LIMITED EXCLUSIVE PATENT LICENSE AGREEMENT BETWEEN DOCUMENT SECURITY SYSTEMS, INC. AND ERGONOMIC GROUP, INC.
BETWEEN
DOCUMENT
SECURITY SYSTEMS, INC.
AND
ERGONOMIC
GROUP, INC.
This
Agreement is effective as of December 29, 2006 between DOCUMENT SECURITY
SYSTEMS, INC. (“Licensor” or “DSS”), a corporation organized and existing under
the laws of the State of New York with its principal address at First Federal
Plaza, Suite 1525, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ and ERGONOMIC
GROUP, INC. (“Licensee” or “Ergonomic”), a corporation organized and existing
under the laws of the
State
of New York with its principal address at
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇.
Licensor and Licensee may also be referred to herein individually as a “Party”
and together as the
“Parties.”
RECITALS
WHEREAS,
Licensor is engaged in the business of designing and developing systems and
products relating to security printing and document anti-counterfeiting and
has
acquired and developed substantial patented and patent pending technology and
know-how for creating encoded images useful in security printing and document
anti-counterfeiting; and
WHEREAS,
Licensee wishes to acquire, and Licensor is willing to grant an
exclusive, limited license to employ Licensor’s Technology (as
defined below) in a Licensed Field (as defined below) upon the terms and
conditions contained herein.
NOW,
THEREFORE, in consideration of the promises and the mutual covenants of this
Agreement, the parties hereby agree as follows:
AGREEMENT
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1.
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Definitions
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1.1
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“Agreement”
shall have the meaning ascribed in the first paragraph of this
Agreement.
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1.2
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“Affiliate”
shall mean any corporation, partnership or limited liability company
of
which more than 50% of the voting control and economic ownership
is owned,
directly, or indirectly, by a
Party
or
under common control of any
Party.
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1.3
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“Approved
Sub-Licensee”
shall mean the companies which have been approved in writing by Licensor
and have executed an AuthentiGuard Technology Sublicense
Agreement.
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1.4
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“AuthentiGuard
Pantograph 4000” shall
mean the technology which creates pantograph backgrounds embedding
hidden
symbols, words and designs into the printed document background that
appear when the document is copied using industry standard copiers
and computer publishing systems and currently marketed by Licensor
under
the trade
name“AuthentiGuard
Pantograph 4000™.”
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1.5
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“Calendar
Quarter”
shall mean a three (3) month period denoting the time span over which
royalties are to be calculated and paid (pro
rated
for any partial period(s)).
The first Calendar Quarter commences on the Effective Date of this
Agreement. Subsequent Calendar Quarters shall begin on the first
day
following the end of the previous Calendar Quarter (i.e., if the
Effective
Date is February
15, 2007,
the first Calendar Quarter would end March 30, 2007 and the second
Calendar Quarter would begin April 1,
2007.)
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1.6
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“Calendar
Year”
shall mean each period of four (4) Calendar Quarters during the Term,
commencing on the Effective Date.
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1.7
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“Claims”
shall have
the meaning ascribed in Section 10.1
below.
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1.8
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“Copies”
shall have
the meaning ascribed in Section 8.4
below.
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1.9
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“Confidential
Information”
shall mean any information furnished or made available on a paper,
electronic or mechanical medium by one Party to another Party
that
(a) is designated by a Party on the medium as confidential, proprietary,
a
trade secret or with a similar designation; (b)
relates to past, present or future research, developments, improvements,
inventions, processes, software, programs, Intellectual Property,
techniques, designs or other technical data, contact lists or other
compilations for marketing or development, or regarding administrative,
management, financial or marketing activities of the Party disclosing
such
information or regarding the identities of customers of the Party
disclosing such information;
and (c) relates to the subject matter of this
Agreement.
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1.10
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“Digital
File”
shall mean any executable code owned and delivered by Licensor
for
use by Licensee in connection with the Technology (as defined hereinbelow)
to enable the placement of security features in Licensed
Products.
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1.11
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“Disclosing
Party”
shall have the meaning ascribed
in
Section 8.1
below.
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1.12
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“DSS”
shall have the meaning ascribed in the first paragraph of this
Agreement.
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1.13
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“Effective
Date”
shall mean the date set forth in the first paragraph of this
Agreement.
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1.14
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“Gross
Margin”
shall mean the invoiced amount of a product or service, less the
direct,
unburdened cost of goods sold; allowances and discounts actually
credited;
taxes, tariffs and import/export duties (but not value-added taxes
assessed on income derived from sales); and commissions paid to
independent sales entities that are not in the employ or under the
control
of Licensee. Installation and set-up fees charged to a customer by
Licensee shall not be included in Gross
Margin.
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1.15
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“Improvements”
shall have the meaning ascribed in Section 4.1
below.
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1.16
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“Initial
Term”
shall have
the meaning ascribed in Section 13.1
below.
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1.17
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“Intellectual
Property” shall
mean, wherever existing in the world, (i) patents, whether in the
form of
utility patents, design patents or industrial designs, and all pending
applications thereof; (ii) trademarks, trade names, service marks,
domain
names, designs, logos, trade dress and trade styles, whether or not
registered, and all pending applications for registration thereof;
(iii)
copyrights, whether or not registered, and all pending applications
for
registration thereof; (iv) know-how, inventions, improvements, methods,
processes, operations manuals and procedures, research records, trade
secrets, confidential information, product designs, engineering
specifications and drawings, technical information, formulas, customer
lists, supplier lists and market analyses; (v) computer software
and
programs, and related flow charts, programmer notes, documentation,
updates, and data, whether in object or source code form; and (vi)
all
other similar proprietary rights, whether or not
registered.
