EX-10.24 3 dex1024.htm LICENSE AGREEMENT DATED AS OF DECEMBER 29, 2009 LICENSE AGREEMENT
Exhibit 10.24
THIS LICENSE AGREEMENT (hereinafter “License” or “License Agreement”) is effective as of the date of signing by the last of the parties to sign below and is by and between Xiamen World Gear Sports Goods Co., Ltd. a corporation under the laws of the People’s Republic of China (“Buyer”), having a place of business at 00-00 Xxxxx 0xx Xxxx, Xxxxxxx, Jimei District, Xiamen City, Fujian Province, People’s Republic of China and Nautilus, Inc., a Washington Corporation (“Nautilus”), having a place of business at 00000 XX Xxxxxxxx Xxxxx, Xxxxxxxxx, XX. 00000. Buyer and Nautilus are referred to collectively herein as the “Parties”. This License is an exhibit to an Asset Purchase Agreement entered into on the same date between Buyer and Nautilus. The parties agree as follows:
| 1. | Definitions and Schedules |
A. Unless expressly otherwise defined herein, the Terms used in this License that are defined in the Asset Purchase Agreement shall have the same meaning as defined in the Asset Purchase Agreement.
B. “And/or” shall mean “and”, “or” and both “and” and “or”.
C. “Accessories” shall mean pedals, seats, seat posts and handlebars that replace standard components of Licensed Indoor Cycles and offer alternate functionality such as additional compatibility, comfort, cost, etc.
D. “Affiliate” shall have the meaning set forth in rule 12b-2 of the regulations promulgated under the Securities Exchange Act in force as of the effective date of this License.
E. “Asset Purchase Agreement” shall mean an agreement entered into between the Parties to which this License Agreement is an exhibit.
F. “Commercial Channel” shall mean bona fide sales to commercial, corporate, and government entities that are not Affiliates of Buyer and that provide access to the Indoor Cycles to multiple users including fitness centers, gyms, health clubs, studios, hotels, resorts, schools, military, and corporate employee centers. The Commercial Channel does not include and excludes all other sales or distributions of Indoor Cycles, including but not limited to sales and other distributions: (a) to end users (non-commercial users, typically home use) and resellers, such as retailers and online resellers; and/or (b) to any entity where there is reason to know that such entity is selling or distributing to end users and/or resellers (except as used equipment following normal use in the entity’s facility).
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G. “Permitted Retail Channel” shall mean bona fide sales to Independent Bike Dealers and Specialty Retailers that are not Affiliates of Buyer. Specialty Retailers shall mean retailers selling fitness equipment and fitness accessories and the sales of fitness equipment and accessories constitutes at least 90% of the retailers total sales. By way of example only, and not of limitation, Specialty Retailers does not include Dick’s Sporting Goods, Cabelas, Sports Authority, or other retailers having greater than 10% sales of non-fitness equipment.
H. “Channel” shall mean the Commercial Channel and the Permitted Retail Channel.
I. “Gross Sales” shall mean the total invoice price of Indoor Cycles and Accessories, and all related charges of any type whether separately invoiced (including, but not limited to, installation charges, shipping charges, taxes, and delivery charges) and whether the Indoor Cycles and/or Accessories are sold, leased or otherwise distributed.
J. “Copyrighted Works” shall mean tangible works of authorship previously used by Nautilus, and/or previously created for use by Nautilus, in connection with marketing and sales of Indoor Cycles in the Commercial Channel, such as, but not limited to, marketing collateral, photos, brochures, artwork, decals, packaging, manuals, guides, instructions, console software, and for which Nautilus owns or has exclusive rights to relevant copyrights, regardless of whether the copyright for any such Copyrighted Works are registered with any copyright office.
K. “Indoor Cycle” shall mean a stationary exercise machine that simulates bicycling and is part of the larger class of Stationary Cycles which consists of Indoor Cycles, Upright Cycles, and Recumbent Cycles. While there is overlap of these product categories, particularly between Indoor Cycles and Upright Cycles, Indoor Cycles are distinguished from Upright Cycles by exposed frames and flywheels, adjustable handlebar positioning, lacking motors, and lacking consoles that control the flywheel resistance. As a business model, Indoor Cycles are generally positioned for use in group settings at fitness centers and health clubs.
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L. “Indoor Cycle Know How” shall mean technical information that may not be confidential, but that is required to efficiently convey manufacture of Indoor Cycles. Indoor Cycle Know How includes tooling for Indoor Cycles and components thereof obtained by Buyer from Nautilus.
