Exhibit 10.29
LICENSE AGREEMENT
AGREEMENT made as of the 29th day of January 2004 by and between H.E.R.C.
Products Incorporated, a Delaware corporation, having its principal office at
1420 Columbus Avenue, Portsmouth, Virginia 23704 ("Licensor"), and Seiwa Pro
Co., Ltd., a corporation organized under the laws of Japan, having its principal
office at 2-3-20 Bessho Matsubara Osaka, Japan Postal code 580-0005
("Licensee").
WHEREAS, Licensor is the owner of certain patented processes and trademarks; and
WHEREAS, Licensor develops and manufactures certain products intended for use in
connection with such patented processes and marketed under such trademarks; and
WHEREAS, Licensor has obtained National Sanitation Foundation (NSF
International, Ann Arbor, Michigan), ANSI/NSF Standard 60 and Standard 61
listings for its products and Licensor's facility for manufacturing same;
WHEREAS, Licensor has developed and owns certain trade secrets and ancillary
know-how regarding such processes and products which Licensee does not presently
possess;
WHEREAS, Licensor has developed patented technology and confidential proprietary
information, processes and trade secrets specifically designed for the
closed-loop chemical cleaning of potable and non-potable based marine, municipal
and industrial water pipe systems and vacuum waste pipe line systems, processed
water systems, fire protection systems, and well cleaning and cooling tower
proprietary chemical formulations; and
WHEREAS, Licensee desires to acquire certain rights to such patented processes
and trademarks, and desires to have at its election the opportunity to access
such trade secrets and know-how and to purchase such products, and is prepared
to limit its use thereof strictly to the licensed applications within and
outside the geographic territory as specified by Licensor;
WHEREAS, the parties desire that Licensor grant to Licensee a license to use the
patented processes, and at the election of the Licensee the opportunity to
purchase products and utilize trade secrets, know-how and certain trademarks
relating thereto, within and outside the territories granted for the Licensed
Purpose set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and conditions herein
contained, the parties hereto agree as follows:
1. Definitions. For purposes of this Agreement, the following terms shall
have the following meanings:
(a) "Affiliate" of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled by" and "under common control with") means the possession,
directly or indirectly, of the power to direct or cause the direction of
the management or policies of a Person, whether through the ownership of
voting securities, by contract or credit arrangement, as trustee or
executor, or otherwise.
(b) "Agreement" means this License Agreement, including the Schedules
hereto.
(c) "Applicable Law" means all applicable provisions of all (i)
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any governmental authority,
(ii) governmental approvals and (iii) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any governmental
authority.
(d) "Gross Selling Price" means the total dollar amount of consideration
realized for rendering cleaning and water treatment services or sales of
products under the Licensed Purpose for the purpose of computing royalties.
(e) "Gross Transfer Price" means the total dollar amount of consideration
realized for the sale, assignment or other disposition of the Licensed
Patents to any Person other than an Affiliate of the Licensee for the
purpose of computing the License Transfer Fee.
(f) "H.E.R.C. Proprietary Rights" means each of the Licensed Patents, and
the Related Products, Related Trademarks, Related Method, and Related
Know-how and Trade Secrets, as each is defined hereinafter.
(g) "Licensed Patents" means each of those issued and pending patents owned
by Licensor as set forth on Schedule A hereto.
(h) "Licensed Purpose" means the use of the Licensed Patents and
Proprietary Technology in connection with the cleaning of marine ship
piping systems, municipal potable distribution systems, commercial,
institutional and industrial infrastructure and facilities piping, water
well rehabilitation, and fire protection sprinkler systems, including at
the election of the Licensee use of the Related Method and Related Products
in the Territory for the cleaning of marine ship piping systems, municipal
potable water distribution systems, commercial, institutional and
industrial infrastructure and facilities piping, water well rehabilitation,
fire protection sprinkler systems.
The Licensed Purpose can include boilers, cooling towers, chill water systems,
closed loop systems or industrial utility systems where Herc's Proprietary
Equipment, Products or Know How is utilized by the Licensor.
(i) "Person" means natural person, firm, partnership, association,
corporation, company, limited liability Company Limited Liability Company,
limited partnership, trust, business trust, governmental authority or other
entity.
(j) "Related Know-how and Trade Secrets" means any information, including,
without limitation, invention records, research records and reports,
development reports, experimental and other engineering reports, designs,
production specifications, raw material specifications, quality control
reports and specifications, drawings and photographs, models, tools and
parts, manufacturing and production techniques, processes, methods,
marketing surveys, or any other information possessed by Licensor, whether
or not considered proprietary, relating to the Licensed Patents, Related
Products and/or Related Method;
(k) "Related Method" means each proprietary method, developed and owned by
the Licensor of cleaning and/or treating potable water and waste water
systems;
(l) "Related Products and Equipment" means each of the products set forth
on Schedule B hereto, including cleaning solutions having ANSI/NSF Standard
60 listing and equipment patented for use with the Related Method as
cleaning aids for potable water distribution systems and waste water
collection systems, together with each of those new or additional products
that Licensor and Licensee may expressly add to this Agreement from time to
time under the provisions hereof;
(m) "Related Trademarks" means each of the trademarks set forth at the on
Schedule C hereto (including the various stylized formats of such
trademarks heretofore used by Licensor or its other licensees), together
with each of those new or additional trademarks that Licensor and Licensee
may expressly add to this Agreement of the Licensee from time to time;
(n) "Royalty-Based Services" means services rendered and related products
sold in connection with the practice of the Licensed Patents for the
Licensed Purpose; and
(o) "Territory" means those territories set forth as "exclusive" on
Schedule D hereto.
