EX-10.4 4 licensetmsvscexhibit.txt [*CONFIDENTIAL TREATMENT REQUESTED] TMS VSC LICENSE AGREEMENT BETWEEN VSC TECHNOLOGIES, LLC, A DELAWARE LIMITED LIABILITY COMPANY AND TMS, INC., AN OKLAHOMA CORPORATION October 10, 2002 TMS VSC LICENSE AGREEMENT THIS TMS VSC LICENSE AGREEMENT (the "Agreement"), made and entered into as of the 10th day of October, 2002 by and between VSC Technologies, LLC, a Delaware limited liability company ("LLC") and TMS, Inc., an Oklahoma corporation ("TMS"). WHEREAS, contemporaneously herewith, Measurement Incorporated, a North Carolina corporation ("MI"), along with TMS and LLC have entered into that certain Master Agreement (the "Master Agreement"), pursuant to which, among other things, the parties agreed that TMS and the LLC shall enter into this Agreement; and WHEREAS, in addition to entering into the Master Agreement, MI, TMS and LLC have contemporaneously entered into that certain Operating Agreement; NOW, THEREFORE, in consideration of the premises, the parties agree as follows: 1. Definitions. 1.1. Code shall mean computer programming code and any other machine processable material necessary to complete the computer programming code. 1.2. Confidential Information shall have the meaning given in Section 3.01 of the Master Agreement. 1.3. Copy shall mean a material object in which a work is fixed by any method now known or later developed, and from which the work can be communicated, either directly or with the aid of a machine or device. The term "copy" includes the material object in which a work is first fixed, including a diskette, or a file which may be downloaded via any electronic or telecommunications means. 1.4. Documentation (in lower case) shall mean textual and/or graphic material, perceivable directly by humans and/or with the aid of a device or machine, relating to a computer program; (when capitalized) the term shall mean documentation relating to the Licensed Software. 1.5. Education Market shall mean customers (including, but not limited to, educational testing companies, private and governmental departments of education and colleges, universities and similar institutions) which conduct testing, surveys or otherwise collect and/or archive information in or for educational systems or institutions. 1.6. Executable Code shall mean the machine readable form of the Code. 1.7. Field means the market for delivering products and/or services for the purpose of scoring and measuring the results of constructed response and selected response answers against predefined criteria and for archiving and exploiting stored images, but shall exclude the Education Market. 1.8. Intellectual Property Rights shall mean any and all rights to exclude existing from time to time in a specified jurisdiction under patent law, copyright law, moral rights law, trade secret law, trademark law, unfair competition law, or other similar rights. 1 1.9. Item shall mean a constructed response answer to be read or archived using the Licensed Software. 1.10. Licensable Activity shall mean any activity encompassed by one or more Intellectual Property Rights, e.g., an activity which, absent a license, would give rise to liability for infringement (or inducement of infringement or contributory infringement) of the Intellectual Property Right(s). 1.11. License shall have the meaning given in Section 2.1. 1.12. Licensed Marks shall mean those trademarks listed in Annex A hereto, and all other trademarks now or hereafter owned by LLC, relating to the Field. 1.13. Licensed Software shall mean the software listed in Annex A hereto, all Improvements (as such term is defined in the Operating Agreement) and Modifications (as defined in Section 3.5 thereto) thereto and all other Program Technology (as such term is defined in the Operating Agreement), relating to the Field. 1.14. Net Sales shall mean TMS's invoice price of Licensed Software, f.o.b. factory, sold or leased by TMS, less only: (a) sales taxes, shipping and/or insurance if these are separately itemized on the invoice; and (b) credits, product returns, refunds, rebates, chargebacks, retroactive price adjustments and any other reasonable allowances granted following the original invoice. A Copy of Licensed Software shall be deemed to be sold or leased upon acceptance of the Licensed Software by the customer. In no event, however, shall Net Sales exceed the amount actually paid to TMS. 1.15. Operating Agreement shall mean the certain operating agreement by and among the LLC, MI and TMS of even date herewith. 