EXHIBIT 10.31
EXCLUSIVE LICENSE AGREEMENT
THIS AGREEMENT, effective December 1st, 1998, by and between VARIFLEX, INC,
a Delaware Corporation, having an address at 0000 X. Xxxxxxxx Xx., Xxxxxxxx,
Xxxxxxxxxx 00000 (hereinafter referred to as "VARIFLEX") on the one hand and
PRODUCT RESOURCE & DEVELOPMENT INC., a Georgia Corporation having an address of
X.X. Xxx 0000, Xxxxxx, Xxxxxxx 00000 (hereinafter referred to as "PRD") and
XXXXXXX XXXXX XXXX having an address at 0000 Xxxxxxxxxxxx Xxxx, Xxxxxx, Xxxxxxx
00000 (hereinafter collectively referred to as "RICH") on the other hand.
WITNESSETH
WHEREAS PRD and RICH have interests in certain intellectual property
relating to trampolines and related accessories and equipment;
WHEREAS VARIFLEX desires to acquire and PRD and RICH desire to grant to
VARIFLEX certain rights to their intellectual property relating to trampolines
and related accessories and equipment.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I. DEFINITIONS
-----------
As used above and throughout this Exclusive License Agreement, the
definitions of the following terms have the meanings set forth below:
(a) "Accessory Product" shall mean any product that is not a Trampoline
Product and is not a Replacement Product and is encompassed, either in whole or
in part, by the Licensed Intellectual Property, and shall specifically include
the items listed in Exhibit B.
(b) "Affiliated Company" shall mean any person or entity controlling,
controlled by or under common control with VARIFLEX.
(c) "Agreement" shall mean this License Agreement.
(d) "Effective Date" shall mean the date set forth in the first paragraph
of this Agreement.
(e) "Issued Patent" shall mean a valid and enforceable patent included in
the Licensed Intellectual Property.
-1-
(f) "Licensed Improvements" shall mean any ideas, whether patentable or
unpatentable, conceived or owned by PRD and/or RICH during the term of this
agreement related to the trampoline design disclosed in the U.S. patent
application listed in Exhibit A.
(g) "Licensed Intellectual Property" shall mean (1) the patent application
listed in Exhibit A, (2) any patent application or patent that originates either
in whole or in part from the application listed in Exhibit A, (3) all know-how,
whether patentable or unpatentable, owned by PRD and/or RICH during the term of
this Agreement related to the trampoline design disclosed in the patent
application listed in Exhibit A and to trampoline accessories therefor; and, (4)
Licensed Improvements.
(h) "Licensed Product" shall mean each Trampoline Product, Replacement
Product and Accessory Product as defined herein.
(i) "Optioned Improvements" shall mean all ideas conceived or owned by PRD
and/or RICH within the period starting from three years from the Effective Date
of this Agreement to the remaining term of this Agreement related to any and all
trampoline designs.
(j) "Replacement Product" shall mean any product that is not a Trampoline
Product and not an Accessory Product and is used to convert a pre-existing
trampoline into a Trampoline Product or to replace parts present in a Trampoline
Product and which is encompassed, either in whole or in part, by the Licensed
Intellectual Property.
(k) "Sold" shall mean that point in time when Licensed Products, less
returns which are accepted and credited, are actually invoiced by VARIFLEX or
its sublicensee.
(l) "Trampoline Product" shall mean a trampoline assembly comprising at
least a frame and a trampoline mat which is encompassed, either in whole or in
part, by the Licensed Intellectual Property.
(m) "Unrelated Third Parties" shall mean any person or entity which is not
an Affiliated Company.
(n) "Net Sales Price" shall mean the invoice price at which a Licensed
Product is sold by VARIFLEX or its sublicensee less sales, use, occupation and
excise taxes, freight allowances, advertising allowances and allowances in lieu
of returns and cash discounts.
ARTICLE II. REPRESENTATIONS AND WARRANTIES
------------------------------
-2-
2.01. PRD and RICH, collectively and individually represent and warrant
that PRD and/or RICH are the owners of the entire right, title and interest in
the Licensed Intellectual Property and warrants that PRD and RICH have the
unencumbered right to grant the exclusive license to the Licensed Intellectual
Property and the right to first commercialize the Optioned Improvements provided
in this Agreement to VARIFLEX, and that PRD and RICH have the full power and
authority to enter into this Agreement and to perform the obligations required
under this Agreement, with respect thereto.
2.02. PRD and RICH, collectively and individually, represent and warrant
that, to the best of their knowledge, any trampoline or trampoline accessory
encompassed by the Licensed Intellectual Property known to PRD and RICH as of
the Effective Date does not infringe upon the rights of any third parties,
including but not limited to any intellectual property rights owned by NBF Inc.
a Georgia Corporation, Xxxxxxxxx Industries, Inc. or Xxxxxxxx, Inc. as a result
of any transfer of rights associated with the agreements set forth in Exhibit D.
2.03. PRD and RICH, collectively and individually, represent and warrant
that neither PRD nor RICH have previously granted and will not grant any rights
to any third party that are inconsistent with the rights granted to VARIFLEX
herein.
2.04 PRD and RICH, collectively and individually, represent and warrant
that, to the best of their knowledge, the patent application listed in Exhibit A
has been properly filed and prosecuted before the U.S. Patent and Trademark
Office.
2.05 PRD and RICH, collectively and individually, represent and warrant
that all ideas pertaining to trampoline designs made by the individuals listed
in Exhibit C, including all ideas encompassed by Licensed Improvements and
Optioned Improvements are or will be owned by PRD and or RICH.
2.06. RICH represents and warrant that the consideration paid to PRD under
this Agreement shall constitute valid and reasonable consideration for all
obligations of RICH under this Agreement.