2. License Grant; Licensor Reservations; FirstRights of Refusal; Right to
Practice. Subject to the terms and conditions set forth herein:
(a) Exclusive License Within Territory. Licensor hereby grants to Licensee
during the term of this Agreement, the exclusive license to make, use and
sell services and products embodying or made in accordance with the
inventions of the Licensed Patents within the Territory for the Licensed
Purpose only, subject to Licensor Reservations under Section 2(b)
hereinafter.
(b) Sub-Licensing Within the Territory. Licensor hereby grants to Licensee
during the term of this Agreement the right to sub-license within the
Territory with the prior approval of the Licensor. Any License Fee or
exchange of compensation for the Sub-License, and all Royalties or fees
from the Sub-License, shall be split between the Licensee and the Licensor
50%-50% for the duration of this Agreement. If this Agreement is terminated
under Section 8 of this Agreement the Licensor has the right to provide a
direct license to the Sub-Licensee at its discretion.
(c) Licensor Reservations. Licensor hereby reserves during the term of this
Agreement the rights granted under Section 2(a) to make, use and sell
services and products otherwise granted exclusively to the Licensee under
Section 2(a) hereof, including the practice of the Licensed Patents and
elective rights granted under Section 4(a)-(b) for the use of Related
Products, Related Method, and Related Trademarks within the Territory and
Expansion Territory for the Licensed Purpose and any and all other places
and purposes.
(d) Separate and Full Consideration. The License granted under Section 2(a)
above for Licensed Patents shall serve as separate and full consideration
under the terms of this Agreement in exchange for all of Licensee's duties
and obligations. In the event that the validity of any of said H.E.R.C.
Proprietary Rights may be challenged or held invalid or unenforceable, then
this Agreement shall in all other respects remain valid and enforceable.
(e) Limitations. Notwithstanding the grant of Section 2(a) of this
Agreement, no license is granted or implied by this Agreement under any
patent of Licensor other than the Licensed Patents granted under this
Agreement, whether or not the claims of such other patent, know-how,
trademark, product or method dominate the claimed invention of any Licensed
Patents, Related Products and Related Method, Related Know-how and Trade
Secrets, and Related Trademarks.
(f) Right to Practice Outside Territory and Expansion Territory. Licensor
hereby grants to Licensee during the term of this Agreement the
non-exclusive right to make, use and sell services and products embodying
or made in accordance with the inventions of the Licensed Patents outside
the Territory and the Expansion Territory for the Licensed Purpose only,
upon prior written application notice to the Licensor, subject to the
written approval of a specific location therefore by Licensor prior to the
commencement of the practice of the Licensed Patents therein. Licensor
approval to practice outside the Territory and Expansion Territory shall
not be unreasonably withheld; provided, that Licensor's disapproval based
upon, but not limited to, the Licensor's good faith intention to license to
others the Licensed Patents and elective rights under Section 4(a)-(b) or
practice the Licensed Patents within the geographic territory and
territories contiguous thereto shall be conclusively deemed to be
reasonable.
(g) First Right of Refusal Outside of Territory. The written approval to
practice outside the Territory and Expansion Territory, if granted by
Licensor under Section 2(e), shall provide the grant to the Licensee of an
exclusive first right of refusal to license the Licensed Patents outside
the Territory and the Expansion Territory for the Licensed Purpose only,
and the elective rights granted under Section 4(a)-(b) for the use of
Related Products, Related Method, and Related Trademarks, within the
territory as defined in the Licensor written approval under the terms
similar to this Agreement and subject to Section 2(b)-2(d).
3. License Fee; Reserved Royalty; Minimum Royalties; Non-Practice
Termination; Elective Inventory Purchases; Transfer Fee.
(a) License Fee and Pre-paid Royalty. Upon execution of the Agreement, the
Licensee shall in consideration for executing the Agreement, pay to the
Licensor as a License Fee the amount of zero dollars US ($0 US); and shall
pay to the Licensor as a pre-paid Royalty the amount of five hundred
thousand dollars US ($500,000.00 US). The $500,000.00 US shall be forwarded
in two payments of $250,000.00 US each. The first $250,000.00 US shall be
paid within 7 business days of the signing of this agreement. The second
$250,000.00 shall be paid upon the 6 month6 month anniversary of the
signing of this agreement if there is no material deviation in Licensor's
operation from its business plan in Japan which was submitted to Licensee
prior to this Agreement date. If there is a significant deviation in
Licensor's operation from its business plan, both parties will negotiate
the terms and conditions of the second payment after the 6 month period.
The pre-paid Royalty will be paid back to the Licensee by the Licensor
through the Reserved Royalty per 3(b). If at the end of 5 years from the
date of this License Agreement there is any Pre-paid Royalty still owed the
Licensee, the Licensor shall pay back the balance of the Pre-paid Royalty
still remaining or the balance can be converted into stock of the Licensor
by mutual agreement of the Licensee and Licensor. The Pre-paid Royalty
shall accrue interest at 2.25% per annum for the first 6 months of this
agreement and 4.5% per annum thereafter calculated on the balance remaining
at the year-end of each anniversary of this agreement.
(b) Reserved Royalty. The Licensee shall pay to Licensor a royalty as
indicated in Schedule F attached hereto annually on the Gross Selling Price
of Royalty-Based Services from the practice of the Licensed Patents and
Proprietary Technology by the Licensee under the license granted under
Section 2 of this Agreement.
