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Exhibit 10.52

 

 

 

 

1.	Definitions

 

 

1.1.

“Affiliate” means with respect to any party, any entity that is Controlled by, under common Control with or Controls such party.

 

1.2.

“Agreement Term” has the meaning set forth in 9.1(b).

 

1.3.

“Application Development Services” has the meaning set forth in Section 2.1(a).

 

1.4.

“Claims” means claims, suits, and legal actions by any third party.

 

1.5.

“Commissions” has the meaning set forth in Section 4.2.

 

1.6.

“Confidential Information” means any trade secret or other information of the disclosing party that is not generally available to the public, whether of a technical, business or other nature (including, without limitation, information relating to the disclosing party's technology, software, products, services, designs, methodologies, business plans, finances, marketing plans, customers, prospects or other affairs), that is disclosed to the receiving party during the Term and that the receiving party knows or has reason to know is confidential, proprietary or trade secret information of the disclosing party. Confidential Information also includes any information that has been made available to the disclosing party by third parties that the disclosing party is obligated to keep confidential. Confidential Information does not include any information that: (a) is or was acquired by the receiving party from a third party and is not subject to an unexpired obligation to such third party restricting the receiving party's use or disclosure thereof; (b) is independently developed by the receiving party without reliance upon or use of any of the Confidential Information; or (c) is or has become generally publicly available through no fault or action of the receiving party.

 

1.7.

“Confidential Materials” means any document, diskette, tape, writing or other tangible item or storage medium of any description that contains any Confidential Information, whether in printed, handwritten, coded, magnetic or other form and whether delivered by the party disclosing the Confidential Information or made by the party that received the Confidential Information.

 

1.8.

“Control” means possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity, whether through the ownership of voting security, contract or otherwise.

 

1.9.

“ChromaID Development Kit” means the development kit, which includes a scanner, PC host software application, Scanhead API, and C sample code, that Visualant released in 2013.

 

1.10.

“Exclusive IP License” means the license of the Licensed IP set forth in Section 3.1.

 

1.11.

“Fully-Diluted Shares” means the total number of Shares outstanding, assuming the exercise or conversion of all securities convertible into Shares, such securities including but not limited to warrants and options.

 

1.12.

“Field of Use” means identification, authentication and diagnostics using a plurality of bands of electromagnetic energy (e.g., Light Emitting Diode (LED), laser) and at least one sensor (e.g., Photodiode, charge coupled device (CCD), complementary metal oxide semiconductor (CMOS) device, charge plate).

 

1.13.

“Global Business Development Services” has the meaning set forth in Section 2.2(a).

 

1.14.

“IDMC Introduced Company” means a company that (a) Visualant, at its sole discretion, has provided IDMC written authorization to contact regarding a Potential Opportunity; (b) is introduced to Visualant by IDMC in writing or in person regarding a Potential Opportunity; and (c) within twenty-four (24) months after the introduction to Visualant by IDMC, enters into a written agreement with Visualant obligating that company to make any payments or potential payments to Visualant.

 

1.15.

“IDMC Report” has the meaning set forth in Section 5.2.

 

1.16.

“IDMC Reporting Period” has the meaning set forth in Section 5.2.

 

1.17.

“IDMC Technology” means technical information, know-how, processes, procedures, compositions, devices, methods, formulae, materials, protocols, techniques, software, designs, drawings or data created by IDMC while performing the Application Development Services, which may not (a) be claimed in the Patents or Patent Applications but are necessary for practicing the Patents or Patent Applications, (b) have resulted from, or are useful in the practice of, the inventions or discoveries described in the Patents or Patent Applications.

 

1.18.

“Improvements” means any patented or patentable addition, modification or substitution of an invention claimed in the Licensed IP that (a) would be infringed by the practice of an invention claimed in the Licensed IP or (b) if not for the Exclusive IP License would infringe one or more claims of the Licensed IP.

 

1.19.

“Indemnitee” means a party and its Affiliates and their respective directors, officers, managers, employees and agents, and the successors, assigns, and heirs of the foregoing.

 

1.20.

“Invention” means the subject matter of an Invention Disclosure.

 

1.21.

“Invention Disclosure” has the meaning set forth in 2.1(a)(1).

 

1.22.

“Inventor” has the meaning set forth in 2.1(a)(1).

 

1.23.

“Knowledge” means with regard to a party’s representation and warranty in this Agreement qualified by knowledge, a party's knowledge after engaging in reasonable inquiry and investigation.

 

1.24.

“License Fee” has the meaning set forth in Section 5.1.

 

1.25.

“License Term” has the meaning set forth in Section 9.1(b).

 

1.26.

“Licensed IP” means the Patent Applications, IDMC Technology, and Patents, which cover the Inventions selected for patenting pursuant to Section 2.1(b)(4).

 

1.27.

“Licensing Revenue” means all gross revenue recognized under GAAP received by Visualant in consideration for the grant of a license of Visualant IP or a sublicense of Licensed IP to a third party.

 

1.28.

“Nonexclusive License” means the license of Visualant IP set forth in Section 3.4.

 

1.29.

“Nonrecurring Engineering Fee” or “NRE Fee” means the one-time cost to research and develop new inventions.

 

1.30.

“Option to License” has the meaning set forth in Section 3.2.

 

1.31.

“Patents” means all patents, utility models, design patents, design registrations, certificates of invention, and other governmental grants or exclusive rights of any kind issued or granted by any government in the world to an inventor or applicant for the protection of inventions or industrial designs anywhere in the world claiming an Invention, or any portion thereof.

 

1.32.

“Patent Applications” means applications for Patents for an Invention, including, without limitation, all reissues, divisionals, renewals, provisionals, re-examinations, extensions, continuations and continuations-in-part, and requests for continuing examinations.

 

1.33.

“Person” means an individual, firm, corporation, partnership, association, limited liability company, trust or any other entity.

 

1.34.

“Potential Opportunity” has the meaning set forth in 2.2(a)(2).

 

1.35.

“Revenue Allocation” has the meaning set forth in Exhibit B.

 

1.36.

