EXHIBIT 10.1
LICENSE AGREEMENT
THIS LICENSE AGREEMENT made effective this 1st day of January, 2001
BETWEEN:
ADVANCED INTERACTIVE INC., a corporation, incorporated
on September 1, 1998 established under the laws of the
State of Nevada, USA, and having its head offices
located at suite 718 - 1350 East Flamingo Road, Las
Vegas, NV 89119
(hereinafter called "AII Nevada")
AND:
ADVANCED INTERACTIVE CANADA INC., a corporation
established under the laws of the Province of British
Columbia which is a wholly owned subsidiary of AII
Nevada with offices at suite 2101 - 1177 West Hastings
Street, Vancouver, BC V6E 2K3
(hereinafter called "AII Canada")
AND:
ALTERNET SYSTEMS INC., a corporation established under
the laws of the State of Nevada, USA, having offices at
Suite 280 - 815 West Hastings Street, Vancouver, BC,
Canada V6C 1B4
(hereinafter called "Alternet")
singularly referred to as "party", and together referred to as
"the Parties"
WITNESSETH THAT:
A. WHEREAS AII Nevada and AII Canada have developed proprietary
software and hardware systems technology known as
"SchoolWeb" and "OfficeServer" for caching Internet and
multimedia files on special servers at schools, homes,
businesses or other locations, and wish to license certain
rights to the SchoolWeb and OfficeServer software and
hardware systems technology (the "Licensed Technology") to Alternet;
B. WHEREAS AII Nevada or AII Canada wishes to provide Products
and Services to customers using the Licensed Technology
including after installation support and services to
customers which use the Licensed Technology; and
C. WHEREAS Alternet is a start-up company with a skilled sales
force, operating in North America, and wishes to enter into
this License Agreement to obtain rights to distribute,
market, sell and license the Licensed Technology, to provide
the Licensed Technology, Products and Services in a
prescribed Field of Use, in a prescribed Territory, under
the terms and conditions of this Agreement, and
D. WHEREAS Alternet represents that it is experienced in, and
wishes to put its full energy towards, the enhancement and
commercial development of a business which would use the
Licensed Technology including devoting funds, staff,
business expertise and business and marketing planning to
further the commercial success of the Licensed Technology.
NOW THEREFORE in consideration of the mutual promises and
covenants hereinafter contained, AII Nevada, AII Canada, and
Alternet, the Parties to this Agreement, agree as follows:
1.0 INTERPRETATION
1.1 As used in this Agreement, the following terms shall have
the definitions respectively assigned to them hereunder
unless the subject matter or context otherwise requires:
(a) "Agreement" means this document comprising Sections 1
to 22 inclusive together with Schedules 1.0 and 2.0
attached hereto, which shall be read with and form a
part of this Agreement;
(b) "SchoolWeb" and "OfficeServer" mean the trademarked
names of the Licensed Technology produced by employing
the Licensed Technology and shall be read to include
any future names trademarked by AII Nevada or AII
Canada or Alternet which relate to the Licensed Technology;
(c) "Follow-on Invention" means an invention made by, owned
by or licensed to AII Nevada or AII Canada that falls
within the scope of the claims of the intellectual
property ("IP") rights forming the Licensed Technology,
or an invention that utilizes the IP or one that
constitutes an Improvement to the IP;
(d) "Field of Use" has the meaning set out in Schedule 1.0, part V;
(e) "herein", "hereby", "hereof", "hereunder", and similar
expressions, when used in any Section, shall be understood to relate
to this Agreement as a whole and not merely to the Section in which
they appear;
(f) "Improvement" means any change to or development of the
Licensed Technology made by, owned by, or licensed to,
AII Nevada or AII Canada, including a Follow-on
Invention, that may improve the Licensed Technology or
the Services or both. Improvement includes for
copyrightable or copyrighted material, any translation,
abridgement, revision or other form in which an
existing work may be recast, transformed or adapted;
for patentable or patented material, any improvement
thereon; and for material which is protected by trade
secret, any new material derived from such existing
trade secret material, including new material which may
be protected or protectable by copyright, patent and/or trade secret;
(g) "Licensed Technology" means the proprietary software
and hardware systems technology currently known as
"SchoolWeb" and "OfficeServer" for caching and indexing
Internet and multimedia files on special servers at
schools, homes and businesses as described in Schedule 1.0, Part I.
The term Licensed Technology also includes:
(i) the head-end hardware and software system
necessary to transmit data via various
broadcasting systems, and the receiving and
decoding hardware and software at the receiving
location, as described in Part III of Schedule 1.0,
(ii) all claims specific to the transmission encoding
process contained in IP described in Part II of
Schedule 1.0, as may be amended from time to time,
including any continuation, divisional, or
continuation-in-part application entitled to
priority based on the IP, as described in Schedule
1.0, as well as any Improvements,
(iii) any Licensed Technology provided by way of
technical assistance as more particularly set out in
Section 4.0 hereof of this Agreement; and
(iv) Product as defined below.
(h) "Maintenance" means provision of Hardware Maintenance,
and Software Maintenance which is required to ensure
Licensed Technology customers' ability to utilize the
Licensed Technology.
"Hardware Maintenance" means the provision of hardware
service calls and repair and/or replacement of hardware
components of SchoolWeb and OfficeServer systems.