2.07. PRD and RICH, collectively and individually, represent and warrant
that all obligations, duties, covenants and other commitments made and provided
by PRD and RICH in this Agreement do not violate, directly or indirectly, any
agreement entered into by either PRD or RICH with any third party, including but
not limited to, those agreements listed in Exhibit D. Without limiting the
foregoing in any way, this section specifically includes a representation and
warranty by PRD and RICH that any and all Licensed Products purchased by
VARIFLEX from
-3-
PRD and RICH under this Agreement for sale by VARIFLEX shall not violate any
agreements listed in Exhibit D.
2.08. PRD and RICH, collectively and individually, represent and warrant
that the rights in the xxxx "ULTRAFLEX" assigned to VARIFLEX in this Agreement
are owned by PRD and RICH and PRD and RICH further represent and warrant that
said rights are free from any liens or encumbrances.
2.09. PRD and RICH, collectively and individually, represent and warrant
that to the best of their knowledge, the xxxx "ULTRAFLEX" as used on Licensed
Products does not infringe upon the trademark rights of any third party.
2.10. PRD and RICH, collectively and individually, represent and warrant
as to the fitness for the intended home and recreational use of any Licensed
Product contemplated for sale by the parties under this Agreement as of the
Effective Date.
2.11. VARIFLEX represents and warrants that VARIFLEX has not previously
entered into and will not enter into any agreement with a third party that is
inconsistent with the obligations of VARIFLEX herein and that VARIFLEX has full
power, right and authority to enter into and carry out its obligations under
this Agreement.
ARTICLE III. CONFIDENTIALITY
---------------
The parties realize that some information received by one party from the
other pursuant to this Agreement may be confidential. It is therefore agreed
that any information received by one party from the other, and clearly
designated in writing as "CONFIDENTIAL", shall not be disclosed by the receiving
party to any third party and shall not be used by the receiving party for
purposes other than those contemplated by this Agreement, such contemplated
purposes including but not limited to, manufacturing, distributing, selling and
marketing the Licensed Products, for a period of three (3) years from the date
this Agreement is terminated for any reason, unless or until:
(a) said information shall become publicly known through no fault of the
receiving party, or
(b) said information was already in the receiving party's possession prior
to the disclosure of said information to the receiving party, or
-4-
(c) said information shall be subsequently disclosed to the receiving
party by a third party who is not under any obligation of confidentiality
to the disclosing party, or
(d) said information is independently developed by the receiving party.
It is to be understood that specific information which has been disclosed
to the receiving party shall not be deemed to be available to the public or in
the receiving party's prior possession merely because it was embraced by more
general information available to the public or in the prior possession of the
receiving party.
ARTICLE IV. GRANT OF LICENSE, OPTION AND TRADEMARK ASSIGNMENT
-------------------------------------------------
4.01 PRD and XXXX xxxxx to VARIFLEX and its Affiliated Companies an
exclusive worldwide license under the Licensed Intellectual Property to:
(a) make, have made, import, use, lease, offer to sell, sell, and/or
otherwise dispose of Licensed Products;
(b) enforce Issued Patents, including but not limited to, initiating
legal proceedings against Unrelated Third Parties for infringement of Issued
Patents; and,
(c) to have made Licensed Products by another manufacturer for the
import, use, lease, offer to sell, sell, and/or otherwise dispose of Licensed
Products by VARIFLEX.
4.02 PRD and RICH further grant to VARIFLEX and its Affiliated Companies
the right to sublicense Unrelated Third Parties under the exclusive license
granted hereunder.
4.03 PRD and XXXX xxxxx to VARIFLEX and its Affiliated Companies a right
to first commercialize all Optioned Improvements on such terms as negotiated and
agreed upon in good faith between the parties. PRD and RICH shall promptly
notify VARIFLEX of any such Optioned Improvements and in no event shall such
Optioned Improvements be disclosed to an Unrelated Third Party before being
first disclosed to VARIFLEX. VARIFLEX shall inform PRD and RICH within thirty
days of disclosure by PRD and RICH of the Optioned Improvements whether it shall
exercise its right to first commercialize any such Optioned Improvement. In the
event VARIFLEX declines to exercise its right to commercialize such Optioned
Improvement, or in the event the parties are unable to reach mutually
satisfactory terms for such Optioned Improvement, PRD and RICH agree that
neither PRD nor RICH shall enter into any transaction or engage in any business
involving such declined Optioned Improvement on terms more favorable than last
offered to VARIFLEX.
-5-
4.04. PRD and RICH hereby assign to VARIFLEX all rights of PRD and RICH in
the trademark "ULTRAFLEX" including all good will associated with the xxxx and
including all rights otherwise associated with the use of the xxxx. PRD and
RICH further agree to execute all documentation reasonably necessary to effect
recordation of this assignment with the appropriate agency. PRD and RICH
further agree to provide all information and signatures necessary to effect
registration of said xxxx in each jurisdiction decided by VARIFLEX.
Notwithstanding the foregoing assignment, any use of said xxxx in connection
with Licensed Products shall be within the sole discretion of VARIFLEX.
ARTICLE V. CONSIDERATION
-------------
5.01. In consideration for the rights granted under this agreement,
VARIFLEX shall make the following payments to PRD:
(a) One lump sum payment in the amount of One Million Dollars
($1,000,000.00) paid in full upon the execution of this Agreement wherein Five
Hundred Thousand Dollars ($500,000.00) of said payment shall be a credit against
Fifty Percent (50.0%) of all royalties otherwise running and payable to PRD
under Sections 5.01(c) through (f) below until said credit has been satisfied in
full. The lump sum payment referred to herein is not contingent upon the
issuance of the U.S. Letters Patent referred to in Section 5.01(b) below and is
payable even if no royalties are payable under Sections 5.01(c) through (f)
below;
(b) A payment in the amount of Five Hundred Thousand Dollars ($500,000.00)
paid upon the issuance of a U.S. Letters Patent from the Licensed Intellectual
Property if such patent includes each of the following: (1) four independent
claims that are either identical in wording to each of the four independent
claims set forth in Exhibit E or that vary from such identical wording in
Exhibit E only to the degree required by the Examiner to overcome any objections
or rejections other than prior art objections or rejections; and (2) such claims
encompass, either in whole or in part, a Licensed Product being sold by
VARIFLEX. In the event no such patent issues within three years of the
Effective date, no such payment shall be made.
