TECHNOLOGY TRANSFER
AND LICENSE AGREEMENT
THIS TECHNOLOGY TRANSFER AND
LICENSE AGREEMENT (the “Agreement”), is entered
into on February 21, 2005 (the “Effective Date”), by
and between JMAR Technologies, Inc., a Delaware corporation, and
Gregory M. Quist (“Quist”) and David A. Drake
(“Drake”) doing business as The LXT Group. The parties
agree as follows:
1. Recitals .
1.1. The parties entered into an
Agreement of Purchase and Sale of Asset dated as of September 7,
2004 (“the Original Agreement”) respecting the purchase
of certain technology and other assets.
1.2. The parties have disputes and
claims against each other pertaining to their respective rights and
obligations under the Original Agreement and desire to enter into
this Agreement to resolve those claims and disputes by superseding,
novating, amending and restating the Original Agreement in the
manner set forth in this Agreement.
2. Definitions .
2.1. Generally . Words and
terms having their initial letter capitalized in this Agreement
shall have the respective meanings set forth in this Section on in
the body of this Agreement.
2.2. Additional Definitions
.
" Affiliate ” means,
with respect to any specified Person, any other Person that
directly, or indirectly through one or more intermediaries,
controls, is controlled by or is under common control with, such
specified Person. “Person” means any individual,
corporation, partnership, limited liability company, limited
liability partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization,
governmental or other entity.
“ CORTS ,” and
“ CORTS System ” means a continuous online
real-time surveillance system that uses light scattering for
detection of microorganism contamination and other particles in
water.
“ Consulting Agreement
” means the consulting agreement between JMAR and Quist and
Drake dated to be effective as of January 31, 2005 with a term
expiring on December 31, 2005, providing for the payment for
eleven hundred (1100) consulting hours at the rate of one
Hundred Ten Dollars ($110) per hour, the form of which is attached
as Exhibit A.
3. Transfer and License of Technology .
3.1. Transfer of Technology . On the terms and subject to
the conditions set forth in this Agreement, at the Closing Quist
and Drake will transfer, convey, assign and deliver to JMAR, and
JMAR will acquire from Quist and Drake, all right, title and
interest of Quist and Drake in the rights, assets, and properties
of Quist and Drake as follows (“Transferred
Technology”):
(a) The registered trademark,
“BioScanner,” a pending trademark for
“BioSentry” and the unregistered common law trademark,
“CORTS”;
(b) The right to enter into a
license with NASA for the exclusive rights to use the technology
embodied in U.S. Patent No. 6,313908 issued to McGill, et al
and assigned to NASA (the “NASA License”) in the field
of detection of microorganisms in water;
(c) Designs, software,
laboratory notebooks, drawings, notes, algorithms, data and other
documents and information related to CORTS and the CORTS System and
the proof of concept, alpha and beta units produced since
April 16, 2004 for the use of light scattering for detection
of microorganism contamination and other particles of water;
and
(d) All books, records,
manuals, data and other materials relating to CORTS and the CORTS
System, and including without limitation, all lists of customers,
markets, technology applications, distribution lists, production
data, sales and promotional materials and records, research and
development files, data and laboratory books, patent disclosures
and accounting records, related to CORTS and the CORTS System and
for the use of light scattering for detection of microorganism
contamination and other particles of water, excluding any
professional books and published papers that Quist or Drake
own.
3.2. License of Patent
Technology . On the terms and subject to the conditions set
forth in the Agreement, at the Closing Quist and Drake will grant
to JMAR , an exclusive, perpetual, worldwide license to make, use,
import, sell, offer for sale, lease or otherwise dispose of
products and services under all right, title and interest of Quist
and Drake in the Provisional Patent Application for a Continuous
On-Line Real-Time Surveillance System, that David A. Drake and
Gregory M. Quist prepared, dated January 5, 2004, filed with
the U.S. Patent & Trademark Office on January 8, 2004 and
the utility patent application related to that provisional patent
application that was filed with the U.S. Patent & Trademark
Office on or about January 10, 2005, and any patent that that
may issue from such applications, limited to the use of light
scattering for detection of microorganisms contamination and other
particles in water (“Licensed Technology”). Otherwise,
Quist and Drake retain all other rights in such patent applications
and any patents that may issue.
