License Agreement - ImageWare Software Inc. and Atlus Co. Ltd.
LICENSE AGREEMENT
THIS AGREEMENT is made this 7th day of March 1997, by and between
IMAGEWARE SOFTWARE INC., a corporation organized under the laws of the State
of California, United States of America ("U.S.A.") and having offices at
15373 Innovation Drive, Suite No. 120, San Diego, California, U.S.A.
(hereinafter called "ISI"), and ATLUS CO., LTD., a corporation organized
under the laws of Japan, and having offices at 4-8 Kagurazaka, Shinjuku-ku,
Tokyo, JAPAN ("Atlus").
W I T N E S S E T H
WHEREAS, Atlus is in the business, among other things, of photoimaging,
computer games, software and other related products and services and has
expertise in developing and marketing such products and services in Japan and
other countries, and would like to use certain of the patents and technology
of ISI in connection with certain of its products and services, including
without limitation its "Print Club" products and services (as such products
and services may hereafter be modified, amended, replaced or substituted from
time to time).
WHEREAS, ISI is in the business, among other things, of imaging,
software and other related products and services and has expertise in
developing and marketing such products and services in the United States and
other countries.
WHEREAS, pursuant to the Securities Purchase Agreement between Atlus
and ISI, dated of even date herewith (the "Securities Purchase Agreement"),
Atlus will purchase, subject to the terms and conditions therein, a certain
amount of ISI's common stock.
NOW, THEREFORE, in consideration of the above premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
ARTICLE 1. DEFINITIONS
1.1 "Copyrighted Materials" shall mean all material authored, published
or distributed by ISI in which ISI holds or asserts an existing copyright and
which are related to the development or use of the Licensed Patents as they
relate to the field of use for Atlus' developed or acquired products.
1.2 "Direct Expenses" shall mean and include all out-of-pocket
expenses incurred by a party hereto in furnishing to the other party the
information and services provided for in this Agreement. Such Direct Expenses
shall include, but are not limited to, living and travel expenses of
personnel of one party traveling for the benefit of the other party.
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1.3 "Intellectual Property" shall mean and include the Licensed
Patents, Copyrighted Materials, Know-How and other proprietary rights of ISI
related to or connected with the developments, use or exploitation of the
Licensed Patents (including without limitation all applications,
registrations and utility models related thereto) as they relate to the field
of use or Atlus' developed or acquired products.
1.4 "Know-How" shall mean and include all processes, inventions,
designs, data, discoveries, trade secrets or other secret or proprietary
information which are presently or in the future become the property or
proprietary rights of ISI and which relate to or are connected with the
development, use or exploitation of the Licensed Patents as they relate to
the field of use or Atlus' developed or acquired products.
1.5 "Licensed Patents" shall mean and include (i) those patents listed
on Exhibit I, attached hereto, which may from time to time be amended by
mutual agreement of the parties; (ii) all patents (including patent
applications), worldwide, pertaining to the subject matter of the patents
described above in clause (i); and (iii) all patents covered under Article 5
hereof; together with all divisions, reissues, continuations, substitutes,
renewals and extensions thereof.
1.6 "Licensed Territory" shall mean each and every country or territory
worldwide in which ISI has rights in the Intellectual Property.
ARTICLE 2. GRANT OF RIGHTS
2.1 In consideration of the payments to be made hereunder, ISI hereby
grants to Atlus, subject to the terms of this Agreement, the non-royalty
bearing, full-term right and license, to develop, modify, use and exploit the
Licensed Patents and other Intellectual Property (other than the Copyrighted
Materials) in and throughout the Licensed Territory. The grant of license
hereunder shall be exclusive, worldwide, with respect to the use of the
Licensed Patents or other Intellectual Property in connection with any Print
Club products and services and similar or competing products or services and
shall be non-exclusive with respect to the use of the Licensed Patents or
other Intellectual Property in connection with other products.
2.2 In consideration of the payments to be made hereunder, ISI hereby
grants to Atlus, subject to the terms of this Agreement, the non-royalty
bearing, non-exclusive, full-term right and license, to use, reproduce, copy,
publish, translate and modify the Copyrighted Materials in connection with
the use, promotion, marketing and sale of the products using the Intellectual
Property in the Licensed Territory as it relates to the field of use for
Atlus' developed or acquired products.