(c) Minimum Royalty. The Licensee shall pay to Licensor royalties as stated
in Section 3(b), but, for the purpose of maintaining the Exclusive License
to the Licensed Territory, in no event shall royalties for a license year
for practice of Licensed Patents in the Territory be less than the Minimum
Royalty during each of the license years as indicated in Schedule E
attached hereto, net to Licensor after taxes, if any, withheld at the
source and payable on or before the 10th day of the first calendar month of
each License Year after the initial license year of this Agreement.
(d) Non-Practice Termination. Licensor may, by written notice to Licensee
within thirty (30) days after receipt of the last report for any license
year after the initial term as extended under Section 8(a), terminate this
Agreement if Licensee has not sufficiently practiced the Licensed Patents
during the preceding license year sufficient to generate an amount of
reserved royalty under Section 3(b) greater than or equal to the amount of
Minimum Royalty as provided by Section 3(c) of this Agreement.
(e) Transfer Fee. The Licensee shall pay to Licensor a License Transfer Fee
of fifty percent (50%) of the Gross Transfer Price for the transfer, sale,
assignment or other disposition of the Licensed Patents by the Licensee or
its Affiliate within thirty (30) days thereof.
4. License Related Products, Related Method and Licensee Elections.
(a) Related Products and Related Method. Licensee may in its sole
discretion elect to contract with Licensor independent of this Agreement
for the non-exclusive use, marketing, sale and provision of the Related
Products, Related Method, and Related Know-how and Trade Secrets in
connection with the practice of the Licensed Patents for the Licensed
Purpose within the Territory and to employ the Licensed Patents in
connection therewith upon terms reasonably agreed upon in writing by the
parties; provided, however, that Licensee expressly agrees that all
chemical products utilized in the practice of the License shall be
exclusively sole sourced from the Licensor to the Licensee from License
Related Products at the Standard Wholesale Price (as defined in Section
7(d), below).
(b) Related Trademarks Election. Licensee may in its sole discretion elect
to contract with the Licensor independent of this Agreement for the
non-exclusive use of the Related Trademarks in the Territory in connection
with the marketing, provision and sale of the Related Products and Related
Method upon terms reasonably agreed upon in writing by the parties;
provided that Licensee hereby acknowledges that its rights under this
subsection (b) shall only provide Licensee with the right to use the
Related Trademarks for advertising and marketing purposes in order to
denote the origin of the Related Products and Related Method.
(c) Training Election. Licensee may at its sole discretion elect to
contract with Licensor to train qualified employees of the Licensee
("Employees") in the application, provisions and operation of the Licensed
Purpose, including the utilization of the Licensed Patents, Related
Products, Related Method, and Related Know-how and Trade Secrets under
terms and at a location or locations reasonably agreed upon in writing by
the parties.
(d) Testing of Samples Election. Licensee may at its sole discretion elect
to contract with Licensor to have Licensor shall provide testing of pipe or
materials in connection with the Licensed Purpose under terms reasonably
agreed upon in writing by the parties.
(e) Special Jobs Assistance. Licensee may at its sole discretion elect to
contract with the Licensor to assist Licensee for special jobs and/or
situations encountered by Licensee in connection with the provision,
conduction and performance of the Licensed Purpose, including, without
limitation, consulting services, telephonic advice and on-site inspection
and analysis, prime contract referral services, subcontract services,
equipment rentals, and equipment design specification services, on terms to
be reasonably agreed upon in writing by the parties at the time such
assistance is requested by Licensee.
5. Duties and Covenants of Licensee.
(a) Incorporation of New Developments. Any developments, upgrades,
enhancements or improvements to the Licensed Patents, Related Products,
and/or Related Method shall, upon the request of Licensor, be adopted and
implemented by Licensee, at Licensee's cost, in connection with Licensee's
provision and performance of the Licensed Purpose.
(b) Express Covenant of Development and Practice. Licensee shall use its
best efforts to identify potential customers and investigate and pursue all
sales leads referred to it by Licensor, develop and practice applications,
secure purchase orders, and market, sell and provide the services and
products under the Licensed Patents for the Licensed Purpose in the
Territory for the mutual benefit of Licensor and Licensee; provided
further, that Licensee shall not otherwise maintain the license without
development and practice of the Licensed Purpose and otherwise hold the
license for speculative purposes. Absent the best efforts of Licensee to
develop and practice the Licensed Purpose, the tender of Minimum Royalty
payments under Section 3(c) for the continuing maintenance of the license
thereby shall be conclusively deemed as holding the license for speculative
purposes contrary to the intention of the parties to the Agreement, and as
such shall constitute the failure to comply with a material provision of
the Agreement.
(c) Quarterly Reports. During the term hereof, Licensee shall provide
Licensor on the 10th day after the end of each license year quarter, a
report on the application of the Licensed Patents and sale of potable water
and waste water cleaning products and services, identifying each project
worked on (with site address), a physical description of the realty (e.g.,
municipality streets/treatment plants, warehouse, office building, etc.),
and the number of linear feet of each system cleaned and/or treated.
