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EXCLUSIVE LICENSE AGREEMENT
THIS Agreement is entered into as of the 5th day of May, 1994, by and between
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ CO, INC, a Missouri corporation, whose address is ▇▇▇ ▇.
▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (herein called
'GEMACO') and SHARPS INTERNATIONAL, a Nevada Limited partnership, whose
address is ▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇ (herein called
'Sharps').
WHEREAS, GEMACO is engaged in the business of manufacturing, producing and
selling playing cards and has developed a sales force to market its products;
WHEREAS, Sharps has exclusive rights in an improved playing card design
layout for playing the game referred to as 'Blackjack' or 'Twenty-One' and
has claims to patent rights (as described in U.S. Patent Application Serial
No. 08/165,302 Filed December 9, 1993 entitled 'Cards and Methods for Playing
Casino 21 or Blackjack'), copyrights, trademarks and other proprietary
information related thereto and described in Appendix A, attached hereto and
incorporated herein by reference (the "Proprietary Information");
WHEREAS, Sharps desires to utilize the sales force developed by GEMACO to
market products manufactured pursuant to a license of the Proprietary
Information, and the parties have agreed that GEMACO will serve as an
exclusive manufacturer and distributor of playing cards which utilize the
Proprietary Information, subject to the terms, conditions and limitations set
forth herein;
NOW, THEREFORE, the parties agree as follows:
1. License, Exclusive Manufacturer.
(a) Sharps hereby grants to GEMACO an exclusive right and license during
the term of this Agreement to manufacture and sell to the customers and in
the sales territory set forth in this Agreement decks of playing cards (as
described in Appendices A, B and C, attached hereto, and referred to herein
as the 'Playing Cards') which utilize the Proprietary Information. GEMACO
agrees to use the Proprietary Information only for the purposes set forth
herein, and will not disclose the Proprietary Information to any third party
or use it in any other manner without the prior written consent of Sharps.
(b) Notwithstanding Paragraph l(a) hereof GEMACO acknowledges that the
Proprietary Information may also be licensed to the United States Playing
Card Company, whose address is ▇▇▇▇▇ & ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, and that
the granting of such license by Sharps does not constitute a breach of the
terms of this Agreement.
2. Patent and Trademark Notices. Sharps will provide GEMACO with all
appropriate patent and trademark notices. GEMACO shall incorporate Sharps'
trademarks into the Ace of Spades in each deck of Playing Cards, as shown in
Appendix C, attached hereto. GEMACO further agrees to incorporate all such
patent and trademark notices into sales and promotional materials produced by
GEMACO relating to the Playing Cards.
3. Ownership. Sharps represents and warrants that it rightfully has
exclusive rights in the Proprietary Information and all portions thereof, and
that it has the right to grant to GEMACO a license for the use of the
Proprietary Information. All applicable rights to patents, copyrights,
trademarks and trade secrets in the Proprietary Information, and any
improvements, enhancements and additional inventions relating thereto, are
and shall remain in Sharps.
4. Infringement
(a) In the event a claim of infringement of a patent, copyright, license
or other proprietary right relating to the Proprietary Information is brought
against GEMACO, GEMACO shall have the option to terminate this Agreement upon
delivery of written notice to Sharps. The parties agree that the intent of
this Paragraph 4(a) is to allow GEMACO and its counsel to evaluate the merits
of such a claim and, if GEMACO determines that it is risking significant
liability in continuing to manufacture and sell the Playing Cards, then
GEMACO may terminate this Agreement to avoid such liability.
(b) If, as a result of any claim of infringement of a patent, copyright,
license or other proprietary right relating to the Proprietary Information,
GEMACO is temporarily restrained or enjoined from using the Proprietary
Information, Sharps shall not be entitled to the payment of any royalties
while such temporary restraining order or injunction is in effect unless
GEMACO continues to manufacture and sell the Playing Cards and the
Proprietary Information, in which case royalties shall continue. In the
event a permanent nonappealable injunction is granted enjoining GEMACO from
manufacturing and selling the Playing Cards, then this Agreement shall
terminate upon the issuance of such permanent injunction. The provisions of
this Section shall apply only to the infringement which is caused by use of
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the Proprietary Information. GEMACO agrees to take any reasonable actions
required to be taken if by taking such action infringement that can be
avoided. If Sharps chooses not to defend GEMACO in such action, it shall so
notify GEMACO in writing. GEMACO may then defend the action at its expense
to protect its exclusive license granted hereunder, and GEMACO shall be
entitled to any award or relief granted by the court pursuant to such action.
(c) If any party other than GEMACO or the United States Playing Card
Company uses the Proprietary Information to manufacture and sell playing
cards during the term of this Agreement, then GEMACO shall be entitled to
continue to use the Proprietary Information to manufacture and sell the
Playing Cards during the period of such infringing use. GEMACO shall notify
Sharps prior to any suspension of royalties. Sharps shall not be entitled to
the payment of any royalties until it restores to GEMACO the exclusive
license granted hereunder, or until Sharps files suit in an effort to stop
the infringing use. If suit is filed by Sharps, royalties shall be paid
while the action is pending. If Sharps chooses not to bring an action
against the infringing party, it shall so notify GEMACO in writing. GEMACO
may then bring an action at its expense against the infringing party to
protect its exclusive license granted hereunder, and GEMACO shall be entitled
to any award or relief granted by the court pursuant to such action. If
GEMACO and Sharps agree to jointly pursue an infringement action, then any
recovery from such suit shall be divided pro rata between GEMACO and Sharps
based upon expenses incurred by each party.