M. “Indoor Cycle Confidential Information” shall mean Confidential Information relating to manufacturing and marketing of Indoor Cycles for the Commercial Channel.
N. “Licensed Accessories” shall mean Accessories solely for the Channel, but not otherwise, and that bear and/or are marketed in connection with any one or more of the Licensed Marks.
O. “Licensed Domain Names” shall mean the domain names listed in Schedule C to this License.
P. “Licensed Indoor Cycles” shall mean Indoor Cycles solely for the Channel, but not otherwise, and that bear and/or are marketed in connection with any one or more of the Licensed Marks.
Q. “Licensed Indoor Cycles and Accessories” shall mean Licensed Indoor Cycles and/or Licensed Accessories.
R. “Licensed Patents” shall mean patents and patent applications listed on Schedule A to this License together with all subsequently filed and/or pending patent applications that claim priority to any one of the patents or patent applications listed on Schedule A.
S. “Licensed Rights” shall mean the rights and restrictions set forth in the license agreements identified in Schedule D to this License.
T. “Licensed Marks” shall mean the registered and common law trademarks and service marks listed in Schedule B to this License.
U. “Nautilus Quality Standards” shall mean the quality control standards set forth in Schedule E to this License, and includes modifications to the Schedule E quality control standards in accordance with the terms of this License.
V. “Nautilus Trademark Usage Guidelines” shall mean the guidelines for use of Nautilus Trademarks as set forth in Schedule F to this License, and include modifications to the Schedule F guidelines in accordance with the terms of this License. The identification of a trademark or name in Schedule F does not mean that any license to such name or xxxx is granted by this License, unless the xxxx or name is included in the Licensed Marks.
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W. “Net Sales” means “Gross Sales” less allowances for: (a) returns of Indoor Cycles and Accessories actually received; (b) refunds by Buyer to customers and cancellation of orders from Buyer by customers for Licensed Indoor Cycles and Accessories; (c) local, State and federal sales, VAT, and use and excise taxes required to be charged by Buyer for sales of Licensed Indoor Cycles and Accessories, if separately stated on an invoice; and (d) freight charges and delivery fees, if separately stated on an invoice, and provided that any such separately stated freight charges and delivery fees do not exceed one hundred and ten (110) percent of the actual costs incurred by Buyer for freight and delivery.
X. “Sales” means sales, leases and any other types of distribution of goods and services.
Y. “Trade Secret” means information, including a formula, pattern, compilation, program, device, method, technique, or process that:
(a) Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and
(b) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
Z. This License incorporates the attached schedules, listed below:
Schedule A: Licensed Patents
Schedule B: Licensed Trademarks
Schedule C: Licensed Domain Names
Schedule D: Licensed Rights (Prior Licenses Affecting Rights Granted Herein)
Schedule E: Quality Control Provisions
Schedule F: Nautilus Trademark Usage Guidelines
Schedule G: Electronic Payment Instructions
Schedule H: Sublicense Agreement (for Triple Link pedals in the USA)
| 2. | License Grant |
| A. | Patent License. |
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Subject to the terms of this License, Nautilus hereby grants Buyer a non-exclusive, non-transferable, non-assignable, non-sublicensable, worldwide, license to the Licensed Patents to make, use, sell, offer to sell, and/or import Licensed Indoor Cycles and Licensed Accessories solely in the Commercial Channel and Permitted Retail Channel. Subject to the terms of this License and while this License is in effect, Nautilus covenants not to xxx Buyer under any patent rights owned by Nautilus and used by Buyer in making, using, selling, offering to sell, and/or importing Licensed Indoor Cycles and Accessories solely in the Commercial Channel and Permitted Retail Channel. While this License is in effect, and commencing upon execution of this License, Nautilus will not grant any license of the Licensed Patents to a third party to make Indoor Cycles for the Commercial Channel. Buyer understands that Mad Dogg Athletics, Inc. is, and remains, an existing licensee (See Schedule D) of Nautilus. Nautilus is not restricted by this Patent License from otherwise exploiting the Licensed Patents itself, such as by having any products made for Nautilus for sale by and/or on behalf of Nautilus.
