TECHNOLOGY LICENSE AGREEMENT
THIS AGREEMENT is made the 1st day of June, 1999.
B E T W E E N
724 SOLUTIONS INC., a corporation incorporated under the laws of
Ontario, having its principal place of business at 4101 Yonge
Street, Suite 702, Toronto, Ontario, Canada M2P 1N6 ("724") -AND-
BANK OF AMERICA NATIONAL TRUST & SAVINGS ASSOCIATION, a national
banking association, having an office at 201 Third Street, San
Francisco, CA, U.S.A., 94103 ("BOFA") BACKGROUND:
1. 724 is in the business of designing, developing and marketing
Internet-based electronic banking applications over a variety of access platforms.
2. Pursuant to a letter of intent entered into by 724 and BofA, dated as of
December 21, 1998, 724 had agreed to license to BofA certain technology
developed by 724 as at the date of this Agreement and during the period
commencing on the date hereof, until February 1, 2000 (the "First
Anniversary") (such technology being, the "1999 Technology"), in return
for a specified license fee (the "1999 License Fee"). 724 granted a
further option to BofA to license the technology developed by 724 during
the one year period commencing on the First Anniversary (the "2000
Technology") for a further license fee that is equal to the 1999 License
Fee (the "2000 License Fee"). Thereafter, BofA would be entitled to
license certain technology developed by 724 during each subsequent year
for an additional fee per year.
3. 724 and Bank of America Corporation ("BAC"), an affiliate of BofA, have
entered into a subscription agreement, dated as of the date hereof (the
"Subscription Agreement"), pursuant to which BAC has agreed to subscribe
for certain shares of 724 as of the date hereof, and certain additional
shares on the First Anniversary. BofA has agreed to license both the
1999 Technology and the 2000 Technology, and to pay both of the 1999
License Fee and the 2000 License Fee (collectively, the "License Fee"),
all in accordance with the terms and conditions of this Agreement.
IN CONSIDERATION of the premises, the mutual covenants contained herein and
other good and valuable consideration (the receipt and sufficiency of which are
hereby irrevocably acknowledged), the parties hereto agree as follows: -2-
ARTICLE I
INTERPRETATION
1.1 DEFINITIONS. In this Agreement, the following expressions shall have the
following meanings:
"1999 DEVELOPMENT PLAN" means the 1999 technology development plan for
724 determined by the Parties and attached hereto as Schedule "B";
"2000 DEVELOPMENT PLAN" means the 2000 technology development plan for
724 to be determined by the Parties in accordance with Section 2.13
hereof, the principal milestones of which are outlined in Schedule "C" hereof;
"2000 SHARES" means the 270,895 common shares of 724 to be issued to BAC
(or its assignee in accordance with the Subscription Agreement) as at the
First Anniversary;
"AFFILIATE" has the following meaning:
(a) one body corporate shall be considered Affiliated with another
body corporate if, but only if, one of them is the subsidiary of
the other or both are subsidiaries of the same body corporate or
each of them is controlled by the same person;
(b) a body corporate shall be considered to be controlled by a person
or by two or more bodies corporate if, but only if:
(i) voting securities of the first-mentioned body corporate
carrying more than 50% of the votes for the election of
directors are held, other than by way of security only, by
or for the benefit of such other bodies corporate; and
(ii) the votes carried by such securities are sufficient, if
exercised, to elect a majority of the board of directors of
the first-mentioned body corporate;
(c) a body corporate shall be considered a subsidiary of another body
corporate if, but only if:
(i) it is controlled by:
(I) that other body corporate, or
(II) that other body corporate and one or more bodies
corporate each of which is controlled by that other
body corporate, or
(III) two or more bodies corporate each of which is
controlled by that other body corporate; or
(ii) it is a subsidiary of a body corporate that is a subsidiary
of that other body corporate;
"AGREEMENT" means this Agreement, all schedules attached hereto and any
agreement or schedule supplementing or amending this Agreement. The
words "hereto," "herein,"
-3-
"hereof," "hereby" and "hereunder" and similar expressions refer to
this Agreement and not to any particular section or portion of it.
References to an Article, Section, Subsection or Schedule refer to the
applicable article, section, subsection or schedule of this Agreement;
"ALLIANCE ANNIVERSARY" has the meaning ascribed to it in Section 2.3;
"ASSOCIATE", where used to indicate a relationship with any person, means,
(a) any body corporate of which the person beneficially owns,
directly or indirectly, voting securities carrying more than 10
per cent of the voting rights attached to all voting securities
of the body corporate for the time being outstanding,
(b) any partner of that person,
(c) any trust or estate in which the person has a substantial
beneficial interest or as to which the person serves as trustee
or in a similar capacity;
(d) any relative of the person, including the person's spouse, where
the relative has the same home as the person; or
(e) any relative of the spouse of the person where the relative has
the same home as the person;
"BOFA FUNDED IMPROVEMENT" has the meaning ascribed to it in Section 2.9;
"BOFA GROUP" has the meaning ascribed to it in Section 4.3.1;
"BUSINESS" means the business of 724, being the business of designing,
developing, marketing, licensing and supporting Internet-based electronic
banking and e-commerce applications over a variety of access platforms,
which is carried on by 724 in North America and may be carried on in
other jurisdictions from time to time;
"BUSINESS DAY" means any day other than a Saturday, Sunday or holiday
observed by Bank of Montreal or BofA;
"CLAIM" means any claim, demand, action, cause of action, damage, loss,
liability, cost or expense (including reasonable professional fees and
disbursements as finally awarded) which may be paid, sustained, suffered
or incurred directly by a Person who asserts a right of compensation,
contribution or indemnity (a "Claimant") or which may be made or brought
against the Claimant by another Person;
"COMPETITOR" means any person or entity which, directly or indirectly
through any Affiliate or Associate of such person or entity: (i) carries
on the Business; and (ii) competes materially with 724 as determined by
the Board of Directors of 724 acting reasonably;
"CONFIDENTIAL INFORMATION" means all information marked as confidential,
or identified as confidential if delivered orally and, in any case,
disclosed by or on behalf of either -4-
Party or their respective Affiliates or subsidiaries (the "DISCLOSING
PARTY") to the other (the "RECIPIENT") or coming to the attention of
the Recipient, its Affiliates, subsidiaries or other controlled
entities or their respective employees, officers, directors, agents or
