Commercial License Agreement dated January 3, 2011 by and between Visualant, Inc. and Javelin, LLC

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"Visualant Patent" means:  (a) any patent or patent application owned, controlled by, or licensed to Visualant now or in the future listed, including any patents or patent applications listed under the heading of "Visualant Patents" in the attached Exhibit A, and any patents that may issue from the pending patent applications listed in the attached Exhibit A; (b) any patent that may issue from any continuation or divisional that has priority based upon any of the patent applications described in (a) above; (c) any reissues, renewals, substitutions, re-examinations and extensions of any of the pat ents described in (a) or (b) above; and (d) any foreign patents corresponding to any of the patents described in (a), (b) or (c) above.

 

 

2.1           License Grant.  Subject to the provisions of Section 2.2 below, Visualant hereby grants to Javelin an exclusive (within the Fields of Use), worldwide, transferable (except as described in Section 6.2), sublicensable royalty-bearing, right and license to use and exploit the Visualant IP within the Fields of Use.  Without limiting the generality of the foregoing, the license and rights granted herein include, without limitation, the rights to do the following: (a) make, have made, offer for sale, sell, use, distribute, have distributed, and import any products or services within the Fields of Use under the Visualant IP ; (b) make Improvements of and to the Visualant IP; (c) exercise any other rights under the Visualant IP, including the right to take any action against any past, present or future infringement of the Visualant IP in the Fields of Use; and (d) sublicense any of the licenses or rights granted hereunder, subject, however, to the prior notice and  consent of Visualant which consent shall not be unreasonably withheld. Should Javelin and Visualant disagree and become deadlocked on regarding license transfer both parties agree to seek resolution through JAMS in Seattle, Washington with both parties agreeing that resolution shall be obtained within 90 days of its submission to JAMS.

 

2.2           Performance Criteria and Termination.  During the Term, and so long as Javelin satisfies the milestones set forth in this Section 2.2 (the "Milestones") the License described in section 2.1 shall remain in effect, and Visualant will not produce or sell any licensed products or technologies by itself or through subsidiaries and will not grant to any Third Party any license under any of the Visualant IP to incorporate or utilize the Visualant IP in products or services intended for use in the Fields of Use.  The following Milestones will apply to Javelin's efforts to commercialize the Visualant IP:

 

 (a)           Within twenty-four (24) months after the Effective Date, develop a demonstration unit of a Licensed Product; and

 

 (b)           Within thirty-six (36) months after the Effective Date, generate first sales of a Licensed Product and deliver the first License Fee to Visualant, or within thirty-six (36) months after the Effective Date, Consummate a license or transfer of the VISUALANT IP to a third party, resulting in upfront cash, equity, or assets of value (minimum total value of $500,000) being paid to JAVELIN, and deliver the 25% profit sharing check and/or transferred equity or assets (minimum value of $150,000).

 

 

 

If Javelin fails to satisfy any of the Milestones, the License will terminate and the restrictions on Visualant imposed by this Section 2 will terminate. Visualant must provide 30 days written notice of intent to terminate to Javelin. Javelin will have 60 days from initial date of the Visualant termination to either satisfy the milestone or begin arbitration through JAMS in Seattle, Washington, to determine if the milestone has been met. If arbitration is commences both Visualant and Javelin agree to standard arbitration procedural rules as outlined by the state of Washington. However, arbitration will be completed and the final ruling must occur prior to 120 days from the date of the initial Visualant written notice.

 

 

3.1           Administration of Visualant IP.  Visualant will control the prosecution, maintenance, registration and other management of the Visualant IP.  Visualant will keep Javelin informed of the status of all prosecution, maintenance, registration and other management activities related to the Visualant IP and will provide Javelin with a reasonable opportunity to advise Visualant on such activities.  Without limiting the generality of the foregoing, if Visualant chooses to abandon any portion of the Visualant IP, Visualant will provide Javelin written notice at least sixty (60) days prior to the last allowable date for filing or taking any other action required with respect to the p rosecution, maintenance or registration of such portion of the Visualant IP and Javelin may, at any time thereafter, take actions necessary to preserve the Visualant IP.

