Exhibit 10.3

 

Scio Diamond Technology Corporation

 

License Agreement

 

This License Agreement (the “Agreement”) is made as of September 17, 2013, (the
“Effective Date”) by and between SCIO Diamond Technology Corporation a Nevada
corporation, having a principal place of business at 411 University Ridge,
Suite D, Greenville, SC 29601 (the “LICENSOR”) and Grace Rich Limited, a Hong
Kong corporation, having a corporate offices at 354 Indusco Ct., Troy, Michigan
48083, (the “LICENSEE”).

 

Agreement

 

1.             BACKGROUND

 

1.1            LICENSEE is a joint venture corporation jointly owned by SAAMABA,
LLC, a Michigan limited liability corporation (“Company A”), Scio Diamond
Technology Corporation, a Nevada corporation (“Company B”) and S21 Research
Holdings, an Israel corporation (“Company C”).  LICENSEE is formed as set forth
in that joint venture agreement entered into among Company A, Company B, and
Company C, as of the Effective Date.

 

1.2            LICENSEE is formed to establish a manufacturing facility in the
PRC for the manufacture, sale and distribution worldwide of type lla
single-crystal CVD diamond, as defined below.

 

1.3            LICENSOR creates, develops, and manufactures technology for the
manufacture of single-crystal CVD diamond, and owns valuable confidential
information, know-how, trade secrets, issued patents, and pending patent
applications relating to that technology.

 

1.4            LICENSEE wishes to obtain an exclusive license and a
non-exclusive license under the foregoing confidential information, know-how,
trade secrets, issued patents, and pending patent applications.

 

1.5            LICENSOR is willing to grant LICENSEE the foregoing exclusive
license and non-exclusive license under the terms and conditions set forth
herein.

 

2.             DEFINITIONS

 

2.1            “Affiliate” means one or more WFOE’s established by LICENSEE
pursuant to the laws of the PRC for the manufacture of type lla single-crystal
CVD diamond, which entity is 100% owned by LICENSEE.  For the purposes of this
Agreement, WFOE(s) shall be the Affiliate only so long as such the 100%
ownership exists.

 

2.2            “Confidential Information” means that information:  (1) disclosed
by LICENSOR to the LICENSEE, or which LICENSEE visually obtains in connection
with this Agreement; and (2) which relates to LICENSOR’s past, present and
future research, development and business activities; and (3) which has been
identified to LICENSEE at the time of disclosure as, or which the LICENSEE knows
or should reasonably know is, confidential to LICENSOR.  Confidential
Information shall also mean the results of any activity performed during the
term of and in performance of services under this Agreement including
manufacturing CVD diamond, or preparing reports, papers, drafts, notes and
meeting minutes and associated prototype(s), parts, and materials.

 

2.3            “Licensed Technology” means all technology, know-how, and
processes for the manufacture of single-crystal type IIa CVD diamond, which is
necessary for LICENSEE and/or the Affiliate to manufacture Type I Licensed
Products and Type II Licensed Products.  The Licensed Technology is expressly
LICENSOR Confidential Information and is considered trade secrets.

 

2.4            “Licensed Patents” means all patents throughout the world:

 

(a)           issued or issuing on patent applications entitled to an effective
filing date prior to the expiration or termination of this Agreement; and

 

(b)           under which patents or the applications therefor LICENSOR has as
of the Effective Date, or thereafter obtains, the right to grant licenses to
LICENSEE of or within the scope granted herein without such grant or the
exercise of rights thereunder resulting in the payment of royalties or other
consideration by LICENSOR or its Affiliate to third parties.

 

(c)             Licensed Patents includes the United States patents set forth in
Exhibit A (Licensed United States Patents), and all United States patents owned
by LICENSOR that cover improvements of the inventions covered by the patents
sets forth in Exhibit A.   Licensed Patents also includes and all patents in
countries outside the United States that correspond to the U.S. patents recited
in the previous sentence, and all patents issuing on patent applications that
are continuations, continuations-in-part, divisionals, reexamination
applications, or reissue applications of any of the patent applications from
which the previously recited patents in this Section 2.4(c) issued.

 

2.5            “Licensed Products,” means Type 1 Licensed Products and/or Type 2
Licensed Products, as the usage may be in this Agreement.

 

2.6            “Operational Readiness” means one hundred (100) Growers are
performing at 85% efficiently using a 4” susceptor technology.

 

2.7            “Eighty-five percent (85%) efficiency” means the 100 Growers are
producing 31,160 carats of diamond per month.

 

[g198661kq01i001.jpg]

Proprietary and Confidential

 

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2.8            “Monthly Payment” means the non-refundable sum of two hundred
fifty dollars per Grower, with a minimum monthly payment of $25,000.00, payable
and creditable as set forth in Section 6 (Monthly Payments).

 

2.9            “Type 1 Licensed Products” means type lla single crystal CVD
manufactured diamond being 4 millimeters in depth and finished at a weight of .5
carat or less after cutting and polishing.

 

2.10          Type 2 Licensed Products” means any type IIa single crystal CVD
manufactured diamond outside the scope of Type 1 Licensed Products.

 

2.11          “PRC” means People’s Republic of China, including its SAR of Hong
Kong and Macao.

 

2.12          “Profit” means earnings before deductions for interest,
depreciation, and amortization, sometimes referred to as “EBIDA.”

 

2.13          “SCIO Grower” means a system to grow a Type IIa single crystal
diamond.  The system includes only the equipment on the diamond manufacturing
facility side of utilities feeding the SCIO Grower, examples of such utilities
being chilled water, gases, electricity and exhaust.  To meet the definition of
SCIO Grower, the system must include at least:

 

reactor/chamber — hoist — cart;

 

control wiring;

 

mass flow control valves and associated control wiring;

 

power pack  and associated control wiring;

 

connections to electrical and mechanical utilities;

 

hydrogen generator;

 

associated filters and pumps;

 

computer and computer controls including appropriate formulas; and

 

exhaust connections.

