|
<PAGE>
Exhibit 10.15
LICENSE AGREEMENT
THIS AGREEMENT is made the 6th day of May, 2005, between:
ECOLOGY COATINGS, INC., a corporation organized and existing
under the laws of
the State of California, USA, with its principal place of
business at 1238
Brittain Road, Akron, Ohio 44310, USA (hereinafter referred to
as "Ecology"),
and
RED SPOT PAINT & VARNISH CO., INC., a corporation organized
and existing under
the laws of the State of Indiana, USA, with its principal place
of business at
1107 East Louisiana Street, Evansville, Indiana 47711, USA
(hereinafter referred
to as "Red Spot").
WHEREAS:
A. Ecology has developed certain 100% solids UV curable
pigmented and clear
paint coating compositions for the metal cylinder treatment
market and as a
result possesses certain technical information, know how, trade
secrets and
patent rights relating to the manufacture and use of such
coatings.
B. Red Spot wishes to acquire an exclusive license to use such
patents and
technical information and Ecology is willing to grant such a
license on the
terms and conditions hereinafter appearing.
NOW, THEREFORE, in consideration of the mutual understandings
and obligations
herein set forth, the Parties agree as follows:
1. DEFINITIONS
As used in this Agreement:
"Effective Date" means the date on which this Agreement has been
signed by
both Parties hereto.
"Party" means Red Spot or Ecology depending on the context, and
"Parties"
means Red Spot and Ecology.
"Agreement Product" means only the exact formulation listed in
Appendix A
attached hereto, which may be amended from time to time by
mutual agreement
of the Parties, and any Improvements thereof which are (a)
conceived,
developed or made using any of the Ecology Technical Information
(including
any information derived from the Ecology Technical Information),
or (b)
covered by one or more claims of an Ecology Patent, subject,
however, to
the understanding that, for purposes of computing royalties,
Agreement
Product does not include any formulations or any improvements
thereof, that
either (i) were already known to Red Spot at the Effective Date
of this
Agreement from a source other than Ecology, as shown by Red
Spot's prior
written records, or (ii) are
<PAGE>
developed by or for Red Spot without use of or reference to
and
independently of any information obtained from Ecology, by
persons who have
not had access to any information obtained from Ecology.
Ecology
acknowledges that Red Spot possesses 100% solids UV curable
technology that
are commercially available and under development that neither
this existing
technology, nor any improvements to the existing technology, are
subject to
this License Agreement so long as such improvements are
developed without
use of or reference to and independently of any information
obtained from
Ecology.
"Agreement Field" means the Metal Cylinder Treatment Market.
"Metal Cylinder Treatment Market" means the application of
paint, resin and
other coating materials over 20lb metal cylinders.
"Ecology Technical Information" means all know-how, trade
secrets, and
other information at Ecology's free disposal at the Effective
Date and up
to the fifth (5th) anniversary of the Effective Date relating to
the use
and manufacture of the Agreement Product set forth on Appendix A
and
Ecology's Improvements thereof, including detailed formulations
and
manufacturing specifications and information regarding testing
instruments,
as well as instructions for the application and final testing
and approval
of such Agreement Product and information relevant to any
customer
approvals for such Agreement Product.
"Ecology Patents" means any patents, including Improvement
Patents, in The
Territory, granted to or applied for by Ecology with respect to
Agreement
Product or the manufacture or use thereof. Current Ecology
Patents as of
the Effective Date are listed in Appendix B. Ecology shall
notify Red Spot
in writing with respect to any Ecology Patents, including
Improvement
Patents, granted or applied for by Ecology after the Effective
Date with
respect to Agreement Product or the manufacture or use thereof,
and any
such Ecology Patents shall, at the option of Red Spot, become
subject to
this Agreement, and Appendix B shall be updated to reflect the
inclusion of
such Ecology Patents in this Agreement.
"The Territory" means North America, i.e., the U.S.A., Canada
and Mexico.
"Net Selling Price" for purposes of computing royalties, means
the actual
gross selling price less any discounts, refunds, credits, or bad
debt.
"Improvement Patents" means any patents in The Territory granted
to or
applied for by Ecology with respect to Ecology's Improvements or
the use
and manufacture of Ecology's Improvements.
