EXHIBIT 6.12
▇▇▇▇▇▇▇ - ESL PRO SOFTWARE LICENSE AGREEMENT
THIS AGREEMENT made as of the 7th day of May, 1998
BETWEEN:
ESL PRO SYSTEMS INC., a Nevada company having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
(hereinafter referred to as "ESL Pro")
OF THE FIRST PART
AND:
▇▇▇▇▇▇▇ INTERNATIONAL TECHNOLOGIES LTD., a British Columbia company having
an office at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
(hereinafter referred to as "▇▇▇▇▇▇▇ International")
AND:
▇▇▇▇▇▇▇ INDUSTRIES INC., a British Columbia company having an office at ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇ ▇▇▇
(hereinafter referred to as "▇▇▇▇▇▇▇ Industries")
(▇▇▇▇▇▇▇ International and ▇▇▇▇▇▇▇ Industries are hereinafter collectively
referred to as "▇▇▇▇▇▇▇")
OF THE SECOND PART
WHEREAS ▇▇▇▇▇▇▇ has developed and owns certain computer software;
AND WHEREAS ESL Pro desires to develop, distribute and sublicense software
products based on ▇▇▇▇▇▇▇'▇ software and ▇▇▇▇▇▇▇ is willing to grant to ESL Pro
an exclusive worldwide right to develop and distribute such software products on
the terms and conditions set out in this Agreement.
NOW THEREFORE, in consideration of these premises and the mutual covenants
contained in this Agreement, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
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1. INTERPRETATION
1.1 Definitions. In this Agreement, the following words and phrases shall have
the following meanings:
(a) "Derived Works" shall mean any work based on the Software and/or
Documentation which work contains code from the Software and/or text
from the Documentation, including:
(i) any revision, modification, translation, abridgement,
condensation, expansion, or any other form in which the
Software and/or Documentation may be recast, transformed, or
adapted,
(ii) any work consisting of editorial revisions, annotations,
elaborations or other modifications to the Software and/or
Documentation which, as a whole, represent an original work
of authorship,
(iii) any product in Object Code Form derived from any Derived
Works, and
(iv) any literature and other materials that together or
separately are provided by ESL Pro to End Users that specify
or describe the functions, characteristics, performance,
structure, sequence, organization and operation of the
Derived Works;
Derived Works shall not include any software or documentation that ESL
Pro can establish:
(i) is developed by or for ESL Pro independent of the Software
and Documentation, or
(ii) is licensed or sub-licensed by ESL Pro from a third party;
(b) "Documentation" shall mean the literature, programmer's notes and
other materials set out in Schedule A to this Agreement provided by
▇▇▇▇▇▇▇ to ESL Pro that specify, describe or otherwise relate to the
functions, characteristics, performance, structure, sequence,
organization and operation of the Software;
(c) "Effective Date" shall mean the 7th day of May, 1998;
(d) "End User" shall mean the ultimate user of the Software or Derived
Works and who has obtained such Software or Derived Works pursuant to
a sublicence agreement;
(e) "Initial Term" shall mean the nine (9) year, five (5) month period
commencing on the Effective Date and ending on September 30, 2007;
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(f) "Market" shall mean the English as a Second Language market;
(g) "Object Code Form" shall mean a form of computer software resulting
from the translation of processing of the Source Code Form of such
software by a computer into machine language or intermediate code,
which is in a form that would not be convenient to human understanding
of the program logic, but is appropriate for execution or
interpretation by a computer;
(h) "Recognized Stock Exchange" shall mean any recognized public market
for the securities of the company, including but not limited to, the
NASD Bulletin Board market in the United States.
(i) "Renewal Term" shall mean any renewal term as set out in section 10.2;
(j) "Reseller" shall mean any original equipment manufacturer (OEM),
dealer, reseller, distributor or other entity authorized by ESL Pro to
distribute and sublicence the Software or Derived Works to
subdistributors or End Users;
(k) "Software" shall mean the computer software described in Schedule A to
this Agreement, including any modifications, enhancements or upgrades
thereto developed by ▇▇▇▇▇▇▇; and
(1) "Source Code Form" shall mean a form of computer software in which a
computer program's logic is easily deduced by a human being with skill
in the art, such as a printed listing of the program or a form from
which a printed listing can be easily generated.
2. GRANT OF LICENCE
2.1 Software Distribution Licence. ▇▇▇▇▇▇▇ hereby grants to ESL Pro, and ESL
Pro hereby accepts, subject to the terms and conditions of this Agreement,
the exclusive worldwide right to use, manufacture, copy, distribute, sell,
market, lease, rent, operate, service and otherwise commercialize and
exploit the Software, directly and through Resellers, in Object Code form,
and the Documentation in the Market, with the right to exploit the same as
a part of a Derived Work in the Market for the Initial term and any Renewal
Terms thereafter.
2.2 Software Development Licence. ▇▇▇▇▇▇▇ hereby grants to ESL Pro, and ESL Pro
hereby accepts, subject to the terms and conditions of this Agreement, the
exclusive worldwide right to use, copy, revise, modify, translate,
condense, expand, develop, add to, subtract from, change, improve, maintain
and otherwise develop Derived Works from the Software and the
Documentation, in either Object Code Form or Source Code Form, for the
Initial Term and any Renewal Terms thereafter in the Market.
