EXHIBIT 10.18
INTELLECTUAL PROPERTY LICENSE AGREEMENT
BETWEEN
INTELLI-CHECK, INC.
AND
CARDCOM, INC.
EFFECTIVE AS OF MARCH 12, 2003
RELATING TO AGE VERIFICATION PRODUCTS
INTELLI-CHECK - CARDCOM
PATENT LICENSE AGREEMENT
TABLE OF CONTENTS
ARTICLE I - GRANTS OF LICENSES
1.01 Grant
1.02 Duration
1.03 Publicity
ARTICLE II - ROYALTY AND PAYMENTS
2.01 Royalty Calculation
2.02 Accrual
2.03 Records and Adjustments
2.04 Reports and Payments
ARTICLE III - TERMINATION
3.01 Breach
3.02 Voluntary Termination
3.03 Survival
ARTICLE IV - MISCELLANEOUS PROVISIONS
4.01 Disclaimer
4.02 Nonassignability
4.03 Addresses
4.04 Taxes
4.05 Choice of Law
4.06 Integration
4.07 Releases
4.08 Acknowledgment of Validity
4.09 Counterparts
DEFINITIONS APPENDIX
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INTELLECTUAL PROPERTY LICENSE AGREEMENT
Effective as of March 12, 2003, Intelli-Check Inc., a Delaware corporation,
("INTELLI-CHECK"), having an office at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ and Cardcom, Inc., a California corporation ("the CORPORATION"),
having an office at ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ agree as
follows*:
ARTICLE I
GRANTS OF LICENSES
1.01 GRANT
(a) INTELLI-CHECK grants to the CORPORATION under INTELLI-CHECK's PATENTS
personal, nonexclusive and nontransferable licenses to make, have made, use,
sell, offer to sell, lease and import AGE VERIFICATION PRODUCTS in THE
TERRITORY.
(b) The licenses granted in this Section 1.01 extend only to AGE VERIFICATION
products and not to other products.
1.02 DURATION
All licenses granted herein shall commence on the effective date and continue
for the LICENSE PERIOD. At the expiration of the LICENSE PERIOD, all licenses
granted herein shall terminate. Notwithstanding the foregoing, if the
CORPORATION desires that the licenses granted herein continue after the
expiration of the LICENSE PERIOD, the CORPORATION shall notify INTELLI-CHECK in
writing of this desire at least ninety (90) days prior to the end of the LICENSE
PERIOD. Upon receiving such notice, the parties agree to enter into good faith
negotiations for the terms and conditions of a "New Agreement" which would be
effective upon the expiration of the LICENSE PERIOD and under which the licenses
and rights granted by INTELLI-CHECK to the CORPORATION herein would continue.
However, it is understood that all negotiations relative to this New Agreement
shall be concluded by the end of the LICENSE PERIOD and INTELLI-CHECK shall have
no obligations to continue negotiations with the CORPORATION after the end of
the LICENSE PERIOD.
-----------------------
*ANY TERM IN CAPITAL LETTERS WHICH IS DEFINED IN THE DEFINITIONS APPENDIX SHALL
HAVE THE MEANING SPECIFIED THEREIN.
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INTELLI-CHECK - CARDCOM
1.03 PUBLICITY
Nothing in this Agreement shall be construed as conferring upon the CORPORATION
any right to include in advertising, packaging or other commercial activities
related to any product or service, any reference to INTELLI-CHECK, its trade
names, trademarks or service marks in a manner which would be likely to cause
confusion or to indicate that such product or service is in any way certified by
INTELLI-CHECK.
Upon EXECUTION, the CORPORATION agrees to cease all advertisements that state or
imply that any of its products provide document verification, or document
authentication, or the like. It shall be permissible for the CORPORATION to
advertise that any product provides age verification so long as such
advertisement does not claim that such product provides document verification or
document authentication.
ARTICLE II
ROYALTY AND PAYMENTS
2.01 ROYALTY CALCULATION
(a) In consideration of the rights granted herein under Section 1.01, the
CORPORATION agrees to pay INTELLI-CHECK a royalty equal to the lesser of:
(i) ten percent (10%) applied to the NET SALES PRICE of each AGE
VERIFICATION PRODUCT which is sold, leased or put into use by the CORPORATION.