“Royalty Products” means the specific uses, products, processes, and services (a) that, if made, used, imported, offered for sale, sold, distributed, or otherwise disposed of by Visualant in the absence of this Agreement would infringe, whether directly or through inducement of or contribution to infringement by another, at least one claim of a Patent included in the Licensed IP, (b) that use or incorporate inventions disclosed or claimed in any Patent Applications included in the Licensed IP, or (c) that otherwise use or incorporate the IDMC Technology included in the Licensed IP.

 

1.37.

“Royalty Product Revenue” means the gross revenue recognized under GAAP that Visualant received from the sale or other disposition of Royalty Products.

 

1.38.

“Royalties” has the meaning set forth in Section 4.3.

 

1.39.

“Sales Revenue” means the gross revenue recognized under GAAP that Visualant received from the sale or other disposition of Visualant’s products including Royalty Products.

 

1.40.

“Services” has the meaning set forth in Section 2.

 

1.41.

“Shares” means the common shares in the capital of Visualant.

 

1.42.

“Squid Development Kit” means the development kit that Visualant plans to release subsequent to the release of the ChromaID Development Kit.

 

1.43.

“Useful IP” means, other than the Licensed IP, the Patent Applications and Patents that relate to spectroscopy and are (a) owned by or licensed by IDMC as of the Effective Date or (b) developed, generated, or otherwise acquired by IDMC after the Effective Date; but for both (a) and (b) only to the extent that IDMC has the ability to grant Visualant a nonexclusive license without (i) breaching any obligation to any third party, (ii) having to acquire additional licensing or patent rights from any third party, and (iii) paying any additional consideration to any third party to grant the nonexclusive license. The determination of whether any particular Patent Application or Patent is within the scope of Useful IP shall be made by IDMC in its sole and absolute discretion.

 

1.44.

“Visualant Technology” means technical information, know-how, processes, procedures, compositions, devices, methods, formulae, materials, protocols, techniques, software, designs, drawings or data created by Visualant for the enablement or development of the Licensed IP.

 

1.45.

“Visualant IP” means intellectual property owned by Visualant, including Improvements made by Visualant.

 

1.46.

“Warrant” has the meaning set forth in Section 4.1.

 

 

2.

Services

 

2.1.

Application Development

 

(a)

Subject to Section 2.1(b), IDMC shall provide the following services (“Application Development Services”) to Visualant:

 

(1)

Identify and engage at least twenty (20) pre-qualified inventors (“Inventors”) for a term of sixty (60) days to develop new applications of the ChromaID Development Kit and submit invention disclosures for such applications (“Invention Disclosures”) to IDMC;

 

(2)

Review the Invention Disclosures with Visualant;

 

(3)

Upon Visualant’s review and input, prepare and file at least ten (10) U.S. Patent Applications and corresponding PCT Patent Applications to protect the Inventions selected by IDMC; and

 

(4)

Pay an NRE fee of up to five thousand U.S. dollars ($5,000) to each Inventor named on the Patent Applications.

 

(b)

To support IDMC’s efforts in providing the Application Development Services, Visualant shall

 

(1)

Provide IDMC with a ChromaID Development Kit for each Inventor at no cost;

 

(2)

Provide technical support to each Inventor, as needed, at no cost;

 

(3)

Review Invention Disclosures with IDMC;

 

(4)

Provide input to assist IDMC in selecting Inventions and preparing and filing Patent Applications; and

 

(5)

Delay the selling of the ChromaID Development Kits for one hundred forty (140) days after providing the ChromaID Development Kits to IDMC, except that Visualant may sell the Development Kits to a mutually agreed upon list of not more than ten (10) other entities, to be set out in a separate side letter to this Agreement.

 

(c)

Visualant hereby grants IDMC an exclusive option to provide Application Development Services to Visualant for the Squid Development Kit for twelve (12) months from the Effective Date. Visualant shall delay selling the Squid Development Kit to other parties for one hundred eighty (180) days after providing the Squid Development Kits to IDMC.

 

2.2.

Global Business Development

 

(a)

Subject to Section 2.2(b) below, IDMC may provide the following services (“Global Business Development Services”) to Visualant:

 

(1)

Present Visualant IP and Licensed IP, if applicable, to potential customers, licensees, and distributors in markets or geographies not being pursued by Visualant;

 

(2)

Introduce Visualant to a potential customer, licensee, or distributor for the purpose of identifying and closing a license, sale, or distribution deal or other monetization event (“Potential Opportunity”);

 

(3)

Upon written request of Visualant, take the lead in any negotiation;

 

(b)

Upon written request of IDMC, Visualant, in its sole discretion, shall provide IDMC with authorization to contact a potential customer, licensee, or distributor.

 

2.3.

Independent Contractor

 

(a)

IDMC is an independent contractor and not an employee or agent of Visualant. This Agreement does not create an agency, joint venture, partnership, or employment relationship.

 

(b)

This Agreement does not authorize IDMC to enter into contracts on Visualant’s behalf. IDMC shall make clear to third parties that IDMC is an independent contractor of Visualant and has no authority to take any action (except as permitted in this Agreement) on behalf of Visualant or bind Visualant to any agreement.

 

3.	License of Intellectual Property

 

3.1.

Exclusive IP License to Visualant. Subject to the terms of this Agreement, IDMC hereby grants and will grant to Visualant a worldwide, nontransferable, exclusive license to the Licensed IP, during the Term, and solely within the Field of Use to (a) make, have made, use, import, sell and offer for sale products and services; (b) make Improvements; and (c) grant sublicenses of any and all of the foregoing rights (including the right to grant further sublicenses). Visualant shall deliver to IDMC a true and correct copy of each and every such sublicense agreement entered into by Visualant within thirty (30) days after execution thereof, and shall promptly advise IDMC in writing of any modification (and supply same) or termination of each such sublicense agreement. Any such sublicense granted under this Agreement must be in accordance with and subject to the terms, conditions and limitations of this Agreement.

 

3.2.

Nonexclusive Option. Subject to the terms of this Agreement, IDMC hereby grants and will grant to Visualant a nonexclusive and nontransferrable option to acquire a worldwide, nontransferrable, nonexclusive license to the Useful IP within the Field of Use to (a) make, have made, use, import, sell and offer to sell products and services and (b) grant sublicenses to any and all of the foregoing rights (“Option to License”). The Option to License may be exercised for up to two (2) years from the Effective Date. Any nonexclusive license granted upon the exercise of the Option to License will be subject to mutually acceptable terms and conditions to be negotiated between the parties.

