Exhibit 10
LICENSE AND DISTRIBUTION AGREEMENT
This License and Distribution Agreement
(the "Agreement") is made as of July 20,
2004 (the "Agreement Date") by and between iBIZ
Technology
Corp., a Florida
corporation with corporate headquarters in Phoenix ("iBIZ"), and Virtual
Devices, Inc., a Pennsylvania corporation
("VDI"), (together, the "Parties").
RECITALS
iBIZ is, among other things, engaged in the
business of producing, marketing and
distributing personal digital assistant ("PDA") accessories, and other items
ancillary to the retail office products industry; and VDI is the owner of
products, designs and patents relating to
accessories for PDAs, and other touch
point applications or mobile devices;
and VDI wishes to
grant, and iBIZ wishes
to receive, the right to market, sell and
distribute such products on the terms
set forth below.
AGREEMENTS
The Parties agree as follows:
1) Definitions. The
following highlighted terms shall be defined as set forth
below:
a)
"Channel(s)" shall
mean the following: (i) all retail channels,
including (A) mass market accounts, (B) office supply "superstores,"
(C) computer
"superstores," (D) independent dealers, including office
supply and computer store independent dealers, (E) campus bookstores,
and (F) consumer electronics superstores; (ii) all commercial Persons
including (A)
distributors to the retail channels, (B) office products
wholesalers, (C)
contract stationers,
(D) mail order businesses, and
(E) similar commercial Persons.
b)
"Improvements" as to any item shall mean any modification or new
models
or designs of the item, provided that modification (i) is covered by
one or more claims of Parents or (ii) is the substantial
equivalent of
the item shown in the
drawings of and described in a VDI design or
Patent.
c)
"Person" shall mean
any individual or any
partnership,
corporation,
limited liability company, or other entity, including an
unincorporated
body in any country.
d)
"Patents" shall mean U.S. patent No. 6,281,878, U.S. and International
patent
applications and
patents that may issue from U.S, or
International patent
applications,
in each case relating to the
Products, together
with any and all
corresponding
patents or design
trademarks, industrial design registrations, utility models, and other
corresponding intellectual properly protection, issued anywhere in the
world, and
all extensions, continuations, continuations-in-part,
divisions and reissues
issued thereof,
in each case which are
now or
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hereafter owned by or
controlled by (with the right to license others)
VDI.
e)
"Products" shall
mean the Stand Alone Accessory Virtual Keyboard
Device, as shown in Exhibit A, for personal digital assistants,
mobile
devices and other touch point applications covered by one or more of
the claims of any Patent or VDI design, all Improvements or new models
thereof which iBIZ desires to sell, and any other products which the
Parties may from time to time mutually agree in writing to include as
Products.
f) "Term:"
"Initial Term" and "Renewed Term" shall have the meaning
set
forth in Section 8a of this Agreement.
g) "VDI
Marks" shall mean the
marks as described
in Exhibit B and
other
product and
pattern names in application with the U.S. Patent and
Trademark Office.
2) Distributor
Appointment and Licenses to iBIZ.
a) Subject
to the terms of this Agreement, VDI hereby appoints iBIZ as an
exclusive distributor
of Products to the
Channel and, except
for the
rights granted in VDI
Reserved Channels,
grants to iBiZ an
exclusive
worldwide license to use the Patents, Products and VDI designs to
offer
for sale or sell the Products to the Channels. VDI further grants to
IBIZ a non-exclusive license, including the right to sublicense, to
use
the Patents,
Products and VDI designs to offer for sale or sell
the
Products to,
such VDI Reserved Channels as VDI from time to time
approves in writing ("Authorized VDI Channels").
b) Subject
to the terms of this
Agreement and the
approval required in
Section 2c below, VDI hereby grants to iBIZ a worldwide
license to use
the VDI Marks in
connection
with the offer for sale or sale of the
Products to the
Channel pursuant to
this Agreement.
iBIZ must,
and
hereby agrees to, place the VDI Marks and the appropriate
Patent terms
on marketing materials
and packaging for all Products sold to
and by
any Channel customer,
indicating
that any VDI Mark is a
trademark of
VDI, as noted in Exhibit B. iBIZ hereby recognizes the ownership of
the
VDI Marks by VDI, and
associated goodwill,
and shall not at any
time
do, allow or cause to be done any act which may impair the VDI
Marks or
the rights of VDI in the VDI Marks. iBIZ hereby disclaims any right,
title or interest in
or to the VDI Marks,
except the right to use the
VDI Marks as provided herein. In the event that iBIZ registers
the VDI
Marks, as a trademark,
domain name, or other proprietary designation,
iBIZ hereby agrees to assign all right, title, and interest in and to
the trademark, domain name, or other proprietary designation to
VDI.
