License Agreement - SunnComm Inc. and Will-Shown Technology Co. Ltd.
LICENSE AGREEMENT
between
SunnComm, Inc.
and
Will-Shown Technology Company, Ltd.
THIS LICENSE AGREEMENT (this "Agreement") is made effective this 5th day of
December, 2000 between WILL-SHOWN TECHNOLOGY COMPANY, LTD, incorporated under
the laws of the R.O.C.with corporate offices located at 2A, No 137, SEC, 2,
TA-Tung Road, Shiju City, Taipei Hsien, Taiwan, R.O.C. ("Licensee"), and
SUNNCOMM, INC., a Nevada corporation, with offices at 668 North 44th Street,
Suite 220, Phoenix, Arizona 85008 USA ("Licensor").
WHEREAS, Licensor is the owner of proprietary, patent-pending encryption and
copy-protection technology designed to copy protect digital music (the "Audio
Copy Protection System"), together with the Licensed Properties as defined
below, and;
WHEREAS, Licensee is desirous of acquiring a license to apply the Audio Copy
Protection System, together with the Licensed Properties, to sound recordings
embodied on compact discs manufactured, marketed and distributed by Licensee
(the "Products"), and;
WHEREAS, Licensor is willing to grant said license upon the terms and
conditions set forth herein:
NOW, THEREFORE, in consideration of the foregoing, and of the mutual covenants,
terms, conditions, and agreements, hereinafter expressed, and other good and
valuable consideration, the receipt and sufficiency for which is acknowledged,
the parties agree as follows:
DEFINITIONS. As used in this Agreement:
A. "Licensed Properties" shall mean the rights to the Know-How and the Marks,
as defined herein.
B. "Know-How" shall mean all trade secrets, patent rights and
otherproprietary information, technology, processes and procedures that are
necessary to develop, apply, produce and otherwise commercially exploit the
Audio Copy Protection System.
C. "Marks" shall mean all rights to use the name "SUN-X" and other names,
trademarks, service marks or logos used by Licensor in connection with the
Know-How.
D. "Net Factory Sales Price" is defined as the gross retail selling price of
each unit of the Products. If Products are made abroad, less usual trade
discounts actually allowed, but not including advertising allowances or fees or
commissions paid to employees or agents of Licensee. The Net Factory Sales
Price shall not include (1) import and export taxes, excise and other sales
taxes, and customs duties, and (2) costs of insurance and transportation, if
separately billed, from the place of manufacture if in the U.S., or from the
place of importation if manufactured abroad, to the customer's premises or next
point of distribution or sale. Subject to the minimum royalty payment described
in Section 2(A) below, bona fide returns not to exceed 25% of total sales of
Products may be deducted from units of Products shipped in computing the
royalty payable after such returns are made.
1. GRANT OF LICENSE.
A. In accordance with this Agreement, Licensor grants to Licensee a
nonexclusive, nontransferable worldwide license to apply the Audio Copy
Protection System, together with the Licensed Properties, to the Products
solely in connection with the manufacturing, sale, marketing, distribution and
advertising of the Products. Licensor shall, at its expense and without
additional costs to Licensee, disclose the Know-How to Licensee, including
manuals, test data and research results. Licensor shall also, at its expense
and without additional costs to Licensee, share with Licensee the
informationpossessed by Licensor, whether now or in the future, that my be
beneficial to Licensee's use of the license granted hereunder, including
without limitation Know-How developed after the date of this Agreement.
B. The license granted to Licensee hereunder shall be exclusive only as it
relates to any Products by artists for which Licensee promotes and distributes
exclusively pursuant to a written exclusive recording agreement between such
artists and Licensee. It is not the intent of Licensor to grant an exclusive
right to the use of the Audio Copy Protection System and the Licensed
Properties otherwise, except as stated herein. Licensee agrees that it shall
use the Audio Copy Protection System exclusively during the term of this
Agreement and any extensions thereof.
C. The rights granted to Licensee hereunder shall include any additional
intellectual property rights used, developed or otherwise acquired by Licensor
that are in any way related to the Audio Copy Protection System and the
Licensed Properties, including any rights in any modifications or improvements
to the Audio Copy Protection System and the Licensed Properties developed by
Licensor (either alone or jointly with third parties) without substantial aid
or involvement by Licensee (collectively, "Licensor Modifications"). Licensor
Modifications shall be solely owned by Licensor. Licensor shall, at its
expense, promptly disclose to Licensee all such additional intellectual
property rights (including without limitation Licensor Modifications) and shall
share with Licensee the related information free of charge.
