LICENSE AGREEMENT
This Agreement entered into as of this 1st day of March, 1998, by and
between INCH, Inc., a corporation of the State of Delaware having a regular
place of business at ▇▇▇ ▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereinafter
referred to as "INCH"); and
COMPACT DISC PACKAGING CORP. a corporation of the State of Delaware having
a regular place of business at c/▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, LLP, ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereinafter referred to as "CDP").
WHEREAS, INCH is the owner of the United States Letters Patent No.
5,383,554, issued January 24, 1995, entitled "CONTAINER FOR STORING AND
DISPLAYING AN ARTICLE" (hereinafter referred to as the "Patent");
WHEREAS, INCH has developed a compact disc packaging system including a
novel package or "box" for compact discs and methods of manufacturing the same,
that embodies and implements the method and apparatus disclosed in the Patent,
which compact disc packaging system constitutes and comprises proprietary trade
secret information known only to INCH (which information is hereinafter referred
to as "CD Technology");
WHEREAS, INCH is the owner of the trademark
INCH PACK
for use in connection with a CD package and INCH intends to file a United States
Trademark Application for registration of such trademark (hereinafter referred
to as the "Trademark");
WHEREAS, CDP desires to obtain an exclusive license under the Patent, said
CD Technology and said Trademark, to make, use, and sell a compact disc
packaging system incorporating the CD Technology and using the Trademark;
WHEREAS, CDP desires to obtain the right to sublicense third parties
("Third Parties") under the Patent, said CD Technology and said Trademark, to
permit such Third Parties to make, use, and sell a compact disc packaging system
incorporating the CD Technology and using the Trademark;
WHEREAS, INCH is willing to grant such a licenses to CDP under the terms
and conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the foregoing premises and other good
and valuable consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, the parties hereto agree as follows:
ARTICLE I - Grant of License
Section 1.1 - Subject to the terms of this Agreement, INCH hereby grants to
CDP the exclusive license and right to make, have made, use, market, and sell
compact disc packages coming within the scope of the invention disclosed and
claimed in said U.S. Letters Patent No. 5,383,554, issued January 24, 1995, and
any and all modifications and derivations thereof, and any and all corresponding
Letters Patent, domestic and foreign, which may issue throughout the world
(hereinafter referred to as the "Territory"), together with the right to ▇▇▇ and
recover for infringement of said Letters Patent, and together with the right to
grant sublicenses to Third Parties who are not affiliated with CDP, from and
after the date of this Agreement until the termination thereof as hereinafter
provided. For purposes of this Agreement, a Third Party is not "affiliated" with
CDP if neither CDP, its parent or subsidiary companies, or the stockholders of
CDP, its parent or subsidiary companies, or the
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respective owners of such stockholders, or their relatives, own(s) a controlling
equity interest in the Third Party.
Section 1.2 - Subject to the terms of this Agreement, INCH hereby grants
CDP the exclusive license and right to make, have made, use, market, and sell
compact disc packages embodying the CD Technology throughout the Territory,
together with the right to ▇▇▇ and recover for misappropriation of the trade
secrets embodied therein, and together with the right to grant sublicenses to
Third Parties who are not affiliated with CDP, from and after the date of this
Agreement until the termination thereof as hereinafter provided.
Section 1.3 - Subject to the terms of Agreement, INCH hereby grants CDP the
exclusive license and right to sell compact disc packages embodying the, CD
Technology throughout the Territory under the Trademark "INCH PACK" in both
block letters and in stylized form, together with the right to grant sublicenses
to Third Parties who are not affiliated with CDP, from and after the date of
this Agreement until the termination thereof as hereinafter provided.
Section 1.4 - The licenses herein granted CDP shall extend to parent and
subsidiary companies of CDP, subject to payment of royalties at the rate herein
provided. CDP shall be responsible for payment of royalties due from its parent
and subsidiary companies. A subsidiary of CDP, is defined for purposes of this
Agreement as a corporation, a majority of the voting stock of which is owned
directly or indirectly by CDP; a parent company is defined as any legal entity
which is a controlling stockholder of CDP.
Section 1.5 - CDP agrees to ▇▇▇▇ all compact disk packages incorporating
the CD Technology licensed herein in accordance with the patent statutes of the
United States and all other countries of the Territory with the words "U.S.
Patent No. 5,383,55411 or their equivalent.
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Section 1.6 - CDP may, but shall not be required to ▇▇▇▇, have marked, and
to require its sublicensees to ▇▇▇▇, all products, sales literature, technical
documentation and advertisements relating to compact disk packaging
incorporating the CD Technology with the following trademark:
INCH PACK
CDP and its sublicensees shall identify such Trademark with a superscript "TM"
or, if registered, with a superscript "(R)" when used.
