NORTH CAROLINA A&T STATE UNIVERSITY MATERIALS MONITORING TECHNOLOGIES, INC. LICENSE AGREEMENT

Exhibit 10.13     NORTH CAROLINA A&T STATE UNIVERSITY
MATERIALS MONITORING TECHNOLOGIES, INC.

LICENSE AGREEMENT
            This Agreement is made by and between North Carolina A&T State (hereinafter referred to as “NCAT”), a constituent institution of the University of North Carolina System and an educational institution organized under the laws of North Carolina, and having its principal office at 1601 East Market Street, Greensboro, North Carolina 27411, and Materials Monitoring Technologies, Inc. (“hereinafter referred to as “LICENSEE”), a corporation having its principal place of business at 2109 Palm Avenue, Tampa, Florida 33605.

          WHEREAS, Dr. Mannur Sundaresan, et al have discovered an invention(s) entitled Sensor Array System and System for Damage Location Using a Single Channel Continuous Acoustic Emission Sensor, and NCAT owns all rights, title, and interest in and to the invention and the Patent Rights (as hereinafter defined) pertaining to such invention; and

          WHEREAS, NCAT has the right to grant licenses to the foregoing invention, and wishes to have the invention perfected and marketed at the earliest possible time in order that products resulting therefrom may be available for public use and benefit; and

          WHEREAS, NCAT is willing to grant a license to LICENSEE to the Patent Rights subject to the terms and conditions set forth herein;

          NOW, THEREFORE, in consideration of the premises and the mutual covenants set forth herein, and for good and valuable consideration, the receipt and sufficiency of which is acknowledged, the parties hereto, intending to be legally bound, agree as follows:
  ARTICLE 1 - DEFINITIONS   1.01 -     “Patent Rights” means the United States patent applications identified below and any patent now issued or here­after issuing on any such patent applications, as well as continuations, divisions, continuations-in-part to the extent the claims are directed to subject matter specifically described in US Patents 6,399,939 and 7,075,424, or reissues thereof.   1.02 -     “Field” or “Field of Use” means the structural health monitoring of bridges and railroads application of the Subject Technology.   1.03 -     “Licensed Product” means any product, process or use thereof (a) which is dominated by an unexpired claim contained in the Patent Rights in the country in which the Licensed Product(s) is made, used, sold or transferred and/or (b) which is manufactured by using a process which is dominated by an unexpired claim contained
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in the Patent Rights in the country in which the Licensed Product(s) is made, used, sold or transferred.

1.04 -     “Net Sales” means LICENSEE’s gross receipts for the sale, use and transfer of Licensed Products, less the sum of the following:

• (a)     Discounts allowed in amounts customary in the trade;
  
  (b)     Sales, tariff duties and/or use taxes directly imposed and with reference to particular sales;
  
  (c)     Outbound transportation prepaid or allowed; and
  
  (d)     Amounts allowed or credited on returns.

No deductions may be made for commissions paid to individuals whether they be independent sales agents or regularly employed by LICENSEE and on its payroll, nor for the cost of collec­tions.  Licensed Products are considered “sold” when billed out or invoiced. Net Sales in the case of Licensed Products used or transferred by LICENSEE means the fair market value of Licensed Products as if they were sold to an unrelated third party in similar quantities.

1.05 -     “Affiliate” or “Affiliates” means (i) any corporation, company or other entity in which LICENSEE owns or controls at least ten percent (10%) of the stock entitled to vote in elec­tion of members of the Board of Directors; or (ii) any corporation, company or other entity which owns or controls at least ten percent (10%) of the stock of LICENSEE.   1.06 -     “Effective Date” means August 2, 2006.
ARTICLE 2 - LICENSE   2.01 -     NCAT grants to LICENSEE and LICENSEE accepts from NCAT, upon the terms and conditions herein specified, an exclusive license to make, have made, use and sell Licensed Products, with the right to sublicense.  Such license is worldwide and remains in effect, on a country by country basis, until the full end of the term or terms for which Patent Rights are issued, unless sooner terminated as hereinafter provided. The foregoing notwith­standing, LICENSEE’s rights and license are subject to the rights of the U.S. Government pursuant to any funding agreement between NCAT and the Government.    2.02 -     LICENSEE may grant sublicenses and extend any license granted to LICENSEE to its Affiliates.  Any such sublicenses or extensions are subject to the terms of this Agreement and may be no less favorable to NCAT than is this license.  A copy of each sublicense must be provided to NCAT no later than 45 days after execution date.  LICENSEE agrees to be responsible for the performance hereunder by its Affiliates and sublicensees, if any. If this Agreement is terminated for any reason, LICENSEE agrees to assign all such sublicenses directly to NCAT.
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2.03 -     NCAT shall have the right to practice the Invention(s) and use the Technology for its own bona fide research, including sponsored research and Small Business Innovative Research (SBIR) collaborations.  NCAT shall have the right to publish any information included in under this invention with reasonably notice to LICENSEE.     2.04 -     The license granted hereunder does not confer any rights upon LICENSEE by implication, estoppel or otherwise as to any technology not part of the Patent Rights licensed hereunder.    2.05 -     LICENSEE agrees that any products constituting Licensed Products or produced through the use of Licensed Products will be manufactured substantially in the United States to the extent required by 35 U.S.C. Sec. 204, if such statute is applicable.   ARTICLE 3 - DUE DILIGENCE

3.01 -     LICENSEE must diligently pursue the development of Licensed Products. This will include manufacturing or producing a Licensed Product for testing, development, and sale, and also seeking required governmental approvals, if appli­cable, of such Licensed Product.  In addition to this general commitment to diligence, LICENSEE agrees to the following diligence requirements:

• (a)     Licensee will support a program of collaborative research under the direction of Dr. Mannur Sundaresan.  This program shall be governed by a separate Development Agreement between the parties.
  