 

3.2           Third Party Infringement.

 

(a)           If any Third Party Infringement comes to the attention of either Party, then such Party will give the other Party prompt written notice thereof (including, without limitation, a statement of the facts which are known by the Party giving the notice and which such Party believes might reasonably serve as a basis for a claim of Third Party Infringement, together with a copy of any documentation evidencing the same).

 

(b)           Javelin will have the first right to respond to, address, and/or prosecute any alleged Third Party Infringement by securing cessation of the infringement or initiating an action or suit against the infringer or otherwise responding to, addressing and/or prosecuting such alleged Third Party Infringement.  To exercise this first right, Javelin must initiate bona fide action to respond to, address, and/or prosecute any alleged Third Party Infringement within ninety (90) days of learning of such infringement.  If Javelin chooses to institute suit or action against an alleged infringer, Javelin may bring such suit in its own name (or, if required by law, in its and Visualant’s name) and at its own expense.  Further, if Javelin institut es an action or suit against an alleged infringer as provided in this Agreement, then (i) Visualant will fully and promptly cooperate and assist Javelin in connection with any such suit or action, and Javelin will pay Visualant’s reasonable attorney’s fees and other out-of-pocket directly associated expenses.  Javelin will not settle any suits or actions in any manner relating to the Visualant IP without obtaining the prior written consent of Javelin, which will not be unreasonable withheld, delayed or conditioned. After Javelin has recovered its reasonable attorney's fees and other out-of-pocket expenses directly related to any action, suit, or settlement for infringement of Visualant IP, the remaining damages, awards, or settlement proceeds will be divided as follows: fifty percent (50%) to Javelin and fifty percent (50%) to Visualant.

 

 

 

 

(c)           If Javelin fails, within ninety (90) days of learning of an alleged Third Party Infringement, to secure cessation of the alleged Third Party Infringement, institute suit against the alleged infringer, or to otherwise respond to, address and/or prosecute the alleged Third Party Infringement, then Visualant may, upon written notice to Javelin, assume full right and responsibility to institute suit or action against the alleged infringer.  If Visualant elects to commence an action as described above, then Visualant may do so in its own name (or if required by law, in its own and Javelin’s name) and at its own expense.  Further, if Visualant institutes an action or suit against an alleged infringer as provided in this Agreement, then Javelin wi ll fully and promptly cooperate and assist Visualant in connection with the action or suit, and Visualant will pay all of Javelin’s reasonable attorney fees and other out-of-pocket directly associated expenses.   Visualant will not settle any suits or actions in any manner relating to the Visualant IP without obtaining the prior written consent of Javelin, which will not be unreasonably withheld, delayed or conditioned. After Visualant has recovered its reasonable attorney’s fees and other out-of-pocket expenses directly related to any action, suit, or settlement for infringement of Visualant IP, the remaining damages, awards, or settlement proceeds will be divided as follows:  fifty percent (50%) to Visualant and fifty percent (50%) to Javelin.

 

(d)           Neither Javelin nor Visualant is obligated under this Agreement to institute or prosecute a suit against any alleged infringer of the Visualant IP.

 

3.3           Ownership of Improvements.

 

(a)           By Javelin.

 

(i)           Javelin or its sublicensees will be the owner of any Intellectual Property Rights in any Improvement to the Visualant IP developed, created or invented by Javelin or its sublicensees at Javelin's expense and neither Javelin nor its sublicensees will be obligated to deliver to Visualant any such Improvement pursuant to this Agreement; provided, however, Javelin will promptly notify Visualant of any such Improvements and license such Improvements to Visualant for use in certain fields of use pursuant to a separate agreement between the Parties containing substantially the same terms as are applicable to the Visualant IP licensed to Javelin pursuant to this Agreement.  Should Visualant license the Javelin owned improvements, Javelins obligations to pay pre-pa id royalties to Visualant will terminate. All other terms of this agreement will remain in force.

