Exhibit 2.2
OLT AGREEMENT
(EXHIBIT C)
PARTIES
This OLT Agreement ("AGREEMENT") is entered into as of this 23rd day
of February, 2001, between On-Point Technology Systems, Inc., a Nevada
corporation ("LICENSEE") and Interlott Technologies, Inc., a Delaware
corporation ("LICENSOR").
RECITALS
Whereas, pursuant to the Asset Purchase Agreement dated February 23,
2001 between Licensor and Licensee (the "APA"), Licensee is conveying to
Licensor the Lottery Assets as defined in the APA; and
Whereas, Licensee desires to retain the unconditional and absolute
non-exclusive right to market but not to manufacture or have manufactured, the
technology, know-how, processes and related equipment for the enhancement of
instant ticket vending machines in order to enable the point of sale automated
on-line activation and validation of instant winner lottery tickets pursuant to
the Licensed Claims as defined below (the "ON-LINE TECHNOLOGY"), with Licensor
also having the right to market the On-Line Technology and the exclusive right
to manufacture the equipment which embodies the On-Line Technology;
Whereas, the On-Line Technology is covered by the claim(s) of United
States Patent 5,772,510 (and related International Patent Cooperation Treaty
Publication Number WO 99/6696) and those aspects of claims seven (7) and eight
(8) of United States Patent 5,222,624 (and claims seven (7) and eight (8) of
related Canadian Patent Number 2,010,273) relating to bar code reading means
(collectively the "Licensed Claims"); and
Whereas, the parties have determined that in order to effectuate the
foregoing, formal title to the On-Line Technology will be transferred to
Licensor as part of the Lottery Assets pursuant to the APA with Licensee
retaining absolute and unconditional ownership of the Marketing Rights as
defined below, by way of a royalty-free unconditional perpetual license.
Now therefore, the parties agree as follows:
TERMS OF AGREEMENT
ARTICLE I: DEFINITIONS
SECTION 1.1 DEFINED TERMS. Terms defined in this Article I and
elsewhere in this Agreement shall have the same meaning throughout the
Agreement. Defined terms may be used
in the singular or plural. Capitalized terms that are not otherwise defined in
this Agreement, shall have the definitions, if any, ascribed to them in the APA.
SECTION 1.2 "AFFILIATE" shall mean any Person that controls another
Person, that another Person controls, or that is under common control with
another Person. For purposes of the preceding sentence, the term "control" means
the power, direct or indirect, to direct or cause the direction of the
management and policies of a Person through voting securities, contract or
otherwise. An "80% Affiliate" of any Person shall mean an Affiliate of which
such Person owns 80% of the equity interest and voting rights.
SECTION 1.3 "CONFIDENTIAL INFORMATION" shall mean all information and
material concerning the On-Line Technology, which either party received from the
other party, including the disclosing party's trade secrets and know-how, patent
applications and drafts thereof, client lists, customer preferences and
requirements, computer software programs, source and object codes, concepts,
ideas, inventions, financial models and records, technology practices and other
proprietary and/or confidential information and other information relating to
the business, plans and prospects of the disclosing party, provided, that except
for patent applications and drafts thereof and source code of any software,
which shall constitute Confidential Information regardless of whether it is
marked confidential, all information which a party desires to have treated as
Confidential Information shall be marked or otherwise designated as
confidential.
SECTION 1.4 "GROSS PROFIT ROYALTY" shall mean the payment to be made by
Licensor to Licensee based on gross profit, as provided in Section 2.4(b) of
this Agreement.
SECTION 1.5 "IMPROVEMENTS" shall mean all developments Licensee or
Licensor may develop (conceive of and/or reduce to practice) in the On-Line
Technology prior to the termination of this Agreement, whether or not patented
or patentable, to the extent that such developments relate to the enhancement of
automated instant ticket vending or dispensing machines in order to enable the
point of sale automated on-line activation and validation of instant winner
lottery tickets pursuant to the Licensed Claims. Improvements exclude software
and hardware relating to the central processing and communication with the
Products.
SECTION 1.6 "LICENSED CLAIMS" shall have the meaning set forth in the
third recital to this Agreement together with the claims under any other patents
granted during the term of this Agreement with respect to On-Line Technology.
SECTION 1.7 "MARKETING RIGHTS" shall mean the non-exclusive right to
sell, lease, license, sublicense, market, distribute, grant marketing or
distribution rights or otherwise deal in commerce in any manner with the On-Line
Technology; provided, however, that Marketing Rights shall not include the right
to manufacture Products or contract for the manufacture of Products except
through Licensor.
