Exhibit 10.1
PATENT
LICENSE AGREEMENT
This
Agreement by and between Laser Design International, LLC
(“LDI”) and Crystal Magic, Inc (“Crystal
Magic” or “Licensee”) is entered into as of
May 6, 2007 (hereinafter the “Effective
date”).
WHEREAS
LDI is the assignee and patentholder of U.S. Patent No.
5,206,496 and the reexamination certificate 5,206,496 C1,
pursuant to an agreement with Diageo Scotland Ltd dated
February 20, 2003; and
WHEREAS
Crystal Magic desires to obtain a non-exclusive license under
the Licensed Patents (defined below) and LDI desires to grant
to Crystal Magic a non-exclusive license to these patents
according to the terms and conditions set forth
below:
NOW
THEREFORE, in view of the above premises and the following
mutual covenants and promises, the parties hereto agree as
follows:
Incorporation
of Recitals. The recitals set forth above are hereby
incorporated as a part of this Agreement.
ARTICLE I
DEFINITIONS
1.1. The
“496 patent” shall mean United States Patent No,
5,206,496 to Clement et al. issued on or about April 27, 1993,
Reexamination Certificate No. 5,206,496 C1, and any foreign
counterparts thereto. The ‘
496 patent is sometimes referred to herein as the
“Licensed Patents”
1.2. “Net
Sates” shall mean the proceeds actually received by
Licensee or its affiliates from the sale, lease, or other
disposition of Laser Subsurface Engraving Product, as
hereinafter defined, as delivered to the purchaser by Licensee
and its Affiliates, before sales tax and excepting added items
not described by the Licensed Patents sold as accessories for
payment actually received by Licensee (such as display bases
and presentation boxes), reduced by any units of such products
returned to and accepted by Licensee or its Affiliates to the
extent that the purchase price of such units has been
refunded. For sales of licensed products to an Affiliate,
sister company, parent company, controlling company,
subsidiary, or entity otherwise related to the Licensee
(hereinafter “Related Company), the higher of the
Related Company’s purchase or sale price for each item
will be included in Net Sales; provided however that the Net
Sales to such Related Company shall not be recognized for
royalty calculations until sold by the Related Company to a
non-Related Company and shall then be recognized as a sale at
the higher of the Related Company’s purchase or sale
price.
CONFIDENTIAL
LDI Crystal
magic
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Patent License Agreement
1.3. “Laser
Subsurface Engraving Machine” shall mean any laser
marking device whose construction or method of operation falls
within the claims of the Licensed Patents.
1.4. “Laser
Subsurface Engraving Product” shall mean objects that
contain internal decorative or indicative images that have
been created inside a transparent medium with a Laser
Subsurface Engraving Machine, as described in the claims of
the Licensed Patents.
1.5. “Affiliates”
shall mean, respectively, a corporation or other entity that
controls or is controlled by LDI or Licensee.
1.6. “Improvement”
shall mean any modification of or improvement to a Laser
Subsurface Engraving Machine which enhances its operability,
effectiveness, capability, or efficiency in making Laser
Subsurface Engraving Products under the claims of the Licensed
Patents.
ARTICLE II
LICENSE GRANT AND RELEASE
2.1. License
of the Licensed Patents. Subject to Licensee’s
compliance with all material terms of this Agreement LDI
grants to Licensee under the Licensed Patents a non-exclusive,
non-transferable, royalty-bearing license to make, use, offer
for sale, sell, lease, or, otherwise dispose of Laser
Subsurface Engraving Product, For the purpose of this
Agreement, all terms are deemed material with the exception of
the terms governed by the following sections; 8.3, 8.4, 8.5,
and 8.6. Compliance with non-material terms may be enforced
(subject to the notice and cure requirements of section 6.2)
through binding arbitration, with the prevailing party
recovering its costs and attorneys fees. The license granted
hereunder does not extend to providing manfacturing, etching
or engraving services to third parties on a fees for service
basis unless said third party is itself licensed.
2.2, Norwood
Consent, LDI represents that Norwood Operating Company has
reconveyed any exclusive rights it once held in the ‘496
patent to LDI and that LDI is able to grant the licenses
granted hereunder without the consent of any third
party.
2.3, Covenant
Not to Sue. Subject to Licensee’s compliance with the
terms of this Agreement, LDI shal not assert any claim or
action against Licensee, its distributors, or direct or
indirect customers for practicing any method or process within
the scope of the Licensed Patents, in making, using, or
selling any Laser Subsurface Engraving Product for which all
applicable royalties have been paid to LDI under this
Agreement
2.4. No
Implied Licenses. Except as expressly stated in this Article
II, no other rights or licenses are granted to Licensee or any
other entity, express or implied, by virtue of this
Agreement.
CONFIDENTIAL
LDI Crystal
magic
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Patent License Agreement
2.5.
Improvements ,
Licensee shall promptly inform LDI of any Improvements. LDI
shall have a right of first refusal to obtain a non-exclusive
royalty” free license from Licensee for any accepted
Improvement. If LDI fails to either refuse or accept any
Improvement within ninety (90) days after being informed by
Licensee of the Improvement, then LDI shall be deemed to have
rejected the offer of the license.
Should
LDI acquire additional patent rights which would be infringed
by practicing under the Licensed Patents, LDI will offer to
Licensee a license of such rights at no additional
cost.
2.6.
Insurance .
Licensee will throughout the term of this Agreement maintain
product liability insurance of such nature and such amount as
LDI shall reasonably consider appropriate and shall so state
to Licensee. Licensee shall further produce copies of all
insurance certificates and renewal certificates to LDI within
thirty days of receipt of the same.
ARTICLE III
CONSIDERATION
3.1.
License
Transfer Fee . The Parties agree that Licensee has
already paid a license transfer fee as part of the litigation
settlement associated with this license agreement
3.2.
Royalty
Payments and Statements Licensee is obligated to pay
royalties (in United States dollars), as follows.
a) a
minimum royalty of $25,000 per year; plus
b) in
any year in which the sum of (i) 2.75% of Net Sales from
locutions or through channels other than Disney or Universal
Studios locations plus (ii) 0.4% of Net Sales from locations
on Disney or Universal Studios properties, exceeds $25,000,
the amount of such excess to a maximum of
$35,000.
Such
royalties, including payments required in order to meet
minimum royalty requirements, will be calculated and paid on a
calendar quarterly basis, within 30 days of the end of the
quarter. In the event that Licensee ceases distribution of
Laser Subsurface Engraving Product, the minimum royalty
obligation set forth herein shall terminate pro rated as of
the point in time when distribution ceased.
For
all sales by Licensee not in United States dollars, the total
of Net Sales shall be converted into United States dollars
using the currency conversion rates listed in the Wall Street
Journal published on the last day of the calendar quarter or
the day closest to the end of the calendar quarter for which
royalty payments are calculated.
CONFIDENTIAL
LDI Crystal
magic
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Patent License Agreement
33. Records;
Audits.
a) Within
thirty (30) days after the end of each calendar quarter.
Licensee will provide LDI with a written report in spreadsheet
format containing the data used by Licensee to determine its
royalty payment to LDI for such quarter, including, without
limitation, the quantity, price, product number, and product
description of all royalty-bearing produce and any other
information that may be reasonably requested by LDI from time
to time for Licensor to determine whether Licensor is paying
the correct amount of royalties. Such a report shall be
provided even if Licensee pays only the minimum royalty
required under this Agreement, Licensee shall maintain the
records from which such report
