EXHIBIT 10.7
PATENT LICENSE AGREEMENT AND RELEASE
This
Patent License
Agreement (the
"Agreement"),
dated as of January
5,
2004 ("Effective
Date"), is by and among between Equity Technologies &
Resources, Inc.,
with its principal
place of business at 325 West Main Street,
Lexington, Kentucky
40507 ("ETCR");
Verified Prescription Safeguards, Inc., a
wholly-owned subsidiary of ETCR with its principal place of
business at 325 West
Main Street,
Lexington, Kentucky
40507 ("VPS");
EnvoiiHealthcare,
L.L.C., a
Nevada limited
liability company with
its principal place of
business at 2225
East Randol Mill Road, Suite 305, Arlington, Texas 76011 ("Envoii"); and VPS
Holding, LLC, a
Kentucky limited liability company and wholly-owned subsidiary
of Envoii with its
principal place of business at 6031 Russell Cave Road,
Lexington, Kentucky 40501 ("VPSH"), and.
BACKGROUND:
A.
ETCR and VPS have
pursued the development of certain intellectual
property and know-how related to prescription drug monitoring
databases for use
in a controlled substance prescription environment, as well as by third parties
in non-controlled substance prescription environments (the
"Technologies").
B.
ETCR, VPS and VPSH
entered into that
certain Assignment and License
dated as of April 23,
2003, pursuant to which all of the rights, title and
interest of ETCR
and VPS in and to that certain patent application number
60/421,799, filed
October 29, 2002 (the "Patent Application") and licensed the
Technologies were
transferred
and assigned to VPSH (the "Original License
Agreement") and the
parties now desire to terminate the Original License
Agreement, ab initio,
and grant to VPSH the
license rights to the intellectual
property contained in the Patent Application and to the Technology
contained in
this Agreement.
C.
ETCR, VPS, VPSH and Envoii had entered into a Joint Venture
Agreement on
April 23, 2003 (the
"Venture Agreement"),
and will, simultaneously with the
execution of this Agreement, terminate the Venture Agreement.
D.
Envoii has proposed to acquire VPSH and as a condition to such
acquisition has required that the parties hereto enter into this
Agreement.
E.
VPSH has been
awarded a contract by the State of Kentucky for the
development and
deployment of a
prescription
drug monitoring pilot project
utilizing the
Technologies, the
intellectual
property claimed in the Patent
Application (the "Pilot Project").
F.
Each of ETCR, VPS,
VPSH and Envoii will
derive benefits from
entering
into this Agreement and hereby acknowledge such benefits.
AGREEMENTS:
NOW,
THEREFORE,
in consideration of the premises, covenants, and
obligations provided in this Agreement, the parties agree as
follows:
1. Termination and Release of Original License Agreement.
1.1
ETCR, VPS and VPSH hereby terminate the Original License
Agreement and
declare it null and void, ab initio.
1.2
Each of ETCR, VPS and
VPSH, on its own behalf and on behalf of its
directors,
partners,
officers,
agents,
successors,
heirs, legal
representatives and
assigns of each of the
foregoing
(collectively, the
"Releasors"), hereby
release, acquit and
forever discharge the
other and
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their respective
directors,
officers,
employees,
and heirs, legal
representatives,
agents and
attorneys,
and each of their respective
successors and
assigns (collectively, the "Releasees") from, and
extinguishes, any and
all claims, demands,
debts, damages, costs, losses,
expenses, commissions,
actions, causes of action, rights, liabilities,
obligations and choses in action of whatever nature or type,
whether known
or
unknown, which any of the Releasors have, ever had or may have, or
which
have
been, or could have been, or in the future otherwise might have been
asserted in connection with the Original License Agreement,
occurring on or
prior to the date hereof. Notwithstanding the foregoing, in
no event shall
this
paragraph operate to release any of Releasees from any claims or
liability resulting
from a breach of the representations, warranties,
covenants and agreements of the Releasees contained in this
Agreement.
2. Termination and Release of Venture Agreement.
2.1
ETCR, VPS, VPSH and Envoii hereby terminate the Venture Agreement and
declare it null and void, ab initio.
2.2
Each of ETCR, VPS, VPSH and Envoii, on its own behalf and on behalf
of
its
directors,
partners,
officers, agents, successors, heirs, legal
representatives and
assigns of each of the
foregoing
(collectively, the
"Venture Releasors"),
hereby release, acquit and forever discharge the
other and their respective directors, officers, employees, and
heirs, legal
representatives,
agents and
attorneys,
and each of their respective
successors and assigns
(collectively, the
"Venture Releasees")
from, and
extinguishes, any and
all claims, demands,
debts, damages, costs, losses,
expenses, commissions,
actions, causes of action, rights, liabilities,
obligations and choses in action of whatever nature or type,
whether known
or
unknown, which any of
the Venture Releasors have, ever had or may have,
or
which have been, or
could have been, or in the future otherwise might
have
been asserted in connection with the Venture Agreement, occurring on
or
prior to the date hereof. Notwithstanding the foregoing, in no event
shall this paragraph
operate to release any of Venture Releasees from any
claims or liability resulting from a breach of the representations,
warranties, covenants
and agreements of the Venture Releasees contained in
this
Agreement.