| B. | Trademark License. |
Subject to the terms of this License, Nautilus hereby grants Buyer an exclusive, non-transferable, non-assignable, non-sublicensable, worldwide, royalty-bearing, license to the Licensed Marks solely for use on Indoor Cycles and Accessories in the Commercial Channel and in connection with marketing and selling Indoor Cycles and Accessories in the Commercial Channel. Subject to the terms of this License, Nautilus hereby also grants to Buyer a non-exclusive, non-transferable, non-assignable, non-sublicensable, worldwide, royalty-bearing, license to the Licensed Marks solely for use on Indoor Cycles and Accessories in the Permitted Retail Channel. No license is granted by this License to use the Licensed Marks, and Buyer shall not use any Licensed Xxxx and/or any xxxx confusingly similar to any Licensed Xxxx, for any goods or services other than for Indoor Cycles and Accessories in the Channel. The Trademark License of this Section 2.B. shall be subject to Buyer’s compliance with Nautilus Quality Standards as to product quality, product appearance, customer satisfaction and service as set forth in Section 4.B. below and in Schedule E and Buyer’s compliance with Nautilus Trademark Usage Guidelines as set forth in Section 4.B. below and in Schedule F. Buyer shall prominently use at least the SCHWINN
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xxxx on all Indoor Cycles sold by Buyer that are made using any Nautilus Trade Secrets, Copyrighted Works, Nautilus Indoor Cycle Know How, or Nautilus Indoor Cycle Confidential Information, and/or that are covered by any Licensed Patents. Buyer may combine the XXXXXXX xxxx with Buyer’s trademarks, for example to market “SCHWINN LA” Indoor Cycles provided that the XXXXXXX xxxx is prominently used. Buyer understands and agrees that Buyer is to focus Buyer’s efforts on sales of Licensed Indoor Cycles and Accessories in the Commercial Channel and that Buyer is only licensed by this License to make up to a maximum of twenty (25) percent of Buyer’s total Net Sales of Licensed Indoor Cycles and Accessories in the Permitted Retail Channel in any Calendar Year.
| C. | Copyright License. |
Subject to the terms of this License, Nautilus hereby grants Buyer a non-exclusive, non-transferable, non-assignable, non-sublicensable, worldwide, license to reproduce, distribute, perform and make derivative works of all Copyrighted Works solely in connection with sales of Licensed Indoor Cycles and Accessories.
| D. | Domain Name License. |
Subject to the terms of this License, Nautilus hereby grants Buyer a non-exclusive, non-transferable, non-assignable, non-sublicensable, worldwide, license to use the Licensed Domain Names solely in connection with sales of Licensed Indoor Cycles and Accessories.
| E. | Trade Secrets, Know How and Confidential Information. |
Subject to the terms of this License, Nautilus hereby grants to Buyer a non-exclusive, non-transferable, non-assignable, non-sublicensable, and worldwide license to Nautilus Indoor Cycle Know How, Nautilus Trade Secrets and Nautilus Indoor Cycle Confidential Information solely for use in connection with sales and marketing of Indoor Cycles and Accessories bearing a Licensed Trademark in the Channel.
| F. | Licensed Rights. |
Except for rights to U.S. Patent 6,877,399 that Nautilus has under the license from Peloton Fitness identified in Schedule D (Peloton License), to which no rights are granted by Nautilus to Buyer under this Section 2.F., to the extent Nautilus has any rights under the Licensed Rights identified in Schedule D that are sublicensable, and subject to the terms of this License, Nautilus hereby grants to Buyer a non-exclusive,
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non-transferable, non-assignable, non-sublicensable, worldwide, license to rights under such Licensed Rights needed by Buyer to market and sell Indoor Cycles and Accessories in the Channel, but not otherwise. To the extent any such Licensed Rights impose restrictions on the activities of Buyer, Buyer shall be subject to and agrees to abide by such restrictions.
| G. | Sublicense Under Nautilus and Peloton License Agreement Identified in Schedule D. |
Contemporaneous with this Agreement, the Parties shall execute a Sublicense Agreement by which Nautilus shall grant Buyer rights to distribute Triple Link pedals in the USA. The Sublicense Agreement is attached as Schedule H.
During a transition period of up to six (6) months from the date of this Agreement, Buyer may acquire Triple Link pedals from Nautilus at a cost of US$28/pair. For all Triple Link pedals imported into the USA, Buyer shall pay Nautilus the royalty specified in the Sublicense Agreement.
| 3. | Payments for License |
For the Trademark License rights granted by this License Agreement to Buyer, Buyer shall pay Nautilus a Royalty which is equal to:
(i) For the calendar year 2009, no Royalty;
(ii) For the calendar year 2010, the Royalty rate shall be five (5) percent of Net Sales of Licensed Indoor Cycles and Accessories;
(iii) For the calendar year 2011, the Royalty rate shall be five (5) percent of Net Sales of Licensed Indoor Cycles and Accessories; and
(iv) For the calendar year 2012 and each year thereafter the Royalty rate shall be three (3) percent of Net Sales of Licensed Indoor Cycles and Accessories.