(ii) One hundred and thirty-five United States dollars (U.S. $135.00)
for each AGE VERIFICATION PRODUCT which is sold, leased or put into use by the
CORPORATION.
(b) In further consideration of the licenses and rights granted in this
Agreement, the CORPORATION agrees to provide contract manufacturing and product
development for INTELLI-CHECK under terms and conditions to be incorporated in a
written "Contract Manufacturing Agreement". This written Contract Manufacturing
Agreement shall include a provision allowing for termination in the event of a
material breach and further including "notice and cure provisions" The notice
provision shall provide that if a party considers the other party to be in
material breach of its obligations under the Contract Manufacturing Agreement,
such party ("the notifying party") shall inform the other party of this position
in a writing which shall specify the nature of the breach. The cure provision
shall then give such other party a period of not less than forty-five (45) days
from the date of the notice to cure the breach and if the breach is not cured
within the forty-five day
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period, the notifying party may hold the other party to be in default of its
obligations under the Contract Manufacturing Agreement. Any such manufacturing
and/or product development shall arise only upon INTELLI-CHECK's election, such
election being communicated in writing to the CORPORATION. INTELLI-CHECK shall
have no liability to the CORPORATION if INTELLI-CHECK decides not to use the
CORPORATION for contract manufacturing and/or product development.
2.02 ACCRUAL
(a) Royalty shall accrue on any AGE VERIFICATION PRODUCT upon its manufacture
and shall become payable upon the first sale, lease or putting into use of such
product. (Rebuilding or enlarging any product, but not repair, shall be deemed
to be a first putting into use of such product Repair of an AGE VERIFICATION
PRODUCT is the replacement of a worn out or broken part in such product or the
replacement of this entire product such that (i) there is no change in the
functionality or capability of the product from that originally provided by the
CORPORATION and (ii) there is no charge for such service other than shipping
and/or taxes. Rebuilding or enlarging of an AGE VERIFICATION PRODUCT is a change
to such product other than repair.) Obligations to pay accrued royalties shall
survive termination of licenses and rights pursuant to Article III.
(b) Notwithstanding any other provisions hereunder, royalty shall accrue and be
payable only to the extent that enforcement of the CORPORATION's obligation to
pay such royalty would not be prohibited by applicable law.
2.03 RECORDS AND ADJUSTMENTS
The CORPORATION shall keep full, clear and accurate records with respect to all
AGE VERIFICATION PRODUCTS and shall furnish any information which INTELLI-CHECK
may reasonably prescribe from time to time to enable INTELLI-CHECK to ascertain
the proper royalty due hereunder on account of products sold, leased and put
into use by the CORPORATION. The CORPORATION shall retain such records with
respect to each AGE VERIFICATION PRODUCT for at least five (5) years from the
sale, lease or putting into use of such product. After 14 days' notice,
INTELLI-CHECK shall have the right through its accredited auditors to make an
examination, during normal business hours, of all records and accounts bearing
upon the amount of royalty payable to it hereunder. Prompt adjustment shall be
made to compensate for any errors or omissions disclosed by such examination.
All documents, materials and information provided by the CORPORATION to the
auditors shall be kept confidential. INTELLI-CHECK will pay for the costs of any
audit unless such audit reveals underpayment by the CORPORATION of ten percent
(10%) or more, in which case the CORPORATION shall reimburse INTELLI-CHECK for
the costs of any audit.
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2.04 REPORTS AND PAYMENTS
(a) Within fifteen (15) days after the end of each quarter ending on March 31st,
June 30th, September 30th and December 31st of each calendar year, beginning
with the quarter in which this Agreement is executed by the CORPORATION, the
CORPORATION shall furnish to INTELLI-CHECK at the address specified in Section
4.03 a statement certified by a responsible official of the CORPORATION showing
in a reasonable manner:
(i) all AGE VERIFICATION PRODUCTS which were sold, leased or put into
use during such quarter;
(ii) the NET SALES PRICE of each such product; and
(iii) the amount of royalty payable thereon.