2.3 With respect to any new patents, technologies, developments or
inventions of ISI (whether patentable or not) which are not covered by
Article 5 hereof (collectively, the "New Technology"), ISI shall first offer
to Atlus the rights to license and use any such New
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Technology. Upon the development of any New Technology, ISI shall give notice
of such New Technology to Atlus and shall furnish to Atlus all accompanying
materials and information, including but not limited to software, charts,
drawings, applications of such technology, supporting documentation,
formulas, specifications and marketing information in connection with such
New Technology and Atlus shall have thirty (30) days in which to analyze and
study the merits and usefulness of such New Technology. If Atlus determines,
within such thirty (30) day period, that it would like to use and license
such New Technology, the parties shall enter into good faith negotiations to
reach an agreement with respect to the license and exploitation of such New
Technology. If an agreement is not reached within ninety (90) days after
entering into such negotiations, ISI shall have the right to enter into
negotiations to license such New Technology to other parties, provided that
such license is not on terms and conditions more favorable than that offered
to Atlus. Prior thereto, ISI shall not discuss or negotiate with any other
party in connection with the New Technology. If at any time ISI enters into
an agreement with any other party with respect to the license or use of any
New Technology, then ISI shall also offer to Atlus the right, without
obligation on the part of Atlus, to (i) enter into an agreement with respect
to such New Technology on similar terms or conditions or (ii) modify any
existing agreement to reflect any more favorable terms and conditions given
to such other party.
2.4 Atlus shall have the right, at any time, to assign or sublicense
all or any portion of its rights and interests hereunder to any affiliate or
subsidiary of Atlus.
ARTICLE 3. LICENSING
In consideration of the above grants and covenants contained herein.
Atlus shall pay to ISI, a one-time licensing fee in the gross amount of One
Million Nine Hundred Sixty One Thousand Thirty Nine Dollars ($1,961,039) to
be paid concurrently with the payment of the Phase I Purchase Amount pursuant
to, and as such term is defined in, the Securities Purchase Agreement.
ARTICLE 4. TECHNICAL INFORMATION AND ASSISTANCE
4.1 ISI shall from time to time, upon the request of Atlus, furnish to
Atlus information and specifications as to formulas, design, engineering,
manufacturing, marketing and other operations, processes, or experience
incidental to the development, use or exploitation of the Intellectual
Property licensed herein as it relates to the field of use for Atlus'
developed or acquired products. Such information shall be that in current use
by ISI and shall include any software, drawings, design sheets, bills of
material, photographs, photostats, Know-How or other information, including
designs and specifications relating to manufacturing equipment, tools and
fixtures, for such development, use and exploitation of the Intellectual
Property.
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4.2 ISI shall, at reasonable times during business hours, receive
persons designated by Atlus at its facilities in the United States for the
purpose of educating and training such persons with respect to the
Intellectual Property.
4.3 All services of ISI's personnel to Atlus, including services
related to the transfer of information, contacts, pursuant to Sections 4.1
and 4.2 above, shall be scheduled so as not unreasonably to interfere with
the normal course of ISI's business.
ARTICLE 5. FUTURE DEVELOPMENTS
5.1 ISI agrees that, to the extent permitted by law, it will promptly
notify the other of, and furnish to Atlus full information in writing
covering, any improvements, developments, inventions, changes or innovations
to the Intellectual Property or any portion thereof, together with any
information concerning improvements in the manufacture, technology,
functionality, marketing or servicing of products incorporating the
Intellectual Property which would be useful to Atlus. ISI agrees that any
such improvements, developments, inventions, changes or innovations to the
Intellectual Property shall be deemed Intellectual Property covered by this
Agreement in which Atlus shall have the right to use and exploit. ISI agrees
that, if such improvements, developments, inventions, changes or innovations
shall involve or include patentable subject matter, then if ISI files for or
secures any patent or secures rights under any patent by license or
assignment with respect to said subject matter in any country, ISI shall at
the request of Atlus and to the extent permitted by law and not prohibited by
any agreement with ISI, grant to Atlus a full-term license in the Licensed
Territory, to develop, use, exploit or sublicense to its affiliates and
subsidiaries, and sell under any such patent, and patent applications upon
the payment of only its share of the royalties, if any, as ISI may be
obligated, by reason of said license to Atlus, to pay to a third party
licensor or licensors.