(d) Reserved Royalty Payments. On the 10th day of the month after the end
of each license year quarter, Licensee shall tender payment of a reserved
royalty payment remittance on the practice application of the Licensed
Patents identified in the Section 5(c) quarterly reports pursuant to
Sections 3(b) after credit for the Minimum Royalty paid in subsequent
license years under Section 3(c) of this Agreement. In the event a reserved
royalty payment obligation for any license year is an amount less than
Minimum Royalty paid in a subsequent year, there shall not be a
carryforward credit of the amount of Minimum Royalty paid in excess of the
actual reserved royalty payment obligation otherwise required to be
remitted. A reserved royalty payment will be offset by then outstanding
pre-paid Royalty
(e) Licensed Purpose Records; Audits. During the term hereof and for a
period of two (2) years after the termination thereof, Licensee agrees to
keep true and accurate records, files, and books of account containing all
the data reasonably required for the full computation and verification of
the reserved royalties to be paid by the Licensee to the Licensor on the
practice application of the Licensed Patents herein granted and the
information to be given in the reports provided for in Section 5(c) hereof;
and Licensee further agrees to permit its books and records to be examined
from time to time to the extent necessary to verify such reports, such
examination to be made at the expense of the Licensor by an auditor
appointed by Licensor who shall be acceptable to Licensee, or by a
certified public accountant appointed by Licensor; provided that only those
royalties paid or payable by Licensee to Licensor within two (2) year
period immediately preceding the start of the audit, and their supporting
records, files, and books of account shall be subject to audit.
(f) Expenses. Licensee shall pay all of its expenses incurred in connection
with fulfilling its obligations under this Agreement.
(g) Compliance with Environmental Laws of All Relevant Jurisdictions.
Licensee acknowledges and agrees that it is the responsibility and
obligation of the Licensee to determine at the time of disposal of the
spent solution (containing dissolved or suspended scale and sediment as a
result of the practice application of the Licensed Patents), whether such
solution meets Resource, Conservation, and Recovery Act ("RCRA") or such
other foreign jurisdiction criteria for hazardous waste. Licensee
acknowledges and agrees that all direct and residual biomasses and
byproduct generated by the practice application of the Licensed Patents
shall be the property of the Licensee and/or the owner of the water system
to which the Licensed Patents are being applied in practice and that
Licensor shall have no responsibility therefor. Licensee agrees to
undertake to contain, transport and dispose of all such biomass and
byproduct in accordance with all Applicable Laws and regulations of all
relevant federal, state and local jurisdictions, whether foreign or
domestic, at no cost to Licensor.
(h) Compliance with Laws; Foreign Corrupt Practices Act. Licensee warrants
that, to its knowledge, its compliance with the terms and conditions of
this Agreement will not violate any Federal, state or local laws,
regulations or ordinances now or hereafter enacted or any third-party
agreements, including but not limited to the Foreign Corrupt Practices Act,
15 USC Section 78 or successor statute(s). Upon request of Licensor, the
Licensee shall issue certificates certifying compliance with any of the
aforementioned laws, regulations or ordinances as may be applicable to the
Licensed Patents and Method and/or services being furnished pursuant
hereto.
(i) The Licensor has chosen Licensee on the basis of Licensee's experience
and qualifications, including Licensee's reputation for ethical business
conduct and compliance with applicable laws. In light of Licensee's
qualifications, the Licensor believes and expects that Licensee will
maintain its ethical conduct and avoid any activity that might result in a
violation of the U.S. Foreign Corrupt Practices Act or other applicable
U.S. or local law.
(ii) In the event that the Licensor should believe, in good faith, that
Licensee has violated the U.S. Foreign Corrupt Practices Act, this
Agreement will become subject to termination as provided in Section 8 of
this Agreement.
(iii) Licensee affirms that it has not and agrees that it will not, in
connection with the transactions contemplated by this Agreement or in
connection with any other business transactions involving the Licensor,
make or promise to make any payment or transfer anything of value, directly
or indirectly,
(1) to any governmental official or employee (including employees of
government corporations);
(2) to any political party, official of a political party or candidate (or
to an intermediary for payment to any of the foregoing),
(3) to any officer, director, employee, or representative of any actual or
potential customer of the Licensor;
(4) to any officer, director, or employee of the Licensor or any of its
affiliates; or
(5) to any other person or entity if such payment or transfer would violate
the laws of the country in which made or the laws of the United States. It
is the intent of the parties that no payments or transfers of value shall
be made which have the purpose or effect of public or commercial bribery,
acceptance of or acquiescence in extortion, kickbacks, or other unlawful or
improper means of obtaining business. This section shall not, however,
prohibit normal and customary business entertainment or the giving of
business mementos of nominal value.
(iv) The U.S. Foreign Corrupt Practices Act makes it unlawful, among other
things, for a U.S. company or anyone acting on its behalf to make or offer
payment, promise to pay, or authorize the payment of anything of value to
(1) any officer or employee of, or any person acting in an official
capacity for, a foreign government or any department, agency, or
corporation thereof, or any foreign political party, party official, or
candidate; or
(2) any person, while knowing that all or a portion thereof will be
offered, given or promised, directly or indirectly, to anyone described in
(i) above, for the purpose of
(a) influencing any act or decision by such person in his official
capacity, or
(b) inducing him to use his influence with a foreign government to affect,
either by action or inaction, any act or decision of such government to
obtain or retain business for any person.
The Licensee acknowledges receipt of a copy of the U.S. Foreign Corrupt
Practices Act, confirms its understanding of the provisions of the Act, and
agrees to comply with those provisions and to take no action that might cause
the Licensor to be in violation of the Act.
(v) Licensee agrees that it will, at the request of the Licensor, and at
least annually, certify that it has not, and to its knowledge no other
person, including but not limited to every employee, representative, and
agent of the Licensor has made, offered to make, or agreed to make any
loan, gift, donation, or other payment, directly or indirectly, whether in
cash or in kind to or for the benefit of any candidate, committee,
political party or faction or government subdivision or any individual
elected, appointed or otherwise designated as an employee or officer
thereof to secure or retain business. Licensee further agrees that should
it learn of or have reason to know of any such payment, offer, or agreement
to make a payment to a government official, political party, or political
party official or candidate for the purpose of maintaining or securing
business for the Licensor, it will immediately advise Licensor of such
knowledge or suspicion.