(c) Except as provided in Section 5.01(g), for each Trampoline Product Sold
by VARIFLEX at a Net Sales Price greater than or equal to One Hundred Eighty
Dollars ($180.00), VARIFLEX shall pay PRD Seven Dollars and Fifty Cents ($7.50)
per unit.
(d) Except as provided in Section 5.01(g), for each Trampoline Product Sold
by VARIFLEX at a Net Sales Price less than One Hundred Eighty Dollars ($180.00)
but equal to or
-6-
greater than One Hundred and Fifty Dollars ($150.00), VARIFLEX shall pay PRD
Five Dollars ($5.00) per unit.
(e) Except as provided in Section 5.01 (g), for each Trampoline Product
Sold by VARIFLEX at a Net Sales Price less than One Hundred Fifty Dollars
($150.00), VARIFLEX shall pay PRD Two Dollars And Fifty Cents ($2.50) per unit.
(f) For each Replacement Product and Accessory Product Sold by VARIFLEX,
VARIFLEX shall pay a royalty in the amount of Ten Percent (10.0%) of the Net
Sales Price of each such Replacement Product and Accessory Product sold by
VARIFLEX.
(g) For each Trampoline Product, Replacement Product or Accessory Product
Sold by VARIFLEX pursuant to a sales order arranged by PRD under the terms of
Article VI, VARIFLEX shall pay a sales commission in the amount of Ten Percent
(10%) of the Net Sales Price, less reductions resulting from delinquent and
uncollected account receivables, for each such Trampoline Product, Replacement
Product or Accessory Product, which commission shall be in addition to any
royalties otherwise due to PRD under Sections 5.01(c) through 5.01(f).
5.02. Notwithstanding the foregoing, VARIFLEX shall be entitled, in its
sole discretion, to (1) terminate all future royalty payments otherwise due to
PRD, without termination of the Agreement, in the event of breach by PRD and/or
RICH of the terms of Sections 2.01, 2.02, 4.03 and 8.01, or (2) offset royalty
payments otherwise due to PRD for damages, losses, liabilities, costs and
expenses suffered or incurred by VARIFLEX (i) as a result of any breach by PRD
and/or RICH of any obligations, covenants, representations and/or warranties in
this Agreement; and/or (ii) at any time during the period of three years from
the Effective Date, any of the individuals identified on Exhibit C, either
collectively or individually make, market, distribute, license, have made,
import, use, lease, offer to sell, sell or otherwise dispose of, directly or
indirectly, any product competitive to the Licensed Products and/or (iii) Xxxxx
Xxxx violates or breaches or takes any action otherwise inconsistent with the
terms of the Estoppel Certificate executed by her in the form attached hereto as
Exhibit F.
ARTICLE VI. SALES AGENCY
------------
6.01. PRD shall be VARIFLEX's designated sales agent for the sale of
Trampoline Products, Accessory Products and Replacement Products to those
customers which PRD has received prior written consent of VARIFLEX to contact.
VARIFLEX shall have the right terminate any written consent or agency given
under this section at its sole discretion upon thirty (30) days written notice.
-7-
6.02 PRD shall have no authority to commit or bind VARIFLEX to a sales
agreement for Trampoline Products with any customers under Sections 6.01 without
prior written approval of VARIFLEX as to the pricing and terms of such sales
agreement.
ARTICLE VII. RESIDUAL INVENTORY
------------------
7.01. For a period of Twelve (12) months from the Effective Date, PRD and
RICH shall have the right to sell, without any responsibility or liability of or
to VARIFLEX, Trampoline Products manufactured and/or assembled by PRD and RICH
from (1) parts in inventory as of the Effective Date located at PRD's facility
in Georgia or from steel material for which purchase orders have already been
issued and (2) parts in inventory either shipped or in transit from Asia to
PRD's facility in Georgia. In no event, however, shall PRD and RICH
collectively sell more than Four Thousand (4000) Trampoline Products.
7.02. Sales of Trampoline Products made by PRD and RICH under Section 7.01
shall be made only to those customers for which PRD and RICH have received prior
written approval from VARIFLEX.
7.03. For sales by PRD and RICH under Section 7.01 only, VARIFLEX shall,
and hereby does, grant PRD and RICH a fully paid up license to use the xxxx
"ULTRAFLEX" in connection with such sales. PRD and RICH agree that any
Trampoline Product sold using the "ULTRAFLEX" xxxx shall be of high quality and
workmanship and, further, VARIFLEX shall have the right to review and approve
the quality and workmanship of each Trampoline Product sold under Section 7.01
using the "ULTRAFLEX" xxxx.
ARTICLE VIII. NON-COMPETITION
8.01. For good and valid consideration as provided in this Agreement,
neither PRD nor RICH shall make, market, distribute, license, have made, import,
use, lease, offer to sell, sell or otherwise dispose of, directly or indirectly,
any product competitive to the Licensed Products for a period of three years
from the Effective Date of this Agreement except that PRD and RICH shall be
allowed to make, have made, import, use, lease, offer to sell, sell or otherwise
dispose of Accessory Products
8.02. Within five business days of the Effective Date, PRD and RICH shall,
for sufficient and valid consideration, obtain legally enforceable non-
competition agreements, in form and substance, reasonably acceptable to VARIFLEX
and its counsel and having at least the terms set forth in Section 8.01, from
the individuals identified in Exhibit C.