If no AGE VERIFICATION PRODUCT has been so sold, leased or put into use, the
statement shall show that fact. The first quarterly report shall include an
accounting and royalties for AGE VERIFICATION PRODUCTS in that quarter as well
as an accounting and royalty payment for such products from the effective date
of this Agreement to the beginning of that quarter. All such statements shall be
kept confidential.
(b) No later than fifteen (15) days after the end of each quarter, the
CORPORATION shall pay in United States dollars to INTELLI-CHECK at the address
specified in Section 4.03 the royalties payable in accordance with such
statement.
(c) Overdue payments hereunder shall be subject to a late payment charge
calculated at an annual rate of three percentage points (3%) over the prime rate
or successive prime rates (as posted in New York City) during delinquency. If
the amount of such late payment charge exceeds the maximum permitted by law,
such charge shall be reduced to such maximum.
ARTICLE III
TERMINATION
3.01 BREACH
(a) In the event of a material breach of this Agreement by the CORPORATION,
INTELLI-CHECK may, in addition to any other remedies that it may have, at any
time terminate all licenses and rights granted by it hereunder by not less than
one (1) month's written notice specifying such breach, unless within the period
of such notice all breaches specified therein shall have been remedied. If a
written
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Contract Manufacturing Agreement, as referenced in Section 2.01(b) is executed
by both parties and the CORPORATION then materially breaches any of its
obligations under the Contract Manufacturing Agreement, then INTELLI-CHECK, at
its sole option, shall have the right to terminate all licenses and rights that
it has granted to the CORPORATION under this Agreement.
(b) In the event of any material breach of this Agreement by INTELLI-CHECK or of
any loss or injury to the CORPORATION arising out of this Agreement, for which
INTELLI-CHECK is liable to the CORPORATION, INTELLI-CHECK's total cumulative
liability to the CORPORATION for all such breaches, losses and injuries shall be
the lesser of (i) the actual value of the injury or loss to the CORPORATION or
(ii) the total royalties paid to INTELLI-CHECK.
3.02 VOLUNTARY TERMINATION
Upon EXECUTION, the CORPORATION shall have no right to voluntarily terminate its
licenses and rights under this Agreement unless:
(i) all claims of U.S. Patent No. 6,463,416 are declared to be invalid
by a final judgment of a U.S. Federal Court; or
(ii) this Agreement is not terminated by INTELLI-CHECK pursuant to the
provisions of this Agreement and nevertheless INTELLI-CHECK brings suit against
the CORPORATION alleging infringement of INTELLI-CHECK'S PATENTS during the
LICENSE PERIOD.
3.03 SURVIVAL
Any termination of licenses and rights of the CORPORATION under the provisions
of this Article III shall not affect the CORPORATION's licenses, rights and
obligations with respect to any AGE VERIFICATION PRODUCT made prior to such
termination.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.01 DISCLAIMER
INTELLI-CHECK MAKES NO REPRESENTATIONS, EXTENDS ANY WARRANTIES OF ANY KIND,
ASSUMES ANY RESPONSIBILITY OR OBLIGATIONS WHATEVER, OR CONFERS ANY RIGHT BY
IMPLICATION, ESTOPPEL OR OTHERWISE, OTHER THAN THE LICENSES AND RIGHTS HEREIN
EXPRESSLY GRANTED.
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INTELLI-CHECK - CARDCOM
4.02 NONASSIGNABILITY
(a) INTELLI-CHECK has entered into this Agreement in contemplation of personal
performance by the CORPORATION and it is INTELLI-CHECK's intention that a
transfer of the CORPORATION's licenses or rights not occur without
INTELLI-CHECK's express written consent and any such transfer without
INTELLI-CHECK's written consent shall be null and void. INTELLI-CHECK shall be
under no obligation whatsoever to grant its consent.
(b) The licenses and rights granted by INTELLI-CHECK to the CORPORATION shall
immediately terminate if there is a change in ownership of a majority of the
shares of the CORPORATION at any time during the LICENSE PERIOD.
4.03 ADDRESSES
(a) Any notice or other communication hereunder shall be sufficiently given to
the CORPORATION when sent by certified mail addressed to ▇▇▇▇▇ ▇▇▇▇ at the
CORPORATION's office above specified, or to INTELLI-CHECK addressed to ▇▇
▇▇▇▇▇▇▇ at INTELLI-CHECK's office above specified. Changes in such addresses may
be specified by written notice.