(vi) Licensee affirms that it has disclosed to the Licensor that no
government official or candidate has any ownership interest, direct or
indirect, in the Licensee or in the contractual relationship established by
this Agreement. In the event that during the term of this Agreement there
is acquisition of an interest in the Licensee or in this Agreement by a
government official, Licensee agrees to make immediate disclosure to the
Licensor and that this Agreement will become subject to termination as
provided in Section 8 of this Agreement. For the purposes of this
paragraph, "government official" means any officer or employee of the
government or any department, agency, corporation, or instrumentality
thereof or of any political party, including immediate family members or
nominees of such officials.
(vii) Licensee affirms that it has disclosed to the Licensor that no
employee, officer, or director of Licensee is a government official or
candidate. In the event that during the term of this Agreement there is a
change in the information contained in this paragraph, Licensee agrees to
make immediate disclosure to the Licensor and that this Agreement will
become subject to termination as provided in Section 8 of this Agreement.
For the purposes of this paragraph, "government official" means any officer
or employee of the government or any department, agency, corporation, or
instrumentality thereof or of any political party, including immediate
family members or nominees of such officials.
6. Duties of Licensor-Notice of Improvements.
If there are any developments, upgrades, enhancements, and/or improvements to
the Licensed Patents, Related Products, and/or Related Method, Licensor shall
notify Licensee of same.
7. Terms of Practice Sales Pricing and Pricing of Related Products.
(a) The prices Licensee charges for the practice application of the
Licensed Patents or the cost of projects it performs within the Territory
shall be established solely by Licensee and be under its sole and complete
control. Should Licensor provide suggested prices or costs, Licensee is
free to either follow those suggestions or not.
(b) In using, marketing and providing the Method, Licensee shall use only
License Related Products purchased from Licensor, or a source authorized by
Licensor, in accordance with this Section. In addition, Licensee shall use
the License Related Products only in connection with marketing and
providing the Method.
All of the sales of the License Related Products to Licensee shall be made under
the provisions of this Agreement. Any documents that either party may use from
time to time for their mutual convenience such as purchase orders or sales
acknowledgment forms shall be deemed to be for administrative convenience only
and the terms and conditions of this Agreement shall supersede and take
precedence over any similar terms and conditions which conditions, which may be
contained on any such forms.
Licensor shall charge Licensee its "Standard Wholesale Price" for the
License Related Products, which shall be the price Licensor may establish
for the License Related Products, from time to time, as in effect on the
date of receipt of Licensee's purchase order. Licensor shall properly pack
all License Related Products for shipment. Shipment of License Related
Products described on a purchase order shall constitute acceptance of the
purchase order on the terms contained in this Agreement.
Licensee shall pay for all Licensed Products thirty (30) days after receipt
of Licensor's invoice, F.O.B. Licensor's plant Portsmouth, Virginia,
freight collect. Licensee shall pay a penalty of 1% per month on any
invoice thirty five (35) days or older. Risk of loss of the goods shall
pass to Licensee upon delivery by the Licensor to the shipping company for
delivery to Licensee, F.O.B. Licensor's plant. Title to the goods shall
remain with the Licensor until Licensor receives full payment therefore.
8. Term and Termination.
(a) This Agreement shall commence on 1st day of February 2004 and shall
continue for a period of five (5) years from date commencement. This
Agreement will be renewed automatically if the Minimum Royalty per Schedule
E is achieved during the Licensed Period or may be renewed by mutual
agreement under the terms of this Agreement for a five (5) year extension
hereof.
(b) Subject to Section 3(d), either party hereto may terminate this
Agreement prior to its expiration if the other party fails to comply with
any material provision of this Agreement. In the event of such failure,
written notice thereof must be given to the defaulting party, which will
have ten (10) days to cure. Should cure not be affected within that time,
this Agreement shall, at the option of the non-defaulting party, terminate
at the end of the cure period. In addition to such right to terminate this
Agreement, the non-defaulting party shall have all other rights, powers and
remedies afforded by law or equity, including, but not limited to, the
right to specific performance.
(c) In the event that (i) a voluntary petition in bankruptcy is filed by
Licensee or Licensor, or (ii) an involuntary petition in bankruptcy is
filed against Licensee or Licensor and is not dismissed within thirty (30)
days thereafter, or (iii) a receiver or trustee of any of Licensee's or
Licensor's property is appointed and not vacated within thirty (30) days
thereafter, or (iv) Licensee or Licensor shall be adjudged insolvent or (v)
an assignment shall be made of Licensee's or Licensor's property for the
benefit of creditors, Licensor or Licensee shall have the right to
terminate this Agreement immediately upon providing notice to Licensee or
Licensor of such termination.
(d) In the event that any act, regulation, directive, or law of a
jurisdiction within the Territory, including any legislature, department,
agency or court, should make impossible or prohibit, restrain, modify or
limit any material act or obligation of Licensee under this Agreement,
Licensor shall have the right, at its option, to suspend or terminate this
Agreement, or to make such modifications therein as may be necessary.
(e) In the event that any act, regulation, directive, or law of a
jurisdiction within the Territory, including any legislature, department,
agency or court, should make impossible or prohibit, restrain, modify or
limit any material act or obligation of Licensor under this Agreement,
Licensee shall have the right, at its option, to suspend or terminate this
Agreement, or to make such modifications therein as may be necessary.