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2
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1.18
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“Licensed
Field”
shall mean all implementations of the
Technology (as subsequently defined herein) which involve the transmission
of a file on the Internet or by any other electronic means of
communication, which file is printed or viewed on a monitor after
transmission.
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1.19
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“Licensed
Patents”
shall mean the
patents and patent applications listed on Exhibit A, and all other
present
and future United States and foreign patents owned by Licensor or
under
which Licensor has rights that protect inventions that are useful
in the
Licensed Field.
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1.20
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“Licensed
Products” shall
mean products
and services in
the Licensed Field that incorporate the Technology and/or are covered
by
the Licensed Patents.
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1.21
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“Licensee”
shall have the meaning ascribed in the first paragraph of this
Agreement.
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1.22
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“Licensee
Indemnified Parties”
shall have
the meaning ascribed in Section 9.1
below.
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1.23
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“Licensor”
shall have the meaning ascribed in the first paragraph of this
Agreement.
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1.24
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“Licensor
Indemnified Parties”
shall have
the meaning ascribed in Section 10.1
below.
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| 1.25 |
“Receiving
Party”
shall
have
the meaning ascribed in Section 8.1.
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1.26
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“Renewal
Term”
shall have
the meaning ascribed in Section 13.1
below.
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| 1.27 |
“Royalty
Fee”
shall have
the meaning ascribed in Section 6.1
below.
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1.28
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“Sales
Report”
shall have
the meaning ascribed in Section 7.1
below.
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1.29
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“Technology”
shall mean (i) AuthentiGuard Pantograph
4000, AuthentiGuard Survivor
21, and all other AuthentiGuard™ technologies
including, without limitation, AuthentiGuard Prism, AuthentiGuard
Block-Out, AuthentiGuard Laser Moiré, and all Improvements thereon
developed and owned by Licensor, (ii) all Digital Files now and in
the
future owned by
or under license to
Licensor,
and all Improvements thereon developed and owned by Licensor;
and (iii) all
specialized, novel or unique techniques, practices, inventions, digitized
formats, improvements, drawings, computer imaging, computer generated
step
and repeat, discoveries, know-how, trade secrets, and all related
knowledge, skill, experience, technical and other proprietary information
and data and other Intellectual Property now or in the future owned
by or
under license to Licensor
that are used to secure documents and files and to thwart counterfeiting,
all of which Licensee acknowledges to be proprietary and valuable
trade
secrets of Licensor.
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3
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1.30
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“Target
Markets”
shall mean each of (a) the high technology industry, (b) the aerospace
industry, (c) the financial industry and (d) the healthcare industry,
and
such other industries as the Parties shall mutually agree in
writing.
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1.31
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“Technology
Marks”
shall mean Licensor’s
trademarks
and service marks which identify Licensor as the source of the
Technology.
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1.32
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“Term” shall
have
the meaning ascribed in Section 13.1
below.
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1.33
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“Territory”
shall mean the
entire world including but not limited to the
United States of America.
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2.
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Grant
of Licenses
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2.1
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Grant
of Licenses. Licensor
hereby grants to Licensee for the Term (as defined in Section 13.1)
and in
the Territory an exclusive,
non-transferable license
to use the Technology and the Licensed Patents in the Licensed Field
to be
sold by Licensee to its customers in the Target Markets. Licensee
shall
have no other rights to
any software, technology, know-how or other Intellectual Property
related
to the production
of Technology,
implied or express,
except as expressly provided in this Agreement.
Under this Agreement, Licensee is not given the right to manufacture,
market or sell, directly or indirectly, or the right or power to
license
to any other person the right to manufacture,
market or sell, directly or indirectly, blank safety paper which
utilizes
the Technology. For purposes hereof, the term “blank safety paper” means
paper which does not have customer specific information AND does
not have
visible
color
such as words, symbols, borders, artwork
or similar features. Licensee understands and agrees that it shall
not
have the right to print “generic” or “blank safety paper” under
this Agreement.
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2.2
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Proprietary
Rights.
Except as expressly set forth in this Agreement, all rights or licenses
with respect to the Technology (including any Improvements or
modifications to the Technology made by Licensor), Technology Marks,
Licensor Confidential or Proprietary Information or other know-how
and
Intellectual Property of Licensor are reserved to Licensor.
Licensee acknowledges that the Technology contains substantial trade
secrets of Licensor, and Licensee agrees to employ reasonable security
precautions to maintain the confidentiality of such trade
secrets.
Except as otherwise provided herein,
Licensee shall
not knowingly
assist any third party
to
reverse engineer
or
assemble,
produce, use, license, sell or otherwise distribute or exploit the
Technology
or
Intellectual Property derived therefrom or
bypass or defeat protection methods for
preventing unauthorized access to the Technology. Notwithstanding
the foregoing, for purposes of this Section 2.3, Licensee shall not
be in
violation of the restrictions provided herein in connection with
the sale
of Licensed Products to customers otherwise in compliance with this
Agreement.
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3.
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Distribution
of Technology
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3.1
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Distribution
of Technology.
Licensee may only distribute the Technology to its customers as the
Technology is embedded in Licensed Products prepared by Licensee
for a
customer of Licensee in the Target Markets.
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3.2
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Sublicense
Agreements with
Approved Sub-Licensees. Licensee
shall have the right to enter
into sub-license
agreements only
with Approved Sub-Licensees, granting
to
such Approved Sub-Licensees all
rights, interest and licenses (except
the right to further sub-license, which is explicitly not granted
to
Approved Sub-Licensees) granted
by Licensor to Licensee under this Agreement.
