Exhibit 10.3


 


TECHNOLOGY LICENSE AGREEMENT


 


THIS
TECHNOLOGY LICENSE AGREEMENT (this “Agreement”) is
made and entered into effective as of October 4, 2007 (the “Effective Date”), by and among Xtero Datacom Inc., a company
organized and existing under the laws of British Columbia having its principal
place of business at Unit
110 – 998 Harbourside Drive, North Vancouver, British Columbia (“Licensor”), and Schmitt Industries, Inc., a Oregon corporation having its
principal place of business at 2765 NW Nicolai, Portland Oregon as (“Licensee”).


 


RECITALS


 


A.            WHEREAS, Licensor owns or has the right to grant licenses
covering certain patents, patent applications, technology, trade secrets, data,
know-how and other intellectual property relating to tank monitoring  apparatuses and techniques to remotely  measure and report tank levels via its
acoustic sensor technology; and


 


B.            WHEREAS, Licensee desires to obtain from Licensor, and
Licensor is willing to grant to Licensee, a license under such technology and
intellectual property for the use, development, production and
commercialization of certain products under the terms and conditions herein;


 


C.            WHEREAS, Licensor is a value added reseller for
Globalstar LLP, a Delaware corporation, (“Globalstar”) whose
technology is included in and integral to the communication component of the products
developed by Licensor to which the Licensed Technology relates.


 


NOW, THEREFORE, in
consideration of the mutual covenants and obligations set forth herein, and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:


 


ARTICLE 1


DEFINITIONS


 


	
  1.01

  	
   

  	
  “Affiliate”
  means any corporation controlling, controlled by or under common control with
  a party.

  
	
   

  	
   

  	
   

  
	
  1.02

  	
   

  	
  “Confidential
  Information” shall have the meaning set forth in Section 7.01
  below.

  
	
   

  	
   

  	
   

  
	
  1.03

  	
   

  	
  “Contract
  Year” means each successive twelve-month period during the Term
  commencing on October       , 2007.

  
	
   

  	
   

  	
   

  
	
  1.04

  	
   

  	
  “Definitive
  Acquisition Agreement” shall have the meaning set forth in the
  Interim Acquisition Agreement.

  



 

















 


	
  1.05

  	
   

  	
  “Improved
  Licensed Products” means any products which encompass, include or
  embody any Licensed Technology, or that relate to any tank measurement device
  or reports and are developed by Licensee.

  
	
   

  	
   

  	
   

  
	
  1.06

  	
   

  	
  “Initial
  Term” means the period commencing on the Effective Date and ending
  on the first anniversary of the Effective Date.

  
	
   

  	
   

  	
   

  
	
  1.07

  	
   

  	
  “Intellectual
  Property Rights” shall mean patent rights, copyrights, trade
  secret rights, trademark rights and all other intellectual and industrial
  property rights of any sort.

  
	
   

  	
   

  	
   

  
	
  1.08

  	
   

  	
  “Interim
  Acquisition Agreement” means the Interim Acquisition Agreement
  between the parties dated on or about the Effective Date.

  
	
   

  	
   

  	
   

  
	
  1.09

  	
   

  	
  “Licensed  Patents” means all patents, inventors’ certificates and
  patent applications together with any renewal, division, continuation,
  continued prosecution application or continuation-in-part of any of such
  patents, certificates and applications, any and all patents or certificates
  of invention issuing thereon, and any and all reissues, reexaminations,
  extensions, divisions, renewals of or to any of the foregoing, and any
  foreign counterparts of any of the foregoing, that are applicable to the
  Licensed Technology or the Licensed Products.

  
	
   

  	
   

  	
   

  
	
  1.10

  	
   

  	
  “Licensed
  Products” mean any product or service made with or incorporating
  the Licensed Technology or that would, in the absence of a license, infringe
  the Licensed Patents, including without limitation any of the following Licensed
  Technology: Tank measurement and reporting apparatuses and techniques to
  achieve accurate tank measurement levels utilizing the acoustic sensor
  technology of Licensor. The term Licensed Products shall include all Improved
  Licensed Products relating to any tank measurement device or reports.

