Exhibit 10.3
SUB-LICENSE AGREEMENT
THIS Agreement, dated May 4, 2000, is by and among Kenside Investments
Limited ("Licensor"), a company incorporated in the British Virgin Islands,
Arcoplate Holdings, PLC ("Sub-licensor"), a company incorporated in the United
Kingdom (U.K.), and Alloy Steel International, Inc. ("Sub-licensee"), a Delaware
(U.S.) corporation having a principal place of business located at 42 Mercantile
Way Malaga, P.O. Box 3087 Malaga D C 6945, Western Australia.
RECITALS
A. Licensor owns certain Patent Rights and Technology Rights related to the
Arcoplate Process.
B. Sub-licensor has obtained an exclusive license from Licensor to develop
and market the Arcoplate Process and commercially exploit the Patents in
the United States;
C. Sub-licensor desires to have the sub-licensed Patent Rights and Technology
Rights developed and used for the benefit of Sub-licensee.
D. Sub-licensee wishes to obtain from Sub-licensor an exclusive sub-license
to develop and market the Arcoplate Process and commercially exploit the
Patents in the United States, the right to grant sub-licenses, and the
right to purchase the license held by Licensor.
NOW, THEREFORE, in consideration of the mutual covenants and premises herein
contained, the parties agree as follows:
1. EFFECTIVE DATE
This Agreement is effective May 4, 2000 ("Effective Date").
2. DEFINITIONS
As used in this Agreement, the following terms have the meanings
indicated:
2.1 "Affiliate" means any business entity more than 50% owned by
Sub-licensee, any business entity which owns more than 50% of
Sub-licensee, or any business entity that is more than 50% owned by
a business entity that owns more than 50% of Sub-licensee.
2.2 "Licensed Field" means Technology Rights, as defined herein, and
Particulars of Patents and Patent Applications, as set forth in
Schedule A, annexed hereto.
2.3 "Methods" means information contained in test reports, operating and
testing procedures, shop practices, instruction manuals, bill of
materials, tables of operating conditions and the like including all
other know how and confidential information whatsoever relating in
any way to the Arcoplate Process including, but not limited to, the
right to use certain technologies associated with the foregoing:
3. Methods of hardening, heating, cooling and providing
uniformity and stress relief;
4. Methods of bonding;
5. Computer control and quality supervision;
6. Composition of powder alloy constituents comprising the raw
alloy powder used as the medium in the Arcoplate Process for
the manufacture of products using the Arcoplate Process; and
7. Details of the metallurgical and chemical formula utilized to
manufacture products through the Arcoplate Process.
2.4 "Licensed Product" means any product Sold by Sub-licensee comprising
the Arcoplate Process pursuant to this Agreement.
2.5 "Arcoplate Process" means inventions and discoveries covered by the
Patent Rights or Technology Rights within Licensed Field.
2.6 "Licensed Territory" means the United States of America.
2.7 "Net Sales" means the gross revenues received by Sub-licensee from
the Sale of Licensed Products less sales and/or use taxes actually
paid, import and/or export duties actually paid, outbound
transportation prepaid or allowed, and amounts allowed or credited
due to returns (not to exceed the original billing or invoice
amount).
2.8 "Patent Rights" means Sub-licensor's rights in information or
discoveries covered by patents and/or patent applications, whether
domestic or foreign, and all divisions, continuations,
continuations-in-part, reissues, reexaminations or extensions
thereof, and any letters patent that issue thereon, which name Gene
Kostecki as either sole or joint inventor ("Inventor") and which
relate to the manufacture, use or sale of Arcoplate.
2.9 "Sale or Sold" means the transfer or disposition of a Licensed
Product for value to a party other than Sub-licensee.
2.10 "Technology Rights" means Sub-licensor's rights in technical
information, know-how, processes, procedures, compositions, devices,
methods, formulas, protocols, techniques, software, designs,
drawings or data created by Gene Kostecki, either solely or jointly,
which are not covered by Patent Rights but which are necessary for
practicing the invention covered by Patent Rights.
3. WARRANTY
3.1 Sub-licensee understands and acknowledges that Sub-licensor, by this
Agreement, makes no representation as to the operability or fitness
for any use, safety, efficacy, ability to obtain regulatory
approval, patentability, and/or breadth of the Arcoplate Process.
Sub-licensor, by this Agreement, also makes no representation as to
whether there are any patents now held, or which will be held, by
others or by Sub-licensor in the Licensed Field, nor does
Sub-licensor make any representation that the inventions contained
in Patent Rights do not infringe any other patents now held or that
will be held by others or by Sub-licensor.