SECTION 1.8 "ON-LINE TECHNOLOGY" OR "OLT" shall have the meaning set
forth in the second recital to this Agreement and shall include all
Improvements, and shall not include any technology other than the enhancement of
instant ticket vending machines in order to enable the point of sale automated
on-line activation and validation of instant winner lottery tickets.
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SECTION 1.9 "PERSON" shall mean any natural person, corporation,
partnership, association, company, trust, limited liability company or other
entity, including any governmental agency.
SECTION 1.10 "PRODUCTS" shall mean (a) the "Playpoint" and
"Counterpoint" dispensing units into which the Technology Enhancement has been
incorporated, (b) any point of sale automated vending or dispensing devices or
machines which utilize technology, know-how, processes and related equipment for
the enhancement of instant ticket vending machines in order to enable the point
of sale automated on-line activation and validation of instant winner lottery
tickets, and (c) any other products as may, from time to time, be added to this
definition by the parties' mutual consent.
SECTION 1.11 "REVENUE ROYALTY" shall mean the payment to be paid to
Licensee based on revenue, as provided in Section 2.4(a) of this Agreement.
SECTION 1.12 "ROYALTIES" shall mean the Revenue Royalty and the Gross
Profit Royalty.
SECTION 1.13 "SALES" shall include leases and other conveyances, but
not licenses, and "to sell" shall include to lease or to convey by any other
manner, but not to license.
SECTION 1.14 "TECHNOLOGY ENHANCEMENT" shall mean the specific hardware
and software by which the On-Line Technology is incorporated into the Products.
SECTION 1.15 "TERRITORY" shall mean the entire world.
ARTICLE II: LICENSE
SECTION 2.1 LICENSE. Subject to all terms and conditions of this
Agreement, Licensee hereby receives and retains the unconditional, perpetual
royalty-free right and license to exercise the Marketing Rights in the
Territory. This grant of the Marketing Rights is non-exclusive, with Licensor
retaining the right to market, distribute, sell or lease Products and otherwise
use the On-Line Technology, subject to limitations set forth in this Agreement.
The rights granted to Licensee pursuant to this Agreement shall include the
right to exercise Marketing Rights with respect to the On-Line Technology, by
any means and in any media whether now known or hereafter developed, to create
Improvements on the On-Line Technology and to incorporate or combine the On-Line
Technology into or with other products of Licensee or products which are
marketed or distributed by Licensee, subject to the manufacturing rights of
Licensor with respect to Products as set forth in this Agreement.
SECTION 2.2 CONFIDENTIALITY. Each party shall maintain the
confidentiality of Confidential Information relating to the On-Line Technology,
including any Improvements, insofar as and to the extent that it has not been
disclosed to the public or entered the public domain in the same manner as it
maintains its own confidential information. In connection with any sublicense of
the Technology, Licensee will require any sublicensee to execute a
confidentiality agreement containing the provisions of this Section 2.2. Each
party agrees that it will not, at any time, use or disclose, for its own account
or for, with or on behalf of others, the
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other party's Confidential Information except as may be necessary or desirable
in order to obtain the benefits of this Agreement.
SECTION 2.3 LICENSOR'S EXCLUSIVE RIGHT TO MANUFACTURE. Licensee agrees
that it will purchase from Licensor all Products that it may require in order to
exercise its Marketing Rights. In this connection, Licensee may instruct its
customers to order Products directly from Licensor, or at Licensee's election,
Licensee may make direct purchases from Licensor. Licensor shall be the sole and
exclusive manufacturer of the Products and will, subject to its standard
commercial terms, which in any event shall be no less favorable to Licensee than
those offered by Licensor to other purchasers of the Products, manufacture and
deliver such Products containing the Technology Enhancement as may be ordered by
or through Licensee, or directly by a customer as the result of Licensee's
efforts.
SECTION 2.4 ROYALTIES.
(a) Licensor shall not sell the Products to purchasers
other than those who have agreed with Licensee to pay directly to Licensee the
Revenue Royalty, or who have agreed to pay directly to Licensee the Revenue
Royalty before activation of the Technology Enhancement. Licensee shall enter
into Revenue Royalty agreements with purchasers of the Products from Licensor on
terms that are no less favorable than terms on which Licensee contracts with
customers procured by it, or to which it sells the Products directly. The
Revenue Royalty shall be an amount equal to one-half of one percent (0.5%) of
revenue derived from the use of the On-Line Technology. Licensor has no
liability or obligation to Licensee for the Revenue Royalty, except that
Licensor agrees to pay over to Licensee any Revenue Royalty received by Licensor
from purchasers of the Products.