2. PERFORMANCE & COMPENSATION.
Upon the execution of this Agreement, Licensee agrees to pay Licensor an
advance royalty fee of USD Forty Thousand Dollars ($40,000.00).
A. Licensee herein agrees that Licensee shall pay Licensor a three
percent(3%) royalty on the Net Factory Sales Price on each unit of Product sold
to which the Audio Copy Protection System has been applied, but in no event
shall Licensor receive a royalty of less than twenty cents ($.20) for each such
unit of Product sold. Payment shall be calculated on a monthly basis and shall
be paid within 30 days from the end of each prior month.
B. Licensee hereby agrees to ship the minimum number of units of Product to
which the Audio Copy Protection System has been applied in accordance with the
schedule set forth on TABLE A below (the "Minimum Performance Requirement").
Licensee's failure to meet the Minimum Performance Requirement shall not
relieve Licensee of the obligation to pay monthly royalties pursuant to Section
2(A) above based upon such Minimum Performance Requirement.
TABLE A
-------
Minimum Units per Month Contract Year
----------------------- -------------
100,000 0 - 6 months
200,000 7 - 9 months
800,000 2 - 3
1,250,000 4 - 5
1,500,000 6 - 7
1,750,000 8 - 9
2,000,000 10 - 11
2,500,000 12 - 13
C. Licensee shall pay to Licensor all royalties due on a monthly basis within
thirty (30) days from the end of each month. Within thirty (30) days after the
end of each calendar month, Licensee shall submit to Licensor a written
statement setting forth the actual number of units shipped of Product to which
the Audio Copy Protection System has been applied, the Net Factory Sales Price
for each such unit of Product, the amount of royalty due on each such unit of
Product for the previous month, and any adjustments for returns. Failure to pay
any royalty payment when due shall constitute a material breach of this
Agreement. If such breach is not cured within the applicable cure period set
forth in Section 3(C) below, Licensor may terminate this Agreement upon written
notice to Licensee and pursue any and all legal and equitable remedies
available to Licensor Late royalty payments shall bear simple interest at the
rate of twelve percent (12%) per annum until paid in full.
D. Upon at least three (3) days advance written notice given to Licensee by
Licensor, Licensee shall make available to Licensor, or if requested by
Licensee, to a Certified Public Accountant or other independent third-party
agreeable to Licensor and Licensee, during reasonable business hours at
Licensee's principal place of business those books and records of Licensee that
relate to the subject matters of this Agreement. Licensor may, at its expense,
cause an audit of such books and records by a Certified Public Accountant or
other independent third-party agreeable to Licensor and Licensee, and any
additional royalties determined to be due shall be paid by Licensee within
fifteen (15) days of written notification of underpayment to Licensee. If such
underpayment exceeds five percent (5%) of the outstanding royalties owed,
Licensee shall pay the cost and expense of the audit.
3. DURATION, DEFAULTS & TERMINATION.
A. This Agreement shall remain in effect, unless sooner terminated upon the
mutual agreement of Licensor and Licensee, upon the following terms and
conditions:
1. The initial term of the license granted herein shall be seven (7) years
with three (3) consecutive option periods of two (2) years each beginning at
the end of the initial term. Each option, which shall be exercised at the sole
discretion of Licensee, shall be subject to the applicable Minimum Performance
Requirement as set forth in TABLE A above.
2. Licensor shall supply or provide to Licensee the following:
e. Available Know-How to enable Licensee to apply the Audio Copy Protection
System to its Products and to develop and manufacture on a commercial scale all
of its Products in the same manner as it is currently using.
f. Suitably qualified technical support staff to assist and supervise in the
transfer of the Audio Copy Protection System and additional assistance to
Licensee as reasonably required.
g. Licensee shall not be entitled to sub-license the license granted under this
Agreement to any third party or to any subsidiary.
h. Licensee shall have no right to manufacture, use or sell the Audio Copy
Protection System or the Licensed Properties otherwise than as expressly set
forth herein.
B. This Agreement shall expire simultaneously with the expiration of the
longest-lived option as extended by Licensee, unless sooner terminated pursuant
to the terms of this Agreement.
C. If Licensee fails to pay Licensor moneys payable under the terms hereof,
or if Licensee violates or fails to keep or perform any other obligation, term,
or condition, or covenant, hereof, or if Licensee shall be adjudged bankrupt or
become insolvent or make an assignment for the benefit of creditors, or be
placed in the hands of a receiver or Trustee in bankruptcy, then Licensor may,
at its option, cancel and terminate this Agreement by giving thirty (30) days
written notice specifying default complained hereof, provided however, that if
Licensee shall, within such (30) thirty days cure the default complained of,
then the notice shall cease to be operative and this Agreement shall continue
in full force and effective as though such default had not occurred, and
provided further that if Licensee shall within such (30) days notify Licensor
in writing that it disputes the asserted default, the matter shall be submitted
to arbitration a hereinafter provided.