 

Operations manuals and checklists for the SCIO Grower will normally be supplied
by SCIO.

 

2.14          “WFOE” means the WHOLLY FOREIGN-OWNED ENTERPRISE established
pursuant to the laws of the People’s Republic of China 100% and owned by
LICENSEE.

 

2.15          “WHOLLY FOREIGN-OWNED ENTERPRISE” means a limited liability
corporation for the purpose of China-based business.

 

3.             LICENSES

 

3.1            Subject to the terms and conditions of this Agreement, LICENSOR
hereby grants to LICENSEE, and LICENSEE hereby accepts, an exclusive, revocable,
non-transferable, with the right to sublicense pursuant to Section 4.1, license
under the Licensed Patents and the Licensed Technology to manufacture and use,
in the PRC and (in conformance with the Shareholder’s Agreement) all its Special
Administrative Regions, Type I Licensed Products, and to import, export, offer
to sell, and sell, worldwide, Type 1 Licensed Products that were manufactured
using the manufacturing license recited in this Section 3.1, and to practice, in
the PRC, any process involved in the manufacture and use of Type 1 Licensed
Products. Notwithstanding the foregoing, Licensee may sell Type 1 Licensed
Products that were not manufactured using the manufacturing license recited in
this Section 3.1, but only to the extent required to satisfy a customer order
that cannot be satisfied through the Licensee’s manufacturing facilities in the
PRC.  LICENSOR is not obligated to indemnify for Type 1 Licensed Products that
were not manufactured using the manufacturing license recited in this
Section 3.1. Notwithstanding the exclusive rights granted to LICENSEE here in
Section 3.1, LICENSOR shall be allowed to manufacture, use, import, export,
offer to sell and sell Type I Licensed Products until the earlier of the
following dates to occur: (a) Operational Readiness Date or (b) June 1, 2014.

 

3.2            Subject to the terms and conditions of this Agreement, LICENSOR
hereby grants to LICENSEE, and LICENSEE hereby accepts, a non-exclusive,
revocable, non-transferable, with the right to sublicense pursuant to
Section 4.1, license under the Licensed Patents and the Licensed Technology to
manufacture and use, in the PRC and all its Special Administrative Regions, Type
2 Licensed Products.

 

3.3            3.3          LICENSOR agrees not to grant licenses under the
Licensed Patents and Licensed Technology for Type 1 Licensed Products to any
other entity, and any attempted grant of license in derogation of the foregoing
shall be null and void and LICENSOR shall be liable for any loss or damages that
the LICENSEE might suffer as a result of any action in violation of this
provision.

 

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3.4            LICENSOR shall cooperate with LICENSEE after the Effective Date
in all reasonable respects to assist in the orderly transfer and disclosure of
the Licensed Technology and, as requested by LICENSEE, to assist in LICENSEE’S
understanding of the Licensed Technology.

 

4.             SUBLICENSES

 

4.1            SUBLICENSE All licenses granted by LICENSOR herein include the
right of LICENSEE to grant sublicenses, of or within the scope of such licenses,
solely to LICENSEE’S Affiliate.  The Affiliate so sublicensed shall be bound by
the terms and conditions of this Agreement as if it were named herein in the
place of LICENSEE, provided, however, that LICENSEE shall be responsible for all
obligations of the Affiliate to LICENSOR, including, without limitation, paying
and accounting to LICENSOR for thirty percent (30%) share of Profits of the
LICENSEE.  Such sublicense agreement shall expressly include a provision making
LICENSOR a third party beneficiary of such sublicense agreement with the full
right to enforce such agreement for LICENSOR’S benefit. Any sublicense granted
to the Affiliate shall terminate on the date such Affiliate ceases to be the
Affiliate.  Such third party beneficiary language is set forth in Exhibit B
(Third Party Beneficiary Language).

 

4.2            The sublicense set forth in Section 4.1 (Sublicenses) shall be
the sublicense set forth in Exhibit D (Sublicense Agreement) except that the
name of the sublicensee shall be that of the Affiliate.

 

5.                                      LICENSE FEE

 

5.1                                       LICENSEE shall pay LICENSOR a
nonrefundable, non-creditable, license fee of Two Hundred and Fifty Thousand
United States dollars ($250,000.00).  The Licensee Fee is payable as follows:

 

One hundred twenty-five thousand dollars ($125,000.00) on October 31, 2013; and

 

One hundred twenty-five thousand dollars ($125,000 on November 30, 2013

 

6.             MONTHLY PAYMENTS

 

6.1                                       LICENSEE shall pay LICENSOR a Monthly
Payment on first day of the month in which the Operational Readiness occurs. 
Thereafter, a Monthly Payment shall be paid on the first day of the month of
each month that Operational Readiness is achieved.  The Monthly Payments
received by Licensor shall be fully creditable against LICENSOR’S share of the
Profits of LICENSEE. Such credit shall be implemented by netting out the
received and as yet uncredited Monthly Payments against LICENSOR’s share of
profit at the end of every profit-reporting period.

 

7.             MARKING

 

7.1          LICENSEE agrees to mark Licensed Products (or their containers or
labels) made, sold, or otherwise disposed of by LICENSEE under the license
granted in this Agreement with the numbers of the all United States Licensed
Patents.  In addition, all Licensed Products shipped to, manufactured in, or
sold in countries other than the United States shall be marked in such manner as
to conform with the patent laws and practice of such countries, provided
LICENSOR gives LICENSEE timely notice pursuant to Article 16 (Notice) of the
issuance and patent numbers of the patents which are to be the subject of such
marking.