advisors (collectively, the "RECIPIENT GROUP"), together with,
regardless of the manner of disclosure and whether or not it was
marked or identified as confidential, the source code version of the
Licensed Technology (including all physical and electronic
manifestations thereof), the Specified Confidential Information, BofA
Funded Improvements that are Derivative Works, Third Party Materials
and BofA's customer information. Confidential Information does not
include any of the following items: (i) information which at the time
of its disclosure is publicly available otherwise than as a result of
disclosures in breach of a duty or obligation in favour of the
Disclosing Party or its Affiliates and through no fault of the
Recipient Group; (ii) information which, after disclosure hereunder,
is released to the public by the Disclosing Party without restriction
or otherwise properly becomes part of the public domain through no
fault of the Recipient Group or any other Person who, to the knowledge
of the Recipient after exercising due diligence, owed a duty of
confidentiality to the Disclosing Party or its Affiliates (but only
after it is released or otherwise becomes part of the public domain);
(iii) information which the Recipient can demonstrate was in the
possession of a member of the Recipient Group at the time of
disclosure and which was not acquired by such Person directly or
indirectly under any obligation of confidence or from a Person who, to
the knowledge of the Recipient after exercising due diligence, owed an
obligation of confidentiality with regard to such information (for the
purposes of subsections (ii) and (iii) information shall also be
treated as confidential after the Disclosing Party shall have
demonstrated to the Recipient that, notwithstanding its due diligence
at the time of disclosure, the source of the information was in fact
under a duty of confidentiality with respect to such information - the
Recipient Group shall not be liable for having acted in good faith
that such information was not confidential until the Recipient is so
informed); and (iv) information which the Recipient can demonstrate
was independently developed by any member of the Recipient Group
without any use of, or reference to, the Confidential Information of
the Disclosing Party;
"CONTINUING ALLIANCE" has the meaning ascribed to it Subsection 2.3;
"CONTINUING ALLIANCE FEE" means $****;
"CPI" means the Consumer Price Index (All Items) as published by the
United States Department of Commerce Bureau of Labor Statistics, or any
successor index thereto;
"CUSTOMER OF BOFA" means a retail or other "end user" financial services
customer of BofA and/or of one of its Affiliates; for purposes of this
definition, a retail or other "end user" is an individual consumer who
accesses the financial services and other products provided by BofA or of
its Affiliates using the Licensed Technology or an employer which
procures access using the Licensed Technology to such financial services
and other products for its employees for their personal consumption and
for use in their employer's business (provided that such business is an
"end user");
"DELIVERABLES" means the 724 Technology as it exists on the date hereof,
and each additional deliverable listed in the 1999 Development Plan and
the 2000 Development
[****]REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH
THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO
RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. -5-
Plan, as they may be revised by the Parties from time to time in
accordance with the provisions of this Agreement;
"DERIVATIVE WORK" means a work which is based on the Licensed Technology,
such as a revision, enhancement, modification, translation, abridgement,
condensation, expansion, or any other form in which the underlying work
may be recast, transformed, or adapted, and which, if prepared without
authorization of the owner of the copyright in the underlying work, would
constitute a copyright infringement. Derivative Works are subject to the
ownership rights and licenses of others in the underlying work;
"ETA" means the EXCISE TAX ACT (Canada);
"IMPROVEMENT" has the meaning ascribed to it in Section 2.9;
"INCLUDING" and "INCLUDES" shall be deemed to be followed by the
statement "without limitation" and neither of such terms shall be
construed to limit any word or statement which it follows to the specific
or similar items or matters immediately following it;
"INTELLECTUAL PROPERTY RIGHTS" includes: (A) any and all proprietary
rights provided under (i) patent law, (ii) copyright law, (iii) design
patent or industrial design law, (iv) semi-conductor chip or mask work
law, or (v) any other statutory provision or common law principle which
may provide a right in either (a) ideas, formulae, algorithms, concepts,
inventions or know-how generally, including trade secret law, or (b) the
expression or use of such ideas, formulae, algorithms, concepts,
inventions or know-how; and (B) any and all applications, registrations,
licenses, sub-licenses, franchises, agreements or any other evidence of a
right in any of the foregoing;
"LICENSE FEE" is $**** million;
"LICENSE FEE HOLDBACK" means ****% of the License Fee;
"LICENSED TECHNOLOGY" means: (i) all of the Deliverables; (ii) all other
724 Technology developed by 724 prior to the Second Anniversary; and
(iii) all other 724 Technology delivered to BofA in accordance with the
provisions of Section 2.3, together with all (a) Updates and Upgrades
delivered to BofA in accordance with this Agreement or the Maintenance
and Support Agreement; (b) Improvements delivered in accordance with this
Agreement which are not BofA Funded Improvements; and (c) BofA Funded
Improvements which are Derivative Works;
"MAINTENANCE AND SUPPORT AGREEMENT" means the software maintenance and
support agreement between the Parties dated as of the date hereof, the
form of which is attached hereto as Schedule "D";
"ORST" means retail sales tax and other amounts payable pursuant to the ORSTA;
"ORSTA" means the RETAIL SALES TAX ACT (Ontario);
"PARTY" means either 724 or BofA and "PARTIES" means both of them;
[****]REPRESENTS MATERIAL WHICH HAS BEEN REDACTED AND SEPARATELY FILED WITH
THE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT PURSUANT TO
RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED. -6-
"PERSON" shall be broadly interpreted and includes an individual,
corporation, partnership, joint venture, trust, association,
unincorporated organization or any other entity recognized by law;
"SECOND ANNIVERSARY" means February 1, 2001;
"724 CHANNEL" means any one of the home banking channels developed or to
be developed by 724 which may include: mobile channels (E.G. WAP wireless
phones, palm pilot, WinCE palm-sized PCs), a PC plug-in, game consoles
and set-top boxes;
"724 TECHNOLOGY" means the Intellectual Property Rights and the Technical
Information relating to the 724 Channels developed by or for 724 that are