-8-
8.03. It is the understanding of the parties that the scope of the
covenants contained herein, including as to time, geographic area and activities
covered, are necessary to protect the reasonable expectations of VARIFLEX in
connection with its acquisition of the rights in the Intellectual Property
Rights under this Agreement, including the goodwill associated with the xxxx
"ULTRAFLEX." The parties intend that the covenants given in this Article shall
be enforced to the greatest extent in time, area, and activities covered as is
permitted by the law. The parties intend that the unenforceability or invalidity
of any term or provision of the covenants given in this Article 8 shall not
render any other term or provision contained herein unenforceable or invalid.
If the business activities, period of time or geographical area covered in this
Article 8 should be deemed too extensive, then the parties intend that they be
construed to cover the maximum scope of business activities, period of time and
geographical area (not exceeding those specifically set forth herein) as may be
permissible under applicable law.
ARTICLE IX. ACCOUNTING
----------
9.01. For the purpose of computing royalties under Sections 5.01(c)
through (e) and commissions under Section 5.01 (f) of this Agreement, the year
shall be divided into twelve calendar months. Within forty-five (45) days after
the end of each calendar month, reports shall be forwarded from VARIFLEX to PRD
setting forth the number of Licensed Products that have been sold during the
preceding quarter and showing the Net Sales Price of the Licensed Products.
VARIFLEX's remittance for the full amount of royalties and commissions due for
such month shall accompany such reports. VARIFLEX shall maintain accurate books
of accounts and records for its sales of the Licensed Products.
9.02. PRD shall have the right, at its own expense, and at a time mutually
agreeable to the parties, to examine and audit the books and records insofar as
they concern sales of the Licensed Products and not more often than once in any
calendar year for the purpose of verifying the reports provided under Section
9.01. In the event that PRD or its representatives shall examine the records,
documents, and materials in the possession or under the control of VARIFLEX,
such examination shall be conducted in such manner as to not unduly interfere
with the business of VARIFLEX and its representative shall not disclose to any
other person, firm or corporation any information acquired as a result of such
examination.
9.03. In the event any examination and audit under Section 9.02 discloses
a negative variance in excess of ten percent (10%) of the royalties paid for any
particular month, then VARIFLEX shall pay the reasonable costs for such audit.
ARTICLE X. DILIGENCE
---------
-9-
10.01. VARIFLEX shall exercise commercially reasonable efforts to develop,
manufacture and sell Licensed Products.
10.02. At any time after the earlier of any one of the following: (1)
three years from the Effective Date; (2) the date of the abandonment of the
patent application identified in Exhibit A, including any continuation or
divisional applications thereof (but not including any continuation-in-part
applications); or (3) the issue date of the first Issued Patent under the
Licensed Intellectual Property, VARIFLEX shall have the right in its sole
discretion to terminate this Agreement upon forty-five days written notice to
PRD and RICH and without any further liability of VARIFLEX. In the event of
such termination, all Licensed Intellectual Property shall revert back to PRD
and RICH and VARIFLEX shall have no further rights to sell, market, distribute
or otherwise dispose of Trampoline Products, Accessory Products or Replacement
Products that would otherwise infringe any Issued Patent under the Licensed
Intellectual Property except as may be reasonably necessary to service product
warranty claims for Licensed Products previously sold.
ARTICLE XI. TERMINATION OF LICENSE
----------------------
11.01. In addition to the other rights and remedies (including termination
rights) afforded to the parties hereto under other provisions of this Agreement,
at law or in equity, if either party is in breach of any obligation required to
be performed by such party hereunder, and in the case of a breach capable of
remedy such breach shall not have been remedied by the breaching party within
sixty (60) days after the date of written notice from the non-breaching party
specifying the breach and requiring its remedy, then the party not in breach may
forthwith terminate this Agreement by written notice.
11.02. On termination of this Agreement for any reason, VARIFLEX shall
continue to have the right to complete deliveries on contracts in force at that
date and or to otherwise dispose of Licensed Products made under this Agreement.
VARIFLEX shall be obligated to pay royalties (if otherwise required under
Section 5 of this Agreement) with respect to all Licensed Products sold by
VARIFLEX under this Section 11.02.
11.03. Notwithstanding the termination of this Agreement for any reason
whatsoever, the provisions of Article III shall remain in force.
11.04. All rights and licenses granted under this Agreement by PRD and
RICH to VARIFLEX including the license itself, are, for purposes of Section 365
of the Bankruptcy Code, licenses to "intellectual property" as defined under the
Bankruptcy Code. The parties
-10-
agree that VARIFLEX shall retain and may exercise any of its rights under the
Bankruptcy Code in the event of a bankruptcy filing by or against PRD and/or
RICH.
ARTICLE XII. PATENT PROSECUTION AND MAINTENANCE
-----------------------------------
12.01. PRD and RICH shall select attorneys to prosecute before the U.S.
Patent and Trademark Office and any corresponding foreign examining authority
any and all patent applications in the Licensed Intellectual Property and shall
exercise the degree of effort common in the practice of patent law to obtain
issuance of the broadest possible claims in such applications. PRD and RICH
shall be obligated to pay all fees and costs necessary to prosecute the
applications. PRD and RICH shall have control and responsibility for such
prosecution, provided however that PRD and RICH shall keep VARIFLEX apprised of
the status of such prosecution and shall provide VARIFLEX with an opportunity to
review and comment, at VARIFLEX's expense, on all substantive documents proposed
to be filed with the examining authority.
12.02. Subject to the limitations set forth in Section 12.03 regarding the
filing of an application in the European Patent Office, PRD and RICH shall be
obligated to pay all fees and costs necessary to prosecute any patent
applications in the Licensed Intellectual Property into Issued Patents and
thereafter VARIFLEX shall be responsible for all reasonable costs to maintain in
force any and all Issued Patents for the respective full term of each Issued
Patent.