(b) Licensor shall pay Licensee the Gross Profit Royalty
equal to the applicable percentage of Licensor's gross profits from the revenue
generated from the Sale of Products utilizing the Technology Enhancement,
including revenue from Sales to Licensee. The Gross Profit Royalty shall become
payable upon activation and use of the Technology Enhancement by the end user.
The applicable percentage is set forth on Schedule B to this Agreement.
(c) Payments of Royalties shall be made on a quarterly
basis, payable on May 15, August 15, November 15 and February 15 with respect to
Sales and other revenue earned during the calendar quarter ending March 31, June
30, September 30 and December 31, respectively, commencing with the first
quarter ending after the date of this Agreement.
(d) Each payment of Gross Profit Royalties shall be
accompanied by a royalty report, setting forth in reasonable detail, the method
of computing and Gross Profit Royalty for the quarter certified by Licensor's
chief financial officer.
(e) Licensee shall have the right to audit or review, by
itself or an accounting firm designated by Licensee, on reasonable notice to
Licensor and during normal business hours, Licensor's books and records relating
to the computation of the Royalties. Such audit or review shall be at Licensee's
sole cost and expense; provided, however, that if, such audit or review
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results in an increase of 10% or more in the amount of Royalties due to
Licensee, then Licensor shall pay the cost of the audit or review.
(f) Sales, revenue and gross profit shall be determined
in accordance with generally accepted accounting principles, consistently
applied, provided that sales type leases shall be accounted for as operating
leases and costs incurred by Licensor that are specifically allocable to making
the Products suitable or ready for production, or to implementation of
production shall be subject to reasonable amortization and included as expenses
in calculating gross profits.
(g) Licensor covenants and agrees that (i) it will sell
the Products to customers through Licensee at prices that are no higher than the
pricing at which it sells or offers to sell the same Products in the same
quantities to such customer directly; (ii) the Technology Enhancement shall not
be offered to a customer as an option by Licensor at a price level that includes
a higher gross profit margin than that included in the price at which the same
equipment without the Technology Enhancement is offered to such customer, and
(iii) Licensor will sell such Counterpoint units containing the Technology
Enhancement as may be ordered through Licensee or directly by a customer as the
result of Licensee's efforts, at the minimum gross margins described in Schedule
A.
ARTICLE III: TRANSFER OF TECHNOLOGY
SECTION 3.1 LICENSEE TECHNICAL ASSISTANCE. In order to ▇▇▇▇▇▇
Licensor's manufacturing utilization of the Technology and Improvements,
Licensee shall provide technical assistance to Licensor regarding matters within
the scope of this Agreement or Licensor's manufacturing obligations, if any,
hereunder; provided, however, that Licensor understands that the ability of
Licensee to provide such assistance is limited since Licensee does not have any
employees who are engaged in manufacturing operations relating to the Products.
Licensee shall not be required to engage any employees or consultants for
purposes of this Section 3.1 or to retain any such employees or consultants
beyond that date that Licensee requires such employees for its then existing
business activities.
ARTICLE IV: IMPROVEMENTS
SECTION 4.1 RIGHTS TO IMPROVEMENTS. If either Licensor or Licensee
shall, during the term of this Agreement, develop (conceive of and/or reduce to
practice) any Improvements, such party shall retain title and ownership to the
Improvements, but the other party shall have the same rights and obligations
with respect to the Improvements that such party would have had if the
Improvements were included in the On-Line Technology as it existed on the date
of this Agreement, provided that if Licensor has incurred costs in connection
with the development and/or implementation of Improvements developed by it, then
the parties shall agree upon reasonable compensation for Licensor before such
Improvements become part of the On-Line Technology or subject to Licensee's
Marketing Rights under this Agreement, and provided further that if Licensee has
incurred costs in connection with the development of Improvements developed by
it, then the parties shall agree upon reasonable compensation for Licensee in
the form of adjustment to the Revenue Royalty, before such Improvements become
part of the On-
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Line Technology or subject to Licensor's rights under this Agreement.
