Document:

Licnse Agrmnt btwn Applied Cryptograghy

    

PATENT LICENSE AGREEMENT
between
SmartMetric, Inc. and Applied Cryptology, Inc.

Dated August1, 2004

PATENT LICENSE AGREEMENT

AGREEMENT made and entered into as of the 1st day of August 2004 by and between Applied Cryptology, Inc., a Nevada corporation having its principal offices at [address] (the “Licensor”), and SmartMetric, Inc., a Nevada corporation having its principal offices at 67 Wall Street, Level 22, New York, New York 10005 (the “Company”).

WHEREAS, the Licensor is the owner of certain technology which is the subject of a Patent Cooperation Treaty Application filed on February 18, 2000 with the United States Patent and Trademark Office, and originally the subject of an application filed on February 18, 1999 with the Australian Patent and Trademark Office, a copy of which is annexed hereto and made a part hereof as Exhibit A, and the recipient of a patent from the United States Patent and Trademark office, dated December 4, 2001, a copy of which is annexed hereto and made a part hereof as Exhibit B, including adaptations, derivatives of, and current and future technological developments thereto (the “Patent”); and

WHEREAS, the Licensor has agreed to license certain rights to use the Patent to the Company, and the Company wishes to accept such rights to use from the Licensor, as more fully described in Section 4.

NOW, THEREFORE, in consideration of the mutual covenants of the parties which are hereinafter set forth, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,

IT IS AGREED: 

1.    Recitals. The parties hereby adopt as part of this Agreement each of the recitals which is contained in the WHEREAS clauses, and agree that such recitals shall be binding upon the parties hereto by way of contract and not merely by way of recital or inducement; and such clauses are hereby confirmed and ratified as being true and accurate by each party as to himself, herself or itself.

2.    Grant of License.

      A.    Subject to the terms and conditions of this Agreement, the Licensor grants to the Company, and the Company accepts from the Licensor, a license (the “License”) to utilize the Patent, including the use, manufacture and sub-license of products which utilize the Patent and the patented technology within the Territory (hereinafter defined). During this terms of this Agreement, Licensor shall not grant any license of the Patent to any other company that directly, or indirectly through a subsidiary, affiliate, licensee or otherwise provides users with Internet access or sells, distribute or manufacturers smartcards.

       B.    The license herein granted to the Company shall be effective as of the date of this Agreement. The Licensor agrees to execute any and all such other and further instruments and documents, and to take any and all such further actions, which are reasonably required to effectuate this Agreement and the intents and purposes hereof. The Company and the Licensor each agree to execute any and all instruments and documents, and to take any and all such further actions reasonably required to effectuate this Agreement and the intents and purposes hereof.

3.    Reservation of Rights. The Licensor retains all rights to the Patent, except with respect to the license of the specific rights granted pursuant to this Agreement as provided for in Section 4 and the Company acknowledges that it shall have no interest or rights in any use by the Licensor of the Patent or any other intellectual property or business opportunity which the Licensor may now, or in the future, obtain except with respect to the license to specific rights granted pursuant to this Agreement.

4.    Rights to Use. The license here stated is a license to make use of the Patent for the purpose of developing software, systems and products to be used in the business of the company, namely providing secure transactions over the Internet from home and office computers and/or providing either or an automatic method for connecting to remote computers and/or a method of delivering targeted advertising to home and/or office computers and/or providing identity verification and access control as provided for in the Patent.

5.    Geographical Scope. The geographical scope of this Agreement shall be worldwide (the “Territory”).

6.    Royalty Payments. In consideration of the license and rights granted in this Agreement, the Company shall pay to Licensor royalties in accordance with this Section 6.

      A.     Accrual. Royalties shall accrue on the first use or putting into use of the Patent as evidenced by (a) the sub-license of the Patent, or the (b) sale, lease or provision to others of one or more products which utilize the Patent by the Company (“Licensed Products”). No royalties may accrue until the first such use of the Patent by the Company. The obligation to pay accrued Royalties shall survive termination of this Agreement. Notwithstanding any other provision hereunder, royalties shall accrue and be payable only to the extent that enforcement of the Company’s obligation to pay such royalty would not be prohibited by applicable law.

B.    Royalty Reports and Payments. Within forty-five (45) days after the end of each calendar quarter (i.e., within 45 days after March 31st, June 30th, September 30th and December 31st) during the Term of this Agreement, the Company shall provide Licensor with a report certified by a duly authorized officer of the Company (the “Royalty Report”) which shall identify this Agreement and include the information set forth in Schedule C as well as any other information Licensor may reasonably require from time-to-time. If no Royalties were accrued during a calendar quarter, the Royalty Report shall state that fact. Simultaneously with each Royalty Report shall pay the Company the royalties accrued during such calendar quarter (“Quarterly Payment”). In the event no royalties accrued during the quarter, no funds shall be owed Licensor.

C.      Method of Payment and Reporting.

 

(i)All payments required hereunder shall be paid to Licensor by electronic bank transfer to the following account:

Bank Acct Name:

Bank:

Bank Number:

ABA:

 

(ii)All Royalty Reports shall be sent to Licensor as follows, with a copy sent to the address indicated for receiving notice on the Cover Sheet (if different than below):

Applied Cryptology, Inc.

314 Brooklyn Avenue

Brooklyn, New York 11213

Licensor may change the foregoing payment account and address upon written notice to the Company.

