License Agreement - Direct Marketing Technology Inc. and Intellipost Corp.
LICENSE AGREEMENT
This Agreement is made by and between Direct Marketing Technology, Inc. ("DMT")
and Intellipost Corporation ("IPOST") on this 30th day of November, 1998 for the
licensing by IPOST from DMT of certain software and related media,
documentation, manuals, materials, information patents, patent applications,
specifications and other Intellectual Property (the "Licensed Property")
required for the operation of the MyPoints(R) Program ("Program") being acquired
by IPOST.
WHEREAS, DMT has acquired the Licensed Property by virtue of an assignment from
MotivationNet, LLC ("MNET");
WHEREAS, IPOST is acquiring a 100% interest in MNET, along with a 100% interest
in Enhanced Response Technologies, Inc. ("ERT"), including ERT's wholly owned
subsidiary MyPoints.Com, LLC which owns and operates the Program (the
"Transaction");
WHEREAS, IPOST, in connection with the Transaction, wishes to obtain an
exclusive license for the Licensed Property for purposes of operating the
Program.
NOW, THEREFORE, there being adequate consideration for the undertaking herein
set forth, DMT hereby grants IPOST a license for the Licensed Property in
accordance with the terms and conditions set forth below:
1. LICENSE. For and in consideration of royalty payments provided for
herein, DMT hereby grants to IPOST, including its subsidiaries,
affiliates and all their successors, and IPOST hereby accepts from DMT,
an exclusive (subject to any existing licenses granted by MNET or
MyPoints.com LLC in the ordinary course of business), limited license to
use the Licensed Property under the terms and conditions set forth in
this Agreement. IPOST acknowledges and agrees that the Licensed Property
is proprietary to DMT and that this Agreement grants IPOST no title or
right of ownership in the Licensed Property, except as provided herein.
IPOST is hereby authorized to:
a. use the Licensed Property in all lawful ways necessary for the
operation of the Program or any successor thereto, and any
similar "private label" programs where the liability for points
or awards issued resides with IPOST, whether such programs are
on-line and/or off-line;
b. use the Licensed Property with regard to any program similar to
the Program operated outside the United States, under the name
MyPoints(R) or otherwise;
c. sublicense those portions of the Licensed Property required by
web sites to participate in the Program, subject to the
requirement that each such web site must execute a MyPoints(R)
Program Agreement with an attached Software License Agreement
with terms that are acceptable to DMT;
d. modify the Licensed Property and/or merge it into another
program for use in IPOST's computer system (subject to the
allowable uses herein); and
<PAGE> 2
e. make copies of the Licensed Property and documentation, for
internal business use, for the operation of the Program and as
required under allowable sublicenses all as specified in 1.a.,
b. and c. above.
2. ROYALTIES. IPOST shall pay to DMT a royalty for the license of the
Licensed Property in the amount of $4,200,000 (the "Royalty"), which
shall be paid based on the greater of $35,000.00 per month, or 3% of
IPOST's monthly revenues generated from the Licensed Property or any
modifications, enhancements or "new versions" (as defined below) of the
Licensed Property (the "Revenue"). Royalty payments shall be deferred
for 90 days from the date of this Agreement. IPOST shall provide DMT a
monthly report showing all IPOST Revenue within 20 days of the end of
each calendar month, along with the Royalty payment for that month. DMT
shall have the right to audit the books and records of IPOST at any time
upon 5 business days' notice.
3. PURCHASE OPTION. IPOST, at its sole option, and if it is not in breach
of this Agreement, may purchase all ownership rights in the Licensed
Property at the completion of the license Term (as hereinafter defined)
for a purchase price of one dollar. During the license Term, IPOST shall
also have the option to purchase all ownership rights in the Licensed
Property for the then remaining portion of the Royalty that has not been
paid (the "Remaining Balance"), discounted to a present value using a
discount rate of the Prime Interest rate (as published in the Wall
Street Journal) ("Prime") plus 2% (the "Prepayment Amount"). Upon
purchasing the Licensed Property under this paragraph 3 or paragraph 4
below, IPOST shall also receive all rights and interests of DMT in and
to all patents and patent applications associated therewith. DMT shall,
at IPOST's cost execute any and all documents reasonably required by
IPOST of the assignment or transfer of said rights and interests to
IPOST.
4. MANDATORY PURCHASE OF LICENSED PROPERTY. IPOST shall purchase all
ownership rights in the Licensed Property if, during the Term of the
license, IPOST completes an initial public offering of stock ("IPO").
The purchase price in such event shall be the then existing Prepayment
Amount as calculated pursuant to paragraph 3 above. Such purchase price
may be payable at IPOST's option either in cash or in unrestricted and
fully registered IPOST shares issued in connection with such IPO,
calculated based on the lowest price such shares are issued in
connection with the IPO.