2.3 Right of First Refusal. ▇▇▇▇▇▇▇ hereby grants to ESL Pro, and ESL Pro
hereby accepts, a right of first refusal to use, manufacture, copy,
distribute, sell, market,
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lease, rent, operate, service and otherwise commercialize and exploit the
Software, in Object Code Form, and the Documentation at a royalty rate to
be determined at the time the right is exercised, in the following markets
not included in the Market:
(a) Japanese as a Second Language;
(b) Spanish as a Second Language;
(c) French as a Second Language;
(d) Chinese as a Second Language; and
(e) any other languages being taught as a Second Language.
3. OWNERSHIP OF SOFTWARE AND DERIVED WORKS
3.1 Software. Subject to the terms and conditions of this Agreement, ▇▇▇▇▇▇▇
shall retain all right, title and interest in and to the Software and the
Documentation and ESL Pro shall not have any ownership interest in any
element, segment or component of the Software or the Documentation.
3.2 Derived Works. Subject to the terms and conditions of this Agreement, ESL
Pro shall retain all right, title and interest in and to all Derived Works
developed by or for ESL Pro, ESL Pro shall retain all right, title and
interest in any patents, trademarks and copyrights awarded to ESL Pro in
respect of such Derived Works, and ▇▇▇▇▇▇▇ shall not have any ownership
interest in any element, segment or component of the Derived Works
developed by or for ESL Pro.
4. DELIVERY OF SOFTWARE
4.1 Delivery of Software. ▇▇▇▇▇▇▇ shall deliver to ESL Pro one (1) complete
copy of the Software, in Source Code Form and in Object Code Form, and the
Documentation, as set out in Schedule A, on or before the date of execution
of this Agreement.
4.2 Delivery of Modifications. ▇▇▇▇▇▇▇ will provide to ESL Pro, at no charge,
copies of any modifications, enhancements or upgrades of the Software and
the Documentation, in both Source Code Form and Object Code Form, which it
may develop. All such modifications, enhancements or upgrades shall form a
part of the Software and the Documentation, as applicable, licensed to ESL
Pro under this Agreement.
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5. PAYMENTS
5.1 Royalties. ESL Pro will pay to ▇▇▇▇▇▇▇ during each year of the Initial
Term, the royalties set out in Schedule B to this Agreement, in accordance
with the schedule set out therein.
5.2 Minimum Royalties. ESL Pro will pay to ▇▇▇▇▇▇▇ the minimum royalties for
each year of the Initial Term, as set out in Schedule B to this Agreement.
Minimum royalties paid by ESL Pro to ▇▇▇▇▇▇▇ in respect of any year shall
be credited against royalties payable by ESL Pro for such year under
section 5.1.
5.3 Share Issuance. Within twenty-eight (28) days of the signing of this
Agreement, ESL Pro will deliver to ▇▇▇▇▇▇▇ three hundred and sixty three
thousand and six hundred (363,600) Common Shares in ESL Pro representing
eighteen point eighteen percent (18.18%) of the total number of issued and
outstanding common shares of all classes of ESL Pro. At no time, prior to
ESL Pro being listed on a Recognized Stock Exchange as contemplated in
section 5.4, shall ▇▇▇▇▇▇▇'▇ equity interest in the issued and outstanding
share capital of ESL Pro be less than eighteen point eighteen percent
(18.18%) of the total number of issued and outstanding common shares of all
classes of ESL Pro. Upon any issuance of common shares in ESL Pro, ESL Pro
will issue to ▇▇▇▇▇▇▇, at no cost to ▇▇▇▇▇▇▇, a pro-rata number of Common
Shares that would bring ▇▇▇▇▇▇▇'▇ equity interest in the issued and
outstanding share capital of ESL Pro to eighteen point eighteen percent
(18.18%) of the total number of issued and outstanding common shares of all
classes of ESL Pro.
5.4 Right of First Refusal to Purchase Shares. If at any time prior to the
listing and posting of the shares of ESL Pro on a Recognized Stock
Exchange, ▇▇▇▇▇▇▇ desires to sell or transfer any of the shares in ESL Pro
delivered to ▇▇▇▇▇▇▇ pursuant to this Agreement, ESL Pro shall have a right
of first refusal to purchase the shares in ESL Pro proposed to be sold by
▇▇▇▇▇▇▇. Notwithstanding the foregoing, in any calendar year prior to the
listing and posting of the shares of ESL Pro on a Recognized Stock
Exchange, ▇▇▇▇▇▇▇ may sell or transfer no more than a total of one third of
the total number of shares in ESL Pro held by it during such year or as the
Recognized Stock Exchange may require.
5.5 Redemption Fee. ESL Pro may redeem the shares in ESL Pro delivered to
▇▇▇▇▇▇▇ pursuant to this Agreement in the event that ▇▇▇▇▇▇▇ breaches its
obligation of non-competition under section 9.1 or if ▇▇▇▇▇▇▇ is unable to
license the Software or Documentation under section 12.1, for a price of
US$0.01 per share. Upon redemption of such shares, all other provisions of
this Agreement not affected by the redemption of the shares held by ▇▇▇▇▇▇▇
shall remain in full force and effect.
5.6 Elimination of Royalties. ESL Pro's royalty obligations under sections 5.1
and 5.2 shall immediately cease if ▇▇▇▇▇▇▇ breaches its obligation of
non-competition under section 9.1.
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5.7 Assumption of Patent Prosecutions. ▇▇▇▇▇▇▇ shall permit ESL Pro to assume
prosecution of all patent applications filed in Canada or in the United
States, by ▇▇▇▇▇▇▇, in respect of the Software and the cost of maintaining
and prosecuting such patent applications shall be deducted from future
royalty payments to be made by ESL Pro under section 5.1, notwithstanding
the year in which any such cost is incurred. Nothing in this section 5.7
shall affect ESL Pro's obligation to make minimum royalty payments under
section 5.2.