Because of the difficulty of allocating royalties and the different types of intellectual property being licensed by this License, the Parties agree that a Royalty based on Net Sales of products that bear and/or are marketed in connection with any one or more of the Licensed Marks is an appropriate and convenient manner of establishing the Royalty.
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C. Minimum Payment to Nautilus.
(i) Buyer shall pay Nautilus an Annual Minimum Royalty beginning in Calendar Year 2010. The royalty payments shall be paid quarterly and each quarterly payment shall be at least one-quarter ( 1/4) of the Annual Minimum Royalty until the royalty payments for the calendar year at least equal the Annual Minimum Royalty.
For the Calendar Year 2009 - Minimum Annual Payment = $0;
For the Calendar Year 2010 - Minimum Annual Payment = $800,000;
For the Calendar Year 2011 - Minimum Annual Payment = $1,000,000;
For the Calendar Year 2012 and each Calendar Year thereafter – Minimum Annual Payment = $600,000.
(ii) Example:
The Annual Minimum Royalty for 2010 is $800,000, or $200,000 per quarter until the total royalty paid to Nautilus for the calendar year is equal to or exceeds $800,000. Thus, if the net sales for Q1 yield royalties less than $200,000, Buyer shall pay $200,000. If the net sales in Q2 yield royalties in excess of $200,000, Buyer shall pay the actual royalty and the royalty paid in excess of one-quarter of the Annual Minimum may not be carried over or credited to Q3 unless the Annual Minimum has been reached. Only, when the actual paid royalties for a Calendar Year exceed the Annual Minimum Royalty, may a royalty payment for a quarter be less than one-quarter ( 1/4) of the Annual Minimum Royalty.
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Nautilus, and for the Calendar Quarter for which a payment is being paid, Buyer shall provide to Nautilus a report stating the Gross Sales, Net Sales, Net Sales in the Commercial Channel, Net Sales in the Permitted Retail Channel, and returns by product number (preferably SKU identifiers), Royalty calculations, Royalty due, and a Quality Control Report as specified in Schedule F during the applicable Calendar Quarter. Nautilus and its agents (e.g., accountants) shall have the right to inspect and copy such records at reasonable times.
I. Currency. All amounts set forth in this License are in U.S. dollars.
| 4. | Rights in Licensed Marks and Use of Marks. |
A. Ownership of Licensed Marks by Nautilus. Buyer confirms that, as between the parties, Nautilus owns all rights in and to the Licensed Marks. Buyer agrees to not use any of the Licensed Marks, or any marks confusingly similar to the Licensed Marks, for any purpose, whether in advertising, promotional materials or otherwise, except as expressly permitted by this License. Buyer shall not use, register or attempt to register any one or more of the following marks and names, or any confusingly similar marks and names for any purpose: Nautilus, Nautilus logo, and/or any other Xxxx owned by Nautilus except for use of the Licensed Marks as expressly permitted by this Agreement.
B. Use of Licensed Marks by Buyer. Any and all uses of the Licensed Marks by Buyer for goods and services, shall be only as permitted by this Agreement, and then only for goods and services that meet Nautilus Quality Standards as set forth in Schedule E to this License Agreement. Nautilus may make reasonable modifications to Nautilus Quality Standards from time to time provided that such modifications benefit customers and/or users and are made applicable to comparable Nautilus Indoor Cycle Products sold by Nautilus outside of the Commercial Channel. Buyer
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shall comply with Nautilus Quality Standards and with all such modifications to Nautilus Quality Standards, but shall have three (3) months to implement any such modifications to Nautilus Quality Standards unless such modifications relate to product safety, which Buyer shall immediately implement. All uses of the Licensed Marks shall inure to the sole benefit of Nautilus. Where Buyer deviates from past usage of a Licensed Trademark, Nautilus shall have the right to require pre-approval of any and all new proposed usages of the Licensed Marks by Buyer, whether in advertising, promotional materials, or otherwise. Where Nautilus requires prior approval, Nautilus shall have a review period of twenty-one (21) days from the receipt by Nautilus from Buyer of advertising and/or promotional materials submitted for approval by Buyer to either approve or deny approval of such materials. If Written Notice of the approval or denial of approval of such materials is not provided to Buyer before the end of the twenty-one (21) day review period, the submitted materials shall be deemed approved. Any Written Notice denying approval of the submitted materials shall provide the reasons for the disapproval and the disapproved materials shall not be used by Buyer. Buyer may correct and resubmit any disapproved materials for approval, which submission will restart the twenty-one (21) day review period. Any disagreement by the Parties as to whether materials should be approved shall be subject to the dispute resolution procedures, including mediation, of Section 15 of this License. All such uses of Licensed Marks must be in accordance with Nautilus Trademark Usage Guidelines of Schedule F, as modified by Nautilus from time to time. Nautilus hereby approves usage of Licensed Marks that strictly comply with the then current version of the Nautilus Trademark Usage Guidelines.