"Software Maintenance" means provision of a service to
repair any software problems, as well as provide
upgrades to the software, on a periodic basis;
(i) "Net Revenue" means the total revenue from the
distribution, marketing, sub-license or sale of the
Licensed Technology, less the cost of installation,
Maintenance, hardware costs, hardware leasing costs,
taxes, costs incurred by third parties (parties other
than the Parties) but charged against the Net Revenue,
discounts and rebates Alternet receives from its rights
to the Licensed Technology, and specifically excludes
revenues of AII Nevada or AII Canada which are realized
from providing Product Software, Software Maintenance
and Software License to Alternet's customers;
(j) "Party" means Alternet, AII Nevada and/or AII Canada as
the context requires, and "Parties" means all of
Alternet, AII Nevada or AII Canada;
(k) "Product" means any Product Hardware and Product
Software which are made in whole or in part by
utilizing the Licensed Technology, or any application
or hardware of the IP which falls within the definition
of Licensed Technology, or which are produced according
to a process which, in whole or in part, is subject to
IP which falls within the definition of Licensed
Technology, or any IP application therefor.
"Product Hardware" means any physical hardware that
resides in the server box, along with any other
peripheral units required to make up the SchoolWeb and
OfficeServer systems. Product hardware may also
include installation and commissioning at the
customer's premises.
"Product Software" means any software operating systems
and software applications that are part of , and allow
the SchoolWeb and OfficeServer to operate, including
software programs that may reside on computer clients
that use the SchoolWeb and OfficeServer systems. Product Software
may also include installation and configuration of software on server
hard drives;
(l) "Restricted Information" means information of a
confidential or proprietary nature disclosed by one
party to another. Restricted Information does not
include:
(i) information which is lawfully in the public domain
at the time of one Party's receipt or acquisition
thereof from the other Party, or which becomes a
part of the public domain through no breach, by
the receiving Party, of any obligation of
confidentiality with respect to such information;
and
(ii) information which, subsequent to one Party's
receipt or acquisition thereof from the other
Party, is lawfully obtained by the receiving Party
from another source without restriction on further
disclosure and without breach by any person of any
obligation of confidentiality (contained herein or
otherwise existing) with respect to such information.
(m) "Services" means any Support Services or Consulting
Services related to the Licensed Technology which are
required to ensure Licensed Technology customers'
ability to utilize the Licensed Technology.
"Support Services" means the provision of help desk and
technical support for purchasers of SchoolWeb and
OfficeServer systems, for 'x' hours per day, 'y' hours
per week.
"Consulting Services" means the provision of consulting
work regarding variations of hardware and software of
SchoolWeb and OfficeServer systems to suit new client
applications;
(n) "Software License" means the license attached to each
SchoolWeb and OfficeServer system sold or leased to
every client;
(o) "Territory" means the geographical area, in which
Alternet has been given the licensed rights to the
Licensed Technology. The Territory is described in
Schedule 1, Part IV.
1.2 For the purposes of this Agreement, any reference to the
"sale" of Licensed Technology or Services shall be
interpreted to include the "lease", "license" or "sub-
license" of Licensed Technology or Service, or both.
2.0 GRANT OF LICENSE
2.1 Subject to the terms of this Agreement AII Canada and AII
Nevada hereby grant to Alternet an exclusive right and
license to commercialize, distribute, sell, sub-license and
market SchoolWeb related Licensed Technology, Products and
Services in the prescribed Fields of Use, and in prescribed
Territories, as set out in Schedule 1.0 hereto; and a non-
exclusive license to commercialize, distribute, sell, sub-
license and market OfficeServer related Licensed Technology,
Products and Services, in the prescribed Fields of Use, and
in prescribed Territories, as set out in Schedule 1 hereto.
2.2 AII Canada and AII Nevada shall be the sole and exclusive
provider of the Software License for SchoolWeb and
OfficeServer systems. AII Canada and AII Nevada shall also
have the right of first refusal to be the provider to
Alternet (at commercially reasonable and competitive rates)
of Product Software and Software Maintenance. The Parties
shall agree annually on suitable levels of service and cost
of both Product Software (including installation and
configuration on a hard drive) and Software Maintenance.
2.3 Alternet agrees that this Agreement does not grant Alternet
any rights to or interest in such Licensed Technology except the right
to use such Licensed Technology in accordance with the terms of this
Agreement. In short, Alternet will not acquire existing IP rights from
AII Nevada or AII Canada as a result of engaging in the
transactions in this License Agreement.
2.4 Alternet agrees that during the term of this Agreement and
thereafter it will not dispute or contest, directly or
indirectly, the validity of AII Nevada's or AII Canada's IP
rights to the Licensed Technology, nor counsel or assist any
other party to do the same, unless compelled to do so by due
process of law.
2.5 Except as concerns GNU licenses and other software vendors
licenses provided to Alternet by AII Nevada or AII Canada,
neither AII Nevada nor AII Canada are aware of any way in
which the Licensed Technology or Services infringe upon any
third parties' copyright, patent, industrial design,
registration or trademark rights. Nothing in this Agreement
shall be construed as a representation, warranty or covenant
by or on behalf of AII Nevada or AII Canada,
(a) that any Licensed Technology which is manufactured,
used, or sold, or any Service which is provided
pursuant to the license granted under this Agreement,
is, or will be, free from infringement of any
copyright, patent, industrial design registration, or
trademark, or is not, or will not be, in breach of a
trade secret,
(b) that it will bring or prosecute any action or suit of
any nature against any third party with respect to such
third party's infringement or alleged infringement of
the Licensed Technology, or
(c) that it will defend any action or suit of any nature
brought by any third party in which it is alleged that
use of the Licensed Technology has infringed, or will
infringe, such third party's rights,
(d) if there are any software license fees to be paid to
third parties then Alternet will pay those fees and the
fees will be considered as part of the cost of the server.