5.8 Quarterly Reports. ESL Pro will submit to ▇▇▇▇▇▇▇ quarterly reports along
with any corresponding royalty fees as specified in Schedule B. Such
reports will identify the type and quantities of Software or Derived Works
distributed by ESL Pro during the calendar quarter. Such reports and
payments will be due within thirty (30) days after each calendar quarter
end and will be submitted even if no reportable transactions occurred
during the quarter covered by the report. Upon request of ▇▇▇▇▇▇▇, ESL Pro
will provide End Users' name, quantities of Software or Derived Works
licensed and date of shipment if available. The report will also include
the units of Software or Derived Works in ESL Pro's possession. ESL Pro
will maintain, and make available for review and copying by ▇▇▇▇▇▇▇ and its
representatives upon reasonable notice during normal business hours, all
relevant records of ESL Pro's Software or Derived Works transactions.
Within ninety (90) days after the end of ESL Pro's fiscal year, ESL Pro
will certify to ▇▇▇▇▇▇▇ in writing the quantities of the Software or
Derived Works licensed during the fiscal year then ended. This
certification will be provided by an executive officer of ESL Pro, its
corporate internal auditors, or its independent certified public
accountants.
6. TRADEMARKS
6.1 Ownership of Trademarks. ESL Pro acknowledges and agrees that ▇▇▇▇▇▇▇ is
the sole and exclusive owner of the trademark "▇▇▇▇▇▇▇" (the "Trademark")
and that ▇▇▇▇▇▇▇ is the exclusive licensing agent thereof.
6.2 Trademark Licence. ▇▇▇▇▇▇▇ hereby grants to ESL Pro a non-exclusive,
worldwide, royalty-free licence (without the right to sublicense) to use
the Trademark to refer to the Software, the Documentation or any Derived
Works, provided that ESL Pro will ensure that the character and quality of
the Software, the Documentation and the Derived Works will be similar to or
better than the Software and the Documentation currently marketed by
▇▇▇▇▇▇▇. ESL Pro shall have no other rights in respect of the Trademarks.
In accepting the licence to use the Trademark granted hereunder, ESL Pro
shall have no obligation to use the Trademark, and the parties acknowledge
that any use of the Trademark by ESL Pro shall be entirely voluntary.
6.3 Proprietary Notices. ESL Pro shall ensure that all copies of the Software,
the Documentation and the Derived Works that use the Trademark shall be
accompanied, where reasonable and appropriate, by a proprietary notice
consisting of the following elements:
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(a) the statement "▇▇▇▇▇▇▇" is a proprietary trademark of ▇▇▇▇▇▇▇
International Technologies Ltd., and is licensed to ESL Pro
Development Inc."; and
(b) the "TM" or "R" symbol, as instructed by ▇▇▇▇▇▇▇, after the first
prominent use of the Trademark in the Software, the Documentation and
the Derived Works. ESL Pro shall have a period of thirty (30) days in
which to begin the use of "R" symbol in replacement of the "TM" symbol
upon receiving instruction to do so by ▇▇▇▇▇▇▇.
6.4 Inspection of Trademark Use. Upon reasonable notice and request from
▇▇▇▇▇▇▇, ESL Pro agrees to provide to ▇▇▇▇▇▇▇:
(a) reproductions of any "splash screens", "about boxes" and other
notices, copyrights, trademarks, and logos used by ESL Pro in respect
of the Software, the Documentation or the Derived Works; and
(b) copies of the Software, the Documentation and the Derived Works, in
Object Code Form only;
(c) any advertising and promotional materials on which the Trademark is
used
so that ▇▇▇▇▇▇▇ may inspect same and monitor ESL Pro's compliance with the
provisions of sections 6.2 and 6.3, but for no other purpose may ▇▇▇▇▇▇▇
use this right.
6.5 Protection and Infringement. ESL Pro agrees to cooperate with and assist
▇▇▇▇▇▇▇ in obtaining, maintaining, protecting, enforcing and defending
▇▇▇▇▇▇▇'▇ proprietary rights in and to the Trademark. In the event that ESL
Pro learns of any infringement, threatened infringement or passing-off in
respect of the Trademark, or that any third party claims or alleges that
the Trademark infringes the right of the third party or is otherwise liable
to cause deception or confusion to the public, ESL Pro shall promptly
notify ▇▇▇▇▇▇▇ giving the particulars thereof. In the event ▇▇▇▇▇▇▇ decides
that proceedings should be commenced, ESL Pro shall provide ▇▇▇▇▇▇▇ with
any necessary information and reasonable assistance.
Each party undertakes to cooperate fully with the other in any action
against any infringer of the Trademark. ESL Pro, in its absolute
discretion, may notify ▇▇▇▇▇▇▇ that it wishes ▇▇▇▇▇▇▇ to join with ESL Pro
in taking steps to end such infringement including legal proceedings in the
parties' joint names. Upon agreement between the parties as to the
proportions in which they shall share the costs thereof, such steps will be
taken. In the event of joint proceedings being taken and damages being
awarded, the costs of the proceedings so far as not recoverable in the
proceedings shall be shared by the parties in the same proportion as they
are awarded damages. If the parties fail to agree as to the proportions in
which they shall share the costs thereof, ESL Pro may, in its absolute
discretion and at its expense, take steps to end such infringement
including legal proceedings in the parties' joint names, so long as ESL Pro
pays ▇▇▇▇▇▇▇'▇ costs in taking such steps.