c) All
packaging and
promotional
material on which any
VDI Mark appears
(the "Materials") must
be approved by VDI. VDI shall have the right to
approve or disapprove
any or all Materials and VDI approval shall not
be unreasonably
withheld. Any Materials submitted to VDI shall be
deemed approved
unless VDI notifies
iBIZ to the contrary
within ten
(10) days after
receipt of such
Materials. iBIZ shall
not (and shall
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not allow any
Customer) to
distribute, sell or
advertise any copy of
the Products
unless and until the
Materials for such copies of the
Product thereto has been approved or deemed approved by VDI. iBIZ
shall
supply VDI with such reasonable number of Materials as are
requested by
VDI (which request shall be no more frequent than quarterly) to
confirm
the conformity with approved Materials. Non-conformity of the
materials
with the approved Materials shall be determined at VDI's sole
reasonable
determination. Any
such determination
not cured to VDI's
reasonable
satisfaction within
thirty (30) days of written notice to
iBlZ of such
non-conformity shall
be grounds for
termination of all
rights granted to iBIZ
under this Agreement.
VDI may, at VDI's sole
discretion, extend the
cure period for
compliance with the
standards
required hereunder. Until VDI validly accepts such cure, said
extension
or extensions shall in
no way be construed as a waiver of VDI right to
terminate rights granted under this Agreement.
3) License Payment.
The price for this
License Agreement is $800,000 USD, to
be paid as
follows:
a)
$300,000 upon execution of this Agreement (less $100,000 note).
b)
$250,000 within 2
months subsequent
to (a) and provided
performance
milestones have been met by VDI.
c)
$250,000 within 2
months subsequent
to )b) and provided
performance
milestones have been met by VDI.
iBIZ
further agrees to fund and/or supply in-kind services of
approximately $200,000 in addition to the License Payment.
4) Royalties.
iBIZ agrees to pay VDI
Royalties according to the following
schedule:
a) No
Royalties for the first 25,000 pieces.
b)
Thereafter, a Royalty
of $5 per piece, sold as permitted hereunder by
iBIZ, or the
difference
between $20 and the cost of the Bill of
Materials for the device, whichever is greater.
5) Performance
Criteria.
a) The
licenses and rights granted under this Agreement, for the duration
of the Initial Term, are subject to the Performance Standards set
forth
in Exhibit C. The parties hereby agree that each Renewed Term may be
subject to revised Performance Standards upon the written
agreement of
both parties. Revisions of the Performance Standards shall he
agreed to
at least ninety (90) days prior to the expiration of the then-current
term. In the absence of revisions to the Performance Standards,
subject
to the Termination provisions herein, a Renewed Term shall be
deemed to
be subject to the Performance Standards of the immediately preceding
term.
b) Reports
on the sales of Products to the Channels by iBIZ for each month
during the Initial Term and each Renewal Term shall be submitted to
VDI
on or before the fifteenth day after the end of that month.
The report
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shall be broken down by customer (listing number of stores carrying
the
Products and the total number of stores in each chain),
Product units
sold and the sales price with notations for any unusual activity and
projections for the coming month, if available.
c) iBIZ
shall keep books and records, in Phoenix, Arizona, regarding the
sales of Products sufficiently accurate to enable the reports
hereunder
to VDI to be verified,
and iBIZ gives VDI the right, upon reasonable
notice, at its own
expanse, to examine
said books and
records, only
insofar as they
concern the sales of Products and not more often than
once in any calendar
year, for the purpose
of verifying
the reports
provided for in this
Agreement. Any such
examination by VDI
shall be
conducted in such a manner as to not unduly interfere with the
business
of iBIZ. VDI and its
representative
shall not disclose to any other
person, firm or corporation any information acquired as a result of
any
such examination;
provided, however, that nothing herein contained
shall be construed to prevent VDI and/or its duly authorized
representative from
filing legal documents
with, or testifying in any
court of competent
jurisdiction with respect to the information in any
action instituted to
enforce its rights under this Agreement.
6) VDI's Representations
and Warranties. VDI
represents and warrants to iBIZ
that:
a) VDI has
the legal power to enter into this Agreement. To VDI's
knowledge, the
making of this
Agreement by VDI does not materially
violate any agreement or organizational document to which it is a
party
or by which it or its
property is bound, and
VDI shall not enter into
any agreement which is
inconsistent
with the rights
granted to iBIZ
hereunder. VDI has
taken all legally required action so that this
Agreement has been
duly authorized
by all necessary action and is
binding on VDI.
b) Except
for rights previously
granted, VDI is the sole and exclusive
owner or licensee of the VDI Marks and all Patents licensed under this
Agreement. VDI has, and will have throughout the term of this
Agreement
the right to license the VDI Marks as provided in this Agreement and
has, and will have
throughout the term of
this Agreement the right to
license under the Patents in accordance with the terms and conditions
of this Agreement.
c) Each
VDI Mark and Patent is