Licensee shall provide Licensor with true and correct complete copies
of
all Sublicense
Agreements and shall, on an annual basis, provide Licensor with a
list of
all Sublicense
Agreements entered into by Licensee, which list shall be certified
by an
officer of Licensee. Notwithstanding
anything to the contrary herein, Licensee shall ensure that each
Sublicense
Agreement shall contain the terms set forth in this Agreement for
the
protection of Licensor. FURTHER, LICENSOR SHALL HAVE, AT ITS OPTION
AND IN
ITS SOLE DISCRETION, THE RIGHT TO PRE-APPROVE OR REJECT ANY SUB-LICENSEE
AND THE TERMS OF ANY SUB-LICENSE AGREEMENT. LICENSEE SHALL PROVIDE
COPIES
OF ALL SUBLICENSE
AGREEMENTS TO LICENSOR PRIOR TO LICENSEE’S EXECUTION OF SUCH SUB-LICENSE
AGREEMENT. ANY SUB-LICENSE AGREEMENT NOT APPROVED BY LICENSOR SHALL
BE
NULL AND VOID.
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4
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3.3
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Patent
Marking.
Licensee hereby agrees to use reasonable commercial efforts to ▇▇▇▇,
without charge to Licensor,
all Licensed Products made under the terms and conditions of this
Agreement with (a) a suitable legend in accordance with statutory
requirements in a form approved in advance by the Licensor indicating
that
the Licensed
Products
contain Technology licensed under specified patents; and (b) any
other
warning labels or other markings as may be reasonably requested by
the
Licensor
from time to time during the Term. Should
the Licensor believe that any Licensed
Product
of the Licensee
should be marked in accordance with this Agreement, the Licensor
shall
inform the Licensee in writing, particularly identifying such Licensed
Products
and the specific patents which are contained in such Licensed
Products.
However, Licensee shall not be required to ▇▇▇▇ Licensed Products
with a
degree of care beyond that exercised by Licensor to ▇▇▇▇ its own
products.
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4.
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Improvements
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4.1
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Ownership
of Improvements. During
the Term, each Party shall advise the other of any technical improvements,
modifications or enhancements relating to the Technology created
from time to time and
useful in the Party’s sole discretion to effectively operate the
Technology (collectively
referred to as “Improvements”). All
such Improvements shall be the property of the Party that made the
Improvement. All Improvements made by Licensor shall be included
in the
license grant of paragraph 2.1. All Improvements made by Licensee
shall be
licensed royalty-free to Licensor for its use, and for the use of
any
other licensees that Licensor has, in all fields other than the Licensed
Field during the Term. Improvements that are made jointly by the
parties
shall be owned jointly and equally; however, Licensee shall have
the
exclusive right to use such Improvements in the Licensed Field during
the
Term. Each Party agrees to execute any and all documents requested
by the
other to perfect rights to jointly-made Improvements.
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5.
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Technical
Support; Training and Technology
Services
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5.1
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General
Support Services.
Licensor shall, at no additional charge, provide to Licensee reasonable
assistance and technical support related to the Technology, Improvements
(other than those Improvements owned by Licensee), Technology Marks
and
Confidential Information.
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5.2
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Limitation
on Liability for Support Services.
Except in the event of willful misconduct, in no event shall the
technicians, employees, officers or agents of Licensor or its affiliates
be liable to Licensee for any damages or claims for damages which
may
occur during the provision of Support
Services.
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5
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6.
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Royalty
and Other Fees
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6.1
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Royalty
Fees.
In consideration for the rights and licenses granted herein to
be rendered by Licensor,
Licensee agrees to pay royalties to Licensor as
follows:
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(a)
Prior
to
the execution of this Agreement, Licensee has paid to Licensor a non-refundable
payment of $500,000. Upon execution of this Agreement, Licensee shall pay to
Licensor an additional non-refundable payment of $500,000. These second $500,000
payment shall be deemed as a royalty advance, to be credited against royalty
fees due for sales during the first and any subsequent Terms of this Agreement.
The royalty fees to be paid are
20%
of
Gross Margin for the first $5.0 million in sales during any Term.
30%
of
Gross margin for the second $5.0 million in sales during such Term.
50%
of
Gross Margin for sales above $10.0 million during such Term.
(b) Licensee
shall, concurrent with the delivery of the Sales Report (as defined in Section
7.1 below) for a Calendar Quarter, deliver to Licensor the Royalty Fee payment
in U.S. dollars in full for such Calendar Quarter.
(c) If
Licensor disputes any information contained in a certified report or the amount
of any Royalty Fee payment provided by Licensee, Licensor shall, within
thirty
(30)
business
days from the date of the disputed Sales Report or payment, as the case may
be,
notify Licensee, in writing, concerning the substance of the dispute and
including any supporting documentation related thereto. The Parties agree to
work together in good faith to resolve each dispute. The
receipt or acceptance by Licensor of any Sales Report or Royalty Fee payment
shall not prevent Licensor
from
subsequently challenging, within forty-five (45) days from the date of the
disputed Sales Report or Royalty Fee payment, in accordance with Section 7.2,
the validity or accuracy of such Sales
Report
or
Royalty Fee payment. All
fees
due hereunder are non-refundable (except as expressly provided herein) and
not
contingent on any additional services or products to be provided
hereunder.
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6.2
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Failure
to Pay.