Section 1.7 - In the event INCH develops a new package design that is not
covered by the Patent, these new designs will be considered part of the CD
Technology. In such event, INCH shall make its best efforts to obtain a patent
for the new package design and CDP shall reimburse INCH for all reasonable
expenses incurred thereof.
ARTICLE II - Royalties and other Payments
Section 2.1 - In consideration of the rights granted by this License
Agreement, CDP shall (i) pay INCH a royalty of two percent (2%) of the
Cumulative Net Sales (as defined below) for each calendar quarter year, of the
CD packages which are sold by CDP, its parent and subsidiary companies, and
which embody or include the invention claimed in the Patent Application and any
patents which may issue therefrom and/or embody or include the CD Technology,
throughout the Territory; (ii) pay INCH twenty-five percent (25%) of any royalty
or other fees received by CDP from any sublicenses (the "Prescribed
Percentage"), which shall be paid to INCH within thirty (30) days of receipt by
CDP together with a copy of any associated royalty report or fee statement
received from the sublicensee; and (iii) reimburse INCH $30,000 for the
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expenses incurred by INCH in obtaining the Patent, including, but not limited to
legal fees and filing fees.
Section 2.2 - The term "Cumulative Net Sales" shall mean the gross sales of
CD packages during the specified term less any returns, credits and allowances
during this period. A "CD package" shall be considered to be "sold" by CDP, or
its parent and subsidiary companies, when shipped, billed and paid for.
Section 2.3 - CDP, its parent and subsidiary companies and its
sublicensees, shall keep accurate records of all sales of CD Packages, which
records shall be open to inspection, upon thirty (30) days written notice from
INCH to CDP, its parent and subsidiary companies and its sublicensees,
respectively, during normal business hours by a Certified Public Accountant
provided by INCH for the sole purpose of verifying the royalty payments to be
rendered hereunder. CDP, its parent and subsidiary companies and sublicensees,
are not obligated to retain such records longer than three years from the due
date of the respective royalty or Prescribed Percentage payment to INCH,
provided that such royalties or Prescribed Percentage are duly paid.
Section 2.4 - Royalties shall be computed on a calendar year quarterly
basis commencing from the date hereof, and the amount due shall be paid within
the thirty (30) days immediately following the end of the quarter year period in
which they accrue. Each payment shall be accompanied by full and true statements
setting forth the total number of CD Packages sold, the selling price thereof
and the number and selling price of any CD Packages returned during such
preceding three (3) months. CDP shall report royalties on its own operations as
well as the operations of its parent and subsidiary companies and sublicensees.
CDP shall be responsible for
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payment of royalties due from its parent and subsidiary companies, whether or
not timely payments have been received from such companies. CDP shall use its
best efforts to collect royalties from its sublicensees and may cancel the
sublicense to any sublicensee who fails to report and make payment of any
royalty or fee within ninety (90) days of the date required by the sublicense.
Section 2.5 - If the total royalties paid to INCH by CDP, its parent and
subsidiary companies, (the "Royalties"), does not equal or exceed a minimum
total of Thirty Thousand Dollars ($30,000) for the period from January 31, 1999
to February 1, 2000, Forty Thousand Dollars ($40,000) for the twelve (12) month
period thereafter, and Fifty Thousand Dollars ($50,000) for each twelve month
period thereafter (the periodic threshold dollar amounts are collectively
referred to as the "Minimum Royalties"), or if CDP does not obtain a cash
capital investment in the amount of One Million Dollars ($1,000,000) within
twenty-four (24) months of the date of this Agreement, INCH shall have the
option to terminate this exclusive license upon written notice to CDP within
thirty (30) days of the end of the respective period (the "Notice").
Notwithstanding the foregoing, if within thirty (30) days of receipt of such
Notice CDP pays the difference between the Minimum Royalty due for the period
covered by the Notice and the Royalties for such period, then CDP shall retain
this exclusive license and the Notice will be null and void. In the event of a
loss of this exclusive license, CDP shall continue to hold a non-exclusive
license, under the terms of this Agreement at the same royalty rate as set forth
in Section 2.1 above. At such time as CDP shall obtain a non-exclusive license,
CDP's right to ▇▇▇ third parties for patent, copyright or trademark infringement
and CDP's right to grant additional sublicenses to Third Parties, shall cease.
CDP shall retain the right to continue to prosecute any
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lawsuit already commenced and to continue any sublicense already granted.
ARTICLE III - Warranties
Section 3.1 - Each Party does hereby warrant that it has full and sole
power, right and authority to enter into this Agreement, that this Agreement has
been duly and validly authorized and executed, by it and that this Agreement is
the valid and binding obligation of such Party.