9. Obligations at Termination. Upon termination of this Agreement:
(a) Licensee shall no longer be authorized to market, provide, sell or use
the Licensed Patents or any elected Related Products, Related Method,
Related Trademarks, and Related Know-how or Trade Secrets;
(b) Licensee shall promptly pay all amounts owing to Licensor including any
such amounts which amounts which might become due at some future date
because of accrued but unpaid reserved royalties and any deferred payment
or credit agreements. Licensor shall also promptly pay all amounts owing to
Licensee which might be due under the prepaid royalties, interest and any
deferred payment or credit agreements.
(c) Upon the termination of this Agreement by either party hereto, Licensee
will return to the Licensor and agrees not to take, retain or thereafter
use, in any way, any customer correspondence, customer lists, application
handbooks, technical letters, products samples, confidential data,
memoranda or information of the Licensor (or any copies thereof);
(d) Licensee will remove and discontinue the use of any sign or any other
designation containing any elected Related Trademarks. Should such Related
Trademarks be printed on any of Licensee's letterhead or other written
documents, the written documents shall promptly be reprinted so as to
remove any such Related Trademarks. Licensee shall promptly return to
Licensor all sales and promotional material bearing the Related Trademarks;
and
(e) The obligations of the parties under Section 9 hereof and Licensee's
obligations under Sections 5(d)-(h), 11 and 12 hereof and to make payments
to Licensor in accordance with the terms of this Agreement shall survive
the termination of this Agreement for any reason.
10. Indemnification and Insurance.
(a) Licensor hereby indemnifies and agrees to hold Licensee harmless from
any loss or claim, including reasonable attorneys' fees and costs, arising
out of (i) the breach by Licensor of any of its representations,
warranties, covenants or obligations hereunder, and/or (ii) the
infringement or alleged infringement of any United States or foreign patent
owned by any third party as a result of the sale, provision of, or use of
the Licensed Patents, Related Method or Related Products by Licensee in
accordance with the terms of this Agreement, provided that Licensee gives
Licensor immediate notice of any such loss or claim and cooperates fully
with Licensor in the handling of such claims.
(b) Licensee hereby indemnifies and agrees to hold Licensor harmless from
any loss or claim, including reasonable attorneys' fees and costs, arising
out of (i) the breach by Licensee of any of its representations,
warranties, covenants or obligations hereunder and/or (ii) the acts of
Licensee or its agents, employees, or representatives in the provision,
installation, application, use, sale or servicing under any of the Licensed
Patents, Related Products or Related Method.
(c) Each party shall name the other as an additional insured on a policy of
insurance providing for completed operations coverage, including public
liability and property damages, in an amount of at least $2,000,000 per
occurrence with a deductible of no more than $25,000 per occurrence. Each
party shall provide the other with a certificate of such insurance upon
request.
11. Confidentiality.
(a) Licensee acknowledges that (i) as a result of the licenses granted
hereunder, Licensee has obtained and will obtain secret and confidential
information concerning the H.E.R.C. Proprietary Rights, (ii) the Licensor
will suffer substantial damage which will be difficult to compute if,
during the term of this Agreement or thereafter, Licensee should enter a
business competitive with the Licensor or divulge confidential information;
and (iii) the provisions of this Agreement are reasonable and necessary for
the protection of the business of the Licensor.
(b) Licensee agrees that, during the term of this Agreement and thereafter,
it shall not use or disclose, directly or indirectly, to any person,
organization or company, any of the H.E.R.C. Proprietary Rights or any
confidential data, inven-tions, discoveries, improvements, designs, systems
developments, devices, acquired by, disclosed to, or which come to
Licensee's attention or knowledge as a licensee of the Licensor, except for
use in connection with this Agreement or under the express written
direction of the Licensor.
(c) If Licensee commits a breach, or threatens to commit a breach, of any
of the provisions of this Section 11, the Licensor shall have the right and
remedy: (i) to have the provisions of this Agreement specifically enforced
by any court having equity jurisdiction, it being acknowledged and agreed
by Licensee that the License granted hereunder is of a special, unique and
extraordinary character and that any such breach or threatened breach will
cause irreparable injury to the Licensor and that money damages will not
provide an adequate remedy to the Licensor; (ii) to require Licensee to
account for and pay over to the Licensor all damages suffered by the
Licensor as a result of any transactions constituting a breach of any of
the provisions of this Section 11 and Licensee hereby agrees to account for
and pay over such damages to the Licensor.
Each of the rights and remedies enumerated in this Section 11(c) shall be
independent of the other, and shall be severally enforceable, and such
rights and remedies shall be in addition to, and not in lieu of, any other
rights and remedies available to the Licensor under law or equity.
In connection with any legal action or proceeding arising out of this
Section 11, the prevailing party in such action or proceeding shall be
entitled to be reimbursed by the other party for the reasonable attorneys'
fees and costs incurred by the prevailing party.
(d) If Licensee shall violate any covenant contained in this Section 11,
the duration of such covenant so violated shall be automatically extended
for a period of time equal to the period of such violation.
(e) If any provision of this Section 11 is held to be unenforceable because
of the scope, duration or area of its applicability, the tribunal making
such determination shall have the power to modify such scope, duration, or
area, or all of them, and such provision or provisions shall then be
applicable in such modified form.
12. Protection of H.E.R.C. Proprietary Rights.
(a) Nothing contained in this Agreement shall be construed as an assignment
or grant to Licensee of any right, title or interest in and to the H.E.R.C.
Proprietary Rights, it being agreed that all rights relating to the
H.E.R.C. Proprietary Rights are reserved by Licensor except for and to the
extent such rights are licensed hereunder. Licensee agrees, at Licensor's
request and expense, to take such action as is appropriate or necessary to
protect Licensor's interest in and to any copyright, patent, trade secret,
trademark or other rights relating to the H.E.R.C. Proprietary Rights.