12.03. PRD and RICH shall file foreign patent applications for the
Licensed Intellectual Property in the following jurisdictions: Mexico, Canada
and the European Patent Office (EPO). All fees and costs associated with the
filings in Mexico and Canada shall be the responsibility of PRD and the RICHS
until such applications mature into Issued Patents and thereafter VARIFLEX shall
be responsible for all reasonable costs to maintain in force any and all Issued
Patents for the respective full term of each Issued Patent. Fees and costs up
to Three Thousand Dollars ($3000.00) shall be paid by PRD and RICH for the
filing in the EPO, after which amount has been reached, any further expenses and
costs shall be the responsibility of VARIFLEX. VARIFLEX may decide to file
patent applications in other foreign countries and PRD and RICH shall cooperate
as reasonably necessary to file in such other foreign countries. All fees and
costs for filing applications in such other foreign countries shall be the
responsibility of VARIFLEX. Each party shall keep the other party promptly
informed of the prosecution of any foreign filed application and shall provide
the other party with an opportunity to review and comment on all substantive
documents proposed to be filed with the foreign examining authority.
-11-
12.04. In the event any Issued Patent is subject to a legal or an
administrative proceeding concerning patent validity, patentability or a related
issue, including but not limited to reexamination and reissue proceedings, PRD
and RICH shall inform VARIFLEX of such a proceeding and keep VARIFLEX regularly
apprised of such proceedings. Furthermore, VARIFLEX shall have the right to
review and comment, at VARIFLEX'S expense, the submissions made by PRD and RICH
in connection with such proceedings.
12.05. Notwithstanding the foregoing, at any time during the term of this
Agreement and at any time during the pendency of any patent application under
the Licensed Intellectual Property, VARIFLEX shall have the right, in its sole
discretion, to require PRD and RICH to seek allowance of patent claims other
than those claims described in Section 5.01(b) or claims other than those
pursued by PRD and RICH. Fees and expenses resulting from the exercise of
VARIFLEX's rights under the preceding sentence shall be divided equally between
PRD and RICH, on the one hand, and VARIFLEX, on the other hand. At PRD and
RICH's discretion, the fees and expenses attributable to PRD and RICH may be
credited against royalties otherwise due and payable to PRD under Sections
5.01(c), (d), (e) and/or (f).
ARTICLE XIII. INDEMNIFICATION AND INSURANCE
-----------------------------
13.01. Indemnification. PRD and RICH, both collectively and individually
---------------
shall indemnify, defend and hold VARIFLEX harmless from and against any and all
claims, actions, liabilities, losses, damages and expenses ("Losses"), including
reasonable attorneys' fees and costs, expert fees and any such fees on appeal,
incurred by VARIFLEX in connection with any claims, actions or liabilities
arising out of or related to any breaches of representations, warranties,
covenants or any other commitments given by PRD and/or RICH in this Agreement.
VARIFLEX will promptly notify PRD and RICH within a reasonable time after it
becomes aware of any claim, action or proceeding that may be subject to
indemnification pursuant to this Article and will cooperate with and authorize
PRD and RICH to carry out the management and defense of such claim, action or
proceeding. PRD and RICH agree that VARIFLEX may participate and choose counsel
of its own selection to defend and/or appeal the claim or action on behalf of
VARIFLEX and that PRD and RICH pay all of VARIFLEX'S legal costs and expenses,
including attorneys' fees and costs and expert fees and shall pay any settlement
amount or judgment agreed to by or awarded against VARIFLEX. VARIFLEX will not
compromise or settle any claim, action or proceeding subject to indemnification
pursuant to this Article without the prior written approval of PRD and RICH.
Section 13.01 shall survive expiration or other termination, for any reason
whatsoever, of this Agreement.
-12-
13.02. Product Indemnification by VARIFLEX. VARIFLEX shall indemnify,
-----------------------------------
defend and hold harmless PRD and RICH from and against any and all claims,
actions, liabilities, losses, damages and expenses ("Losses"), including
reasonable attorneys' fees and costs and such fees on appeal, incurred by PRD
and RICH in connection with any claims, actions or liabilities arising out of or
related to (i) the manufacture and sale of Licensed Products by VARIFLEX, except
for any claim of infringement of the intellectual property rights of a third
party, so long as such third party is not either a party or successor in
interest to a party to the agreements listed in Exhibit D; (ii) the failure of
VARIFLEX to comply with all applicable laws, rules and/or regulations of any
jurisdiction regarding approval of, advertising, selling, importing or exporting
Licensed Products; or (iii) any product warranties granted by VARIFLEX. PRD and
RICH will promptly notify VARIFLEX within a reasonable time after it becomes
aware of any claim, action or proceeding that may be subject to indemnification
pursuant to this Article and will cooperate with and authorize VARIFLEX to carry
out the sole management and defense of such claim, action or proceeding.
VARIFLEX agrees that PRD and RICH may participate and employ counsel of its own
selection and at its own cost to defend and/or appeal the claim or action on
behalf of PRD and RICH. PRD and RICH will not compromise or settle any claim,
action or proceeding subject to indemnification pursuant to this Article without
the prior written approval of VARIFLEX. This Article 13.02 shall survive
expiration or other termination, for any reason whatsoever, of this Agreement.
Notwithstanding the foregoing, in no event shall the indemnification under this
section be construed to apply to any losses arising out of a breach of any
covenant, representation, warranty and/or any other obligation by PRD and/or
RICH under this Agreement.
13.03. Product Indemnification by PRD and the RICHS. PRD and RICH shall
--------------------------------------------
indemnify, defend and hold harmless VARIFLEX from and against any and all
claims, actions, liabilities, losses, damages and expenses ("Losses"), including
reasonable attorneys' fees and costs and such fees on appeal, incurred by
VARIFLEX in connection with any claims, actions or liabilities arising out of or
related to (i) the manufacture and sale of Trampoline Products, Replacement
Products or Accessory Products by PRD and RICH; (ii) the failure of PRD and
RICH to comply with all applicable laws, rules and/or regulations of any
jurisdiction regarding approval of, advertising, selling, importing or exporting
Licensed Products; or (iii) any product warranties granted by PRD and RICH.