C. No Challenges to Licensed Marks. Buyer shall not in any way challenge or interfere with Nautilus’ rights in the Licensed Marks or assist anyone else in doing so. Buyer shall not register or attempt to register any of the Licensed Marks or any confusingly similar marks in any country.
D. Disputed Marks. If: (i) Nautilus determines that one or more of the Licensed Marks poses a significant risk of infringing the rights of a third party in a country; or (ii) Nautilus receives a letter from a third party asserting rights in one or more of the Licensed Marks in a country (any xxxx falling into 4.D. (i) and/or 4.D. (ii) shall hereinafter be called a Disputed Licensed Xxxx), then Nautilus shall have the option to
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substitute a different xxxx for each Disputed Licensed Xxxx, in which case each substituted xxxx shall become a Licensed Xxxx; and thereafter, upon sixty (60) days Written Notice to Buyer of the Disputed Licensed Xxxx, Buyer shall cease all use of each Disputed Licensed Xxxx for which such Written Notice has been provided.
| 5. | Registration, Filings and Enforcement. |
A. Registrations and Filings. Nautilus, in its sole discretion, has the option to, but is not required to: (i) file additional applications to register any one or more of the Licensed Marks in the United States and/or in any other country; (ii) maintain any registration for any one or more of the Licensed Marks in any country; (iii) file to register copyrights in the United States in the name of Nautilus as owner for any one or more Copyrighted Works; and/or (iv) file any U.S. Patent Application, and/or maintain a patent or pending application for any one or more inventions. Notwithstanding the requirements of this Section 5.A., to the extent permitted by the law of the country where the registration has been granted and while this License is in effect, Nautilus agrees to maintain the existing registrations in Schedule B to this License that include or consist of the word SCHWINN; provided, however, to the extent Buyer has the information, Buyer must cooperate with Nautilus, at Buyer’s expense, and as requested by Nautilus, by providing information concerning the use of such marks and specimens of use; so as to assist Nautilus to maintain such registrations. While this License is in effect, Nautilus, at the written request of Buyer and at Buyer’s expense for all such actions of Nautilus, agrees to file applications in the name of Nautilus to register the Licensed Marks in countries where they have not been registered, to prosecute such applications, and to obtain and maintain registrations based on any such applications for Licensed Marks in other countries. Nautilus is not required to continue the prosecution of any such application beyond a final rejection thereof by the respective Trademark Office.
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| 6. |
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| FedEx), or upon deposit thereof in the United States mail by certified mail return receipt requested (provided the address for notice is in the United States), with postage thereon fully prepaid, addressed as follows: |
| To Nautilus: | Nautilus, Inc. | |||
| Attention: Legal Department | ||||
| 00000 XX Xxxxxxxx Xxxxx | ||||
| Xxxxxxxxx, XX 00000 | ||||
| Fax: 011-306-859-???? | ||||
| E-Mail: | ||||
| To Buyer: | Xiamen World Gear Sports Goods Co., Ltd. | |||
| Attention: Xxxxxxx Xxxxx | ||||
| 00-00 Xxxxx 0xx Xxxx | ||||
| Xxxxxxx, Jimei District, Xiamen City, | ||||
| Fujian Province | ||||
| People’s Republic of China | ||||
|
| ||||
| Telephone: 000-00-000-0000-000 | ||||
| Fax: 000-00-000-000-0000 | ||||
| E-Mail: | ||||
| With a Copy to: |
| |||
| Attention: X. Xxxx Xxxxx | ||||
| 0000 X Xxxxxxxxx Xxxxxx | ||||
| Xxxxxxxxxx, Xxxx, 00000 | ||||
|
| ||||
| Fax: 000-000-0000 | ||||
| E-Mail: xxxx.xxx@xxxxx.xxx |
| 7. | Entire Agreement. This License, and Schedules A - G hereto, which are incorporated by reference herein, contains the entire agreement of the parties relating to licensing of intellectual |
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| property rights from Nautilus to Buyer, and supersedes all existing agreements and all other oral, written or other communications between the parties relating to its subject matter. This License Agreement cannot be modified except in a writing signed by all of the parties and that expressly recites that the writing is an amendment to or a modification of this License Agreement. |