3.2 Sub-licensee, by execution hereof, acknowledges, covenants and
agrees that it has not been induced in any way by Sub-licensor to
enter into this Agreement, and further warrants and represents that
(i) it has conducted sufficient due diligence with respect to all
items and issues pertaining to this Article 3 and all other matters
pertaining to
this Agreement; and (ii) Sub-licensee has adequate knowledge and
expertise, or has utilized knowledgeable and expert consultants, to
adequately conduct the due diligence, and agrees to accept all risks
inherent herein.
4. LICENSE
4.1 Sub-licensor hereby grants to Sub-licensee an exclusive license to
manufacture, have manufactured, market, distribute and/or sell
Licensed Products within the Licensed Territory for use within
Licensed Field. This grant is subject to the payment by Sub-
licensee to Sub-licensor of all consideration as provided herein.
4.2 Sub-licensee may extend the license granted herein to any Affiliate
consistent with this Agreement.
4.3 Sub-licensee may grant sub-licenses consistent with this Agreement.
5. INSTRUCTION IN METHODS
5.1 At the request of Sub-licensee, Sub-licensor will arrange for the
personal instruction in the Methods by a qualified person on the
staff of the Sub-licensor for the training of trainees of
Sub-licensee at the premises of Sub-licensee.
5.2 The Sub-licensor's obligation to send skilled persons to
Sub-licensee whether for the purpose of assisting in start-up or to
render assistance at Sub-licensee's premises after start-up shall be
limited to such reasonable number of persons of such rank as to
cause minimum interference with the Sub-licensor's operations and
current commitments consistent with satisfying the reasonable needs
of Sub-licensee.
5.3 Sub-licensee's trainees will be given adequate opportunity to study
the Methods and Patent Rights and will be permitted to make notes
and sketches.
5.4 For each person sent by Sub-licensor for the purposes of instruction
and/or assistance to the premises of Sub-licensee, Sub-licensee
shall pay to Sub-licensor for the period of his absence from
Sub-licensor's premises a sum to cover such person's salary and
pension contribution, the value of "fringe" or other benefits, and
expenses attributable to the visit including travel, accommodation,
food and incidental expenses.
5.5 The Methods shall remain the property of Sub-licensor.
6. PAYMENTS AND REPORTS
6.1 In consideration of rights granted by Sub-licensor to Sub-licensee
under this Agreement, Sub-licensee will pay Sub-licensor the
following:
A. A sum equal to 3% of Net Sales for the Licensed Products sold
by Sub-licensee, calculated at the end of each Quarter and
payable within fifteen (15) days of the end of the relevant
Quarter by electronic bank transfer (or by any other means
mutually agreed upon) to the designated account of
Sub-licensor, without deduction for the cost of transmission;
and
2. A sum calculated in accordance with clause 6.1(A) in respect
to the Net Sales derived by every sub-licensee of
Sub-licensee.
6.2 During the Term of this Agreement and for 1 year thereafter,
Sub-licensee agrees to
keep complete and accurate records of its and its Sub-licensees'
Sales and Net Sales of Licensed Products under the license granted
in this Agreement in sufficient detail to enable the sums payable
hereunder to be determined. Sub-licensee agrees to permit
Sub-licensor or its representatives, at Sub-licensor's expense, to
periodically examine its books, ledgers, and records during regular
business hours for the purpose of and to the extent necessary to
verify any report required under this Agreement.
6.3 Sales to any associated company or Affiliate of Sub-licensee of the
Licensed Products manufactured by Sub-licensee shall not be deemed
to be sales for the purposes of the calculation of sums due
hereunder unless such associated company uses the Product
commercially in which case they shall be deemed sales at the price
at which the Products are currently sold by Sub-licensee to other
persons in transactions negotiated at arm's length. Provided that if
such associated company or Affiliate resells the Products to third
parties on which payments to the Sub-licensor have to been made, a
sum on such sales shall be payable to the Sub-licensor calculated on
the sales price due to such associated company or Affiliate as
hereinbefore provided for sales in the ordinary course of business
by Sub-licensee.