1.16. Person shall mean a natural person, a corporation (for profit or not-for-profit), an association, a partnership (general or limited), a joint venture, a trust, a government or political department, subdivision, or agency, or any other entity. 1.17. Prescribed Term shall mean terms, conditions and warranties implied by law and to some contracts for the supply of goods and services which the law expressly provides: (a) may not be excluded, restricted or modified; or (b) may be excluded, restricted or modified only to a limited extent. 1.18. Processor System shall mean a central processing unit ("CPU") and one or more co-processors (e.g., math or graphics co- processors) associated with the CPU. 1.19. Royalty shall have the meaning given in Section 3.1. 1.20. Sheet shall mean two sides or two pages of a single sheet of paper whether processed in whole or in part by the Licensed Software. 1.21. Term shall have the meaning given in Section 4. 2 1.22. Territory shall be the world. 1.23. Trademark Use means use of a Licensed Mark in accordance with and subject to Section 2.4. 1.24. Transactional Agreements shall have the meaning given in Section 1.07 of the Master Agreement. 1.25. Use or Using of the Licensed Software shall mean the performance of the following steps only: (a) copying some or all of a Copy of the Licensed Software into memory accessible by one or more Processor Systems, solely for the purpose of making the Copy accessible to that Processor System for execution of the Licensed Software (specifically not including making other Copies of the Licensed Software in disk storage or other permanent storage); and (b) causing the User's Processor System to execute the computer programs which have been copied into its memory. 1.26. User shall mean each Person who Uses the Licensed Software to perform VSC Services, in the Field. 1.27. User License shall mean a license granted by TMS to a User to Use the Licensed Software in accordance with Section 1.24 (a) and (b). 1.28. User License Agreement shall have the meaning given in Section 2.2. 1.29. VSC Services shall mean the processing of Sheets, which may include archiving the resulting images of those Sheets, and reading Items utilizing the Licensed Software. 2. Grant of License. 2.1. License Rights Granted. Subject to the terms and conditions of this Agreement, LLC hereby grants to TMS and TMS hereby accepts a non-exclusive license in the Territory (the "License") during the Term, under any and all Intellectual Property Rights owned or otherwise assertable by LLC, to engage in the following Licensable Activities: (a) Distribution of Copies of the Licensed Software to customers within the Field for the sole purpose of performing VSC Services by Users thereof; (b) Trademark Use of the Licensed Marks; and (c) Distribution of Documents for use by Users. 2.2. Sublicensing. TMS shall have the right to grant User Licenses in the Territory, but shall have no other right to grant other sublicenses of the rights conferred by this Agreement. Prior to granting any User License, TMS and MI, on behalf of the LLC, shall agree upon a standard User License agreement (excluding financial terms), which form shall be attached hereto as Annex B ("User License Agreement"). 4 [***] 3.2. Monthly Reports. Within twenty (20) days after the end of each month, TMS will furnish LLC with an itemized report ("Monthly Sales Report"), signed on behalf of TMS by an authorized representative of TMS, that sets forth in detail: (a) the number of Copies of Licensed Software distributed to Users in that reporting period pursuant to this Agreement; (b) the calculation of Net Sales for that reporting period; and (c) the name and addresses of each User who provided VSC Services in that reporting period pursuant to this Agreement, which information shall be kept confidential by LLC pursuant to the Master Agreement; and (d) the amount due LLC for Royalties during that reporting period. 