"Improvements" shall mean any of the following modifications
made to the
Agreement Product set forth on Appendix A during the term: (a)
use of
isomeric forms of the monomers included in the Agreement Product
set forth
on Exhibit A, (b) use of chemical modifications to the monomers
included in
the Agreement Product set forth on Exhibit A that would be
obvious to a
person reasonably skilled in the art in order to improve
properties such
as, by way of example only, flow, leveling, anti-blocking, and
defect
-2-
<PAGE>
prevention, (c) use of additives and fillers that would be
obvious to a
person reasonably skilled in the art in order to improve
properties such
as, by way of example only, flow, leveling, anti-blocking, and
defect
prevention, (d) use of acrylate as a substitute for methacrylate
or vice
versa, and/or (e) direct substitution of one oligomer for
another, or one
monomer for another, or a different form of photoinitiator,
while leaving
the rest of the formula intact; and any modifications to the
method of
manufacture or use of any of the foregoing that would be obvious
to a
person reasonably skilled in the art.
2. LICENSE GRANT
2.1 Ecology hereby grants to Red Spot an exclusive
royalty-bearing right and
license to use the Ecology Technical Information and Ecology
Patents to
make, have made, use, offer for sale, and sell Agreement Product
in The
Territory for use solely within the Agreement Field. In the
event that Red
Spot does not commercially release the Agreement Product within
three (3)
years after the Effective Date, or if at any time during the
term Red Spot
takes the Agreement Product off the market, then the foregoing
license
grant shall convert to non-exclusive. Red Spot promptly shall
respond to
any requests from Ecology regarding such funding status.
3. HANDOVER OF ECOLOGY TECHNICAL INFORMATION
3.1 As soon as practical after the Effective Date of this
Agreement (the
Parties envision fifteen (15) days for delivery), Ecology or its
designee
shall transmit to Red Spot written copies, in the English
language, of all
Ecology Technical Information in the possession of Ecology that
is
necessary for the manufacture, use and sale of the Agreement
Product, and
shall transmit to Red Spot, from time to time, any additional
Ecology
Technical Information that is necessary for the manufacture, use
and sale
of Agreement Product and Ecology's Improvements thereof, which
Ecology has
developed or which Ecology has acquired with a right to further
disclose,
throughout the term of this Agreement. Red Spot is entitled to
use any such
Ecology Technical Information that may be provided, according to
the terms
of the license granted in Article 2 above, without payment of an
additional
fee other than the royalties set forth in Article 5 below.
3.2 Ecology Technical Information for Agreement Product shall at
least include
all documents or information listed in Appendix C of this
Agreement.
3.3 Each disclosure of Ecology Technical Information shall be
documented by a
record of issue which is to be signed by both Ecology and Red
Spot.
4. TECHNICAL ASSISTANCE
4.1 Up to the fifth (5th) anniversary of the Effective Date of
this Agreement,
Ecology shall receive into its facilities, members of Red Spot's
technical
staff for the purpose of consultation on matters relating to
the
interpretation of the Ecology Technical Information. The timing
and
duration of such visits and the numbers of personnel to be
received shall
be reasonable and shall be mutually agreed. Red Spot will be
responsible
for all out-of-pocket expenses of Red Spot arising from such
visits
including travel and
-3-
<PAGE>
subsistence expense. Red Spot will not be responsible for
expenses of
Ecology in connection with such visits.
4.2 Ecology will, if so requested by Red Spot and provided the
exigencies of
its own business permit and that staff is available, send
suitably
qualified members of its technical staff to advise Red Spot on
the
production of Agreement Product at Red Spot's factory or
laboratories in
The Territory. The number of Ecology personnel making such
visits and the
timing and duration of their visits shall be reasonable and
shall be
mutually agreed but shall not in any event exceed ten (10)
man/days during
the first year or five (5) man/days in any following year up to
the fifth
(5th) anniversary of the Effective Date of this Agreement. In
the event
that Red Spot requests additional assistance in the form of
visits of
Ecology personnel over and above five (5) man/days then Ecology
will
consider such request and if such assistance is provided Red
Spot shall pay
to Ecology a fee equivalent to Ecology's "charge-out" rate to
third parties
at the time for such personnel, the current rate being One
Thousand Dollars
($1,000.00) per man/day. Such payment, which is to be reimbursed
by Red
Spot according to the terms of this Article, will be made within
thirty
(30) days after the date of Ecology's invoice therefor.
