Exhibit 10
LICENSE AND DISTRIBUTION AGREEMENT
This License and Distribution Agreement (the "Agreement") is made as of July 20,
2004 (the "Agreement Date") by and between iBIZ Technology Corp., a Florida
corporation with corporate headquarters in Phoenix ("iBIZ"), and Virtual
Devices, Inc., a Pennsylvania corporation ("VDI"), (together, the "Parties").
RECITALS
iBIZ is, among other things, engaged in the business of producing, marketing and
distributing personal digital assistant ("PDA") accessories, and other items
ancillary to the retail office products industry; and VDI is the owner of
products, designs and patents relating to accessories for PDAs, and other touch
point applications or mobile devices; and VDI wishes to grant, and iBIZ wishes
to receive, the right to market, sell and distribute such products on the terms
set forth below.
AGREEMENTS
The Parties agree as follows:
1) Definitions. The following highlighted terms shall be defined as set forth
below:
a) "Channel(s)" shall mean the following: (i) all retail channels,
including (A) mass market accounts, (B) office supply "superstores,"
(C) computer "superstores," (D) independent dealers, including office
supply and computer store independent dealers, (E) campus bookstores,
and (F) consumer electronics superstores; (ii) all commercial Persons
including (A) distributors to the retail channels, (B) office products
wholesalers, (C) contract stationers, (D) mail order businesses, and
(E) similar commercial Persons.
b) "Improvements" as to any item shall mean any modification or new models
or designs of the item, provided that modification (i) is covered by
one or more claims of Parents or (ii) is the substantial equivalent of
the item shown in the drawings of and described in a VDI design or
Patent.
c) "Person" shall mean any individual or any partnership, corporation,
limited liability company, or other entity, including an unincorporated
body in any country.
d) "Patents" shall mean U.S. patent No. 6,281,878, U.S. and International
patent applications and patents that may issue from U.S, or
International patent applications, in each case relating to the
Products, together with any and all corresponding patents or design
trademarks, industrial design registrations, utility models, and other
corresponding intellectual properly protection, issued anywhere in the
world, and all extensions, continuations, continuations-in-part,
divisions and reissues issued thereof, in each case which are now or
hereafter owned by or controlled by (with the right to license others)
VDI.
e) "Products" shall mean the Stand Alone Accessory Virtual Keyboard
Device, as shown in Exhibit A, for personal digital assistants, mobile
devices and other touch point applications covered by one or more of
the claims of any Patent or VDI design, all Improvements or new models
thereof which iBIZ desires to sell, and any other products which the
Parties may from time to time mutually agree in writing to include as
Products.
f) "Term:" "Initial Term" and "Renewed Term" shall have the meaning set
forth in Section 8a of this Agreement.
g) "VDI Marks" shall mean the marks as described in Exhibit B and other
product and pattern names in application with the U.S. Patent and
Trademark Office.
2) Distributor Appointment and Licenses to iBIZ.
a) Subject to the terms of this Agreement, VDI hereby appoints iBIZ as an
exclusive distributor of Products to the Channel and, except for the
rights granted in VDI Reserved Channels, grants to iBiZ an exclusive
worldwide license to use the Patents, Products and VDI designs to offer
for sale or sell the Products to the Channels. VDI further grants to
IBIZ a non-exclusive license, including the right to sublicense, to use
the Patents, Products and VDI designs to offer for sale or sell the
Products to, such VDI Reserved Channels as VDI from time to time
approves in writing ("Authorized VDI Channels").
b) Subject to the terms of this Agreement and the approval required in
Section 2c below, VDI hereby grants to iBIZ a worldwide license to use
the VDI Marks in connection with the offer for sale or sale of the
Products to the Channel pursuant to this Agreement. iBIZ must, and
hereby agrees to, place the VDI Marks and the appropriate Patent terms
on marketing materials and packaging for all Products sold to and by
any Channel customer, indicating that any VDI Mark is a trademark of
VDI, as noted in Exhibit B. iBIZ hereby recognizes the ownership of the
VDI Marks by VDI, and associated goodwill, and shall not at any time
do, allow or cause to be done any act which may impair the VDI Marks or
the rights of VDI in the VDI Marks. iBIZ hereby disclaims any right,
title or interest in or to the VDI Marks, except the right to use the
VDI Marks as provided herein. In the event that iBIZ registers the VDI
Marks, as a trademark, domain name, or other proprietary designation,
iBIZ hereby agrees to assign all right, title, and interest in and to
the trademark, domain name, or other proprietary designation to VDI.