  
	
   

  	
   

  	
   

  
	
  1.11

  	
   

  	
  “Licensed
  Technology” means inventions
  (whether patented or not), ideas, designs, processes, know-how, documents,
  records, scientific and engineering information and data, literature, plans
  and specifications (whether reduced to writing or not), and any
  manifestations or embodiments thereof and Intellectual Property Rights
  therein, used or owned by or licensed or otherwise properly available to
  Licensor that relate to tank measurement via acoustic sensor devices,
  internal measurement devices, other external devices, manual or mechanical
  measurement devices.

  
	
   

  	
   

  	
   

  
	
  1.12

  	
   

  	
  “Licensed
  Territory” means the total of the World.

  
	
   

  	
   

  	
   

  
	
  1.13

  	
   

  	
  “Monitoring Fees” means the revenues from monitoring
  services provided by or on behalf of Licensee or its Affiliates or agents
  relating to the Licensed Products.

  
	
   

  	
   

  	
   

  
	
  1.14

  	
   

  	
  “Net Sales”
  means the gross revenues from sales or
  leasing or rental of Licensed Products by Licensee or its Affiliates or
  agents, less credits, bad debts, discounts, rebates, recalls, promotional
  dollars, shipping, sales and use taxes, and duties if any. Net Sales shall be
  deemed made on the date when Licensed Products are shipped or service
  provided. For

  



 


2

















 


	
   

  	
   

  	
  purposes of
  this definition, (i) Net Sales shall not include samples, free goods or
  other marketing programs pursuant to which Licensee dispenses Licensed
  Products without charge in order to induce sales; and (ii) Licensor will
  not be entitled to any compensation on Licensee’s sales to Licensor or
  Affiliates of Licensor or Licensee.

  
	
   

  	
   

  	
   

  
	
  1.15

  	
   

  	
  “Royalty”
  shall have the meaning specified in Section 3.01.

  
	
   

  	
   

  	
   

  
	
  1.16

  	
   

  	
  “Royalty
  Report” means a written report certified as correct by the
  Licensee’s independent auditors showing, for each period in question:
  (i) the total volume of Licensed Products sold by Licensee,
  (ii) the total gross sales price of Licensed Products sold by Licensee
  for which the Royalty is due, (iii) the total Net Sales of the Licensed
  Products sold by Licensee, (iv) the Royalty due, and (v) the amount
  of any underpayment or overpayment. (vi) the amount of product units
  sold and the amount of monitoring revenue received in each month.

  
	
   

  	
   

  	
   

  
	
  1.17

  	
   

  	
  “Term”
  means the Initial Term and, if applicable, the Extended Term.

  



 


ARTICLE 2


LICENSE GRANT


 


	
  2.01

  	
   

  	
  Subject
  to the terms and conditions of this Agreement, Licensor hereby grants to
  Licensee the exclusive (subject to section 3.05) right and license, within
  the Licensed Territory, to make, have made, use, offer, and sell the Licensed
  Products during the Term. This license is not transferable or assignable,
  except as explicitly stated elsewhere in this Agreement without the
  permission and agreement of Licensor.

  
	
   

  	
   

  	
   

  
	
  2.02

  	
   

  	
  This
  grant of license shall include the right to use any existing or
  hereafter-acquired trademark of Licensor (whether registered or not), or any
  packaging trade dress of Licensor, in connection with the promotion,
  marketing, offer, or sale of Licensed Products in the Licensed Territory.

  
	
   

  	
   

  	
   

  
	
  2.03

  	
   

  	
  Licensor
  will use reasonable commercial efforts to ensure that the rights of Licensor
  in respect of the technology owned or controlled by Globalstar are assignable
  or sub-licensable to Licensee on substantially the same terms as such
  technology is currently licensed to Licensor.

  



 


ARTICLE 3


ROYALTIES


 


	
  3.01

  	
   

  	
  Licensee will pay to
  Licensor (i) a royalty of fifteen percent (15%) of the Net Sales
  (the “Royalty”) occurring during the
  Term, and (ii) a royalty of twenty five percent (25%) of the Monitoring
  Fees collected during the Term.

  
	
   

  	
   

  	
   

  
	
  3.02

  	
   

  	
  The Royalty shall be
  paid quarterly in respect of Net Sales and monthly in respect of Monitoring
  Fees. Within thirty (30) days after the end of each calendar quarter during
  the

  



 


3

















 


	
   

  	
   

  	
  Term, Licensee shall
  report to Licensor the total Net Sales for such quarter and shall remit to
  Licensor in full the Royalty due hereunder for such quarter. Within fifteen
  (15) days after the end of each calendar month during the Term, Licensee
  shall report to Licensor the total Monitoring Fees for such month and shall
  remit to Licensor in full the Royalty due hereunder for such month.