5.2 ISI agrees to use best efforts to make available to Atlus the
services of trained personnel for reasonable periods and at times convenient
to the party supplying the personnel for the purpose of consulting with the
other party regarding, or training the other party's personnel in the use of,
such improvements, developments, inventions, changes or innovations.
5.3 For the continuing exchange of information provided in this
Article, Atlus shall reimburse ISI for its Direct Expenses incurred by reason
thereof.
ARTICLE 6. CONFIDENTIAL TREATMENT OF INFORMATION
6.1 Each party hereby agrees to use its best efforts to keep strictly
secret and confidential during the term of this Agreement and at any time
thereafter all confidential information acquired from the other party
pursuant to this Agreement except as disclosure or use of such information is
(i) expressly permitted by this Agreement, (ii) reasonably necessary to
achieve the purposes of this Agreement (i.e., Atlus may disclose such
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information to its employees or contractors in connection with the
development, use, analysis or exploitation of such information), and (iii)
required by applicable law. To that end, the party furnishing any such
confidential information, shall, in good faith, mark "confidential" all
information which is disclosed to the other party and which is subject to
this Article 6.
6.2 The obligations imposed by this Article shall not apply with
respect to any information furnished by a party if such information is, or
becomes, published or otherwise generally available to the public other than
through the fault of such other party, is at the time of disclosure is in the
possession of such other party to which disclosed or is independently
developed by such other party.
ARTICLE 7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF ISI AND
INDEMNIFICATION BY ISI
7.1 ISI is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all requisite
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations
of the Company hereunder have been taken, and this Agreement constitutes a
valid and legally binding obligation of the Company, enforceable in
accordance with its terms.
7.2 ISI is not in violation or default of any provisions of its
Articles of Incorporation or Bylaws as amended and in effect on and as of the
date of this Agreement or of any material provision of any instrument or
contract to which it is a party or by which it is bound or, to its knowledge,
of any material provision of any federal or state judgement, writ, decree,
order, statute, rule or governmental regulation applicable to the Company.
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
such violation or be in conflict with or constitute, with or without the
passage of time and giving of notice, either a default under any such
provision, instrument or contract or an event which results in the creation
of any lien, charge or encumbrance upon any assets of the Company.
7.3 ISI represents and warrants that it has the unrestricted right to
use, assign, license or sublicense the Licensed Patents and other
Intellectual Property and has the right and ability to enter into this
Agreement and to grant the rights and licenses herein. ISI further represents
and warrants that, to the best of its knowledge, there are no legal actions
or claims for infringement against or challenging the validity of the
Licensed Patents or other Intellectual Property or otherwise challenging
ISI's proprietary rights in the Intellectual Property anywhere in the world.
There are no outstanding orders, writs, injunctions, decrees or judgments
against the Company or the Intellectual Property.
7.4 The rights of ISI in the Licensed Patents are in full force and
effect. Except as disclosed in Article 8, below, there are no liens,
encumbrances, security interests,
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licenses, assignments, or transfer of any interest in the Licensed Patents or
other Intellectual Property.
7.5 No information, representation or warranty by ISI in this Agreement
or any documents provided hereunder by Seller contains any untrue statement
or omissions as to any material fact necessary to make the statement herein
or therein not misleading.
7.6 ISI shall, at Atlus' request, execute and deliver such other
documents, papers and information as may reasonably be necessary to carry out
the purposes and intent of this Agreement. ISI agrees to use its best efforts
to maintain and preserve the Licensed Patents and other Intellectual Property.
7.7 ISI unconditionally and irrevocably indemnifies, protects and
agrees to defend and hold harmless Atlus from and against all loss, damage,
actions, claims of third parties, cost or expense (including reasonable
attorneys' fees and expenses) arising from (i) the breach or violation or any
representation or warranty of ISI contained herein or (ii) the failure of ISI
to perform or satisfy any covenant or obligation contained herein.