c) All packaging and promotional material on which any VDI Mark appears
(the "Materials") must be approved by VDI. VDI shall have the right to
approve or disapprove any or all Materials and VDI approval shall not
be unreasonably withheld. Any Materials submitted to VDI shall be
deemed approved unless VDI notifies iBIZ to the contrary within ten
(10) days after receipt of such Materials. iBIZ shall not (and shall
not allow any Customer) to distribute, sell or advertise any copy of
the Products unless and until the Materials for such copies of the
Product thereto has been approved or deemed approved by VDI. iBIZ shall
supply VDI with such reasonable number of Materials as are requested by
VDI (which request shall be no more frequent than quarterly) to confirm
the conformity with approved Materials. Non-conformity of the materials
with the approved Materials shall be determined at VDI's sole
reasonable determination. Any such determination not cured to VDI's
reasonable satisfaction within thirty (30) days of written notice to
iBlZ of such non-conformity shall be grounds for termination of all
rights granted to iBIZ under this Agreement. VDI may, at VDI's sole
discretion, extend the cure period for compliance with the standards
required hereunder. Until VDI validly accepts such cure, said extension
or extensions shall in no way be construed as a waiver of VDI right to
terminate rights granted under this Agreement.
3) License Payment. The price for this License Agreement is $800,000 USD, to
be paid as follows:
a) $300,000 upon execution of this Agreement (less $100,000 note).
b) $250,000 within 2 months subsequent to (a) and provided performance
milestones have been met by VDI.
c) $250,000 within 2 months subsequent to )b) and provided performance
milestones have been met by VDI.
iBIZ further agrees to fund and/or supply in-kind services of
approximately $200,000 in addition to the License Payment.
4) Royalties. iBIZ agrees to pay VDI Royalties according to the following
schedule:
a) No Royalties for the first 25,000 pieces.
b) Thereafter, a Royalty of $5 per piece, sold as permitted hereunder by
iBIZ, or the difference between $20 and the cost of the Bill of
Materials for the device, whichever is greater.
5) Performance Criteria.
a) The licenses and rights granted under this Agreement, for the duration
of the Initial Term, are subject to the Performance Standards set forth
in Exhibit C. The parties hereby agree that each Renewed Term may be
subject to revised Performance Standards upon the written agreement of
both parties. Revisions of the Performance Standards shall he agreed to
at least ninety (90) days prior to the expiration of the then-current
term. In the absence of revisions to the Performance Standards, subject
to the Termination provisions herein, a Renewed Term shall be deemed to
be subject to the Performance Standards of the immediately preceding
term.
b) Reports on the sales of Products to the Channels by iBIZ for each month
during the Initial Term and each Renewal Term shall be submitted to VDI
on or before the fifteenth day after the end of that month. The report
shall be broken down by customer (listing number of stores carrying the
Products and the total number of stores in each chain), Product units
sold and the sales price with notations for any unusual activity and
projections for the coming month, if available.
c) iBIZ shall keep books and records, in Phoenix, Arizona, regarding the
sales of Products sufficiently accurate to enable the reports hereunder
to VDI to be verified, and iBIZ gives VDI the right, upon reasonable
notice, at its own expanse, to examine said books and records, only
insofar as they concern the sales of Products and not more often than
once in any calendar year, for the purpose of verifying the reports
provided for in this Agreement. Any such examination by VDI shall be
conducted in such a manner as to not unduly interfere with the business
of iBIZ. VDI and its representative shall not disclose to any other
person, firm or corporation any information acquired as a result of any
such examination; provided, however, that nothing herein contained
shall be construed to prevent VDI and/or its duly authorized
representative from filing legal documents with, or testifying in any
court of competent jurisdiction with respect to the information in any
action instituted to enforce its rights under this Agreement.
