License Agreement - EG&G Inc. and Rapiscan Security Products Inc.
LICENSE AGREEMENT
THIS AGREEMENT is made and entered into as of the 19th day of December
1994, by and between:
EG&G Inc., a corporation of the Commonwealth of Massachusetts, having a
principal place of business at EG&G Instruments Group, 45 William Street,
Wellesley, Massachusetts 02181, ("LICENSOR")
and
Rapiscan Security Products, Inc., a corporation of the State of California,
having a principal place of business at 2830 Temple Avenue,, Long Beach,
California 90806, ("LICENSEE")
CONSIDERATIONS UNDERLYING THIS AGREEMENT
LICENSOR is the parent company of the owner of the entire right, title and
interest in United States Patent 4,366,382 entitled X-RAY LINE SCAN SYSTEM FOR
USE IN BAGGAGE INSPECTION (the "LICENSED PATENT") and has the right to make this
license;
LICENSEE desires to obtain from LICENSOR a license under the patent
regarding both past and future sales of products read upon by any of the claims
of LICENSED PATENT ("LICENSED PRODUCTS");
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LICENSEE and LICENSOR intend for this Agreement to prescribe the rights and
obligations among the parties regarding the LICENSED PATENT and all LICENSED
PRODUCTS; and LICENSOR is willing to grant such a license;
NOW THEREFORE, in consideration of the premises and of the mutual covenants
and agreements herein contained, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Definitions
A) "NET SALES" means with respect to LICENSED PRODUCTS sold by LICENSEE,,
the number of current LICENSED PRODUCTS SOLD by LICENSEE to purchasers (if said
purchasers are unrelated to LICENSEE) times the ROYALTY BASE for each LICENSED
PRODUCT.
B) "SOLD" means thirty (30) days from the day first billed out, shipped,
paid for or put into use, whichever shall first occur, excluding transfers for
resale (but not for use) between LICENSEE and its affiliated companies and
excluding non-revenue bearing transfers for demonstration including but not
limited to reliability testing purposes.
C) "AFFILIATE" shall mean and include any legal entity at least thirty
three percent (33%) of which directly or indirectly
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controls, is controlled by, or is under common control with a party of this
Agreement.
D) LICENSEE and LICENSOR acknowledge that the ROYALTY BASE has been the
subject of negotiation and is intended to define a royalty only on the subject
matter of the claims of the LICENSED PATENT while maintaining simplicity in
accounting. The ROYALTY BASE is also intended to exclude returns and separately
set forth charges, if any, included in the invoiced price including, but not by
way of limitation, charges for packing, transportation, design, engineering,
special testing, insurance, taxes, customs, duties, installation and warranty
charges. In the event LICENSEE shall transfer LICENSED PRODUCTS to related or
affiliated third parties, the NET SALE shall be the ROYALTY BASE applicable to a
sale to an unrelated or unaffiliated third party or if such transfer had been
made as a normal sale.
E) "EFFECTIVE DATE" shall mean the date first written above.
F) "LICENSED PATENT" shall include foreign counterparts, including
Canadian Patent 1,171,980, reissue or reexamined patents, PCT, divisions,
continuations or continuations-in-part thereof.
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2. Grant of License
LICENSOR hereby grants to LICENSEE a non-exclusive, personal, non-
transferable right and license in the LICENSED PATENT to make, have made, use
and sell or otherwise dispose of LICENSED PRODUCTS.
3. Royalties
A) LICENSEE shall pay to LICENSOR a continuing royalty equal to eight
percent (8%) of LICENSEE's NET SALES.
B) i. The ROYALTY BASE for LICENSEE's current X-Ray scanner shall be
twenty eight thousand dollars ($28,000).
ii. Comparable models of X-ray scanners shall have a ROYALTY BASE of
sales price less a fourteen percent (14%) allowance for warranty and
installation charges, but the ROYALTY BASE shall not exceed fifty thousand
dollars ($50,000) less allowance.
iii. LICENSOR and LICENSEE shall negotiate a ROYALTY BASE for X-ray
scanners having significantly distinguishable operating features, such as
suitability for the automatic market.