 

8.             CONFIDENTIALITY

 

8.1          LICENSOR is the owner of all Confidential Information.

 

8.2          LICENSEE shall treat the Confidential Information of LICENSOR as
set forth below.  However, the term “Confidential Information” shall not mean
any information disclosed by LICENSOR to LICENSEE, which LICENSEE can
satisfactorily demonstrate is:

 

(a)           already in the possession of the LICENSEE and not furnished by the
LICENSOR;

 

(b)           rightfully received by the LICENSEE from a third party without
obligation of confidence;

 

(c)           independently developed by the LICENSEE without referring to
Confidential Information of the LICENSOR;

 

(d)           now, or hereafter becomes, publicly available without breach of
this Agreement; or

 

(e)           approved for release by written agreement of the LICENSOR.

 

8.3          All intellectual property conceived, reduced to practice, made,
prepared, or developed that relates to the Confidential Information, whether by
LICENSEE or the Affiliate, shall be the exclusive property of LICENSEE (the “New
Intellectual Property “).  Subject to the exclusive license granted in
Section 3.1, LICENSEE grants LICENSOR a fully paid, non-exclusive irrevocable,
non-transferable, royalty free license under the New Intellectual Property to
make, have made, use, have used, offer to sell, sell, export and import any
product, and to practice and have practiced any process

 

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in the manufacture and use thereof.  Subject to the exclusive license granted in
Section 3.1, the foregoing license shall include the unrestricted right to grant
sublicenses, including royalty-bearing sublicenses, of or within the scope of
the recited license. All New Intellectual Property shall be disclosed to
LICENSOR as it is conceived so that LICENSOR may exercise the license granted in
this Section 8.3.

 

8.4          The LICENSEE agrees to clearly label as “CONFIDENTIAL” all
Confidential Information reduced to writing by the LICENSEE as a result of oral
and/or visual disclosures of Confidential Information.  The LICENSEE also agrees
to clearly label as “CONFIDENTIAL” all New Intellectual Property that is reduced
to writing by LICENSEE or the Affiliate.

 

8.5          LICENSEE and the Affiliate agree to hold all Confidential
Information in trust and confidence for LICENSOR, and not to use such
Confidential Information other than for the manufacture of License Products by
exercising the license granted to LICENSEE in this Agreement.  LICENSEE and the
Affiliate agree not to disclose any such Confidential Information, including the
New Intellectual Property, by publication or otherwise, to any person other than
those employees whose services are required, who have a need to know for
manufacture of License Products using the licenses granted by Agreement, and who
agree in writing to be bound by and comply with the provisions of this
Article 6.  An employee confidential information and invention agreement (the
“Employee Agreement”) substantially in the form attached hereto and subject to
local law, signed by an employee as a condition of employment with LICENSEE or
the Affiliate, satisfies the requirement for the writing recited in the previous
sentence.  A copy of the Employee Agreement substantially in the form to be
implemented is attached hereto as Exhibit C (Employee Confidential Information
and Invention Agreement).

 

8.6          Disclosure of Confidential Information shall not be precluded if
such disclosure is in response to a valid order of a court or other government
body having jurisdiction over this Agreement; provided however, that LICENSEE or
the Affiliate, as the case may be, shall first have given prompt written notice
of such order to LICENSOR to enable LICENSOR to oppose such order or seek a
protective order requiring that the information and/or documents so disclosed be
used only for the purpose for which the order was issued.

 

8.7          LICENSEE shall maintain all writings, documents, articles, items of
work-in-process, and work that embodies, or includes any, Confidential
Information in restricted access areas to prevent access by unauthorized persons
or parties.

 

9.             USE OF NAMES AND TRADEMARKS

 

9.1          Nothing contained in this Agreement shall be construed as
conferring any right to use in advertising, publicity or other promotional
activities any name, trademark, trade name, or other designation of either party
hereto (including any contraction, abbreviation, or simulation of any of the
foregoing), unless expressly approved by both parties in writing prior to use
thereof.

 

10.          AUDIT RIGHTS

 

10.1        No more frequently than once per calendar year, the LICENSOR and its
duly authorized representatives shall have the right, at normal business hours
of the day at the LICENSOR’s sole expense, and subject to reasonable
confidentiality commitments, to audit the LICENSEE and its Affiliates’ books of
account and records and all other reasonably-related documents and material
reasonably-related to Licensed Products and in possession of or under the
control of the LICENSEE and/or the Affiliates, with respect to the handling of
information and other intellectual property, the carrying out of other
obligations, in accordance with this Agreement, and the carrying out of the
obligation of Licensee to pay Licensor a thirty percent (30%) share of Profits
as set forth in the Joint Venture Agreement by and between the parties hereto. 
Such representatives will have the right to make copies and extracts of the
foregoing documents.

 

10.2        In addition, LICENSEE agrees to supply LICENSOR two random units of
Type 1 Licensed Products and Type 2 Licensed Products every month so that
LICENSEE may inspect the supplied Licensed Products in an effort to maintain
quality.

