License Agreement - Celerity Systems Inc. and Enkay Telecom Co. Ltd.
This LICENSE AGREEMENT (this "Agreement") is made and entered into as of
the 26th day of September, 1996, by and among CELERITY SYSTEMS, INC., a
corporation organized and existing under the laws of the State of Tennessee,
United States of America ("Licensor") and ENKAY TELECOM CO., LTD, a corporation
organized and existing under the laws of the Republic of Korea ("Licensee").
WHEREAS, Licensor is engaged in the development, manufacture and licensing
of hardware, software, systems and equipment used in the interactive digital
cable television business, including its next generation set-top box unit called
the "Topper 4000" (the "Product"); and
WHEREAS, Licensee is in the business of manufacturing and selling various
types of consumer electronic equipment and desires to manufacture and distribute
the Product in the Republic of Korea and elsewhere; and
WHEREAS, the parties executed a Memorandum of Understanding dated June 14,
1996 (the "Memorandum"), evidencing their intention to enter into a definitive
Agreement granting license rights to Licensee as described herein.
NOW, THEREFORE, in consideration of the terms, covenants and conditions
contained herein, the parties hereto mutually agree as follows:
1. Manufacture and Distribution Rights.
(a) Licensor hereby grants to Licensee, and Licensee hereby
accepts, the right and license to manufacture and sell the
Product on the terms and conditions set forth herein. Licensor
hereby grants to Licensee, and Licensee hereby accepts, a
license, in and to technology, know-how and intellectual
property rights related to the Product (the "Technology")
necessary to and solely for the purpose of manufacture and
sale of the Product.
(b) The license granted hereby may not be transferred or
sublicensed by Licensee, but shall extend to any wholly-owned
subsidiaries and divisions of Licensee. Licensee shall be
responsible for the compliance by each such subsidiary and
division with the terms and provisions of this Agreement, and
agrees to report and pay royalties to Licensor in accordance
with Section 3 hereof with respect to production of the
Product by each such subsidiary or division. Any such
affiliate shall agree in advance in writing to be bound by all
the terms of this Agreement, and Licensee shall agree to
guarantee the obligations of such assignee hereunder.
(c) The license granted hereby conveys no right to Licensee to use
or register any trademark or trade name of Licensor, or to use
the name of Licensor or any trademark or trade name in any
manner whatsoever in connection with the sale of the Product
hereunder. Nothing in this Agreement shall be construed as
conveying, expressly or by implication, any right under any of
Licensor's know-how except in connection with the manufacture
and sale of the Product
(d) Licensee shall not have the Product manufactured for it by any
third party without the prior written consent of Licensor,
except where such third party has been licensed by Licensor to
manufacture the Product.
(e) Upon the termination of this license for any reason, Licensee
shall return the Technology, including but not limited to the
source codes, and any and all copies thereof, to Licensor.
(f) Nothing contained herein shall prohibit Licensor from using
the Technology for its own purposes, nor from licensing the
Product and the Technology to others, provided that such usage
or licensing by Licensor is not in competition with the sale
of the Product by Licensee in the Republic of Korea in
connection with or as a part of the SWAN II Interactive
Digital CATV project for Korea Telecom. Nothing contained
herein shall prohibit Licensor from using the Technology for
the development, sale and distribution of its server products
for use with set-top boxes manufactured by others which may be
competitive with Licensee.
2. Territory. The license to manufacture and sell the Product granted
hereby shall be exclusive as to sales for delivery within the
Republic of Korea. Licensee may from time to time request the right
to sell the Product in other areas. If Licensor has not at the time
granted to anyone else the right to sell the Product in such other
areas, Licensor will grant to Licensee the non exclusive right to
manufacture and sell the Product in such other areas on
substantially the same terms as are set forth in this Agreement,
provided that such right shall exist only until such time as
Licensor grants to Licensee or someone else an exclusive right to
sell in any such area.
(a) In consideration of the Technology to be provided to Licensee
by Licensor under this Agreement, Licensee shall pay to
Licensor the sum of one million two hundred thousand dollars
($1,200,000), in addition to periodic royalties as hereinafter
provided, payable by Licensee to Licensor as follows:
(i) one hundred thousand dollars (U.S. $100,000) within
three (3) weeks after execution of the Memorandum,
nonrefundable, such payment to be in consideration of
Licensor's agreement herein to undertake development of
the Topper 4000;
(ii) five hundred thousand dollars (U.S. $500,000) upon the
execution of this Agreement, nonrefundable; and
(iii) six hundred thousand dollars (U.S. $600,000), as a
fixed, up front license fee, upon Licensor's
demonstration of the proper functioning
of the Product according to the specifications set forth
in Exhibit A attached hereto for the SWAN II Interactive
Digital CATV project for Korea Telecom or Licensee's
first sale of any Product utilizing the Technology,
whichever occurs first.