 

3.3.

Reserved Rights. Nothing contained in this Agreement will be construed as conferring any rights by implication, estoppel or otherwise, under any intellectual property rights other than the rights expressly granted in this Agreement with respect to the Licensed IP. All rights not expressly granted in this Agreement are reserved by the respective parties, including right in any Visualant IP existing or created in the future. Subject to the Exclusive IP License, as between the parties, IDMC retains all of its right, title and interest to the Licensed IP.

 

3.4.

Nonexclusive License to IDMC.

 

(a)

Visualant hereby grants and will grant to IDMC a nonexclusive, worldwide, fully paid up,  nontransferable, sublicenseable, perpetual license to the Visualant IP, solely outside the Field of Use to (a) make, have made, use, import, sell and offer for sale products and services and (b) grant sublicenses of any and all of the foregoing rights (including the right to grant further sublicenses).

 

(b)

Visualant hereby grants and will grant to IDMC a nonexclusive, worldwide, fully paid up, royalty-free, nontransferable, nonsublicenseable, perpetual license to access and use Visualant Technology solely for the purpose of marketing sublicenses to the Visualant IP to third parties.

 

3.5.

No Opposition to Intellectual Property. Visualant shall not (i) take any action to oppose, challenge or dispute the validity, enforceability, or scope of any Patent Applications or Patents included in the Licensed IP or (ii) use or authorize any third party to use any Licensed IP in any manner whatsoever other than as expressly permitted pursuant to this Agreement. IDMC agrees that, during the Agreement Term, neither IDMC nor any of its subsidiaries will (i) take any action to oppose, challenge or dispute the validity, enforceability, or scope of the Improvements or (ii) use or authorize any third party to use any Improvement in any manner whatsoever other than as expressly permitted pursuant to this Agreement.

 

 

3.6.

Commercialization. Visualant shall use commercially reasonable efforts to develop viable commercial uses of the Licensed IP and to sublicense Licensed IP to other parties for the purpose of those parties making and selling Royalty Products. Such commercially reasonable efforts include technical development and customer collaboration regarding Royalty Products in order to advance the technology toward commercialization and monetization through sub-licensing by Visualant.

 

4.	Compensation to IDMC

 

4.1.

Warrant. As consideration for the Exclusive IP License and Application Development Services, Visualant shall issue to IDMC the equivalent of five percent (5%) of the Fully Diluted Shares of Visualant’s common stock in the form of warrants with a strike price of twenty U.S. cents ($0.20) per Share at the Effective Date (“Warrant”) pursuant to the Warrant to Purchase Common Stock, attached to this Agreement as Exhibit A, within 30 days of the Effective Date. As of October 11, 2013, this represented 14,575,286 warrants of common stock.

 

4.2.

Commissions. As consideration for the Global Business Development Services, Visualant shall pay IDMC the following commissions (“Commissions”):

 

(a)

Ten percent (10%) of the Licensing Revenue from any IDMC Introduced Company,

 

(b)

An additional ten percent (10%), for a total of twenty percent (20%), of the Licensing Revenue from any IDMC Introduced Company if IDMC negotiates the agreement between Visualant and the IDMC Introduced Company; and

 

(c)

Five percent (5%) of the Sales Revenue from any IDMC Introduced Company.

 

4.3.

Royalties. As consideration for the Exclusive IP License and other rights granted in this Agreement, Visualant shall pay IDMC a royalty of five percent (5%) of Royalty Product Revenue (“Royalties”). For clarity, IDMC is entitled to receive both Royalties and Commissions pursuant to 4.2(c) when Visualant receives Royalty Product Revenue from an IDMC Introduced Company.

 

4.4.

Payment Dates. Visualant shall compute Commissions and Royalties payments based on Sales Revenue and Royalty Product Revenue, respectively, that Visualant receives in a calendar quarter, with the calendar quarter ending on the last day of the months of March, June, September, and December. Within thirty (30) days after the end of each such calendar quarter period (“Payment Dates”), Visualant shall pay to IDMC all amounts, if any, owed for such period.

 

4.5.

Payment Mechanics. Visualant shall make all payments to IDMC under this Agreement in United States Dollars. Where Visualant has recognized gross revenues in currency other than United States Dollars, Visualant shall compute the payments based upon the foreign exchange rate existing at the time the gross revenue is recorded as published in The Wall Street Journal. Payments will be made by wire transfer to the account specified by IDMC from time to time in a written notice to Visualant.

 

4.6.

Taxes. All payments under the Agreement will be made free of all taxes or other withholding and without any deduction, offset, setoff or other charge. Without limiting the foregoing, Visualant may not reduce the amounts payable by any taxes, fees, or other charges imposed on the remittance of royalties or any other amounts payable under this Agreement. Notwithstanding the above, each party shall be responsible for its own income taxes and any gross receipts, sales, use, excise, import, export, value-added or other taxes that may be imposed on such party as a result of the transactions contemplated by the Agreement.

 

4.7.

Reports. Visualant shall submit a written report of its Licensing Revenue, Sales Revenue, and Royalty Product Revenue (the “Report”) on a quarterly basis on the Payment Dates. Visualant shall include in the Report the name of each party from which Licensing Revenue, Sales Revenue, or Royalty Product Revenue was received, the total amount received from each such party, and a computation of the amount owed for the applicable quarter. If no amount is owed, the Report will so state. Visualant shall have an officer of Visualant or a designee of the officer certify the Report to be correct. Visualant shall send the Report to IDMC as set forth in Section 10.2 and email a copy of the Report to accountsreceivable@intven.com.

 

 

4.8.

Late Charges. Visualant will pay a late charge on any overdue amounts calculated at the rate of one percent (1%) per month, accrued daily from the date due until paid. If such rate exceeds the maximum legal rate in the jurisdiction where a claim therefor is being asserted, the rate will be reduced to such maximum legal rate. The right to late charges under this Agreement will be in addition to any other rights that IDMC may have that are conferred by operation of law or in equity.