2.6 Alternet agrees that it will not institute any action or
suit of any nature against AII Nevada or AII Canada, by way
of indemnification or otherwise, in respect of any of the
matters set out in Section 2.4.
2.7 In the event of an alleged infringement of the Licensed
Technology or any right with respect to the Licensed
Technology, Alternet shall have the right to prosecute
litigation designed to enjoin infringers of the Licensed
Technology. AII Nevada and AII Canada agree to co-operate
to the extent of executing all necessary documents and to
vest in Alternet the right to institute any such suits, so
long as all the direct costs and expenses of bringing and
conducting any such litigation or settlement shall be borne
by Alternet and in such event all recoveries in excess of
all costs relating to the litigation shall enure to Alternet.
2.8 Subject to the prior written consent (said consent not to be
unreasonably withheld) of AII Nevada or AII Canada, Alternet
may grant sublicenses to third parties on terms and
conditions substantially in accordance with the terms and
conditions contained herein. AII Canada's or AII Nevada's
entitlement to payments derived from such sublicensing
arrangements shall be agreed upon by the Parties prior to
AII Nevada or AII Canada providing its written consent.
2.9 In the event that any complaint is made against Alternet
with respect to its marketing, use or sale of the Licensed
Technology or Services, the following procedure shall be adopted:
(a) Alternet shall promptly notify AII Nevada or AII Canada
upon receipt of any such complaint and shall keep AII
Nevada or AII Canada fully informed of the actions and
positions taken by the complainant and taken or
proposed to be taken by Alternet on behalf of itself or
a sublicensee,
(b) all costs and expenses incurred by Alternet or any
sublicensee of Alternet in investigating, resisting,
litigating and settling such a complaint, including the
payment of any award of damages and/or costs to any
third party, shall be paid by Alternet or any
sublicensee of Alternet, as the case may be save and
except in the case of negligence or fault in the
provision of Services by AII Canada or AII Nevada (in
which case the costs and expenses shall be paid by AII
Canada or AII Nevada);
(c) no decision or action concerning or governing any final
disposition of the complaint shall be taken without
fully informing AII Nevada or AII Canada;
(d) AII Nevada or AII Canada may elect to participate
formally in any litigation involving the complaint to
the extent that the court may permit, but any
additional expenses generated by such formal
participation shall be paid by AII Nevada or AII Canada
(subject to the possibility of recovery of some or all
of such additional expenses from the complainant); and
(e) if the complainant is willing to make or accept an
offer of settlement and Alternet is willing to make or
accept such offer and AII Nevada or AII Canada is not,
then AII Nevada or AII Canada shall conduct all further
proceedings at its own expense, and shall be
responsible for the full amount of any damages, costs,
accounting of profits and settlement costs in excess of
those provided in such offer, but shall be entitled to
retain unto itself the benefit of any litigated or
settled result entailing a lower payment of costs,
damages, accounting of profits and settlement costs
than that provided in such offer.
2.10 In the event that any complaint is made against AII Nevada
or AII Canada with respect to the use of the Licensed
Technology by Alternet or the marketing, use or sale of the
Licensed Technology by Alternet for which AII Nevada or AII
Canada is relying upon the indemnification of Alternet
pursuant to Section 14 herein, then the following procedure
shall be adopted:
(a) AII Nevada or AII Canada shall promptly notify Alternet
upon receipt of any such complaint and shall keep
Alternet fully informed of the actions and positions
taken by the complainant and taken or proposed to be
taken by AII Nevada or AII Canada,
(b) pursuant to the indemnification contained in Section
14, all reasonable costs and expenses incurred by AII
Nevada or AII Canada in investigating, resisting,
litigating and settling such a complaint, including the
payment of any award of damages and/or costs to any
third party, shall be paid by Alternet,
(c) no decision or action concerning or governing any final
disposition of the complaint shall be taken without
full consultation with and approval by Alternet in
writing, such approval not to be unreasonably withheld,
(d) Alternet may elect to participate formally in any
litigation involving the complaint to the extent that
the Court may permit, with the consent of AII Nevada or
AII Canada, such consent not to be unreasonably
withheld, but any additional expenses generated by such
formal participation shall be paid by Alternet (subject
to the possibility of recovery of some or all of such
additional expenses from the complainant), and
(e) if the complainant is willing to accept an offer of
settlement and AII Nevada or AII Canada is willing to
approve the acceptance of such an offer and Alternet is
not, then Alternet shall conduct all further
proceedings at its own expense and shall be responsible
for the full amount of damages, costs, accounting of
profits and settlement costs in excess of those
provided in such offer, but shall be entitled to retain
unto itself the benefit of any litigated or settled
result entailing a lower payment of costs, damages,
accounting of profits and settlement costs than that
provided in such offer.
2.11 Upon request by AII Nevada or AII Canada (both acting
reasonably and without undue interference in the business of
Alternet):
(a) Alternet shall provide AII Nevada or AII Canada with
copies of all reports, minutes, notes, and other
documents containing information which Alternet
generates in relation to the use of the Licensed
Technology (provided no law, statute or regulation bars
such provision); and
(b) Alternet shall grant to AII Nevada or AII Canada an
exclusive, irrevocable right and license to use such
information together with the right to grant other
sublicensees the right to use such information at no
cost to AII Nevada or AII Canada.