3. Grant of License.
3.1
ETCR and VPS hereby
grant to VPSH, its
successors
and assigns, an
exclusive, perpetual, world-wide, sub-licenseable, right and
license to all
of
the respective rights, title, and interest of ETCR and VPS in and
to (a)
the
Technologies,
(b) the Patent Application, and (c) any and all
intellectual property
claimed under the Patent Application or related
thereto, together with all rights to recover damages for past,
present, and
future infringement of the Technologies
and any patent that may issue from
the
Patent Application, anywhere in the world.
3.2
ETCR and VPS each hereby agree to reasonably assist and cooperate in
all
respects with VPSH and its attorneys and agents, and will execute
documents and take such further acts reasonably requested by VPSH and its
attorneys and agents, to acquire, evidence and perfect the license
in VPSH
to
the Technologies, the
Patent Application and any intellectual property
claimed thereunder.
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3.3
ETCR and VPS each
hereby agree to
continue to
prosecute the Patent
Application and any continuations, continuations-in-part,
divisionals, and
continued prosecution
applications derived therefrom. Notwithstanding the
foregoing, in the
event that ETCR and VPS do not take the appropriate
actions to
prosecute the Patent Application or any continuations,
continuations-in-part,
divisionals, and
continued prosecution applications
derived therefrom,
VPSH may do so and all costs and expenses may be
deducted by
VPSH from any royalty payments due to ETCR under this
Agreement.
3.4
ETCR and VPS will provide VPSH and its representatives with access to,
at
reasonable times and
upon reasonable
notice, relevant documents and
records pertaining
to the conception and reduction to practice of the
inventions disclosed
in the Patent
Application and
Technology, and
will
permit MBH and its representatives to make copies of the same.
4. Royalties.
4.1
In consideration
of the rights granted
to VPSH under this
Agreement,
VPSH
will pay ETCR the following royalties:
(a) An initial royalty
of two-thirds (2/3) of
the first $150,000
in
gross revenues,
received by VPSH from
the State of Kentucky in connection
with
the Pilot Project.
In the event the
State of Kentucky extends or
expands the Pilot Project, the parties agree that all
revenues received in
connection with such
extension or expansion
shall be the sole property of
VPSH.
(b) For all other projects incorporating or utilizing the
intellectual
property described in the Patent Application or the Technology,
VPSH shall
pay
a royalty of:
(i) Twenty-five
percent (25%) of the Net Revenues (as defined
below) if the project was undertaken by VPSH as a direct
result of an
initial introduction to the customer by ETCR; or
(ii) Five percent
(5%) of the Net
Revenues if the project was
undertaken by VPSH without an initial introduction to the customer
by
ETCR.
For
purposes of this Section 3.1, "Net Revenues" means the revenues
actually received
by VPSH from the
applicable
project, less the direct
costs incurred by VPSH in connection with performing the project
(limited
to
development,
engineering, and
training and
communication costs).
To
receive the royalty percentage specified in Section 3.1(b)(i), ETCR must
provide VPSH with a written list of potential contacts prior to
engaging in
any
marketing of VPSH services to such contacts. VPSH may remove any
potential customer from he contact list provided by ETCR if VPSH or
another
representative or
agent of VPSH has
previously contacted
such potential
customer. Only agreements with customers listed on ETCR's approve
list will
be
eligible for the royalty percentage specified in Section
3.1(b)(i).
4.2
Royalties will accrue at the time VPSH
receives the revenues from the
applicable project,
and will be due and
payable on a calendar
quarterly
basis, on or
before the last business day of the month following the
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calendar quarter in
which such amounts are received. Notwithstanding the
foregoing, VPSH may
withhold twenty-five
percent (25%) of any royalties
accrued on a project
until completion of that project to ensure that
royalties are paid only on Net Revenues. Any royalty holdback will be
paid
to
ETCR within thirty (30) days after completion of the applicable
project.
VPSH
will also provide ETCR with a monthly report within ten business
days
after the end of each calendar month, detailing the project revenues and
associated costs, the
total royalty accrued for the immediately preceding
calendar month and the calculations used to arrive at those
amounts.
4.3
All past due royalties
will accrue
interest at the lesser
of (a) one
and
one-half percent (1
1/2%) per month, or (b) the maximum rate permitted
by
applicable law, in each case, from the date due until fully
paid.
4.4
VPSH will permit ETCR, once per year, to audit VPSH's books and
records
related to the use of the Software, at reasonable times and with
reasonable
notice, for the
purpose of verifying
VPSH's adherence to the terms and
conditions of this Agreement. Any audit requested by ETCR will be
conducted
during VPSH's
regular business hours, will comply with VPSH's normal
security procedures,
and will not unreasonably interfere with VPSH's
business operations.
All out-of-pocket costs associated with an audit will
be
paid by ETCR, unless
the audit discovers (a) that VPSH is violating the
terms and restrictions of the licenses granted in this Agreement;
or (b)