D.    Overdue Payments. Payments which are required hereunder and which are overdue shall be subject to a late payment charge calculated at an annual rate of one percent (1%) over the U.S. prime rate or successive U.S. prime rate (as posted in the Wall Street Journal) during delinquency. If the amount of such charge exceeds the maximum permitted by law, such charge shall be reduced to such maximum.

    E.  Currency. All payments to be made under this Agreement shall be made in United States dollars unless otherwise indicated. Any conversion to United States dollars for a payment required under this Agreement shall be at the prevailing rate for bank cable transfers as quoted for the day such payment is due under this Agreement or, if paid earlier, the day actually paid, by leading United States banks in New York City dealing in the foreign exchange market.  

    7.  Duties of Licensor. During the Term, Licensor shall provide such other services to the Company as may be necessary in order to implement the intent and purposes of this Agreement including assisting the Company in obtaining the approval of the Patent in the United States and in those other countries in which the Licensor determines to file a patent.

    8.  Term. The term of this Agreement (the “Term”) shall commence as of the date hereof and shall remain in force in perpetuity, subject to the terms and conditions of this Agreement, including, but not limited to, Article 13 of this Agreement.

    9.  Licensor’s Representations, Warranties and Covenants. The Licensor warrants, represents and covenants to the Company as follows:

    A.  The Licensor is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada with full right, power and legal capacity to enter into this Agreement. Licensor has no other business aside from owning this Patent. The execution of this Agreement by the Licensor, its delivery to the Company and the consummation of the transactions which are contemplated by this Agreement have been approved and authorized by the Board of Directors of Licensor and require no further authorization on the part of the Licensor for the performance and consummation by the Licensor of the transactions which are contemplated by this Agreement.

    B.    The performance of this Agreement shall not result in any breach of, or constitute a default under, or result in the imposition of any lien or encumbrance upon any property of the Licensor or cause an acceleration under any arrangement, agreement or other instrument to which the Licensor is a party or by which any of his assets are bound. The Licensor has performed all of his obligations which are required to be performed by him pursuant to the terms of any such agreement, contract or commitment.

    C.  The Licensor is the sole and exclusive owner and Licensor of the Patent which has been approved by the United States Patent and Trademark Office with the applicable authorities.

    10.  Company’s Representations, Warranties and Covenants. The Company represents, warrants and covenants to the Licensor as follows:

    A.    The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada, with all requisite power and authority to carry on its business as presently conducted, to enter into this Agreement and to carry out the transactions which are contemplated herein.

    B.    The Company has full right, power and legal capacity to enter into this Agreement. The execution of this Agreement by the Company and its delivery to the Licensor, and the consummation of the transactions which are contemplated by this Agreement have been duly approved and authorized by all necessary action by its Board of Directors and no further authorization on the part of the Company for the performance and consummation by the Company of the transactions which are contemplated in this Agreement.

    C.    The performance of this Agreement shall not result in any breach of, or constitute a default under, or result in the imposition of any lien or encumbrance upon any property of the Company or cause an acceleration under any arrangement, agreement or other instrument to which the Company is a party or by which any of its assets is bound.

    11.    Company’s Obligations. 

    A.    The Company shall take such steps and bear the costs related thereto as may be necessary to develop the software and/or products which is necessary to utilize and exploit the Patent. All technological developments under, including, without limitation, all software, and any improvements to, and derivatives of, the Patent which are developed by the Company shall be the Company’s property. 

    B.    The Company shall bear the costs related to both defending and enforcing the Patent, including, but not limited to, legal fees and filing fees with patent offices.

    12.    Non-Use and Non-Disclosure of Confidential Information.

    A.    As used in this Agreement, “Confidential Information” means information which is disclosed to the Company or known by the Company as a result of or through this Agreement, and not generally known by the public about the Patent, including without limitation, all documentation and software relating thereto, and all know-how and technology required to use the Patent and information and data in written, graphic and/or machine readable form, processes and services, including information with respect to research, development, inventions, manufacture, purchasing, accounting, engineering, marketing, merchandising and selling regardless of whether patentable, trademarkable or copyrightable, including, but not limited to, any information acquired by the Company from any source prior to the commencement of this Agreement.

    B.    Except as required in order to exploit the Patent pursuant to this Agreement, the Company will not, during or after the term of this Agreement, directly or indirectly, use any Confidential Information or disseminate or disclose any Confidential Information to any person, firm, corporation, association or other entity except in accordance with this Agreement. The foregoing prohibition shall not apply to any Confidential Information which (i) becomes publicly available through no act or omission of the Company, (ii) is reasonably required to be disclosed in a proceeding to enforce the Company’s rights under this Agreement, (iii) is required to be disclosed by court order or by any law, (iv) is or becomes available to the Company from third parties who in making such disclosure breach no confidentiality relationships, or (v) is intentionally disclosed by the Licensor on an unrestricted basis to any entity not a party to this Agreement.

    C.    Upon the termination of this Agreement, all documents, records, notebooks and similar repositories of or containing Confidential Information, including copies thereof, then in the Company’s possession, whether prepared by it or others, will be delivered to the Licensor.

    D.    The Company hereby waives, now and for the future, any rights under or with respect to any discoveries, concepts or ideas, or improvements or know-how which relate to the Patent.

    13.    Rescission.

    A.    If there occurs a rescission of this Agreement pursuant to Paragraph B of this Article 13, the Licensor, upon written notice to the Company pursuant to Paragraph C of Article 15, may:

     (i)  Require that the Company cease any further use of the Patent; and

    (ii)  Cease performance of all the Licensor’s obligations hereunder without liability to the Company.