3.0 TRANSFER OF LICENSED TECHNOLOGY
3.1 To the extent required for marketing, use and sales, and
subject to the terms and conditions contained in this
Agreement, and upon execution of the Agreement, AII Nevada
or AII Canada shall provide to Alternet, at AII Nevada's or
AII Canada's expense:
(a) an IP disclosure statement prepared by AII Nevada or
AII Canada relating to the IP referred to in Schedule
1.0, Part I;
(b) all of the available technical information described in
Schedule 1.0, Parts I and III which deal with the
knowledge of the Licensed Technology, within one
hundred fifty (150) days after the effective date of
this Agreement, and
(c) technical assistance in accordance with Article 4.0.
3.2 During the term of this Agreement AII Nevada or AII Canada
shall provide to Alternet any Improvement to the Licensed
Technology, in which case the provisions of Article 7 hereof
shall apply to said Improvement.
3.3 To maintain quality control during the term of this
Agreement, Alternet agrees to purchase materials and
software provided by AII Nevada or AII Canada provided that
these are available at commercially reasonable and
competitively advantageous rates. AII Nevada's or AII
Canada's proprietary software shall be kept by Alternet as
highly Restricted Information as outlined in Section 8.0.
3.4 Alternet further agrees to make all reasonably necessary
efforts to affix or print the SchoolWeb or OfficeServer
trademark on software or hardware components comprising the
Licensed Technology marketed under this Agreement to its
customers, such that a trade mark is clearly visible to its
customers.
4.0 TECHNICAL ASSISTANCE
4.1 Upon the written request of Alternet, AII Nevada or AII
Canada will make available, for a time period and at a
commercially reasonable and competitive price to be
determined at the time of the request, and at a level to be
determined by AII Nevada or AII Canada, the services of a
minimum of two (2) full time suitable, competent personnel
to assist Alternet in exploiting the Licensed Technology for
the purposes specified in Section 2.1 to provide Products
and Services to customers.
4.2 Upon the written request of Alternet, AII Nevada or AII
Canada may permit Alternet to attach a reasonable number of
two (2) or more of its personnel to AII Nevada's or AII
Canada's facilities, in accordance with terms and conditions
reasonably specified by AII Nevada or AII Canada, in order
to assist Alternet in exploiting the Licensed Technology.
4.3 Upon the written request of AII Nevada or AII Canada,
Alternet may, at Alternet's discretion, permit AII Nevada or
AII Canada to attach a limited number of its personnel to
any facility where the Licensed Technology is being
exploited by Alternet for the purposes specified in Section
2.1, under terms and conditions specified by Alternet, to
enable AII Nevada or AII Canada to observe such exploitation
of the Licensed Technology.
4.4 AII Nevada or AII Canada may also provide to Alternet other
forms of technical assistance, including making its
facilities available in connection with a demonstration of
the Licensed Technology. Such technical assistance will be
provided upon payment therefor by Alternet, on the basis of
AII Nevada's or AII Canada's standard commercial rates
(which shall be commercially reasonable) plus travelling and
living expenses at AII Nevada's or AII Canada's standard
rates (provided these rates are commercially reasonable).
5.0 PAYMENTS
5.1 In consideration of the grant of license under this
Agreement Alternet shall pay to AII Nevada or AII Canada
during the term of this Agreement, the following payments
(the "Payments"):
(a) Payments from its revenue from the sale, lease or sub-
license of Licensed Technology, Products and Services
equal to forty (40) % of the Net Revenue received for
such revenue, except that payment under Net Revenue
shall not be less than US$1000 per server per annum;
and
(b) Payments, if applicable, for Product Software and
Software Maintenance provided by AII Nevada or AII
Canada (if these fees are first received by Alternet
from its clients to whom the services were rendered),
as agreed annually by the Parties as described in
Article 2.2 for both the SchoolWeb and OfficeServer
portions of the Licensed Technology;
(c) Also, in consideration of the license granted, and on
execution of this Agreement, Alternet will issue to AII
Nevada the greater of 2,000,000 of its common shares,
or an amount equal to 25% of Alternet's totally issued
and outstanding common shares at the date of execution
of this Agreement. Furthermore, Alternet will give AII
Nevada the right to appoint Karim Lakhani (or such
other person as may be agreed by AII Nevada and
Alternet) to its Board of Directors;
(d) For the term of this Agreement and commencing on
January 15, 2001 Alternet will make payments to AII
Nevada or AII Canada of US$10,000 per month in year one
(1), US$20,000 per month in year two (2), and
increasing in US$8,000 per month in each of the
subsequent years of the Agreement to maximum monthly
payments of US$64,000 in year ten (10), said payments
to be reduced in any given month by the amount received
in the previous month by AII Nevada or AII Canada from
payments in 5.1(a) hereof after the first three years
of this agreement, except that the total payment under
5.1(a) and 5.1(d) shall not be less that the regular
monthly fee in 5.1(d).
5.2 The Parties agree that a payment in respect of Licensed
Technology or Service shall be made even if such Licensed
Technology or Service is not covered by a claim of a
proprietary right set forth in Schedule 1.0, Part II.
5.3 Alternet shall provide financial accounting statements to
AII Nevada or AII Canada within thirty (30) days after each
quarterly period during the term of this Agreement. All
such statements shall include a calculation of the amount
due to AII Nevada or AII Canada for payments under Section
5.1, be certified as correct by the Treasurer or other
responsible financial officer of Alternet, and be
accompanied by a remittance to AII Nevada or AII Canada of
the amount shown to be payable.
5.4 All payments and statements to be submitted by Alternet to
AII Nevada or AII Canada shall be sent as directed by AII
Nevada or AII Canada. All amounts payable to AII Nevada or
AII Canada shall be calculated and paid in US dollars (using
prevailing currency exchange rates where Alternet has
received revenues in Canadian dollars).