D. Termination of this Agreement granted herein shall not relieve Licensee of
its obligations to pay Licensor moneys due and unpaid at the time of
termination. Termination of this Agreement shall not impair or prejudice any
cause of action or claim that one party may have against the other party for
any breach of this Agreement.
4. Quality Control and Use of Licensed Properties
A. The quality of the Audio Copy Protection System and the Licensed
Properties provided by Licensee shall be substantially consistent with such
services and products provided by Licensor or by others authorized by Licensor
unless otherwise approved by Licensor.
B. Each unit of Product to which the Audio Copy Protection System has been
applied shall bear the trademark "SUN-X" in form, print size and position
mutually acceptable to the parties hereto.
C. Licensee shall use confidentiality, patent, trademark and other notices in
connection with the Audio Copy Protection System and the Licensed Properties in
accordance with reasonable guidelines provided by Licensor.
D. Licensor shall provide Licensee with samples of all promotional materials,
if any, used by Licensor in connection with the Audio Copy Protection System
and the Licensed Properties. Licensee may duplicate and distribute promotional
materials obtained from Licensor to promote its Products to which the Audio
Copy Protection System has been applied, and may prepare and use its own
promotional materials (subject to Licensor's approval, which shall not be
unreasonably withheld) for the marketing and promotion of such Products.
Licensee may use its own marks in conjunction with the Marks.
5. ARBITRATION. All disputes under this Agreement that cannot be resolved by
the parties shall be submitted to arbitration under the rules and regulations
of the American Arbitration Association. Either party may invoke this Section
after providing 30 days' written notice to the other party. Any award may be
enforced by a court of law. The arbitration hearing shall be held in Maricopa
County in the State of Arizona. Each party hereto shall choose one arbitrator,
and the two chosen arbitrators shall choose a third arbitrator. The majority
decision of the arbitrators shall be final, and the non-prevailing party shall
bear the cost and expense of the arbitration, including the reasonable
attorneys' fees and arbitration costs and fees of the prevailing party.
6. WARRANTIES.
A. Licensor represents and warrants that it is the exclusive owner of all
right, title and interest in and to the Audio Copy Protection System and the
Licensed Properties, that no other person has any superior rights to or in
theAudio Copy Protection System and the Licensed Properties, and that it knows
of no person who claims any superior rights in or to the Audio Copy Protection
System and the Licensed Properties. Licensor represents and warrants that it
has the power, authority and legal right to enter into this Agreement.
B. Licensor represents and warrants that the use of the Audio Copy Protection
System and the Licensed Properties by Licensee pursuant to this Agreement will
not conflict with or infringe on the rights of other persons, and that it knows
of no person who claims that the use of the Audio Copy Protection System and
the Licensed Properties by Licensee will conflict with or infringe on the
rights of any person.
C. During the term of this Agreement, Licensor shall take all actions
reasonably necessary to maintain and protect the Audio Copy Protection System
and the Licensed Properties, and shall take no action that impairs or
diminishes the Audio Copy Protection System and the Licensed Properties.
D. Licensor shall take all actions necessary to enforce, defend and otherwise
protect the Audio Copy Protection System and the Licensed Properties. If
Licensee requests Licensor to take legal action to protect any aspect of the
Audio Copy Protection System and the Licensed Properties, Licensor shall
either: (i) promptly take such legal action at Licensor's expense; or (ii)
cooperate with Licensee to allow Licensee to take such legal action at
Licensee's expense. Each party shall promptly notify the other if such party
becomes aware of any information indicating that there may be an infringing or
otherwise unauthorized use of the Audio Copy Protection System and the Licensed
Properties or that there is an authorized claim or potential claim of a right
in the Audio Copy Protection System and the Licensed Properties. Either party
who takes legal action under this Section shall keep the other party informed
of all decisions and actions relating to such legal action, and shall, upon
request, provide the other party with copies of all documents relating to such
action. Licensor and Licensee shall cooperate with each other to take all
actions authorized under this Section. Nothing in this Section shall prevent
Licensee from taking legal action to enforce or defend its own intellectual
properties. The rights provided under this Section are without prejudice to any
other available remedies.
7. TRANSFER OF RIGHTS. This Agreement shall be binding on any successors and
assigns of the parties. Licensor retains the right to assign its interests in
this Agreement to any other party. Licensee may assign its interest in this
Agreement upon receipt of prior written consent from Licensor.
8. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties and there are no other promises or conditions in any other agreement
whether oral or written. This Agreement supersedes any prior written or oral
agreements between the parties.