VARIFLEX will promptly notify PRD and RICH within a reasonable time after it
becomes aware of any claim, action or proceeding that may be subject to
indemnification pursuant to this Article and will cooperate with and authorize
PRD and RICH to carry out the sole management and defense of such claim, action
or proceeding. PRD and RICH agree that VARIFLEX may participate and employ
counsel of its own selection and at its
-13-
own cost to defend and/or appeal the claim or action on behalf of VARIFLEX.
VARIFLEX will not compromise or settle any claim, action or proceeding subject
to indemnification pursuant to this Article without the prior written approval
of PRD and RICH. This Article 13.03 shall survive expiration or other
termination, for any reason whatsoever, of this Agreement.
13.04. Insurance. VARIFLEX shall maintain adequate product liability
---------
insurance covering the sale and use of Licensed Products in such amounts and
with such insurers as is customary in accordance with sound business practices
for companies similarly situated as VARIFLEX. So long as no extra costs are
incurred and so long as allowed by VARIFLEX's existing insurance carrier,
VARIFLEX shall add PRD and RICH as additional insureds on any insurance policy
in existence under this Section 13.04. In no event, however, shall PRD and RICH
be named insureds on an insurance policy carried by VARIFLEX for the sale of
Trampoline Products, Replacement Products Accessory Products by PRD and RICH
other than sales made under the provisions of Article VI.
ARTICLE XIV. PATENT ENFORCEMENT
------------------
14.01. Upon learning of the infringement of any Issued Patent by third
parties ("Infringement Claim"), either party shall inform the other in writing
of that fact, and shall supply the other with any evidence available pertaining
to the Infringement Claim.
14.02. VARIFLEX shall have three months after learning of such
Infringement Claim within which to initiate an Infringement Claim at its sole
expense. If no such Infringement Claim is initiated by VARIFLEX within that
time, PRD and RICH shall then have the option to initiate such Infringement
Claim at its sole expense.
14.03. Any proceeds actually received as a result of an Infringement
Claim, less fees and costs associated with said Infringement Claim (the "Net
Proceeds"), shall divided such that the party initiating the Infringement Claim
shall receive Ninety Percent (90%) of the remaining Net Proceeds actually
received and the non-initiating party shall receive Ten Percent (10%) of the
remaining Net Proceeds actually received.
14.04. In the event of the initiation of legal proceedings by VARIFLEX
under either Section 4.01(b) or Section 14.02, PRD and/or RICH, at VARIFLEX's
request, shall agree to become a named party in such litigation if, in
VARIFLEX's sole discretion and opinion, PRD's and RICH's appearance in such
action is necessary and prudent to adjudicate the disputed rights in such
action.
-14-
14.05. In the event of the initiation of legal proceedings by PRD and RICH
under Section 14.02, VARIFLEX, at PRD's and RICH's request, shall agree to
become a named party in such litigation if, in PRD's sole discretion and
opinion, VARIFLEX's appearance in such action is necessary and prudent to
adjudicate the disputed rights in such action.
ARTICLE XV. GOVERNING LAW AND DISPUTES
--------------------------
15.01. The construction, validity and performance of this Agreement shall
be governed in all respects by the laws of the State of New York, U.S.A.
15.02. Any dispute concerning any aspect of this Agreement shall be
resolved through binding arbitration under the rules of the American Arbitration
Association, which arbitration shall be conducted in Los Angeles, California.
The parties agree that the arbitrator in such Arbitration is authorized to
assess reasonable attorneys fees and reasonable travel costs for the RICHS upon
the prevailing party in such Arbitration.
-15-
ARTICLE XVI. ASSIGNMENT
----------
16.01. Neither this Agreement nor any interest hereunder shall be
assignable by VARIFLEX without the prior written consent or agreement of PRD and
RICH, which consent or agreement shall not be unreasonably withheld, except in
connection with (1) a sale or transfer of all or substantially all of the
relevant business and assets of VARIFLEX or (2) the sale or transfer of all or
substantially all of the relevant business assets to which this Agreement
relates to an Affiliated Company in which cases no consent or agreement will be
required. This Agreement shall inure to the benefit of and shall be binding upon
VARIFLEX's successors and permitted assigns, and shall be deemed to include the
names of VARIFLEX's successors and permitted assigns to the extent necessary to
carry out the intent of this Agreement. However, in the event of an assignment
to an Affiliated Company, VARIFLEX shall remain responsible for the obligations,
commitments and responsibilities otherwise attributed to it in this Agreement.
16.02. Neither this Agreement nor any interest hereunder, including but
not limited to, title to the Intellectual Property, shall be assignable by PRD
or RICH or its permitted assignees without the prior written consent or
agreement of VARIFLEX except that no consent by VARIFLEX shall be required for
(1) an assignment to any entity controlled by or under common control with RICH;
(2) assignments or conveyances to an inter vivos trust established by RICH for
the benefit of immediate family members of RICH; and (3) an assignment of rights
to receive royalty payments to the estate of RICH upon the death of RICH. In no
event, however, shall transfer of any interests terminate the responsibilities
of RICH and PRD under this Agreement.
ARTICLE XVII. MISCELLANEOUS
-------------
17.01. As a condition to VARIFLEX making the payments to PRD set forth in
Section 5.01(a), PRD and RICH shall provide to VARIFLEX all correspondence
received as of the Effective Date from the U.S. Patent and Trademark Office in
connection with the patent application listed in Exhibit A.
17.02. This Agreement may be executed in subparts, however, the Agreement
shall be effective only upon the concurrent receipt by VARIFLEX of this
Agreement as executed by PRD and RICH and of the Estoppel Certificate referred
to in Exhibit F as executed by Xxxxx Xxxx.
17.03. No variation or amendment of this Agreement shall bind either party
unless made in writing and agreed to in writing by PRD and RICH and a duly
authorized officer of VARIFLEX.