(b) The initial one hundred thousand dollars (U.S. $100,000) and
five hundred thousand dollars (U.S. $500,000) payments
provided for above shall be made before Licensor provides any
technical know-how, information or data to Licensee.
(c) In consideration of the license herein granted, and in
addition to the fixed payments provided for in Section 3(a)
above, Licensee shall pay to Licensor periodic royalties at
the rate of ten dollars (U.S. $10) for each unit of the
Product sold by Licensee. Such periodic royalties shall be
paid by Licensee to Licensor within thirty (30) days following
the end of each fiscal quarter of this Agreement, beginning
with the end of the third full month following the execution
of this Agreement.
(d) Licensee will furnish to Licensor within thirty (30) days
following the end of each such quarter a written statement
certified by the Chief Financial Officer of Licensee showing
the number of units of the Product sold by Licensee during
such quarter, including customer names and selling prices, and
the amount of periodic royalties due for the corresponding
period, together with payment of the royalties due.
(e) Licensee will at all times during the term of this Agreement
keep accurate books of account and other records reflecting
all sales of the Product, and will carefully prepare and
maintain such books and records for at least five (5) years
following the termination of this Agreement. Licensee hereby
grants to Licensor or its duly accredited representative the
right to inspect and make copies of such books and records for
the purpose of ascertaining or confirming the accuracy of
statements rendered hereunder, such inspection and copying to
be at the expense of Licensor.
(f) All payments provided for in this Agreement shall be made to
Licensor in Knoxville, Tennessee in United States currency.
All payments shall be net to Licensor, without deduction for
taxes, assessments, or other charges which may be imposed on
Licensor by the Government of the Republic of Korea or any
political subdivision thereof with respect to any amounts
payable to Licensor pursuant to this Agreement, and without
deduction for banking or wire transfer fees. Such taxes,
assessments or other charges, and fees shall be paid by
4. Term. The term of this Agreement, and the duration of the license
granted hereby, shall be three (3) years from the date of this
Agreement. This Agreement shall be subject to renewal on terms to be
agreed upon by the parties. Either party intending
to seek renewal of this Agreement shall give notice thereof to the
other party at least one hundred eighty (180) days prior to the
5. Delivery of Technology. Following the Licensor's receipt of fee
payments provided for in Sections 3(a)(i) and 3(a)(ii) above in the
aggregate amount of six hundred thousand dollars (U.S. $600,000),
Licensor will supply to Licensee technical information necessary for
the production of the Product, pursuant to Technology Transfer
Agreement between Licensor and Licensee in the form of Exhibit B
6. Additional Licensee Responsibilities.
(a) Licensee agrees to actively develop the market and to promote
the sale of the Product in the Republic of Korea, including
marketing, distribution, installation and service of the
(b) Licensee will maintain a marketing, sales and service
organization properly trained to market the Product and to
insure proper installation and servicing thereof.
(c) Licensee will provide to Licensor on at least a quarterly
basis information and analysis of marketing and sales of the
Product in the Republic of Korea and professional support for
future development and sales of the Product in the Republic of
(d) Licensee will be solely responsible for providing service and
support for the Products. Licensor shall have no Product
service or support responsibilities.
7. Additional Licensor Responsibilities. Licensor will sell to
Licensee, and Licensee will purchase from Licensor, the proprietary
gate arrays referred to as TOP4B. The part numbers will be disclosed
to Licensee as deemed appropriate by Licensor. Licensor reserves the
right to change the proprietary gate arrays as it deems appropriate.
Licensor will sell to Licensee nonproprietary parts for the Product
as mutually agreed. In all cases, prices will include a reasonable
markup above Licensor's cost.
8. No Patent Warranty. Licensor makes no representation or warranty
that the Product is free from any infringement of any patent or
proprietary rights of others, except that Licensor is aware of no
claim or charge of any such infringement.