SECTION 4.2 INFORMATION RELATING TO IMPROVEMENTS. Subject to Section
4.1, above, with respect to Improvements developed by Licensor, Licensor shall
promptly provide Licensee with such information concerning the Improvements as
is reasonably necessary to enable Licensee to exercise its Marketing Rights with
respect to the Improvements. With respect to Improvements developed by Licensee,
Licensee shall promptly provide Licensor with such information concerning the
Improvements as are reasonably necessary to enable Licensor to exercise its
rights to manufacture and market such Improvements as provided in this
Agreement. In addition, each party shall provide the other party with such other
information and documentation as the other party may reasonably request.
ARTICLE V: REPRESENTATIONS AND WARRANTIES
SECTION 5.1 ORGANIZATION; VALIDITY. Licensor and Licensee each warrants
to the other that it is a corporation duly organized and in good standing under
the laws of its jurisdiction of incorporation; it has the necessary corporate
and other power and authority to enter into and perform under this Agreement and
the entry into and performance under this Agreement shall contravene no rights
or entitlements of, nor constitute the breach, of any obligations to, third
parties.
ARTICLE VI: COVENANTS
SECTION 6.1 COMPLIANCE. Each of Licensor and Licensee shall faithfully
comply with its obligations under this Agreement.
SECTION 6.2 INDEMNIFICATION.
(a) Licensee shall indemnify and hold Licensor harmless
from any claims arising from or out of Licensee's activities in connection with
this Agreement, including, without limitation, marketing the Products in the
Territory; PROVIDED, HOWEVER, that Licensee's duty to indemnify shall be subject
to Licensor's promptly notifying Licensee in writing of any notice Licensor
receives to which this indemnity applies, and lending all reasonable assistance,
at Licensor's expense, in the defense or settlement of such suit which defense
shall be under the control and direction of Licensee, if Licensee undertakes
such defense without reservation of rights concerning indemnification of the
asserted claim(s).
(b) Licensor shall indemnify and hold Licensee harmless
from any claims arising from or out of Licensor's activities in connection with
this Agreement, including, without limitation, the exercise of Licensor's
manufacturing rights pursuant to this Agreement; PROVIDED, HOWEVER, that
Licensor's duty to indemnify shall be subject to Licensee's promptly notifying
Licensor in writing of any notice Licensor receives to which this indemnity
applies, and lending all reasonable assistance, at Licensee's expense, in the
defense or settlement of such suit which defense shall be under the control and
direction of Licensor, if Licensor undertakes such defense without reservation
of rights concerning indemnification of the asserted claim(s).
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ARTICLE VII: PATENTS
SECTION 7.1 RIGHT TO SEEK PATENTS. Nothing in this Agreement shall
limit or restrict Licensor or Licensee from seeking patents on Improvements
developed by Licensor or Licensee, respectively. Each party shall cooperate with
the other party in connection with any patent application filed by the other
concerning Improvements. Neither Licensor nor Licensee makes any warranty to the
other concerning the validity or enforceability of any patent rights included in
the On-Line Technology, including the Licensed Claims. The parties agree to
share equally the cost of defense or enforcement of the Licensed Claims, and any
recovery on such claims. This Agreement may be terminated at the option of the
Licensor in the event that the Licensed Claims are invalid or unenforceable. In
such event, Licensee shall retain the non-exclusive right to market and shall
hereby be granted the right to manufacture the Technology Enhancement. In the
event that manufacturing the Products constitutes or creates an infringement of
the valid and enforceable patent rights held by any third party, then Licensor
shall be relieved of any obligation to manufacture such infringing Products.
ARTICLE VIII: TERMINATION
SECTION 8.1 TERMINATION. This Agreement shall have a term commencing on
the date of this Agreement and continuing in effect until the latest expiration
of the Licensed Claims or the expiration of twenty (20) years from the date
hereof, whichever shall occur first, provided that termination of this Agreement
shall not affect the perpetual duration of Licensee's Marketing Rights to the
On-Line Technology, which shall survive any termination of this Agreement.
ARTICLE IX: GENERAL PROVISIONS
SECTION 9.1 INTEGRATION, AMENDMENT AND WAIVER. This Agreement, together
with any Schedules which are an integral part of this Agreement, constitutes the
sole agreement between the parties with respect to its subject matter and merges
all prior discussions and agreements between them. This Agreement may not be
modified or amended, nor may any right be waived, except by a written instrument
executed by an officer of each party in the case of a modification or amendment,
or the party granting the waiver in the case of a waiver. No failure to
exercise, and no delay in exercising, any right, power or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or privilege hereunder preclude the exercise of any other
right, power or privilege (hereunder or otherwise). No waiver of any breach of
any agreement hereunder or any other agreement shall be deemed to be a waiver of
any preceding or succeeding breach of the same of any other agreement. No
extension of time for the performance of any obligations or other acts hereunder
or under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and remedies
of the parties under this Agreement are in addition to all other rights and
remedies, at law or in equity, that they may have against the other.