 

11.          EXPRESS WARRANTY; DISCLAIMER OF WARRANTIES; LIMITATION OF LIABILITY

 

11.1        LICENSOR warrants to LICENSEE that it has the lawful right to grant
the licenses granted in this Agreement.

 

11.2        Other than the express warranty set forth in Section 9.1, THE
LICENSES HEREIN ARE GRANTED WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING,
WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE.  LICENSOR MAKES NO REPRESENTATIONS OR WARRANTIES THAT THE
LICENSED PRODUCTS WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHTS OF
ANY THIRD PARTY.  ALL INTELLECTUAL PROPERTY, AND ANY OTHER INFORMATION, IF ANY,
PROVIDED BY THE LICENSOR, IS PROVIDED “AS IS”, WITHOUT WARRANTY OF ANY KIND,
WHETHER EXPRESS OR IMPLIED  LICENSOR DOES NOT REPRESENT OR WARRANT THE ACCURACY
OR COMPLETENESS OF THE FOREGOING INTELLECTUAL PROPERTY OR INFORMATION.  THE
ENTIRE RISK ARISING OUT OF THE EXERCISE OF THE LICENSES GRANTED HEREUNDER
REMAINS WITH THE LICENSEE.

 

11.3        IN NO EVENT WILL LICENSOR BE LIABLE FOR ANY INCIDENTAL, SPECIAL, OR
CONSEQUENTIAL DAMAGES (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF
BUSINESS, LOST PROFITS, OR LOSS OF GOOD WILL) RESULTING FROM EXERCISE OF THE
LICENSES GRANTED HEREUNDER,  OR THE USE OF THE LICENSED TECHNOLOGY, OR THE
MANUFACTURE, USE, OR SALE OF LICENSED PRODUCTS,  WHETHER ARISING IN AN

 

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ACTION OR CLAIM BASED ON CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE, EVEN IF
LICENSOR HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.  IN NO EVENT SHALL
LICENSOR’S LIABILITY EXCEED THE AGGREGATE AMOUNT PAID BY TO LICENSOR BY LICENSEE
DURING THE TERM OF ONE (1) YEAR PRIOR TO THE DATE THE CAUSE OF ACTION AROSE.

 

11.4        Nothing in this Agreement is or shall be construed as an obligation
to bring or prosecute actions or suits against third parties for patent
infringement, except as provided in Article 11.

 

12.          PATENT INFRINGEMENT

 

12.1        In the event that LICENSEE shall learn of the substantial
infringement of any of the Licensed Patents, LICENSEE shall promptly provide
LICENSOR with reasonable evidence of such infringement.  Both parties to this
Agreement agree that neither will notify a third party of the infringement
without first obtaining consent of the other party, which consent shall not be
unreasonably denied.  Both parties shall cooperate with each other in an attempt
to terminate such infringement without litigation.

 

12.2        LICENSEE may request that LICENSOR take legal action against the
infringement.  Such request shall be made in writing and shall include
reasonable evidence of such infringement and damages to LICENSEE.  If the
infringing activity has not been abated within one hundred twenty (120) days
following the effective date of such request, LICENSOR shall have the right to:

 

(a)           commence suit on its own account or

 

(b)           refuse to participate in such suit.

 

12.3        LICENSOR shall give notice of its election in writing to LICENSEE
within sixty (60) days after receiving such request from LICENSEE and absent
refusal to participate in such suit, shall commence suit promptly thereafter,
but with control of such suit remaining in LICENSOR.  LICENSEE shall have the
right to join or intervene at its own expense in any such suit commenced by
LICENSOR.  LICENSEE may at its election bring suit for patent infringement if,
and only if, LICENSOR elects not to commence suit and if the infringement
occurred during the period and in a jurisdiction where LICENSEE had exclusive
rights under the Agreement.  However, in the event LICENSEE elects to bring suit
in accordance with this paragraph, LICENSOR may thereafter join such suit at its
own expense and control of such suit shall remain with LICENSEE. Such legal
action as is decided upon shall be at the expense of the party on whose account
suit is brought and all recoveries recovered thereby shall belong to such party,
provided, however, that for legal action brought jointly by LICENSOR and/or
LICENSEE (or by any one or more of such parties with later joinder or
intervention by the other and fully participated in by the parties), such
recoveries shall be shared jointly by them in proportion to the share of expense
paid by each party, after deduction of loss suffered by LICENSEE .

 

13.                               INDEMNIFICATION

 

13.1        Licensee Indemnity.  LICENSEE agrees, and agrees to require its
sublicensee, to indemnify, hold harmless, and defend LICENSOR and its officers,
employees, and contractors against any and all liability, claims, suits, losses,
damages, costs, fees, and expenses for, death, illness, personal injury,
property damage, and improper business practices arising out of the manufacture,
use, sale, lease or other disposition of the Licensed Products by LICENSEE, by
its sublicensee, or any of its or  their customers.

 

13.2        Licensor Indemnity.  Subject to the Sections 3.1 and 3.2, LICENSOR
shall defend LICENSEE and its officers, directors and agents (collectively, the
“INDEMNITEES”) from and against any claim, suit or other proceeding (each a
“Claim”) brought or threatened against the INDEMNITEES by a third party to the
extent the Claim arises out of or results from any claim that a Licensed
Product, to the extent that the Licensed Product’s manufacture is within the
scope of the licenses under this Agreement, infringes any patent, and shall
settle such Claim and pay the amount of such settlement or, as in the case of
suit, pay all damages, expenses and costs (excluding attorneys’ fees) awarded
from an unappealable decision of a court of competent jurisdiction.  As an
express condition precedent to LICENSOR’s obligations under this Section 11.2,
the INDEMNITEE must: (a) give LICENSOR prompt written notice of any such Claim,
(b) grant LICENSOR sole control over the defense and settlement of the Claim,
(c) provide LICENSOR with full cooperation for the defense of the Claim, and
(d) not enter into any settlement or compromise of such Claim without LICENSOR’s
prior written approval.  If such Licensed Product is held to infringe or, in
LICENSOR’s opinion, likely to be held to infringe, LICENSOR may, at LICENSOR’s
option and expense, (i) procure for the INDEMNITEES the right to continue
exercising their rights under this Agreement with respect to the Licensed
Product, (ii) replace or modify the Licensed Product so it is not infringing, or
(iii) if neither (i) nor (ii) are commercially practicable, terminate this
Agreement immediately upon written notice.  Licensee may participate in the
defense or settlement of the Claim with counsel of its choice and at its own
expense provided that control of such defense and settlement remains in
LICENSOR.  THE FOREGOING STATES LICENSOR’S ENTIRE LIABILITY AND THE INDEMNITEES’
EXCLUSIVE REMEDY FOR INFRINGEMENT CLAIMS WITH RESPECT TO THE LICENSED PRODUCTS.