9. Indemnification. Licensee agrees to indemnify, to defend and to hold
harmless Licensor from claims of third persons either:
(a) proximately caused by the fault or negligence of Licensee, its
officers, employees or agents; or
(b) which relates to any customer disputes or claims relating to
sale, distribution, installation, training or service of any
Product or the performance thereof, whether arising out of
express or implied warranty; or
(c) which relates to any other failure by Licensee to comply with
any terms of this Agreement; or
(d) which relates to any failure by Licensee to comply with
applicable laws and/or regulations in accordance with Section
10. Insurance. Licensee agrees to maintain during the term hereof
liability insurance for personal injury and property damage,
including products liability and contractual coverage, as set forth
herein. Coverage for personal injury shall be not less than one
million dollars (U.S. $1,000,000) annual aggregate liability.
Coverage for property damage shall be not less than five hundred
thousand dollars (U.S. $500,000) per occurrence. Such liability
insurance obtained by Licensee shall include Licensor as a named
insured. Licensee shall supply Licensor with a Certificate of
Insurance upon written request by Licensor.
11. Force Majeure. Neither party hereto shall be liable for any delay
arising from circumstances beyond its control including (but not
limited to) acts of God, war, riot or civil commotion, industrial
dispute, fire, flood, drought, shortage of material or labor or act
of government, provided that the party seeking to be excused shall
make every reasonable effort to minimize the delay resulting
therefrom. Each party shall keep the other fully informed of any
12. Government Regulations.
(a) Licensee shall comply with all laws and regulations of all
applicable jurisdictions relating to the manufacture, sale and
distribution of the Products.
(b) This Agreement shall be subject to all United States laws and
regulations now or hereafter in effect applicable to the
subject matter hereof. The Export Administration Regulations
of the United States Department of Commerce prohibit, except
under an individual validated license, the exportation from
the United States of technical data relating to certain
commodities (listed in the Export Administration Regulations,
unless the exporter (under this Agreement, Licensor) has
received certain assurances from the foreign importer.
Licensee acknowledges that it has received a copy of the
current Export Administration Regulations of the United States
Department of Commerce and has access to Supplementary
Bulletins from the United States Department of Commerce.
Licensee agrees to comply with all applicable Export
Administration Regulations of the United States Department of
Commerce, and hereby gives to Licensor the assurances called
for in Part 779.4 of such Export Administration Regulations.
(c) If the terms of this Agreement are such as to require or make
that this Agreement or any part of it be registered with or
reported to any national or supranational agency in any area
in which Licensee will do business hereunder, Licensee will,
at its expense, promptly undertake such registration or
report. Licensee will supply prompt notice and appropriate
verification of any such registration or report and any agency
ruling resulting therefrom.
(d) Licensee will, at its expense, carry out any formal
recordation of this Agreement required by the law of the
Republic of Korea as a prerequisite to enforceability of this
Agreement in the Republic of Korea or for any other reason,
and promptly supply verified proof of such recordation to
(a) If either party hereto shall breach this Agreement, the other
party may give the defaulting party written notice of such
default. If the defaulting party shall fail or refuse to
remedy such default within thirty (30) days from the date of
said notice, this Agreement may be terminated by a second
written notice and said termination shall be effective as of
the date of the second notice of default. Such termination
shall be without prejudice to any other rights or claims the
aggrieved party may have against the defaulting party.
Defaults under this Agreement shall be deemed to include, but
shall not be limited to:
(i) material failure by either party to fulfill any of its
obligations under this Agreement;
(ii) an adjudication of bankruptcy of either party under any
bankruptcy or insolvency law;
(iii) the commission by either party of a receiver for
business or property, or the meaning of any general
assignment for the benefit of creditors; or
(iv) without the prior consent of Licensor, sale by Licensee
of substantially all of its assets or sale or other
transfer of controlling interest in the ownership of
(b) In addition, either party may, immediately upon notice,
terminate this Agreement in its entirety or with respect to
any particular license or right granted hereunder if:
(i) Such termination is necessary to comply with an order or
official request of the government of the terminating
(ii) Normal conduct of the business of the other party as a
private enterprise ceases or is substantially altered as
a consequence of action
taken by governmental or other authority.
(c) Licensor may, immediately upon notice, terminate this
Agreement in its entirety or with respect to any particular
license or right granted by it hereunder if by law or
regulation of the government of the Republic of Korea,
Licensee is disabled from making the payments to Licensor
which it is required to make under this Agreement, and such
disability continues for more than thirty (30) days.
14. Amendments. No provision of this Agreement may be amended, revoked
or waived except by a writing signed by a duly authorized
representative of each of the parties hereto.
15. Assignment. Except as otherwise provided herein, this Agreement
shall not be assignable. Licensee shall have the right to transfer
all or any part of its rights and obligations hereunder to any
wholly-owned affiliate of Licensee, provided, however, that such
affiliate shall agree in advance in writing to be bound by all the
terms of this Agreement and that Licensee agrees to guarantee the
obligations hereunder of such assignee.