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C) As consideration for LICENSEE's making of LICENSED PRODUCTS prior to
the effective date of this Agreement, LICENSEE shall pay or shall cause an
AFFILIATE to pay to LICENSOR the sum calculated by multiplying the aggregate NET
SALES of LICENSED PRODUCTS made, sold or otherwise disposed of in the United
States from April 1988 to the EFFECTIVE DATE by the continuing royalty
percentage in Article 3A above. The sum shall be paid to LICENSOR within thirty
(30) days following the EFFECTIVE DATE. A report in accordance with the
requirements of Article 4A below shall be required with the payment.
D) The obligation to pay royalties shall extend to the expiration of the
LICENSED PATENT or until a judgment from a court of last resort that the
LICENSED PATENT is declared invalid becomes final.
4. Reports and Payments
A) Within forty five (45) days after the and of each calendar quarter,
LICENSEE shall render to LICENSOR a report stating the number and types of
LICENSED PRODUCTS manufactured, used or sold during said quarter, the NET SALES
of the LICENSED PRODUCTS, and a computation of royalties due LICENSOR. At the
time of rendering such report, LICENSEE shall make the royalty payment required
by this Agreement.
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B) LICENSEE agrees to keep full and accurate records, files and books of
account for a period of four (4) years following each report to LICENSOR
containing all the data reasonably required for the computation and verification
of the royalties paid and the information given in the reports provided for
herein.
C) LICENSOR shall have the right, during reasonable hours and upon
reasonable advance notice, to have the correctness of any such report audited at
LICENSOR'S expense, by a firm of independent public accountants, selected by
LICENSOR and reasonably acceptable to LICENSEE, which shall examine LICENSEE's
records only on matters pertinent to this Agreement. No more than one such
audit shall be conducted per annum. LICENSOR shall authorize said independent
public accountants to enter into a reasonable proprietary agreement in order to
shield LICENSOR from proprietary business information of LICENSEE. In the event
that it shall be determined by said independent public accountants at any time
that LICENSEE has under reported in an amount in excess of ten percent (10%) of
the royalties properly due with one or more reports, LICENSEE, in addition to
any other remedy shall reimburse LICENSOR's full cost and expense associated
with such audit and to pay to LICENSOR an amount equal to two (2) times that
which LICENSEE has failed to report or pay.
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D) All payments shall be in United States currency payable to LICENSOR at
the address specified below and shall be in immediately available funds.
E) All payments due pursuant hereto shall be made without deduction of
taxes of any kind. In the event applicable exchange control regulations prevent
remittance of United State currency by LICENSEE, LICENSEE agrees at LICENSOR's
option to deposit an equivalent amount in a currency and in a bank as designated
by LICENSOR for the account of LICENSOR.
5. Most Favored Licensee
If subsequent to the Effective Date of this agreement another manufacturer
of X-ray scanning systems similarly situated to LICENSEE is granted a license by
LICENSOR which provides to said manufacturer a combined royalty rate and royalty
base more favorable than that provided herein to LICENSEE, LICENSOR shall notify
LICENSEE of any such license, and describe in the notice such more favorable
combined rate and base as well as any additional burdens imposed upon such
manufacturer. LICENSEE shall have thirty (30) days to notify LICENSOR whether
LICENSEE desires to have the more favorable combined rate and bass provided that
LICENSEE shall also accept the additional burdens. If LICENSEE elects to adopt
such more favorable license terms, such adoption and such terms will be
effective as of the first day of the
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reporting quarter containing the effective date of the agreement between
LICENSOR and said manufacturer.
6. Non-assignability
A) The license granted herein is non-assignable and LICENSEE shall not
grant a sublicense hereunder. Change of control of LICENSEE shall constitute an
assignment of this license which shall be permitted with written consent of
LICENSOR, which consent shall not be unreasonably withheld. An initial public
offering of shares by LICENSEE shall not constitute a "Change of Control" within
the meaning of this paragraph.