5.5 All overdue accounts shall bear interest at a rate equal to
the Royal Bank of Canada's bank prime commercial lending
rate in effect on the date the payment becomes overdue, plus 2%.
5.6 Alternet agrees that it will not sell or sub-license the
Office Server portion of the Licensed Technology for a price
less than US$2,500 per server per year unless otherwise
agreed with AII Nevada.
5.7 AII Nevada and AII Canada agree that they will direct
Alternet as to which one of them any individual Payment
should be made. AII Canada and AII Nevada are both included
as parties to this Agreement because:
(a) this permits them to direct income in accordance with
the applicable laws governing income distribution
between a US parent and a Canadian subsidiary;
(b) it is unclear to Alternet which has Proprietary IP
rights to all or part of the Licensed Technology so it
is necessary for Alternet to contract with both to
protect its rights under this Agreement.
6.0 AUDIT AND INSPECTION OF RECORDS
6.1 Alternet shall keep proper and detailed records and accounts
including invoices, receipts, and vouchers showing all
information necessary for the accurate determination of the
Payments.
6.2 During reasonable business hours, Alternet shall make
available such accounts and records and permit AII Nevada or
AII Canada or its authorized representatives to audit and
inspect such records, to take extracts therefrom and make
copies thereof. Furthermore Alternet shall afford
reasonable facilities for such audits and inspections and
furnish AII Nevada or AII Canada or its authorized
representatives with all information requisite to the
understanding of the records.
6.3 All costs incurred in conducting an audit or inspection
referred to in Section 6.2 shall be borne by Alternet if the
amount found to be due to AII Canada or AII Nevada exceeds
by five (5%) percent or more the amount which Alternet
previously reported as due to AII Canada or AII Nevada.
6.4 Alternet shall keep and preserve the accounts and records
referred to in Section 6.1, relative to each year of the
term of this Agreement, for a period of five years thereafter.
7.0 IMPROVEMENTS
7.1 If AII Nevada or AII Canada develops or acquires an
Improvement to the Licensed Technology and has the right to
license or transfer such Improvement to others, AII Nevada
or AII Canada shall, by written notice, inform Alternet of
the Improvement within ninety (90) days of its development
or acquisition. Any such Improvement shall, upon the
request of Alternet become part of the Licensed Technology
and all further use, licensing or transfer of the
Improvement by Alternet (including any revenues it realizes)
shall be subject to the term of this Agreement.
7.2 If Alternet develops or acquires an Improvement to the
Licensed Technology and has the right to license or transfer
such Improvement to others, Alternet shall, by written
notice, inform AII Nevada or AII Canada of the Improvement
within ninety (90) days of its development or acquisition.
Upon request by AII Nevada or AII Canada, Alternet shall
transfer such Improvement to AII Nevada or AII Canada and
grant to AII Nevada or AII Canada an exclusive, irrevocable
right and license to use such Improvement together with the
right to grant to others sublicenses to use such Improvement
at no cost to AII Nevada or AII Canada.
7.3 Should AII Nevada or AII Canada or Alternet, as the case may
be, decide not to seek or maintain IP protection on any
Improvement or Follow-on Invention more than six (6) months
after its discovery, the other Parties shall be entitled to
apply for, obtain or maintain, as the case may be, such IP
Rights protection, in their own names and at their own
expense, and AII Nevada or AII Canada or Alternet, as the
case may be, shall do all such things as are requisite for
implementing the foregoing including assigning their
ownership rights to the Improvement or Follow-on Invention
to the Party seeking IP protection.
7.4 Subject to Section 9.2, no fee shall be charged by any Party
to another Party for the costs of creating an Improvement or
Follow-on Invention under Sections 7.1 or 7.2.
8.0 PROTECTION OF RESTRICTED INFORMATION
8.1 A Party receiving Restricted Information pursuant to this
Agreement (hereinafter referred to as the "Receiving Party")
shall respect the confidential nature thereof. A Receiving
Party shall, in addition to complying with the provisions of
Sections 8.2 and 8.3, use the same precautions to protect
Restricted Information which it uses to protect its own
proprietary or confidential information.
8.2 A Receiving Party shall not, without the prior written
consent of the other Party, disclose or permit disclosure of
such Restricted Information to any person, firm, corporation
or other entity, other than to employees, agents or
contractors of the Receiving Party who require such
Restricted Information in order to carry out the purposes of
this Agreement and who receive such Restricted Information
under an obligation of confidence no less onerous than that
set out in this Agreement for the benefit of AII Nevada or
AII Canada and Alternet. Where Restricted Information is
disclosed to such employees, agents or contractors, the
Receiving Party shall ensure that such employees, agents or
contractors do not further disclose such Restricted
Information in violation of this Section 8.0.
8.3 A Receiving Party shall not use or permit use of such
Restricted Information in any manner not permitted under the
terms of this Agreement.
8.4 Any copy or other reproduction of Restricted Information
shall be identified as confidential and shall be subject to
the same restrictions as to disclosure and use as apply to
the original thereof.
8.5 Notwithstanding Section 21.0 of this Agreement, the
provisions of this Section 8.0 shall survive the expiration
or early termination of this Agreement for a period of ten
(10) years from the date of expiration referred to in
Section 11.0.
9.0 AII NEVADA OR AII CANADA PARTICIPATION IN PRODUCT SOFTWARE,
SOFTWARE MAINTENANCE AND R&D WORK
9.1 Alternet agrees that AII Nevada or AII Canada shall have the
right and the obligation to provide all SchoolWeb and
OfficeServer Product Software and Software Maintenance work
at commercially reasonable and competitive rates. In the
event that AII Nevada or AII Canada is unable to provide the
required services at commercially reasonable and competitive
rates , Alternet may use the services of another Product
Software and Software Maintenance company, upon written
approval from AII Nevada or AII Canada, which approval shall
not be unreasonably withheld.
