Exhibit 10.2
LICENSE AGREEMENT
THIS Agreement, dated May 4, 2000, is between Kenside Investments Limited
("Licensor"), a company incorporated in the British Virgin Islands, and Alloy
Steel International, Inc. ("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. Licensor desires to have the Patent Rights and Technology Rights developed
and used for the benefit of Licensee.
C. Licensee wishes to obtain from Licensor an exclusive license to develop
and market the Arcoplate Process and commercially exploit the Patents
worldwide, excluding the United States, and the right to grant
sub-licenses.
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
Licensee, any business entity which owns more than 50% of Licensee,
or any business entity that is more than 50% owned by a business
entity that owns more than 50% of 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:
1. Methods of hardening, heating, cooling and providing
uniformity and stress relief;
2. Methods of bonding;
3. Computer control and quality supervision;
4. 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
5. Details of the metallurgical and chemical formula utilized to
manufacture products through the Arcoplate Process.
2.4 "Licensed Product" means any product sold by 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 worldwide, excluding the United States.
2.7 "Net Sales" means the gross revenues received by 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 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 Licensee.
2.10 "Technology Rights" means 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 Licensee understands and acknowledges that 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.
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 Licensor in the Licensed Field, nor does 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 Licensor.
3.2 Licensee, by execution hereof, acknowledges, covenants and agrees
that it has not been induced in any way by 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) 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 Licensor hereby grants to 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 Licensee to
Licensor of all consideration as provided herein.
4.2 Licensee may extend the license granted herein to any Affiliate
consistent with this Agreement.
4.3 Licensee may grant sub-licenses consistent with this Agreement.
5. INSTRUCTION IN METHODS
5.1 At the request of Licensee, Licensor will arrange for the personal
instruction in the Methods by a qualified person on the staff of the
Licensor for the training of trainees of Licensee at the premises of
Licensee.
5.2 The Licensor's obligation to send skilled persons to Licensee
whether for the purpose of assisting in start-up or to render
assistance at 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 Licensor's operations and current commitments
consistent with satisfying the reasonable needs of Licensee.
5.3 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 Licensor for the purposes of instruction
and/or assistance to the premises of Licensee, Licensee shall pay to
Licensor for the period of his absence from 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 Licensor.
6. PAYMENTS AND REPORTS
6.1 In consideration of rights granted by Licensor to Licensee under
this Agreement, Licensee will pay Licensor the following:
A. A sum equal to 2% of Net Sales for the Licensed Products sold
by 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 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 Licensee.
6.2 During the Term of this Agreement and for 1 year thereafter,
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. Licensee agrees
to permit Licensor or its representatives, at 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 Affiliate of Licensee of the Licensed Products
manufactured by Licensee shall not be deemed to be sales for the
purposes of the calculation of sums due hereunder unless such
associated company uses the Licensed Product commercially in which
case they shall be deemed sales at the price at which the Licensed
Products are currently sold by Licensee to other persons in
transactions negotiated at arm's length. Provided that if such
associated company or Affiliate resells the Licensed Products to
third parties on which payments to the Licensor have been made, a
sum on such sales shall be payable to the 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 Licensee.
7. COMMON STOCK: EQUITY OWNERSHIP
7.1 In consideration of the rights granted to Licensee by Licensor in
this Agreement, Licensee will, upon execution of this Agreement,
issue Licensor 4,760,000 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 25 years thereafter. Licensee shall have three
options to extend this Agreement for further terms of ten (10) years
each on the same terms as this Agreement (other than this option to
extend) if the 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 Licensee at the end of the initial period or
the extended period as applicable.
8.2 This Agreement will earlier terminate:
A. automatically if Licensee becomes bankrupt or insolvent and/or
if the business of Licensee is placed in the hands of a
receiver, assignee, or trustee, whether by voluntary act of
Licensee or otherwise; or
B. upon 30 days written notice from Licensor if 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, Licensee has
cured the default or breach and so notifies Licensor, stating
the
manner of the cure; or
C. upon 45 days written notice if Licensee breaches or defaults
on any other obligation under this Agreement, unless, before
the end of the 45 day period, Licensee has cured the default
or breach or commencing to cure such default or breach is not
capable of being cured during such period and so notifies
Licensor, stating the manner of the cure; or
D. at any time by mutual written agreement between Licensee and
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 Licensor, at its own expense, must enforce any patent exclusively
licensed hereunder against infringement by third parties. If
Licensor does not file suit against a substantial infringer of a
patent within six (6) months of knowledge thereof, then Licensee may
enforce any patent licensed hereunder on behalf of itself and
Licensor. However, in the event that damages are obtained in favor
of each of the parties or in favor of Licensor in a sum which
includes losses suffered by 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 Licensor and Licensee agree or are advised by counsel that prior
to the institution of proceedings for infringement the patent
specification should be amended, 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 Licensee's
assets to a third party, this Agreement may not be assigned by Licensee
except by an affiliate without the prior written consent of Licensor,
which will not be unreasonably withheld.
11. PATENT MARKING
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
Licensee agrees to hold harmless and indemnify 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 Licensee, its Affiliates or their officers,
employees, agents or representatives.
13. CONFIDENTIAL INFORMATION AND PUBLICATION
13.1 Licensor and 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 Licensee, both parties agree that a
patent application should be filed for the Arcoplate process and/or
identified aspects of the Arcoplate Process, Licensor will prepare
and file the appropriate patent applications, and Licensor will pay
the cost of searching, preparing, filing, prosecuting and
maintaining same. If Licensor notifies Licensee that it does not
intend to pay the cost of an application, or if Licensor does not
respond or make an effort to agree with Licensee on the disposition
of rights in the subject invention, then Licensee may file an
application at its own expense and Licensor will have no rights to
the invention. Licensor will provide 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, 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 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 Licensee to pay the same and to be credited
with the cost thereof.
14.3 Licensor agrees and undertakes, during the term of the Agreement:
a. not to allow any Patent or Application to be abandoned or to
lapse; and
b. 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 Licensee and 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 Licensor and/or 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.
IN WITNESS WHEREOF, parties hereto have caused their duly authorized
representatives to execute this Agreement.
Kenside Investments Limited Alloy Steel International, Inc.
By _________________________________ By___________________________________
Name:_______________________________ Name:________________________________
________________________________________________________________________________