Section 3.2 - The CD Technology is licensed as-is. INCH does not warrant
that the CD Technology is capable of industrial realization or commercial
exploitation, the risks of which are being assumed solely by CDP, and INCH shall
have no responsibility for the consequence of any such failure of industrial
realization or commercial exploitation. It is understood that INCH is not
making, and expressly disclaims, any warranties or representations with respect
to the validity or enforceability of any patent rights which may relate to the
CD Technology nor is it making any representations or warranties that the
manufacture, use or sale of any product involving the practice thereof and will
not infringe the patents of any third party. INCH makes no other warranty or
guarantee of any kind whatsoever, either express or implied, including without
limitation any warranties of merchantability or fitness for a particular
purpose. In no event will INCH be liable for any incidental, special, or
consequential damages arising out of or relating in any way to this License
Agreement, the CD Technology or licensee's use of the same. In no event will
INCH be liable for any damages in excess of the royalties received by INCH from
CDP.
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Section 3.3 - CDP warrants and covenants that: (a) with the exception of
the sale of CD Packages, CDP will not accept any purchase order or contract that
will by its terms or by the operation of law abridge INCH's rights in and to the
CD Technology; (b) CDP will obtain any required export licenses to implement
this Agreement in foreign countries, including but not limited to submission of
an international import certificate and a statement as to ultimate consignee or
purchaser; and (c) CDP has all legal right to conduct its activities as
contemplated by this Agreement, including but not limited to all necessary
rights to produce and sell CD Packages, which include and contain substantial
technology in addition to the CD Technology.
ARTICLE IV - Rights and Obligations of Parties
Section 4.1 - In consideration of CDP's control over the manufacture,
marketing and use of CD Packages, CDP hereby agrees to indemnify and hold INCH
harmless against all damages awarded or liabilities imposed by reason of, or
arising out of any product liability or breach of warranty claim concerning the
products manufactured hereunder, including all expenses and attorneys' fees
incurred in CDP's defense, but only to the extent of the cumulative royalties
earned and/or paid during the term of this Agreement. INCH and its officers and
counsel, warrant and assert that they presently have no knowledge of any prior
art or defect in the Patent which would render it unenforceable.
Section 4.2 - In the event that suit should be instituted against CDP by
any third party charging the CD Packages which include the CD Technology made
and/or sold by CDP, its parent and subsidiary companies and/or its sublicensees,
to be an infringement of any patent or patents by virtue of the CD Technology
licensed or sold hereunder being dominated by a third
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party patent, CDP shall have the right to withhold payment of the royalties
accruing hereunder. CDP agrees to pay 50% of said royalties so withheld into an
interest-bearing escrow account nominated by INCH for CDP's protection against
any and all loss or expense resulting from or incident to such suit. In such
event, royalty payments to INCH will not be resumed until such suit or suits
shall have been terminated and until CDP shall have been reimbursed in full, but
only from withheld royalties, which sums shall have been paid to escrow or
retained by CDP, for all costs, expenses, attorneys' fees and damages incurred
or suffered by it directly or indirectly on account of or by reason of such suit
or suits. INCH shall have the right to be represented in any such suit by
counsel of its own selection at its own expense.
Section 4.3 - During the term of the exclusive license granted hereunder,
CDP has the right but not the obligation to ▇▇▇ a third party in its own name
for infringement of the Patent and may join INCH as the title holder. In the
event that CDP intends to institute suit against a third party for infringement
of the Patent rights licenced hereunder, CDP shall notify INCH at least thirty
(30) days in advance of commencing suit. During this period of thirty (30) days,
INCH shall have the option of joining CDP as a co-plaintiff (or, if a
declaratory judgment action has been filed by the third party, as a
co-defendant) in the suit. If CDP elects to ▇▇▇ for infringement of said Patent
rights, CDP and INCH shall share equally in any and all damages which may be
recovered from a third party. In the event that CDP elects not to ▇▇▇ for
infringement within sixty (60) days after due notice of such infringement has
been given CDP by INCH, INCH shall have the exclusive right to ▇▇▇ and recover
damages for infringement of said Patent rights without accounting to CDP.
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Section 4.4 - CDP shall not settle any infringement suit in connection with
the Patent rights licensed hereunder by granting a sublicense to a third party
without the prior written approval of INCH, which approval shall not be
unreasonably withheld. Similarly, neither INCH nor CDP shall obtain a license
from a third party, in settlement of an infringement suit by such third party in
connection with the Patent rights licensed hereunder without first obtaining the
prior written approval of the other party hereof, which approval shall not be
unreasonably withheld.
Section 4.5 - INCH agrees that it will promptly notify CDP of and
communicate to CDP full information in writing covering any improvements,
developments, inventions, changes or innovations in the CD Technology disclosed
in the Patent No. 5,383,554 of any size or type or part thereof, which INCH may
develop or acquire. INCH further agrees that if such improvements, developments,
inventions, changes or innovations shall involve or include patentable subject
matter, then if INCH files or secures any patent thereon in any country, INCH
shall grant to CDP a full time license to make, use and sell CD packages covered
by any such patents.