Licensee shall execute such applications, documents and registrations on
behalf of Licensor as may be reasonably requested by Licensor therefor;
(b) Any improvements made by Licensee or Licensor to the H.E.R.C.
Proprietary Rights, whether or not said improvements are patentable or
patented shall be deemed vested solely in Licensor and made available
promptly to Licensee for use hereunder provided that same shall be sole
property of Licensor, and Licensee hereby assigns such improvements to
Licensor. Licensor hereby agrees that Licensee shall be free to use such
improvements during the term of and pursuant to this Agreement without
payment of any additional compensation to Licensor; and
(c) Licensee hereby acknowledges the value of the publicity and goodwill
associated with the H.E.R.C. Proprietary Rights and acknowledges that any
goodwill, copyright, patent, trademark and any other rights and titles in
and to the H.E.R.C. Proprietary Rights, their design, representation and
character, and adaptations, treatments and the name thereof, exclusively
belong to and/or are controlled by Licensor. Licensee undertakes and agrees
not to use the H.E.R.C. Proprietary Rights in any manner whatsoever which
would materially harm or damage the value of the H.E.R.C. Proprietary
Rights and to only use such rights in accordance with and under the terms
of this Agreement.
13. Infringement of H.E.R.C. Proprietary Rights by Third Parties.
Licensee shall promptly notify Licensor in writing of any apparent unauthorized
use or infringement or imitations by others of any of the H.E.R.C. Proprietary
Rights which may come to Licensee's attention. Promptly after receipt of such
notice, Licensor and Licensee and their respective legal counsel will meet to
jointly discuss what action, if any, Licensor and/or Licensee may take with
respect to such alleged infringement. After such discussions, Licensor shall,
based upon advice of its legal counsel but in its sole and absolute discretion,
determine what action, if any, will be taken by Licensor and Licensee with
respect to such alleged infringement. In no event may Licensee take any such
action without the prior written consent of Licensor. In furtherance thereof,
Licensor, if it so determines, may (i) commence or prosecute any claims or suits
in its own name; or (ii) join Licensee as a party thereto; or (iii) upon written
notice to Licensee, authorize and direct Licensee to commence or prosecute any
such claims or suits in the name of Licensee, and Licensee agrees to diligently
prosecute same if so directed. Licensee agrees to cooperate fully in any action
at law or in equity undertaken by Licensor or Licensee against such unauthorized
use, infringement or imitation. Licensor agrees that all expenses incurred by
Licensee under this Section in connection with any such action shall be borne by
Licensor, and all recoveries therein shall be for Licensor's exclusive benefit.
14. Adjudication of Licensed Patents.
(a) Should any patent licensed hereunder be declared invalid or not
infringed or limited in scope by a final decision of a court or other
tribunal of competent jurisdiction in the country in which said patent was
granted binding on all persons in all parts of said country, then the
construction placed upon said patent by said court or other tribunal shall
be followed by the parties hereto from and after the date of entry of the
decree of said court or tribunal and fees and royalties for the practice
application of Licensed Patents under Section 2, or sales or use of Related
Products and Related Method under Section 4 which are solely dependent upon
such patent construction shall thereafter be payable only in accordance
with such construction. Fee and royalty obligations under Section 3
otherwise due shall be the continued obligation of the Licensee.
(b) Nothing in this Agreement precludes Licensee from contesting the
validity of any patent licensed herein. In the event that evidentiary
material comes to the attention of Licensee subsequent to the Effective
Date which, in Licensee's judgment, bears on the validity or scope of any
patent licensed herein, Licensor will in good faith discuss the material
with Licensee and will negotiate in good faith a modification of this
Agreement.
15. Force Majeure
If performance of this Agreement is interfered with for any length of time by an
act of God, war, civil commotion, earthquake or other similar occurrences which
are beyond the control of either party, neither party shall be held responsible
for non-performance of this Agreement for such a length of time. Either party
shall use its best efforts to minimize the effects, if possible, which any such
cause has upon its respective obligations under this Agreement.
16. Miscellaneous.
(a) Assignment. The License granted in this Agreement shall be binding upon
any successor of Licensor in ownership or control of the Licensed Patents
and the obligations of Licensee, including but not limited to the
obligation to make reports and pay royalties, shall run in favor of any
such successor and of any assignee of Licensor's benefits under this
Agreement. Licensor may assign this Agreement to any person to whom its
business or any of the H.E.R.C. Proprietary Rights is transferred. Licensee
may assign this Agreement, subject to prior written approval by Licensor,
to any person and the obligations, duties and covenants of Licensee,
including but not limited to the obligation to develop and practice the
Licensed Patents for the Licensed Purpose, make reports and pay royalties,
shall run in favor of Licensor and are binding on any assignee of
Licensee's benefits and obligations under this Agreement. A change of
ownership or control of Licensee of fifty percent (50%) or more of the
voting stock or interest of Licensee shall require the written consent of
Licensor to allow Licensee to continue practice the patents under this
Section 15(a).
(b) Failure to Enforce. The failure of either party to enforce at any time
or for any period of time any of the provisions of this Agreement shall not
be construed as a waiver of such provisions or of the right of the party
thereafter to enforce each and every such provision. Any such waiver must
be in writing.
(c) Relationship of the Parties. The relationship of the parties to this
Agreement is licensor and licensee. Licensee and its agents and employees
shall not be deemed agents or representatives of the Licensor. Neither
Licensee nor Licensor shall have any right to enter into contract or
commitment in the name, or on behalf of, the other, or to bind the other in
any respect whatsoever.