    B.    The Licensor may rescind this Agreement and reclaim all rights and interest in the Patent if:

(i)  the Company admits in writing that it is unable to pay its debts as they mature;

(ii)   the Company files a petition for protection as a debtor under the bankruptcy laws, or a petition to take advantage of any insolvency act;

(iii)  the Company makes an assignment for the benefit of its creditors;

(iv)  the Company consents to the appointment of, or possession by, a custodian for the whole or any substantial part of its property;

(v)  the Company, with regard to a petition filed with or without the Company’s consent by a third party to subject the Company as a debtor to the bankruptcy laws, fails to have such petition dismissed within sixty (60) days from the date that such petition is filed;

(vi)  notwithstanding the sixty (60) day provision in subparagraph v of this paragraph B of this Article 13, the Company, pursuant to a petition in bankruptcy filed against it, is adjudicated a bankrupt; or

(vii)  the Company files a petition or answer seeking reorganization or similar aid or relief under the bankruptcy laws or any state or the federal law for the relief of debtors, or if the Company fails in a timely fashion to deny the material allegations of a petition filed against it for any such relief; or

(viii) a court of competent jurisdiction shall enter an order, judgment or decree appointing, with or without the Company’s consent, a custodian for the whole or any substantial part of the Company’s property, or approving a petition filed against the Company seeking reorganization or similar aid or relief under any bankruptcy or insolvency laws or any state or the federal law for the relief of debtors, and such order, judgment or decree shall not be vacated, set aside or stayed within sixty (60) days from the date of entry thereof; or

(ix)  under the provisions of any law for the relief of debtors, any court of competent jurisdiction, or a custodian, shall assume custody or control of the whole or any substantial part of the Company’s property, with or without the Company’s consent, and such custody or control shall not be terminated or stayed within sixty (60) days from the date of assumption of such custody or control; or

(x)  any creditor of the Company commences a proceeding to foreclose a security interest in, or lien on, any property or assets of the Company; or

(xi) a court of competent jurisdiction shall enter a final judgment for the payment of money by the Company and such judgment shall not be vacated, set aside or stayed within sixty (60) days from the date of entry thereof; or

(xii)  there is an imposition of any attachment or levy, or the issuance of any note of eviction against the assets or properties of the Company.

    C.    The foregoing rights and remedies of the Licensor shall be cumulative and in addition to all other rights and remedies available to the Licensor in law and equity.

    D.    The Company agrees to execute any and all other instruments and documents, and to take any and all further actions, which may be reasonably required to effectuate this Agreement and the intents and purposes hereof.

    14.    Survival. All covenants, agreements, representations and warranties made in or in connection with this Agreement shall survive its termination, and shall continue in full force and effect after its termination, it being understood and agreed that each of such covenants, agreements, representations and warranties is of the essence of this Agreement and the same shall be binding upon and shall inure to the benefit of the parties hereto, their successors and assigns.

    15.    Miscellaneous.

    A.    Headings. Headings contained in this Agreement are for reference only and shall not in any way affect the meaning or interpretation of this Agreement.

    B.    Enforceability. If any provision of this Agreement should, for any reason, be held to be invalid or unenforceable under the laws of any jurisdiction, this Agreement shall be construed as if such invalid or unenforceable provisions are not contained herein.

    C.    Notices. Any notice or other communication required or permitted hereunder must be in writing and sent by either (i) registered or certified mail, postage prepaid, return receipt requested, (ii) overnight delivery with confirmation of delivery or (iii) facsimile transmission with an original mailed by first class mail, postage prepaid, in each case addressed as follows:

	
To the Licensor:
	
Applied Cryptology, Inc.

	
 
	
c/o Colin Hendrick, President

	
 
	
314 Brooklyn Avenue

	
 
	
Brooklyn, New York 11213

	
 
	
 

	
To the Company:
	
SmartMetric, Inc.

	
 
	
67 Wall Street, Level 22

	
 
	
New York, New York 10005

	
 
	
Attn: Colin Hendrick, President

	
 
	
Facsimile No.: 917.591.3226

	
 
	
 

	
Copy to:
	
Schonfeld & Weinstein, L.L.P.

	
 
	
80 Wall Street, Suite 815

	
 
	
New York, New York 10005

	
 
	
Facsimile No.: 212.344.1600

or in each case to such other address and facsimile number as shall have last been furnished by like notice. If mailing is impossible due to an absence of postal service, notice shall be in writing and personally delivered to the aforesaid addresses. Each notice or communication shall be deemed to have been given as of three (3) days after the date so mailed or as of the date delivered, as the case may be.