7.8 ISI agrees that it shall neither use for itself nor license to any
third party any of the Intellectual Property in connection with the design,
use or manufacture of products or services which compete with the Print Club
products and services.
ARTICLE 8. BARBER PATENT
8.1 The parties hereto acknowledge that ISI has assigned U.S. Patent
No. 5,343,386 ("Barber Patent") and related worldwide rights to a third party
pursuant to the Asset Acquisition Agreement dated as of June 19, 1996 between
ISI and David B. Douds. ISI agrees to use its best efforts to obtain the
rights to grant, and to grant, to Atlus the exclusive rights for Atlus to use
the Barber Patent in connection with the Print Club products and services
within ninety (90) days of the date hereof. In the event that ISI cannot
secure said rights within said period, ISI will negotiate in good faith to
find a mutually agreeable settlement to such matter involving a partial
return of fees paid hereunder.
8.2 Immediately upon ISI's obtaining the right (regardless of whether
such right is secured prior to or after the expiration of such ninety (90)
day period described above) to grant to Atlus the license and use of the
Barber Patent, as set forth in Section 2.1, this Agreement will be deemed to
include the Barber Patent as one of the Licensed Patents and Atlus shall have
the rights in the Barber Patent in accordance with Section 2.1 and all other
terms and conditions of this Agreement; provided, that in the event ISI
obtains the right to grant to Atlus only part of the rights set forth in
Section 2.1 (I.E., only non-exclusive rights in the Print Club products and
services or non-worldwide rights) then ISI shall be deemed to have granted to
Atlus such fullest rights available to ISI.
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8.3 ISI hereby covenants and agrees to take all action, including
exercising its rights of reversion, if any, in the Barber Patent and shall
not take any action which would jeopardize or restrict the granting of the
Barber Patent rights to Atlus hereunder.
ARTICLE 9. INFRINGEMENT ACTIONS
9.1 If any infringement action, proceeding or claim of any kind or
nature is instituted against Atlus because of its development, use and
exploitation of the Intellectual Property, Atlus shall promptly notify ISI in
writing of such action, proceeding or claim and ISI shall defend and save
harmless Atlus against any such action, proceeding or claim; PROVIDED,
HOWEVER, if any infringement action, proceeding or claim of any kind or
nature is instituted against Atlus anywhere in the Licensed Territory because
of its development, use and exploitation of the Intellectual Property in
connection with the Print Club products and services, ISI and Atlus shall
cooperate in defending against any such action, proceeding or claim and shall
share in the costs thereof on a 50-50 basis; and PROVIDED, FURTHER, HOWEVER,
that in any infringement action, proceeding or claim of any kind or nature
instituted against Atlus because of its development, use or exploitation of
the Intellectual Property in connection with other products (I.E. non-Print
Club products and services) in Japan. ISI and Atlus each agrees to allocate
such costs in respect thereof on a 70-30 (ISI to Atlus) basis. ISI shall use
its best efforts to ensure that Atlus has the continuous right and use of the
Intellectual Property granted hereunder. If it is determined that any of the
Intellectual Property does infringe upon the rights of another party, ISI and
Atlus shall cooperate to try to obtain the rights to use such Intellectual
Property or shall use its best efforts to modify such Intellectual Property
so as to no longer infringe upon such third party's rights.
9.2 If during the term of this Agreement any unauthorized use of the
Intellectual Property is made, Atlus shall immediately upon learning thereof
promptly notify ISI in writing, setting forth the facts in reasonable detail.
The parties shall cooperate in good faith to determine what action, if any,
to take against such unauthorized use. The allocation of costs of any action
or proceeding commenced to protect against such unauthorized use and the
allocation of any award received therefrom shall be in accordance with the
first sentence of Section 9.1 above for the respective products in such
respective territory; provided, however, that with respect to the
infringement of the Intellectual Property in connection with Print Club
products or services (or similar or competing products or services), if
requested by Atlus, ISI shall commence action and take steps to protect the
Intellectual Property against such unauthorized use and Atlus shall reimburse
ISI for its reasonable out-of-pocket costs, and any award received in excess
of the costs incurred by and reimbursed to Atlus shall be shared on a 50-50
basis between Atlus and ISI.
