Exhibit 10.7

 

 

LICENSE AGREEMENT

 

This Agreement is made by and among Sigma Labs, Inc., a Nevada corporation, and
its wholly-owned subsidiary, B6 Sigma, Inc., a Delaware corporation (referred to
jointly as "Licensor" unless the context otherwise requires), and Allotrope
Sciences Corp., a Delaware corporation ("Licensee"), and is effective as of
April 11, 2013 ("Effective Date").

 

RECITALS

 

A.                Licensor is the owner of the Licensed Patents, which relate to
projectile and munitions-related technologies developed by Licensor, and,
subject to the terms and conditions of this Agreement, is prepared to grant an
exclusive license to Licensee to exploit and practice such Licensed Patents
throughout the Territory; and

 

B.                 Licensee wishes to acquire an exclusive license under the
Licensed Patents as set forth herein.

 

AGREEMENT

 

NOW, THEREFORE, in consideration for the mutual covenants and promises contained
in this Agreement, the parties agree as follows:

 

1.Definitions

 

(a)The term “Licensed Patents” means the patents set forth on Exhibit A.

 

(b)The term “Territory” means the United States of America and ITAR compliant
countries.

 

2.Grant of Rights

 

(a)                Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Licensee an exclusive license to make, have made, use,
offer to sell, sell, manufacture, practice and otherwise commercialize the
Licensed Patents in the Territory.

 

(b)               Ownership of any development, improvement, design, layout of
the technology licensed herein shall always be the property of Licensor.
Notwithstanding anything to the contrary, all rights to the patents or
intellectual property rights now existing or to be obtained in the future, which
are based on the Licensed Patents, shall be the sole property of Licensor.

 

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3.                  Investment. Licensee anticipates that it will need to spend
approximately $150,000 on the composite projectile and approximately $250,000 on
the Structurally Sound Reactive Material in order to bring these technologies to
a point where they are directly marketable. This amount of additional investment
required may include, but is not limited to:

 

(a)                Additional focused engineering development. For example, for
the projectile the additional work required includes mass balancing of the
projectile so it will be aerodynamically stable, investigating alternative
materials such as tungsten carbide (WC) to keep the cost down, and the
manufacturing of a limited number of additional projectiles to offer to
Government customers for trials and evaluation.

 

(b)               Limited additional ballistic testing. There may be additional
ballistic testing required to meet the needs of various Government clients.

 

(c)                Focused marketing. There will be materials, animations, and
presentations that will be required to effectively sell to Government program
managers and key decision makers.

 

For the Structurally Sound Reactive Materials, similar work needs to be carried
out, with the addition of more alloy development to enhance the brittleness and
breakup of the alloy, as well as working with weapons designers to figure out
exactly which components on which system are the best candidates for initial
introduction of this material.

 

Licensee may offer subcontracts to pre-existing development partners or vendors
(e.g.. New Lenox Ordnance, VForge, etc.) for any "additional focused engineering
development", "limited additional ballistic testing", "alloy development",
"weapons design work".

 

Licensee will require engineering services support and may consider contracting
directly with Licensor for some of the above mentioned additional development
and testing trials.

 

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4.                  Marketing Plans. Licensee represents that it has excellent
connectivity to both US Government clients as well as defense contractors.
Licensee will directly sell the projectile technology licensed hereunder to U.S.
Federal or Foreign Government clients. Licensee will sell the Reactive
Structural Material technology licensed hereunder to U.S. Federal or Foreign
contractors who are in need of specialized munitions for UAV and other systems
as emerging growth markets. Additionally, Licensee may consider sales to system
integrators requiring enhancements to current weapons systems where it makes
business sense. Should international clients be identified as possible sales
prospects, Licensee will ensure compliance with and bear all costs associated
with all existing International Traffic in Arms Regulations regulations and
requirements. Licensee agrees that export-controlled technical data will not be
disclosed under this Agreement. Also, Licensee will ensure compliance with and
bear all costs associated with any licensing or registration required by the
U.S. Department of State Directorate of Defense Trade Controls Compliance &
Registration Division or any other such agency governing sales of arms and
munitions, e.g.. Form DS-2032.