9.2 In the event that Alternet wishes to contract to have any
research or development work with a third party (the
"Contractor") to have any services carried out in relation
to the Licensed Technology, AII Nevada or AII Canada shall
have the right of first refusal to carry out such work at
commercially reasonable and competitive rates. Concurrently
with entering into such an Agreement, the Contractor must
agree to enter into a non-disclosure and non-competition
agreement with Alternet, AII Nevada and AII Canada,
satisfactory to AII Nevada and AII Canada.
9.3 Alternet agrees that in the promotion of Licensed Technology
or Service by Alternet, where reasonable to do so, the
words, "developed, produced, or supplied under license from
Advanced Interactive Inc.", shall be used.
10.0 DUE DILIGENCE
10.1 Alternet shall use its best efforts and exercise due
diligence in commercially exploiting the Licensed Technology
as provided for herein. Alternet shall, within 90 days of
the effective date of this Agreement, produce a Business
Plan, to be attached to this Agreement as Schedule 2. The
Business Plan shall be prepared in consultation and
collaboration with AII Nevada or AII Canada and shall
outline the entire business strategy for exploitation of the
Licensed Technology, forecasts of sales of Licensed
Technology and Services for current and future years, and
forecasts of minimum targets of performance.
11.0 TERM
11.1 This Agreement shall be effective as of the date first set
out herein. Unless otherwise terminated pursuant to the
provisions hereof, this Agreement shall continue in force
for a period of five (5) years following the effective date
and may automatically be renewed (at Alternet's sole and
absolute discretion) for a further 5 year term.
12.0 TERMINATION AND EXPIRATION
12.1 The Parties shall be entitled to terminate this
Agreement and/or to revoke the grant of license under this
Agreement if the other Party becomes insolvent or makes an
assignment for the benefit of creditors or passes a
resolution for winding up or takes the benefit of any
statute relating to bankruptcy or insolvency or the orderly
payment of debts, or a receiver is appointed, provided
however that no termination of this Agreement shall take
effect if a trustee or other representative of the Insolvent
Party is willing and able to complete that Party's
obligations under this Agreement. The Insolvent Party is
required to notify the other Parties 30 days prior to filing
a petition for bankruptcy.
12.2 Alternet shall be entitled to terminate this Agreement upon
the occurrence of any of the following events:
(a) failure by AII Nevada or AII Canada to provide Licensed
Technology, Products and Services, within 90 days after
being advised by Alternet in writing of the failure.
12.3 AII Nevada and AII Canada shall be entitled to terminate
this Agreement and/or revoke the grant of license hereunder
upon any of the following events:
(a) the failure by Alternet to make timely payments to
AII Nevada or AII Canada when due; or
(b) the failure by Alternet to comply with Section 14.3.
12.4 Any termination shall be effected by a notice which
shall, as of the date stated therein, terminate the license
granted hereunder, together with all rights of Alternet
under this Agreement, without prejudice to the right of AII
Nevada or AII Canada to sue for and recover any benefits due
to AII Nevada or AII Canada, and without prejudice to the
remedy of either Party in respect of any previous breach of
this Agreement. A failure by AII Nevada or AII Canada in
12.2 above may be waived by Alternet to prevent termination
of this Agreement and a failure by Alternet in 12.3 above
may be waived by AII Nevada or AII Canada to prevent
termination of this Agreement.
12.5 Upon expiration of the term of this Agreement, or upon
early termination of this Agreement:
(a) all rights to the Licensed Technology shall revert to
AII Nevada or AII Canada, and Alternet thereafter shall
not utilize the Licensed Technology and Services, IP
and IP applications which form a part of the Licensed
Technology in any manner or for any purpose whatsoever,
(b) Alternet shall return to AII Nevada or AII Canada and
AII Nevada or AII Canada shall have the right to take
possession of all technical information furnished by
AII Nevada or AII Canada to Alternet under this Agreement,
(c) Alternet may sell all stocks of Licensed Technology
which remain unsold, and shall complete all Services
which are in the course of being provided by it or are
contracted for at the date of expiration or earlier
termination provided that within thirty (30) days after
the date of such sale of Licensed Technology or the
completion of such Services, Alternet submits Payments
to AII Nevada or AII Canada with respect thereto,
computed in accordance with Article 5 hereof.
(d) (i) AII Nevada's or AII Canada's rights to use
any information licensed to it under Section
2.10(b) shall remain in full force; and
(ii) AII Nevada's or AII Canada's rights to use any
Improvement licensed to it under Section 7.2 shall
remain in full force.
(e) Upon termination of this Agreement, Alternet agrees not
to manufacture, supply, market, or sell any other
system similar to the Licensed Technology for a period
of five (5) years.
13.0 ASSIGNMENT/CHANGE OF OWNERSHIP
13.1 This Agreement shall be binding upon and enure to the
benefit of the Parties hereto and their respective
successors and permitted assigns. No Party shall assign
this Agreement or any rights hereunder, whether by operation
of law or otherwise, without first obtaining the written
consent of the other Parties and any assignment or attempted
assignment made without such consent is void.
14.0 LIABILITY/INDEMNIFICATION
14.1
(a) In no event shall AII Nevada or AII Canada be liable to
Alternet for any injury to or death of persons or for
damage to, or loss of property, or for any other loss,
cost, expense or damage of any kind whatsoever
(hereinafter collectively referred to as "damages")
arising out of or in any way resulting from this
Agreement, whether based on contract, tort including
negligence, strict liability or otherwise, unless such
damages result from the negligence of AII Nevada or AII Canada.