3.3. Assumption of Liabilities . On the terms and subject
to the conditions set forth in this Agreement, at the Closing JMAR
will assume and agree to pay, perform or discharge all liabilities,
obligations and commitments arising out of or requiring performance
under agreements, contracts or commitments entered into after
April 16, 2004 that are included in the Transferred Technology
and Licensed Technology (the “Assumed
Liabilities”).
3.4. Excluded Assets and Excluded Liabilities . JMAR
shall not assume any liabilities, obligations or commitments of
Quist or Drake (the “Excluded Liabilities”) relating to
or arising out of the business, products, services, operations,
assets, properties, taxes or deferred taxes of Quist or Drake on or
prior to the Closing, other than the Assumed Liabilities. Quist and
Drake are not transferring or licensing any asset, right or
property not specifically described and set forth in
Sections 3.1 and 3.2, above.
3.5. Consideration . In consideration for the transfer,
conveyance, assignment, license and delivery by Quist and Drake of
the Transferred Technology and Licensed Technology to JMAR, Quist
and Drake shall receive payments (the “CORTS Payments”)
equal to two percent (2%) of the gross revenue of any nature
arising from any CORTS System regardless of the technology employed
(the “CORTS Revenue”), commencing on the date on which
JMAR receives from unaffiliated third parties the first dollar of
CORTS Revenue (the “Revenue Start Date”) and continuing
until the seventh anniversary thereof (the “Revenue End
Date”). In addition, the One Hundred Twenty Five Thousand
Dollar ($125,000) loan JMAR made to Quist and Drake pursuant to the
Alliance Agreement between them dated as of June 10, 2004 (the
“Loan”) shall be satisfied solely from CORTS Payments
that are generated from revenues of any nature from any CORTS
System received after the third anniversary of the Revenue Start
Date, and shall be repaid by payment of 50% of each CORTS Payment
due thereafter until repaid in full. If, on the Revenue End Date,
the Loan has not been repaid in full, the remaining unpaid portion
of the Loan shall then be forgiven. On the Closing Date, the Loan
shall be amended to provide that interest shall begin accruing on
April 2, 2005 at the prime rate quoted by the Western edition
of the Wall Street Journal (the “Prime Rate”) until
satisfied or discharged. Quist and Drake may prepay the Loan
without penalty.
(a) Payments. Each CORTS Payment shall be paid in
arrears within forty-five (45) days after the end of each
calendar quarter commencing with the first quarter in which the
Revenue Start Date occurs, and shall be accompanied by a true and
accurate written report signed and certified to be correct by the
Chief Financial Officer or Chief Executive Officer of JMAR setting
forth the amount of revenue received, the nature of the receipts,
and the basis upon which the CORTS Payment has been calculated. Any
CORTS Payment not timely paid shall accrue interest at the Prime
Rate.
(b) Audit. JMAR shall keep full, true and accurate
records and books of account containing all particulars that may be
necessary for the purpose of calculating the CORTS Payments. These
records and books of account shall be kept by JMAR at its usual
place of business and such books and the supporting data shall be
retained for at least six (6) years following the end of the
calendar year to which they pertain. Quist and Drake shall have the
right on ten (10) days prior written notice, to audit such
books and records at JMAR’s usual place of business following
the end of the calendar year. If any audit discloses underpayment
of the CORTS Payment exceeding ten percent (10%) for the audited
period, JMAR shall pay the cost of the audit, plus the amount of
the underpayment with interest at the rate at the lesser of the
Prime Rate or the maximum rate permitted by law, plus a penalty
equal to ten percent (10%) of any underpayment. Otherwise, Quist
and Drake shall bear the cost of such audit.
4. Representations and Warranties . Quist and Drake
represent and warrant to JMAR as follows:
4.1. Authority . Quist and Drake have the full power and
authority to execute and deliver this Agreement and the Consulting
Agreement (collectively the “Transaction Documents”)
and to consummate the transactions contemplated hereby. The
Transaction Documents have been duly and validly executed and
delivered by Quist and Drake and constitute the legal, valid and
binding agreements and obligations of Quist and Drake, enforceable
against Quist and Drake in accordance with their respective terms,
except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting creditors’ rights
generally or by general principles of equity, including principles
governing the availability of equitable remedies.