 

4.9.

Audit.

 

(a)

The receipt or acceptance by IDMC of any payment will not prevent IDMC from subsequently challenging the validity or accuracy of the payment. Visualant shall keep and maintain true and complete books and records in sufficient detail to enable all amounts payable to IDMC under this Agreement to be accurately determined. Visualant shall maintain its books and records for at least five (5) years after the end of the calendar year to which they pertain.

 

(b)

IDMC or its Affiliates shall have the right to have a reputable independent certified public accountant or other qualified auditor acceptable to Visualant, which acceptance may not be unreasonably withheld or delayed, inspect and audit Visualant books and records relating to Licensing Revenue, Sales Revenue, and Royalty Product Revenue to verify Visualant’s compliance with the terms and conditions of Section 4.2 and Section 4.3. IDMC or its Affiliates shall provide Visualant no less than thirty (30) days prior written notice of an audit request and such audit shall take place during Visualant’s normal business hours and not occur more frequently than once in any twelve (12) month period. Visualant may make its books and records available for audit by such independent accountant or auditor subject to a reasonable nondisclosure agreement between Visualant and the accountant or auditor that prohibits disclosure other than disclosures that are necessary to substantiate any finding of noncompliance with Section 4.2 and Section 4.3.

 

(c)

If an audit conducted in accordance with this Section 4.9 uncovers any underpayment, Visualant shall promptly remit to IDMC the amounts owed to IDMC plus interest equal to the lesser of (i) prime rate as published in The Wall Street Journal on the date full payment of the amounts owed to IDMC was made plus two percent (2%) or (ii) the highest interest rate allowed by law. If the underpayment exceeds five percent (5%) of the amounts that would otherwise have been due during any twelve (12) month consecutive period that is audited, then Visualant shall also reimburse IDMC for its reasonable, out-of-pocket expenses incurred for conducting the audit. Any underpayment and interest, if any, owed to IDMC shall be paid within thirty (30) business days following delivery of the auditor’s report and any failure to provide such payment shall be deemed a material breach of this Agreement. If the audit reveals any overpayment, then IDMC shall credit the amount overpaid against Visualant's future payments to IDMC or if the Term has expired, IDMC shall pay Visualant such overpaid amount within thirty (30) business days following the delivery of the auditor’s report; provided that Visualant shall also reimburse IDMC for its reasonable, out-of-pocket expenses incurred for conducting the audit.

 

5.	Compensation to Visualant

 

5.1.

License Fee. As consideration for the Nonexclusive License, IDMC shall pay Visualant a license fee of five percent (5%) of Revenue Allocation (the “License Fee”) subject to the terms of Exhibit B.

 

5.2.

Reports. On an annual basis, IDMC will provide to Visualant a report reasonably detailing Revenue Allocation with respect to Visualant IP (the “IDMC Report”) for the preceding twelve (12) month period (each, an “IDMC Reporting Period”) when there has been Revenue with respect to Visualant IP in such IDMC Reporting Period. IDMC Reports shall be sent pursuant to Section 10.2.

 

5.3.

Payment. IDMC shall pay the License Fee at the same time IDMC submits the IDMC Report to Visualant. IDMC shall make all payments to Visualant under this Section in United States Dollars. Payments will be made by wire transfer to the account specified by Visualant from time to time in a written notice to IDMC.

 

5.4.

Taxes. All payments under the Agreement will be made free of all taxes or other withholding and without any deduction, offset, setoff or other charge. Without limiting the foregoing, IDMC may not reduce the amounts payable by any taxes, fees, or other charges imposed on the remittance of royalties or any other amounts payable under this Agreement. Notwithstanding the above, each party shall be responsible for its own income taxes and any gross receipts, sales, use, excise, import, export, value-added or other taxes that may be imposed on such party as a result of the transactions contemplated by the Agreement.

 

6.	Confidentiality

 

6.1.

Terms of the Agreement. Neither party shall disclose the terms of this Agreement to any third party without the prior written consent of the other nondisclosing party, except: (a) to attorneys, auditors, or other advisors, provided that appropriate and reasonable confidentiality arrangements are established with such attorneys, auditors, or advisors; (b) to surviving entities, in the event of a sale or merger of such party; (c) to actual or potential equity or debt investors in such party, provided appropriate and reasonable confidentiality arrangements are established with the investors; (d) to its banks, investors, and other current and prospective financing sources of such party or its Affiliates; or (e) as may be necessary in the opinion of legal counsel to comply with the requirements of judicial process, any law, government order, or regulation. Notwithstanding the foregoing, any party may disclose the existence of the Agreement to any third party.

 

6.2.

Confidential Treatment.

 

(a)

Any Confidential Information and Confidential Materials exchanged by the parties are made available to the receiving party solely for the purpose of conducting the on-going business relationship between the parties and in the case of Confidential Information and Confidential Materials that are subject to any licenses or other rights granted under this Agreement, for the purpose of exercising such licenses and other rights in accordance with the other terms and conditions of this Agreement. The receiving party will not use, disclose, disseminate or distribute any Confidential Information or Confidential Materials for any other purpose without the prior written consent of disclosing party. Notwithstanding the foregoing, the receiving party may, subject to Section 6.2(b), disclose Confidential Information and Confidential Materials to any proposed or actual licensee, sublicensee, distributors, or customers of the receiving party in connection with the marketing and negotiation activities described in this Agreement. Without limitation of the foregoing, the receiving party shall not use nor permit the use of any Confidential Information or Confidential Materials to design, develop, provide or market any product or service that would compete with any product or service of the disclosing party. For clarity, the foregoing agreement not to compete does not limit or restrict the licenses and other grants set forth in this Agreement.

 

(b)

The receiving party will protect any Confidential Information and Confidential Materials from any unauthorized use, disclosure, copying, dissemination or distribution. Without limitation of the foregoing, the receiving party will: (i) make the Confidential Information and Confidential Materials available only to those of its employees, agents and other representatives who have a need to know the same for the purpose specified in Section 6.2(a) who have been informed that the Confidential Information and Confidential Materials belong to the disclosing party and are subject to this Agreement, and who have agreed or are otherwise obligated to comply with this Agreement; (ii) not disclose the Confidential Information to any third party except as permitted in Section 6.2(a); (iii) make or copy the Confidential Materials only as reasonably required for the purpose specified in Section 6.2(a); (iv) not deliver, distribute, display, demonstrate or otherwise make available the Confidential Materials to any third party except as provided in clause (i) above; (v) not reverse engineer, decompile or disassemble any computer program included in such Confidential Materials; except to the extent permitted by law; and (vi) not remove or obliterate markings (if any) on Confidential Information or Confidential materials indicating its proprietary or confidential nature.