    D.    Governing Law; Disputes. This Agreement shall in all respects be construed, governed, applied and enforced in accordance with the laws of the State of New York without giving effect to the principles of conflicts of laws thereof and shall be deemed to be an agreement made pursuant to the laws of the State of New York entered into in the State of New York. The parties hereby consent to and submit to personal jurisdiction over each of them by the courts of the State of New York in any action or proceeding, waive personal service of any and all process and specifically consent that in any such action or proceeding any service of process may be effectuated upon any of them by certified mail, return receipt requested, in accordance with paragraph C of this Article 14. The parties agree, further, that the prevailing party in any action or proceeding as determined by the tribunal making the final and nonappealable determination of the matter in dispute, shall be entitled to reimbursement of all of its reasonable fees, costs and expenses, including, without limitation, legal fees and disbursements, in connection with such matter. In connection with the tribunal’s determination for the purpose of which party, if any, is the prevailing party, the tribunal shall take into account all of the factors and circumstances including, without limitation, the relief sought, and by whom, and the relief, if any, awarded, and to whom. In addition, and notwithstanding the foregoing sentence, a party shall not be deemed to be the prevailing party in a claim seeking monetary damages unless the amount of the final determination exceeds the amount offered in a writing by the other party by fifteen percent (15%) or more. For example, if the party initiating a claim (“A”) seeks damages of $100,000 plus costs and expenses, and the other party (“B”) has offered A $50,000 prior to the commencement of the proceeding, if the tribunal awards any amount less than $57,500 to A, the tribunal should determine that B has prevailed.

    E.    Modification. This Agreement may not be changed, modified, extended, terminated or discharged except in writing, signed by each of the parties hereto.

    F.    Further Actions. The parties hereto agree to execute any and all instruments and documents, and to take any and all such further actions reasonably required, to effectuate this Agreement and the intents and purposes hereof.

    G.    Binding Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and assigns.

    H.    Non-Waiver. Except as otherwise expressly provided herein, no waiver of any covenant, condition, or provision of this Agreement shall be deemed to have been made unless expressly made in writing and signed by the party against whom such waiver is charged. The failure of any party to insist upon the performance of any of the provisions, covenants, or conditions of this Agreement or to exercise any option herein contained, shall not be construed as a waiver or relinquishment in the future of such provision, covenant, or condition. The acceptance by a party, made with such party’s knowledge of the breach or failure of any covenant, condition, or provision hereof, of performance by the other party, shall not be deemed a waiver by the accepting party of such breach or failure. The waiver by one party of breach by the other party shall not be construed as a waiver of any other or any subsequent breach.

    I.    Counterparts. This Agreement may be executed simultaneously in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

    J.    Entire Agreement. The parties have not made any representations, warranties, or covenants about the subject matter hereof which is not set forth herein, and this Agreement, together with any instruments executed simultaneously herewith, constitutes the entire Agreement between them about the subject matter hereof. All understandings and agreements heretofore had between the parties about the subject matter hereof are merged in this Agreement and any instrument executed simultaneously herewith.

	
 

	 	 	 
	

	 

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

	
 
	
Licensor

	
 
	
 

	
 
	
/s/ Colin Hendrick 

		

	
 
	
Colin Hendrick

	
 
	
 

	
Attest:
	
SmartMetric, Inc.

	
 
	
 

	
 
	
By:/s/ Colin Hendrick

		

	
	 	 	 
	

	 

SCHEDULE A

To Patent License Agreement

The following patent, as well as all continuations and reissues thereof, are “Licensed Patents” under the Agreement:

	
U.S. Patent No.
	
Issue Date
	
Title

	
6,325,285
	
Dec. 4, 2001
	
Smart Card With Integrated Fingerprint Reader

 

 

	
Signature below by both Parties indicates that thisSchedule is agreed to and accepted by them as part of the patent License 
	
 

	
Agreement.
	
 

		
	
THE COMPANY: 
	
LICENSOR:

		
		
	
By: /s/ Colin Hendrick
	
By: /s/ Colin Hendrick

	
(Authorized Signature)
	
(Authorized Signature)

		
	
/s/ Colin Hendrick
	
/s/ Colin Hendrick

	
(Typed or Printed Name)
	
(Typed or Printed Name)

	
(Date) 8/24/04
	
(Date) 8/24/04

                         

	
	 	 	 
	

	 

SCHEDULE C

To Patent License Agreement

1.Royalties

For each product made by or for the Company or a sub-license of the Company which products utilize the Patent pursuant to this Agreement, royalties shall be Two Percent (2%) of the greater of 

(a)The sales price of such Licensed Product; OR

(b)The Fair Market Value of such Licensed Product, where “Fair Market Value” shall mean the selling price which a seller would realize from an unaffiliated buyer in an arms-length sale of the licensed product at the time of the making of the Product, and wherein such selling price is not discounted or diminished by any other agreement or arrangement between such buyer and seller, including agreements or arrangements relating to any other product, service, or benefit furnished or provided by the seller to the buyer.

2.Royalty Report

Each Royal Report required under the Agreement shall identify the gross receipts of the Company in accordance with this Agreement, as well as, for the Company, the number of products manufactured in accordance with this Agreement; the identity of each customer who is furnished such product(s), the number of units of licensed product furnished to each such customer (such units identified by type and model number), the price charged to each such customer for each such unit to licensed product, and the date such units of Licensed Product were furnished to each such customer.

	
Signature below by both Parties indicates that thisSchedule is agreed to and accepted 
	
 

	
by them as part of the patent License Agreement.
	
 

	
 
	
 

	
THE COMPANY: 
	
LICENSOR:

	
 
	
 

	
By: /s/ Colin Hendrick
	
By: /s/ Colin Hendrick

	
(Authorized Signature)
	
(Authorized Signature)

	
 
	
 

	
/s/ Colin Hendrick
	
/s/ Colin Hendrick

	
(Typed or Printed Name)
	
(Typed or Printed Name)

		
	
(Date) 8/24/04
	
(Date) 8/24/04Employment Agreement

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of 1st July 2004 and effective as of the Effective Date (as defined below), by and between SmartMetric Inc., a Nevada corporation (the “Company”), and Colin Hendrick (“Executive”).