(b) Notwithstanding Section 14.1(a), in no event shall AII
Nevada or AII Canada be liable to Alternet for any
indirect, consequential, special, incidental or
contingent damages of any nature whatsoever, including
but not limited to loss of revenue or profit, or loss
of use of either, or costs of capital.
(c) Notwithstanding Section 14.1(a), in no event shall AII
Nevada or AII Canada be liable to Alternet for an
amount in excess of the total consideration received by
AII Nevada of AII Canada hereunder as at the date of
claim, or an aggregate amount of $50,000 over the
entire term of the Agreement, whichever is the lesser.
14.2 Alternet shall indemnify and hold harmless AII Nevada
or AII Canada from and against any and all claims, demands,
actions, suits or proceedings of whatever nature including
all costs and expenses incurred in connection therewith,
brought or instituted by a third party, and based on or
arising out of Alternet's unauthorized disclosure of any
Restricted Information of AII Nevada or AII Canada; the
supply, use or sale of a Product, or the provision of a
Service or both by Alternet; or the use by any customer of
Alternet of any Product or Service.
14.3 Prior to the receipt of revenue from its use of Licensed
Technology, Alternet shall obtain and maintain insurance
coverage with respect to public liability, product
liability, and errors and omissions with respect to
Alternet's use of the Licensed Technology. Alternet shall
provide AII Nevada or AII Canada with a certified copy of
such a policy of insurance prior to any utilization of the
Licensed Technology, and such policy of insurance shall:
(i) name AII Nevada or AII Canada as co-insured;
(ii) contain an appropriate and commercially standard
cross-liability clause;
(iii) be a minimum face amount of US$2,000,000; and
(iv) require the insurer to provide AII Nevada or AII
Canada with a minimum of sixty (60) days notice
prior to cancellation or expiry.
In the event that Alternet fails to pay the premiums as they fall
due, AII Nevada or AII Canada may, at its option, renew such
policy or alternatively purchase a new policy of insurance in
accordance with the terms and conditions above described and
Alternet shall reimburse AII Nevada or AII Canada forthwith upon
demand any premiums, sums, or other costs so incurred by AII
Nevada or AII Canada in renewing or purchasing such a policy of
insurance. Failure to reimburse AII Nevada or AII Canada within
six months may be cause for termination of this agreement.
15.0 FORCE MAJEURE
15.1 No Party shall be in breach of this Agreement where its
failure to perform or its delay in performing any obligation
is due wholly or in part to a cause beyond its reasonable
control including but not limited to an act of God, an act
of any national, civil or military authority, civil
commotion, war, strikes, lockouts and other labour disputes,
fires, floods, sabotage, earthquake, storm, or epidemic.
15.2 Each Party shall notify the other promptly of any
failure to perform or delay in performing due to a cause set
out in Section 15.1, and shall provide an estimate, as soon
as practicable, of the date when the obligation will be performed.
15.3 When the performance of an obligation is delayed by at
least six months due to a force majeure event and the
Parties have not agreed upon a revised basis for performing
the obligation, either Party may, upon thirty (30) days
prior written notice, terminate this Agreement.
16.0 NOTICES
16.1 Any notice, request, demand, consent or other communication
provided or permitted under this Agreement shall be in
writing unless otherwise specified, and shall be transmitted
by personal delivery, telex, telecopier, or by registered
mail addressed to the recipient at its address as follows:
AII Nevada:
Advance Interactive Inc.
718-1350 East Flamingo Rd
Las Vegas Nevada 89119
USA
Attention: Karim Lakhani, President and CEO
AII Canada:
Advanced Interactive Canada Inc.
2010 - 1177 West Hastings Street
Vancouver, B.C. V6E 2K3
Canada
Attention: Harry K. Davis, CEO
Alternet:
Alternet Systems Inc.
280 - 815 West Hastings street
Vancouver, BC V6C 1B4
Canada
Attention: Michael Dearden, President
16.2 Any communication so transmitted shall be deemed to
have been received on the date on which it was personally
delivered, or sent by telex or telecopier, or if mailed, on
the 10th day next following the mailing thereof.
16.3 Any Party may change its address for purposes of
receipt of communication by giving at least fifteen (15)
days prior written notice of such change to the other
Parties, in the manner prescribed above.
17.0 ARBITRATION
17.1 All Parties shall act in good faith and utilize their
best efforts to resolve any dispute arising in connection
with this Agreement. All disputes which are not so resolved
shall be finally settled under and in accordance with the
current Arbitration Act in effect in British Columbia, Canada.
17.2 The Arbitration Panel shall consist of three
arbitrators and any award made by the arbitrators shall be
decided by majority vote and shall state the reasons for
their decision. The arbitrators shall also decide and fix in
their award the extent to which each of the Parties shall
bear the arbitration costs. Any such arbitration shall be
held at Vancouver, B.C., Canada and shall be conducted in
the English language. Judgement upon any award may be
entered in any court having jurisdiction. Alternatively, an
application may be made to such court for a judicial
acceptance of the award and an order of enforcement.
17.3 The performance of obligations under the terms of this
Agreement shall continue during any arbitration proceedings
and payments due to AII Nevada or AII Canada shall not be
withheld on account of any such proceeding.
18.0 WAIVER
18.1 The failure of a Party to enforce, at any time, any of
the provisions of this Agreement or any of its rights
hereunder, or to insist upon strict adherence to any
condition of this Agreement shall not be considered to be a
waiver of such provision or right or condition, nor shall it
deprive that Party of the right thereafter to enforce any
such provision or right or to insist upon such strict adherence.