provided to or intended to be provided to 724's customers generally and
expressly excludes confidential or proprietary enhancements and
modifications of or for 724's other customers, as determined by 724, but
shall include the Deliverables;
"SPECIFIED CONFIDENTIAL INFORMATION" means all of 724's computer
programs, code, algorithms, user manuals, programmer instructions,
programmer materials, development notes, schematics, architectural
diagrams and drawings, patent applications, 724's product and marketing
plans and strategies, forecasts, financial plans, business models and
business plans, customers, customer lists, financial statements and
projections, tax returns, non-public product pricing, materials presented
to members of the board of directors of 724 or to the shareholders of
724, names and expertise of employees (when such name or expertise is
disclosed by or on behalf of one Party to the other), the terms of this
Agreement and any Technical Information or proprietary business
information disclosed, made available, or otherwise obtained on 724's premises;
"SUBSCRIPTION AGREEMENT" means the subscription agreement between 724 and
BAC dated as of the date hereof;
"TAX RATE" means, at any given time, the combined Canadian federal and
Ontario provincial corporate tax rate applicable to non-manufacturing and
processing active business income earned by a corporation which is not a
Canadian controlled private corporation, including any applicable surtaxes;
"TECHNICAL INFORMATION" means all right, title and interest in and to all
technical know-how of 724 including:
(i) all information of a scientific, technical or business nature
whether in oral, written, graphic, machine readable, electronic
or physical form; and
(ii) all patterns, plans, designs, research data, research plans,
trade secrets and other proprietary know-how, processes,
formulas, drawings, technology, computer software and related
manuals, unpatented blue prints, flow sheets, equipment and parts
lists, instructions, manuals, records and procedures;
"THIRD PARTY MATERIALS" means any software, documentation, technology,
Intellectual Property Rights and other materials which are not owned by
724 but delivered to BofA -7-
hereunder together with the Licensed Technology or incorporated in the
Licensed Technology;
"UPDATE" means a set of procedures or new program code that 724
implements to correct defects in any Licensed Technology and which may
include modifications to improve performance or a revised version or
release of Licensed Technology which may incidentally improve its
functionality, but expressly excludes Upgrades (the determination of
whether a version or release is an Update or Upgrade in accordance with
this and the following definition shall be made by 724 in good faith);
"UPGRADE" means a new version or release of 724 Technology that 724 makes
generally available to its customers to improve the functionality of, or
add functional capabilities to, the Licensed Technology or to support
additional 724 Channels.
1.2 HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not affect the construction or interpretation hereof.
1.3 EXTENDED MEANINGS. Words in the singular include the plural and
vice-versa and words in one gender include all genders.
1.4 ENTIRE AGREEMENT. The Parties agree that this Agreement, the Maintenance
and Support Agreement and the Subscription Agreement constitute the
complete and exclusive statement of the terms and conditions between them
covering the performance thereof and cannot be altered, amended or
modified except in writing executed by the Parties to be bound thereby.
Each of the Parties acknowledge that it has not been induced to enter
into this Agreement by any representations and it has not relied on any
representations, warranties or conditions not specifically stated herein
or in the Subscription Agreement or the Maintenance and Support Agreement.
1.5 INVALIDITY. If any of the provisions contained in this Agreement are
found by a court of competent jurisdiction to be invalid, illegal or
unenforceable in any respect, the validity, legality or enforceability of
the remaining provisions contained herein shall not be in any way
affected or impaired thereby.
1.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California and the federal laws
of the United States applicable therein (excluding any conflict of laws
rule or principles that might refer such construction to the laws of
another jurisdiction) and shall be treated, in all respects, as a
California contract. The Parties submit to the non-exclusive
jurisdiction of the courts of the Province of Ontario or California. If
either Party is permitted to select whether any matter brought before a
court is to be decided by jury or by judge, the Parties agree that they
will not select to have any such matter decided by jury and hereby waive
any such right to a jury trial. The Parties expressly exclude the
application of the United Nations Convention on Contracts for the
International Sale of Goods.
1.7 CURRENCY. Except as otherwise expressly provided in this Agreement, all
dollar amounts referred to in this Agreement are stated in the lawful
currency of the United States of America. -8-
1.8 COMPUTATION OF TIME. When calculating the period of time within which or
following which any act is required or permitted to be done, notice given
or step taken pursuant to this Agreement, the date which is the reference
date in calculating such period shall be excluded. If the last day of
such period is a non-Business Day, the period in question shall end on
the next following Business Day.
1.9 SCHEDULES. The following Schedules are incorporated into and form part
of this Agreement:
Schedule "A" Arbitration Rules of Procedure
Schedule "B" 1999 Development Plan
Schedule "C" Principal Milestones of the 2000 Development Plan
Schedule "D" Form of Maintenance and Support Agreement
ARTICLE II
GRANT OF LICENSE
2.1 GRANT OF LICENSE. Subject to the terms and conditions hereof, 724 grants
to BofA a non-exclusive, non-transferable, fully paid-up, royalty-free,
irrevocable, worldwide, perpetual license:
(a) USE OF LICENSED TECHNOLOGY BY BOFA AND ITS AFFILIATES: to use,
modify, enhance, amend and/or change the Licensed Technology
required to modify, enhance, amend, change, maintain, implement,
correct, update and support the 724 Channels and create
Derivative Works thereof for its own internal use and the
internal use of Affiliates of BofA (only for so long as they
remain Affiliates); and
(b) USE BY CUSTOMERS OF BOFA AND ITS AFFILIATES: to sublicense and
distribute only the client executable version of the Licensed
Technology as modified or amended, including any Derivative
Works, to Customers of BofA and Customers of Affiliates of BofA
(with respect to particular Customers, only for so long as the
relevant Affiliate of BofA remains an Affiliate) but only for
their own personal display and use in connection with the banking
business of BofA and its Affiliates.