5. LICENSE BACK TO DMT. In the event that IPOST exercises any of its
options to purchase all ownership rights in the Licensed Property as
provided in either paragraph 3 or 4 above, IPOST shall provide to DMT a
license back of the Licensed Property, as it exists at the time of
IPOST's purchase and as further developed, modified or enhanced over
time, at a fair market value royalty rate for comparably sized programs,
for DMT's and its affiliates own business uses, including, without
limitation, DMT's affiliate's home shopping business (where IPOST, or
its successor, is the operator). However, any business uses that DMT or
its affiliates shall make of the Licensed Property shall not directly
compete with any of the uses by IPOST authorized under this Agreement,
and DMT shall not have the right to sell, license or transfer the
Licensed Property to third parties.
2
<PAGE> 3
6. DMT'S RETAINED OWNERSHIP AND USE. During the Term hereof, DMT shall
retain any and all title and ownership rights in and to the Licensed
Property as originally licensed to IPOST hereunder. All subsequent
modifications and/or enhancements of the Licensed Property made by IPOST
shall be owned by IPOST. Notwithstanding anything herein to the
contrary, DMT shall have the ability to use the Licensed Property and
any modifications and enhancements made by IPOST royalty free for any of
its own business uses (including any of DMT's affiliate's home shopping
business enterprises) so long as such uses do not directly compete with
IPOST's allowable uses of the Licensed Property as provided herein, and
DMT shall not have the right to sell, license or transfer the Licensed
Property to third parties.
7. INCLUSION OF COPYRIGHT NOTICE. IPOST agrees to reproduce and include the
copyright notice, if any, on any copy, modification or portion merged
into another program.
8. TERM. The license granted under this Agreement shall commence upon the
date this Agreement is executed and shall continue for a period of one
hundred twenty-three (123) months (the "Term").
9. TERMINATION REQUIREMENTS. Upon termination of this Agreement IPOST shall
(unless it exercises its purchase option), within 30 days of said
termination, return to DMT, or destroy, the Licensed Property together
with all copies, modifications, and merged portions in any form. If
IPOST chooses to destroy the Licensed Property, and all copies,
modifications, and merged portions thereof, it shall certify to DMT in
writing that the destruction has taken place and that IPOST no longer
has in its possession, nor has it transferred to the possession of
anyone else, the Licensed Property or any media containing same or any
portion thereof
10. NEW VERSION. DMT agrees to provide IPOST with one copy of the latest
available version of the Licensed Property at no cost to IPOST. If DMT
develops and implements any new version of the Licensed Property during
the term of this Agreement, DMT shall provide IPOST, at no charge, with
a copy of the new version as soon as it is available. "New version"
shall mean that the Licensed Property has been significantly modified,
enhanced and extended through the addition of substantial new
capabilities. If IPOST develops a "new version" of the Licensed
Property, IPOST shall provide a copy to DMT immediately. IPOST shall, in
any event, provide DMT a copy of the Licensed Property then currently in
use by IPOST on a monthly basis, including any enhancements, changes or
modifications made by IPOST.
11. WARRANTIES.
a. DMT warrants that it has acquired whatever ownership rights MNET
had in and to the Licensed Property from MNET in connection with
the Transaction.
b. DMT warrants that, to its knowledge, the Licensed Property
licensed for the purposes set forth herein contains no
authorization codes, computer viruses or other contaminants,
including any codes or instructions that can modify, damage or
disable IPOST's computer systems.
3
<PAGE> 4
c. IPOST represents and warrants that it has been provided with all
materials, documents, schematics, source code and literature
that it has requested regarding the Licensed Property in
connection with the Transaction, and has determined that the
Licensed Property, as it exists upon assignment to DMT in
connection with the Transaction, is sufficient for its needs and
accepts the Licensed Property "as is".
12. DISCLAIMER OF WARRANTIES. THE FOREGOING WARRANTIES ARE THE ONLY
WARRANTIES DMT HAS GIVEN TO IPOST WITH RESPECT TO LICENSED PROPERTY
BEING LICENSED HEREIN. SUCH WARRANTIES ARE IN LIEU OF ALL OTHER
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION WARRANTIES
OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE. DMT
EXPRESSLY DOES NOT WARRANT OR REPRESENT THAT THE LICENSED PROPERTY DOES
NOT OR WILL NOT INFRINGE OR OTHERWISE VIOLATE ANY PATENT, TRADEMARK,
COPYRIGHT OR OTHER INTELLECTUAL PROPERTY RIGHTS (COLLECTIVELY THE
"INTELLECTUAL PROPERTY RIGHTS") OF ANY THIRD PARTY, AND DMT SHALL BE
UNDER NO OBLIGATION TO INSURE THAT THE LICENSED PROPERTY DOES NOT OR
WILL NOT INFRINGE ON ANY SUCH INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD
PARTY, OR THAT IPOST SHALL HAVE CONTINUED RIGHTS TO USE THE LICENSED
PROPERTY THROUGHOUT THE TERM OF THIS LICENSE.