SECTION 9.2 INDEPENDENT CONTRACTORS. In all matters relating to this
Agreement, Licensee and Licensor shall act as independent contractors, neither
shall be the employee, joint venturer, partner or agent of the other, and each
shall assume any and all liability for its own acts. Neither Licensee nor
Licensor shall have any authority to assume or create obligations, express or
implied, on behalf of the other party or any subsidiary or Affiliate of the
other party, and
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neither party shall have any authority to represent the other party as its
agent, employee, partner or in any other capacity.
SECTION 9.3 GOVERNING LAW. The parties agree that the validity,
interpretations and enforcement of this Agreement shall be governed by and
construed in accordance with the laws of the State of Ohio, applicable to
contracts negotiated, made and duly to be performed in such State without regard
to principles of conflicts of laws. If any part of this Agreement is for any
reason determined to be invalid by any court of competent jurisdiction, the
unenforceable provision(s) shall be reformed as closely as possible to implement
the parties' intent without the illegality. In the event that either party shall
commence an action in order to enforce its rights under this Agreement, the
prevailing party shall be entitled to legal fees.
SECTION 9.4 ASSIGNMENT. Neither party shall assign its rights or duties
under this Agreement to any third party without the other party's prior written
consent, except that Licensor and Licensee may assign their rights and duties
hereunder, in whole or in part, to any 80% Affiliate. Notwithstanding the
foregoing, Licensee shall have the right to sublicense, assign or otherwise
transfer the Marketing Rights without Licensor's consent and Licensor shall have
the right to sublicense assign or otherwise transfer its right to manufacture
the Products without Licensee's consent.
SECTION 9.5 NOTICES. All notices, requests, demands and other
communications that are required or may be given under this Agreement shall be
in writing and shall be deemed to have been duly given when received if
personally delivered; when transmitted if transmitted by telecopy upon receipt
of written confirmation; the day after it is sent, if sent for next day delivery
to a domestic address by recognized overnight delivery service; and upon
receipt, if sent by certified or registered mail, return receipt requested;
provided, however, that if a party refuses to accept delivery, the date of
delivery shall be the date of attempted delivery. In each case notice shall be
sent to:
If to Licensor
Interlott Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
With a copy to:
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
1800 Star Bank Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
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If to Licensee
On-Point Technology Systems, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.; ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Executive Officer
With a copy to:
Interlott Technologies, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇, CEO
or to such other place and with such other copies as either party may designate
as to itself by written notice to the others.
SECTION 9.6 SERVICE OF PROCESS. Each party irrevocably consents to the
service of any and all process in any action or proceeding arising out of or
relating to this Agreement by the mailing of copies of such process by certified
or registered mail or by delivery by an overnight courier service that provides
evidence of delivery to such party at the address specified in Section 9.5.
SECTION 9.7 EXPENSES. Except as otherwise may be expressly provided in
this Agreement, each of the parties shall pay its own fees and expenses,
including its own counsel fees and accountant's fees incurred in connection with
this Agreement or any transactions contemplated by this Agreement.
SECTION 9.8 COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
SECTION 9.9 HEADINGS. The headings of the articles and sections of this
Agreement are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written whereupon it enters into full
force and effect in accordance with its terms.
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ON-POINT TECHNOLOGY
Attest: SYSTEMS, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------- ---------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-------------------------------
Title: CEO
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Attest: INTERLOTT TECHNOLOGIES, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------- ---------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: CEO
------------------------------
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ON-LINE TECHNOLOGY AGREEMENT
Schedule A
Gross Profit Royalty
Gross Profit ONPT
------------ ----
Gross profit % 25.0% 2.0% First order up to 3,500 units
Gross profit % 26.0% 2.2% First order up to 3,500 units
Gross profit % 27.0% 2.4% First order up to 3,500 units
Gross profit % 28.0% 2.6% First order up to 3,500 units
Gross profit % 29.0% 2.8% First order up to 3,500 units
Gross profit % 30.0% 3.0%
Gross profit % 31.7% 3.7%
Gross profit % 33.3% 4.3%
Gross profit % 35.0% 5.0%
Gross profit % 36.7% 5.7%
Gross profit % 38.3% 6.3%
Gross profit % = or greater than 40.0% 7.0%
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