Kwikset Smartscan Agreement:
Note 12 – Commitments and Contingencies
On May 16, 2007, Sequiam Biometrics, Inc. (“SBI”), a wholly-owned subsidiary of the Company, and Kwikset Corporation (“Kwikset”) amended that certain Cooperative Development and Supply Agreement dated as of September 13, 2005 (the “Agreement”). The amended agreement (the “Amendment”) provides for: (a) current payments to SBI for non-recurring engineering costs and test equipment; and (b) a fixed royalty payment to SBI for the BioLock product over a royalty term that begins June 1, 2007 and is extended to May 31, 2012. The Amendment also grants SBI full reseller privileges for the BioLock product based on terms and conditions set by Kwikset.
Kwikset and SBI further agreed to conduct a two phase cost reduction project for the BioLock. Kwikset agreed to pay SBI 50% of the Phase 1 cost savings achieved for a period of twelve months following the first delivery of the cost reduced product. Kwikset also agreed to pay Sequiam 50% of the Phase 2 incremental cost savings achieved for a period of twelve months following the first delivery of the phase 2 cost reduced product. Sequiam may also sell its proprietary technology to Kwikset for use in future versions of the BioLock product.
The Amendment removes a development project called BioSystems from the Agreement so that it, and all future projects contemplated by SBI and Kwikset will be governed by separate agreements. SBI also agreed to deliver to Kwikset all information necessary for the manufacture of the BioLock product exclusive of trade secrets and source code, which remain SBI’s property.
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