9.3 ISI and Atlus agree to cooperate in good faith, and each agrees to
use its best efforts to assist the other, in the defense or prosecution of
any action, proceeding or claim described in Sections 9.1 and 9.2.
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ARTICLE 10. TERM AND TERMINATION
10.1 This Agreement shall remain in effect until and shall terminate
upon the expiration of the last to expire of the rights granted under
Article 2 hereof (including any rights granted pursuant to Article 5 hereof).
10.2 In the event of a material default by either party in the
performance of its duties, obligations or undertakings under this Agreement,
the other party shall have the right to give written notice to the defaulting
party advising such party of the specific default involved and, if within
thirty (30) days after such notice the defaulting party shall not have
remedied or commenced diligently to remedy the default, the other party shall
have the right, in addition to any other rights and remedies it may have, to
terminate this Agreement upon ten (10) days written notice to the defaulting
party.
ARTICLE 11. BANKRUPTCY
In the event that ISI shall commence a case, or an involuntary case be
commenced against ISI, under any applicable bankruptcy, reorganization,
insolvency or other similar law now or hereafter in effect, or a receiver,
liquidator, assignee, custodian, trustee, sequester (or other similar
official) is appointed for ISI or for all or any substantial part of its
assets, then the license and rights granted hereunder to Atlus shall continue
in full force and effect, and Atlus shall have the right, but not the
obligation, to maintain and preserve the Licensed Patents and other
Intellectual Property.
ARTICLE 12. PAYMENTS AND TAXES
12.1 The license and technical assistance fee shall be paid by Atlus to
ISI by wire transfer to the account designated by ISI in writing.
12.2 Any taxes, duties or imposts assessed or imposed upon any payments
due hereunder to ISI with respect to this Agreement, shall be the
responsibility of ISI.
12.3 Atlus and ISI each hereby agree to use its best efforts to obtain
any necessary approval of this Agreement by any governmental authorities
necessary to effect the purposes of this Agreement.
ARTICLE 13. ARBITRATION
All disputes arising in connection with this Agreement shall be finally
settled by arbitration. The arbitration shall be held in California, and
conducted in accordance with the Rules of the American Arbitration
Association. Judgment upon the award rendered may be entered in any court
having jurisdiction, or application may be made to such court for a judicial
acceptance of the award and an order or enforcement. Each party shall bear
its own expenses of the arbitration, but the arbitrator's fees and costs
shall be borne equally between
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the parties participating in the arbitration. The member or members of the
panel of arbitrators each shall be familiar with the imaging and software
industry.
ARTICLE 14. FORCE MAJEURE
Any failure or delay in the performance by either party hereto of its
obligations hereunder shall not be a breach of this Agreement if such failure
or delay arises out of or results from causes beyond such party's control.
These causes shall include but not be restricted to fire, storm,
flood, earthquake, explosion, accident, acts of a public enemy, war (declared
or undeclared), rebellion, insurrections, sabotage, epidemic, quarantine
restrictions, labor disputes, shortages of labor, materials or supplies,
failures by contractors or subcontractors, transportation embargoes, or
failures or delays in transportation, acts of God, acts, rules, regulations,
orders or directives of any government or any state, subdivision, agency or
instrumentality thereof or the order of any court of competent jurisdiction.
Without prejudice to any other remedies that may then be available to either
of them, in the event failure or delay arising out of or resulting from such
causes, the parties will cooperate in an effort to agree upon the
establishment of such alternative arrangements not subject to such failure or
delay as will confer upon them benefits comparable in character and
substantially equivalent in amount to those intended to be conferred by this
Agreement, on terms and conditions not materially more burdensome to either
party than those herein provided.
ARTICLE 15. INVALID PROVISION
The invalidity or unenforceability of any particular provision of this
Agreement shall not affect the other provisions hereof, and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provisions were omitted.
ARTICLE 16. GOVERNING LAW
The existence, validity, construction, operation and effect of this
Agreement shall be determined in accordance with and governed by the laws of
the State of California.