3.3. Annual Reports. Within forty-five (45) days after the end of each calendar year, TMS will furnish LLC with a consolidated year-end report, signed on behalf of TMS by an officer of TMS. (a) The year-end distribution report will include year-to-date information as of the year end. (b) The year-end distribution report may be combined with the final Monthly Sales Report for the year in question under Section 3.2 if (i) the final Monthly Services Report results are separately stated, and (ii) the year-end report is delivered on or before the time at which the final Monthly Sales Report is due. 3.4. Records; Inspection Rights. TMS will maintain appropriate records of the number and location of all Copies that it may make of the Licensed Software, as well as records of services and deductible expenses made pursuant to the License granted hereunder. Such records shall, within three (3) years after the royalty period to which such records relate, be open to inspection from time to time on reasonable notice during normal business hours by LLC or by an independent accountant selected by LLC and approved by TMS, which approval shall not be unreasonably withheld. LLC or the accountant shall have the right to examine the records which relate to the computation of the Royalties to be paid under this Agreement and the accountant may report the findings of such examination of records to LLC solely to the extent of reporting the accuracy of the reports and payments made by TMS, including the amount of any discrepancy, if any. Such examination, however, shall not occur more than one (1) time per year, unless the prior year's audit disclosed a discrepancy, or unless a cumulative total of two audits has disclosed a discrepancy, in which case such examinations may occur up to four (4) times per year at times and intervals selected in the sole discretion of LLC. A copy of any report provided to LLC by the accountant shall be given concurrently to TMS. Any accountant so selected shall sign, at the request of TMS, an appropriate agreement with TMS to keep confidential all information obtained as a result of such examination of records. LLC shall be responsible for all the costs associated with such audit, unless the examination of the accountant reveals: (i) an underpayment by TMS by more than ten percent (10%) of the amount actually owing to LLC during any annual reporting period, or $10,000, whichever is greater, in which case TMS shall bear such costs; or (ii) there is an underpayment in the period in question and the amount of all underpayments from all prior periods exceeds $20,000, in which case TMS shall bear such costs of the final audit. [*CONFIDENTIAL TREATMENT REQUESTED] 5 3.5. Modification of Licensed Software. TMS may modify any of the Licensed Software ("Modifications") without the specific written permission of LLC. Modifications shall be subject to Section 7.1.3 of the Operating Agreement 4. Term. The term (the "Term") of this Agreement shall commence upon execution and shall continue until terminated as provided herein. 5. Disclaimer of Warranties and Representations. LLC DISCLAIMS ANY AND ALL WARRANTIES, CONDITIONS OR REPRESENTATIONS (EXPRESS OR IMPLIED, ORAL OR WRITTEN), WITH RESPECT TO THE LICENSED SOFTWARE OR ANY PART THEREOF, INCLUDING ANY AND ALL IMPLIED WARRANTIES OR CONDITIONS OF MERCHANTABILITY, OR FITNESS OR SUITABILITY FOR ANY PURPOSE (WHETHER OR NOT LLC KNOWS, HAS REASON TO KNOW, HAS BEEN ADVISED, OR IS OTHERWISE IN FACT AWARE OF ANY SUCH PURPOSE), WHETHER ALLEGED TO ARISE BY LAW, BY REASON OF CUSTOM OR USAGE IN THE TRADE, OR BY COURSE OF DEALING. IN ADDITION, LLC EXPRESSLY DISCLAIMS ANY WARRANTY OR REPRESENTATION TO ANY PERSON OTHER THAN TMS (AND ANY PERSON CLAIMING RIGHTS DERIVED FROM TMS'S RIGHTS) WITH RESPECT TO THE LICENSED SOFTWARE OR ANY PART THEREOF. [***] [*CONFIDENTIAL TREATMENT REQUESTED] 6 [***] 7. Termination. 7.1. Termination. The only cause for termination of this Agreement shall be if a party fails to perform any of its obligations under this Agreement and fails to remedy said breach within thirty (30) days after being given written notice of specific failure or default and termination by the non-breaching party (MI may act on behalf of the LLC, in the case of a failure to pay royalties under Section 3 or other default by TMS under this Agreement). 7.2. Effect of Termination. In the event that this Agreement is terminated: (a) any and all rights granted to TMS under this Agreement including all sublicenses granted to Users in violation of the terms of this Agreement shall immediately terminate, but any sublicenses granted to third parties not affiliated with TMS that were granted in good faith by TMS to bona fide purchasers for value and that were in compliance with the terms of this Agreement at the time of such grants shall survive termination, and such Users shall be deemed licensees to LLC; (b) each party will deliver to the other party within twenty (20) days of termination all copies in its possession or control of the other party's Confidential Information relating to this Agreement; (c) TMS's obligations to make royalty payments shall survive termination; (d) except as specially provided herein, neither party hereunder shall be discharged or relieved from any liability or obligation existing prior to such termination; and (e) all Users whose sublicenses are terminated under (a) above shall cease Using Licensed Software and Licensed Marks. 