Provided however, that the license hereby granted shall not extend to any
use by, or disclosure to, Affiliates of BofA or any other Person
contemplated by this Section 2.1 which is, directly or indirectly, (or
who is a director, officer, employee or agent of) a Competitor unless
such company or other entity is wholly-owned, directly or indirectly, by
Bank of America Corporation. Provided, however, that notwithstanding the
immediately preceding sentence, BofA shall be entitled to license
Customers of BofA or of its Affiliates who are Competitors to use the
client-executable version of the Licensed Technology (i.e. manifestations
of the Licensed Technology intended for use by the end-user and not
including the Source Code or those components of Specified Confidential
Information not reasonably necessary for BofA's Customer to use the Licensed -9-
Technology in the manner contemplated by this Section 2.1) so long as
BofA obtains for 724's benefit the agreement contemplated in Sections
2.1, 2.2 and 2.6.
Subject to the foregoing, 724 grants BofA the right to authorize other
Persons to carry out any of the foregoing permitted uses in this Section
2.1 on behalf of BofA, provided that BofA shall cause such other Person
to not further disclose or make use (unless such other Person is merely a
Customer of BofA or of its Affiliates, in which case BofA need merely
cause such Customer to agree to not further disclose or make use) of the
Licensed Technology or the Confidential Information of 724 in any manner
whatsoever except for and on behalf of BofA as provided in this Section.
BofA shall cooperate with 724 in enforcing its rights against such
Persons specified above, including: (a) making 724 a third party
beneficiary in any agreement that grants the authority to a third party
in accordance with this Section 2.1; (b) taking such action as is
reasonably necessary to enforce BofA's agreements with such Persons; and
(c) promptly notifying 724 upon becoming aware of any breach by any such
Person of any right of 724 hereunder or otherwise, including any
infringement of 724's Intellectual Property Rights or any unauthorized
disclosure or use of 724's Confidential Information.
BofA hereby covenants and agrees to indemnify and hold harmless 724 in
respect of all losses (including loss of profit or revenue), costs,
damages, liabilities, obligations and expenses incurred or sustained
(together with the amount of all taxes thereon, including as provided in
Section 3.3) in the event that any Person (unless such Person is merely a
Customer) contemplated by this Section 2.1 uses or discloses 724's
Confidential Information contrary to the terms hereof. With respect to
Persons who are merely Customers of BofA or of its Affiliates, BofA shall
similarly indemnify and hold harmless 724 unless it obtained for 724's
benefit the agreements contemplated in Sections 2.1, 2.2 and 2.6 and it
has not made available to such Customer any 724 Technology, Third Party
Materials or BofA Funded Improvements which are Derivative Works contrary
to the terms hereof. For the purposes of Article IV, a claim for any
such indemnity shall be a "Breach of Confidentiality Claim".
2.1.1 CLARIFICATION OF PERMITTED USE. For greater certainty, it is the
intent of the parties that, while BofA may subcontract to third
parties certain permitted functions involving the Licensed
Technology in accordance with the provisions of Section 2.1, the
third parties shall only be entitled to use and/or disclose the
Licensed Technology and 724's Confidential information for the
benefit of BofA or its Affiliates and not for their own internal
use or in their own businesses. BofA acknowledges and agrees
that the parties intend that the practical effect of Section 2.1
shall be that the benefit of use of the Licensed Technology and
724's Confidential Information in accordance with the terms
hereof shall only extend to BofA and its Affiliates. Therefore,
the reference to a prohibition on the operation of a "service
bureau" in Section 2.2 is meant to confirm that BofA and its
Affiliates shall not have a license to use or disclose the
Licensed Technology or 724's Confidential Information for the
benefit of a third party, since that would deny 724 the right and
opportunity to negotiate a separate license fee with the third
party. Therefor, the License hereby granted shall not be
construed so as to permit any third party other than Affiliates
of BofA (and then only to the extent provided above) to receive,
copy, review, use or benefit from the Licensed Technology or
724's Confidential Information. The third party users referred to -10-
in Section 2.1 are merely to be performing functions for BofA
that it could have done itself in accordance with the license
terms. Provided, however, that notwithstanding the foregoing,
and for greater certainty, the licenses granted herein include
the right to sublicense a business Customer to use the
client-executable version of the Licensed Technology for its
own internal "end user" business purposes.
2.2 RESTRICTIONS ON USE. BofA shall: (a) not transfer, assign, lease,
export, grant a sublicense of, or otherwise make available, the Licensed
Technology or the license contained herein or 724's Confidential
Information to any Person except as and when authorized to do so herein;
(b) not use the Licensed Technology or 724's Confidential Information
except as authorized herein; (c) not use the Licensed Technology or 724's
Confidential Information to act as a service bureau, in whole or in part,
for any other Person; (d) take such precautions with respect to the
Licensed Technology and 724's Confidential Information as BofA would
otherwise take to protect its own proprietary software or hardware or
information from unauthorized use or disclosure. BofA shall cause each
of its Affiliates, independent contractors, permitted sublicensees of the
Licensed Technology, Customers of BofA and Customers of BofA's Affiliates
who are granted the right to use the Licensed Technology and each of the
other Persons contemplated by Section 3.1 to agree to comply with the
above restrictions (provided that, for Customers, the provisions of
clause (d) above shall refer instead to such precautions as such
Customers would take with respect to their own Intellectual Property, but
not less than a reasonable standard of care).