 

(c)

Notwithstanding Section 6.2(b), the receiving party may disclose or produce any Confidential Information or Confidential Materials if and to the extent required by any discovery request, subpoena, court order or governmental action, provided that, to the extent permitted by applicable law, the receiving party gives the disclosing party reasonable advance notice of the same (e.g., so as to afford the disclosing party a reasonable opportunity to appear, object and obtain a protective order or other appropriate relief regarding such disclosure).

 

6.3.

Ownership and Rights.

 

(a)

All Confidential Information and Confidential Materials exchanged in accordance with Section 6.2 are and remain the property of the disclosing party or its third party suppliers or licensors. Section 6.2 will not be interpreted or construed as granting any license or other right under any patent, copyright, trademark, trade secret or other proprietary right.

 

(b)

The receiving party will hold all Confidential Information and Confidential Materials in trust for the disclosing party and will promptly permanently erase, destroy them or deliver them to the disclosing party upon the earlier of the disclosing party's request or when they are no longer needed for the purpose described in Section 6.2. Upon the disclosing party's request, the receiving party will certify in writing its permanent erasure or destruction of such Confidential Materials; provided, however, that the receiving party (a) shall be permitted to retain one (1) copy of such Confidential Materials in its archival files solely for the purposes of verifying compliance with the terms of this Agreement, and (b) shall not be required to erase or destroy computer files stored securely by the receiving party or its affiliates that are created during automatic system backups.

 

7.	Representations, Warranties and Covenants

 

7.1.

IDMC. IDMC represents and warrants as of the Effective Date and covenants as follows:

 

(a)

IDMC is a limited liability company duly organized, validly existing, and in good standing under the laws of the state of Delaware, and has the requisite power to enter into and perform its obligations under this Agreement;

 

(b)

the execution, delivery, and performance of this Agreement have been duly and validly authorized by IDMC and do not require the consent or approval of any Person under any agreement, license, or other document to which IDMC is a party or by which IDMC is bound other than any consents or approvals which shall have been obtained on or prior to the Effective Date;

 

(c)

IDMC is not a party to any agreements or obligations inconsistent with this Agreement;

 

(d)

the execution, delivery, and performance of this Agreement by IDMC will not conflict with, result in any violation of or default under (with or without notice or lapse of time, or both), give rise to a right of termination, cancellation, or acceleration of any obligation or to loss of a material benefit under, or to the creation of a lien, pledge, security interest, charge, or other encumbrance on assets under (i) any provision of the governing instruments of IDMC or (ii) any loan or credit agreement, note, bond, mortgage, indenture, contract, lease, or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to IDMC or its properties or assets;

 

(e)

this Agreement constitutes a valid and legally binding obligation of IDMC, enforceable against IDMC in accordance with the terms of this Agreement, except to the extent that enforceability may be limited by the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity;

 

(f)

IDMC shall obtain all rights necessary to grant Visualant the Exclusive License;

 

(g)

IDMC shall only transfer, assign, or exclusively license the Licensed IP subject to the Exclusive License; and

 

(h)

IDMC shall only sublicense Visualant IP pursuant to the Nonexclusive License.

 

7.2.

Visualant. Visualant represents and warrants as of the Effective Date and covenants as follows:

 

(a)

Visualant is a public company duly organized, validly existing, and in good standing under the laws of State of Nevada and has the requisite power to enter into and perform its obligations under this Agreement;

 

(b)

the execution, delivery, and performance of this Agreement have been duly and validly authorized by Visualant and do not require the consent or approval of any Person, under any agreement, license, or other document to which Visualant is a party or by which Visualant is bound other than any consents or approvals which shall have been obtained on or prior to the Effective Date;

 

(c)

Visualant is not a party to any agreements or obligations inconsistent with this Agreement and the execution, delivery, and performance of this Agreement by Visualant will not conflict with or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, or acceleration of any obligation or to loss of a material benefit under, or the creation of a lien, pledge, security interest, charge, or other encumbrance on assets under (i) any provision of the governing instruments of Visualant, or (ii) any loan or credit agreement, note, bond, mortgage, indenture, contract, lease, or other agreement or instrument, permit, concession, franchise, license, judgment, order, decree, statute, law, ordinance, rule, or regulation applicable to Visualant or its properties or assets;

 

(d)

this Agreement constitutes a valid and legally binding obligation of Visualant, enforceable against Visualant in accordance with the terms of this Agreement, except to the extent that enforceability may be limited by the effect of (i) any applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally, and (ii) general equitable principles, regardless of whether such enforceability is considered in a proceeding at law or in equity;

 

(e)

the Warrants are duly authorized and validly issued;

 

(f)

Visualant owns the Visualant IP licensed to IDMC pursuant to the Nonexclusive License and have maintained relevant documents substantiating the same;

 

(g)

Visualant has the right to grant the Nonexclusive License to IDMC;

 

(h)

Visualant shall only transfer, assign, or license Visualant IP subject to the Nonexclusive License; and

 

(i)

Visualant shall comply with all applicable laws and rules in exercising the Exclusive IP License and other rights granted and assigned to it under this Agreement.

 

7.3.