5. GEMACO Licensure. Sharps agrees to disclose to GEMACO the identity
of all partners of Sharps and all other information which GEMACO is required
to disclose to any state regulatory agency or other body which regulates the
gaming industry and its suppliers. The parties agree that if such disclosure
reveals information which, in GEMACO judgment, would subject to GEMACO to the
loss of a state license or disqualification from doing business in any state,
then Sharps agrees to either (a) reorganize to eliminate the partner whose
background threatens GEMACO's state licensure/qualification; or (b) assign
ownership of the Proprietary Information to GEMACO or another assignee which
will not result in such loss of license or disqualification. Following any
such assignment, payment of royalties hereunder by GEMACO will be made to the
assignee or licensee.
6. GEMACO Design. GEMACO shall provide Sharps with the appropriate
copy and art ('C-Prints') for use in designing the faces of the Playing
Cards, but Sharps acknowledges that such C-Prints constitute confidential,
proprietary, and copyrighted information and will not be used by Sharps for
any other purpose without the prior written consent of GEMACO. Upon
completion of the work to design the faces of the Playing Cards, Sharps will
immediately return all C-Prints and any copies to GEMACO. Further, upon
termination of this Agreement for any reason, Sharps will immediately remove
all GEMACO designs from all computer memory and certify to GEMACO in writing
that it has done so.
7. Customers Sales Territory, The parties agree that there shall be no
restrictions on GEMACO with respect to the types of customers to which GEMACO
can sell the Playing Cards or the sales territory in which GEMACO can offer
the Playing Cards.
8. Term. This Agreement shall commence upon the date it is executed by
both parties and remain in effect until terminated pursuant to the terms of
Paragraph 4 or 14 hereof This Agreement and the rights of GEMACO hereunder
shall not be modified, affected or terminated by reason of the insolvency,
bankruptcy, receivership, or assignment for the benefit of creditors of
Sharps or by any action or proceeding pertaining to the financial condition
of Sharps.
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9. Royalties.
(a) GEMACO shall pay Sharps a royalty on the sale of the Playing Cards
by GEMACO in the amount of Four Cents (4) for each deck of Playing Cards sold
by GEMACO. Sharps shall not be entitled to a royalty for any deck of Playing
Cards which is returned to GEMACO by the customer, and to the extent that
royalties have been paid to Sharps for returned decks, GEMACO shall be
entitled to offset the amount of all such royalties paid on returned decks
against the next royalty payment due Sharps.
(b) In the event Sharps' U.S. Patent Application Serial No. 08/165,302
and all other patent applications to the Proprietary Information are denied,
the royalty as set forth in Paragraph 9(a) shall be reduced from Four Cents
(,4) per deck to Two Cents (2) per deck from the date of such denial.
(c) Sharps acknowledges that GEMACO has, prior to the execution of this
Agreement, manufactured decks of playing cards to be used for 'peeking'
purposes, and that the sale of any such decks of playing cards by GEMACO
during the term of this Agreement is not part of this Agreement and shall not
result in any obligation on the part of GEMACO to pay royalties to Sharps for
the sale of such playing cards, unless such playing cards are modified to use
the Proprietary Information.
(d) The royalties specified in this Paragraph 9 shall be adjusted
annually for any increases in the Consumer Price Index as kept by the United
States Department of Commerce. The royalties shall be adjusted upwardly in
an amount equal to the percentage increase in the Consumer Price Index
between the start of calendar year 1994 and the start of the calendar year
during which royalties accrue. Any increase shall apply to all royalties.
10. Most Favored Royalty. Licensor agrees that the royalty rate
specified in Paragraph 9 shall be revised to match a more favorable rate
granted to U.S. Playing Card Company or any other licensee of the Proprietary
Information while this Agreement remains in effect.
11. Sales and Promotion' GEMACO agrees that during the term of this
Agreement it will use Two Cents (2) from the sale of each deck of Playing
Cards for the purpose of sales and promotion of the Playing Cards.
12. Payment of Royalties. GEMACO shall pay Sharps the royalties due
under this Agreement within thirty (30) days after the end of each calendar
quarter (March 31, June 30, September 30, December 31) while this Agreement
is in effect. Each payment of royalties shall be accompanied by a written
itemized statement prepared by GEMACO showing the number of decks of Playing
Cards sold and the amount of the royalties by account. Each listing shall
show the customer's name, the number of decks sold during the preceding
quarter, and the calculation of the royalty due.