 

5.                  License Fees. Licensee agrees to pay Licensor license fees,
as follows:

 

(a)                $12,500 upon execution of this Agreement, and $12,500 six
months following the Effective Date.

 

(b)               $25,000 on the second anniversary of the Effective Date.

 

6.                  Royalty Payments. Royalty payments will replace license fees
starting in the third year in accordance with the following: Within 30 days
following the end of each applicable year following the Effective Date, Licensee
shall pay to Licensor royalty payments, as follows:

 

(a)                3.5% of the aggregate gross sales by Licensee relating to the
Licensed Patents ("Sales"), if such Sales equal at least $1,000,000 during the
first year following the Effective Date;

 

(b)               3.5% of Sales, if such Sales equal at least $1,000,000 during
the second year following the Effective Date;

 

(c)                3.5% of Sales, if such Sales equal at least $1,000,000 during
the third year following the Effective Date;

 

(d)               3.5% of Sales, if such Sales equal at least $2,000,000 during
the fourth year following the Effective Date;

 

(e)                3.5% of Sales, if such Sales equal at least $3,000,000 during
any year after the fourth year following the Effective Date.

 

7.                  Mandatory Performance Targets. The following minimum gross
revenue requirements will be the main condition of exclusive licensing
hereunder. If any such revenue target is not met, such exclusive licensing shall
terminate immediately. However, the parties hereto may negotiate a non-exclusive
license to the Licensed Patents in the event Licensee's exclusive license shall
terminate:

 

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(a)                Third Year after the Effective Date. Licensee shall generate
at least $1,000,000 of Sales during the third year following the Effective Date.

 

(b)               Fourth Year after the Effective Date. Licensee shall generate
at least $2,000,000 of Sales during the fourth year following the Effective
Date.

 

(c)                Fifth Year after the Effective Date and Subsequent Years.
Licensee shall generate at least $3,000,000 of Sales during the fifth year
following the Effective Date, and during each subsequent year during the term of
this Agreement.

 

8.Reports.

 

(a)                Quarterly Reports. Within 45 days of the end of each calendar
quarter, Licensee will deliver to Licensor a full and accurate accounting for
such quarter of Sales, earned royalties due and satisfaction of milestones in
Section 7. Quarterly reports are required regardless of whether any payments are
required for such calendar quarter. Information about Sales will be provided on
a Licensed Patent and country-by-country basis for Licensee. The report will
identify all Sales in connection with the Licensed Patents that were sold by
Licensee during that reporting period. The report will also include such other
information reasonably requested by Licensor from time to time.

 

(b)               Records and Audit. Licensee will keep accurate books of
account and records to document the derivation of all amounts payable to
Licensor under this Agreement. These books and records will be kept at
Licensee’s principal place of business for at least five years following the end
of the calendar year to which they pertain. Licensee will provide Licensor
access to these books upon reasonable notice, during normal business hours, for
audit by a Licensor representative or agent for the purpose of verifying
Licensee’s royalties statement or Licensee’s compliance in other respects with
this Agreement. Should an audit by Licensor show an underpayment, Licensee will
immediately pay all past due amounts. In addition, should an audit by Licensor
show an underpayment by more than 5% in any reporting period, Licensee will pay
all of Licensor's actual out-of-pocket audit expenses immediately upon request.
Should an audit by Licensor show an overpayment, Licensor will credit such
overpayment against the next payment due from Licensee under this Agreement.
Audits will not occur more than once in any 12 month period; however, if an
audit shows an underpayment, thereafter audits may occur every 6 months, at
Licensor's sole option.