ARTICLE 17. ENTIRE AGREEMENT AMENDMENTS
This Agreement constitutes the entire agreement of the parties and the
provisions hereof shall supersede any and all prior agreements or
understandings relating to the same subject matter; but this Agreement shall
not supersede and shall be deemed contemporaneous with the Stock Purchase
Agreement and the Technical and Marketing Assistance Letter of Understanding
between the parties hereto. This Agreement may be amended only by a writing
signed by a duly authorized representative of both parties.
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ARTICLE 18. NOTICES
Any notice required or permitted under this Agreement shall be given in
writing and shall be deemed effectively given upon personal delivery to the
party to be notified or three business days after deposit with the United
States Post Office by registered or certified mail, return receipt requested,
postage prepaid or other internationally reputable overnight air courier
service and addressed to the party to be notified at the address indicated
for such party indicated below, or at such other address as such party may
designate by ten (10) days' advance written notice to the other parties.
If to the Company: ImageWare Software, Inc.
Attention: Mr. James Miller
15373 Innovation Drive, Suite 120
San Diego, CA 92128
If to Investor: Atlus Co., Ltd.
Attention: Mr. Minegishi
4-8 Kagurazaka, Shinjuku-ku
Tokyo, Japan
or at such other address as either party most recently may have designated in
writing to the other party for such purpose; or (b) on the day sent, when
sent by facsimile and confirmed by prepaid first-class registered airmail,
addressed to ISI or Atlus, as the case may be.
ARTICLE 19. CONTROLLING TEXT
It is understood and agreed that the English text of this Agreement is
controlling.
ARTICLE 20. COUNTERPARTS
This Agreement may be executed in counterparts and any number of
counterparts signed in the aggregate by the parties hereto shall constitute a
single original instrument.
ARTICLE 21. NO AGENCY CREATED
Neither party shall be deemed to be an agent of the other party as a
result of, or in any transaction under or relating to this Agreement and
neither party shall make any warranty or representation or incur any
obligation on behalf of or in the name of the other party and no partnership,
joint venture or agency relationship is created by this Agreement or the
transactions contemplated hereunder.
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ARTICLE 22. ASSIGNMENT
ISI shall not assign or delegate any of its rights or obligations
hereunder without the prior written consent of Atlus.
ARTICLE 23. HEADINGS
The headings herein are for reference only and shall not affect the
construction of this Agreement.
ARTICLE 24. EFFECTIVE DATE OF AGREEMENT
This Agreement shall become effective on the date hereof.
[signature page to follow]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
IMAGEWARE SOFTWARE INC.
By /s/ S. James Miller
----------------------------------
Name: S. James Miller
Title: Chairman & CEO
ATLUS CO., LTD.
By /s/ Naoya Harano
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Name: Naoya Harano
Title: President
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EXHIBIT I
LICENSED PATENTS
<TABLE>
<CAPTION>
Patent
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<S> <C>
1. Patent Name Image Editing System
U.S. Patent No.: 5,577,179
Date of Patent: Nov. 19, 1996
Assignee: ImageWare Software, Inc.
San Diego, CA
2. Patent Name Image Editing System Including Masking Capability
U.S. Patent No.: 5,469,536
Date of Patent: Nov. 21, 1995
Assignee: ImageWare Software, Inc.
San Diego, CA
3. Patent Name Image Editing System for Taking a Background and
Inserting Part of an Image Therein
U.S. Patent No.: 5,345,313
Date of Patent: Sep. 6, 1994
Assignee: ImageWare Software, Inc.
San Diego, CA
4. Patent Name Apparatus for Making Electronically-Produced
Postcards and Method of Operating Same
U.S. Patent No.: 5,343,386
Date of Patent: Aug. 30, 1994
Assignee: ImageWare Software, Inc.
San Diego, CA
</TABLE>
Exhibit I
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Agreement Clarifying and Amending Certain Terms of the License Agreement
("Amendment")
Without prejudice to any other terms of the "License Agreement" between
Atlus Co. Ltd. ("Atlus") and ImageWare Software, Inc. ("ISI") dated March 7,
1997, the parties wish to clarify certain terms, and amend certain terms of
the License Agreement. Atlus and ISI each acknowledge that consideration has
been given to each of them for the agreements herein, the receipt and
sufficiency of which are hereby acknowledged. Unless otherwise specified in
this Amendment, all capitalized terms contained herein shall have the meaning
ascribed to those terms within the License Agreement.
