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EXHIBIT 10.3
ROYALTY AGREEMENT
This ROYALTY AGREEMENT (the "AGREEMENT") is entered into as of this
____ day of March, 1995, subject to satisfaction of the condition set forth in
Section 6.9 hereof, by and between XXXXXXXXX XXXXXXXXX, an individual
("CONSARINO"), and ROLLERBALL INTERNATIONAL INC., a corporation organized under
the laws of the State of Delaware ("ROLLERBALL").
RECITALS
A. Rollerball is engaged in the business of developing,
manufacturing and distributing inline skates and accessories
principally in the United States of America.
X. Xxxxxxxxx has performed services to Rollerball to the
development and introduction of Rollerball skate products to the
market.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and on the
basis of the representations, warranties, covenants and agreements set forth
below, Consarino and Rollerball agree as follows:
1. COMPENSATION FOR SERVICES
1.1 As the total compensation due to Consarino for services performed
by Consarino for Rollerball, Rollerball shall pay to Consarino a royalty (the
"Royalty") which is equal to one percent (1%) of worldwide Net Sales, with the
exception of letter of credit sales, of the Rollerball skate products which are
listed on Schedule A to this Agreement (the "Rollerball Skate Products"). For
purposes of this Agreement, "Net Sales" shall mean gross sales minus all
returns, trade discounts and allowances. On Net Sales generated by letter of
credit sales, Consarino shall be paid a Royalty of .6% of worldwide Net Sales of
the Rollerball Skate Products. Notwithstanding the foregoing, the total amount
of the Royalty paid by Rollerball to Consarino on all types of sales in any
given fiscal year shall not exceed $350,000. The Royalty shall be paid in
perpetuity, unless adjusted pursuant to Section 1.3 below.
1.2 Consarino shall not be paid a royalty in connection with any
products, other than the Rollerball Skate Products as listed on Schedule A,
developed, manufactured or distributed by Rollerball.
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1.3 In the event that Rollerball shall file a Registration Statement
with the Securities and Exchange Commission for purposes of registering the
common stock of Rollerball under the Securities Act of 1933, as amended, the
amount of the Royalty described in Section Agreement shall not apply. All
royalties due to Consarino in connection with the manufacture C, and
distribution of the Rollerball Skate Products shall be reduced proportionately
with all other Rollerball royalty recipients if deemed necessary, in the good
faith determination of Rollerball and its advisors, to facilitate an initial
public offering of Rollerball's common stock, and such reductions, if any, will
be negotiated by the parties in good faith.
1.4 The Royalty shall be paid in U.S. currency once every six (6)
months, not later than forty (40) days following the last day of Rollerball's
second and fourth fiscal quarters, with the first such payment to be made on or
before August 8, 1995.
1.5 Consarino shall be responsible for payment of any and all state and
federal taxes owed on a Royalty payment from Rollerball. The parties acknowledge
and agree that any compensation paid by Rollerball to Consarino shall be
reported to the Internal Revenue Service and appropriate state taxing
authorities by Rollerball in accordance with U.S. tax laws and regulations.
2. REPRESENTATIONS AND WARRANTIES
Rollerball hereby represents and warrants to Consarino that:
2.1 Rollerball is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has full corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
2.2 Rollerball has taken all requisite corporate action to authorize
and approve the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and this Agreement constitutes a legal,
valid and binding agreement of Rollerball, except as such enforcement may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or by the scope of equitable remedies which may be available.
2.3 The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby will not violate the Articles of
Incorporation or the bylaws of Rollerball or any agreement, contract or other
instrument to which Rollerball is a party, or any statute, rule, regulation,
order, judgement, award or decree.
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2.4 There is no litigation, proceeding or investigation pending or, to
the knowledge of Rollerball, threatened against Rollerball affecting any of its
assets or properties that could result, either in any case or in the aggregate,
in any material adverse change in the assets, properties or business of
Rollerball, or that could impair the validity of this Agreement or any action to
be taken pursuant to this Agreement.