 

13.3        Exception to Licensee Indemnity.  LICENSOR shall not have any
obligation to indemnify the INDEMNITEES from and against any Claim that arises
out of or is based upon the modification of the any of the Growers or the
modification of any Licensed Technology by or for the

 

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INDEMNITEES without the written approval of LICENSOR.

 

14.                               TERM AND TERMINATION

 

14.1        TERM.  The term of this Agreement shall commence on the Effective
Date and shall continue for the life of the last to expire of the Licensed
Patents, unless sooner terminated as provided in this Article 14.

 

14.2        TERMINATION BY LICENSOR.  Should LICENSEE fail to perform any
obligation or meet any warranty of this Agreement on its part to be respectively
performed or met, which failure can be cured, then upon written notice of such
failure from LICENSOR, LICENSEE shall have  two (2) years from the date of such
notice to correct such failure, and upon the failure of LICENSEE to do so,
LICENSOR may cancel and terminate this Agreement upon ten (10) days further
written notice.  Should such failure by its nature not be curable, LICENSOR may
terminate this Agreement effective upon ten (10) days written notice.

 

14.3        OWNERSHIP TERMINATION.  This Agreement shall terminate on the date
that LICENSOR ceases to maintain an undiluted thirty percent (30%) ownership
share of LICENSEE, provided such dilution was the direct result of some act or
event caused by LICENSEE, Company A, or Company C as defined in the Joint
Venture Agreement of even date. Furthermore, notwithstanding any provision
contrary hereto, in the event that any obligations are owing by LICENSOR to
Company A pursuant to a loan made or to be made by Company A to LICENSOR (the
“Loan”), at Company A’s option, This Agreement shall not terminate and shall
remain in full force and effect for so long as the Loan remains outstanding.

 

14.4        LICENSEE agrees not to challenge the validity of any of the Licensed
Patents or Licensed Technology, either solely, or jointly with one or more other
party.  Any such challenge shall be null and void.

 

14.5        SUBLICENSE TERMINATION.  Every sublicense agreement granted to an
Affiliate shall terminate on the effective date of termination of this
Agreement.

 

14.6        RIGHTS AFTER TERMINATION.  No termination of this Agreement shall
relieve LICENSEE or the Affiliates of any obligation or liability accrued
hereunder prior to such terminations, or rescind or give rise to any right to
rescind anything done by LICENSEE or the Affiliate, or to rescind any payments
made or other consideration given to LICENSOR under this Agreement or the
sublicense agreement prior to the time such terminations become effective, and
such terminations shall not affect in any manner any rights of LICENSOR arising
under this Agreement or the sublicense agreement prior to such terminations.

 

15.          EXPORT CONTROLS

 

15.1        LICENSEE understands that LICENSOR is subject to United States laws
and regulations (including the Arms Export Control Act, as amended, and the
Export Administration Act of 1979), controlling the export of technical data,
LICENSOR’S computer software, laboratory prototypes and other commodities, and
LICENSOR’S obligations under this Agreement are contingent on compliance with
such laws and regulations.  The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by LICENSEE that LICENSEE shall not export
such technical data and/or commodities to certain foreign countries without
prior approval of such agency.  LICENSOR neither represents that a license shall
not be required nor that, if required, it shall be issued.

 

16.          Notices

 

16.1        All notices required or permitted to be given pursuant or in
reference to this Agreement shall be in writing and shall be valid and
sufficient if dispatched by certified mail, postage prepaid, and addressed as
follows:

 

if to LICENSOR, to:

 

SCIO Diamond Technology Corporation

411 University Ridge, Suite D,

Greenville, SC 29601

Attention:  Michael W. McMahon, CEO

 

Email: mmcmahon@sciodiamond.com

 

If to Licensee

 

Grace Rich

354 Indusco Ct.

Troy, Michigan 48083

 

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Attention:  Chris Loomis

Email:  cloomis@combine.com

 

With a copy to:

 

1)            WFOE in the PRC

2)            SAAMABA LLC in Michigan

3)            Dickinson Wright in Washington DC

 

14.2        Notices of change of address may be made at any time in the manner
set forth above.  Notices of change of address given as herein provided shall be
considered to have been given when sent electronically (email) with proof of
delivery or five (5) days after the dispatch thereof using a reputable courier
service.

 

15           GENERAL

 

15.1        AGREEMENT CONFIDENTIALITY.  This Agreement and its terms and
conditions are confidential.  Neither party shall make any public announcement
about or otherwise disclose to any third party the terms, conditions or content
of this Agreement or the parties’ discussions regarding the subject matter of
this Agreement without the prior written consent of the other party, except to
perfect its rights under this Agreement.

 

15.2        ASSIGNMENT.  This Agreement may not be assigned in whole or in party
by LICENSEE without the prior written consent of the LICENSOR. Any attempted
assignment in derogation of the foregoing shall be null and void.