7.3 Payment of Claimed Royalties. Notwithstanding 7.1 and 7.2 above, this Agreement shall continue in full force and effect as long as TMS delivers claimed Royalties into escrow until any matters in dispute are resolved. 8. Miscellaneous. 8.1. Independent Contractor. The parties acknowledge and understand that each party is an independent contractor under this Agreement. This Agreement shall not create nor be construed to create an employee/employer, agent/principal, partnership or joint venture or any other relationship among TMS and LLC other than that of independent contractor. Further, no party has any authority whatsoever to represent to any party that it is the other's attorney-in-fact or to act on behalf of or bind the other party in any capacity or way with respect to this Agreement. [*CONFIDENTIAL TREATMENT REQUESTED] 7 8.2. Further Action. Without further consideration, each party hereby agrees to execute and deliver, and to cause its officers, trustees, employees and agents to execute and deliver, such other instruments, and to take such other action as the other party may reasonably request to more effectively convey, transfer, vest and put in possession, the rights granted hereunder, and to assist in the recordation of same as necessary, all in such form and substances as the requesting party may reasonably request. 8.3. Binding Agreement. This Agreement shall be binding upon and shall inure to the benefit of the legal representatives, administrators, successors and any permitted assigns and licensees of the parties hereto but shall otherwise be non-transferable without the express written consent of the non-assigning party. 8.4. Governing Law. This Agreement and all User license agreements shall be deemed to have been made under, and shall be construed and interpreted in accordance with the laws of the State of Delaware. 8.5. Entire Agreement. The terms and conditions herein contained, including all the annexes hereto, along with the Transactional Agreements and all exhibits, annexes and schedules thereto, constitute the entire agreement between the parties and supersede all previous communications whether oral or written between the parties hereto with respect to the subject matters hereof, and no other previous agreement or understanding varying or extending the same shall be binding upon either party hereto. Nothing herein shall otherwise limit any rights or obligations of MI, TMS or LLC under the Operating Agreement. 8.6. No Waiver. The parties covenant and agree that if any party fails or neglects for any reason to take advantage of any of the terms provided for the termination of this Agreement or if either party, having the right to declare this Agreement terminated, shall fail to do so, any such failure or neglect by either party shall not be a waiver or be deemed or be construed to be a waiver of any cause for the termination of this Agreement subsequently arising, or as a waiver of any of the terms, covenants or conditions of this Agreement or of the performance thereof unless such breach has been cured as provided herein. None of the terms, covenants and conditions of this Agreement may be waived by any party except by written consent by all the parties. 8.7. Amendment. No amendment or modification to this Agreement shall be effective unless it is in writing and signed by duly authorized representatives of both parties. 8.8. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 8 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Agreement by their duly authorized officers on the date specified above. LLC: VSC TECHNOLOGIES, LLC By: Measurement Incorporated, Manager By: /s/ Henry H. Scherich ---------------------------------- Henry H. Scherich, Ph.D., President By: TMS, Inc., Manager By: /s/ Deborah L. Klarfeld ----------------------------------- Deborah L. Klarfeld, President TMS: TMS, INC. By: /s/ Deborah L. Klarfeld ----------------------------------- Deborah L. Klarfeld, President