(b) Payments by the CORPORATION shall be made by check to INTELLI-CHECK at its
offices above specified, Attention: ▇▇ ▇▇▇▇▇▇▇. Changes in such address or
account may be specified by written notice.
4.04 TAXES
The CORPORATION shall pay any tax, duty, levy, customs fee, or similar charge
("taxes"), including interest and penalties thereon, however designated, imposed
as a result of the operation or existence of this Agreement except for
INTELLI-CHECK's U.S. income taxes (both federal and state). The provisions of
Section 4.04 shall only apply to the CORPORATION's business activities.
4.05 CHOICE OF LAW AND VENUE
The parties are familiar with the principles of New York commercial law, and
desire and agree that the law of New York shall apply in any dispute arising
with respect to this Agreement. Further, any proceeding brought by either party
arising from this agreement shall be venued in New York City.
4.06 INTEGRATION
This Agreement sets forth the entire agreement and understanding between the
parties as to the subject matter hereof and merges all prior discussions between
them. Neither of the parties shall be bound by any warranties, understandings or
representations with respect to such subject matter other than as expressly
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INTELLI-CHECK - CARDCOM
provided herein or in a writing signed with or subsequent to execution hereof by
an authorized representative of the party to be bound thereby.
4.07 RELEASES
Effective upon EXECUTION, INTELLI-CHECK hereby releases the CORPORATION,
including its officers, employees and shareholders, and all customers
(purchasers and users), suppliers and distributors of products of the kinds
herein licensed as of the effective date hereof to the CORPORATION, from all
claims, demands and rights of action which INTELLI-CHECK may have on account of
any infringement or alleged infringement of the patents licensed herein by
reason of the manufacture or any past or future use, lease, sale, offer to sell
or importation of any of such products which, prior to the effective date
hereof, were made, sold, used, offered for sale, leased or imported by the
CORPORATION. Effective upon EXECUTION, the CORPORATION hereby releases
INTELLI-CHECK, including its officers, employees and shareholders, and all
customers (purchasers and users), suppliers and distributors of any product or
service used or furnished by INTELLI-CHECK, from all claims, demands and rights
of action which the CORPORATION may have on account of any infringement or
alleged infringement of any patent by reason of the manufacture or any past or
future use, lease, sale, offer to sell or importation of any of product or
service, which, prior to the effective date hereof, were used or furnished by
INTELLI-CHECK.
4.08 ACKNOWLEDGMENT OF VALIDITY
The CORPORATION hereby expressly acknowledges in all respects the validity and
enforceability of INTELLI-CHECK's PATENTS and the CORPORATION's obligations to
pay royalties as specified herein for the LICENSE PERIOD shall continue
notwithstanding the fact that INTELLI-CHECK's PATENTS are held invalid and/or
unenforceable in any proceeding after EXECUTION, except that the CORPORATION's
royalty obligations shall terminate if the CORPORATION's licenses and rights are
terminated in accordance with Section 3.02. The CORPORATION also agrees that it
shall not in any way challenge, or assist others in challenging, the validity or
enforceability of INTELLI-CHECK's PATENTS. The provisions of this Section 4.09
shall survive (i) any termination of the licenses and rights granted under this
Agreement as provided for in this Agreement or (ii) the expiration of the
LICENSE PERIOD.
4.09 COUNTERPARTS.
This Agreement may be executed in multiple counterparts, each of which shall be
deemed an original but all of which together shall constitute one and the same
instrument.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be executed
in duplicate originals by its duly authorized representatives on the respective
dates entered below.
INTELLI-CHECK, INC.
By:
--------------------------------------------------------------
Title: CHAIRMAN - CEO
-----------------------------------------------------------
Date: 6/19/2003
------------------------------------------------------------
CARDCOM, INC.
By:
--------------------------------------------------------------
Title: PRESIDENT
-----------------------------------------------------------
Date: 6/19/2003
------------------------------------------------------------
THIS AGREEMENT DOES NOT BIND OR OBLIGATE EITHER PARTY
IN ANY MANNER UNLESS DULY EXECUTED BY AUTHORIZED
REPRESENTATIVES OF BOTH PARTIES.