6) VDI's Representations and Warranties. VDI represents and warrants to iBIZ
that:
a) VDI has the legal power to enter into this Agreement. To VDI's
knowledge, the making of this Agreement by VDI does not materially
violate any agreement or organizational document to which it is a party
or by which it or its property is bound, and VDI shall not enter into
any agreement which is inconsistent with the rights granted to iBIZ
hereunder. VDI has taken all legally required action so that this
Agreement has been duly authorized by all necessary action and is
binding on VDI.
b) Except for rights previously granted, VDI is the sole and exclusive
owner or licensee of the VDI Marks and all Patents licensed under this
Agreement. VDI has, and will have throughout the term of this Agreement
the right to license the VDI Marks as provided in this Agreement and
has, and will have throughout the term of this Agreement the right to
license under the Patents in accordance with the terms and conditions
of this Agreement.
c) Each VDI Mark and Patent is valid in the United States with
applications for some pending internationally.
d) The importation, sale or offer for the sale of Products, or sublicense
of such rights, in accordance with this Agreement will not violate or
infringe the patent, copyright, trademark, trade secret or other
proprietary rights of any third party. VDI has no knowledge that the
VDI Marks or any VDI Patent are being infringed upon by others
7) iBIZ's Representations and Warranties iBIZ represents and warrants to VDI
that:
a) iBIZ has the legal power to enter into this Agreement. The making of
this Agreement by iBIZ does not violate any agreement or organizational
document to which it is a party or by which it or its property is
bound. iBIZ shall not enter into any agreement, which is inconsistent
with the rights granted to iBIZ hereunder.
b) iBIZ has taken all legally required action so that this Agreement has
been duly authorized by all necessary action and is binding on iBIZ.
8) Termination
a) Subject to the rights to terminate contained in this Agreement, the
initial term of this Agreement (the "Initial Term") shall continue in
force for a period of three (3) years from the Agreement Date, and
shall be automatically renewed on a yearly basis thereafter (the
"Renewed Term" or "Renewed Terms"), unless otherwise terminated in
writing by either Party at least ninety (90) days prior to the
expiration of the then current Term. Upon termination of this Agreement
and subject to Section 8c, the Patent rights and VDI Marks rights
licensed to iBIZ hereunder shall automatically revert to VDI, and iBIZ
shall promptly desist from the use of such rights to the extent such
use would constitute an infringement of VDI intellectual property
rights. Either party may terminate this Agreement ay any time i) if the
other Party is in breach of any material term of this Agreement, which
breach remains unremedied thirty (30) calendar days after receipt of
notice specifically identifying the breach; or ii) immediately upon
written notice by one Party to the other Party in the event that (A) a
trustee, receiver or administrative receiver should be appointed for
the other Party or substantially all its property, (B) the other Party
should become insolvent or unable to pay its debts as they mature or
ceases to pay its debts as they mature in the ordinary course of
business, or makes an assignment for the benefit of creditors, or (C)
any proceedings should be commenced by the other Party under any
bankruptcy, insolvency, or debtor's relief laws, or (D) the other Party
is liquidated or dissolved.
b) VDI shall have the right to terminate this Agreement if at anytime
during this Agreement iBIZ markets or sells any product not made by VDI
that is the substantial equivalent of any item or incorporates a
distinctive feature of an item shown to iBIZ in VDI drawings, designs,
models, patents or samples.
c) Upon termination of this Agreement, iBIZ shall no longer have exclusive
rights in the Channels but shall have the right to continue to be
supplied until iBIZ's customers have delisted or discontinued the
Products; provided, however, in any event all such rights to be
supplied shall terminate six (6) months after the effective date of
termination.
9) Ownership of Intellectual Property. Each of the Parties shall retain all
of their respective intellectual property rights, including copyright,
trade secret, patent and trademarks, in or relating to their respective
products and materials furnished under this Agreement, It is understood
that Products do not include any product which iBIZ develops or acquires
rights to if the product (a) does not infringe one or more claims of
Patents or (b) is not the substantial equivalent of any item or portion of
an item shown in models or design drawings provided by VDI or described in
any such Patent.
10) Confidentiality. Pursuant to the terms and conditions of this Agreement,
iBIZ and VDI may provide each other with customer or prospective customer
lists, financial information, concepts, ideas, strategies, research, trade
secrets and other such proprietary information and property, including,
without limitation, information regarding operations, pricing policies,
marketing techniques and plans, market structure and confidential patent
and trademark information, etc. (collectively, the "Confidential
Information"). Any and all Confidential Information disclosed to one party
by the other shall be kept confidential by the recipient, and except as is
contemplated by the Agreement, the recipient party shall not use such
Confidential Information for its own independent economic advantage other
than pursuant to this Agreement, or disclose or offer to disclose such
Confidential Information to any third party. Confidential Information
shall not include information which:
a) the recipient can demonstrate by written records was known to the
recipient prior to disclosure hereunder otherwise than as a result of a
previous confidential disclosure by the disclosing party;
b) is in the public domain or comes into the public domain through no
fault of the recipient; or
c) can be demonstrated by written records to have been disclosed to the
recipient by a third party under no obligation of confidentiality to
the other party with respect thereto.