B) LICENSOR may assign this Agreement and its obligations herein to any
Affiliate of LICENSOR. LICENSOR shall give LICENSEE prompt notice of any such
assignment.
7. Patent Marking
Commencing within ninety (90) days following the EFFECTIVE DATE, LICENSEE
agrees to mark LICENSED PRODUCTS to specify that the LICENSED PRODUCTS are
manufactured under license from Astrophysics Research Corporation and in a form
in accordance with the notice requirements of Title 35 of the United States
Code, Section 287. The following form of notice will be acceptable to LICENSOR:
"U.S.
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Pat. No. 4,366,382." LICENSOR shall permit LICENSEE to promptly effect a cure
should inadvertent failure to so mark be discovered.
8. Duration
A) This Agreement shall continue in full force and effect until the
expiration of the LICENSED PATENT unless this Agreement is sooner terminated as
herein provided.
B) LICENSOR may terminate this Agreement forthwith upon notice to
LICENSEE if:
i. LICENSEE remains in default in making any payment or report
required hereunder or fails to comply with any other provision hereof for a
period of forty five (45) days, in each case after written notice of each such
default or failure is given by LICENSOR; provided that if LICENSEE shall be in
default in making any two successive payments or reports required hereunder on a
timely basis, LICENSOR shall be entitled to terminate this Agreement forthwith
upon notice to LICENSEE, unless a genuine good faith dispute exists as to the
amount due and any amounts not in dispute are timely paid;
ii. LICENSEE should become insolvent, enter into bankruptcy
voluntarily or involuntarily and the petition is not dismissed in 91 days or
make any assignment for the benefit of one
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or more creditors or should an order for compulsory liquidation of LICENSEE be
made by any court;
iii. LICENSEE shall be determined by a court of competent jurisdiction
to have willfully or deliberately violated any provision of this Agreement, or
to have concealed from LICENSOR any failure to comply with this Agreement,
including, but not limited to, the deliberate or willful understatement of
royalties payable or the refusal to timely pay royalties, or shall be determined
to have acted other than in good faith in breaking any provision of this
Agreement; or
iv. LICENSEE shall have engaged in any unauthorized infringement of
the LICENSED PATENT and shall not have cured such a default within a period of
thirty (30) days after written notice from LICENSOR.
C) Any termination of the Agreement shall not relieve LICENSEE of
liability for any payments accrued or owing prior to the date of such
termination or for any payments on LICENSED PRODUCTS manufactured or located in
the United States prior to the date of such termination and sold thereafter.
D) LICENSEE acknowledges, that this Agreement was entered into as a
result of a dispute based upon LICENSOR's assertion that the LICENSED PATENT was
valid and enforceable and was being
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infringed by LICENSEE. The parties acknowledge that this Agreement is in lieu of
a final settlement of the dispute. LICENSEE agrees that should it, during the
term of this Agreement, contest the validity of the LICENSED PATENT by filing or
causing others to file any legal action or any proceeding for reexamination of
the LICENSED PATENT, then LICENSOR shall have the right to forthwith and
thereafter terminate this Agreement and/or any, and all rights granted to
LICENSEE by this Agreement, to the extent that the exercise of such right to
terminate is permitted under the laws of the United States.
9. Notices
All notices required to be sent by either party under this Agreement shall
be in writing and sent either by prepaid certified or registered U.S. mail,
return receipt requested or by prepaid DHL, Federal Express or United States
Postal Service Express mail for next business day delivery, and shall be deemed
to have been duly given when received.
If to LICENSEE, to:
Rapiscan Security Products, Inc.
2830 Temple Avenue,
Long Beach, California 90806
Attention: President
FAX (310) 644-0616
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If to LICENSOR, to:
EG&G Inc
45 William Street
Wellesley, MA 02181-4078
Attention: Vice President, Instruments Group
FAX (617) 431-4153
With a copy to:
EG&G, Inc.