 

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9.                  Infringement of Licensed Patents by Third Parties. Should
Licensor or Licensee become aware of any infringement or alleged infringement of
any intellectual property constituting any portion of the Licensed Patents, that
party shall immediately notify the other party in writing of the name and
address of the alleged infringer, the alleged acts of infringement, and any
available evidence of infringement. Licensor and Licensee agree to work jointly
(on a best effort basis) to prevent any infringement.

 

10.              Term and Termination

 

(a)                Term. The initial term of this Agreement shall be five (5)
years, unless sooner terminated as provided below. Subject to the satisfaction
by Licensee of the milestones in Section 7, Licensee may renew this Agreement
for up to three (3) additional periods of one (1) year each (each a “renewal
term”) after the expiration of the initial term, by giving written notice of
renewal to Licensee at least one hundred twenty (120) days prior to the
expiration of the initial term or any renewal term unless, at the expiration of
the initial term or any renewal term, Licensee has failed to make any payment to
Licensor which is due and payable hereunder. No termination of this Agreement
shall operate to deny either party of its rights or remedies, either at law or
in equity, and shall not relieve Licensee of its obligations to pay royalties
and other financial obligations hereunder up through the date of termination.

 

(b)               Termination by Licensee or Licensor for Convenience. Either
party may terminate this Agreement by giving 90 days prior written notice of
termination to the other party.

 

(c)                Termination for Breach. Either party may terminate this
Agreement by written notice if the other party breaches this Agreement and fails
to cure such breach within 30 days of written notice of breach for payment
defaults, or within 90 days of written notice of breach for non-payment
defaults.

 

(d)               Immediate Termination by Licensor. This Agreement will
terminate immediately upon written notice from Licensor if any of the following
occur: (a) Licensee uses or Licensee attempts to transfer or assign its rights
or obligations under this Agreement in any manner contrary to the terms of this
Agreement or in derogation of Licensor's proprietary rights; or (b) Licensee is
determined to be insolvent, makes an assignment for the benefit of creditors,
has a bankruptcy petition filed by or against it (which is not dismissed within
60 days), or a receiver or trustee in bankruptcy or similar officer is appointed
to take charge of all or part of Licensee’s property..

 

(e)                Obligations on Termination. Upon termination of this
Agreement: (i) Licensee shall immediately cease and desist from using the
Licensed Patents and all right, title and interest that Licensee may have in the
Licensed Patents shall vest in Licensor immediately and automatically, without
the need of further action. No termination of this Agreement by either party
shall relieve such party from any obligation or liability that arose prior to
such termination.

 

11.              Relationship of Parties. Nothing in this Agreement will be
deemed or construed to create the relationship of principal and agent, or of
partnership or joint venture, and neither party will hold itself out as an
agent, legal representative, partner, subsidiary, joint venturer, servant, or
employee of the other. Neither party, nor any of their officers, employees, or
representatives, will have any right, collectively or individually, to bind the
other party, to make any representations or warranties, to accept service of
process, to receive notice, or to perform any act on behalf of the other party
except as expressly authorized under this Agreement or in writing by the other
party in its sole discretion.

 

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12.              Indemnification. Licensee shall defend, indemnify and hold
Licensor harmless against all claims or expenses (including reasonable
attorneys’ fees) arising out of or relating to Licensee's manufacture, use,
sale, offer for sale, or disposition in connection with the Licensed Patents,
except to the extent such claims are caused by the negligence or willful
misconduct of Licensor.