11) Indemnity.
a) Each Party ("Indemnifying Party") shall indemnify, defend and hold
harmless the other Party and its agents, officers, directors, managers,
members, employees, successors and assigns, and each of them
("Indemnified Parties"), from and against any and all claims, suits,
actions and proceedings, and from and against any and all liabilities,
judgments, losses, damages, costs, charges, and expenses of whatever
nature or character (including reasonable attorneys' fees and expenses)
incurred by the Indemnified Parties resulting from, arising out of or
in connection with (i) any breach of this Agreement (including any
breach of a representation or warranty) by the Indemnifying Party or
(ii) any negligent act or omission or willful misconduct by the
Indemnifying Party in connection with the performance of this
Agreement, ("lndemnifiable Damages"). If an Indemnified Party becomes
aware of a potential claim under this Section 11, that Party shall
promptly notify the Indemnifying Party, which shall then have the right
to take control of the litigation or claim, including hiring legal
counsel to handle the litigation or claim.
b) VDI shall indemnify, defend and hold harmless iBIZ and its agents,
officers, directors, managers, members, employees, successors and
assigns, and each of them (collectively, the "iBIZ Indemnified
Parties"), from and against any and all claims, suits, actions and
proceedings, and from and against any and all liabilities, judgments,
losses, damages, costs, charges, and expenses of whatever nature or
character (including reasonable attorneys' fees and expenses) incurred
by the iBIZ Indemnified tied Parties resulting from, arising out of or
in connection with any claim relating to the validity of the Patent or
any claim that the Patent infringes upon the intellectual property or
other rights or any third party.
c) iBIZ shall indemnify and hold harmless VDI, its agents, officers,
directors, managers, members, employees, successors and assigns, and
each of them (each, "VDI Indemnified Parties"), from and against any
and all claims, suits, actions and proceedings, and from and against
any and all liabilities, judgments, losses, damages, costs, charges,
and expenses of whatever nature or character (including reasonable
attorneys' fees and expenses) incurred by the Indemnified Parties
resulting from, arising out of or in connection with any third party
claim that a patent, trademark, copyright, or other intellectual
property of such Person has been infringed or otherwise violated solely
as a result of a modification or enhancement to a Product which was
made by or at the direction of iBIZ or any Channel customer.
d) Notwithstanding any other provision of this Section 11, (i) an
Indemnified Party shall be entitled to indemnification hereunder only
when the aggregate of a11 Indemnifiable Damages to such Indemnified
Party exceeds $1,000 (the "Deductible Amount") and then such
Indemnified Party shall be entitled to indemnification for its
Indemnifiable Damages in excess of the Deductible Amount and (ii) no
individual Indemnifying Party shall be liable under this Section 11 for
any amount in excess of $1,000,000, The limitations of this paragraph
(i), however, shall not apply to Indemnifiable Damages arising out of
common law fraud.
12) Governing Law and Disputes. This Agreement shall be governed and construed
according to the internal laws of the Commonwealth of Pennsylvania,
without giving effect to any choice or conflict of law provision or rule
that would cause the application of the laws of any jurisdiction other
than the Commonwealth of Pennsylvania. If after the Agreement Date any
dispute arises under Section 11 with respect to a claim for Indemnifiable
Damages ("Dispute"), the Parties shall attempt to settle the Dispute first
by negotiations between the Parties. Any Party may give the other Party
written notice of a Dispute ("Dispute Notice") and, as soon as reasonably
practicable after delivery of the Dispute Notice, the Parties shall
attempt to resolve the Dispute by negotiations. Only if the Parties have
not resolved the Dispute within thirty (30) days after delivery of the
Dispute Notice may either Party seek to pursue judicial relief.