 

W I T N E S E T H:

WHEREAS, Executive is currently serving as Chief Executive Officer and President of the Company, and the Company wishes to assure itself of the services of Executive for the period provided in this Agreement (“Agreement”); and

 

WHEREAS, Executive is willing to serve in the employ of the Company on the terms and conditions hereinafter set forth.

 

NOW THEREFORE, in consideration of the promises and the mutual covenants herein contained, the Company and Executive, intending to be legally bound, hereby agree as follows:

 

Section 1.   Employment.

(a)   Agreement to Employ. Upon the terms and subject to the conditions of this Agreement, the Company hereby employs Executive, and Executive hereby accepts employment by the Company.

 

(b)   Employment Period. For the purposes of this Agreement, the Effective Date shall mean July 1, 2004. The term of Executive’s employment shall initially be for a period of one (1) year (the “Initial Term”) commencing on the Effective Date; provided that such term may be renewed by the mutual written agreement of Executive and the Company for additional consecutive one (1) year terms (each, a “Renewal Term”), unless, in either case, this Agreement shall have been earlier terminated in accordance with Section 5 (the “Employment Period”).

 

Section 2.   Position and Duties.

During the Employment Period, Executive agrees to serve as Chairman of the Board of Directors, President and Chief Executive Officer of the Company. Executive shall render administrative and management services to the Company such as are customarily performed by persons situated in a similar executive capacity and shall perform such other duties not inconsistent with his title and office as may be assigned to him by or under the authority of the Board of Directors of the Company (“Board of Directors”). Executive shall also perform the duties of Chief Software Engineer and Electronic Engineer. During the Employment Period, Executive shall devote a majority of his business time, skill and efforts to the business of the Company. Notwithstanding the foregoing, Executive may (i) except as provided in Section 6(a) hereof, (x) make and manage personal business investments of his choice, (y) serve in any capacity with any civic, educational or charitable organization, or any trade association, and (z) be involved in the management and serve on the Board of Directors of any other company that does not conflict with the business interests of SmartMetric, Inc., only upon obtaining approval by the Board of Directors. Executive shall not be relocated from New York City without Executive’s consent. If in the event the Executive is relocated to a place other than New York for a period longer then one month and not exceeding three (3) years then the company will pay all expenses for relocation including rent/or mortgage payments for the duration of the relocation. Executive shall have such authority as is necessary or appropriate to carry out his assigned duties. 

 

Section 3.   Compensation.

The Company shall pay Executive an annual salary of $170,000 commencing upon the Company’s achieving a minimum of $1,000,000 in gross revenues. Prior to the Company’s achieving a minimum of $1,000,000 in gross revenues, Executive may receive as salary a maximum of 25% of any offering proceeds received by the Company, which amount shall not exceed $170,000 in any given 12 month period. In addition the Executive may earn bonus amounts payable in cash, to be paid to the Executive within sixty (60) days following the year-end audit, based upon the satisfaction of performance criteria that will be established by a committee of the Board of Directors (the “Compensation Committee”) in its discretion, and subject to the approval of the Board of Directors (or, if the Compensation Committee is not yet established, by the Board of Directors). The Compensation Committee shall be comprised of a minimum of three (3) directors, a majority of whom are independent. Such performance criteria will include corporate performance goals consistent with the Company’s business plan. The final determination as to the actual corporate and individual performance against the pre-established goals and objectives, and the bonus amounts payable in relationship to such performance, shall be made by the Compensation Committee in its sole discretion. If this Agreement is renewed in accordance with Section 1(b), the Compensation Committee shall review Executive’s salary in light of the performance of Executive and the Company, and may, in its discretion, increase (but not decrease) such salary by an amount it determines to be appropriate. Executive’s annual salary payable hereunder, is referred to herein as “Salary”. 

 

Section 4.   Benefits.

 

(a)   Vacations. Executive shall be entitled to up to three (3) weeks’ paid vacation and up to 21 days paid religious holidays (in addition to the holidays the Company extends, as a matter of policy, to its employees) during each year of the Employment Period which, with regard to vacation time shall be scheduled in Executive’s discretion, subject to and taking into account the business exigencies of the Company, and with regard to religious holidays will be taken at the appointed times. Unused vacation (but not religious holidays) may be accrued from year to year in accordance with the Company’s policy as in effect from time to time with regard to executive employees.

 

(b)   Business Expenses. The Company shall pay or reimburse Executive for all documented reasonable business expenses incurred by Executive in the performance of Executive’s duties hereunder, in accordance with the Company’s policies.

 

(c)   Other Benefits. During the Employment Period, Executive shall receive such other life insurance, pension, disability insurance, health insurance and sick pay benefits and other benefits which the Company extends, as a matter of policy, to its executive employees and, except as otherwise provided herein, shall be entitled to participate in all deferred compensation and other incentive plans of the Company on the same basis as other like employees of the Company.

 

(d)   Indemnification. The Company shall, to the maximum extent permitted by applicable law and the Company’s certificate of incorporation or its bylaws, indemnify Executive and hold Executive harmless from and against any claim, loss or cause of action arising from or out of Executive’s performance as an officer, director or employee of the Company provided that Executive acted in good faith, was not negligent and did not breach any duty owed to the Company. If any claim is asserted hereunder for which Executive reasonably believes in good faith he is entitled to be indemnified, the Company shall pay Executive’s reasonable legal expenses (or cause such expenses to be paid), as may be required but no less frequently than on a quarterly basis, provided that Executive shall reimburse the Company for such amounts, plus simple interest thereon at the 90-day United States Treasury Bill rate as in effect from time to time, compounded annually, if Executive shall be found by a final, non-appealable order of a court of competent jurisdiction not to be entitled to indemnification. 