-16-
17.04. If any provision of this Agreement is agreed by the parties to be
illegal, void or unenforceable under any law that is applicable hereto or if any
court of competent jurisdiction in a final decision determines that such a
provision is illegal, void or unenforceable, then this Agreement shall continue
in force save that such provision shall be deemed to be deleted herefrom with
effect from the date of such agreement or decision or such earlier date as the
parties may agree.
17.05. If either party fails to fulfill its obligations hereunder, when
such failure is due to an act of God, or other action such as fire, flood, civil
commotion, riot, war (declared and undeclared), revolution, embargoes, then said
failure shall be excused for the duration of said event.
17.06. The headings in this Agreement are for convenience only and are not
intended to have any legal effect.
17.07. A failure by any party hereto to exercise or enforce any rights
conferred upon it by this Agreement shall not be deemed to be a waiver of any
such rights or operate so as to bar the exercise or enforcement thereof at any
subsequent time or times.
17.08. Nothing in this Agreement is intended or shall be deemed to
constitute a partnership, agency, employer-employee or joint venture
relationship between the parties. All activities by the parties hereunder shall
be performed by them as independent contractors. No party shall incur any debts
or make any commitments for or on behalf of the other party, unless specifically
authorized in this Agreement or specifically authorized in writing by PRD and
RICH or by an officer of VARIFLEX.
17.09 Unless otherwise terminated hereunder, the term of this Agreement
shall expire simultaneously with the last to expire patent of the Licensed
Intellectual Property that issues with claims encompassing a Licensed Product.
17.10. This Agreement constitutes the entire agreement between the parties
as to the subject matter hereof, and all prior negotiations, representations,
agreements and understandings are merged into, extinguished by and completely
expressed by this Agreement.
-17-
IN WITNESS WHEREOF, the parties have executed this Agreement on the 1st day
of December, 1998.
VARIFLEX:
---------
VARIFLEX INC.
Date: 12/1/98 /s/ XXXXXXX X. XXXX, XX
------- ---------------------------------
Xx. Xxxxxxx X. Xxxx, XX
Chief Executive Officer
PRD:
----
PRODUCT RESOURCE & DEVELOPMENT
Date: 12/1/98 /s/ R. XXXXX XXXX
------- ---------------------------------
President
RICH:
-----
XXXXXXX XXXXX XXXX
Date: 12/1/98 R. XXXXX XXXX
------- ---------------------------------
-18-
EXHIBIT A
---------
U.S. Patent Application Serial Number 09/013,469, (bearing Attorney Docket
Number 05650.0009 at the law firm of Finnegan, Henderson, Farabow,Garrett &
Dunner, L.L.P. in Washington, D.C.) executed January 19, 1998 by Xxxxxxx Xxxxx
Xxxx entitled "TRAMPOLINE WITH ELASTIC FRAME ATTACHMENT SYSTEM."
-19-
EXHIBIT B
---------
Bungie Jumper
Play Station
Mounting Platform
Optional Foam Pads
Aerobaflex
-20-
EXHIBIT C
---------
Xx. Xxxxx Xxxx
Xx. Xxxxxxx Rich
Xx. Xxxx Xxxxxx
-21-
EXHIBIT D
A. Asset Purchase Agreement between NBF, Inc. a Florida Corporation and NBF,
Inc., a Georgia Corporation executed May 24, 1994.
B. Product Purchase Agreement between R. Xxxxx Xxxx and Xxxxx Xxxx on the one
hand and NBF, Inc., a Georgia Corporation, on the other hand, executed May
24, 1994.
C. License Agreement between NBF, Inc., a Georgia Corporation owned by Xxxxxxxxx
Industries, Inc., a Delaware Corporation on the one hand and R. Xxxxx Xxxx
and Xxxxx Xxxx on the other hand, executed on May 24, 1994.
D. Agreement with NBF, Inc. Shareholders between Xxxxx Xxxx and NBF, Inc., a
Georgia Corporation, executed on May 24, 1994.
E. Product Rights Xxxx of Sale between R. Xxxxx Xxxx and Xxxxx Xxxx on the one
hand and NBF, Inc., a Georgia Corporation, on the other hand executed on May
24, 1994.
F. Assignment by R. Xxxxx Xxxx to NBF, Inc., a Georgia Corporation of U.S.
Patent Pending - A Trampoline Having Safety Features - Attorney Docket
6715/81-1208 executed May 24, 1994.
G. Employment Agreement executed by R. Xxxxx Xxxx as employee and NBF, Inc., a
Georgia Corporation, as employer.
H. RWR Insurance Letter executed by NBF, a Georgia Corporation and R. Xxxxx
Xxxx.
I. Employment Agreement executed by Xxxxx Xxxx as employee and NBF, Inc., a
Georgia Corporation, as employer.
J. JR Insurance Letter executed by NBF, a Georgia Corporation and Xxxxx Xxxx.
K. Settlement Agreement by Xxxxx Xxxx and R. Xxxxx Xxxx on the one hand and NBF,
Inc., a Georgia Corporation and Xxxxxxxxx Industries, a Delaware Corporation,
on the other hand, executed on October 25, 1995.
-22-
EXHIBIT E
---------
Page 1 of 2
1. A trampoline comprising:
a trampoline mat;
a frame surrounding the trampoline mat; and
an attachment system for connecting the frame to the trampoline mat, the
attachment system including a plurality of elastic straps connected to a
periphery of the trampoline mat and a plurality of connectors for connecting the
elastic straps to the frame, wherein each connector has a configuration
corresponding to the shape of the frame, said configuration providing a
connection between the connector and the frame, and wherein the plurality of
elastic straps cover substantially all of a space between the trampoline mad and
the frame.