(d) Notice. All notices to be given hereunder to Licensor shall be in
writing and sent to the address set forth below, or to such other address
as may be subsequently designated by the parties hereto:
H.E.R.C. Products Incorporated
1420 Columbus Avenue
Portsmouth, Virginia 23704
Attention: S. Steven Carl, CEO
with a copy to:
John A. Gulick III, V.P.-Office of General Counsel
H.E.R.C. Products Incorporated
23845 N. 74th Street
Scottsdale, Arizona 85255
All notices to be given hereunder to Licensee shall be in writing and sent to
the address set forth below, or to such other address as may be subsequently
designated by the parties hereto:
Seiwa Pro Co., Ltd.
2-3-20 Bessho Matsubara
Osaka, Japan
Postal code 580-0005
Attention: Masaaki Okuda, CEO
with a copy to:
Seiwa Pro Co., Ltd.
2-3-20 Bessho Matsubara
Osaka, Japan
Postal code 580-0005
Attention: Masaaki Hashimoto, Director
Notices shall be deemed given upon delivery by hand, by facsimile transmission
or by overnight courier, and three days after being deposited in the U.S. mail.
Either party may change its effective address by giving thirty (30) days notice
of the new address in the manner provided in this Section.
(e) Severability. In the event that any provision hereof is held to be
invalid or void by any court of competent jurisdiction, the same shall be
deemed severed from the remainder of this Agreement, and shall in no way
affect any other provision hereof. If any provision shall be deemed invalid
as being unduly broad, such provision shall be deemed valid to the extent
permitted by law.
(f) Blue Penciling. If any provision of this Agreement is held to be
unenforceable because of the scope, duration or area of its applicability,
the tribunal making such determination shall have the power to modify such
scope, duration or area, or all of them, and such provision or provisions
shall then be applicable in such modified form.
(g) Jurisdiction; Governing Law. In the event of any dispute under this
Agreement, then and in such event, each party hereto shall submit to the
jurisdiction of the federal and state courts located in Norfolk, Virginia,
United States of America, and neither party shall raise any objection to
such venue. This Agreement and all amendments thereto shall, in all
respects, be governed by and construed and enforced in accordance with the
internal law (without regard to principles of conflicts of law) of the
State of Virginia.
(h) Entire Agreement. With the express exception of a third party
confidentiality and non-disclosure agreement executed by the Parties on 29
July 2003, this Agreement constitutes the entire agreement between the
parties concerning the subject matter and takes the place of all previous
agreements or understandings, whether written or oral, respecting its
subject matter. Any representation, promise, or condition in connection
with such subject matter which is not incorporated in this Agreement shall
not be binding upon either party. This Agreement may not be modified,
renewed, extended, waived, and (except as provided in Section 8 hereof)
terminated or amended except by a writing executed by all parties hereto.
No modification, renewal, waiver, termination or amendment shall be binding
upon the party against whom enforcement of such is sought without a writing
executed by the parties. As used herein, the words "terminated" and
"termination" include any and all means of bringing to an end prior to its
expiration by its own terms this Agreement, or any provision thereof,
whether by release, discharge, abandonment, or otherwise.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
in duplicate originals by its duly authorized officers or representatives on the
date first written above.
LICENSOR: H.E.R.C Products Incorporated
By:____________________________
Printed Name: S. Steven Carl
Title: Chairman & CEO
LICENSEE: Seiwa Pro Co., Ltd.
By:____________________________
Printed Name: Masaaki Okuda
Title: President & CEO
-----------------
SCHEDULE A
Licensed Patents
"Method of Cleaning and
Maintaining Water Distribution Pipe Systems"
Applied for Patent
(Japan. Pat. Appln. Ser. No. 521313/94 dtd. 03/22/1994)
"Pipe System Cleaning and In-Line Treatment of Spent Cleaning Solution"
Applied for Patent
(Japan Pat. Appln. Ser. No. 538767/98 dtd 03/04/1998)
"Cleaning and Passivating Water Distribution Systems"
Applied for Patent
(Japan Pat. Appln. Ser. No. 2000-573488 dtd. 10/04/1999)
South Korean Patents
Method of Cleaning and Maintaining Water Distribution Pipe Systems
Issued Patent
Ser. No. 355912 dtd. 03/22/2002
Cleaning and Passivating Water Distribution Systems
Applied for Patent
Ser. No. 2001-7004107 on 10/04/1999
Malaysian Patents
Method of Cleaning & Maintaining Potable Water Distribution Pipe Systems
With a Heated Cleaning Solution
Applied for Patent
Ser. No. PI95001617 dtd. 06/15/1995
SCHEDULE B
Related Products and Equipment
Line Out(R)
Pipe Klean(R) PreBlend
Pipe Klean(R)
Pipe Klean(R) C
Pipe Klean(R) Neutralizer
Well Klean(R)
Well Klean II(R)
Well Klean(R) Preblend
Well Klean(R) Neutralizer
Mobile Recirculation Unit (MRU)
SCHEDULE C
Related Trademarks
Line Out(R)
Pipe Klean(R)
Well Klean II(R)
SCHEDULE D
Exclusive Territory
Japan
China
Taiwan
South Korea
Singapore
Malaysia
SCHEDULE E
Minimum Royalty
License Year Minimum Royalty
1 US $0
2 US$50,000
3 US$100,000
4 US$100,000
5 US$100,000
** US$100,000
** Per annum for balance of term, as extended.
SCHEDULE F
Annual Royalty Schedule
Sales Amount Royalty
0- US$1,000,000.00 10%
US$1,000,001.00-US$5,000,000.00 7.5%
US$5,000,001.00-US$10,000,000.00 5%
US$10,000,001.00 and above 3%