  
	
   

  	
   

  	
   

  
	
  3.03

  	
   

  	
  Licensee shall make and
  keep full and accurate books and records showing the sales of Licensed
  Products sold under the license herein granted in sufficient detail to enable
  any royalties paid hereunder or the total net sales to be determined.
  Licensee shall deliver a Royalty Report to the Licensor within 30 days of the
  end of the Initial Term and within 45 days of the end of each subsequent
  12-month period of the Extended Term, if applicable. This Section shall
  survive the expiration or earlier termination of the Term.

  
	
   

  	
   

  	
   

  
	
  3.04

  	
   

  	
  Licensee’s obligation
  to pay the Royalty to Licensor under Section 3.01 shall continue on a
  Licensed Product by Licensed Product, country by country basis, until the
  expiration or final determination of invalidity of the last valid claim
  within the Licensed Patents. Notwithstanding the above, Licensee shall be
  obligated after expiration of the royalty term to pay any royalty amounts
  that accrued under Section 3.01 prior to such expiration.

  
	
   

  	
   

  	
   

  
	
  3.05

  	
   

  	
  In the event that the
  Royalty received by Licensor for any 12-month period during the Extended Term
  is less than US$25,000, all exclusive license rights granted hereunder shall
  thereafter be non-exclusive.

  



 


ARTICLE 4


REPRESENTATIONS AND WARRANTIES


 


	
  4.01

  	
   

  	
  Licensor
  represents and warrants that it is the owner or authorized licensee of the
  Licensed Technology, that it has the rights and authority to grant the
  licenses hereunder, and that it has not made and will not make any commitment
  or restriction inconsistent with this Agreement or which will materially
  affect the rights granted by this Agreement.

  
	
   

  	
   

  	
   

  
	
  4.02

  	
   

  	
  Licensor
  represents and warrants that it is the owner of the Licensed Patents.
  Licensor expressly disclaims any warranty that the Patents are valid or
  enforceable, or that practice of any inventions claimed by the patent
  applications for the Licensed Technology will not infringe the rights of any
  other parties, or that Licensor is the first, original, and/or sole inventor
  of any invention claimed therein, or that practice of any inventions claimed
  therein will be or are commercially viable.

  
	
   

  	
   

  	
   

  
	
  4.03

  	
   

  	
  Licensee is solely responsible for quality, safety,
  and performance of Licensed Products made or sold by Licensee under this
  Agreement, and Licensee is solely responsible for all express or implied
  warranties to consumers relating to such Licensed Products. Licensor is not
  responsible or liable for any products liability or other claims made by
  purchasers or users of Licensed Products made or sold by Licensee under this
  Agreement.

  



 


4

















 


ARTICLE
5


PATENT APPLICATIONS AND
ENFORCEMENT


 


	
  5.01

  	
   

  	
  Licensor reserves the
  right to determine whether or not to take any action to enforce the
  proprietary rights in the Licensed Patents. Licensor will have no obligation
  during the Term of this Agreement to bring suit at Licensors’ expense against
  any infringer of Intellectual Property Rights in the Licensed Technology.
  This Agreement does not confer upon Licensee the right to sue an infringer,
  or alleged infringer of the Intellectual Property Rights in the Licensed
  Technology. To the extent a third party infringes the Intellectual Property
  Rights in the License Technology, in a Licensed Territory, during the Term,
  and such infringement results in an economic harm to Licensee, then Licensee
  may reduce the Royalty payable under Article 3 by a pro rata amount to
  compensate for the infringement. In determining the amount of Royalty
  reduction, the parties will consider: (i) the volume of sales in the
  Licensed Territory where the infringement is occurring compared to the total
  volume, (ii) the type and degree of proprietary protection in the
  Licensed Territory where the infringement is occurring, and (iii) the
  degree to which the economic harm can be established by Licensee.

  
	
   

  	
   

  	
   

  
	
  5.02

  	
   

  	
  Each party will notify the others of any claim
  that (i) a Licensed Patent is invalid; (ii) any Licensed
  Product infringes a patent of a third party; (iii) a third-party product
  infringes a Licensed Patent; or (iv) any other third party infringement
  of Intellectual Property Rights in the Licensed Technology.