4.2. Consents and Approvals; No Violations . Neither the
execution and delivery of this Agreement nor related agreements by
Quist and Drake nor the consummation of the transactions
contemplated hereby or compliance with any of the provisions hereof
will (i) require any consent, approval, authorization or
permit from, any governmental or regulatory authority or other
third party, except for any such consents, approvals,
authorizations, permits, the absence of which would not have a
material adverse effect on the assets, properties, business or
financial condition of the Quist and Drake; (ii) result in a
breach of the terms, conditions or provisions of, or constitute a
default (or an event which, upon notice or lapse of time or both,
would constitute a default) under or cause, permit or give rise to
any right of termination, cancellation or acceleration under any of
the terms, conditions or provisions of any material note, bond,
deed of trust, mortgage, indenture, lease, license, joint venture,
loan or credit agreement or any other material agreement or other
material instrument or obligation to which Quist and Drake are
parties or by which Quist and Drake may be bound;
(iii) conflict with or result in a violation of any provision
of (A) any statute, rule, regulation or ordinance which
conflict or violation might have a material adverse effect on the
assets, properties, business or financial condition of Quist and
Drake or (B) any material order, injunction, judgment, award
or decree applicable to Quist and Drake or any of their properties
or assets; or (iv) result in or require the creation or
imposition of any lien upon or with respect to any of the
properties or assets of Quist and Drake.
4.3. No Other Representations . Because JMAR is
intimately familiar with the status of CORTS and CORTS System as
well as the Transferred Technology and Licensed Technology, except
for the express warranties set forth in Sections 4.1 and 4.2,
or Section 8.3, Quist and Drake are making no representation
or warranties whatsoever and the Transferred Technology and
Licensed Technology is being transferred or licensed, as the case
may be, “AS IS, WHERE IS, WITH ALL FAULTS” AND WITHOUT
ANY WARRANTY, WHETHER EXPRESSED OR IMPLIED AS TO THE CONDITION OF
SUCH TECHNOLOGY AND ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING BUT NOT LIMITED TO ANY WARRANTY REGARDING INFRINGEMENT
ARE HEREBY DISCLAIMED.
5. Representations and Warranties of JMAR . JMAR
represents and warrants to Quist and Drake as follows:
5.1. Organization . JMAR is a corporation duly
incorporated, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted. JMAR is duly
qualified to do business as a foreign corporation and in good
standing in the State of California.
5.2. Authorization of Transaction Documents . JMAR has
the requisite corporate power and authority to enter into and
deliver the Transaction Documents, and to carry out its obligations
thereunder. The execution and delivery by JMAR of the Transaction
Documents, the performance by JMAR of its obligations under the
Transaction Documents and the consummation by JMAR of the
transactions contemplated hereby have been or by the Closing will
be duly authorized by all necessary corporate action on its part.
The Transaction Documents have been duly and validly executed and
delivered by JMAR and are the legal, valid and binding agreements
and obligations of JMAR, enforceable against it in accordance with
their terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting
creditors’ rights generally or by general principles of
equity, including principles governing the availability of
equitable remedies.
5.3. Consents and Approvals; No Violations . Neither the
execution and delivery of the Transaction Documents nor the
consummation of the transactions contemplated hereby or compliance
with any of the provisions thereof will (i) conflict with or
result in any breach of any provision of the Certificate of
Incorporation or Bylaws of JMAR, each as amended to date;
(ii) require any consent, approval, authorization or permit
from, or filing with or notification to, any governmental or
regulatory authority or other third party, except for any such
consents, approvals, authorizations, permits, filings or
notifications, the absence of which would not have a material
adverse effect on the assets, properties, business or financial
condition of JMAR; (iii) result in a breach of the terms,
conditions or provisions of, or constitute a default (or an event
which, upon notice or lapse of time or both, would constitute a
default) under or cause, permit or give rise to any right of
termination, cancellation or acceleration under any of the terms,
conditions or provisions of any material note, bond, deed of trust,
mortgage, indenture, lease, license, joint venture, loan or credit
agreement or any other material agreement or other material
instrument or obligation to which JMAR is a party or by which JMAR
or any of its assets may be bound; (iv)