 

13.              Confidentiality and Non-Disclosure; Return of Proprietary
Information.

 

(a)                Licensee acknowledges that Licensor has furnished to Licensee
copies of all internal formal and informal Licensor reports, notes, sketches or
mock ups associated with documenting engineering development efforts to date for
the Licensed Patents (collectively, the "Proprietary Information"), and has
disclosed and will disclose to Licensee in connection with this Agreement other
confidential or proprietary information, including business plans, strategies,
trade secrets and other non-public information ("Confidential Information,"
which includes the Proprietary Information). Licensee will inform Licensor of
any disclose of Confidential Information to any other party. Licensee shall not
use any Confidential Information for any purpose other than with respect to the
license granted hereunder. Confidential information does not include information
that Licensee can establish (i) is or becomes publicly available other than as a
result of a breach of this Agreement by, or other fault of, Licensee, (ii) is
lawfully received from a third party which is not under an obligation of
confidentiality for the benefit of Licensor, (iii) was either in the possession
of or known to Licensee at the time of disclosure without any limitation on use
or disclosure for the benefit of Licensee, (iv) is independently developed by
Licensee without the use or benefit of Licensor's Confidential information, or
(vi) must be disclosed pursuant to any law, regulation or judicial or
governmental order.

 

(b)               Licensee agrees that it will not trade in the securities of
Licensor at any time Licensee is in possession of material non-public
information about Licensor. Licensee further agrees not to provide "tips" for
trading by other persons by disclosing material nonpublic information to them.
Licensee acknowledges that it is aware that violation of the insider trading
laws can result in substantial civil liability, administrative penalties and
other sanctions imposed on Licensee.

 

(c)                Licensee shall return all Confidential Information, including
any copies thereof made by Licensee, to Licensor upon the termination of the
exclusive license hereunder. Licensee shall certify to Licensor that all such
Confidential Information was returned.

 

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14.Assignment; Sublicense

 

(a)                Licensee shall have the right to assign or otherwise transfer
this Agreement and the rights acquired by Licensee hereunder, with the prior
written consent of Licensor (which consent may be withheld in Licensor's sole
and absolute discretion).

 

(b)               Licensee shall have the right to sublicense the Licensed
Patents to any third party, with the prior written consent of Licensor (which
consent may be withheld in Licensor's sole and absolute discretion).

 

(c)                Licensor shall have the right to assign or otherwise transfer
this Agreement and the rights herein, to any third party, without the prior
written consent of Licensee.

 

(d)               During the term of this Agreement, no patent owner or assignee
may designate additional assignees.

 

15.Notices

 

(a)                All notices, demands, and other communications under this
Agreement shall be deemed to have been duly given and delivered one (1) day
after sending, if sent by fax or email, and five (5) days after posting, if sent
by registered airmail, postage prepaid, to the parties at the following
addresses:

 

For Licensor:100 Cienega Street, Suite C

Santa Fe, New Mexico 87501

 

For Licensee:1107 Key Plaza #106,

Key West, FL 33040

 

The parties hereto may give written notice of change of address, and, after such
notice has been received, any notice of request shall thereafter be given to
such party at the changed address.

 

16.Arbitration.

 

(a)                Parties’ Consent to Arbitration. Except as otherwise provided
in this Agreement, Licensor and Licensee consent and submit to the exclusive
jurisdiction and venue of the State of California, County of Los Angeles, for
the adjudication of any dispute between Licensor and Licensee that arises out of
or relates to this Agreement. Except as provided in this Agreement, any dispute,
controversy or claim arising out of or relating to this Agreement shall be
settled by binding arbitration heard by one (1) arbitrator (who shall be an
attorney with experience in patent and intellectual property matters), in
accordance with the Commercial Arbitration Rules (“Rules”) of the American
Arbitration Association. The arbitrator shall be appointed in accordance with
the Rules. The parties hereto agree that the venue of such arbitration shall be
the County of Los Angeles, California.

 

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(b)               Powers. The arbitrator shall be bound by the terms and
conditions of this Agreement and shall have no power, in rendering the award, to
alter or depart from any express provision of this Agreement, and the failure to
observe this limitation shall constitute grounds for vacating the award. Except
as otherwise provided in this Agreement, the arbitrator shall apply the law
specified in Section 17 below. Any award of the arbitrator shall be final and
binding upon the parties and judgment may be entered in any court of competent
jurisdiction, including, without limitation, the courts of the State of
California or any federal court in California, or any court of competent
jurisdiction within the Territory. The award and judgment thereon shall include
interest at the legal rate from the date that the sum awarded to the prevailing
party was originally due and payable, and attorneys’ fees and other arbitration
costs, including, without limitation, costs associated with expert witnesses.