13. Audit
(a) Sharps shall have the right to hire an independent accounting firm
to perform an audit of GEMACO's books and records not more than two (2) times
per calendar year while this Agreement is in effect to verify the accuracy of
sales statements provided and royalties paid to Sharps by GEMACO; provided,
however, that such independent accounting firm shall not be allowed to
disclose any of GEMACO's pricing information to Sharps which is revealed
during such audit, and GEMACO may refuse to allow such audit to be performed
until the independent accounting firm retained by Sharps to perform such
audit enters into a nondisclosure agreement with GEMACO agreeing to be bound
by the restriction set forth in this Paragraph.
(b) In the event that the audit reveals an underpayment by Sharps, then
GEMACO shall, within ten (10) days of Sharps providing notice of such
underpayment, pay to Sharps the amount of such underpayment. The fees and
costs incurred by Sharps in performing the audit shall be the responsibility
of Sharps, unless the audit reveals an underpayment by GEMACO in any calendar
quarter of $1,000 or more, in which case the fees and costs of the audit
shall be paid by GEMACO.
14. Termination. This Agreement may be terminated by either party
immediately upon written notice to the other party for cause. For purposes
of this Agreement, the parties agree that "cause" shall be defined as:
(a) material breach of any term or condition of this Agreement which is
not cured within ninety (90) days after receipt of written notice from the
non-breaching party, except with respect to payment of royalties, in which
case GEMACO shall have ten (10) days to cure such default after delivery of
written notice by Sharps; or
(b) beginning with the calendar quarter ending June 30, 1995, failure of
GEMACO to sell 125,000 or more decks of Playing Cards in any calendar
quarter.
15. Inspection of Samples. GEMACO agrees that upon request of Sharps,
GEMACO will either (i) ship to Sharps a sample card Poker) with a hole
drilled through the center; or (ii) make available for Sharps' inspection at
GEMACO's facility in Independence, Missouri a sample deck with a hole drilled
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through the center, for each different model of the Playing Cards which is
manufactured by GEMACO. The parties agree that the intent of this provision
is to allow Sharps to maintain control over the quality of the Playing Cards
in compliance with the law of trademark licensing.
16. Notices. All notices required to be sent under this Agreement shall
be sent by overnight delivery service or by certified or registered mail to
the addresses listed in the first paragraph of this Agreement, unless a party
notifies the other party in writing of any change of address. Notice shall
be effective upon receipt if delivered, and three (3) days after mailing if
mailed.
17. Governing Law. This Agreement shall be construed under and in
accordance with the laws of the State of Missouri.
18. Entire Agreement. This Agreement constitutes the entire agreement
of Sharps and GEMACO with respect to the subject matter of this Agreement.
This Agreement may only be modified in writing, signed by both parties.
19. Successors and Assigns. @ Agreement may not be assigned by either
party without the prior written consent of the other; provided, however, that
GEMACO or Sharps may assign its rights hereunder in the event of a sale of a
majority of its issued and outstanding voting stock or the sale of
substantially all of its assets. Subject to the foregoing, this Agreement
shall be binding upon Sharps and GEMACO, and their respective successors and
assigns.
20. No Waiver. No waiver by either party of a breach or default
hereunder shall be deemed a waiver by such party of a subsequent breach or
default of a like or similar nature.
21. Severability. In the event any term or provision of this Agreement
shall for any reason be held to be invalid, illegal or unenforceable in any
respect such invalidity, illegality or unenforceability shall not effect any
other term or provision of this Agreement and shall be interpreted and
construed as if such term or provision, to the extent it shall have been held
to be invalid, illegal or unenforceable, had never been contained herein.
22. Arbitration. Any claim, dispute or controversy arising out of or in
connection with or relating to the interpretation or enforcement of this
Agreement shall be settled, insofar as possible, by mutual consultation and
consent of the parties. If the parties are unable to resolve such claim,
dispute or controversy, then such claim, dispute or controversy shall be
submitted by the parties to arbitration by the American Arbitration
Association in Kansas City, Missouri under the Commercial Arbitration Rules
then in effect for that Association. The arbitration award may be entered in
any court having competent jurisdiction with respect to this Agreement. The
cost of such arbitration shall be paid by the non-prevailing party unless
otherwise determined by the arbitrator or arbitrators.
THIS EXCLUSIVE LICENSE AGREEMENT CONTAINS A BINDING
ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES.
IN WITNESS WHEREOF, GEMACO and Sharps have executed this Exclusive License
Agreement as of the day and year first above written.
SHARPS INTERNATIONAL ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, CO., INC.
"Sharps" "GEMACO"
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇. ▇. ▇▇▇▇▇▇▇▇
------------------- --------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇. ▇. ▇▇▇▇▇▇▇▇, President
Managing General Partner
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APPENDIX A
Description of Proprietary Information
1. The playing cards and methods described in the materials of Appendix
B or subsequently filed patents or patent applications on substantially the
same technology.
2. The trademarks of Appendix C and other trademarks agreed to between
the parties for use with the Playing Cards.
3. All designs protected under copyright prepared in whole or in part
by Sharps and used in the Playing Cards manufactured by GEMACO.
▇▇
▇▇▇▇▇▇▇▇ ▇
Description of Playing Cards
See attached copy of U.S. patent application.
See attached copy of descriptive publication prepared by Sharps.