| 10. | Confidentiality and Unauthorized Disclosure. |
A. Definition of “Confidential Information. As used in this License, the term “Confidential Information” means: (i) proprietary information that one party (the “Disclosing Party”) discloses to the other party (the “Receiving Party”); (ii) information marked or designated by the Disclosing Party as confidential; (iii) information, whether or not in written form and whether or not designated as confidential, that is known by the Receiving Party to be treated by the Disclosing Party as confidential or which, given the nature of the information or the circumstances surrounding its disclosure, would be understood by a reasonable person as being confidential or proprietary; and (iv) information provided to the Disclosing Party by third parties that the Disclosing Party is obligated to keep confidential provided that, in the event that such third party information does not otherwise qualify as Confidential Information hereunder, the Disclosing Party notifies the Receiving Party of such obligations. Confidential Information shall not include: (i) information that is publicly available at the time of disclosure by the Disclosing Party to the Receiving Party or its Representatives; (ii) information that becomes publicly available other than through actions of the Receiving Party or any of its Representatives in violation of this Agreement; (iii) information already known to the Receiving Party as documented by written records that predate the disclosure; (iv) information
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from the Disclosing Party that becomes owned by the Receiving Party; (v) information rightfully obtained from third parties and not subject to any obligation of confidentiality to the Disclosing Party; (vi) information independently developed by the Receiving Party without use of, reference to, or reliance on the Disclosing Party's Confidential Information; and (vii) any information following the expiration of five (5) years from the date of the first disclosure thereof to the Receiving Party.
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person the tax structure and any of the tax aspects of the transaction(s) contemplated by the Agreement solely to the extent necessary to describe or support any United States federal income tax benefits that may result therefrom or any materials relating thereto in order to comply with United States federal or state securities laws. For the purposes of this provision, “tax structure” is limited to facts relevant to the U.S. federal income tax treatment of the transaction(s) and does not include information relating to the identity of the parties, their affiliates, agents, or advisors.
| 11. | Termination and Default. |
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of any Dispute resolution procedure under Section 15 below concerning the issue of whether a material term or condition has or has not been performed by Buyer. Except as otherwise expressly provided by this License, in the event of a default of this License by Nautilus that is not cured within any applicable cure period, Buyer shall have the right to terminate this License by Written Notice of termination to Nautilus provided at any time up to the longer of six (6) months following expiration of any applicable cure period; or one (1) month following the completion of any Dispute resolution procedure under Section 15 below concerning the issue of whether a material term or condition has or has not been performed by Nautilus. Whether a material term or condition has or has not been performed is subject to the Dispute resolution procedures of Sections 15.B. – 15.C. of this License.
B. Termination for Failure to Meet Minimum Annual Net Sales Requirement.
(i). Nautilus shall have the right to terminate this License upon Written Notice to Buyer, with no cure period being available to Buyer, in the event during any three (3) consecutive Calendar Years the Minimum Annual Net Sales set forth in Section 11.B.(ii) below are not met. This three (3) year time period shall be reset and start over in the event the Net Sales for a given Calendar Year exceeds the Minimum Annual Net Sales requirement.
| (ii) | For the Calendar Year 2009 - Minimum Annual Net Sales = $0; |
For the Calendar Year 2010 - Minimum Annual Net Sales = $16,000,000;
For the Calendar Year 2011 - Minimum Annual Net Sales = $20,000,000;
For the Calendar Year 2012 and each Calendar Year thereafter, Minimum Annual Net Sales shall be $20,000,000.