BofA shall include (and shall cause its Affiliates to include)
counterpart restrictions which are substantially the same as the
restrictions set forth in the preceding clauses (a) through (d), in each
license, services or other agreement of BofA or its Affiliates concerning
the Licensed Technology or concerning services or products using or
incorporating the Licensed Technology. BofA shall cooperate with 724 in
enforcing the above-mentioned restrictions against its Affiliates,
independent contractors, permitted sublicensees of the Licensed
Technology and Customers of BofA who are granted the right to use the
Licensed Technology and the other Persons contemplated by Section 3.1 or
any other person obtaining access through BofA, directly or indirectly,
to the 724 Technology or to 724's Confidential Information, including:
(i) making 724 a third party beneficiary in any agreement that grants the
authority to a third party to use the Licensed Technology or 724's
Confidential Information; (ii) taking such action as is reasonably
necessary to enforce BofA's agreements with such Persons; and
(iii) promptly notifying 724 upon becoming aware of any breach by any
such Person of any right of 724 hereunder or otherwise, including any
infringement of 724's Intellectual Property Rights and any unauthorized
disclosure or use of 724's Confidential Information.
2.3 SCOPE OF LICENSED TECHNOLOGY: In addition to the items specified in the
definition of "LICENSED TECHNOLOGY" appearing in Section 1.1 of this
Agreement, "LICENSED TECHNOLOGY" shall include the following:
2.3.1 CONTINUING ALLIANCE BEYOND SECOND ANNIVERSARY. If BofA pays the
full amount of the License Fee, and BAC (or such other Affiliate
of BAC as shall be permitted by the Subscription Agreement)
subscribes for and pays to 724 the full subscription price for
the 2000 Shares in accordance with the terms and
-11-
conditions of the Subscription Agreement, it may elect prior
to the Second Anniversary, and at each anniversary thereafter,
to continue as a development partner with 724 for an
additional year and thereby to license additional 724
Technology (the "CONTINUING ALLIANCE" and each anniversary
after the Second Anniversary during the Continuing Alliance is
referred to as an "ALLIANCE ANNIVERSARY") in consideration of
the Continuing Alliance Fee, adjusted once annually at 724's
option for increases in the CPI during the prior 12 month
period. No earlier than 90 days prior to the Second
Anniversary and prior to each Alliance Anniversary thereafter,
724 shall invoice BofA for the Continuing Alliance Fee on
terms which are net 60 days. If BofA does not remit payment
within 60 days after receipt of any particular invoice, BofA
shall be deemed to have elected not to enter into or extend
(as the case may be) the Continuing Alliance beyond the Second
Anniversary or beyond the day before the Alliance Anniversary
which is the first day of the Continuing Alliance period in
respect of which such invoice was prepared (as the case may
be). Under the Continuing Alliance, BofA shall license
additional 724 Technology so that the Licensed Technology
shall include, in addition to all 724 Technology previously
licensed hereunder, all 724 Technology developed by 724 up to
the end of the Continuing Alliance.
BofA's right to continue the Continuing Alliance terminates as of
the close of business on the last day of the last 12-month period
that the Continuing Alliance was in effect; provided that BofA
may reinstate the Continuing Alliance at any time during the two
year period after such alliance was terminated, by paying the
Continuing Alliance Fee for all prior periods for which it has
not been paid, with interest calculated in accordance with
Section 4.4. For greater certainty, BofA may reinstate the
Continuing Alliance after it has been terminated only one time.
2.3.2 SECOND ANNIVERSARY. If BofA pays the full amount of the License
Fee, and BAC (or such Affiliate of BAC as shall be permitted by
the Subscription Agreement) subscribes for and pays to 724 the
full subscription price for the 2000 Shares in accordance with
the terms and conditions of the Subscription Agreement, but does
not elect, or is deemed (pursuant to Section 2.3) not to have
elected, to enter into the Continuing Alliance as at the Second
Anniversary, the Licensed Technology shall include, in addition
to all components previously licensed hereunder, all 724
Technology developed up to the Second Anniversary and the first
version of each 724 Channel that is significantly completed as at
the Second Anniversary.
2.3.3 PREFERRED CUSTOMER OPTION BEYOND SECOND ANNIVERSARY. If BofA
pays the full amount of the License Fee, and BAC (or such
Affiliate of BAC as shall be permitted by the Subscription
Agreement) subscribes for and pays to 724 the full subscription
price for the 2000 Shares in accordance with the terms and
conditions of the Subscription Agreement, but BofA either does
not elect, or is deemed (pursuant to Section 2.3) not to have
elected, to enter into or extend the Continuing Alliance, BofA
may, from time to time on or prior to the fourth anniversary of
the end of the Continuing Alliance (or, if the Continuing
Alliance was not entered into, then on or prior to February 1,
2005, obtain a license for additional 724 Technology, and, upon
BofA's payment of all applicable license fees, the Licensed
Technology shall include, in addition to all components -12-
previously licensed hereunder such Upgrades and new 724
Technology developed and made generally available to 724's
customers in respect of which such additional license fees have
been paid. 724 shall determine the license fees for said
Upgrades and new 724 Technology based on its list prices (no
discount from standard rates) and the other terms of such license
shall be the same for BofA as apply to 724's customers,
generally, except that BofA shall be entitled to a source-code
(rather than object code, which is expected to be the general
case) license.
2.4 BOFA COMMITMENT. BofA acknowledges and agrees that it has committed to
working with 724 towards achieving the Deliverables, and unconditionally
agrees to pay the non-refundable License Fee in accordance with the terms
of Section 3.1 hereof, unless this Agreement terminates in accordance
with Section 6.1 (Business Termination). Notwithstanding the forgoing,
the License Fee Holdback which is attributed to the acceptance of the
Deliverables shall be subject to the terms and conditions of Section 2.14 (Acceptance).
2.5 MAINTENANCE AND SUPPORT AGREEMENT. 724 will provide maintenance and
support services in respect of the Licensed Technology in accordance with
the Maintenance and Support Agreement, the form of which is attached
hereto as Schedule "D". The Services (as such term is defined in the
Maintenance and Support Agreement) will commence, and 724 may invoice the
Maintenance Fee, only after the first 724 Channel is delivered to (as
contemplated in Section 2.16 hereof) and accepted by BofA in accordance
with the acceptance testing procedure in Section 2.14 hereof.