Disclaimer. The parties acknowledge and agree that, other than the representations and warranties set forth in Sections 7.1 and 7.2, there are no other representations or warranties made by any party. VISUALANT ACKNOWLEDGES THAT IDMC MAKES NO REPRESENTATION OR WARRANTY (EXPRESS, IMPLIED OR STATUTORY) REGARDING THE LICENSED IP AND EXPRESSLY DISCLAIMS ALL SUCH REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION, IDMC GIVES VISUALANT NO ASSURANCE, REPRESENTATION OR WARRANTY (A) REGARDING PATENTABILITY, VALIDITY, ENFORCEABILITY OR SCOPE, OF THE LICENSED IP; (B) THAT THE LICENSED IP WILL NOT BE FOUND INVALID, UNPATENTABLE OR UNENFORCEABLE IN THE FUTURE FOR ANY REASON IN ANY ADMINISTRATIVE, ARBITRATION, JUDICIAL OR OTHER PROCEEDING; AND (C) THAT USE OR PRACTICE OF THE LICENSED IP OR ANYTHING MADE, USED, SOLD OR OTHERWISE DISTRIBUTED OR DISPOSED OF UNDER ANY OF THE LICENSED IP IS OR WILL BE FREE FROM INFRINGEMENT OF ANY OTHER PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF THIRD PARTIES, EVEN IF IDMC HAS BEEN MADE AWARE OF SUCH INFRINGEMENT.

 

8.	Continuing Obligations

 

8.1.

Patent Marking. Visualant will mark any product, and prominently indicate for any service, method or process, covered by this Agreement and at least one claim of any Patents included in any Licensed IP with the patent number(s) of the applicable Patents in a manner that complies with the marking requirements set forth in 35 U.S.C. § 287(a), as amended from time to time, and any other similar laws in other jurisdictions.

 

8.2.

Prosecution and Maintenance of Licensed IP. Visualant shall, without any further compensation, cooperate fully and comply with all reasonable requests made by IDMC in furtherance of preparation, filing, prosecution, maintenance, or enforcement of the Licensed IP.

 

8.3.

Assignment; Abandonment. IDMC may at its sole discretion assign any Licensed IP to another party provided that such party is subject to the obligations undertaken by IDMC pursuant to this Agreement with respect to the Patent Right. IDMC may at any time abandon its preparation, filing, prosecution, or maintenance of any Patent or Patent Application or any claim thereof that is part of the Patents licensed under this Agreement; provided that IDMC will provide Visualant thirty (30) days’ prior written notice of the abandonment.

 

8.4.

Patent Office and Other Similar Proceedings. Each party shall promptly give the other party notice upon becoming aware of any request for, filing or institution of any proceeding before a patent office, administrative body or court, seeking to protest, oppose, cancel, re-examine, declare an interference proceeding, initiate a conflict proceeding or other process affecting the scope, ownership, validity or term of the Licensed IP. As between the parties, IDMC shall have the right, at IDMC’s discretion, to conduct or defend such proceeding, if such proceeding involves the Licensed IP.

 

8.5.

Enforcement and Defense by IDMC. Each party shall promptly give the other party notice upon becoming aware of any instance of infringement of any Licensed IP. IDMC shall have the right, at its discretion, but not the obligation, to initiate, direct, conduct and settle any infringement action or validity defense relating to the Licensed IP.

 

8.6.

Indemnification.

 

(a)

Visualant will defend, indemnify and hold harmless the IDMC Indemnitees against any and all Claims, based upon any theory of liability (including warranty, strict liability, negligence or tort, and regardless of any factual basis), arising out of the exercise of the Exclusive IP License or any other rights granted under this Agreement with respect to the Licensed IP by Visualant or any sublicensee, all subject to the following:

 

(1)

IDMC Indemnitees will give Visualant written notice of the Claim, which any IDMC Indemnitee desires Visualant to defend, indemnify and hold harmless under this Agreement promptly after any IDMC Indemnitee receives notice thereof along with sufficient information for Visualant to identify the Claim. IDMC Indemnitees will cooperate and provide such assistance (including testimony and access to documentation within the possession or control of any IDMC Indemnitee) as Visualant may reasonably request in connection with Visualant’s defense, settlement and satisfaction of the Claim; provided that Visualant will pay or reimburse all of the costs and expenses reasonably incurred by IDMC Indemnitees to provide any such cooperation and assistance in accordance with Visualant’s request.

 

(2)

As part of Visualant’s obligation to defend, indemnify and hold harmless IDMC Indemnitees, Visualant will pay any and all (i) costs and expenses reasonably incurred by Visualant in connection with the defense, settlement or satisfaction of any Claim (including any amounts agreed to by Visualant in settlement of the Claim) and (ii) amounts required by any judgment or order of any court to be paid by IDMC Indemnitees as damages or other relief based upon the Claim; provided that IDMC Indemnitees have complied with their obligations under Section 8.6(a)(1) with respect to the Claim.

 

(3)

In no event will Visualant be required to pay an aggregate amount under Section 8.6(a)(2) exceeding the aggregate Royalties and Commissions Visualant paid to IDMC under this Agreement as of the time such payments must be satisfied.

 

(b)

IDMC will defend, indemnify and hold harmless the Visualant Indemnitees against any and all Claims arising from a breach of the representations and warranties made by IDMC to Visualant pursuant to Section 7.1, subject to the following:

 

(1)

Visualant Indemnitees will give IDMC written notice of the Claim which any Visualant Indemnitee desires IDMC to defend, indemnify and hold harmless under this Agreement promptly after any Visualant Indemnitee receive notice thereof along with sufficient information for IDMC to identify the Claim. Visualant Indemnitees will cooperate and provide such assistance (including testimony and access to documentation within the possession or control of any Visualant Indemnitee) as IDMC may reasonably request in connection with IDMC’s defense, settlement and satisfaction of the Claim; provided that IDMC will pay or reimburse all of the costs and expenses reasonably incurred by Visualant Indemnitees to provide any such cooperation and assistance in accordance with IDMC’s request.

 

(2)

As part of IDMC’s obligation to defend, indemnify, and hold harmless Visualant Indemnitees, IDMC will pay any and all (i) costs and expenses reasonably incurred by IDMC in connection with the defense, settlement, or satisfaction of the Claim (including any amounts agreed to by IDMC in settlement of the Claim) and (ii) amounts required by any judgment or order of any court to be paid by Visualant Indemnitees as damages or other relief based upon the Claim; provided that Visualant Indemnitees have complied with their obligations under Section 8.6(b)(1) with respect to the Claim.

 

(3)

In no event will IDMC be required to pay an aggregate amount under Section 8.6(b)(2) exceeding the aggregate Royalties and Commissions that have been paid to IDMC under this Agreement as of the time such payments must be satisfied.