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It is understood that ESL Pro has no obligation to incur any costs for
protection of infringement of the Trademark, unless it chooses to.
7. REPRESENTATIONS AND WARRANTIES
7.1 ▇▇▇▇▇▇▇'▇ Representations and Warranties. ▇▇▇▇▇▇▇ represents and warrants
that:
(a) it holds the entire right, title and interest in and to the Software
and the Documentation, free and clear of the claims and interests of
any third party;
(b) it has the right and power to license on an exclusive basis the
Software and the Documentation;
(c) it has filed applications for patent protection in Canada in respect
of the Software; and
(d) the execution and delivery of this Agreement does not violate or
constitute a breach of the terms of any agreement, document, charter
or by-laws to which ▇▇▇▇▇▇▇ is a party or otherwise bound.
8. ESCROW
8.1 Escrow of Derived Works. Subject to the negotiation of an escrow agreement
satisfactory to both parties, ESL Pro agrees to place in escrow with a
mutually agreeable escrow agent, one (1). copy of each Derived Work
developed by or for ESL Pro under this Agreement, in Source Code Form. ESL
Pro agrees to update the currency of the Derived Works held in escrow for
each major revision of the Derived Works, provided that ESL Pro shall not
be required to updates more than two (2) times per year.
8.2 Escrow Agreement. ESL Pro and ▇▇▇▇▇▇▇ agree to negotiate in good faith, the
terms and conditions of an escrow agreement pursuant to section 8.1.
9. NON-COMPETITION
9.1 Covenant Not to Compete. During the Initial Term and any Renewal Term,
▇▇▇▇▇▇▇ shall not sell, sublicence, manufacture, lease, distribute or
otherwise provide or promote any software products derived from or
providing a similar functionality to the Software in the Market, either
directly or indirectly, nor assist any other person in doing so, except
with the written consent of ESL Pro.
9.2 For the purposes of this Section, "Identifiers" for any software shall mean
the software's packaging, trademarks, marketing materials, promotions,
advertising, product name, the displays in the software itself and the
software's documentation
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with the sole exception that Identifiers are not to include the trademark
▇▇▇▇▇▇▇. With respect to ▇▇▇▇▇▇▇ licensing the Software to other licensees,
for teaching English, ▇▇▇▇▇▇▇ will ensure that the following language will
appear in the license and sublicense agreements and shall enforce same (as
per section 9.3:
1. except to the extent required by law, the Identifiers for the Software
contain no foreign language content and no references to foreign
languages;
2. each of the Identifiers for the Software shall be expressly targeted
at a market other than English as a Second Language, and
3. the Software and Identifiers shall appear to reasonable consumers of
such product to be for use for markets other than English as a Second
Language.
▇▇▇▇▇▇▇ shall ensure direct and indirect compliance with this Section by
itself and all ▇▇▇▇▇▇▇'▇ licensees and sub-licensees by obtaining the
agreement of such parties for the benefit of ▇▇▇▇▇▇▇ and ESL Pro, to be
bound by these Sections 9. 1 and 9.2 and to obtain such covenants from any
further sub-licensees within all license agreements with all such parties.
9.3 Enforcement. ▇▇▇▇▇▇▇ agrees to cooperate with and assist ESL Pro in
maintaining, protecting, enforcing and defending ESL Pro's proprietary
rights in and to the Software and Documentation in the Market. In the event
that ▇▇▇▇▇▇▇ learns of any infringement, threatened infringement or
passing-off in respect of the Software or Documentation ▇▇▇▇▇▇▇ shall
promptly notify ESL Pro giving the particulars thereof. In the event ESL
Pro decides that proceedings should be commenced, ▇▇▇▇▇▇▇ shall provide ESL
Pro with any necessary information and reasonable assistance.
Each party undertakes to cooperate fully with the other in any action
against any infringer of the Software or Documentation in the Market. ESL
Pro, in its absolute discretion, may notify ▇▇▇▇▇▇▇ that it wishes ▇▇▇▇▇▇▇
to join with ESL Pro in taking steps to end such infringement including
legal proceedings in the parties' joint names. Upon agreement between the
parties as to the proportions in which they shall share the costs thereof,
such steps will be taken. In the event of joint proceedings being taken and
damages being awarded, the costs of the proceedings so far as not
recoverable in the proceedings shall be shared by the parties in the same
proportion as they are awarded damages. If the parties fail to agree as to
the proportions in which they shall share the costs thereof, ESL Pro may,
in its absolute discretion and at its expense, take steps to end such
infringement including legal proceedings in the parties' joint names, so
long as ESL Pro pays ▇▇▇▇▇▇▇'▇ costs in taking such steps.
It is understood that ▇▇▇▇▇▇▇ has no obligation to incur any costs for
protection of infringement of the Software or Documentation in the Market,
unless it chooses to.
ESL Pro shall have the right to audit the records of ▇▇▇▇▇▇▇ and its
licenses on reasonable notice to ensure compliance with sections 9.1, 9.2
and 9.3.
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10. TERM AND TERMINATION
10.1 Initial Term. This Agreement shall commence on the Effective Date and shall
continue through the Initial Term and each subsequent Renewal Term, if any.
10.2 Renewal Terms. This Agreement will be renewed automatically for 3 (three)
consecutive ten-year (10) periods (the "Renewal Terms") on the same terms
and conditions as are set out herein, except for price and payment terms,
as provided elsewhere in this Agreement.
