TRADEMARK LICENSE AND CONTRACT ASSIGNMENT AND ASSUMPTION AGREEMENT
TRADEMARK
LICENSE AND
CONTRACT
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS
TRADEMARK LICENSE AND CONTRACT ASSIGNMENT AND ASSUMPTION AGREEMENT
("Agreement")
is
made and entered into as of June 15, 2005 by and between Aronite Industries,
Inc., a Nevada corporation ("Aronite"),
and
Special Stone Surfaces, Es3 Inc., a Nevada corporation ("Es3"),
with
respect to the following facts:
A. Aronite
was engaged in the business of distributing decorative coatings that can
be
applied to resemble stone.
B. Es3,
among other businesses, intends to engage in a similar business and wishes
to
procure from Aronite certain rights and contract obligations on the terms
set
forth in this Agreement.
THEREFORE,
in consideration of the foregoing premises and the mutual covenants contained
in
this Agreement, the parties agree as follows:
1. Trademark
License.
a. License.
hereby
grants Es3 a thirty year exclusive, transferable, sub-licensable, except
as
expressly provided in this Agreement, non-assignable, terminable, license
to use
any and all (i) trademarks or tradenames that Aronite owns, whether or not
registered with the patent and trademark office ("Licensed Trademarks") and
(ii)
marketing collateral, including source files and images ("Marketing
Collateral").
b. Control.
This
license is limited to use in North America, Central America and South America
for the authorized uses specified herein. Es3 acknowledges and agrees that
any
and all use of the Licensed Trademarks by Es3 inures solely to the benefit
of
Aronite and that Aronite reserves the right in its sole discretion to control
the nature and quality of the goods sold or services rendered by Es3 utilizing
the Licensed Trademarks.
c. Ownership
by Aronite.
Es3
acknowledges and agrees that Aronite holds all right, title and interest
in the
Licensed Trademarks. Any and all goodwill arising from Es3's use of the Licensed
Trademarks shall inure solely to the benefit of Aronite, and neither during
nor
after the termination of this Agreement and the license granted hereunder
shall
Es3 assert any claim to the Licensed Trademarks (or any confusingly similar
xxxx) or such goodwill. Es3 shall not directly or indirectly, during the
term of
this Agreement or thereafter, through itself or third parties, challenge
Aronite's rights in the Licensed Trademarks. In no event shall Es3 seek to
register any Licensed Trademark or any other xxxx used by Aronite in any
country, state or territory thereof. In the event that the laws, regulations
or
practices of any legal jurisdiction convey any right in any Licensed Trademark
used by Aronite to Es3, Es3 hereby assigns such right or interest to Aronite
and
agrees to enter into any further documentation required by Aronite, in its
sole
discretion, to perfect ownership of such right or interest in Aronite. Es3
agrees to ensure that its successors, assigns and affiliated companies, if
any,
comply with the terms of this provision.
2. License
Royalties
a. Prices.
Es3
shall pay to Aronite the applicable royalties set forth on Exhibit A for
the
Licensed Trademarks and the Marketing Collateral and other exclusive rights
provided pursuant to this Agreement.
b. Payments.
Es3
will report its sales of products using the Licensed Trademarks to Aronite
quarterly within thirty (30) days of the end of each calendar quarter. The
report will include the information reasonably necessary to calculate the
royalties due hereunder. At the time of furnishing the report, Es3 will pay
to
Aronite all unpaid royalties that accrued during the prior calendar
quarter.
c. Interest.
Es3
shall pay to Aronite interest on overdue payments at an annual rate of 18
percent, compounded monthly, or, if lower, the maximum rate permitted by
law.
d. Taxes.
All
payments to Aronite hereunder shall be net of all VAT, customs duties, sales,
use and other taxes or charges that may be imposed upon such payments. If
Es3
shall be obliged to deduct any withholding tax from the royalties to be paid
pursuant to this Agreement in accordance with any applicable tax law, Es3
shall
(i) pay such additional amounts as are necessary to ensure that the net amount
actually received by Aronite, free and clear of all such taxes, will equal
the
full amount that Aronite would have received had no such taxes been levied,
and
(ii) promptly provide Aronite with the necessary certificate required by
any
applicable tax law showing, inter alia, that such deductions have been made.