 

15.3        BANKRUPTCY.  All rights and licenses granted under or pursuant to
this Agreement are, and shall be deemed to be, for purposes of § 365(n) of Title
11 of the United States Code (the “Bankruptcy Code”), licenses of rights to
“intellectual property” as defined under § 101 of the Bankruptcy Code.  The
Parties agree that in the event that any proceeding shall be instituted by or
against the LICENSOR seeking to adjudicate it bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking an entry of an
order for relief or the appointment of a receiver, trustee or other similar
official for it or any substantial part of its property, or the LICENSOR shall
take any action to authorize any of the foregoing, the LICENSEE hereunder shall
retain and may fully exercise all of its rights and elections under the
Bankruptcy Code including, without limitation, the exercise of its licenses
hereunder

 

15.4        NO SUCCESSION.  The parties agree that (a) this Agreement is not
intended to confer upon LICENSEE the status of a successor corporation or entity
of LICENSOR, and (b) LICENSEE is not assuming or undertaking any liabilities or
obligations of LICENSOR, of any kind or nature, as part of the transactions
contemplated by this Agreement.

 

15.5        COUNTERPARTS.  This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; such
counterparts shall together constitute but one agreement.

 

15.6        HEADINGS.  The headings in this Agreement are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Agreement.

 

15.7        INTEGRATION.  This Agreement constitutes the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior
written and oral agreements and understandings with respect to such subject
matter.

 

15.8        EQUITABLE RELIEF.  Because LICENSEE will have access to and become
acquainted with the Confidential Information, the unauthorized use or disclosure
of which would cause irreparable harm and significant injury which would be
difficult to ascertain and which would not be compensable by damages alone, the
parties agree that the LICENSOR will have the right to obtain an injunction,
specific performance, or other equitable relief without prejudice to any other
rights and remedies that it may have for such breach of this Agreement.

 

15.9        GOVERNING LAW; ARBITRATION

 

15.10      This Agreement shall be governed in all respects by the laws of the
United States of America and by the laws of the State of Michigan, excluding its
conflict of law provisions.

 

15.10.1  Each party agrees that any arbitration arising under or related to this
Agreement shall be commenced only after good faith attempts to resolve the
subject dispute have been made in a meeting between respective executives of the
parties.

 

15.10.2  All disputes, controversies or claims arising out of or relating to
this Agreement, or the breach, termination, or invalidity thereof, shall be
settled by arbitration in Detroit, Michigan in accordance with the American
Arbitration Association Arbitration

 

7

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Rules.  Discovery shall be according to the Federal Rules of Civil Procedure,
including the taking of depositions.  The award rendered by the arbitrator shall
include costs of the arbitration, reasonable attorneys’ fees and reasonable
costs for experts and other witnesses. Judgment on the award may be entered in
any court having jurisdiction.  The parties agree that the arbitrator shall have
the authority to issue interim orders for provisional relief, including, but not
limited to, orders for injunctive relief, attachment or other provisional
remedy, as necessary to protect either party’s name, proprietary information,
trade secrets, know-how or any other proprietary right.  The parties agree that
any interim order of the arbitrator for any injunctive or other preliminary
relief shall be enforceable in any court of competent jurisdiction.

 

15.10.3  In addition, either party shall be free at any time to seek equitable
relief in accordance with Section 15.8 (Equitable Relief) from any court of
competent jurisdiction, in order to protect that party’s name, Confidential
Information, or trade secrets.

 

15.11      SEVERABILITY.  If any provision or provisions of this Agreement shall
be held to be invalid, illegal, or otherwise unenforceable, the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby if the material benefits to be enjoyed by the
parties under this Agreement will otherwise be realized.

 

15.12      AMENDMENT AND WAIVER.  No amendment to this Agreement shall be
effective unless it shall be in writing and signed by the parties to the
amendment.  Any failure of a party to comply with any obligation, covenant,
agreement or condition contained in this Agreement may be waived by the party
entitled to the benefits thereof only by a written instrument signed by the
party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement or condition shall not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure of compliance.  Except as may otherwise be specifically provided herein,
any consent or approval required hereunder to be obtained from either party
shall be deemed not to have been given by such a party unless such consent or
approval is evidenced by a writing executed on behalf of such party by an
authorized signatory.

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective officers as of the day and year first above
written.

 

 

SCIO DIAMOND TECHNOLOGY CORPORATION

 

 

 

By:

 

 

Michael W. McMahon

 

Chief Executive Officer

 

 

 

GRACE RICH LIMITED By:

 

 

 

 

Name:

 

 

 

 

 

Title:

 

 

8

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EXHIBIT A

 

Licensed United States Patents

 

Title

 

Patent #

 

Date Filed

 

Date Issued

 

Expiration Date

 

System And Method For Producing Synthetic Diamond

 

6,582,513

 

5/14/1999

 

6/24/2003

 

5/13/2019

 

System And Method For Producing Synthetic Diamond

 

2001281404

 

8/8/2001

 

2/24/2003

 

8/7/2021

 

System And Method For Producing Synthetic Diamond

 

2,456,847

 

8/8/2001

 

4/23/2013

 

8/7/2021

 

Method Of Growing Single Crystal Diamond In A Plasma Reactor

 

8,187,380

 

10/29/2004

 

5/29/2012

 

10/28/2024

 

Grown Diamond Mosaic Separation

 

8,048,223

 

7/21/2005

 

11/1/2011

 

7/20/2025

 

Enhanced Diamond Polishing

 

7,238,088

 

1/5/2006

 

7/3/2007

 

1/4/2025

 

System And Method For Producing Synthetic Diamond

 

7,879,148

 

3/13/2008

 

1/1/2011

 

3/12/2028

 

Method Of Growing A Single Crystal Diamond

 

10/978,104

 