16. Notices. Any notice required to be given hereunder shall be deemed
sufficient and delivery shall be deemed complete if sent by
registered Air Mail or confirmed telex to the following addresses:
To Licensor: Celerity, Systems, Inc.
9051 Executive Park Drive
Knoxville, Tennessee 37923
To Licensee: Enkay Telecom Co., LTD.
Enkay Building, 115, Samsung-Dong
Kangnam-Ku, Seoul, Korea 135-090
17. Governing Law. This Agreement and the relationship of the parties
hereto shall be governed in all respects by the laws of the State of
Tennessee, United States of America, except that questions affecting
the validity, construction and effect of any patent shall be
determined by the law of the country in which the patent has been
granted. In the event of any controversy between the parties
respecting the interpretation or application of the terms of this
Agreement, the English language version of this Agreement shall be
18. Resolution of Disputes.
(a) All disputes and controversies between the parties hereto of
every kind and
nature arising out of or in connection with this Agreement as
to the existence, construction, validity, interpretation or
meaning, performance, nonperformance, enforcement, operation,
breach, continuation, or termination of this Agreement shall
be resolved as set forth in this Section 18.
(b) Either party to this Agreement may within fifteen (15) days
after a dispute or controversy arises submit any dispute or
controversy hereunder in writing for resolution by a senior
executive officer of the highest executive level for each of
the parties. If such persons cannot resolve the dispute or
controversy within thirty (30) days, then the dispute or
controversy shall be submitted to binding arbitration pursuant
to the following procedure.
(c) The dispute or controversy shall be submitted to a single
arbitrator with experience in international high technology
commercial matters to be chosen by the senior executive
officers at the highest executive level for each of the
parties within thirty (30) days after the conclusion of the
mediation provided for above. If senior executive
representatives of the disputing parties cannot within such
time agree on an arbitrator, the arbitrator shall be chosen
under International Chamber of Commerce procedures from its
panels of arbitrators with international high technology
(d) The arbitration hearing shall be held in New York, New York,
United States of America, or at such other place as the
parties and the arbitrator agree, within thirty (30) days
after the dispute is submitted to an arbitrator. The
Arbitration Rules of the International Chamber of Commerce, or
such other rules and procedures as the arbitrator may
determine, shall be utilized in the arbitration proceedings.
The arbitration hearing shall be conducted in the English
(e) The arbitration hearing shall be concluded in not more than
three (3) days unless otherwise ordered by the arbitrator. The
award on the hearing shall be made within thirty (30) days
after the close of the submission of evidence at or in
connection with the hearing.
(f) An award rendered by the arbitrator appointed pursuant to this
Agreement shall be final and binding on the parties to such
proceeding. The award shall be enforceable under the June 10,
1958 Convention on the Recognition and Enforcement of Foreign
Arbitral Awards. Judgment on such award may be entered by any
of the disputing parties in the highest court having
jurisdiction in any country.
(g) The provisions of this Section 18 of this Agreement shall be a
complete bar and defense to any suit, action or proceeding
instituted in any court or before any administrative tribunal
with respect to any dispute or controversy arising out of or
in connection with this Agreement. The arbitration provisions
of this Agreement shall, with respect to any such dispute or
the termination or expiration of this Agreement.
(h) Nothing contained in this Section 18 shall give the arbitrator
selected hereunder any authority, power or right to alter,
change, amend, modify, add to, or subtract from the provisions
of this Agreement. Rather, the arbitrator shall endeavor to
interpret the provisions of this Agreement so as to carry out
its terms with reference to any dispute submitted for
(i) The parties shall each bear all of their respective
arbitration costs and expenses, provided, however, that the
parties shall share equally the costs and expenses of the
(j) The failure or refusal of any party hereto to submit to
arbitration in accordance with this Agreement shall be deemed
a breach of this Agreement.
19. Entire Agreement. This Agreement, including the Technology Transfer
Agreement attached hereto as Exhibit A, represents the entire
agreement and understanding of the parties hereto with respect to
the subject matter hereof and supersedes all other prior agreements,
understandings and communications, whether oral or written,
including the Memorandum.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers as of the day and year first herein written.
CELERITY SYSTEMS, INC.
By: /s/ M. R. Youssefi
M. R. Youssefi
ENKAY TELECOM CO., LTD.
/s/ Choi. Hyun Yui
By: Choi. Hyun Yui