If
Licensee fails to pay any amount owed to Licensor under this Agreement
when such amount is due and payable, Licensee shall also pay Licensor
interest
on
the amount of such under-payment or non-payment at
the rate equal to three quarters of a percent (0.75%) per month,
accruing
from
the due date until paid. Licensor
shall also have the right, at its option, to terminate this Agreement
should Licensee not cure any default within a reasonable time under
the
circumstances. Any
payments received from Licensee, when there is any amount overdue,
shall
be applied first to discharge any such accrued late charges. In addition
to the amounts payable by Licensee as
specified herein or other fees arising
from this Agreement, Licensee shall pay or reimburse Licensor for
all
federal, state, or local taxes, duties, or similar assessments arising
from Licensee’s sales of Licensed Products pursuant to this Agreement,
except taxes based on Licensor’s net income, which taxes shall be paid
solely by Licensor. Each Party agrees to defend, indemnify and hold
the
other Party harmless for, from and against any claim, liability,
loss,
costs or other damages, including, without limitation, attorneys’ fees,
expert witness
fees,
and costs of collection, arising from any federal, state or local
income,
sales, use, excise, import or export, value added or similar tax
or duty,
and
any other tax incurred by the other Party arising from or in connection
with this Agreement,
except for taxes based on either Party’s
income.
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7.
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Sales
Reports; Record Inspection and
Audit
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6
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7.1
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Sales
Reports.
Within
forty-five (45) days after the end of each Calendar Quarter, Licensee
shall deliver a report to Licensor
certified by an authorized officer of Licensee
showing in detail the dollar value of Licensed Products sold, and
the
amount of Royalty Fees due to Licensor for the
prior
Calendar Quarter (a “Sales Report”). Licensee shall also
provide
additional supporting information and documentation relating
to Licensed
Products
sold as Licensor may reasonably request.
The failure of Licensee to deliver a Sales Report on its due date
shall be
deemed to be a material breach of this
Agreement.
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7.2
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Maintenance
of Books and Records; Record Inspection and Audit.
During the Term and for a period of two
(2)
years thereafter, Licensee agrees to keep and maintain accurate and
separate records related to this Agreement, including Customer agreements
which resulted in the distribution of Licensed Products. Licensee
further agrees that during such two (2) year period it
shall
make these records available for inspection, from
time to time, by Licensor, or a
third party retained by Licensor, at
Licensee’s site and at Licensor’s cost.
Any audit and/or inspection shall be conducted during regular
business hours at Licensee’s facilities upon at least three
(3)
days prior written notice. Such examination shall be conducted in
such a
manner as to not unduly interfere with Licensee’s business. Subject
to Section 7.3, if the audit reveals an underpayment of Royalty Fees
by
Licensee under this Agreement, Licensee shall pay to Licensor the
full
amount of any underpayment revealed by the audit, plus interest on
the
underpaid amounts accruing at the rate of three quarters of a percent
(0.75%) per month until all underpaid amounts are paid in full.
Notwithstanding
the foregoing, if such audit reveals an underpayment by an amount
in
excess of twenty percent (20%) for the period covered by the audit
report,
Licensee shall pay
to Licensor
all of the fees and
costs associated with such audit,
the amount underpaid, interest due and an additional payment of fifteen
percent (15%) of the total amount due for the audited period.
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7.3
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Audit
Dispute Resolution Process.
If
Licensee disputes or otherwise desires to obtain third party verification
of an audit report, the Parties agree that Licensee, within thirty
(30)
days from the date of the subject audit report, shall notify Licensor
of
its intent to verify the audit report. Licensee shall schedule, with
an
independent auditor, an audit of the subject records as soon as possible
following the date of Licensee’s notice to Licensor hereunder. Licensor
shall timely cooperate with and provide to the auditor all documentation
and other information requested by the auditor. If the results of
the
independent audit are consistent with Licensor’s audit results, Licensee
shall pay all amounts due as set forth in Section 7.2 and all costs
and
fees associated with the independent audit. If the results of the
independent audit differ from Licensor’s audit, the Parties shall rely
upon the results of the independent audit in determining what, if
any,
amounts are due pursuant to Section 7.2 and both Parties shall equally
share the cost and fees of the independent audit. The Parties agree
that a
final determination of Licensee’s underpayment by an amount in excess of
ten percent (10%) for the period covered by the audit report shall
be
deemed to be a material breach of this
Agreement.
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8.
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Confidentiality
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8.1
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The
Parties acknowledge that in the course of their performance under
this
Agreement, they may be furnished with, receive, or otherwise have
access
to Confidential Information of or concerning the other Party. For
the purposes of this Agreement, the Party disclosing Confidential
Information shall be referred to as the “Disclosing Party” and the Party
receiving Confidential Information shall be referred to as the “Receiving
Party.” Any Technology shall be treated as the
Confidential Information of Licensor.
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8.2
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A
Receiving Party shall not use the Disclosing Party’s Confidential
Information for any purpose other than in accordance with this Agreement
and shall not disclose, without the prior written consent of the
Disclosing Party, Confidential Information to any person,
other than Approved
Sub-Licensees and their respective employees and independent
contractors who
(a) are subject to a nondisclosure obligation comparable in scope
to this
Section;
and (b) have a need to know such Confidential Information. All information
disclosed or otherwise provided shall be presumed Confidential
Information, unless indicated otherwise by the Disclosing
Party.