9. RELATIONSHIP. Licensor and Licensee and their employees and agents or
independent contractors in relation to one another with respect to all matters
arising under this Agreement. Neither this Agreement nor any transaction under
or relating to this Agreement shall be deemed to create an agency, partnership,
joint venture, association or employment relationship between the parties.
10. AMENDMENT. This Agreement may be modified or amended, if the amendment is
made in writing and is signed by both parties.
11. SEVERABILITY. If any provision of this Agreement shall be held to be
invalid or unenforceable for any reason, the remaining provisions shall
continue to be valid and enforceable. If a court finds that any provision of
this Agreement is invalid or unenforceable, but that by limiting such provision
it would become valid or enforceable, then such provision shall be deemed to be
written, construed, and enforced as so limited.
12. WAIVER OF CONTRACTUAL RIGHT. The failure of either party to enforce any
provision of this Agreement shall not be construed as a waiver or limitation of
that party's right to subsequently enforce and compel strict compliance with
every provision of this Agreement.
13. NOTICE. All correspondence such as purchase orders, statements, payments,
notices, etc. shall be considered as so delivered to Licensor or Licensee when
sent by registered mail, postage prepaid, within (10) days' written notice
thereof delivered to:
If to Licensor: SUNNCOMM INC.
Attn: President
668 North 44th Street
Suite 220
Phoenix, AZ 85008
Attn: Peter H. Jacobs
Facsimile: (602) 267-7400
Telephone: (602) 267-7500
With copies to: Gammage & Burnham
Two N. Central Avenue, 18th Floor
Phoenix, Arizona 85004
Attn: William D. O'Neal, Esq.
Facsimile (602) 256-4475
Telephone: (602) 256-4468
If to Licensee: WILL-SHOWN TECHNOLOGY CO. LTD.
Attn: Joe Shih
2A, No 137, SEC, 2, TA-Tung Road,
Shiju City, Taipei Hsien, Taiwan, R.O.C.
14. APPLICABLE LAW. This Agreement shall be governed by the laws of the State
of Arizona without regard to conflict of law rules
15. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same Agreement.
16. CONFIDENTIALITY. Licensee acknowledges that the Audio Copy Protection
System and the Licensed Properties are proprietary to Licensor and highly
confidential (its "Confidential Information") and Licensor acknowledges that
Licensee may disclose proprietary and confidential information (its
"Confidential Information") to Licensor during the term hereof. Accordingly,
each party agrees to:
A. Maintain the other party's Confidential Information in confidence and not
use, copy, modify or distribute any such Confidential Information except as
permitted by this Agreement;
B. Restrict access to the other party's Confidential Information to those of
its employees, contractors and agents who reasonably require access to such
Confidential Information in order to perform the activities permitted by this
Agreement;
C. Provide the other party written notice of any breach to this Section
within fifteen (15) days of learning of such breach;
D. Upon early termination of this Agreement immediately return all originals
and copies of the other party's Confidential Information, including without
limitation computer data and other records or memorials of Know-How in any form
or quantity, that may have been provided to the other.
E. No obligation of confidentiality or return of information as stated above
shall extend to information that: (i) was known by the receiving party prior to
its delivery hereunder, except for all material provided by Licensor to
Licensee prior to the execution of this Agreement; (ii) becomes known to the
receiving party through no act of its own or its employees, subcontractors or
agents; or (iii) becomes a matter of public knowledge through no fault of the
receiving party or its agents, subcontractors or agents.
F. Each party represents and warrants to the other that it will maintain
confidentiality agreements and obligations with its respective employees,
subcontractors and agents which will impose upon them confidentiality
obligations consistent with this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
LICENSOR:
SUNNCOMM INC., a Nevada corporation
By: /s/ Peter H Jacobs
-----------------------------
Peter H Jacobs, President
LICENSEE:
WILL-SHOWN TECHNOLOGY CO. LTD,
By /s/ Joe Shih
-------------------------------
Joe Shih, it's President
AGREEMENT ADDENDUM
1. The "Licensee" will ask the "Licensor" to provide one set of software
package which has been installed with "The Audio Copy Protection System"
2. Licensee shall be given thirty (30) days from the date of installation at
Licensee's facilities to penetrate the technology and confirm Licensee's
systems as described herein function normally.
IN WITNESS whereof the parties hereto have executed the Agreement Addendum in
accordance with their respective constitutions the day and year first written
above.
FOR SUNNCOMM, INC.
BY__________________________________
Peter H. Jacobs, President
FOR WILL-SHOWN TECHNOLOGY COMPANY
BY____________________________________
Joe Shih, President