2. A trampoline attachment system for connecting a trampoline mat to a
surrounding frame, the attachment system comprising:
a plurality of elastic straps connected to a periphery of the trampoline
mat; and,
a plurality of connectors for connecting the elastic straps to the frame,
wherein each connector has a configuration corresponding to the shape of the
frame, said configuration providing a connection between the connector and the
frame, and wherein the plurality of elastic straps cover substantially all of a
space between the trampoline mat and the frame.
3. A trampoline comprising:
a trampoline mat;
a frame surrounding the trampoline mat;
an elastic portion connected to a periphery of the trampoline mat and
extending between the trampoline mat and the frame to cover substantially all of
a space between the trampoline mat and the frame; and,
-23-
EXHIBIT E
---------
Page 2 of 2
at least one connector for connecting the elastic portion to the frame,
wherein the at least one connector has a configuration corresponding to the
shape of the frame, said configuration providing a connection between the at
least one connector and the frame.
4. A trampoline comprising:
a trampoline mat;
a frame surrounding the trampoline mat; and
an attachment system for connecting the frame to the trampoline mat, the
attachment system including a plurality of elastic straps connected to a
periphery of the trampoline mat and a plurality of connectors for connecting the
elastic straps to the frame, wherein each connector comprises a single wire
which has a configuration corresponding to the shape of the frame, the single
wire having a front bar for receiving a loopportion of one of the plurality of
elastic straps, and an arm portion on each side of the front bar for engaging
with a surface of the frame.
-24-
EXHIBIT F
---------
Page 1 of 3
ESTOPPEL CERTIFICATE
--------------------
I, XXXXX XXXX, do hereby acknowledge, certify, represent, warrant and
covenant as follows:
1. I am the wife of Xxxxx Xxxx. Our address is 0000 Xxxxxxxxxxxx Xxxx,
Xxxxxx, Xxxxxxx 00000.
2. I have received a copy of the Exclusive License Agreement, effective
December 1, 1998 (the "License Agreement"). The parties are Xxxxx Xxxx, Product
Resource & Development Inc., a Georgia corporation ("PRD") and Variflex, Inc., a
Delaware corporation ("Variflex") (collectively, the "Parties"). I am familiar
with the general purpose and contents of the License Agreement. If capitalized
terms are used in this Estoppel Certificate and not otherwise defined, they
shall have the meanings given them in the License Agreement.
3. It was originally contemplated that I would be a party to the License
Agreement. However, I have advised the Parties that I have no right, title or
interest in the License Agreement or the Licensed Product, Licensed Intellectual
Property, Licensed Improvements, Optioned Improvements or Issued Patent referred
to therein (collectively, the "Licensed Property"). Therefore, at my initiative
and request, Variflex agreed that it would not insist that I be a party to the
License Agreement if I executed and delivered this Estoppel Certificate.
4. I acknowledge and understand that Variflex would not enter into the
License Agreement if I did not become a party thereto or execute and deliver
this Estoppel Certificate. I am executing and delivering this Estoppel
Certificate for the express purpose of inducing Variflex to enter into the
License Agreement without me being a party thereto and Variflex has agreed to do
so in consideration for my execution and delivery of this Estoppel Certificate.
-25-
EXHIBIT F
---------
Page 2 of 3
5. I have absolutely no right, title or interest, direct or indirect,
contingent or remote in (a) the License Agreement, (b) any of the Licensed
Property, (c) any modifications, amendments, supplements, extensions or renewals
of the License Agreement, or (d) any agreement entered into in the future which
is or was contemplated under the License Agreement. The Parties shall have the
absolute right to enter into such modifications, amendments, supplements,
extensions, renewals or future agreements as they deem appropriate without my
knowledge or consent. When used in this Estoppel Certificate the term License
Agreement shall mean the License Agreement and all such modifications,
amendments, supplements, extensions, renewals and future agreements.
6. Except for rights acquired pursuant to a permitted assignment under
Section 16.02 of the License Agreement and except for rights acquired by
operation of the laws of intestate succession or through the will of Xxxxx Xxxx,
if for any reason I do own or hold, or am deemed to own or hold, any right,
title or interest in the License Agreement or any of the Licensed Property, or I
hereafter acquire or am deemed to have acquired any such right, title or
interest, I hereby unconditionally and irrevocably assign and transfer all such
rights, titles and interests to Xxxxx Xxxx, including, without limitation, any
rights, titles or interests I may have or hereafter acquire under applicable
community property or other laws as a result of my status as the wife of Xxxxx
Xxxx.
7. I understand that I was a party to certain of the agreements listed in
Exhibit D to the License Agreement. To the best of my knowledge and belief,
none of the obligations, duties, covenants and other commitments made and
provided by PRD and/or Xxxxx Xxxx in the License Agreement violate, directly or
indirectly, any of the agreements listed in Exhibit D to the License Agreement
and the sale to Variflex or license by Variflex of the Licensed Product under
the License Agreement for resale by Variflex does not violate any of the
agreements listed in Exhibit D to the License Agreement.
-26-
EXHIBIT F
---------
Page 3 of 3
8. I will not engage in or take, or permit or allow anyone else to engage
in or take, on my behalf or for my benefit, any conduct or action which is or
may be construed to be inconsistent with any of the representations, warranties,
certifications or covenants set forth in this Estoppel Certificate.
9. Variflex, and its successors and assigns, are entitled to rely upon
this Estoppel Certificate. I acknowledge and understand that Variflex is relying
upon the truth, accuracy, and binding effect of this Estoppel Certificate in
entering into the License Agreement.
10. I have been advised and represented by Xxxxxx Xxxxx my separate and
independent legal counsel of my choice in connection with this Estoppel
Certificate and the matters referred to herein.
11. I agree that since Variflex and its legal counsel are located in
California, the interpretation, effect and enforceability of this Estoppel
Certificate shall be governed by the laws of the State of California (excluding
its conflict of laws).
Executed this 1st day of December, 1998 /s/ Xxxxx Xxxx
------------------
By: XXXXX XXXX
-27-