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7
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8.3
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A
Receiving Party shall not be liable for disclosure or use of any
particular Confidential Information that: (a) is or becomes publicly
known
through no fault of the Receiving Party; (b) is developed independently
by
the Receiving Party without reference to any Confidential Information
of
the Disclosing Party; (c) is known by the Receiving Party at the
time of
disclosure by the Disclosing Party if the Receiving Party does not
then
have a duty to maintain its confidentiality,
as
evidenced by the Receiving Party’s records; or (d) is rightfully obtained
by the Receiving Party from a third party not obligated to preserve
its
confidentiality. A Receiving Party also may disclose Confidential
Information solely to the extent required by a court or other governmental
authority, provided that (i) the Receiving Party gives the Disclosing
Party prompt prior notice of the required disclosure;
(ii) the Receiving Party uses reasonable efforts to resist disclosing
the
Confidential Information;
(iii) the Receiving Party cooperates with the Disclosing Party to
obtain
a protective order or otherwise limit the disclosure;
and (iv) as soon as reasonably possible, the Receiving Party provides
a
letter from its counsel confirming that the Confidential Information
is in
fact
required to be disclosed. Licensee
hereby acknowledges and agrees that Licensor may be required under
applicable federal securities laws and regulations to disclose the
terms
of this Agreement, which shall not be deemed a violation of this
Section
8.
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8.4
|
All
Confidential Information shall remain the property of and be deemed
proprietary to the Disclosing Party. At any time upon the Disclosing
Party’s request, the Receiving Party shall promptly return to the
Disclosing Party all Confidential Information, including all copies
thereof, and all documents, materials, or products generated or produced
by,
or at the request of,
the Receiving Party that contain, summarize, outline or otherwise
reference the Disclosing Party’s Confidential Information (individually
and collectively, “Copies”). At the Disclosing Party’s option,
Receiving Party shall destroy all of
the Disclosing Party’s
Confidential Information and Copies and
certify such destruction to the Disclosing Party. This paragraph
shall not
apply to Confidential Information that is furnished to Licensee under
its
license rights and that is used in exercising those
rights.
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| 8.5 |
A
Receiving Party further agrees to receive Confidential Information
in
strict confidence and to accord such Confidential Information at
least the
same level of protection against unauthorized use or disclosure that
the
Receiving Party customarily accords to its own confidential, proprietary
or trade secret information of a like nature, but in no event less
than a
reasonable level of protection. The Receiving Party shall have sole
responsibility for the physical security and maintenance of the
confidentiality of all Confidential Information delivered to it by
the
Disclosing Party. The Disclosing Party shall have the right, upon
at least
three (3) business days prior written notice to the Receiving Party
and
during the Receiving Party’s normal business hours, to visit and inspect
the Disclosing Party’s places of business for the purpose of verifying, to
the satisfaction of the Disclosing Party, that the Receiving Party
is
performing its obligations under this Section
8.
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9.
|
Infringement
Indemnity; Infringement Lawsuits and Patent
Prosecution
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9.1
|
Licensor
shall indemnify, defend and hold the Licensee and its affiliates,
shareholders, directors, officers, members, managers, employees,
agents,
independent contractors, licensees and representatives (“Licensee
Indemnified Parties”) harmless for, from and against, any and all suits,
actions and proceedings, claims, threats, demands, liabilities, losses,
damages, judgments, obligations, fines, expenses (including, without
limitation, attorneys’ fees and expert witness fees) and costs
(individually and collectively, “Infringement Claims”), made against a
Licensee Indemnified Party by a third party arising from or in connection
with any actual or alleged claims that the Technology, Improvements
(other
than improvements owned by Licensee or jointly owned by Licensee),
Technology Marks, Confidential Information and/or other proprietary
information provided by Licensor under this Agreement infringes any
patent, trademark, copyright, trade secret or other property right
of a
third party. The indemnification in this Section 9 is contingent
upon (a)
the Licensee Indemnified Parties promptly notifying the Licensor
in
writing of any known claim which may give rise to an Infringement
Claim;
(b) Licensor’s control of the defense and settlement of such Infringement
Claims at Licensor’s sole expense; provided, however, that any settlement
be made with the consent or an unconditional full release of the
Licensee
Indemnified Parties; and (c) the Licensee Indemnified Parties cooperate
with all reasonable requests of the Licensor (at the Licensor’s expense)
in defending or settling an Infringement Claim. Licensee Indemnified
Parties reserve the right to retain their own counsel, in addition
to
Licensor’s counsel, at Licensee’s sole
expense
to participate in the defense of any Infringement
Claims;
provided, however, Licensee Indemnified Parties may not take deliberate
and willful action that impairs Licensor’s defense of the Infringement
Claims.
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8
|
9.2
|
In
addition to the rights and obligations of the Parties set forth in
Section
9.1, if an Infringement Claim is made or threatened, Licensor, at
its own
expense and in its sole discretion, may exercise any of the following
remedies: (i) obtain for Licensee the right to continue to use the
Technology, Improvements, Technology Marks, and/or Confidential
Information, as the case may be, consistent with this Agreement;
(ii)
modify the Technology, Improvements, Technology Marks, and/or Confidential
Information, as the case may be, so it is non-infringing and complies
in
all material respects with this Agreement; (iii) replace the Technology,
Improvements, Technology Marks, and/or Confidential Information,
as the
case may be, with non-infringing technology, trademarks or information
and/or materials, as the case may be, that complies in all material
respects with this Agreement; or (iv) refund all License Fees paid
hereunder by Licensee and Approved Sub-Licensees for the prior twelve
(12)
month period. Licensor will have no obligation to indemnify Licensee
or
Licensee personnel for claims that Licensor’s Technology, Improvements,
Technology Marks, and/or Confidential Information, infringe the
intellectual property rights of a third party to the extent such
claims
arise solely as a result of Licensee's avoidable implementation of
Licensor’s Technology with other software and/or hardware not furnished or
authorized in writing by Licensor, and provided such infringement
or claim
would have been avoided in the absence of such implementation, or
Licensee's modification of the Technology by anyone not authorized
in
writing by Licensor other than Licensor’s agents or subcontractors, and
provided such infringement or claim would have been avoided in the
absence
of such modification. The foregoing represents
Licensor’s entire obligation, and Licensee’s entire remedy, with respect
to Infringement Claims.
|
|
9.3
|
Infringement
Lawsuits.