3. AUDIT RIGHTS
3.1 Upon ten (10) days written notice by Consarino to Rollerball,
Consarino shall be given the right to audit Rollerball's accounting books and
financial records as they pertain to payment of the Royalty, together with
appropriate backup documentation related to the production and manufacture of
the Rollerball Skate Products.
3.2 In the event that Consarino's audit as provided for by Section 3.1
above demonstrates, in the good faith judgment of Rollerball and its advisors,
that Consarino is owed an additional Royalty payment, upon written notice of the
deficiency by Consarino to Rollerball, Rollerball shall have forty-five (45)
days to pay the balance owing to Consarino without penalty.
3.3 In the event that an audit conducted by Consarino pursuant to
Section 3.1 above results in a good faith dispute between Rollerball and
Consarino as to whether Consarino is owed an additional Royalty payment, the
parties hereto agree to abide by the results of a second audit to be conducted
by an independent auditor to be mutually agreed upon by Rollerball and Consarino
(the "Independent Audit"). Prior to the commencement of an Independent Audit,
Consarino will provide a written notice (the "Audit Notice") to Rollerball which
will request that the Independent Audit be conducted and will state the amount
of additional Royalty payment. which is alleged by Consarino to be owed by
Rollerball. In the event that the Independent Audit demonstrates that Consarino
is not owed an additional Royalty payment, Consarino will pay the costs and
professional fees associated with the Independent Audit. In the event that the
Independent Audit demonstrates that Consarino is owed an additional Royalty
payment, in addition to Consarino's other remedies provided by California law
and by this Agreement, Rollerball shall pay Consarino the additional Royalty
payment and interest at the rate of ten percent (10%) per annum on the principal
balance due and owing from the date for payment of the Royalty set forth in
Section 1.4 to the date that the Royalty is paid in full. In the event that the
Independent Audit demonstrates that Consarino is owed an additional Royalty
payment, the costs of the Independent Audit shall be borne by the parties in
proportion to the amount determined by the Independent Audit to be owed by
Rollerball as compared to the amount of additional Royalty payment demanded by
Consarino in the
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Audit Notice. For example only, if the Audit Notice states that an additional
Royalty payment of $50,000 is owed by Rollerball and the Independent Audit
determines that, in fact, Consarino is owed $25,000, and the Independent Audit
costs $20,000 to conduct, the parties will each pay $10,000 of Independent Audit
expense. If the parties are required by the firm conducting the Independent
Audit to pay an advance retainer or fee, the parties will share that obligation
equally, and an adjustment and/or reimbursement will be made at the conclusion
of the independent Audit to reflect the proportional obligation of the parties
as determined above.
3.4 Any audit of Rollerball's accounting books and financial records
conducted in connection with the payment of the Royalty shall occur at
Rollerball's corporate headquarters in Los Angeles, California.
3.5 Except as otherwise provided by this Agr~eni~nt, Consarino shall be
solely responsible for paying the cost of any audit conducted by Consarino
pursuant to Section 3.1, except that Rollerball shall produce relevant
accounting records at its own cost.
4. ARBITRATION
4.1 In the event of a default in the terms and provisions of this
Agreement, the parties hereto agree that they shall submit their dispute to
arbitration pursuant to the rules of the American Arbitration Association.
Furthermore, during the arbitration process, Consarino shall have the right to
conduct discovery, including but not limited to obtaining copies of all
pertinent accounting documents and deposing any and all witnesses regarding
relevant accounting issues.
5. ATTORNEYS' FEES
In the event any party takes legal action to enforce any of the terms
of this Agreement, the unsuccessful party to such action shall pay the
successful party's expenses, including attorneys' fees, incurred in such action.
6. MISCELLANEOUS PROVISIONS
6.1 Severable Provisions. The provisions of this Agreement are
severable, and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions, and any
partially unenforceable provisions to the extent enforceable, shall nevertheless
be binding and enforceable.
6.2 Successors and Assigns. All of the terms, provisions and
obligations of this Agreement shall inure to the benefit of
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and shall be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns. Notwithstanding the foregoing, neither
this Agreement nor any rights hereunder shall be assigned, pledged, hypothecated
or otherwise transferred by Consarino without the prior written consent of
Rollerball in each instance.