 

(ii)           Visualant will be the owner of any Intellectual Property Rights in any Improvement to the Visualant IP developed, created or invented by Javelin at Visualant's expense (e.g., pursuant to a separate research and development agreement or otherwise) and Visualant will not be obligated to deliver to Javelin any such Improvement pursuant to this Agreement; provided, however, Javelin will promptly notify Visualant of any such Improvements and Visualant will license such Improvements to Javelin for use in the Fields of Use pursuant to a separate agreement between the Parties containing substantially the same terms as are applicable to the Visualant IP licensed to Javelin pursuant to this A greement. Additional prepaid royalties from Javelin will not be charged by Visualant for this license. All other terms and conditions will remain in force.

 

 

 

 

(b)           By Visualant.

 

(i)           Visualant will be the owner of any Intellectual Property Right in any Improvement of the Visualant IP developed, created or invented by Visualant and Visualant will not be obligated to deliver to Javelin any such Improvement pursuant this Agreement; provided, however, Visualant will promptly notify Javelin of any such Improvements and Visualant will license such Improvements to Javelin for use in the Fields of Use pursuant to a separate agreement between the Parties containing substantially the same terms as are applicable to the Visualant IP licensed to Javelin pursuant to this Agreement.   Additional scheduled prepaid royalties from Javelin will not be required by Visualant for this license. All other terms and conditions will remain in force.

 

(ii)           Javelin will be the owner of any Intellectual Property Rights in any Improvement to the Visualant IP developed, created or invented by Visualant at Javelin’s expense (e.g., pursuant to a separate research and development agreement or otherwise) and Javelin will not be obligated to deliver to Visualant any such Improvement pursuant to this Agreement; provided, however, Visualant will promptly notify Javelin of any such Improvements and license such Improvements to Visualant for use in certain fields of use pursuant to a separate agreement between the Parties containing substantially the same terms as are applicable to the Visualant IP licensed to Javelin pursuant to this Agreement.  Should Visualant license the Javelin owned improvements, Javelins ob ligation to pay the prepaid royalties to Visualant will cease. All other terms and conditions will remain in force.

 

 

 

 

 

 

4.1           License Fee.  Javelin will pay Visualant five percent (5%) of the Gross Revenues received with respect to any Licensed Product incorporating one or more of the valid and unexpired Visualant IP (the "License Fee").

 

4.2           Prepaid Royalty. Javelin will pay Visualant a pre-paid royalty of $15,000 upon signature of the definitive agreement. A pre-paid royalty will be paid annually for each year of the term of the definitive agreement, and will increase 33% per year for 4 years then remain fixed at the 4th year rate for the duration of the term. This prepaid royalty  obligation will cease upon expiration of or non-issuance of the subject patent(s). If at the end of each quarter from the date of the definitive agreement 5% of gross revenues from JAVELIN products that utilize VISUALANT IP exceeds the accumulated  prepaid royalty(s), JAVELIN wil l pay to VISUALANT the difference between 5% of gross revenues and the prepaid annual royalty made for that quarter within 30 days of the end of that quarter (e.g., if JAVELIN gross revenues total $250,000 during 2011, JAVELIN will pay to VISUALANT at the end of that year an additional $5,000 in royalties above the minimum licensing fee of $15,000 for that year. This royalty obligation will cease upon expiration, or non-issuance of the subject patent(s).

 

4.3           Profit Sharing. JAVELIN will also provide profit sharing of 25% to VISUALANT of any license or transfer of technology to a third party that results in upfront cash, equity, or assets of value being paid to JAVELIN. Any and all such arrangements will be approved by the CEO of VISUALANT and JAVELIN prior to finalizing any technology transfer or Joint Venture/partnering agreement that results in a license or rights being transferred to the third party. Such approval shall not be unreasonably withheld. Any such transfer would remain subject to the royalties set forth in 4.2 above.  Should Visualant and Javelin disagree on the transfer of patent rights by Javelin to a sublicensee, both parties agree to arbitrate using JAMS in Seattle, Washington. The arbitrator’s final decision must be completed within 60days of Javelin’s notification to Visualant of its intention to sublicense. If after 60 days the arbitration has failed to produce a decision, Javelin would have the right to go forward with the initial proposed license agreement to the sublicensee.