In the event that Licensee learns of the infringement of one or more
Licensed Patents in the Licensed Field that are actually in substantial
use by customers of Licensee, Licensee may request that Licensor
take
legal action against the infringement of the Licensed Patents. Such
request shall be made in writing and shall include reasonable evidence
of
such infringement and damages to Licensee. If the infringing activity
has
not been abated within one hundred and twenty (120) days following
the
effective date of such request and Licensor shall not have filed
suit
against the infringing party, , then Licensee shall have the right
to
commence suit on its own account. In such case, (1) Licensee shall
prosecute the suit at its own expense and shall be the sole beneficiary
of
any recovery, and (2) Licensor will reasonably cooperate and advance
such
suit, but at Licensee’s expense.
|
9
|
9.4
|
Patent
Prosecution.
Licensor will diligently prosecute and maintain the Licensed Patents
at
its expense using counsel of its choice. Licensor’s obligation hereunder
shall continue for so long as this Agreement remains in
effect.
|
|
10.
|
Indemnification
by Licensee
|
|
10.1
|
Licensee shall
indemnify, defend and hold the Licensor and its directors, officers,
employees, agents and independent contractors (“Licensor Indemnified
Parties”) harmless from and against, any and all suits, actions and
proceedings, claims, liabilities, losses, damages, expenses (including
attorneys’ fees) and costs (individually
and collectively, “Claims”),
made against a Licensor Indemnified Party by a third party to the
extent
arising from
Licensee’s
(or its officers’, directors’, employees’, agents’ and independent
contractors’)
improper or unauthorized use of the Technology. The indemnities
in
this Section 10 are
contingent upon: (a) the Licensor Indemnified Parties promptly notifying
the Licensee in writing of any claim which may give rise to a
Claim
for indemnification hereunder;
(b) the Licensee being allowed to control the defense and settlement
of
such Claims; provided, however, that any settlement be made with
the
consent of
the Licensor Indemnified Parties or includes, as
an
unconditional part
thereof, a full
release of the Licensor Indemnified Parties; and (c) the Licensor
Indemnified Parties cooperating
with all reasonable requests of the Licensee (at the Licensee’s expense)
in defending or settling a Claim. Licensor Indemnified Parties reserve
the
right to retain their
own counsel, in addition to Licensee’s counsel, at Licensor’s sole expense
to participate in the defense of any Claim
provided
that Licensor Indemnified Parties may not take deliberate and willful
action that impairs Licensee’s defense of the
Claim.
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|
11.
|
Limited
Warranties; Limitation of
Liability
|
|
11.1
|
Each
Party represents and warrants to Licensee that it has the right,
power and
authority to enter into this Agreement and that the signatory on
behalf of
such Party to this Agreement has full authority to enter into and
bind the
Party to the obligations set forth in this
Agreement.
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|
11.2
|
Licensor
represents and warrants to Licensee that it has no knowledge of patents
or
other proprietary rights of another party, or a claim by another
party
that it has patents or other proprietary rights, that are infringed
by the
Technology licensed hereunder.
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|
11.3
|
Licensor
represents and warrants to Licensee that as of the Effective Date
and
throughout the Term that: (a) Improvements (except as otherwise provided
herein), Technology Marks, and Licensor’s Confidential Information are the
sole and exclusive property of Licensor; (b) that Licensor has all
right,
title and interest in the Technology, Improvements (except as otherwise
provided herein), Technology Marks, and Licensor Confidential Information
to grant to Licensee the rights provided in this Agreement; (c) that
nothing contained in this Agreement conflicts with any other obligation
or
agreement of Licensor; and (d) that no liens, claims or other obligations
exist that will affect Licensee’s and/or Approved
Sub-Licensees’
use or rights to any Technology, Improvements, Technology Marks,
and/or
Confidential Information granted under this Agreement.
Licensor does not warrant that the Technology will meet Licensee’s
requirements or that the use of the Technology will be uninterrupted
or
error-free.
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|
11.4
|
LIMITATION
OF LIABILITY.
NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT,
CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS,
BUSINESS INTERRUPTION, LOSS OF BUSINESS INFORMATION, AND THE LIKE,
ARISING
OUT OF THE USE OF OR INABILITY TO USE THE TECHNOLOGY OR ANY PRODUCTS
OR
SERVICES PROVIDED HEREUNDER, REGARDLESS OF THE FORM OF ACTION, WHETHER
IN
CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF THE OTHER
PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. BECAUSE SOME STATES
DO
NOT ALLOW THE EXCLUSION OR LIMITATION OF LIABILITY FOR CONSEQUENTIAL
OR
INCIDENTAL DAMAGES, THE ABOVE LIMITATION MAY NOT
APPLY.
|
10
|
12.
|
Marketing
and Advertising Obligations; Technology
Marks.
|
|
12.1
|
Marketing
and Advertising Requirements.
Licensee shall actively advertise and promote the Technology during
the
Term, which promotional efforts shall include, without limitation,
attending and presenting at industry trade shows, preparing customer
mailings and presentations, brochures or other promotional material
and
references to the Technology on Licensee’s websites. During the Term,
Licensee shall confer with Licensor on a semi-annual basis to review
and
plan the Licensor’s promotional activities. Licensor shall have the right
to pre-approve all promotional materials, but pre-approval shall
not be
withheld unreasonably.
Licensor shall cooperate and assist Licensee on all reasonable requests
with respect to the aforementioned marketing and advertising
efforts.
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|
12.2
|
License
for Technology Marks.