10.3 Termination. This Agreement may be terminated:
(a) by either party, immediately, in the event any assignment is made by
the other party for the benefit of creditors, or if a receiver,
trustee in bankruptcy or similar officer shall be appointed to take
charge of any or all of the other party's property, or if the other
party files a voluntary petition under federal bankruptcy laws or such
petition is filed against the other party and is not dismissed within
one hundred and twenty (120) days;
(b) by ▇▇▇▇▇▇▇, on thirty (30) days written notice, in the event ESL Pro
fails three (3) times, during the Initial Term or a single Renewal
Term, to make a royalty payment under section 5.1 or a minimum royalty
payment under section 5.2, and fails to cure such breach within ninety
(90) days of receipt of written notice thereof;
(c) by ▇▇▇▇▇▇▇, on thirty (30) days written notice, in the event ESL Pro
issues any common shares in ESL Pro, which would dilute the equity
position in ESL Pro owned by ▇▇▇▇▇▇▇, and fails to cure such condition
within ninety (90) days of receipt of written notice thereof;
(d) by ESL Pro, on ninety (90) days written notice, at any time after the
third anniversary of the Effective Date; and
(e) on notice by ▇▇▇▇▇▇▇ on the third anniversary of the Effective Date,
if:
(i) ESL Pro is not a publicly traded company on a Recognized
Stock Exchange, and
(ii) ESL Pro elects not to offer to redeem the Common Shares in
ESL Pro, held by ▇▇▇▇▇▇▇, at one-hundred and thirty-three
percent (133%) of their fair market value, which fair market
value is to be determined by the auditors of ESL Pro as of
the third anniversary of the Effective Date. It is agreed by
both parties that the fair market value assessment of the
Common Shares of ESL Pro will be completed by the auditors
of ESL Pro within ninety (90) days of the third anniversary
of the Effective Date.
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With respect to the period of the notice set out in this section (e),
in the event that, on the third anniversary of the Effective Date:
(i) ESL Pro has made application to a Recognized Stock Exchange
for listing on such stock exchange, the period for cure
after the notice shall be one hundred and eighty (180) days,
and,
(ii) ESL Pro has not made such an application, the period for
cure after the notice shall be thirty (30) days.
10.4 Effect of Termination. Upon expiration or earlier termination of this
Agreement for any reason:
(a) all rights, obligations and licences of the parties hereunder shall
cease, except that:
(i) ESL Pro's liability for any charges, payments or expenses
due to ▇▇▇▇▇▇▇ which accrued prior to the termination date
shall not be extinguished by termination, and such amount
(if not otherwise due on an earlier date), shall be
immediately due and payable on the termination date, and
(ii) ESL Pro shall have the right to distribute and sell all
copies of the Software and the Documentation in its
inventory on the date of such termination or expiration
provided that ESL Pro complies with the terms and conditions
of this Agreement related to the distribution thereof;
(b) ESL Pro shall deliver to ▇▇▇▇▇▇▇, at ESL Pro's expense
(i) all originals and copies of the Software and the
Documentation in the possession or under the control of ESL
Pro or any affiliate, and
(ii) all materials in the possession of ESL Pro that display any
trademark, trade name or other proprietary ▇▇▇▇ of ▇▇▇▇▇▇▇.
ESL Pro shall certify in writing to ▇▇▇▇▇▇▇ within ten (10) days
following termination that it has complied with this subsection (b);
and
(c) the sublicences granted under this Agreement by ESL Pro to End Users
or Resellers (solely with respect to existing inventory of the
Reseller) prior to termination shall not be affected by the
termination of this Agreement, so long as such End Users or Resellers
are not in breach of their sublicence agreements with ESL Pro and
agree to owe all further obligations thereunder directly to ▇▇▇▇▇▇▇.
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 11
10.5 Release of Derived Works. Upon any early termination of this Agreement
under subsection 10.3(a), where terminated by ▇▇▇▇▇▇▇, or subsections
10.3(b) through 10.3(e), the Derived Works held in escrow under section
8.1, if any, shall be released to ▇▇▇▇▇▇▇ and ownership of all patents,
trademarks and copyrights awarded to ESL Pro in respect of the Derived
Works, to the extent owned by ESL Pro, shall be transferred to ▇▇▇▇▇▇▇.
11. CONFIDENTIALITY
11.1 Proprietary Information. ▇▇▇▇▇▇▇ and ESL Pro agree and acknowledge that in
order to further the performance of this Agreement, they will be required
to disclose to each other certain of their respective confidential
information which will be identified as such in writing ("Confidential
Information"). The Source Code Form of the Software and the Documentation,
whether or not it is identified in writing as "Confidential Information",
shall be deemed the Confidential Information of ▇▇▇▇▇▇▇ under this
Agreement.
11.2 Protection of Property Information. Each party agrees to take all
reasonable steps to protect, in perpetuity, the confidentiality of the
other party's Confidential Information with at least the same degree of
care that it utilizes with respect of its own similar proprietary
information.
(a) not to disclose or otherwise permit any other person or entity access
to, in any manner, the Confidential Information of the other party or
any part thereof, in any form whatsoever, except to its employees (or
in the case of ESL Pro, a Reseller) requiring access to such
Confidential Information in the course of his or her employment in
connection with this Agreement or a Reseller sublicence agreement and
who has signed an agreement obligating the employee or the Reseller to
maintain the confidentiality of such Confidential Information;
(b) to notify the other party promptly and in writing of the circumstances
surrounding any suspected possession, use or knowledge of the such
party's Confidential Information or any part thereof at any location
or by any person or entity other than those authorized by this
Agreement; and
(c) not to use the Confidential Information of the other party for any
purpose other than as explicitly set forth in this Agreement.