2.6 CUSTOMER AND AFFILIATES LICENSE AGREEMENTS. Where BofA enters into a
sublicense pursuant to Section 2.1 hereof, BofA shall enter into license
agreements with Customers of BofA and Affiliates of BofA in a form
satisfactory to 724, acting reasonably, that: (i) protects the
Confidential Information of 724; (ii) restricts the use of the Licensed
Technology by the Affiliates, Customers of BofA and Customers of
Affiliates of BofA solely to that set out in Section 2.1(b);
(iii) restricts the number of copies of the relevant Licensed Technology
to that number of copies reasonably required for their own use and for
backup purposes, provided that all copyright notices and any other
proprietary notices are included; (iv) forbids the decompiling,
disassembly and reverse engineering of the Licensed Technology;
(v) requires that the Affiliates, Customers of BofA and Customers of
Affiliates of BofA comply with all export laws in respect of the Licensed
Technology; (vi) disclaims any liability on the part of 724 for damages,
liabilities, costs or expenses incurred or sustained by the Affiliates,
Customers of BofA and Customers of Affiliates of BofA in connection with,
or by virtue of, the use of the Licensed Technology; (vii) makes 724 a
third party beneficiary of such agreements for the purposes of giving 724
the benefit of such waivers and liabilities as well as the right to
protect the Intellectual Property Rights in the Licensed Technology and
the confidentiality and use of its Confidential Information; and (viii)
contains terms and conditions prescribed by third party licensors of
Third Party Materials that are delivered with or incorporated in the
Licensed Technology. BofA will provide the initial form of license
agreement referred to herein and, after 724 provides its approval, only
amendments thereto adverse to the interests of 724 or otherwise material
shall require further approval of 724. Terms and conditions that apply
to Third Party Materials may have to be approved by the third party
licensors of such materials. BofA shall cooperate with 724 and the
licensor of any Third -13-
Party Materials in enforcing their rights against the Affiliates,
Customers of BofA and Customers of Affiliates of BofA, including: (a)
taking such action as is reasonably necessary to enforce BofA's and its
Affiliates' agreements with such Persons; and (b) promptly notifying 724
upon becoming aware of any breach by any such Person of any right of 724
(whether provided for herein or otherwise) or of a licensor of Third
Party Materials, including any infringement of any Intellectual Property
Rights and any unauthorized disclosure or use of Confidential Information.
Notwithstanding any provision of this Agreement to the contrary, the
parties acknowledge and agree that any agreement for 724's benefit that
is required to be obtained by BofA from persons who are merely its
Customers or merely Customers of Affiliates may be obtained in electronic
form (i.e. "click-through", "click-wrap" or "web-wrap") provided that:
(i) the agreements by or on behalf of BofA and/or its Affiliates
with such Customers concerning the products or services
incorporating or using the Licensed Technology are similarly
in electronic format; and
(ii) 724 is given the right to review and approve the form and
content of the portion of such electronic agreements relevant
to the Licensed Technology, such approval not to be
unreasonably withheld or delayed.
2.7 PROVISION OF LICENSED TECHNOLOGY AND BOFA FUNDED IMPROVEMENTS. Upon
request by BofA, 724 shall provide to BofA the following Licensed
Technology and BofA Funded Improvements:
(a) the source code version of any software included in the Licensed
Technology and BofA Funded Improvements, excluding any Third
Party Materials, in machine-readable form on machine-readable
storage. When compiled, such source code version will produce
the object code version of the software; and
(b) all applicable documentation and other explanatory materials in
724's possession, including any programmer's notes, technical or
otherwise, for the Licensed Technology and BofA Funded
Improvements, excluding Third Party Materials, as may be
reasonably required by BofA, that a competent computer programmer
possessing ordinary skills and experience would need to further
develop, maintain and operate the Licensed Technology or BofA
Funded Improvements, as the case may be, without further recourse
to 724 including, but not necessarily limited to, general
flow-charts, input and output layouts, field descriptions,
volumes and sort sequence, data dictionary, file layouts,
processing requirements and calculation formula and the details
of all algorithms.
Unless otherwise agreed between the Parties, 724 agrees to deliver to
BofA the then current version of the Licensed Technology (excluding Third
Party Materials that 724 does not have the right to distribute),
including the source code version of the Licensed Technology (excluding
Third Party Materials that 724 does not have the right to distribute) and
the corresponding object code version, upon BofA's reasonable request but
no less frequently than annually. In addition, 724 agrees to include
with such delivery a list of all Third Party Materials and Intellectual
Property Rights licensed by -14-
724 which are included in the Licensed Technology, other than general
software development tools.
2.8 OWNERSHIP OF LICENSED TECHNOLOGY AND RELATED INTELLECTUAL PROPERTY
RIGHTS. BofA acknowledges and agrees that the Licensed Technology and
all Intellectual Property Rights therein and 724's Confidential
Information are and shall at all times remain the exclusive property of
724 and its Affiliates and Subsidiaries and that no rights, title or
ownership interest of any kind whatsoever in the Intellectual Property
Rights therein, or any portion of same, except for the right to use as
specifically provided in Section 2.1 hereof, shall pass to BofA, its
Affiliates, Customers of BofA and Customers of Affiliates of BofA or any
other Person. 724 acknowledges and agrees that BofA shall have all
right, title and interest in and to any software or technology that BofA
independently develops to work with the Licensed Technology, provided
such software or technology does not constitute a Derivative Work and
provided that such software or technology does not infringe 724's
Intellectual Property. BofA shall reproduce all copyright and other
Intellectual Property Rights notices of 724, and the licensors of Third
Party Materials, with each copy of the Licensed Technology made by BofA
or products and services incorporating or using or accompanied by the
Licensed Technology and/or Third Party Materials.
2.9 BOFA REQUESTED IMPROVEMENTS. From time to time, BofA may request and/or
fund certain additional functionality (each is referred to as an
"IMPROVEMENT"). If BofA makes such a request, 724 will use commercially
reasonable efforts to accommodate BofA and may, at its option, charge
BofA either on a time and materials or project fee basis for the
development of such Improvements.