Licensor hereby grants to Licensee a non-exclusive, royalty-free
license,
including the right to sublicense to Approved
Sub-Licensees(s),
to use the Technology Marks on Licensed Products, advertising and
promotional material, and elsewhere, as contemplated herein. Licensee
(and/or
Approved Sub-Licensees) shall,
upon reasonable notice from Licensor, fully and promptly correct
and
remedy any deficiencies in its use of the Technology
Marks.
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|
12.3
|
Ownership
of Technology Marks.
Licensee acknowledges Licensor’s claim of sole ownership of the Technology
Marks and all associated goodwill. Nothing in this Agreement or in
the
performance thereof, or that might otherwise be implied by law, shall
operate to grant Licensee any right, title, or interest in or to
the
Technology Marks, other than as specified in the limited license
grant
herein. Licensee’s use of the Technology Marks shall inure solely to the
benefit of Licensor. Licensor shall have the sole right to, and in
its
sole discretion may, commence, prosecute or defend, and control any
action
concerning the Technology Marks. Licensee shall not contest the validity
of, by act or omission jeopardize, or take any action inconsistent
with,
Licensor’s rights or goodwill in the Technology Marks, including attempted
registration of the Technology Marks, or use or attempt registration
of
any ▇▇▇▇ confusingly similar thereto. Licensee shall maintain and
not
alter or remove, without Licensor’s consent, any copyright, trademark,
patent and other proprietary or protective notices contained in any
Technology.
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|
13.
|
Termination
|
|
13.1
|
Term.
This
Agreement will begin as of the Effective Date and will continue for
a
period of two
(2)
years (the “Initial Term”), unless earlier terminated in accordance
with Section 13.2 below.
Upon expiration of the Initial Term, this Agreement shall automatically
renew for additional two-year terms (each a “Renewal Term”), unless
Licensee provides Licensor with thirty (30) days written notice prior
to
the expiration of the Initial Term or any Renewal Term, of its intent
NOT
to renew the Agreement.
The Initial Term and any Renewal Term(s) shall each be referred to
as the
“Term.”
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|
13.2
|
Termination.
Either Party may terminate this Agreement for cause: (a) upon thirty
(30)
days prior written notice of a material breach of the other Party,
if the
breach has not been cured within such thirty (30) day period; or
(b)
immediately upon written notice to the other Party (i)
if the other Party declares or a petition is filed in any court for
insolvency or bankruptcy and such petition is not dismissed in
sixty (60) days;
or
(ii) for the other Party’s reorganization under the United States
bankruptcy act of
any similar statute; (iii) if the other Party consents to the appointment
of a trustee in bankruptcy or a receiver or similar entity.
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11
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13.3
|
Effect
of Termination. Upon
the expiration or
termination of this Agreement for
any reason
(a)
all licenses granted hereunder shall cease; (b)
each Party shall return to the other and make no further use of
the
any
of the other Party’s Confidential Information
in
its possession
and all Copies
thereof;
(c)
the Parties shall immediately discontinue any and all promotional
activities hereunder and Licensee shall cease all use of Technology
Marks
and promotional materials and return, at no charge, all sales, promotional
and display or advertising materials, which were furnished by Licensor;
and (d)
all amounts due to
Licensor by Licensee
through the termination date under the terms of this Agreement shall
become immediately due and payable. Upon
termination of this Agreement, Licensee and Approved Sub-Licensees
shall
be permitted a reasonable opportunity, not to exceed ninety (90)
days, to
sell their remaining inventory of finished Licensed Products. The
provisions of Sections 2.2,
4.1 and 8, 9, 10, 11,
12.3, 13, 14 and 15
shall survive the termination or expiration of this
Agreement.
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|
14.
|
Notices
|
|
All
notices sent under this Agreement shall be in writing and (i) hand
delivered; (ii) transmitted by legible facsimile with a copy sent
concurrently by certified mail, return receipt requested; or (iii)
delivered by prepaid overnight courier. Notice shall be effective
(i) upon
receipt if delivered by hand; (ii) one (1) business day after deposit
with
an overnight courier service; or (iii) three (3) business days after
deposit with the United States Postal Service if sent via certified
mail.
Notices shall be sent to the Parties
at
the following addresses or such other addresses as the Parties
subsequently may provide in accordance with this Section 14.1:
|
|
If
to Licensor:
Document
Security Systems, Inc.
▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Fax:
▇▇▇-▇▇▇-▇▇▇▇
Attention:
Chief Executive Officer
|
With
a copy to:
Law
Offices of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇
▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attention:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Esq.
|
|
If
to Licensee:
The
Ergonomic Group
▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attn:
▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Executive
Vice
President
Chief
Operating Officer
|
With
a copy to:
▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
Attn:
▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇, Esq.
|
|
15.
|
Miscellaneous
|
12
|
15.1
|
Assignment.
Licensee may not assign this Agreement or the rights and obligations
hereunder to any third party
except as contemplated herein
without the prior express written approval of the Licensor.
Any
purported assignment without the consent of the Licensor shall be
void.
The provisions of this Agreement shall be binding upon, and shall
inure
to, the benefit of the Parties hereto, their legal representatives,
permitted
successors
and permitted assigns.
In
the event of a “change of control” of Licensee, Licensor shall have the
right to terminate this Agreement, unless such change of control
is
acceptable to Licensor, such acceptance not to be unreasonably withheld.
For purposes hereof, the term “change of control” shall mean the sale or
other transfer of more than 50% of the outstanding ownership of Licensee.
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|
15.2
|
Governing
Law; Jurisdiction.
