BHL previously entered into a predecessor license agreement with Web2XML on June 1, 2001 that allowed BHL to develop barcode-related comparison shopping applications. Under this earlier agreement, BHL developed its UPCSmart division and portal. The new license agreement between Web2XML and BHL provides BHL with an exclusive world-wide license over the Web2XML software technology for all barcoding applications until June 30, 2002 (after which the license will become a non-exclusive license for barcoding applications until February 20, 2007). The license agreement also provides BHL with a 5 year non-exclusive world-wide license (automatically renewable thereafter) over the Web2XML software technology for other applications.
The option agreement between BHL and the shareholders of Web2XML grants BHL the right to acquire 100% of the outstanding securities of Web2XML until December 31, 2001. The exercise price of the option is $3.5 million (Cdn) payable in cash. As consideration for the granting of the extended license agreement and the option agreement, BHL will: (a) pay an upfront $25,000 license/option fee; (b) pay an ongoing 7% royalty (with a minimum royalty payment of $50,000 over the upcoming 15 months) on all future sub-license fees received by BHL from the Web2XML technology (although no royalties will be payable for sub-licenses for comparison shopping applications); and (c) issue 500,000 treasury common shares to Web2XML.
Issuance of the 500,000 treasury common shares will occur only after receipt of approval from the CDNX for the transaction.
Don Campbell, President & CEO of BHL, stated that "this is a major step forward in the development of our new business focus. Over the past several months, we have developed the UPCSmart portal and are excited about the present opportunities for that endeavor. During the UPCSmart development process we have, however, identified a number of other exciting commercial applications for the Web2XML technology, particularly in the pursuit of wireless business-to-business applications utilizing barcoded information. This new license agreement provides us with the full range of opportunity to pursue these avenues utilizing the Web2XML platform. We believe that we have developed an extensive base of knowledge on creating innovative applications based on this platform, and we can now concurrently pursue both the UPCSmart portal launch and these other attractive opportunities. In addition, the option to acquire 100% of Web2XML in the upcoming year provides a maximum of optionality for BHL as we explore new applications of this technology without requiring the expenditure of significant resources in BHL at this time. All in all, I believe that this transaction opens up a new world of opportunity for BHL on terms that are very attractive for our shareholders and without significant depletion of our existing cash resources."
Paul Tan, President & CEO of Web2XML, stated that "we are pleased to have extended our partnership with BHL at this time. Over the past months, we have developed an excellent working relationship with BHL and believe that they have demonstrated the expertise and commitment to implement our technology in a number of new commercial applications. We look forward to working together in a mutually beneficial relationship for both of our companies."
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