If BofA funds any Improvement (a "BOFA FUNDED IMPROVEMENT"), then:
(a) if such BofA Funded Improvement is a Derivative Work, 724 shall
own the Derivative Work, together with all Intellectual Property
Rights therein, and 724 hereby grants BofA a perpetual,
fully-paid, irrevocable, exclusive world-wide license to use,
reproduce, sublicense, market, perform, display and prepare
derivative works therefrom; and
(b) if such BofA Funded Improvement is not a Derivative Work, BofA
shall own the BofA Funded Improvement, and 724 hereby assigns to
BofA all of its right, title and interest therein, together with
all Intellectual Property Rights therein.
If 724 (either at the time of the initial request by BofA for the
Improvement or thereafter) determines that a BofA Funded Improvement
could be exploited by 724 in connection with its business and/or could be
licensed to one or more customers of 724, then 724 and BofA will
negotiate, acting in good faith, an agreement on mutually agreeable,
commercially reasonable terms pursuant to which BofA will:
(a) if the BofA Funded Improvement is a Derivative Work, waive the
exclusivity of the license by 724 to BofA of the BofA Funded
Improvement, or
(b) if the BofA Funded Improvement is not a Derivative Work, grant to
724 the right to exploit the BofA Funded Improvement. -15-
None of the fees stated in Section 3 of this Agreement or which are
stated in the Maintenance and Support Agreement are "BofA funding" within
the meaning of this Section 2.9.
2.10 WAIVER OF MORAL RIGHTS. 724 agrees to use commercially reasonable
efforts to cause any employee, permitted subcontractor or any other
person under 724's control who was involved in the development of the
Licensed Technology and BofA Funded Improvements, in such form as is
satisfactory to BofA, acting reasonably, to irrevocably waive in favour
of 724 any and all moral rights arising under the COPYRIGHT ACT (Canada)
as amended (or any successor legislation of similar force and effect) or
similar legislation in other applicable jurisdictions or at common law
that such individual, as author, has with respect to any copyrighted
works prepared by such individual that are included in the Licensed
Technology or BofA Funded Improvements.
2.11 THIRD PARTY MATERIALS. BofA acknowledges that certain Third Party
Materials may be required in order to develop, compile, use or operate
the Licensed Technology and BofA Funded Improvements, and agrees as follows:
(a) BofA agrees that 724 may include Third Party Materials in the
Licensed Technology or BofA Funded Improvements with BofA's
consent (not to be unreasonably withheld or delayed) and at
BofA's expense, on terms agreeable to BofA, acting reasonably, if
required in connection with the development of or use of the
Licensed Technology or BofA Funded Improvements, as the case may be;
(b) BofA shall cooperate with 724 to obtain the necessary licenses or
rights to use Third Party Materials used with the Licensed
Technology or BofA Funded Improvements, or included therein,
provided however that BofA will release 724 from any performance
or other obligations that 724 is unable to comply with as result
of BofA's election not to directly acquire a license or right to
use any Third Party Materials; and
(c) BofA shall: (i) comply with; (ii) cause its Affiliates, agents,
independent contractors and other Persons given access to the
Licensed Technology to comply with; (iii) use commercially
reasonable efforts to cause the Customers of BofA and the
Customers of its Affiliates, to comply with; and (iv) cooperate
with 724 and third party licensors by including in agreements
with its Affiliates, Customers of BofA and Customers of its
Affiliates and permitted sublicensees of the Licensed Technology
and BofA Funded Improvements and all other Persons given access
to the Licensed Technology, all terms and conditions specified by
each third party licensor relating to its Third Party Materials,
including restrictions on use of the Third Party Materials and
payment of any license, maintenance or other amounts (including
applicable taxes) specified by such third party licensor. BofA
will cooperate with 724 and the relevant third party licensors in
enforcing the rights of such licensors of Third Party Materials.
2.12 COMPLIANCE WITH LAWS. BofA understands that the Licensed Technology,
BofA Funded Improvements and Third Party Materials may include
cryptographic technology and other technology that is subject to
restrictions imposed by export controls and other laws and regulations,
and that the export of the Licensed Technology, BofA Funded Improvements -16-
and Third Party Materials outside the United States of America and Canada
may be highly regulated. BofA shall fully comply, and cause its
Affiliates and permitted sublicensees of the Licensed Technology, BofA
Funded Improvements and Third Party Materials and all other Persons
(other than Persons who are merely Customers of BofA or of its
Affiliates) given access to the Licensed Technology to comply (or, in the
case of persons who are merely Customers of BofA or of its Affiliates, to
agree to comply) with all applicable export control and other relevant
laws and regulations of any applicable jurisdiction that apply to the
Licensed Technology and BofA Funded Improvements, including any Third
Party Materials that are used with the Licensed Technology and BofA
Funded Improvements. If any such Affiliate or other Person (other than
Persons who are merely Customers of BofA or of its Affiliates) fails to
comply with such laws, BofA shall fully indemnify and save harmless 724
in connection with any loss (including loss of profits) cost, expense,
damage or liability sustained, suffered or incurred in connection
therewith. Provided, however, that BofA will provide a similar indemnity
to 724 in the event that it fails to obtain for 724 from any particular
Customer restrictions required by this Section 2.12 as part of the type
of agreement contemplated by Sections 2.1, 2.2 and 2.6 or if BofA or its
Affiliates discloses, distributes or makes available to the Customers the
source code or any other component of the Licensed Technology that is
part of 724's Confidential Information. For the purposes of Article IV,
a claim for any such indemnity shall be a "724 Third Party Claim".