This Agreement shall be governed in accordance with the laws of the
State
of New York, without regard to conflict of laws principles. All disputes
under this Agreement shall be resolved in the appropriate state or
federal
courts located in Rochester, New York.
Each
Party consents to the jurisdiction of and venue in such courts, agrees
to
accept service of process by mail and hereby waives any jurisdictional,
lack of venue, or forum defenses otherwise available to it.
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|
15.3
|
Force
Majeure.
No
Party shall be in default or otherwise liable for any delay in or
failure
of its performance under this Agreement, other than of obligations
regarding payments or confidentiality, if such delay or failure is
caused
by something beyond its reasonable control and without its fault
or
negligence, including,
but not limited to,
any act of God, strikes, lockouts, riots, any acts of the common
enemy,
the elements, earthquakes, floods, fires, epidemics, governmental
laws and
regulations ,
inability to secure products or services from other persons, entities
or
transportation facilities, failures or delay in transportation or
communications or power failures. Such delay or failure shall not
constitute a breach of this Agreement and shall automatically extend
any
completion dates for a period equal to the duration of such events.
Lack
of funds shall not constitute a reason beyond the Party’s reasonable
control.
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|
15.4
|
Remedies
Cumulative; Waivers.
The rights and remedies provided in this Agreement and all other
rights
and remedies available to either Party
at
law or in equity are, to the extent permitted by law, cumulative
and not
exclusive of any other right or remedy now or hereafter available
at law
or in equity. A Party’s failure to assert any right or remedy shall not
constitute a waiver of that right or remedy. No
waiver by either Party of any default shall be deemed as a waiver
of prior
or subsequent default of the same or other provisions of this
Agreement.
|
|
15.5
|
Construction;
Severability. The
Parties acknowledge that they have reviewed this Agreement and bargained
over its terms. Accordingly, this Agreement shall be construed without
regard to the Party or Parties responsible for its preparation, and
shall
be deemed to have been prepared jointly by the Parties.
Headings contained in this Agreement are not intended to be full
and
accurate descriptions of the contents of this Agreement and shall
not
affect the meaning or interpretation of this Agreement. If any term,
clause, or provision hereof is held invalid or unenforceable by a
court of
competent jurisdiction, such invalidity shall not affect the validity
or
operation of any other term, clause, or provision and such invalid
term,
clause, or provision shall be deemed to be severed from the Agreement.
This Agreement may be executed in counterparts, each of which shall
be
deemed to be original but all of which together shall constitute
a single
instrument. The
signatures required for execution may be transmitted to the other
Party
via facsimile and such signatures shall be deemed a duplicate
original.
|
|
15.6
|
Relationship
of Parties.
Nothing in this Agreement shall be construed as creating a partnership,
joint venture or agency relationship between the Parties,
or as authorizing either Party to act as agent for the
other.
|
13
|
15.7
|
Entire
Agreement; Termination of Prior Agreements.
This Agreement and the
Exhibits and
Schedules hereto
constitute
the entire agreement between the Parties
and supersedes
any and
all prior agreements between the Parties
concerning the subject matter of this Agreement. The
pre-printed terms and conditions on any forms, purchase orders, invoices,
or confirmations of the Parties shall not be construed as superseding
this
Agreement and in the event of any conflict between such documents
and this
Agreement, the terms of this Agreement shall prevail. No modifications
or
amendments may be made to this Agreement except as expressed in writing
and signed by each Party.
|
| 15.8 |
Publicity.
Either Party may refer to the other by name in advertising, promotional
materials and publications in connection with this Agreement
only upon
receiving the prior written consent of the other Party, which
consent
shall not be unreasonably withheld. Notwithstanding anything
to the
contrary herein, Licensee acknowledges and agrees that (a) it
is the
Licensor’s intention to issue a press release within ten (10) days of
the
date hereof regarding the signing of this Agreement;
and (b) either Party may be required, under applicable securities
laws, to
disclose the existence and contents of this Agreement.
|
|
15.9
|
Export
Control; Government Customers. Anything
contained in this Agreement notwithstanding, the obligations of the
Parties hereto shall be subject to all laws, present and future,
including
export control laws and regulations, of any government having jurisdiction
over the Parties
hereto and to orders, regulations, directions or requests of any
such
government. Each Party
shall undertake to comply with and will be solely responsible for
complying with such laws applicable to such party.
Both Parties agree and acknowledge that an appropriate restrictive
rights
legend pertaining to government Customers shall be contained in any
license agreement concerning the
Technology.
|
|
15.10
|
Irreparable
Damage:
The
Parties acknowledge and agree that any violation of this Agreement
would
subject the other to irreparable injury for which monetary damages
will
not be an adequate remedy. Therefore,
in addition to any remedies otherwise available, the non-breaching
Party
will be entitled to any injunctive relief and specific performance
to
enforce the terms of this Agreement. The
breaching Party shall pay all reasonable attorney's fees and court
costs,
arbitration cost, and/or appeal costs incurred by the non-breaching
Party
should it be necessary for the non-breaching Party to enforce the
terms of
this Agreement.
|
IN
WITNESS WHEREOF, the Parties
have
caused this Agreement to be executed by their respective duly authorized
officers as of the date first written above.
|
LICENSOR
DOCUMENT
SECURITY SYSTEMS, INC.
By:
/s/
▇▇▇▇▇▇▇
▇▇▇▇▇
Name:
▇▇▇▇▇▇▇ ▇▇▇▇▇
Title:
Chief
Executive Officer
|
LICENSEE
ERGONOMIC
GROUP, INC.
By:
/s/
▇▇▇▇▇▇
▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇
▇▇▇▇▇▇▇
Title:
Executive
Vice President
and
Chief Operating Officer
|
14