11.3 Exceptions. Nothing in this article 11 shall restrict the receiving party
from disclosing the Confidential Information of the other party, if such
Confidential Information:
(a) was rightly possessed by the receiving party before it was received
from the disclosing party;
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 12
(b) is independently developed by the receiving party without reference to
the disclosing party's Confidential Information;
(c) is subsequently furnished to the receiving party by a third party not
under any obligation of confidentiality with respect to such
Confidential Information, and without restrictions on use or
disclosure; or
(d) is or becomes public or available to the general public otherwise than
through any act or default of the receiving party.
12. INDEMNIFICATION
12.1 Indemnification for Infringement. Except as provided below, ▇▇▇▇▇▇▇ shall
defend and indemnify ESL Pro from and against any damages, liabilities,
costs and expenses (including reasonable attorney's fees) arising out of
any claim that the Software or the Documentation infringes any valid patent
or copyright or misappropriates a trade secret of a third party, provided
that:
(a) ESL Pro shall have promptly provided ▇▇▇▇▇▇▇ with written notice
thereof and reasonable cooperation, information, and assistance in
connection therewith; and
(b) ▇▇▇▇▇▇▇ shall have sole control and authority with respect to the
defence, settlement, or compromise thereof.
Should any Software or Documentation become or, in ▇▇▇▇▇▇▇'▇
reasonable opinion, be likely to become the subject of an injunction
preventing its use as contemplated in this Agreement, ▇▇▇▇▇▇▇ may, at
its option:
(c) procure for ESL Pro the right to continue using such Software or
Documentation; or
(d) replace or modify such Software or Documentation so that it becomes
non-infringing.
If the remedies provided under subsections (c) and (d) are not
reasonably available to ▇▇▇▇▇▇▇, the ESL Pro may, at its sole option:
(e) terminate the Agreement and redeem the shares in ESL Pro delivered to
▇▇▇▇▇▇▇ pursuant to this Agreement, for a price of US$0.01 per share
(see section 5.5)..
Any damages, liabilities, costs and expenses (including reasonable
attorney's fees) incurred by ESL Pro as a result of a valid action
against the Software or Documentation, shall be deducted from future
royalty payments.
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 13
12.2 Exclusions. ▇▇▇▇▇▇▇ shall not have liability or obligation to ESL Pro
hereunder with respect to any patent, copyright or trade secret
infringement or claim thereof based upon:
(a) use of the Software or Documentation by ESL Pro in combination with
any devices or products not authorized by ▇▇▇▇▇▇▇;
(b) use of the Software or Documentation in an application or environment
for which such Software or Documentation were not designed or
contemplated;
(c) modifications, alterations or enhancements of the Software or
Documentation not created by or for ▇▇▇▇▇▇▇, or
(d) any claim of infringement of a patent, copyright or trade secret in
which ESL Pro or any affiliate of ESL Pro has an interest.
ESL Pro shall indemnify and hold ▇▇▇▇▇▇▇ harmless from all costs,
damages and expenses (including reasonable attorney's fees) arising
from any claim enumerated in subsections (a) through (d) above.
12.3 Entire Liability. This article 12 states the entire liability of ▇▇▇▇▇▇▇
with respect to infringement of patent, copyright and trade secrets by the
Software or Documentation or any part thereof or by their operation.
13. GENERAL PROVISIONS
13.1 Assignment. This Agreement may not be assigned by ESL Pro without the prior
written consent of ▇▇▇▇▇▇▇ whose consent shall not be unreasonably
withheld. In the case of any permitted assignment or transfer of or under
this Agreement, this Agreement or the relevant provisions shall be binding
upon, and inure to the benefit of the successors, executors, heirs,
representatives, administrators and assigns of the parties hereto.
13.2 Entire Agreement; Amendment. This Agreement and Schedule A and B attached
hereto constitute this entire agreement between the parties with regard to
the subject matter hereof. All other agreements between the parties shall
still be in effect. No amendment, modification or change of terms of this
Agreement shall bind either party unless in writing signed by both parties.
13.3 Force Majeure. In the event that either party is prevented from performing,
or is unable to perform, any of its obligations under this Agreement due to
any cause beyond the reasonable control of the party invoking this
provision, the affected party's performance shall be excused and the time
for performance shall be extended for the period of delay or inability to
perform due to such occurrence.
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 14
13.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Province of British Columbia, Canada and
the parties hereto irrevocably attorn to the jurisdiction of the courts of
such province.
13.5 Headings. Captions and heading contained in this Agreement have been
included for ease of reference and convenience and shall not be considered
in interpreting or construing this Agreement.
13.6 No Agency; Independent Contractors. Nothing contained in this Agreement
shall be deemed to imply or constitute either party as the agent or
representative of the other party, or both parties as joint ventures or
partners of any purpose.
13.7 Notice. Any notice or communication from one party to the other shall be in
writing and either personally delivered or sent via facsimile or certified
mail, postage prepaid and return receipt requested addressed, to such other
party at the address specified below or such other address as either party
may from time to time designate in writing to the other party.
If to ▇▇▇▇▇▇▇:
▇▇▇▇▇▇▇ International Technologies Ltd. & ▇▇▇▇▇▇▇ Industries Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No. (▇▇▇) ▇▇▇-▇▇▇▇
If to ESL Pro:
ESL Pro Systems Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇
Telephone No: (▇▇▇) ▇▇▇-▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
No change of address shall be binding upon the other party hereto until
written notice thereof is received by such party at the address shown
herein. All notices shall be in English and shall be effective upon
receipt.