 

(c)                Entitlement to Costs. If any legal action or dispute arises
under this Agreement, arises by reason of any asserted breach of it, or arises
between the parties and is related in any way to the subject matter of the
Agreement, the prevailing party shall be entitled to recover all costs and
expenses, including reasonable attorneys’ fees, investigative costs, reasonable
accounting fees and charges for experts. The “prevailing party” shall be the
party who obtains a provisional remedy such as a preliminary injunction or who
is entitled to recover its reasonable costs of suit, whether or not the suit
proceeds to final judgment; if there is no court action, the prevailing party
shall be the party who wins any dispute. A party need not be awarded money
damages or all relief sought in order to be considered the “prevailing party” by
the arbitrator(s) or a court.

 

17.              Governing Law. All questions concerning this Agreement, the
rights and obligations of the parties, enforcement and validity, effect,
interpretation and construction which are governed by state law shall be
determined under the laws of the State of California. United States federal law
shall apply to all other issues; however, if a provisional remedy is sought, the
law of the place where such remedy is sought shall apply.

 

18.              General Provisions

 

(a)                The parties hereto have read this Agreement and agree to be
bound by all its terms. The parties further agree that this Agreement shall
constitute the complete and exclusive statement of the Agreement between them
with respect to the subject matter herein, and supersedes all proposals, oral or
written, and all other communications between them relating to the Licensed
Patents.

 

(b)               No modifications or amendments to this Agreement shall be
binding upon the parties unless made in writing and duly executed by the
parties.

 

(c)                The provisions of this Agreement are severable, and in the
event that any provisions of this Agreement shall be held to be invalid,
illegal, or unenforceable, the validity, legality, and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

 

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(d)               Failure of any of the parties hereto to enforce any of the
provisions of this Agreement or any rights with respect thereto or to exercise
any election provided for therein, shall in no way be considered a waiver of
such provisions, rights, or election or in any way to affect the validity of
this Agreement. No term or provision hereof shall be deemed waived and no breach
excused, unless such waiver or consent shall be in writing and signed by the
party claimed to have waived or consented. The failure by any of the parties
hereto to enforce any of said provisions, rights, or elections shall not
preclude or prejudice other provisions, rights, or elections which it may have
under this Agreement. Any consent by any party to, or waiver of, a breach by the
other, whether express or implied, shall not constitute a consent or waiver of,
or excuse for any other, different or subsequent breach. All remedies herein
conferred upon any party shall be cumulative and no one shall be exclusive of
any other remedy conferred herein by law or equity.

 

(e)                This Agreement shall be binding not only upon the parties
hereto, but also upon without limitations thereto, their assignees, successors,
heirs, devices, divisions, subsidiaries, officers, directors and employees.

 

(f)                Headings used in this Agreement are for reference purposes
only and shall not be deemed a part of this Agreement.

 

(g)               This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original all of which constitute one and
the same agreement.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the Effective Date.

 

 

LICENSOR    LICENSEE            SIGMA LABS, INC.    Allotrope Sciences Corp.   
    By:  /s/ Mark Cola    By:  /s/ Alan Yarborough  Its:  4-11-13    Its: 
4-11-13                  B6 Sigma, Inc.                  By:  /s/ Mark Cola    
    Its:  4-11-13        

 

 

 

 

Signature Page

License Agreement

 

 

 

 

EXHIBIT A

 

LICENSED PATENTS

 

United States Patent Number 8,359,979 - Composite Projectile

United States Patent Number 8,372,224 -Structurally Sound Reactive Materials