4.3 Any information conveyed during the provision of technical
assistance by
Ecology, whether verbally, in writing, by inspection of samples,
equipment,
or facilities, or otherwise, shall be considered to be Ecology
Technical
Information under this Agreement, provided that such information
if it is
presented in writing by Ecology is clearly marked as Ecology
Technical
Information and if it is disclosed verbally or visually is
identified as
Ecology Technical Information at the time of disclosure, and
subsequently
outlined in writing, confirmed as Ecology Technical Information,
and
provided to Red Spot within thirty (30) days of the
disclosure.
5. ROYALTIES
5.1 In consideration of the rights and licenses granted to it
hereunder, Red
Spot agrees to pay Ecology, an initial payment of $125,000 on
the Effective
Date and thereafter quarterly payments commencing in August 2005
that are
based on 15% of the Net Selling Price of all Agreement
Products
manufactured and used or sold by Red Spot from the prior quarter
until an
additional $375,000 has been paid to Ecology, for total maximum
payments
under this Article 5.1 of $500,000.
5.2 Red Spot also agrees to pay for a period of fifteen (15)
years after the
first commercial sale of the Agreement Product, a running
royalty of (a) 7%
of the Net Selling Price of all Agreement Products manufactured
and used or
sold by Red Spot. Royalties shall cease beyond the fifteen (15)
year period
specified above unless Red Spot is operating under any issued
Ecology
Patent(s) in which case royalties continue for the life of
the
last-to-expire of such Ecology Patent(s).
5.3 The running royalties payable under Section 5.2 and the
quarterly payments
payable under Section 5.1 shall be calculated quarterly. Red
Spot shall
report in writing to Ecology within thirty (30) days after the
end of each
calendar quarter the quantities of each Agreement Product
subject to
royalties hereunder that were used, sold or transferred
-4-
<PAGE>
by Red Spot during said quarter and the calculation of the
royalties
thereon. With each report Red Spot shall pay to Ecology the
total amount of
the said royalties that are due. If no product subject to fee
hereunder has
been made, used, sold or transferred by Red Spot during any such
period,
Red Spot shall so report in writing to Ecology within thirty
(30) days
after the end of such period. For Agreement Product that is used
by Red
Spot for commercial purposes, the average Net Selling Price for
third party
sales during the applicable quarter shall be used to calculate
royalties
due. All payments shall be made in U.S. Dollars payable in
cleared funds to
such bankers as Ecology directs. If any currency conversion
shall be
required in connection with the calculation of royalties
hereunder, such
conversion shall be made by using the average exchange rates in
effect for
purchase of U.S. Dollars published by The Wall Street Journal on
the last
business day of each calendar month in the calendar quarter for
which such
royalties are due. It is understood that the amounts to be paid
hereunder
shall be reduced by the amount of any foreign withholding,
value-added or
other tax. Ecology shall accept the resulting net payment as
due
performance under this Agreement. Any amounts not paid when due
shall bear
interest at the rate of 8% per annum or, if less, the maximum
amount
permitted by applicable law.
5.4 Red Spot shall keep adequate records in sufficient detail to
enable the
fees payable to Ecology hereunder to be determined. Said records
shall be
maintained for a period of three (3) years following submission
of the
report to which such records pertain. Upon thirty (30) days'
prior written
notice by Ecology, Red Spot shall permit said records to be
inspected, and
employees of Red Spot associated with performance under this
Agreement to
be interviewed, at Ecology's expense, at any time during regular
business
hours by an independent auditor appointed by Ecology, and
reasonably
acceptable to Red Spot. The auditor shall determine and report
to Ecology
only the amount of the payments due and details concerning
any
underreporting, as well as adherence to any other requirements
under the
Agreement. If such audit discloses any underreporting, Red Spot
shall
immediately pay Ecology such underreported amount along with
interest
calculated pursuant to the terms set forth herein. If the audit
determines
an underpayment in excess of ten percent (10%), Red Spot shall
also
reimburse Ecology for the cost of the audit.
6. OPTION TO NEGOTIATE FUTURE LICENSES
6.1 Red Spot and Ecology agree that the licenses granted herein
may be
extended, based on each Party's respective business
circumstances, to
additional territories and additional non-exclusive or exclusive
fields and
such extensions would only become effective upon the written
agreement of
both Red Spot and Ecology.
7. NON-COMPETE WITH RED SPOT
7.1 Ecology agrees not to sell, directly or indirectly, the
Agreement Product
for use in the Agreement Field in The Territory for so long as
Red Spot (i)
releases the Agreement Produc
| 