 

(e)   Key-Person Life Insurance. The company may purchase “key-person” life insurance policies on the Executive’s life in such amounts and of such types as is determined by the Board of Directors. Executive shall cooperate fully with the Company in obtaining such insurance and shall submit to such physical examinations and provide such information as is reasonably required to obtain and maintain such policies. Neither Executive nor his successor-in-interest or estate shall have any interest in any such key-person policies so obtained.

 

Section 5.   Termination of Employment.

 

(a)   Early Termination of the Employment Period. Executive’s employment under this Agreement may be terminated in any of the following manners:

 

Executive may, upon written notice to the Company, terminate employment with the Company at any time for “Good Reason” (as defined in Section 5(e)) it being agreed that any such termination, although effected by Executive shall not constitute a Voluntary Termination;

 

Executive’s employment may, upon written notice to Executive, be terminated by the Company at any time for “Cause” (as defined in Section 5(d));

 

This Agreement shall terminate automatically upon Executive’s death;

 

The Company may, upon written notice to Executive, terminate this Agreement upon Executive’s Disability. As used herein, the term “Disability” shall mean a determination that Executive suffers from illness or other physical or mental impairment that prevents Executive from substantially performing his duties for a period of 60 days during any six (6) month period during the Employment Period or for 90 days during any twelve (12) month period during the Employment Period. The determination of whether (and, if appropriate, when) a Disability has occurred shall be made by a majority of the Board of Directors of the Company.

 

Any termination pursuant to this Section 5(a) shall be communicated to the non-terminating party by a “Notices” in accordance with Section 10.

 

(b)   Benefits Payable Upon Termination.

 

(i)   Following the end of the Employment Period pursuant to any manner described in Section 5(a) or for any other reason, the Company shall pay to Executive (or, in the event of his death, his surviving spouse, if any, or his estate): (A) any Salary earned, but unpaid, for services rendered to the Company on or prior to the date on which the Employment Period ended, and (B) amounts which are vested or which Executive is otherwise entitled to receive under the terms of or in accordance with any plan, policy, practice or program of, or any contract or agreement with, the Company at the date the Employment Period ends. In addition, the Executive shall be eligible for insurance coverage’s mandated under COBRA and for any benefits for which Executive, as a former employee, is eligible under the terms of the welfare plans, programs and arrangements of the Company. The Corporation shall pay the first twelve (12) months of COBRA premiums for Executive’s coverage under the Company’s group medical insurance plan.

 

(ii)   Vested benefits referred to in Section 5(b)(i) shall be payable in accordance with the terms of the plan, policy, practice, program, contract or agreement under which such benefits have accrued.

 

(c)   Continuing Obligations. After receipt of written notice of termination, but prior to the effective date of such termination, Executive shall continue to perform his duties under this Agreement unless specifically instructed to discontinue such performance. In the event of termination, Executive and the Company shall remain liable for their respective obligations accrued under this Agreement prior to the effective date of termination.

 

(d)   Definition of Cause. For purposes of this Agreement, “Cause” means Executive’s:

 

(i)   persistent and repeated refusal, failure or neglect to perform the material duties of his employment under this Agreement (other than by reason of Executive’s physical or mental illness or impairment), provided that such Cause shall be deemed to occur only after the Corporation gave written notice thereof to Executive specifying in reasonable detail the conduct constituting Cause, and Executive failed to cure and correct his conduct within thirty (30) days after such notice;

 

(ii)   committing any act of fraud or embezzlement, provided that such Cause shall be deemed to occur only after the Corporation gave written notice thereof to Executive specifying in reasonable detail the instances of such conduct, and Executive had the opportunity to be heard at a meeting of the Board of Directors;

 

(iii)   breach of clauses (a), (b) or (c) of Section 6 hereof that results in a material detriment to the Company;

 

(iv)   conviction of a felony (including pleading guilty to a felony); or

 

(v)   habitual abuse of alcohol or drugs.

 

(e)   Definition of Good Reason. For purposes of this Agreement, “Good Reason” means:

 

(i)   any material reduction in Executive’s authority, duties or responsibilities;

 

(ii)   any material change in Executive’s reporting lines or removal of the Executive from his principal positions as of the beginning of the Employment Period (other than a promotion); or

 

(iii)   any material failure by the Company to pay or provide the compensation and benefits under this Agreement; provided that, in each such event, the Executive shall give the Company notice thereof which shall specify in reasonable detail the circumstances constituting Good Reason, and there shall be no Good Reason with respect to any such circumstances cured by the Corporation within thirty (30) days after such notice.

 

Section 6.   Noncompetition and Confidentiality.

 

(a)   Noncompetition. During the Employment Period and for three years thereafter, Executive shall not, without the consent of the Company, assist or become associated with any person or entity, whether as a principal, partner, employee, consultant or shareholder (other than as a holder of not in excess of 5% of the outstanding voting shares of any publicly traded company purchased in open market transactions) that is actively engaged in the business of applying Smartcard technology to Internet access and internet e-commerce solutions. 