Thus, for example, if Buyer’s actual Net Sales for the Calendar Year 2010 is $15,000,000; for the Calendar Year 2011 is $19,000,000; and for the Calendar Year 2012 is $19,000,000; then Nautilus shall have the right to terminate this Agreement by Written Notice to Buyer following the end of the Calendar Year 2012 because the Annual Minimum Net Sales requirement has not been met for three consecutive Calendar Years. Termination for this reason does not excuse Buyer from paying the required Minimum Annual Payments under this License for any Calendar Year prior to termination. If, on the other hand, the Net Sales for the Calendar Year 2010 is $15,000,000; the Net Sales for the Calendar Year 2011 is $19,000,000; and the Net Sales for the Calendar Year 2012 is $21,000,000; then the Minimum Annual Net Sales has been met for the Calendar Year 2012 and there has not been three consecutive three (3) years
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during which the Minimum Annual Net Sales has not been met. In this case, the three consecutive Calendar Year time period for determining a failure to meet Minimum Annual Net Sales will not restart until such time, if any, that a Calendar Year again occurs in which the Net Sales falls below the applicable Minimum Annual Net Sales requirement for that Calendar Year. The Minimum Annual Net Sales requirement shall not apply to any Calendar Year during which one or more Force Majeure events of Section 16.(c) significantly disrupts the ability of Buyer to make sales of Licensed Indoor Cycles and Accessories. The Calendar Year of any such Force Majeure disruption event shall not be considered in determining whether the Minimum Annual Sales requirement has been met for three (3) consecutive Calendar Years, but shall not result in restarting the three (3) Calendar Year calculation. Thus, for example, assume during the Calendar Year 2011, the Net Sales are $19,000,000; during the Calendar Year 2012 there is a Force Majeure event that significantly disrupts sales of Licensed Indoor Cycles and the Net Sales for Calendar Year 2012 are $6,000,000; the Net Sales for the Calendar year 2013 are $18,000,000 and the net sales for the Calendar Year 2014 are $18,000,000. Based on these assumptions, there is no Minimum Annual Net Sales requirement for the Calendar Year 2012 because of the Force Majeure event. Therefore, the License is not subject to termination for failure to meet the Minimum Annual Net Sales requirements for the three (3) Calendar Years of 2011, 2012 and 2013. However, the License is subject to termination for failure to meet the Minimum Annual Net Sales requirements at the end of the Calendar Year 2014 because of the failure for the three (3) Calendar Years 2011, 2013 and 2014, which are deemed consecutive Calendar Years because the Force Majeure event Calendar Year 2012 is not counted and does not restart the three consecutive Calendar Year count.
C. Termination for Failure to Make the Minimum Royalty Payments. Nautilus shall have the right to terminate this License upon Written Notice to Buyer in the event any Minimum Royalty payment for a quarter required by Section 3.B. is not made when due and is not paid within thirty (30) days of the Written Notice.
(i) Any and all use of Licensed Marks by Buyer, as well as of any marks, names or domain names confusingly similar thereto, shall immediately cease except that Buyer may complete all unfinished goods (work-in-progress) and sell all inventory for up to six (6) months after termination. Buyer may not acquire any additional parts or
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materials to complete unfinished goods after termination of this Agreement. Any and all use by Buyer of any Licensed Patents and any other rights licensed by Nautilus under this License to Buyer shall immediately cease upon sale of outstanding inventory.
(ii) All payments from Buyer to Nautilus that have accrued as of the date of termination or expiration shall immediately become due and payable.
| 12. | Term. |
A. Except as provided in Section 12.B. below, this License, including, but not limited to the rights licensed under Sections 2.A., 2.B.,2.C., 2.D., 2.E. and 2.F in the Commercial Channel, unless terminated in accordance with the terms of this License, shall continue in force.
B. Term for the Permitted Retail Channel
(i) Initial Term: Unless terminated in accordance with its terms, the Initial Term of this License for the Permitted Retail Channel shall be for only four (4) years from the effective date of the License. If no extension to the Initial Term is negotiated by the Parties, Buyer shall automatically have a two (2) year Wind Up Term to wind up its activity in the Permitted Retail Channel and at the end of the Wind Up Term, Buyer shall cease all sales in the Permitted Retail Channel involving the Licensed Trademarks.
(ii) Notice for Renegotiation: No earlier than six months prior to the expiration of the Initial Term and no later than sixty (60) days prior to the expiration of this Initial Term for the Permitted Retail Channel, Buyer may provide Written Notice to Nautilus of Buyer’s desire to renegotiate a license to rights for the Permitted Retail Channel for a period of time beyond the Initial Term.
(iii) Renewal Term: If Nautilus does not respond by written notice to Buyer’s request for renegotiation within sixty (60) days, then this License for rights for the Permitted Retail Channel will continue for a Renewal Term of four (4) years commencing at the end of the Initial Term.
(iv) Second Notice for Renegotiation: No earlier than six months prior to the expiration of the Renewal Term and no later than sixty (60) days prior to the expiration of this Renewal Term, Buyer may provide Written Notice to Nautilus of Buyer’s desire to renegotiate a license to rights for the Permitted Retail Channel for a period of time beyond the Renewal Term.
pg. 19
(v) If Nautilus does not respond by written notice to Buyer’s request to renegotiate a license for rights for the Permitted Retail Channel, then Buyer’s rights in the Permitted Retail Channel shall continue and have the same term as Buyer’s rights in the Commercial Channel.