1) Without limiting other meanings, for the purposes of the License
Agreement, "Print Club" shall include among other possible products or
services, any product or service now or hereafter offered by Atlus or its
assignees or licensees in conjunction with any apparatus, operated on a
pay-per-use basis, by means of currency, tokens, credit card or other
transactional means, including without limitation a photo booth or photo
kiosk, permitting customers to create or reproduce images, whether as
stickers, post cards, or any other form of reproducing copies, which images
are generally intended for entertainment or amusement, or for business card,
address labels and similar applications. Print Club shall not include
products designed expressly for law enforcement purposes. Without limiting
Atlus' existing rights under the License Agreement, ISI will in good faith
negotiate with Atlus with respect to the exploitation of the Intellectual
Property for post office kiosks, passport kiosks and driver's license kiosks,
and shall not enter into an arrangement with any other party until such
negotiations have been completed.
2) ISI acknowledges and agrees that included within the rights granted Atlus
pursuant to Article 2.1 of the License Agreement are all rights heretofore
granted by ISI to David Douds, Imageware Specialty Products, or any other
entity owned or controlled by David Douds.
3) Article 9.2 of the License Agreement is deleted and replaced with the
following:
If during the term of this Agreement either party learns of any
unauthorized use of any Intellectual Property, then that party shall
promptly notify the other party in writing, setting forth the facts in
reasonable detail. The parties shall consult in good faith as to what
action, if any, to take against such unauthorized use. Following such
consultation, Atlus shall have the exclusive right in its sole and
absolute discretion to commence and pursue such litigation to protect
against such unauthorized use, at its cost and in its own name. ISI
shall cooperate fully with Atlus in such litigation by producing any and
all records, executing all documents, and providing all testimony and
other assistance as Atlus may require to exercise its rights under this
Section 9, or to pursue or facilitate such litigation and Atlus shall
reimburse ISI for its reasonable out-of-pocket expenses in such regard.
Any damages or other payments realized in connection with any such
litigation shall be first applied to repay Atlus and ISI proportionally
for the expenses each incurred, including legal fees, in connection with
such litigation. Any damages, payments and license fees remaining
following such application
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payable in consideration of future use of any Intellectual Property,
shall be shared on an seventy percent (70%) (Atlus), thirty percent
(30%) (ISI) basis. Atlus may settle, compromise or dismiss any action in
its sole discretion and pursuant to such terms as it deems appropriate.
Should Atlus choose not to commence or pursue litigation then ISI may
commence and pursue such litigation at its cost, and any recovery shall
be applied first to reimburse ISI for all of its expenses, including
legal fees, and the balance shared on a 70/30 basis between ISI and
Atlus.
4) Article 9.3 shall be renumbered Article 9.4, and a new Article 9.3 shall
be added as follows:
ISI understands that in connection with certain litigation, Atlus may
wish to pursue such litigation in the name of ISI. In such event, ISI
shall cooperate with Atlus in pursuing such actions on terms Atlus and
ISI may determine at the time.
5) Atlus hereby confirms its agreement to purchase and then convert the
Five Hundred Thousand Dollars ($500,000) eight percent (8%) convertible notes
held by three (3) holders on or before November 3, 1997, and to purchase Two
Million and Five Hundred Thousand Dollars ($2,500,000) of ISI stock in
accordance with Phase II of the March 7, 1997 Securities Purchase Agreement
on or before November 3, 1997, subject to the conditions therein (other than
the forecast condition). Atlus will reimburse ISI for the payment made by ISI
to David Douds on or before August 28, 1997.
6) The parties intend to continue their good faith discussions regarding
other needed clarifications and amendments of the License Agreement, although
the rights and obligations set forth in this Amendment are in no way
dependent upon the existence or outcome of those discussions. Each of the
parties has been represented by counsel in connection with this amendment,
which shall be effective as of the date hereof.
Executed this 28th day of July, 1997
Atlus Co. Ltd.
By: /s/ [ILLEGIBLE]
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Imageware Software Inc.
By: /s/ S. James Miller, Jr.
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