7. COMMON STOCK: EQUITY OWNERSHIP
7.1 Licensor and Sub-licensor acknowledge that Sub-licensee shall have
the option to purchase the License for the Licensed Products from
Kenside Investments Ltd., upon 30 days' notice to Kenside and
Sub-licensor. Such buy-out right shall commence nine (9) months from
the effective date herein. In the event Sub-licensee exercises its
right to buy-out the License from Sub-Licensor, Sub-licensee shall
issue Sub-Licensor 1,298,908 fully paid, non-assessable shares of
its common stock, at $0.01par value. The stock certificates
representing the shares issuable upon exercise of the purchase right
hereof will bear a restrictive legend indicating that such shares
are not registered under the Securities Act of 1933, as amended (the
"Act"), and none of such securities may be offered, sold, pledged,
hypothecated, assigned or transferred except (i) pursuant to a
registration statement under the Act which has become effective and
is current with respect to such securities or (ii) pursuant to a
specific exemption from registration under the Act but only upon a
Holder hereof first having obtained the written opinion of counsel
to the Company.
8. TERM AND TERMINATION
8.1 The term of this Agreement is from the Effective Date and shall
continue in force for twenty-five (25) years thereafter.
Sub-licensee shall have two options to extend this Agreement for
further terms of five (5) years each on the same terms as this
Agreement (other than this option to extend) if the Sub-licensee
gives written notice of intention to extend at least 120 days in
advance of the end of the initial period or the extended period as
applicable and there is no unremedied breach of this Agreement by
the Sub-licensee at the end of the initial period or the extended
period as applicable.
8.2 This Agreement will earlier terminate:
A. automatically if Sub-licensee becomes bankrupt or insolvent
and/or if the
business of Sub-licensee is placed in the hands of a receiver,
assignee, or trustee, whether by voluntary act of Sub-licensee
or otherwise; or
B. upon 30 days written notice from Sub-licensor if Sub-licensee
breaches or defaults on its obligation to make payments (if
any are due) or reports, in accordance with the terms of
Article 6, unless, before the end of the 30-day period,
Sub-licensee has cured the default or breach and so notifies
Sub-licensor, stating the manner of the cure; or
C. upon 45 days written notice if Sub-licensee breaches or
defaults on any other obligation under this Agreement, unless,
before the end of the 45 day period, Sub-licensee has cured
the default or breach and so notifies Sub-licensor, stating
the manner of the cure; or
D. If Sub-licensee shall come under the direct or indirect or de
facto direction or control of any other individual, firm or
company operating in the field covered by this agreement and
competing with the Sub-licensor; or
E. at any time by mutual written agreement between Sub-licensee
and Sub-licensor, upon 180 days written notice to all parties
and subject to any terms herein which survive termination.
8.3 If this Agreement is terminated for any cause, nothing herein will
be construed to release either party of any obligation matured prior
to the effective date of the termination;
9. INFRINGEMENT BY THIRD PARTIES
9.1 Sub-licensor, at its own expense, must enforce any patent
exclusively licensed hereunder against infringement by third
parties. If Sub-licensor does not file suit against a substantial
infringer of a patent within six (6) months of knowledge thereof,
then Sub-licensee may enforce any patent licensed hereunder on
behalf of itself and Sub-licensor. However, in the event that
damages are obtained in favor of each of the parties or in favor of
Sub-licensor in a sum which includes losses suffered by Sub-licensee
in any such action for infringement, they shall share the costs of
such action in so far as they are not fully recovered from the
infringer in the proportion in which they share the said damages. If
the award does not discriminate between the parties on the matter of
damages or costs and either party can show that the losses which it
suffered from such infringement exceeded the losses of the other
party, it shall be entitled to a proportionately higher share of the
damages on its agreeing to bear a proportionately higher share of
the costs. In this paragraph, expense or expenditure means only
reasonable expense or expenditure on fees for legal representation,
for the services of patent agents and reasonable incidental matters.
9.2 In any infringement suit or dispute, the parties agree to cooperate
fully with each other. At the request and expense of the party
bringing suit, the other party will permit access to all relevant
personnel, records, papers, information, samples, specimens, etc.,
during regular business hours.
9.3 If Sub-licensor and Sub-licensee agree or are advised by counsel
that prior to the institution of proceedings for infringement the
patent specification should be amended, Sub-licensor shall, at its
own expense, apply to amend the specification.
The amendments shall be jointly agreed by the parties and their
legal advisors and approved by patent counsel whose fees shall be
shared equally by the parties.
10. ASSIGNMENT
Except in connection with the sale of substantially all of Sub-licensee's
assets to an affiliate, this Agreement may not be assigned by Sub-licensee
without the prior written consent of Sub-licensor, which will not be
unreasonably withheld.
11. PATENT MARKING
Sub-licensee must permanently and legibly mark all products and
documentation manufactured or sold by it under this Agreement with a
patent notice as may be permitted or required under Title 35, United
States Code.