  
	
   

  	
   

  	
   

  
	
  5.03

  	
   

  	
  Licensee shall mark Licensed Products or packaging
  of Licensed Products with the patent number(s) of any Licensed
  Patent(s), provided that Licensor so notifies Licensee that the patent
  number(s) applies thereto. In addition, Licensee agrees to use
  reasonably prudent efforts to determine whether Licensed Products made by or
  for Licensee are covered by any Licensed Patents and to mark such Licensed
  Products that Licensee determines are covered by issued patents to comply
  with Section 287(a), Title 35, of The United States Code or any
  applicable marking requirements of any other countries or jurisdictions
  within the Licensed Territory in which such patents are issued.

  
	
   

  	
   

  	
   

  
	
  5.04

  	
   

  	
  Licensee shall not challenge the validity of any of
  the Licensed Patents and shall not take any other steps to the detriment of
  the validity of any of the Licensed Patents.

  



 


ARTICLE 6


TERM


 


	
  6.01

  	
   

  	
  The
  term of this Agreement shall commence on the Effective Date and continue in
  full force and effect during the Initial Term and, if applicable pursuant to
  section 6.02, the Extended Term.

  
	
   

  	
   

  	
   

  
	
  6.02

  	
   

  	
  In
  the event that the Licensee or an Affiliate thereof does not, solely by
  reason of Licensor’s breach of the Interim Acquisition Agreement or the
  Definitive Acquisition Agreement, acquire all or substantially all of the
  securities in or assets of Licensor on or

  



 


5

















 


	
   

  	
   

  	
  before
  May 31, 2008, the term of this Agreement shall extend from the end of
  the Initial Term until expiration or termination of Licensee’s royalty payment
  obligations as specified under Section 3.04 (the “Extended
  Term”).

  



 


ARTICLE 7


CONFIDENTIAL INFORMATION


 


	
  7.01

  	
   

  	
  In connection with this
  Agreement, the parties will provide to each other Confidential Information,
  including but not limited to each party’s know-how, invention disclosures,
  proprietary materials and/or technologies, economic
  information, business or research strategies, trade secrets and material
  embodiments thereof. As used herein, “Confidential
  Information” means any information of a confidential or
  proprietary nature disclosed by a party to this Agreement to another party in
  written or oral form.

  
	
   

  	
   

  	
   

  
	
  7.02

  	
   

  	
  The
  recipient of a disclosing party’s Confidential Information shall maintain
  such Confidential Information in confidence, and shall disclose such
  Confidential Information only to those of its employees, agents, consultants,
  sublicensees, attorney’s, accountants and advisors who have a reasonable need
  to know such Confidential Information and who are bound by obligations of
  confidentiality and non-use no less restrictive then those set forth herein.
  The recipient of the disclosing party’s Confidential Information shall use
  such Confidential Information solely to exercise its rights and perform its
  obligations under this Agreement (including, without limitation, the right to
  use and disclose such Confidential Information in regulatory applications and
  filings), unless otherwise mutually agreed in writing. The recipient of
  another party’s Confidential Information shall take the same degree of care
  that it uses to protect its own confidential and proprietary information of a
  similar nature and importance (but in any event no less than reasonable
  care). This Section 7.02 shall survive the expiration or earlier
  termination of the Term.

  
	
   

  	
   

  	
   

  
	
  7.03

  	
   

  	
  Confidential
  Information shall not include information that: (a) is in the
  recipient’s possession prior to receipt from the disclosing party as
  demonstrated by contemporaneous documentation; (b) is or becomes,
  through no fault of the recipient, publicly known; (c) is furnished to
  the recipient by a third party without breach of a duty to the disclosing
  party; (d) is independently developed by the recipient without use of,
  application of or reference to the disclosing party’s Confidential Information
  as demonstrated by contemporaneous documentation.

  
	
   

  	
   

  	
   

  
	
  7.04

  	
   

  	
  It shall not be a
  violation of this Article 7 to disclose Confidential Information
  required to be disclosed under applicable law, but such disclosure shall be
  only for the sole purpose of and solely to the extent required by such law,
  and provided that the recipient, to the extent possible, shall give the
  disclosing party prior written notice of the proposed disclosure and
  cooperate fully with the disclosing party to minimize the scope of any such required
  disclosure, to the extent possible and in accordance with applicable law.