 

(b)   Confidentiality and Company Property. Executive agrees that he will not at any time during the Employment Period and for five (5) years thereafter for any reason, in any fashion, form, or manner, either directly or indirectly, divulge, disclose or communicate to any person, firm, corporation or other business entity, in any manner whatsoever, any confidential information or trade secrets concerning the business of the Company, including, without limiting the generality of the foregoing, the techniques, methods or systems of its operation or management, any information regarding its financial matters, research and development data and materials, and intellectual property rights, including, without limitation, patents, patent applications, patent rights, trademarks, trademark applications, trade names, service marks, service mark applications, copyrights, copyright applications, databases, algorithms, computer programs and other software, know-how, trade secrets, proprietary processes and formulae, inventions, trade dress, logos and designs or any other material information concerning the business of the Company (including customer lists), its manner of operation, its plans or other material data (the “Confidential Information”). The provisions of this Section 6 shall not apply to (i) information disclosed in the performance of Executive’s duties to the Company based on his reasonable good faith belief that such a disclosure is in the best interests of Company (ii) information that is, at the time of the disclosure, public knowledge; (iii) information disseminated by the Company to third parties in the ordinary course of business; (iv) information lawfully received by Executive from a third party who, based upon inquiry by Executive, is not bound by a confidential relationship to the Company; or (v) information disclosed under a requirement of law or as directed by applicable legal authority having jurisdiction over Executive and (vi) information, ideas or inventions developed by Executive prior to his employment by the Company.

 

During and after the term of employment hereunder, the Executive agrees not to remove from the Company’s premises any documents, records, files, notebooks, correspondence, computer printouts, computer programs, computer software, price lists, microfilm, or other similar documents containing confidential information, including copies thereof, whether prepared by him or others, except as his duties shall require, and in such cases, will promptly return such items to the Company. Upon termination of the Executive’s employment with the Company, all such items including summaries or copies thereof, then in his possession, shall be returned to the Company immediately. The Executive agrees to the return of such items, which shall be a requirement in order for him to receive, at the time of such termination, or any time thereafter, any compensation due him pursuant to any paragraphs hereunder or otherwise;

 

(c)   Patents and Inventions. Executive owns all of the rights, title and interest in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by Executive, solely or jointly, or in whole or in part, during the Employment Term. The foregoing includes all adoptions and improvements to the patent and the underlying technology (the “Patent”) that are the subject of that certain license agreement between Executive and the Company dated as of August 1, 2004 (the “License Agreement”) pursuant to which Executive has granted the Company an exclusive royalty license to distribute, sell develop and otherwise utilize the Patent which consists of a business system concept involving the use of a Smartcard to facilitate interconnectivity to the Internet, storage of personal information and form filling and transaction and identity verification functions. In the event the License Agreement terminates, the Patent reverts to the Executive in accordance with the terms and conditions of the License Agreement.

 

Executive hereby grants to the Company during the Employment Term a right of first refusal to be the licensee of or to purchase on terms to be mutually agreed upon all of the rights, title and interest of Executive in and to all inventions, ideas, disclosures and improvements, whether patented or unpatented, and copyrightable material, made or conceived by Executive, in whole or in part, during the Employment Term which (i) relate to methods, apparatus, designs, products, processes or devices sold, leased, used or under construction or development by the Company or (ii) otherwise relate to or pertain to the business, functions or operations of the Company. However, under no circumstances shall Executive utilized, sell, transfer, license or otherwise hypothecate any such patents, inventions, ideas, disclosures, improvements and/or copyrightable materials so as to compete with the business or products of the Company.

 

(d)   Non-Solicitation of Employees. During the Employment Period and for five years thereafter, Executive will not directly or indirectly induce any employee of the Company or any of its subsidiaries or affiliates to terminate employment with such entity, and will not directly or indirectly, either individually or as owner, agent, employee, consultant or otherwise, employ or offer employment to any person who is or was employed by the Company or a subsidiary thereof, unless such person shall have ceased to be employed by such entity for a period of at least six months.

 

(e)   Injunctive Relief with Respect to Covenants. Executive acknowledges and agrees that the covenants and obligations of Executive with respect to Noncompetition, inventions, confidentiality and Company property contained in this Section 6 relate to special, unique and extraordinary matters and that a violation of any of the terms of such covenants and obligations will cause the Company irreparable injury for which adequate remedies are not available at law. Therefore, Executive agrees that the Company shall be entitled to an injunction, restraining order or such other equitable relief as a court of competent jurisdiction may deem necessary or appropriate to restrain Executive from committing any violation of the covenants and obligations contained in this Section 6. These injunctive remedies are cumulative and are in addition to any other rights and remedies the Company may have at law or in equity.

 

Section 7.   No Conflict With Prior Agreements: Due Authorization.

 

Executive represents to the Company that neither Executive’s execution of this Agreement or commencement of employment hereunder nor the performance of Executive’s duties hereunder conflicts with any contractual commitment on Executive’s part to any third party. The Company represents to Executive that it is fully authorized and empowered by action of the Company’s Board of Directors to enter into this Agreement and that performance of its obligations under this Agreement will not violate any agreement between it and any other person, firm or other entity. Executive agrees that by execution of this Agreement any other employment agreements between Executive and the Company and any of its subsidiaries, are hereby terminated and neither party shall have any further rights or obligations thereunder.

 

Nothing herein shall be construed to require Executive to use or disclose any information that he is prohibited from using or disclosing as a result of legal or contractual obligations.