10/29/2004

 

 

 

 

 

System And Method For Producing Synthetic Diamond

 

2003-519552*

 

8/8/2001

 

 

 

 

 

System And Method For Producing Synthetic Diamond

 

2012-108309*

 

8/8/2001

 

 

 

 

 

System And Method For Producing Synthetic Diamond

 

11/776,682

 

7/12/2007

 

 

 

 

 

Synthetic Diamond Having Alternating Layers With Different Concentrations Of
Impurities

 

10/997,377

 

10/29/2004

 

 

 

 

 

Diamond Structure Separation

 

11/056,338

 

2/11/2005

 

 

 

 

 

System And Method For Producing Synthetic Diamond

 

12/047,690

 

3/13/2008

 

 

 

 

 

Gemstone Production From Cvd Diamond Plate

 

8,342,164

 

5/8/2009

 

1/1/2013

 

5/7/2029

 

Angle Cut On CVD Diamond

 

12/463,132

 

5/8/2009

 

 

 

 

 

Diamond Identifier

 

12/463,121

 

5/8/2009

 

 

 

 

 

 

--------------------------------------------------------------------------------

*Japan

 

U.S. Patent Application Serial Numbers included in the above table means that
the application is still pending.

 

9

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EXHIBIT B

 

Third Party Beneficiary Language

 

Third Party Beneficiary. This Agreement is for the benefit of SCIO Diamond
Technology Corporation as a third party beneficiary. This Agreement may be
enforced by SCIO Diamond Technology Corporation or its subsidiaries, which shall
have all of the benefits of this Agreement, as if named herein for Grace Rich
Limited.

 

10

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EXHIBIT C

 

Employee Confidential Information and Invention Agreement

 

This Proprietary Information And Inventions Agreement (the “Agreement”) is made
between me, the undersigned employee, and (NAME OF JOINT VENTURE) (the
“Company”), and is a material part of the consideration for my continued
employment by the Company, is further entered into for a cash payment of $100,
for the premises, mutual covenants and representations contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by the parties. The parties agree as follows.

 

1.             No Conflict. I have not entered into, and I agree I will not
enter into, any agreement either written or oral in conflict with this Agreement
or my employment with the Company. I will not violate any agreement with or
rights of any third party or, except as expressly authorized by the Company in
writing, hereafter use or disclose my own or any third party’s confidential
information or intellectual property when acting within the scope of my
employment or otherwise on behalf of the Company. Further, I have not retained
anything containing any confidential information of a prior employer or other
third party, whether or not created by me.

 

2.             Intellectual Property Assignment. The Company shall own all
right, title and interest (including, but not limited to, patent rights,
copyrights, trade secret rights, mask work rights, database rights and all other
intellectual and industrial property rights of any sort throughout the world)
relating to any and all inventions (whether or not patentable), works of
authorship, mask works, designs, know-how, research, development, trade secrets,
techniques, processes, procedures, plans, policies, discoveries, hardware,
software, screens, specifications, designs, drawings, ideas and information made
or conceived or reduced to practice, in whole or in part, by me or any other
employee, independent contractor or agent of the Company during the term of my
employment with Company (collectively, “Inventions”), and I will promptly
disclose all Inventions to the Company. “Inventions” is to be broadly defined.
By way of example and without limitation, Inventions include all items mentioned
in the first sentence of this paragraph and any and all information concerning
teaching techniques, processes, formulas, innovations, discoveries,
improvements, research or development and test results, data, formats, marketing
plans, business plans, strategies, forecasts, unpublished financial information,
budgets, projections, and customer and supplier identities, characteristics and
agreements.

 

I hereby make all assignments necessary to accomplish the foregoing. I shall
further assist the Company, at the Company’s expense, to further evidence,
record and perfect such assignments, and to perfect, obtain, maintain, enforce,
and defend any rights specified to be so owned or assigned. I hereby irrevocably
designate and appoint the Company and its agents as attorneys-in-fact to act for
and in my behalf to execute and file any document and to do all other lawfully
permitted acts to further the purposes of the foregoing with the same legal
force and effect as if executed by me. If I wish to clarify that anything
created by me prior to my employment that relates to the Company’s actual or
proposed business is not within the scope of this Agreement, I have listed it on
Appendix A (Prior Matter). If I use or (except pursuant to this paragraph 2)
disclose my own or any third party’s confidential information or intellectual
property when acting within the scope of my employment or otherwise on behalf of
the Company, the Company will have and  I hereby grant the Company a perpetual,
irrevocable, worldwide, royalty-free, non-exclusive, sub licensable right and
license to exploit and exercise and exercise all such confidential information
and intellectual property rights.

 

3.             Moral Rights. To the extent allowed by law, paragraph 2 includes
all rights of paternity, integrity, disclosure and withdrawal and any other
rights that may be known as or referred to as “moral rights,” “artist’s rights,”
“droit moral,” or the like (collectively “Moral Rights”). To the extent I retain
any such Moral Rights under applicable law, I hereby ratify and consent to any
action that may be taken with respect to such Moral Rights by or authorized by
the Company and agree not to assert any Moral Rights with respect thereto. I
will confirm any such ratifications, consents and agreements from time to time
as requested by the Company.