ARTICLE V - Quality Control
Section 5.1 - In the event CDP sells or offers for sale products under the
trademark "INCH PACK", CDP shall produce, and shall require its parent and
subsidiary companies and its sublicensees to produce, CD packages which meet the
quality standards conventional in the "jewel box" industry, as regards
dimensional tolerances, flatness and optical clarity. In the event of a failure
by CDP to comply with these quality standards, or should any of the CD Packages
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not comply with such quality standards for any reason, then upon notice given by
INCH to CDP, including an in-plant notice given by INCH's quality control
representatives of this failure, CDP, and/or its parent and subsidiary companies
and/or its sublicensees, shall immediately cease all further production and
shipment of the subject CD Packages until the failure is corrected and, if
requested by INCH, CDP will recall or require the recall of any substandard
product at CDP's sole expenses
Section 5.2 - In the event CDP sells or offers for sale products under the
trademark "INCH PACK", CDP shall comply promptly with the quality control
sampling and reporting procedures prescribed by INCH. INCH's representatives
shall be permitted to enter and inspect at reasonable times during business
hours, without prior notice, those plants and warehouses where the CD Packages
are being manufactured, packaged or stored.
ARTICLE VI - Consultancy
Section 6.1 - INCH will supply consulting services to CDP in the area of
the design and manufacture of CD Packages at such times and at such places as
CDP shall designate. Such consulting services shall be provided by or at the
direction of ▇▇▇▇▇ ▇▇▇▇▇, President of INCH.
Section 6.2 - INCH is an independent contractor as regards the services
rendered under this Agreement. Neither INCH nor CDP are an agent or
representative of the other and have no right or authority, expressed or
implied, to assume or create any obligation on behalf of the other.
Section 6.3 - INCH agrees to provide CDP free of charge an initial transfer
of all information, currently known, relevant to the design, manufacture and
marketing of the CD Technology. INCH believes that this initial information
transfer is expected to require not more
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than two (2) man days. After completion of the initial information transfer, CDP
will pay INCH for consulting services requested of INCH by CDP in writing prior
to performance at the rate specified below:
During Phase I (prior to the sale and delivery of the
first 10,000 units): $50/hr.
During Phase II (after the sale and delivery of the
first 10,000 units): $110/hr.
INCH will invoice CDP not more often than weekly and CDP will make payment
within 30 days after invoicing.
ARTICLE VII - Term and Termination
Section 7.1 - This license becomes effective on the date first hereinabove
appearing and shall remain in force for a minimum of five (5) years and a
maximum of the life of the U.S. Patent No. 5,383,554 and any corresponding
patents which may issue in other countries, unless terminated in accordance with
the provisions hereinafter set forth.
Section 7.2 - This Agreement may be terminated at the election of INCH if
CDP is adjudged bankrupt or makes a composition with creditors or if a receiver
of its affairs is appointed.
Section 7.3 - Either INCH or CDP may terminate this Agreement at its
election in the event of breach or default by the other, without waiver of any
other remedy, by serving notice of termination on the other effective not less
than two (2) months after service and specifying the particulars of the breach
or default. If, within the two (2) month period following such notice, the
breach or default is remedied, this Agreement shall continue in full force and
effect, otherwise it shall terminate in accordance with such notice.
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ARTICLE VIII - Assignability and Construction
Section 8.1 - CDP may assign this Agreement only in connection with the
transfer, merger or sale of its entire business relative to this Agreement. INCH
may assign this Agreement, but no such assignment shall operate to defeat any
present licenses to CDP granted hereunder.
Section 8.2 - All notices provided for in this Agreement shall be given in
writing and shall be effective when either served by personal delivery or
deposited postage-paid via Certified Mail addressed to the parties at the
addresses given above or such addresses as the parties may later fix by notice.
Section 8.3 - This Agreement constitutes the complete Agreement between the
parties relative to the subject matter hereof and no modification shall be
binding upon either party hereto unless it is in writing referring to this
Agreement and executed by both parties.
Section 8.4 - This Agreement is made in, and shall be construed in
accordance with the laws of the State of New York. Jurisdiction is conferred
upon the federal and state courts in the State of New York.
Section 8.5 - Any portion or provision of this Agreement which in any way
contravenes the law of any state or country in which the Agreement is effective
shall in such state or country to the extent of such contravention of law be
deemed separable and shall not effect the other provisions of this Agreement.
Section 8.6 - Termination of this Agreement shall not effect any
contractual rights or duties which by terms of this Agreement are intended to
survive termination of this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
on the dates indicated below.
Dated: March 13, 1998 INCH, INC.
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By /s/ ▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇
Title: President
Dated: March 15, 1998 COMPACT DISC PACKAGING, CORP.
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By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: President
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