12. INDEMNIFICATION
Sub-licensee agrees to hold harmless and indemnify Sub-licensor and its
officers, employees and agents from and against any claims, demands, or
causes of action whatsoever, including without limitation those arising on
account of any injury or death of persons or damage to property caused by,
or arising out of, or resulting from, the exercise or practice of the
license granted hereunder by Sub-licensee, its Affiliates or their
officers, employees, agents or representatives.
13. CONFIDENTIAL INFORMATION AND PUBLICATION
13.1 Sub-licensor and Sub-licensee each agree that all information
contained in documents marked "confidential" and forwarded to one by
the other (i) be received in strict confidence, (ii) be used only
for the purposes of this Agreement, and (iii) not be disclosed by
the recipient party, its agents or employees without the prior
written consent of the other party, except to the extent that the
recipient party can establish competent written proof that such
information:
A. was in the public domain at the time of disclosure;
B. later became part of the public domain through no act or
omission of the recipient party, it's employees, agents,
successors or assigns;
C. was lawfully disclosed to the recipient party by a third party
having the right to disclose it;
D. was already known by the recipient party at the time of
disclosure;
E. was independently developed by the recipient; or
F. is required by law or regulation to be disclosed.
13.2 Each party's obligation of confidence hereunder shall be fulfilled
by using at least the same degree of care with the other party's
confidential information as it uses to protect its own confidential
information. This obligation shall exist while this Agreement is in
force and for a period of three (3) years thereafter.
14. PATENTS AND INVENTIONS
14.1 If after consultation with Sub-licensee, both parties agree that a
patent application should be filed for the Arcoplate process and/or
identified aspects of the Arcoplate Process, Sub-licensor will
prepare and file the appropriate patent applications, and
Sub-licensor will pay the cost of searching, preparing, filing,
prosecuting and maintaining same. If Sub-licensor notifies
Sub-licensee that it does not intend to pay the cost of an
application, or if Sub-licensor does not respond or make an effort
to agree with Sub-licensee on the disposition of rights in the
subject invention, then Sub-licensee may file an application at its
own expense and Sub-licensor will have no rights to the invention.
Sub-licensor will provide Sub-licensee a copy of any patent
application, as well as copies of any documents received or filed
with the respective patent office during the prosecution thereof.
14.2 During the term of the Agreement, Sub-licensor shall procure the
payment of all renewal fees, registration fees and the carrying out
of such acts and things as may be necessary to maintain the Patents
and shall, if requested, produce to Sub-licensee the receipt for
such renewal fees or other evidence of renewal at least one (1) week
prior to the last day for renewing such patents and in default shall
recognize the right of Sub-licensee to pay the same and to be
credited with the cost thereof.
14.3 Sub-licensor agrees and undertakes, during the term of the
Agreement:
1. not to allow any Patent or Application to be abandoned or to
lapse; and
2. not to allow the specification of any Patent or Application to
be amended or re-filed within the scope of this agreement
without the consent of the other party, but such consent shall
not be unreasonably withheld or delayed.
15. GOVERNING LAW
15.1 The terms and provisions herein contained and all the disputes or
claims relating to this Agreement shall be governed by, interpreted
and construed in accordance with the internal laws of the United
States of America and the State of New York, without reference to
its conflict of laws principles.
16. GENERAL
16.1 This Agreement constitutes the entire and only agreement between the
parties for the Arcoplate process and all other prior negotiations,
representations, agreements, and understandings are superseded
hereby. No agreements altering or supplementing the terms hereof may
be made except by a written document signed by both parties.
16.2 Any notice required by this Agreement must be given by prepaid,
first class, certified mail, return receipt requested, at such other
addresses as may be given from time to time under the terms of this
notice provision.
16.3 Sub-licensee and Sub-licensor must comply with all applicable
federal, state and local laws and regulations in connection with its
activities pursuant to this Agreement.
16.5 Failure of Sub-licensor and/or Sub-licensee to enforce a right under
this Agreement will not act as a waiver of that right or the ability
to later assert that right relative to the particular situation
involved.
16.6 Headings are included herein for convenience only and shall not be
used to construe this Agreement.
16.7 If any part of this Agreement is for any reason found to be
unenforceable, all other parts nevertheless remain enforceable.
16.8 Sub-licensee shall have the right to cure any breach or default
under this Agreement and the License Agreement between Licensor and
Sub-licensor.
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this Agreement.
Arcoplate Holdings, PLC (UK) Alloy Steel International, Inc.
By_______________________________ By__________________________________
Name:____________________________ Name:_______________________________
Kenside Investments Limited
By_______________________________
Name:____________________________