 

 

4.5           Reporting and Payment.  Once Javelin satisfies the Milestone set forth in Section 2.2(d), within thirty (30) calendar days of the end of each subsequent calendar quarter (or portion thereof) during the Term of this Agreement, Javelin will remit payment to Visualant for all License Fees earned during such calendar quarter (or portion thereof).  Each payment will be accompanied by a statement setting forth in reasonable detail the basis for such payment.  All amounts payable under this Agreement are payable in the lawful money of the United States.

 

 

4.6           Taxes.  Javelin will collect and pay any sales, use, excise, import or export value added or similar tax or duty not based on Visualant's or any of its affiliates' net income associated with sales of the Licensed Products by Javelin.

 

 

5.1           General.  Unless otherwise terminated pursuant to Section 5.2, the term of the License (the "Term") will commence as of the Effective Date and will continue until the last to expire of the Visualant IP.

 

5.2           Early Termination.  Javelin may terminate this Agreement for its convenience upon thirty (30) days’ written notice to Visualant.  In addition, either Party may terminate the Agreement by giving the other Party written notice of termination if:  (a) the other Party commits a material breach of this Agreement and fails to cure such breach within thirty (90) days after the non-breaching Party gives the breaching Party written notice of such breach; or (b) the bankruptcy, receivership or similar proceeding against the other Party which is not dismissed within thirty (180) days after it is commenced.  Any disagreement between the parties associated with a no tice of early termination will be decided by arbitration, using JAMS in Seattle, Washington.

 

 

 

6.1           Waiver; Amendments.  The failure of any Party to insist, in any one or more instances, upon performance of any of the terms, covenants or conditions of this Agreement will not be construed as a waiver or a relinquishment of any right or claim granted or arising hereunder or of the future performance of any such term, covenant, or condition, and such failure will in no way affect the validity of this Agreement or the rights and obligations of the parties hereto.  This Agreement may not be modified, amended or supplemented except by an agreement in writing signed by Visualant and Javelin.

 

 

 

 

Javelin:	Javelin llc 1005 NE Boat St. #3 Seattle WA 98105
Visualant:	Visualant, Inc.
	500 Union Street Suite 406 Seattle, WA 98101

 

Any Party may change its address for such communications by giving notice thereof to the other parties in conformity with this Section.

 

6.5           Protection of the License in Bankruptcy.  The Parties expressly agree that the Visualant IP and Javelin Softwares "intellectual property" as defined in Section 101(35A) of the United States Bankruptcy Code, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code").  In the event of any proceeding under the Bankruptcy Code for the bankruptcy, reorganization or protection of either Party, this Agreement shall be subject to Section 365(n) of the Bankruptcy Code.

 

6.6           Severability.  If any provision of this Agreement, or the application thereof, will for any reason and to any extent be held to be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other persons or circumstances will be interpreted so as best to reasonably effect the intent of the parties hereto.  The parties further agree to replace such invalid or unenforceable provision of this Agreement with a valid and enforceable provision which will achieve, to the extent possible, the economic, business and other purposes of the invalid or unenforceable provision.

 

6.7           Counterparts.  This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, and all of which together will constitute one and the same instrument notwithstanding that all Parties are not signatories to each counterpart.

 

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be made and executed by duly authorized officers.

Visualant, Inc.   By:  /s/ Ron Erickson                                                   Name: Ron Erickson                                                     Title:  Chairman and CEO                                             Date Signed:  January 3, 2011

Javelin, LLC   By:   /s/ Peter Purdy                                              Name:  Peter Purdy                                                Title:  Partner                                                          Date Signed:  January 3, 2011                              By:   /s/ Mathew Creedican                                  Name:  Mathew Creedican                                   Title:  Partner                                                          Date Signed:  January 3, 2011

[Signature Page to Commercial License Agreement]

 

 

 

 

 

 

 

 

 

Annual Fee by Year
Year	Annual Fee
2011	$15,000
2012	$20,000
2013	$26,666
2014	$35,555
2015	$47,407
2016	$47,407
…	…
End of term	$47,407

 

 

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