ROYALTY AGREEMENT
THIS AGREEMENT is entered into effective as of the __ day of ____________,
1998 (the "Effective Date"), by and between Celerity Systems, Inc., a Delaware
corporation (hereinafter called "Celerity"), and the undersigned individual or
entity (hereinafter called the "Lender").
Recitals
A. The Lender has made a loan (the "Loan") to Celerity as evidenced by a
Promissory Note (the "Note") dated the same date as the Effective Date.
B. In consideration for the Loan, Celerity has agreed to make certain royalty
payments to the Lender with respect to sales of its T 6000 set top box (as
defined in Section 1.E. below), subject to the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the Loan and the mutual promises and
covenants set forth herein, the parties hereto do hereby agree as follows:
1. Calculation and Payment of Royalties.
A. Celerity hereby agrees to pay to the Lender royalty payments (the
"Royalty" or "Royalties") equal to the product of (i) a fraction,
the numerator of which is the principal amount of the Note, and the
denominator of which is $100,000, (ii) Fifty Cents ($0.50), and
(iii) the number of T 6000 set top boxes shipped by Celerity to
customers during the Royalty Period (as defined in Section 1.B.
below), subject to the other provisions of this Agreement. Royalties
shall not be paid with respect to non-revenue producing shipments of
the T 6000, including, but not limited to, shipments of loaned
units, beta shipments, and shipments of test and evaluation units,
nor shall Royalties be due on units for which Celerity is only
reimbursed for the costs of shipping and insuring the units and/or
similar costs.
B. The "Royalty Period" means the period commencing on the Effective
Date and ending at 12:01 A.M. on the third anniversary of the
Effective Date; provided, however, that (i) if the initial term of
the Note is two (2) years, then the Royalty Period shall end at
12:01 A.M. on the fourth anniversary of the Effective Date, and (ii)
if the initial term of the Note is three (3) years, then the Royalty
Period shall end at 12:01 A.M. on the fifth anniversary of the
Effective Date; provided, further, that if the initial term of the
Note is for one (1) or two (2) years, then, under certain
circumstances, the Royalty Period may be extended at the election of
the Lender in accordance with the terms of Section 2 below and the
Note.
C. Subject to the other provisions of this Agreement, the Royalty
applicable to each T 6000 shipped by Celerity shall be deemed to be
earned thirty (30) days following the date of
shipment by Celerity. Celerity will issue a written report to the
Lender within thirty (30) days following the expiration of each
calendar quarter; provided, however, that each report with respect
to a calendar quarter ending December 31 (other than the final such
report due under this Agreement, as it may be extended, which shall
be due not later than January 31 of the following year) shall be
issued not later than December 31. Such report shall set forth the
number (or estimated number, in the case of any report issued on
December 31) of units shipped during such calendar quarter for which
the Royalty has been earned and shall be accompanied by a check
representing payment of all Royalties owed.
D. Royalty payments with respect to any calendar quarter will be
subject to adjustments for refunds provided and amounts declared
uncollectible by Celerity, in its sole discretion, during the
applicable (or any subsequent) calendar quarter. In addition,
Royalty payments set forth in reports issued on December 31 shall be
subject to adjustment in subsequent calendar quarters, to the extent
actual Royalties differ from any estimated Royalties set forth in
such report.
E. For the purposes hereof, the "T 6000 set top box" shall mean the
current version of Celerity's T 6000 digital set top box as of the
Effective Date, all versions of the T 6000 digital set top box
containing updates, upgrades and enhancements, and all other digital
set top boxes developed and manufactured by Celerity that are
derived from or based in any substantial part on the design of the
current version of the T 6000 digital set top box as of the
Effective Date.
2. Extension of Royalty Period.
Under certain circumstances, the Lender may elect to extend the payment
date of the Note by providing written notice of such election as provided
for in the Note. If the Note has an initial term of one (1) year and (i)
if the Lender extends the payment date of the Note for one (1) year, then
the end of the Royalty Period will also be extended for one (1) additional
year (from 12:01 A.M. on the third anniversary of the Commencement Date to
12:01 A.M. on the fourth anniversary of the Commencement Date), and (ii)
if the Lender extends the payment date of the Note for two (2) years, then
the end of the Royalty Period will also be extended for two (2) years
(from 12:01 A.M. on the third anniversary of the Effective Date to 12:01
A.M. on the fifth anniversary of the Effective Date). If the Note has an
initial term of two (2) years and the Lender extends the payment date of
the Note for one (1) year, then the end of the Royalty Period will also be
extended for one (1) year (from 12:01 A.M. on the fourth anniversary of
the Commencement Date to 12:01 A.M. on the fifth anniversary of the
Commencement Date).
3. General Provisions.
A. This Agreement shall be binding upon, enforceable by and shall inure
to the benefit of the parties hereto and their respective successors
and assigns, except that the Lender may not transfer any of its
rights or obligations under this Agreement unless such
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transfer is made in connection with a transfer of the Note to a
person who is a registered holder thereof in accordance with the
terms of the Note, and the Lender shall be required to transfer such
rights and obligations in connection with a transfer of the Note.
B. This Agreement is entered into pursuant to and shall be governed by
the laws of the State of Delaware, without regard to the conflicts
of laws principles of such State. The Company and the Payee each
irrevocably consent to the jurisdiction of, and venue in, the courts
of the State of Delaware, and of the federal courts located in the
State of Delaware, in connection with any action or proceeding
arising out of or relating to this Note, any document or instrument
delivered pursuant to, in connection with or simultaneously with
this Note, or a breach of this Note or any such document or
instrument. In the event that any provision of this Agreement shall
be deemed to be invalid and unenforceable in whole or in part, the
remainder of this Agreement shall remain in full force and effect.
C. This Agreement, the Note and the Subscription Agreement collectively
constitute the entire agreement between the parties with respect to
the subject matter hereof and may be amended only by a written
instrument executed by Celerity and the Lender.
D. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested, or by Federal Express, Express Mail or
similar overnight delivery or courier service or delivered (in
person or, if receipt is confirmed orally or in writing, by telecopy
or similar telecommunications equipment) against receipt to the
party to whom it is to be given, (i) if to Celerity, as follows:
Celerity Systems, Inc., Attention: President, 0000 Xxxxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx, Xxxxxxxxx 00000, (ii) if to the Lender, at the
Lender's address set forth below, or (iii) in either case, to such
other address as the party shall have furnished by notice in
accordance with the provisions of this paragraph. Any such notice
shall be deemed given at the time of receipt thereof.
E. The section headings of this Agreement are for reference purposes
only and are to be given no effect in the construction or
interpretation of this Agreement.
F. This Agreement may be executed by the parties hereto in separate
counterparts, each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute one
and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been duly executed by the parties as
of the Effective Date.
CELERITY SYSTEMS, INC.
By: ____________________________
Title: _________________________
0000 Xxxxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxxx 00000
LENDER: ________________________
________________________________
Print Name
________________________________
Signature
________________________________
Title, if applicable
LENDER ADDRESS:
________________________________
________________________________
________________________________
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