  (b)     Within three (3) months from the Effective Date of this Agreement, LICENSEE shall deliver to NCAT a report showing LICENSEE’s plans for commercializing the Subject Technology.
  
  (c)     LICENSEE must commercialize Licensed Products according to the following schedule:

  • (1)                   days after a working prototype is developed, Licensee will offer the product for commercial sale. 

3.02 -     LICENSEE will use its best efforts to have the Subject Technology cleared for marketing in those countries in which LICENSEE intends to sell Licensed Products by the responsible government agencies requiring such clearance.  To accomplish such clearances at the earliest possible date, LICENSEE agrees to file, according to the usual practice of LICENSEE, any necessary data with such government agencies.  Should LICENSEE terminate this Agreement, LICENSEE agrees to assign its full interest and title in such market clearance application, including all data relating thereto, to NCAT at no cost to NCAT.
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3.03 -     Failure by LICENSEE to comply with the provisions of this Article 3 results in NCAT having the right, at its option, to convert any exclusive license to a non-exclusive license, or to cancel the license upon thirty (30) days notice, and to require a reversion of rights to all relevant materials, research information and technology, including Patent Rights, transferred to LICENSEE by NCAT.  The LICENSEE will have the opportunity to cure the failure to comply within thirty (30) days of receipt of notice.  If the failure to comply is not cured within that time, the termination will be effective as of the thirtieth (30th) day after receipt of notice.


ARTICLE 4 - LICENSE FEE, ROYALTIES, RECORDS, AND REPORTS

4.01 -     In partial consideration for the license granted in this Agreement, LICENSEE must pay to NCAT a license fee of Seventy-nine thousand dollars ($79,000.00) which is due and payable to NCAT at the execution of this agreement. The license fee is non-refundable and is not creditable against any future payments or royalties.

4.02 -     For as long as this license is in effect, LICENSEE must pay to NCAT a royalty of three and one half percent (3.5%) of Net Sales of Licensed Products by LICENSEE, its Affiliates and/or sublicensees. In the case of sublicenses, LICENSEE must also pay to NCAT twenty-five percent (25%) of any income, revenue or other financial consideration (e.g. advance payments, license issue fees, license maintenance fees, option fees, equity, etc.) received by LICENSEE from its sublicensees, except for income, revenue or other financial consideration which is received directly as a running royalty on actual sales of Licensed Product.

4.03 -     LICENSEE must pay to NCAT minimum annual royalties beginning August 2, 2009.  The minimum annual royalty payments must be made according to the following schedule:  

                                                                                                                                                                                  
Payment of the specified minimum annual royalty payments shall be made within sixty (60) days following each of the dates above specified, consistent with the reporting and payment require­ments set forth in 4.04 hereof. 

4.04 -     LICENSEE will render to NCAT on a quarterly basis a written account of the Net Sales of Licensed Products as of July 1, October 1, January 1, and April 1 of
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    each calendar year.  The reports of Net Sales and the royalty payment due NCAT thereon shall be due and payable within sixty (60) days following the applicable date.  LICENSEE shall make such reports even if there have been no Net Sales or if no royalties are due to NCAT for a particular quarter.  LICENSEE’s reports shall include at least the following:

• (a)     All Licensed Products manufactured and sold.
  
  (b)       Gross receipts for Licensed Products sold.
  
  (c)        Accounting for all sub-licensing revenues.
  
  (d)       Deductions applicable as provided in section 1.05. 
  
  (e)       Total sales made to U.S. Government Agencies which may require no royalty payment.
  
  (f)         Total royalties due to NCAT.
  
  (g)       Names and addresses of all sub-licensees of LICENSEE.

4.05 -     LICENSEE and its Affiliates will keep full, true, and accurate books of accounts and other records containing all particulars which may be necessary to ascertain and verify properly such Net Sales.  Upon NCAT’s request, LICENSEE and its Affiliates will permit an independent Certified Public Accountant selected by NCAT (except one to whom LICENSEE has some reason­able objection) to have access during ordinary business hours to such of LICENSEE’s or its Affiliates’ records as may be necessary to determine, in respect of any three (3) month period ending not more than five (5) years prior to the date of such request, the correctness of any report made under this Agreement.  Nothing herein limits the authority of the State Auditor of North Carolina.

4.06 -     All payments made as a result of this Agreement will be paid in United States dollars in Greensboro, North Carolina, or at such other place as NCAT may reasonably designate consistent with the laws and regulations controlling in any foreign country.  If any currency con­version shall be required in connection with the payment of royalties hereunder, such conversion shall be made by using the exchange rate prevailing at the Chase Manhattan Bank (N.A.) on the last business day of the calendar quarterly reporting period to which such royalty payments relate.   4.07 -     The royalty payments set forth in this Agreement, if overdue, will bear interest until payment at a per annum rate of four percent (4%) above the prime rate in effect at the Chase Manhattan Bank (N.A.) on the due date.  However, in no event shall any penalties hereunder exceed eighteen percent (18%) per annum (or 1.5 % per month). 

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    ARTICLE 5 - PATENTS   5.01 -     NCAT may select patent counsel and have sole responsibility for filing, prosecuting and maintaining appropriate