6.3 Governing Law. The validity, construction and interpretation of
this Agreement shall be governed in all respects by the laws of the State of
California.
6.4 Consent to Jurisdiction. Each party hereto, to the fullest extent
it may effectively do so under applicable law irrevocably (i) submits to the
exclusive jurisdiction of any court of the State of California or the United
States of America sitting in the City of Los Angeles over any suit, action, or
proceeding arising out of or relating to this Agreement, (ii) waives and agrees
not to assert, by way of motion, as a defense or otherwise, any claim that it is
not subject to the jurisdiction of any such court, any objection that it may now
or hereafter have to the establishment of the venue of any such suit, action or
proceeding brought in any such court and any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum,
(iii) agrees that a judgment in any such suit, action or proceeding brought in
any such court shall be conclusive and binding upon such party and may be
enforced in the courts of the United States of America or the State of
California (or any other courts to the jurisdiction of which such party is or
may be subject) by a suit upon such judgment and (iv) consents to process being
served in any such suit, action or proceeding by mailing a copy thereof by
registered or certified air mail, postage prepaid, return receipt requested, to
the address of such party specified in or designated pursuant to Section 6.7.
Each party agrees that such service (i) shall be deemed in every respect
effective service of process upon such party in any such suit, action or
proceeding and (ii) shall, to the fullest extent permitted by law, be taken and
held to be valid personal service upon and personal delivery to such party.
6.5 Headings. Section and subsection headings are not to be considered
part of this Agreement and are included solely for convenience and reference and
in no way define, limit or describe the scope of this Agreement or the intent of
any provisions hereof.
6.6 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements, understandings, negotiations and discussions,
whether oral or written, relating to the subject matter of this Agreement. No
supplement, modification, waiver or termination of this Agreement
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shall be valid unless executed by the party to be bound thereby. No waiver of
any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provisions hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.
6.7 Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given (i) if
personally delivered, when so delivered, (ii) if mailed, one (1) week after
having been placed in the United States mail, registered or certified, postage
prepaid, addressed to the party to whom it is directed at the address set forth
below or (iii) if given by telex or telecopier, when such notice or other
communication is transmitted to the telex or telecopier number specified below
and the appropriate answer back or telephonic confirmation is received: 5
If to Rollerball:
Rollerball International Inc.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, President
Telecopier Number: (000) 000-0000
With a copy to:
Manatt, Xxxxxx & Xxxxxxxx
00000 Xxxx Xxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
Telex Number: 215653 MPRT UR
Telecopier Number: (000) 000-0000
If to Consarino:
Xxxxxxxxx Xxxxxxxxx
00000 Xxxxxx Xxxxxx
Xxxxxxxxx 0
Xxx Xxxxxxx, Xxxxxxxxxx 00000
With a copy to:
Xxxxx & Xxxxx
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxx, Esq.
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Telecopier Number: (000) 000-0000
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
6.8 Third Parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any person other than Rollerball or Consarino any rights
or remedies under or by reason of this Agreement.
6.9 Execution and Delivery of Restatement of Assignment of Rights and
Royalty Agreement. This Agreement shall become binding upon and enforceable by
the parties hereto only upon the full execution and delivery by all named
parties thereto) of the Restatement of Assignment of Rights and Royalty
Agreement, dated as of the date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date and year first set forth above.
______________________________
XXXXXXXXX XXXXXXXXX
______________________________
ROLLERBALL INTERNATIONAL INC.
By: __________________________
Xxxx Xxxxxxxxxx,
President
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SCHEDULE A
ROLLERBALL SKATE PRODUCTS
1. All products currently manufactured by Rollerball using the Roll Ball
Technology and all products to be developed and manufactured by
Rollerball using the Roll Ball Technology.
2. Accessory equipment including replacement balls knee pads, elbow pads
and helmets which bear the Rollerball trademark; provided, however,
that this category 2 shall not include clothing.
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