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INTELLI-CHECK - CARDCOM
DEFINITIONS APPENDIX
GENERAL DEFINITIONS:
AGE VERIFICATION PRODUCTS means any product that reads information on a
document, such information being in human recognizable and/or machine readable
form, and then performs an age calculation based on the information read. AGE
VERIFICATION PRODUCTS may provide additional functionality but in no event shall
such products include DOCUMENT VERIFICATION OR AUTHENTICATION PRODUCTS. In
addition to the foregoing, AGE VERIFICATION PRODUCTS may provide the following
functions (i) calculate a checksum on all three tracks of any examined document
for the purpose of verifying that the magnetic track data bits have been
correctly inputted, (ii) read the Issuer Identification Number or "IIN" or other
jurisdiction identifying data from any document and (iii) determine the total
number of bytes on a bar code or on track 2 of a document having a magnetic
stripe, provided that (ii) and (iii) are used for the purpose of age
verification and not document verification. The term "product" in this
definition is not limited to form and includes, but is not limited to, hardware,
software, firmware, and any combination of the foregoing. An AGE VERIFICATION
PRODUCT may be embodied in either a unitary structure or a combination of
separate structures. Further, for purposes of calculating royalties under this
Agreement, AGE VERIFICATION PRODUCTS includes any attachment or ancillary
device, product, or system intended for connection or use with one or more AGE
VERIFICATION PRODUCTS.
DOCUMENT VERIFICATION OR AUTHENTICATION PRODUCTS means any product that reads
information on a document, such information being in human recognizable and/or
machine readable form, and makes a determination of whether the document is
valid or authentic. A DOCUMENT VERIFICATION OR AUTHENTICATION PRODUCT may
provide additional functionality and may encompass an AGE VERIFICATION PRODUCT.
EXECUTION means the date the last party signs this Agreement.
INTELLI-CHECK'S PATENTS means U.S. Patent No. 6,463,416 ("the `416 Patent") and
any parent application and any continuation, continuation-in-part, divisional,
reissue of the `416 Patent and all foreign counterparts of any of the foregoing.
The inclusion of patents other than the `416 Patent in the definition of
INTELLI-CHECK's PATENTS are only to the extent that such other patents have
claims that cover AGE VERIFICATION PRODUCTS, there being no intent to grant any
licenses to the CORPORATION with respect to DOCUMENT VERIFICATION or
AUTHENTICATION PRODUCTS.
LICENSE PERIOD means a period of three (3) years commencing on the effective
date of this Agreement.
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NET SALES PRICE means, with respect to any AGE VERIFICATION PRODUCT that is
made, have made, sold, offered for sale, leased or put into use in The
TERRITORY, the price received by the CORPORATION for each such product in the
form in which it is provided by the CORPORATION, whether or not assembled (and
without excluding therefrom any components or subassemblies thereof which are
included in such price). In determining "price" the following shall be excluded:
(a) usual trade discounts actually allowed to unaffiliated
persons or entities;
(b) costs of insurance and shipping costs; and
(c) export, sales and value added taxes, and customs duties.
Notwithstanding the foregoing, in the event that the purchasing or leasing of
any AGE VERIFICATION PRODUCT is from the CORPORATION to an "affiliated entity",
such entity being either an individual or a company, such that the transaction
is not an "arm's length" business transaction, NET SALES PRICE shall be the
greater of (i) the price as set forth in the preceding provisions of this
definition and (ii) that price which the CORPORATION would have realized from an
unaffiliated entity in an arm's length transaction of an identical item in the
same quantity and at the same time and place as the transaction to an affiliated
entity. Examples of affiliated entities include, but are not limited to, those
entities which are family members or personal friends of any officer or Director
of the Corporation or companies, regardless of form, in which any such persons
directly or indirectly own or control a substantial equitable interest as well
as those transactions in which AGE VERIFICATION PRODUCTS are provided for other
than money or money in combination with returned products or services.
INTELLI-CHECK, pursuant to Section 2.03, shall have the right to investigate
those transactions that it believes are to an "affiliated" entity".
THE TERRITORY means the United States of America and Canada.
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