2.13 TECHNOLOGY DEVELOPMENT PLANS. Each of the Parties agrees that the 1999
Technology Plan (a copy of which is attached as Schedule "B" hereto)
specifies the initial set of Deliverables and the performance
specifications, delivery dates and the prorata portion of the License Fee
Holdback attributable to each Deliverable. The Parties shall use their
commercially reasonable efforts to work together to develop, by no later
than the First Anniversary, a mutually agreeable 2000 Technology Plan
(including the Deliverables generally described in Schedule "C" hereto),
which will specify the Deliverables to be delivered prior to the Second
Anniversary, including the functional and performance specifications,
delivery dates and the prorata portion of the License Fee Holdback
attributable to each such Deliverable, and which, when settled in final
form and initialled by the parties, shall be attached hereto and made a
part hereof a replacement for Schedule "C". The aggregate of the prorata
amounts of the License Fee Holdback attributable to each of the 1999
Development Plan and the 2000 Development Plan shall be one half of the
total License Fee Holdback. The Parties will develop mutually agreed
detailed functional and performance specifications for each subsequent
Improvement. The specifications shall be the basis for the Acceptance
Tests called for in Section 2.14.
The Parties acknowledge that the Parties' development plans and
performance requirements are subject to change from time to time, and, in
order to accommodate such changes, the Parties shall work together in the
event that the change in their development plans or performance
requirements results in a required change in either the 1999 Technology
Plan or the 2000 Technology Plan. If a Party wishes to change a
Deliverable, or the scheduled delivery date for such Deliverable, it
shall promptly notify the other Party of such change. The Parties shall
then work together, acting reasonably, to make mutually agreeable changes
to the relevant technology plan, and shall reapportion the prorata
License Fee Holdback among the remaining Deliverables in the relevant
technology development plan. If any such change accelerates the delivery
date of a Deliverable or results in a significant change in the scope,
requirements or amount of -17-
effort required to be expended by 724, 724 will be permitted, upon BofA's
prior written consent, to charge BofA on either a time and materials
basis at 724's then standard current rates (the current rates are
specified in Schedule "A" to the Maintenance and Support Agreement) or a
fixed price project fee.
The Parties further acknowledge that there may be certain factors beyond
the control of 724 that could frustrate the development, delivery or
testing of any Deliverable (a "Dependency"), including interoperability
issues arising in BofA's systems and third party facilities providers'
systems. If a Dependency causes a Deliverable to be delayed, the Parties
will work together in good faith to complete the Deliverable as soon as
practicably possible (subject to any extra charges that may result and be
paid in accordance with the immediately preceding paragraph). The
Parties shall, in the event of any such delay, negotiate in good faith an
amendment to the 1999 Development Plan and/or the 2000 Development Plan
for the purpose of developing new or additional Deliverables against
which to apply the License Fee Holdback amount allocated to the
Deliverable that was frustrated. In the event that no such agreement is
reached by the Parties acting reasonably and in good faith, BofA shall
not be obligated to pay the License Fee Holdback amount in question.
2.14 ACCEPTANCE TESTING.
2.14.1 Each Deliverable and BofA Funded Improvement or any Upgrade or
Update delivered hereunder (for purposes of this Section 2.14
only, collectively referred to as a "Deliverable") will be
subjected to acceptance testing by BofA during an Acceptance Test
Period consisting of not more than 60 days from the date of
delivery of the Deliverable to BofA. "Acceptance Test" means a
test which can reliably and consistently confirm that a
Deliverable substantially meets the functional and performance
specification (a "Specification") prepared in accordance with
Section 2.13. In this regard, BofA shall, in conjunction with
724, establish a "Test Plan" to take place during the particular
Acceptance test Period, which Test Plan involves numerous test
runs or other verification of the Deliverable. BofA covenants
and agrees to use commercially reasonable efforts to notify 724
of Critical or Major defects (as contemplated in Section 2.14.4)
as early as possible throughout the Acceptance Test Period and
shall use commercially reasonable efforts to complete as much of
the Test Plan for the particular Acceptance Test in order that
724 obtain as much information concerning the status of the
Deliverable as possible from the particular Acceptance Test. An
Acceptance Test Period shall be considered to be completed when
the Test Plan for the particular Acceptance Test Period has been
completed or the Test Plan has had to be abandoned as a result of
Critical or Major (as defined below) errors which make further
testing of the Deliverable meaningless or which would yield
unreliable test results.
2.14.2 A Deliverable will be "accepted" if BofA provides written notice
that the Deliverable has passed the Acceptance Test, or will be
deemed to have been "accepted" if:
(a) BofA does not notify 724 within the initial or, if applicable,
any subsequent Acceptance Test Period that it does not accept the Deliverable; -18-
(b) BofA does not notify 724 during the Acceptance Test Period of
defects or problems constituting non-compliance of the
Deliverable with its Specification; or
(c) BofA uses the Deliverable for commercial production purposes or
otherwise uses the Deliverable on other than a "testing" basis
for a period of five Business Days.
2.14.3 Acceptance will be effective on the earliest of: (i) the date
upon which 724 receives notice of acceptance; (ii) the last day
of the Acceptance Test Period (provided that notice of the
failure of the Acceptance Test or of defects or problems has not
been delivered prior to the end of the Acceptance Test Period)
and (iii) the fifth Business Day after the day upon which BofA
first uses the Deliverable for commercial production purposes or
otherwise uses the Deliverable on other than a "testing" basis;
and that day will be deemed to be the "Acceptance Date".
2.14.4 If all or part of the Acceptance Test indicates that the
Deliverable does not comply with its Specification, BofA will
notify 724 of the particular failure and will, acting reasonably,
classify the defects or problems encountered as follows:
(a) CRITICAL - a failure substantially preventing the useful
operation of the Deliverable;
(b) MAJOR - a failure which does not preclude the useful
operation of the Deliverable, but substantially reduces its
effectiveness or which materially and adversely affects the
performance or functionality of the Deliverable from the
perspective of the Customer; or
(c) MINOR - a defect or problem other than a Critical or Major problem.
2.14.5 Upon receipt of notification of a Critical or Major problem, 724
will use commercially reasonable efforts to correct such Critical
or Major problem (in conjunction with all other Critical or Major
problems identified by the particular Acceptance Test) within the
time period determined jointly by BofA and 724, acting reasonably
and having regard to the nature of such Critical or Major
problem(s). Under no circumstances will such correction period
extend beyond 30 days from the end of the particular Acceptance
Test Period.
When the Critical and Major defects identified by a particular
Acceptance Test ha