13.8 No Waiver. The waiver by either party of a breach or a default of any
provision of this Agreement by the other party shall be construed as a
waiver or any succeeding breach of the same or any other provision, nor
shall any delay or omission on the
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 15
part of either party to exercise or avail itself of any right, power or
privilege that it has, or may have hereunder, operate as a waiver of any
right, power or privilege by such party.
13.9 Publicity.
(a) Neither party shall originate any publicity, news release or other
public announcement relating to this Agreement or the existence of an
arrangement between the parties without the prior written approval of
the other party, except as otherwise required by law.
(b) Upon acceptance of this Agreement, ▇▇▇▇▇▇▇ agrees to use its best
efforts to deliver a news release to its shareholders announcing the
signing of this Agreement and also agrees to provide ESL Pro
reasonable access to the ▇▇▇▇▇▇▇ web site on the world wide web
(▇▇▇.▇▇▇▇▇▇▇.▇▇▇) for the purposes of providing links to the ESL Pro
web site (▇▇▇.▇▇▇▇▇▇.▇▇▇).
13.10 Quiet Enjoyment. In the event of any dispute between the two parties
concerning a material breach of this Agreement (except with respect of
section 10.3(b) or 10.3(c)) both parties shall have the right to quiet
enjoyment of the products or services detailed within the Agreement until
the dispute is completely resolved. If a period of ninety (90) days elapses
and the dispute is not resolved, then both parties agree that the dispute
will go to binding arbitration. This provision specifically provides ESL
Pro the right to continue conducting its business during any aforementioned
dispute with ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ agrees not to contact or solicit ESL Pro's
clients or enter the Market, until any such dispute is completely resolved.
13.11 Survival. The provisions of sections 10.4 and 10.5 and articles 11
(Confidentiality), 12 (indemnification) and 13 (General Provisions) shall
survive any termination or expiration of this Agreement according to their
respective terms.
13.12 Arbitration. Except for applications for injunctions required to protect
Confidential Information, all disputes arising out of or in connection with
this Agreement or in respect of any defined legal relationship associated
therewith or derived therefrom shall be referred to and finally resolved by
arbitration under the rules of the British Columbia International
Commercial Arbitration Centre, and in connection therewith:
(a) the appointing authority shall be the British Columbia International
Arbitration Centre;
(b) the arbitration will be conducted by a single arbitrator unless the
parties agree otherwise;
(c) the case shall be administered by the British Columbia International
Commercial Arbitration Centre in accordance with its Procedures for
Cases under the BCICAC Rules;
▇▇▇▇▇▇▇ - ESL Pro Software License Agreement
Page 16
(d) the place of arbitration shall be ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇;
and the language of the arbitration shall be English.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the date first above written.
ESL PRO SYSTEMS INC.
by its authorized signatory:
-----------------------------------
▇▇▇▇ ▇. ▇▇▇▇, President
▇▇▇▇▇▇▇ INTERNATIONAL TECHNOLOGIES LTD.
by its authorized signatory:
-----------------------------------
▇▇▇ ▇▇▇▇▇▇▇▇, Chairman
▇▇▇▇▇▇▇ INDUSTRIES INC.
by its authorized signatory:
-----------------------------------
▇▇▇ ▇▇▇▇▇, President
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Page 17
SCHEDULE A
THE SOFTWARE AND THE DOCUMENTATION
▇▇▇▇▇▇▇ will deliver to ESL Pro one (1) copy of each of the following:
Software
* ▇▇▇▇▇▇▇ English as a Second Language Program - Level One (in Source Code
Form)
* Digifusion (in Source Code Form)
* Dr Boz (in Source Code Form)
* Bozinput (in Source Code Form)
* ▇▇▇▇▇▇▇ Picture Dictionary (in Source Code Form)
* ▇▇▇▇▇▇▇ keyboard firmware (in Source Code Form)
Documentation
* ▇▇▇▇▇▇▇ ESL Program - Level One -- Online Users Guide (Windows HLP file)
* ▇▇▇▇▇▇▇ ESL Program - Level One - Users Guide (Word file)
* Product Evaluations & Government Studies (Word file)
* TV Documentary footage * Newspaper articles
* Radio Interviews * other Marketing Materials
* ▇▇▇▇▇▇▇ keyboard mold (for plastic top keyboard case)
The Software and the Documentation shall include any related technology not
specifically outlined in this schedule.
----------------------------------------------------------------------
The Software and Documentation has been accepted by ESL Pro as of the date set
out below.
ESL PRO SYSTEMS INC.
by its authorized signatory:
------------------------------------ ----------------
▇▇▇▇ ▇. ▇▇▇▇, President Date
-A-1-
SCHEDULE B
ROYALTY SCHEDULE
ESL Pro will pay to ▇▇▇▇▇▇▇ a royalty equal to five percent (5%) of the gross
dollar amounts received by ESL Pro for licensing the Software and the
Documentation and the Derived Works, which contain Software, in the Market. ESL
Pro shall have no obligation to pay royalties in respect of Software and
Documentation for which it does not receive monetary consideration, if such
Software and the Documentation and the Derived Works was given away as: (i)
promotional copies; (ii) demonstration copies; or (iii) for co-operative
advertising, and such Software or Documentation or Derived Works was given away
for the purpose of generating future revenues.