 

9.	Term and Termination

 

9.1.

Term.

 

(a)

License Term. The term of the Exclusive IP License and the Nonexclusive IP License (the “License Term”) commences on the Effective Date and, subject to earlier termination pursuant to Section 9.2, terminates when all claims of the Patents expire or are held in valid or unenforceable by a court of competent jurisdiction from which no appeal can be taken.

 

(b)

Agreement Term. The term of the Agreement (the Agreement Term”) commences on the Effective Date until either party terminates this Agreement. Either party may terminate this Agreement for convenience at any time following the fifth anniversary of the Effective Date by providing at least ninety (90) days’ prior written notice to the other party, provided, however, that the Exclusive IP License, the Nonexclusive IP License, the obligation to pay License Fee, Commissions, and Royalties, and the audit rights in Section 4.9 shall survive termination or expiration of the Agreement.

 

9.2.

Termination. The License shall terminate immediately  and automatically if any of the following occurs: (a) an insolvency, receivership or bankruptcy proceeding (voluntary or involuntary) is instituted with respect to Visualant and such proceeding is not abandoned or dismissed within one hundred twenty (120) days of institution; (b) Visualant effects an assignment for the benefit of creditors; (c) Visualant dissolves (voluntarily or involuntarily) or liquidates; or (d) Visualant otherwise materially breaches this Agreement, which breach is not cured within ninety (90) days after written notice thereof from IDMC.

 

9.3.

Effect of Termination. If this Agreement is terminated for any reason while any sublicense granted by Visualant or by IDMC is in effect, each sub-licensee that has such a sublicense will have a one hundred eighty (180) day grace period (following the effective date of the termination of this Agreement) to complete orders in process and to sell or otherwise dispose of any products containing any of the Licensed IP.

 

 

9.4.

Survival. All obligations of a continuing nature including, without limitation, those set forth in Sections 4, 5, 9, and 10 will survive any termination of this Agreement or expiration of the Term.

 

9.5.

Reversion. Upon the occurrence of a termination or expiration pursuant to Section 9.2 and subject to Section 9.3, all of Visualant’s right, title and interest in, to and under the Exclusive IP License shall automatically be assigned by Visualant to IDMC. Visualant or its successor in interest shall, promptly upon the written request of IDMC, execute and deliver to IDMC or its designee such instruments and agreements as IDMC may reasonably request in order to confirm such transfer of Visualant’s right, title and interest in, to and under the Exclusive IP License to IDMC.

 

10.	Miscellaneous

 

10.1.

Limitation of Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE TO THE OTHER PARTY FOR INDIRECT DAMAGES, INCLUDING ANY LOST PROFITS OR OTHER INCIDENTAL OR CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY ARISING OUT OF THIS AGREEMENT, INCLUDING THE USE OR INABILITY TO USE ANY LICENSED IP, EVEN IF SUCH PARTY OR ITS REPRESENTATIVES HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THIS SECTION 10.1 WILL NOT APPLY TO ANY DAMAGES ARISING OUT OF EITHER PARTY'S (a) WILLFUL MISCONDUCT (WHICH, FOR THE AVOIDANCE OF DOUBT, INCLUDES SUCH PARTY'S WILLFUL BREACH OF ANY OF ITS EXPRESS OBLIGATIONS UNDER THIS AGREEMENT, EXCEPT TO THE EXTENT THAT SUCH PARTY IS REASONABLY RELYING ON THE ADVICE OF ITS LEGAL COUNSEL) OR GROSS NEGLIGENCE WITH RESPECT TO THIS AGREEMENT; OR (b) FRAUD. THE PARTIES ACKNOWLEDGE THAT THESE EXCLUSIONS OF POTENTIAL DAMAGES WERE AN ESSENTIAL ELEMENT IN SETTING CONSIDERATION UNDER THIS AGREEMENT. FURTHER, IN NO EVENT WILL IDMC’S AGGREGATE LIABILITY UNDER THIS AGREEMENT OR WITH REGARD TO THE LICENSED IP LICENSE EXCEEDS THE AMOUNT VISUALANT PAID TO IDMC UNDER THIS AGREEMENT AT THE TIME SUCH LIABILITY MUST BE SATISFIED.

 

10.2.

Notices. Except as otherwise approved by the parties or stated elsewhere in this Agreement, all notices, requests, consents, approvals and communications called for by this Agreement shall be in writing and, if properly addressed to the recipient in the manner required by this Section 10.2, shall be deemed for purposes of this Agreement to have been given, delivered and received: (i) on the date of actual receipt if delivered personally to the recipient; (ii) three (3) business days after mailing by first class mail, postage prepaid; (iii) on the date of transmission by email or facsimile, provided that acknowledgement or receipt is received by the sender; or (iv) one (1) business day after deposit with a reputable overnight courier service. A writing will be deemed to be properly addressed, if addressed to the applicable party as follows, or to such other address or addresses as the addressee previously may have specified by written notice to the other parties in the manner contemplated by this Section 10.2:

 

If to Visualant: Ron Erickson Visualant, Inc. 500 Union Street, Suite 420 Seattle, WA 98101 USA Facsimile: (206) 826-0951 Email: ron@visualant.net

If to IDMC: Chris Alliegro Invention Development Management Company, LLC 3150 139th Ave. SE, Building 4 Bellevue, WA 98005 USA Facsimile: (425) 467-2350 Email: Notice-US@intven.com

10.3.

Headings and Title. The section headings and titles in this Agreement are for convenience of reference only. They do not form part of this Agreement and shall in no way affect its interpretation.

 

10.4.

Amendments and Waiver. No amendment to this Agreement shall be effective unless it is in writing and executed by all parties. Waiver by any party of any provision of this Agreement shall not be construed as a waiver of any other provision, nor shall it be construed as a waiver of any provision with respect to any other past, present, or future event or circumstance.

 

 

10.5.

Press Release. In connection with this Agreement, the parties will collaborate in good faith in a joint press release regarding this Agreement

 

10.6.

No Agency. The relationship of the parties hereto with respect to the matters contained herein is that of independent contractors, and nothing contained herein shall be deemed to create any relationship of agency, joint venture, or partnership. No party hereto shall have the power to commit, contract for, or otherwise obligate the other in any manner whatsoever as a result of this Agreement.