13) Notices. All notices, consents, requests, instructions, approvals, and
other communications provided for herein shall only be validly given,
made, or served if in writing and (a) sent by certified mail, return
receipt requested, postage prepaid, (b) sent by overnight courier delivery
service, receipt acknowledged, fees prepaid, or (c) transmitted by
facsimile transmission to the telephone numbers set forth below and
confirmed by either method (a) or (h) above, and addressed to:
If to VDI: 2661 Clearview Road
Allison Park, PA 15101
Unites States
Tel: 412-492-8500
Fax: 412-492-0202
Att: Steve Montellese
If to iBIZ: 2238 West Lone Cactus Drive, Suite 200
Phoenix, AZ 85027
Tel: 623-492-9200
Fax: 623-492-9921
Attention: Ken Schilling
or such other address, facsimile telephone number, or person as shall be
designed in writing by like notice given by any party hereto to all other
Parties. All such notices, consents, requests, instructions, approvals, and
other communications provided for herein shall be deemed to have been validly
given, made, or served when deposited in the U. S. Mail or with the overnight
courier delivery service or upon completion of facsimile transmission thereof.
14) Attorney's Fees. Each of the Parties shall be responsible for the payment
of his or its own attorney's fees and costs incurred in connection with
the negotiation and drafting of this Agreement.
15) Severability. It is the desire, intent, and agreement of the Parties that
this Agreement be enforced to the fullest extent permissible under the law
and public policy applied by any jurisdiction in which enforcement is
sought. Accordingly, to the extent that any portion of this Agreement
shall be invalid and unenforceable under applicable law, such portion
shall be deemed amended to delete or to reform the portion, which is
otherwise invalid or unenforceable. Such deletion or reformation shall
apply only with respect to the operation of such portion in the particular
jurisdiction in which such portion is otherwise invalid or unenforceable.
The deemed amendment of any such portion shall not invalidate the
remainder of such portion of this Agreement or the remaining provisions of
this Agreement.
16) Succession and Assignment. This Agreement shall be binding upon and inure
to the benefit of the Parties named herein and their respective heirs,
legal representatives, successors and assigns. Subject to Section 8b, iBIZ
may not assign either this Agreement or any of its rights, interests, or
obligations hereunder without the prior written approval of the VDI.
17) Prior Agreements. Except as otherwise expressly stated herein, this
Agreement supersedes and terminates all prior agreements, whether written
or oral, to which the Parties or any of them are also parties concerning
its subject matter, and as of the execution of this Agreement, none of
such other agreements shall any longer have any force or effect.
18) Entire Agreement. This Agreement contains the entire understanding of the
Parties with respect to the subject matter of this Agreement, and the
terns of this Agreement are contractual and not a mere recital.
19) Counterparts. This Agreement may be executed in one or more counterparts,
and each executed counterpart shall be considered an original of this
Agreement.
20) Facsimile Signatures. In the event this Agreement as signed by a Party is
delivered to another Party via facsimile, the transmitting Party intends
to be contractually bound by the facsimile signature(s) hereon.
21) Modification. This Agreement may not be amended, modified, or supplemented
except by a written instrument signed by each of the Parties or their
respective authorized officers or representatives.
22) Headings. The section and subsection headings contained in this Agreement
are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
23) Third-Party Beneficiaries. This Agreement shall not confer any rights or
remedies upon any person or entity other than the Parties and their
respective successors and assigns.
24) Exhibits. The Exhibits hereto are incorporated herein by reference and
constitute a part of this Agreement.
25) Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of
intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all
rules and regulations promulgated thereunder, unless the context requests
otherwise. The word "including" shall mean including without limitation.
The words "hereby", "herein", "hereof', "hereto", "hereunder",
"hereinafter", and words of similar import refer to this Agreement as a
whole and not to any particular section or subsection of this Agreement.
The word "hereafter" shall mean after, and the word "heretofore" shall
mean before, the Agreement Date.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Agreement
Date.
iBIZ, Corp.
By:
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Title:
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VDI, Inc.
By:
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Title:
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EXHIBIT A
Licensed Product Design Example (actual configuration may vary):
[GRAPHIC OMITTED]
EXHIBIT B
Trademarks and Patent Lines as they should appear on packaging and
marketing materials for the Products:
[OBJECT OMITTED]
Virtual Devices, Inc.
VKey(TM)
EXHIBIT C
Performance Standards
During the two-year period beginning on the date of shipment of the first
Product and ending twenty-four (24) months later, iBIZ must meet the following
criteria for automatic renewal of this Agreement,
1) Sale of 1,000,000 units.
2) Sale of 50,000 units per quarter.
EXHIBIT D
Request for Revision
During the term of this agreement, each party will have the right to issue a
request in writing with thrity days notice for revision to the agreement as
deemed necessary by the parties.