 

Section 8.   Post-Termination Obligations.

 

(a)   Notwithstanding anything else provided in this Agreement, all payments and benefits to Executive under this Agreement shall be subject to Executive’s compliance with clause (b) of this Section 8 during the term of this Agreement and for one full year after the expiration or termination hereof.

 

(b)   Executive shall, upon reasonable notice, furnish such information and assistance to the Company as may reasonably be required by the Company in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided that the Company shall be required to reimburse Executive for the reasonable value of his time in connection therewith and for any out-of-pocket costs attributable thereto.

 

Section 9.   Source of Payments.

 

All payments provided in this Agreement shall be timely paid in cash or check by the Company.

 

Section 10.   Miscellaneous.

 

(a)   Survival. Sections 4(d), 5, 6, 7 and 8 shall survive the termination hereof.

 

(b)   Binding Effect. This Agreement shall be binding on the Company and any person or entity which succeeds to the interest of the Company (regardless of whether such succession occurs by operation of law) by reason of the sale of all or a portion the Company’s stock, a merger, consolidation, or reorganization involving the Company or a sale of the assets of the business of the Company (or portion thereof) in which Executive performs a majority of his services. This Agreement shall also inure to the benefit of Executive’s heirs, executors, administrators and legal representatives.

 

(c)   Assignment. Neither this Agreement nor any of the rights or obligations hereunder shall be assigned or delegated by any party hereto without the prior written consent of the other party, except that the Company may delegate to any of its direct or indirect wholly owned subsidiaries its obligations to provide compensation and benefits hereunder, provided no such delegation shall relieve the Company of its obligations hereunder.

 

(d)   Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto with respect to the matters referred to herein, and supersedes any other employment agreement Executive may have with the Company or any subsidiary of the Company and no other agreement, oral or otherwise, shall be binding between the parties unless it is in writing and signed by the party against whom enforcement is sought. There are no promises, representations, inducements or statements between the parties other than those that are expressly contained herein. Executive acknowledges that he is entering into this Agreement of his own free will and accord, and with no duress, that he has been represented and fully advised by competent counsel in entering into this Agreement, that he has read it and that he understands it and its legal consequences. No parol or other evidence may be admitted to alter, modify or construe this Agreement, which may be altered, modified or amended only by a writing signed by the parties hereto.

 

(e)   Severability; Reformation. In the event that one or more of the provisions of this Agreement shall become invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein shall not be affected thereby. In the event that any of Sections 6(a), (b) or (c) is not enforceable in accordance with its terms, Executive and the Company agree that such Section shall be reformed to make such Section enforceable in a manner which provides the Company the maximum rights permitted at law.

 

(f)   Waiver. Waiver by any party hereto of any breach or default by the other party of any of the terms of this Agreement shall not operate as a waiver of any other breach or default, whether similar to or different from the breach or default waived. No waiver of any provision of this Agreement shall be implied from any course of dealing between the parties hereto or from any failure by either party hereto to assert its or his rights hereunder on any occasion or series of occasions.

 

(g)   Notices. Any notice required or desired to be delivered under this Agreement shall be in writing and shall be delivered personally against receipt, by courier service or by registered mail, return receipt requested, and shall be effective upon actual receipt by the party to which such notice shall be directed, and shall be addressed as follows (or to such other address as the party entitled to notice shall hereafter designate in accordance with the terms hereof):

 

(i)  If to the Company, to:
SmartMetric Inc.
67 Wall Street, 22nd Floor
New York, New York 10005

(ii)  If to Executive, to:
Colin Hendrick
314 Brooklyn Avenue
Brooklyn, New York 11213

(h)   Excise Tax Limit. Notwithstanding anything in this Agreement to the contrary, in the event it shall be determined that any payment or distribution by the Company or any other person or entity to or for the benefit of Executive is a “parachute payment” (within the meaning of Section 280G of the Internal Revenue Code, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (a “Payment”) in connection with, or arising out of, his employment with the Company or a change in ownership or effective control of the Company (within the meaning of Section 280G of the Internal Revenue Code, and would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code) (the “Excise Tax”), the Payments shall be reduced to the extent necessary so that such remaining Payment would not be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code.

 

(i)   Headings. Headings to paragraphs in this Agreement are for the convenience of the parties only and are not intended to be part of or to affect the meaning or interpretation hereof.

 

(j)   Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 

(k)   Withholding. Any payments provided for herein shall be reduced by any amounts required to be withheld by the Company from time to time under applicable Federal, State or local income or employment tax laws or similar statutes or other provisions of law then in effect.

 

(l)   Arbitration; Legal Fees. Except as provided in this Agreement any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in New York, New York in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. The Company shall reimburse Executive for all reasonable legal fees and costs and other fees and expenses which Executive may incur in respect of any dispute or controversy arising under or in connection with this Agreement; provided, however, that the Company shall not reimburse any such fees, costs and expenses if the fact finder determines that the action brought by Executive was frivolous or in the event judgment is entered against Executive.

 

(m)   GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.

IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto set his hand as of the day and year first above written.

 

 

 

	
 
	
SMARTMETRIC, INC.

	
 
	
 

	
 
	
By:/s/ Colin Hendrick

	
 
	
Name:  Colin Hendrick

	
 
	
Title:  President and CEO

	
 
	
 

	
 
	
EXECUTIVE

	
 
	
 

	
 
	
/s/ Colin Hendrick

	
 
	
Colin Hendrick

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