18.2 The exercise by a Party of any of its rights under this
Agreement will not prejudice that Party from exercising any
other rights it may have under this Agreement, irrespective
of any previous action or proceeding taken by such Party.
18.3 Where a Party waives any of its rights under this
Agreement, such waiver will be valid only where it is
expressed in writing and only where it is signed by the
Party for whose benefit such right was granted.
19.0 GOVERNING LAW
19.1 This Agreement shall be governed by, subject to and
interpreted in accordance with the laws of the Province of
British Columbia and the federal laws of Canada applicable
therein. The Parties hereto agree that the Courts of the
Province of British Columbia shall have jurisdiction to
entertain any action or other legal proceeding based on any
provisions of this Agreement. Each Party hereby agrees to
the jurisdiction of such Courts.
20.0 SEVERABILITY
20.1 In the event that any provision contained in this Agreement
shall be declared invalid, illegal or unenforceable by a
court or other lawful authority of competent jurisdiction,
this Agreement shall continue in force with respect to the
enforceable provisions and all rights and remedies accrued
under the enforceable provisions shall survive any such
declaration.
21.0 SURVIVAL
21.1 In addition to the provisions of Section 6.4 and 8.5 hereof,
Sections 2.4, 2.5, 2.6, 7.3, 14.1, 14.2 and this Section
21.0 shall survive the early termination or expiration of
this Agreement.
22.0 ENTIRE AGREEMENT
22.1 This Agreement constitutes the entire agreement between the
Parties relating to the subject matter herein and supersedes
any and all prior agreements, negotiations, representations
and understandings whether written or oral between the
Parties. This Agreement may not be released, supplemented,
or modified in any manner except by further written
agreement signed by a duly authorized officer or
representative of each of the Parties.
23.0 OUTSTANDING LIABILITIES
23.1 The Parties hereto agree and confirm that Alternet, AII
Nevada and AII Canada are current (and not in arrears) on
any and all payments outstanding as of the date of execution
of this Agreement and that there are no presently
outstanding payments as of the date of execution hereof.
24.0 INDEPENDENT LEGAL ADVICE
24.1 The Parties hereby confirm that Heenan Blaikie has
represented only Alternet in the preparation and negotiation
of this Agreement and that AII Canada and AII Nevada have
hereby been advised to seek independent legal advice in
general and in particular with respect to any tax
consequences arising out of the transactions (including
Payment transactions) contemplated in this Agreement.
25.0 CURRENCY
25.1 All dollar figures in this Agreement are given in the valid
currency of the United States.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement
to be executed as of by their duly authorized signing officers.
ADVANCED INTERACTIVE INC. ALTERNET SYSTEMS INC.
/s/ Karim Lakhani /s/ Michael Dearden
Mr. Karim Lakhani Mr. Michael Dearden
President and CEO President
ADVANCED INTERACTIVE CANADA INC.
/s/ Harry Davis
Mr. Harry Davis
CEO
SCHEDULE 1.0
PART I Licensed Technology
1. SchoolWeb software and ancillary systems as
described in the product description attached hereto.
2. OfficeServer software, and ancillary systems as
described in the product description attached hereto.
PART II Territory
The Territory for the SchoolWeb portion of the Licensed
Technology is exclusive for USA and Canada.
The Territory for the OfficeServer portion of the
Licensed Technology is non-exclusive, worldwide.
PART III The Field of Use
The Field of Use for the SchoolWeb portion of the
Licensed Technology is for educational purposes.
The Field of Use for the OfficeServer portion of the
Licensed Technology is unlimited.
SCHEDULE 2.0 BUSINESS PLAN
To be developed by Alternet in co-operation with AII
Nevada or AII Canada
SCHOOLWEB PRODUCT DESCRIPTION
SchoolWeb is a server with a Linux operating system that has the
ability to act as a Windows NT file server equivalent. SchoolWeb
provides local network services and access to the Internet.
SchoolWeb caches previously visited Internet sites and demanded
sites transferred by the broadcast/cable/satellite network. Both
'Policy-based' (scheduled) and 'Dynamic' (demand-based) caching
is used to provide a large cache of educational material at the
school location for immediate access by students and teachers.
Access requests are serviced by SchoolWeb Librarian and an
automatic indexing and retrieval system.
SCHOOLWEB SYSTEM SOFTWARE AND HARDWARE
Linux Operating System
Virtual Private Network and Firewall
Roaming E-mail server
High-speed local HTTP (Web) server
Proxy/cache/DNS server
Automatic on-line backup
Redundant on-line system
FTP server
NFS server
Print Server
Broadcast caching software
Head-end broadcast equipment
OFFICESERVER PRODUCT DESCRIPTION
OfficerServer is a server with a Linux operating system that has
the ability to act as a Windows NT file server equivalent.
OfficeServer provides local network services and access to the
Internet. OfficeServer caches previously visited Internet sites
and demanded sites transferred by the broadcast/cable/satellite
network. Both 'Policy-based' (scheduled) and 'Dynamic' (demand-
based) caching is used to provide a large cache of business
material at the office location for immediate access by employees
and others.
OFFICESERVER SYSTEM SOFTWARE AND HARDWARE
Linux Operating System
Virtual Private Network and Firewall
Roaming E-mail server
High-speed local HTTP (Web) server
Proxy/cache/DNS server
Automatic on-line backup
Redundant on-line system
FTP server
NFS server
Print Server
Broadcast caching software
Head-end broadcast equipment