45 William Street
Wellesley, Massachusetts 02181-4078
Attention: Vice President and General Counsel
FAX (617) 431-4115
unless a different address shall have been duly given previously.
10. Governing Law and Jurisdiction
A) The construction and legal effect of this Agreement shall be governed
by the laws of the State of California, U.S.A. without regard to conflicts of
laws rules.
B) Any disputes, controversies or claims between the parties arising out
of or relating to this Agreement shall be settled by binding arbitration
according to the rules of the American Arbitration Association. Such arbitration
shall take place in Los Angeles County, California, or such other place as the
parties may mutually agree.
C) Notwithstanding the foregoing, in the event that the parties do not
agree on whether a particular design of X-ray
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scanner product, marketed or to be marketed by LICENSEE, is read upon by the
claims of the LICENSED PATENT, resolution of that question shall be resolved by
such dispute mechanism as the parties shall agree to, or if they cannot agree,
the dispute as to whether a particular design is read upon by the claims of a
LICENSED PATENT shall be presented in a mini-trial format, using the Federal
Rules of Evidence, where appropriate, to a group of three professionals
("Judges") acceptable to both parties, at least one of whom shall be a patent
lawyer and at least one of whom shall be skilled in the art of X-ray scanners.
At the end of the mini-trial, the question of whether the claims, properly
construed and interpreted pursuant to the laws of the United States, shall be
put to the three Judges. The majority vote of the three judges shall resolve the
dispute and shall be binding on both parties and shall be the sole method for
resolving any disputes directed to such a question in the absence of agreement
of the parties. It is the intent of this section to provide a quick, inexpensive
and binding resolution of such disputes.
11. Miscellaneous
A) LICENSOR makes no warranty, either express or implied, that the
PRODUCTS manufactured and sold by LICENSEE will not infringe any patents of any
country or nation of the world not owned or controlled by licensor.
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B) LICENSOR undertakes to use its best efforts to enforce the LICENSED
PATENT against third parties and to cause them to stop any infringement.
LICENSEE may identify to LICENSOR from time to time in writing third parties
whom it believes are infringing the LICENSED PATENT. LICENSOR shall make
reasonable efforts to determine whether those third parties are infringing.
LICENSOR shall within 120 days notify LICENSEE as to whether it believes the
third party is infringing, and if not why not, or shall state to LICENSEE why
infringement cannot be confirmed. Should LICENSOR cease to use best efforts to
obtain cessation of unlicensed infringement of the LICENSED PATENT, LICENSEE
beginning one year after notice to LICENSOR may pay all future royalties in to
an escrow account payable to LICENSOR at such time as LICENSOR obtains cessation
of unlicensed infringement of the LICENSED patent. Should efforts on behalf of
LICENSOR cease, the escrow account shall be payable to LICENSEE. If such efforts
on behalf of LICENSOR are continuing at the time the LICENSED PATENT expires,
the escrow account shall be payable to LICENSOR. "Best efforts" as used herein
shall allow LICENSOR full latitude to conduct its enforcement of the LICENSED
PATENT, and actions that would not result in a finding of laches or estoppel in
an infringement action, e.g. prosecuting only one lawsuit at a time, shall be
deemed to meet the requirement of best efforts.
C) LICENSOR shall not be liable for any consequence or damage arising out
of or resulting from anything made available
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hereunder, or for the exercise by LICENSEE of any rights granted hereunder, nor
be liable to LICENSEE for consequential damages under any circumstances.
D) If any provision of the Agreement is or becomes or is deemed invalid,
illegal or unenforceable under the applicable laws or regulations of the United
States, State of California or any other jurisdiction, such provision will be
deemed to be amended to the extent necessary to conform to the applicable laws
or regulations or, if it cannot be so amended without materially altering the
intention of LICENSEE and LICENSOR, it will be stricken, and the remainder of
this Agreement will remain in full force and effect.