  



 


6

















 


ARTICLE 8


MISCELLANEOUS


 


	
  8.01

  	
   

  	
  Assignment. No right or interest in this
  Agreement shall be assigned by Licensee without prior written consent of
  Licensors, which consent may not be unreasonably withheld; provided, however,
  that Licensee shall have the right to assign this Agreement, without
  obtaining the prior consent, to (a) an Affiliate of Licensee, or
  (b) the purchaser of or successor to all or substantially all of the
  assets of Licensee.

  
	
   

  	
   

  	
   

  
	
  8.02

  	
   

  	
  Dispute Resolution. In the event of any dispute among the
  parties as to any of the terms and conditions herein, including any monetary
  payment due hereunder, if the parties are unable to resolve the dispute
  themselves within at least ninety (90) days, it will be submitted to
  arbitration by a single arbitrator (agreeable to both parties) of the
  American Arbitration Association (“AAA”). The
  parties shall share equally the fees and costs of the arbitrator, location
  and reporter. Nothing in this Agreement shall prevent either party from
  seeking injunctive, interim, or equitable relief, payment of undisputed
  debts, or relief or remedies in respect of intellectual property or confidentiality
  rights, before any court having jurisdiction over the other party.

  
	
   

  	
   

  	
   

  
	
  8.03

  	
   

  	
  Notices. All notices and other communications
  required or permitted to be given under this Agreement shall be in writing
  and shall be delivered by hand or sent by facsimile (with confirmation of
  receipt) or sent (postage prepaid) by registered, certified, or express mail
  or by reputable express courier service (such as Federal Express), and shall
  be deemed given and received when delivered by hand, or when sent by facsimile
  (with confirmation of receipt), or five days after sent by mail (three
  business days in the case of express mail or courier service), addressed in
  each case to the respective party at its address specified below, or at such
  other address as such party may from time to time designate by written notice
  to the other party as herein provided:

  



 


	
   

  	
   

  	
  If to Licensee, to:

  



 


	
   

  	
  Schmitt
  Industries, Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Fax No.:

  	
   

  	
   

  



 


	
   

  	
   

  	
  If to Licensor, to:

  



 


	
   

  	
  Xtero Datacom Inc.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attention:

  	
   

  	
   

  
	
   

  	
  Fax No.:

  	
   

  	
   

  



 


7

















 


	
  8.04

  	
   

  	
  Entire Agreement. This Agreement reflects the entire
  agreement between and among the parties with regard to the subject matter
  hereof. Except as otherwise provided herein, this Agreement cancels and
  supersedes all prior agreements, commitments, representations,
  understandings, and obligations verbal or written, between and among the
  parties relating to the subject matter hereof.

  
	
   

  	
   

  	
   

  
	
  8.05

  	
   

  	
  Modification. This Agreement may not be modified or
  amended except in a writing signed by both parties.

  
	
   

  	
   

  	
   

  
	
  8.06

  	
   

  	
  Independent Contractors. Under this Agreement, Licensor and
  Licensee are independent contractors to each other and not joint venturers,
  partners, or agents of each other, and none of them shall have the power to
  bind the others or make any promises or representations on behalf of the
  others to third parties.

  
	
   

  	
   

  	
   

  
	
  8.07

  	
   

  	
  Binding Effect. The terms and provisions of this
  Agreement shall be binding upon and inure to the benefit of the parties and
  their respective heirs, permitted assigns, and successors in interest,
  through merger, sale of assets, sale of stock, or otherwise.

  
	
   

  	
   

  	
   

  
	
  8.08

  	
   

  	
  Governing Law. This Agreement shall be governed by and construed
  in accordance with the internal laws of the Province of British Columbia,
  without giving effect to the conflict of laws principles of such Province.

  



 


	
   

  	
   

  	
  IN WITNESS WHEREOF, the parties have caused this
  Agreement to be executed by their duly authorized officers on the 

  
	
  respective dates hereinafter set forth.

  



 


Xtero Datacom Inc.


 


 


	
  By:

  	
  /s/ David Peachey

  	
   

  	
  Date:

  	
  October 4, 2007

  	
   

  



 


 


Schmitt
Industries, Inc.


 


 


	
  By:

  	
  /s/ Wayne A. Case

  	
   

  	
  Date:

  	
  October 4, 2007

  	
   

  



 


8