(v) If Nautilus does provide a response to the Buyer’s renegotiation request within the sixty (60) day response time, the Parties agree to negotiate in good faith in an attempt to reach a new license agreement, which may be on different terms than this License Agreement, relating to rights in the Permitted Retail Channel. If within three (3) months of the response to Buyer’s renegotiation request, the Parties are unable to agree to terms for a new license agreement for rights in the Permitted Retail Channel, then the Parties agree that they have failed to renegotiate a License for the Permitted Retail Channel and Buyer shall enter the above defined two (2) year Wind Up Term.
(vi) Any expiration of rights licensed to Buyer in the Permitted Retail Channel will not affect the Minimum Annual Payments under Section 3.C. above.
| 13. | Disclaimer. |
| 14. |
pg. 20
| User, End-Use and Destination restrictions issued by the United States and other governments. Nothing in the preceding sentence shall be construed to grant Buyer any rights to in any manner for any purpose not expressly recited by this License. |
| 15. | Controlling Law, Venue and Dispute Resolution. |
A. Court and Law. This Agreement shall be interpreted in accordance with and governed by the substantive and procedural laws of the State of Washington, without regard to choice-of-law principles. The parties hereby irrevocably consent to the exclusive jurisdiction of the courts of the State of Washington, Clark County, or of a U.S. District Court for the Western District of Washington, USA in connection with any dispute relating to this License Agreement and/or to any alleged breach of this License Agreement. Each party hereby irrevocably waives any objection that the party may now or hereafter have regarding this choice of forum.
B. Resolution Procedures. The parties agree to follow procedures set forth in sub-sections 15.C. – 15.E. for the resolution of any dispute, whether this License specifically recites the applicability of these dispute resolution procedures to the Dispute.
C. Negotiated Resolution. Buyer and Nautilus wish to avoid disputes. In the event of any dispute, the parties shall first attempt to resolve the matter by an in-person meeting between executive level managers of Buyer and Nautilus to review a presentation by each of them concerning the dispute. The meeting will be held in Seattle, Washington unless otherwise agreed. Unless otherwise agreed by Buyer and Nautilus, only if the executive level managers are unable to resolve the dispute within the shorter of thirty (30) days of the first such meeting or forty-five (45) days from the first Written Notice by either Party requesting such meeting, shall any party be free to proceed under Section 15.D.
D. Mediation. Any Dispute that has not been resolved under Section 15.C. shall be the subject of non- binding mediation before a single impartial mediator selected by mutual agreement of Buyer and Nautilus. This mediator shall be an attorney with at least 15 years experience in intellectual property licensing issues. Buyer and Nautilus agree to make a good faith effort to select a mediator within thirty (30) days from the date that the mediation is first requested by Written Notice by either Buyer or Nautilus. Unless otherwise agreed to by the parties, the mediation will be held in Seattle, Washington and shall be completed within sixty days of any such Written Notice of a request for mediation. A party shall not be entitled to request mediation until after the end of the negotiation and resolution procedure of Section 15.C. Each party shall bear its own costs, including attorney fees of any mediation and shall
pg. 21
share equally the costs of the mediator. Unless otherwise agreed by the parties, only if mediation does not resolve the alleged claim or controversy, shall any party be free to proceed under sub-section 15.E.
| 16. | General. |
pg. 22
H. No Third Party Beneficiaries. This License is intended solely for the benefit of the parties hereto. Except as expressly set forth in the License, nothing in the License shall be construed to create any liability to or any benefit for any person not a party to this License.
pg. 23
N. Determining Time Periods. Time periods for Written Notice under this Agreement, such as a time period for taking action upon Written Notice, shall not count the day the Written Notice is effective and shall end at midnight Vancouver, Washington time of the last day of the time period.
In agreement hereto the parties have signed below.
| Xiamen World Gear Sports Goods Co., Ltd.
(Buyer) | Nautilus, Inc.
(Nautilus) | |
| /s/ Xxxxxxx Xxxxx | /s/ Xxxxxxx X. Xxxx | |
| Signature | Signature | |
| Xxxxxxx Xxxxx | Xxxxxxx X. Xxxx | |
| Printed Name | Printed Name | |
| CEO | CFO | |
| Title | Title | |
| December 5, 2009 | December 5, 2009 | |
| Date | Date | |
pg. 24