E) This Agreement constitutes the entire understanding of the parties
with respect to its subject matter and supersedes all prior and contemporaneous
oral or written negotiations, agreements and understandings. This Agreement may
be modified only in writing signed by LICENSOR and LICENSEE.
F) No failure or delay to act upon any default or to exercise any right,
power or remedy hereunder will operate as a waiver of any such default, right,
power or remedy.
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G) This Agreement has been drafted on the basis of mutual understanding
so that neither party shall be prejudiced as being the drafter thereof.
H) LICENSOR shall cause all payments, reports, audits, and other
communications to be transmitted to and directly kept by LICENSOR and not
transmitted or disclosed to LICENSOR's subsidiary, EG&G Astrophysics Research, a
competitor of LICENSEE in X-ray baggage inspection systems. LICENSOR shall
endeavor in good faith to not transmit to EG&G Astrophysics information derived
from such communications. This Agreement and any payments made under this
Agreement will not be used as a marketing tool by LICENSOR. Factual reference
to the LICENSED PATENT as being the property of LICENSOR's subsidiary shall not
be deemed to be use as a marketing tool.
I) LICENSOR warrants that it owns EG&G Astrophysics Research, Inc., the
owner of the entire right title and interest of
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the LICENSED PATENT, and that LICENSOR is legally capable of and authorized to
enter into this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by its duly authorized representative.
LICENSOR: LICENSEE:
EG&G INC. RAPISCAN SECURITY PRODUCTS, INC.
By /s/ By /s/
---------------------------- -------------------------------
Title: Vice President Title:
------------------------
Date: December 19, 1994 Date:
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MODIFICATION TO LICENSE AGREEMENT
EG&G, Inc. (LICENSOR) and Rapiscan Security Products, Inc., (LICENSEE)
hereby agree to modify the License Agreement entered into by and between the two
companies on December 19, 1994, as follows:
Section 1, paragraph A is deleted and replaced with:
A) "NET SALES" shall men the total of the NET INVOICE PRICE for LICENSED
PRODUCTS sold by LICENSEE that do not meet the criteria outlined in Sections Ai,
Aii or Aiii of Paragraph 3.
The following paragraph is added to Section 1:
G) "NET INVOICE PRICE" shall mean the gross invoice selling price of each
LICENSED PRODUCT sold by LICENSEE less warranty and installation charges of
fourteen percent (14%). The term LICENSED PRODUCT shall not include any kits or
any parts sold for additional assembly.
Paragraphs A, B and C of Section 3 are deleted and replaced with the
following:
3. Royalties
A) LICENSEE shall pay LICENSOR a continuing royalty equal to eight percent
(8%) of LICENSEE's NET SALES subject to the following exceptions:
i. For every "Series I" machine sold by LICENSEE at a NET INVOICE
PRICE between $15,000 and $20,000, LICENSEE shall pay LICENSOR a flat rate of
$750 per machine;
ii. For every "Series 300" machine sold by LICENSEE at a NET INVOICE
PRICE between $20,000 and $30,000, LICENSEE shall pay LICENSOR a flat rate of
$1000 per machine;
iii. For every "Series 500" machine sold by LICENSEE at a NET INVOICE
PRICE
a) between $30,000 and $35,999, LICENSEE shall pay LICENSOR a flat
rate of $1500 per machine.
b) between $36,000 and $42,000, LICENSEE shall pay LICENSOR a flat
rate of $2000 per machine.
iv. If the NET INVOICE PRICE is below the lowest of the aforesaid
minimums, then the royally for such sale shall be negotiated in good faith
between the parties.
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v. No royalty shall be paid on any portion of a NET INVOICE PRICE in
excess of $50,000 for the above mentioned, or comparable, machine models.
All remaining sections of the License Agreement remain in full force and
effect.
This modification is effective as of December 19, 1994.
LICENSOR LICENSEE:
EG&G, INC. RAPISCURITY PRODUCT INC.
By: /s/ Angelo Castellano By: /s/ Deepak Chopra
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Title: Vice President Title: CEO