As an advance against the royalties due each year, ESL Pro will pay to ▇▇▇▇▇▇▇ a
minimum royalty, equal to $80,000 in the 1st year and five months ending
September 30, 1999, $95,000 in the 3rd year, $150,000 in the 4th year. In each
of year 5 through year 10, the minimum royalty will be ten (10%) percent greater
than in the previous year. For each year of each subsequent Renewal Term, the
minimum royalty will be five (5%) percent greater than in the previous year.
The minimum royalties paid by ESL Pro to ▇▇▇▇▇▇▇ in respect of any year will be
considered an advance against royalties payable by ESL Pro for such year and
will be credited against such royalties.
ESL Pro will pay to ▇▇▇▇▇▇▇ the royalties as per the following schedule:
Term Year Description Date Amount
---- ---- ----------- ---- ------
1 1 Quarterly Royalty Fee summary & payment 06/30/1998 *
1 Quarterly Royalty Fee summary & payment 09/30/1998 *
1 2 Minimum Royalty Fee payment 10/31/1998 $80,000
1 2 Quarterly Royalty Fee summary & payment 12/31/1998 *
1 2 Quarterly Royalty Fee summary & payment 03/31/1999 *
1 2 Minimum Royalty Fee payment 04/01/1999 *
1 2 Quarterly Royalty Fee summary & payment 06/30/1999 *
1 2 Quarterly Royalty Fee summary & payment 09/30/1999 *
1 3 Minimum Royalty Fee payment 10/01/1999 $45,000
1 3 Quarterly Royalty Fee summary & payment 12/31/1999 *
1 3 Quarterly Royalty Fee summary & payment 03/31/2000 *
1 3 Minimum Royalty Fee payment 04/01/2000 $50,000
1 3 Quarterly Royalty Fee summary & payment 06/30/2000 *
1 3 Quarterly Royalty Fee summary & payment 09/30/2000 *
1 4 Minimum Royalty Fee payment 10/01/2000 $75,000
1 4 Quarterly Royalty Fee summary & payment 12/31/2000 *
1 4 Quarterly Royalty Fee summary & payment 03/31/2001 *
1 4 Minimum Royalty Fee payment 04/01/2001 $75,000
1 4 Quarterly Royalty Fee summary & payment 06/30/2001 *
1 4 Quarterly Royalty Fee summary & payment 09/30/2001 *
1 5 Minimum Royalty Fee payment 10/01/2001 *
-B-1-
Term Year Description Date Amount
---- ---- ----------- ---- ------
1 5 Quarterly Royalty Fee summary & payment 12/31/2001 *
1 5 Quarterly Royalty Fee summary & payment 03/31/2002 *
1 5 Minimum Royalty Fee payment 04/01/2002 $82,500
1 5 Quarterly Royalty Fee summary & payment 06/30/2002 *
1 5 Quarterly Royalty Fee summary & payment 09/30/2002 *
1 6 Minimum Royalty Fee payment 10/01/2002 $90,750
1 6 Quarterly Royalty Fee summary & payment 12/31/2002 *
1 6 Quarterly Royalty Fee summary & payment 03/31/2003 *
1 6 Minimum Royalty Fee payment 04/01/2003 $90,750
1 6 Quarterly Royalty Fee summary & payment 06/30/2003 *
1 6 Quarterly Royalty Fee summary & payment 09/30/2003 *
1 7 Minimum Royalty Fee payment 10/01/2003 $99,825
1 7 Quarterly Royalty Fee summary & payment 12/31/2003 *
1 7 Quarterly Royalty Fee summary & payment 03/31/2004 *
1 7 Minimum Royalty Fee payment 04/01/2004 $99,825
1 7 Quarterly Royalty Fee summary & payment 06/3012004 *
1 7 Quarterly Royalty Fee summary & payment 09/30/2004 *
1 8 Minimum Royalty Fee payment 10/01/2004 $109,808
1 8 Quarterly Royalty Fee summary & payment 12/31/2004 *
1 8 Quarterly Royalty Fee summary & payment 03/31/2005 *
1 8 Minimum Royalty Fee payment 04/01/2005 $109,808
1 8 Quarterly Royalty Fee summary & payment 06/30/2005 *
1 8 Quarterly Royalty Fee summary & payment 09/30/2005 *
1 9 Minimum Royalty Fee payment 10/01/2005 $120,788
1 9 Quarterly Royalty Fee summary & payment 12/31/2005 *
1 9 Quarterly Royalty Fee summary & payment 03/31/2006 *
1 9 Minimum Royalty Fee payment 04/01/2006 $120,788
1 9 Quarterly Royalty Fee summary & payment 06/30/2006 *
1 9 Quarterly Royalty Fee summary & payment 09/30/2006 *
1 10 Minimum Royalty Fee payment 10/01/2006 $132,867
1 10 Quarterly Royalty Fee summary & payment 12/31/2006 *
1 10 Quarterly Royalty Fee summary & payment 03/31/2007 *
1 10 Minimum Royalty Fee payment 04/01/2007 $132,867
1 10 Quarterly Royalty Fee summary & payment 06/30/2007 *
1 10 Quarterly Royalty Fee summary & payment 09/30/2007 *
2 1 Minimum Royalty Fee payment 10/01/2007 $139,510
2 1 Quarterly Royalty Fee summary & payment 12/31/2007 *
2 1 Quarterly Royalty Fee summary & payment 03/31/2008 *
2 1 Minimum Royalty Fee payment 04/01/2008 $139,510
2 1 Quarterly Royalty Fee summary & payment 06/30/2008 *
2 1 Quarterly Royalty Fee summary & payment 09/30/2008 *
This payment schedule will continue through the Initial Term of the Agreement
and through subsequent Renewal Terms.
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-B-2-