notice shall be deemed to have been timely performed or given on the next succeeding day which is not a Saturday, Sunday or California state or national h oliday.

 

o. Qualification; Authority.  Each individual executing this Agreement on behalf of a partnership, corporation, limited liability company or as trustee of a trust represents and warrants that he or she is duly authorized to execute and deliver this Agreement on behalf of such entity (and that no additional signatures on behalf of such entity are required in order for this Agreement to be binding).  Upon request of either Party, the other Party agrees to deliver such documents reasonably necessary to evidence the foregoing.

 

p. No Partnership.   Nothing contained herein shall create or be deemed to have created a partnership or joint venture of any kind between the Parties, or the relationship of principal and agent between the Parties.

 

q. Further Assurances.  The Parties shall undertake such additional and further actions, and execute such additional documents and instruments, as may be reasonably necessary or appropriate to provide each Party with the intended benefits of this Agreement.

 

r. Survival of Covenants.  Each of the provisions contained herein or in any of the agreements or instruments to be executed pursuant to this Agreement which provide for, or otherwise contemplate, performances by either Party which may extend beyond the Term shall survive expiration of the Term.

 

s. Limitation of Liability.  The obligations of the Parties under this Agreement and under all of the documents referenced herein are intended to be binding only upon the assets of the Parties and shall not be personally binding upon the principals, members, shareholders, officers, directors, employees or agents of the Parties or their personal assets.

 

t. ARBITRATION OF DISPUTES.  ANY DISPUTE ARISING OUT OF OR IN ANY WAY RELATING TO THIS AGREEMENT SHALL BE RESOLVED IN ORANGE OR SAN DIEGO COUNTY, CALIFORNIA, BY ARBITRATION THROUGH THE JUDICIAL ARBITRATION AND MEDIATION SERVICE ("JAMS") OR OTHER ALTERNATIVE DISPUTE RESOLUTION AGENCY MUTUALLY ACCEPTABLE TO THE PARTIES, BEFORE A RETIRED JUDGE OR JUSTICE OF THE CALIFORNIA COURTS.  SUCH ARBITRATION SHALL BE COMMENCED UPON THE WRITTEN REQUEST OF ANY PARTY, AND SHALL BE CONDUCTED ON A CONFIDENTIAL BASIS.  WITHOUT LIMITING ANY OTHER POWERS OF THE ARBITRATOR, THE ARBITRATOR SHALL HAVE THE AUTHORITY OF A JUDGE PRO TEM OF THE CALI FORNIA SUPERIOR COURT, WITH THE AUTHORITY TO ISSUE ANY INJUNCTIVE ORDERS (INCLUDING ANY EX PARTE ORDERS) AND EQUITABLE RELIEF (INCLUDING SPECIFIC PERFORMANCE AND INJUNCTIVE RELIEF) DEEMED NECESSARY OR APPROPRIATE UNDER THE CIRCUMSTANCES.  ARBITRATION SHALL BE CONDUCTED AS A TRIAL BY THE COURT APPLYING THE SUBSTANTIVE LAW OF THE STATE OF CALIFORNIA (WITHOUT REGARD TO ITS CONFLICT OF LAW RULES) WITH A WRITTEN STATEMENT OF DECISION, AS PROVIDED UNDER SECTION 632 OF THE CODE OF CIVIL PROCEDURE.  JUDGMENT UPON THE ARBITRATOR’S AWARD MAY BE ENTERED IN ANY COURT OF COMPETENT JURISDICTION.  BOTH PARTIES EXPRESSLY SUBMIT AND AGREE TO THE JURISDICTION AND VENUE AS PROVIDED HEREIN.  THE PARTIES SHALL SHARE EQUALLY THE ARBITRATOR’S FEE, HOWEVER THE ARBITRATOR MAY DIRECT RECOVERY OF SUCH FEES AS COSTS BY THE PREVAILING PARTY.  IN ANY SUCH ARBITRATION, THE PREVAILING PARTY SHALL IN THE ARBITRATOR’S DISCRETION BE ENTITLED TO AN AWARD OF REASONABLE ATT ORNEYS’ FEES, WHICH SHALL BEAR A REASONABLE RELATIONSHIP TO THE AWARD OR JUDGMENT OBTAINED, IN ADDITION TO ANY OTHER RELIEF GRANTED.

 

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL.  BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION.  IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.  YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.

 

Initials:  /s/_____                                Initials: /s/____

 

 

u. Schedules and Exhibits. All schedules and exhibits referred to in this Agreement are attached hereto and incorporated herein by this reference.

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS]

 

IN WITNESS WHEREOF, the Parties have executed this Sublicense Agreement as of the date set forth above.

Licensee BIOLARGO, INC.   /s/		Licensor IOTEQ INC.   /s/
By: Dennis P. Calvert Title: President		By: Jared Franks Title: President

 

 

(a)           In consideration for the grant of the License, Licensee shall pay to Licensor a royalty (the “Royalty”) equal to five percent (5%) (the “Royalty Percent”) of the “net ex works price” of all Licensed Products sold by the Licensee (minus product returns). Royalty payments shall be made quarterly, within 30 days of the end of the calendar quarter. The “net ex works price” means the gross invoiced price of the Licensed Products sold, reduced by (i) usual arm's length trade discounts, (ii) customs duties, transportation, and insurance charges (if these items are included in the gross invoiced price), and (iii) the portion of the gross price (net of any discounts) attributable to consulting and other special s ervices provided by Licensee to its customers (determined in accordance with U.S. Generally Accepted Accounting principles applied on a consistent basis).

 

(b)           After Licensor has received cumulative payments under all IP license agreements totaling A$850,000, the Royalty Percent shall be reduced from five percent to two and one-half percent (2-1/2%).

 

(c)           If Licensee sub-licenses the IP or any portion of the IP to any other party, Licensee shall pay Licensor a Royalty equal to sixty percent (60%) of all consideration received by Licensee with regard to any such sub-license. Royalty payments shall be made to Licensor within 30 calendar days following receipt thereof by Licensee. After Licensor has received cumulative payments under all IP license agreements totaling A$850,000, the Royalty percentage due Licensor pursuant to this paragraph shall be reduced from sixty percent to thirty percent.

 

(d)           A minimum license fee of US$150,000 shall be paid by the Licensee to the Licensor under this Agreement, during the Term, for each calendar year. This minimum license fee shall be paid in monthly installments of US$12,500 (the “Monthly Royalty Minimum”), and shall be credited against and thereby reduce the Royalty otherwise payable under clauses (a), (b), and (c) with respect to the calendar year in which the minimum annual payment is due.