13. LIMITATIONS OF LIABILITIES. DMT'S ENTIRE LIABILITY WITH RESPECT TO THE
LICENSED PROPERTY SHALL BE LIMITED TO THE AMOUNT PAID BY IPOST PURSUANT
TO THIS LICENSE AGREEMENT FOR THE SIX MONTH PERIOD PRIOR TO ANY SUCH
LIABILITY BEING CLAIMED BY IPOST. UNDER NO CIRCUMSTANCES SHALL DMT BE
LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES, EXPENSES, LOST PROFITS,
LOST SAVINGS, OR OTHER DAMAGES ARISING OUT OF THE USE OF, OR INABILITY
TO USE, THE LICENSED PROPERTY, OR THE BREACH OF ANY EXPRESS OR IMPLIED
WARRANTY, EVEN IF DMT HAS BEEN ADVISED OF THE POSSIBILITY OF THOSE
DAMAGES. No action, regardless of form, arising out of any transaction
under this Agreement, may be brought by either party more than one year
after the injured party has actual knowledge of the occurrence which
gives rise to the cause of such action.
14. INDEMNIFICATION. IPOST agrees to defend, indemnify and hold harmless DMT
and its officers, directors, employees, agents, representatives, and
affiliates (collectively the "DMT Parties") from and against any claim,
demand, action, cause of action, loss or damage that in any way arises
out of or relates to a claim that the Licensed Property violates or
infringes upon the Intellectual Property Rights of any third party.
IPOST shall not be required to indemnify DMT as provided for herein for
any claim that arises out of DMT's or its affiliates' use of the
Licensed Property as allowed pursuant to this License. IPOST will have
the right in its sole discretion to control the defense of and settle
any such claim, provided that any such settlement provides for a full
release of the DMT Parties. If any such settlement shall not provide for
a full release of the DMT Parties, IPOST shall first receive the DMT
Parties' written consent to such settlement. In the event that IPOST
settles any such claim, IPOST will have no power or authority to object
under any
4
<PAGE> 5
provision of this Section 14 to any indemnification claim by DMT with
respect to such settlement. The DMT Parties will be entitled, at their
expense, to participate in such defense.
15. NONDISCLOSURE. IPOST agrees that it shall treat DMT's Confidential
Information with the same degree of care it treats confidential
information of its own which it does not wish to disclose to the public.
For the purposes of this Agreement, "Confidential Information" shall
mean the Licensed Property and related documentation, manuals
information and specifications and information of DMT so identified as
"confidential" by DMT. It shall not include (i) information in the
public domain or which comes into the public domain other than through
breach hereof by IPOST, (ii) information in IPOST's possession prior to
disclosure to it by DMT, or (iii) information disclosed to IPOST by a
third party who is not under a similar obligation to DMT. IPOST shall
have the right to disclose such Confidential Information as it is
obligated to disclose by order of a court of law or administrative body
which has the legal authority to order such disclosure. However, before
any such disclosure IPOST shall notify DMT of the order to disclose to
allow DMT the opportunity to bring action to protect its Confidential
Information.
16. GOVERNING LAW. This Agreement shall be construed according to, and the
rights of the parties shall be governed under, the laws of the State of
California.
17. NOTICES. Notices required hereunder shall be sent by facsimile or by
Certified Mail, Return Receipt Requested, postage prepaid and, if sent
by mail, shall be deemed received five days after the date of deposit in
the U.S. Mail.
18. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties in connection with the licensing of the Licensed
Property.
19. WAIVER, AMENDMENT OR MODIFICATION. Any waiver, amendment or modification
of any provision of this Agreement, or any right, power or remedy
hereunder shall not be effective unless made in writing, and signed by
the party against whom enforcement of such waiver, amendment or
modification is sought. No failure or delay by either party in
exercising any right, power or remedy with respect to any of its rights,
obligations or powers hereunder shall operate as a waiver thereof, or a
waiver of any other provision of this Agreement.
20. SUCCESSORS AND ASSIGNS. All the terms and provisions of this Agreement
shall be binding upon and shall inure to the benefit of the parties
hereto and their successors and assigns and legal representatives. IPOST
shall have the right to assign this Agreement to any of its subsidiaries
or affiliates, and shall have the right to assign its rights to the use
of the Software Program pursuant to the provisions of Section 1.c.
above. Except as provided for herein, IPOST shall not assign this
Agreement, nor any right granted hereunder, in whole or in part, without
DMT's prior written consent, which consent shall not be unreasonably
withheld.
21. SEVERABILITY. If any provision of this Agreement, or the application of
any provision of this Agreement, shall be held by any court or tribunal
of competent jurisdiction to be
5
<PAGE> 6
contrary to law, unenforceable or otherwise illegal, the remaining
provisions of this Agreement shall continue in full force and effect.
22. SURVIVAL. The provisions of Sections 11, 12, 13, and 14 shall survive
termination of this License for any reason.
[Remainder of page intentionally left blank]
6
<PAGE> 7
IN WITNESS WHEREOF, DMT and IPOST have caused this Agreement to be executed by
their duly authorized representatives.
Direct Marketing Technology, Inc. Intellipost, Inc. ("IPOST")
By: /s/ Thomas Newkirk By: /s/ Steven M. Markowitz
--------------------------------- --------------------------------------
Title: Title:
------------------------------ -----------------------------------
7