 

4.             Confidential Information.  I agree that all Inventions and all
other business, technical and financial information (including, without
limitation, the identity of and information relating to customers, potential
customers, suppliers, strategic partners, service providers, employees, agents
or shareholders of the Company) I develop, learn or obtain during the term of my
employment that relate to the Company or the business or demonstrably
anticipated business of the Company or that are received by or for the Company
in confidence, constitute “Proprietary Information.” Proprietary Information
includes not only information disclosed by the Company or its clients to me in
the course of my employment, but also information developed or learned by me
during the course of my employment with the Company, such as Inventions (as
defined above). Proprietary Information is to be broadly defined. Proprietary
Information includes all information that has or could have commercial value or
other utility in the business in which the Company or clients are engaged or
contemplate engaging. Proprietary Information also includes all information of
which the unauthorized disclosure

 

11

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could be detrimental to the interests of the Company or clients, whether or not
the Company or clients identify such information as Proprietary. By example and
without limitation, Proprietary Information includes any and all information
concerning teaching techniques, processes, formulas, trade secrets, innovations,
inventions, discoveries, improvements, research or development and test results,
specifications, data, know-how, formats, marketing plans, business plans,
strategies, forecasts, unpublished financial information, budgets, projections,
and customer and supplier identities, characteristics, and agreements. During
the term of my employment with Company, and thereafter, I will hold in
confidence and not divulge, disclose or otherwise use any Proprietary
Information except within the scope of my employment by the Company. However, I
shall not be obligated under this paragraph with respect to information I can
document is or becomes readily publicly available without restriction through no
fault of mine. I acknowledge that all Proprietary Information, in any form or
medium (including all copies),except that I may keep a single personal copy of
(i) my compensation records, (ii) materials distributed to shareholders
generally and (iii) this Agreement. I also recognize and agree that I have no
expectation of privacy with respect to the Company’s telecommunications,
networking or information processing systems (including, without limitation,
stored computer files, email messages and voice messages) and that my activity
and any files or messages on or using any of those systems may be monitored at
any time without notice.

 

At the time of termination, regardless of reason and without reservation,
employee will sign the attached Appendix B (Affidavit).

 

5.             Non-Solicitation.  I agree that during the term of my employment
and until the fifth anniversary of the conclusion of my employment with the
Company, I will not encourage or solicit any employee or consultant of the
Company to leave the Company for any reason (except for the bona fide firing of
Company personnel within the scope of my employment). I also agree that during
the term of my employment (whether or not during business hours) and until the
fifth anniversary of the conclusion of my employment with the Company, I will
not solicit business from, divert business from, or attempt to convert to other
methods of using or offering the same or similar products or services as
provided by the Company or its affiliates to any client or prospective client of
the Company or its affiliates.

 

6.             Non-Compete.   I agree that upon termination of my employment for
any reason and until the fifth anniversary of the conclusion of my employment
with the Company, I will not engage in any activity that is in any way
competitive with the business or demonstrably anticipated business of the
Company or its affiliates, and I will not in any way assist any other person or
organization in competing or in preparing to compete with any business or
demonstrably anticipated business of the Company or its affiliates.

 

7.             Survival.  I agree that my obligations under paragraphs 2, 3, 4,
5 and 6 of this Agreement shall continue in effect after termination of my
employment, regardless of the reason or reasons for termination, and whether
such termination is voluntary or involuntary on my part, and that the Company is
entitled to communicate my obligations under this Agreement to any future
employer or potential employer of mine. My obligations under paragraphs 2, 4 and
4 also shall be binding upon my heirs, executors, assigns, and administrators
and shall inure to the benefit of the Company, its subsidiaries, successors and
assigns.

 

8.             Governing Law; Choice of Forum. Any dispute in the meaning,
effect or validity of this Agreement shall be resolved in accordance with the
laws of the State of South Carolina without regard to the conflict of laws
provisions thereof. I further agree that if one or more provisions of this
Agreement are held to be illegal or unenforceable under applicable South
Carolina law, such illegal or unenforceable portion(s) shall be limited or
excluded from this Agreement to the minimum extent required so that this
Agreement shall otherwise remain in full force and effect and enforceable in
accordance with its terms. I also agree that if any restriction in this
Agreement shall be determined to be invalid and unenforceable, it shall
automatically be modified, or may be modified by a court of competent
jurisdiction, to the extent necessary to make it valid and enforceable. I also
understand that any breach of this Agreement will cause irreparable harm to the
Company for which damages would not be an adequate remedy, and, therefore, the
Company will be entitled to injunctive relief with respect thereto in addition
to any other remedies. I hereby waive any requirement that the Company post a
bond or similar security or instrument in connection with any action the Company
may commence in an effort to enforce this Agreement.

 

9.             Miscellaneous.  Except for my employment agreement with the
Company, this Agreement supersedes all prior agreements and understandings
between the parties— whether communicated in writing, orally or otherwise—and
the representations, covenants and agreements herein shall be binding and in
full force against the parties effective from the commencement of my employment
with the Company. I may not assign this Agreement or any rights or obligations
hereunder. This Agreement shall bind and inure to the benefit of each party and
its respective successors, heirs and assigns. Any references to the “Company” in
this Agreement shall include any subsidiary, affiliate, strategic partner,
assign and/or successor of the Company or any similarly situated party.

 

12

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I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE OBLIGATIONS
WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. I SIGN THIS AGREEMENT VOLUNTARILY
AND FREELY, IN DUPLICATE, WITH THE UNDERSTANDING THAT ONE COUNTERPART WILL BE
RETAINED BY COMPANY AND THE OTHER COUNTERPART WILL BE RETAINED BY ME.

 

EMPLOYEE

 

 

 

By:

 

 

 

 

 

Address:

 

 

 

 

 

Date of Commencement of Employment

 

 

 

 

Date:

 

 

 

 

 

Signed:

 

 

 

 

 

Accepted and Agreed to:

 

 

 

 

WFOE

 

 

 

 

 

Signed:

 

 

(TYPED NAME)

 

 

 

 

Chief Executive Officer

 

 

13

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EXHIBIT D

 

Sublicense Agreement

 

14

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