 

10.7.

Severability. If any provision in this Agreement is held to be invalid or unenforceable, the remainder of this Agreement will have full force and effect, and the invalid or unenforceable provision will be modified or partially enforced, to the maximum extent permitted to effectuate the original intent of the parties.

 

10.8.

Entire Agreement. This Agreement sets forth the entire understanding between the parties related to the subject matter hereof and supersedes all prior negotiations, correspondence, understandings, and agreements among the parties with respect to the subject matter hereof.

 

10.9.

Governing Law; Jurisdiction; Venue. This Agreement and any action arising hereunder shall be construed in accordance with and be governed by the laws of the State of Washington, without regard to the conflicts of law provisions thereof. Each party irrevocably agrees that any legal action, suit or proceeding brought by it in any way arising out of this Agreement must be brought solely and exclusively in the United States District Court for the Western District of Washington, United States of America, unless such court does not have jurisdiction, in which case such legal action, suit or proceeding must be brought solely and exclusively in the state court sitting in King County, Washington, United States of America.

 

 

10.11.

Construction; Terms. All parties to this Agreement have cooperated in the drafting and preparation of   this Agreement. This Agreement shall be interpreted reasonably and fairly in accordance with its terms without consideration or weight being given to the Agreement or any portion hereof having been drafted by a party or its counsel. Terms defined in a given number, tense, or form shall have the corresponding meaning when used in this Agreement with initial capitals in another number, tense, or form. “Includes” or “including” shall not be deemed limited by the specific enumeration of items, but shall be deemed without limitation. The term “or” is not exclusive. Unless the context clearly intends to the contrary, words singular or plural in number shall be deemed to include the other and pronouns having a masculine or feminine gender shall be deemed to include the other.

 

10.12.

Consent. Each party’s execution of this Agreement shall act as its consent to the arrangements and transactions contemplated hereby.

 

 

 

VISUALANT, INC.       By: /s/ Ronald P. Erickson Name: Ronald P. Erickson   Title: CEO

INVENTION DEVELOPMENT MANAGEMENT COMPANY, L.L.C., on behalf of itself and its Affiliates (as defined above)     By: /s/ Chris Alliegro Name: Chris Alliegro   Title: Executive Vice President

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A= the total number of shares with respect to which this Warrant is then being exercised.

 

B= the arithmetic average of the Closing Sale Prices of the shares of Common Stock for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.

 

C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

VISUALANT, INCORPORATED   By: /s/ Ronald P. Erickson Name: Ronald P. Erickson Title: President and Chief Executive Officer

 

 

 

 

 

 

 

 

____________

a “Cash Exercise” with respect to _________________ Warrant Shares; and/or

____________

a “Cashless Exercise” with respect to _______________ Warrant Shares.

 

_________________________________

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:	___________________________________________
	(Please Print)
Address:	___________________________________________
	(Please Print)
Dated: _______________ __, ______
Holder’s Signature: _____________________________
Holder’s Address: ______________________________

 

(a)

“Amounts” as generally used in this Exhibit means cash amounts and amounts that are not cash, which will be valued by IDMC and/or its Affiliates at their cash equivalent under customary valuation techniques.

 

(b)

“Portfolio Monetization” has the meaning set forth in Section (II) below.

 

(c)

“Revenue” means Amounts received and recognized by IDMC and or its Affiliates as revenue under generally accepted accounting principles from (a) licensing of Visualant IP and/or (b) damages awarded in litigation or other proceedings attributable to Visualant IP. “Revenue,” as used in this Exhibit, may refer to Revenue from a Portfolio Monetization or a monetization event involving solely Visualant IP.

 

(d)

“Revenue Allocation” has the meaning set forth in Section (II)(b) below.

 

(a)

Categories. Each patent or patent application included in any transaction (including Visualant IP, if any) will be ranked by IDMC and/or its Affiliates as of the date of the applicable transaction to one of the following four categories:

 

(1)

Patents and patent applications actually asserted against the party transacting with IDMC and/or its Affiliates and discussed in detail during the discussions leading to the Revenue (e.g., patents and patent applications that are identified, analyzed and discussed in the assertion materials and negotiations);

 

(2)

Patents and patent applications specifically mentioned (but not discussed in detail) in the discussions leading to the Revenue (e.g., patents listed as one of the patents or patent applications that the party transacting with IDMC and/or its Affiliates may infringe or need to license);

 

(3)

Patents and patent applications in the same patent classification code as one or more of the patents and patent applications in the foregoing two categories (e.g., patents and patent applications not asserted or specifically mentioned but which, as evidenced by their class code, may have been infringed by the company transacting with IDMC and/or its affiliates);

 

(4)

Patents and patent applications otherwise included in the transaction.

 

(b)

Revenue Allocations. Revenue will be allocated among the four categories as follows (“Revenue Allocations”):

 

(1)

55% for category (1)

(2)

27.5% for category (2)

(3)

13.75% for category (3)

(4)

3.75% for category (4)

 

 

 

(III)

Adjustments to Revenue Allocations. Notwithstanding the foregoing Revenue Allocations, for any given Portfolio Monetization, in the event that the formula set forth above results in allocated per item Revenue in category (1) being less than the allocated per item Revenue in category (2), (3) or (4), or the allocated per item Revenue in category (2) being less than the allocated per item Revenue in category (3) or (4), or the allocated per item Revenue in category (3) being less than the allocated per item Revenue in category (4), then, in each such event, IDMC and/or its Affiliates will appropriately adjust the formula such that the allocated per item Revenue for each category is equal to or higher than the allocated per item Revenue for each higher numbered category (for example, the allocated per item Revenue in category (1) should be equal to or higher than allocated per item Revenue in categories, (2), (3) and (4), after the adjustment). Furthermore, in the event that any category has no patents or patent applications, then IDMC and/or its Affiliates will adjust the Revenue Allocations to allocate the null category’s Revenue Allocation pro rata (based on relative Revenue Allocations) among the other categories. For purposes of this paragraph, an “item” will be a patent or a patent application included in the given Portfolio Monetization.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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