Aronite shall, at the request of Es3, apply for, and use reasonable endeavors
to
obtain, an exemption certificate or direction to pay gross in relation to
withholding taxes on royalties under any applicable tax law.
3. Buy
Out Option. All
of
the Licensed Trademarks and Marketing Collateral and related intellectual
property under this Agreement may be purchased by Es3 at its option at any
time
in accordance with the formula established in Exhibit A.
4. Contract
Assignment and Assumption.
Aronite
hereby assigns all of Aronite's rights and obligations under that certain
Sublicense and Distribution Agreement dated as of April 30, 2004 between
Aronite
and Xxxx Co. LLC (the "Xxxx
Agreement").
Es3
hereby accepts the assignment of the Xxxx Agreement and assumes and agrees
to
discharge, pay, perform and satisfy, effective as of the close of business
on
the date hereof, all of the duties, liabilities and obligations and covenants
of
Aronite pursuant to or under the Xxxx Agreement. Es3 is not assuming or
otherwise responsible for any duties, liabilities and obligations of Aronite
pursuant to or under the Xxxx Agreement which came due prior to the date
of this
Agreement. Es3 is not accepting or assuming or agreeing to discharge, pay,
perform or satisfy any duties, liabilities or obligations other than the
Xxxx
Agreement. Without limiting the generality of the foregoing, Es3 is not assuming
any contracts, warranty or support obligations for any Aronite customers.
5. Issuance
of Es3 Shares. As
additional consideration for the licenses and assignment set forth in this
Agreement, and in addition to the assumption of the Xxxx Agreement set forth
herein, Es3 hereby transfers to Aronite 8,618,750 shares of its authorized
but
unissued Common Stock.
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6. Indemnification
by Es3. Es3
agrees to defend, indemnify and hold Aronite and its successors, officers,
directors, shareholders, employees and assigns harmless against any and all
losses or damages arising out of or in connection with Es3’s performance of or
failure to perform the obligations of Aronite to be performed under the Xxxx
Agreement after the date of this Agreement.
7. Indemnification
by Aronite. Aronite
agrees to defend, indemnify and hold Es3 and Es3's successors, officers,
directors, shareholders, employees and assigns harmless against any and all
losses or damages arising out of or in connection with Aronite’s performance of
or failure to perform the obligations of Aronite to be performed under the
Xxxx
Agreement prior to the date of this Agreement.
8. Representation
and Warranties of Aronite. Aronite
represents and warrants to Es3 as follows:
a. Corporate
Authority.
Aronite
has the requisite corporate power and authority to execute, deliver and perform
its obligations under this Agreement.
b. Binding
Obligation.
This
Agreement has been duly and validly executed and delivered by Aronite and
constitutes a legal, valid and binding obligation of Aronite, in accordance
with
its terms except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally.
c. No
Previous Transfer.
Aronite
has not previously assigned or transferred or purportedly assigned or
transferred, voluntarily, involuntarily or by operation of law, any of its
rights, titles, interests, duties and obligations in any of the Licensed
Trademarks, the Marketing Collateral or the Xxxx Agreement.
d. Investor
Status.
Aronite
is an "accredited investor" as that term is defined in Rule 501(a) of Regulation
D under the Securities Act of 1933, as amended (the "Securities
Act"),
on
the basis that each of its owners are accredited investors.
e. No
Government Review.
Aronite
understands that neither the SEC nor any securities commission or other
governmental authority of any state, country or other jurisdiction has approved
the issuance of the Common Stock or passed upon or endorsed the merits of
the
Common Stock or this Agreement or any other document relating to the assignment,
or confirmed the accuracy of, determined the adequacy of, or reviewed this
Agreement or any other documents.
f. Investment
Intent.
The
shares of Common Stock are being acquired by Aronite which may distribute
them
to its stockholders for their own account for investment purposes only, not
as a
nominee or agent and not with a view to the resale or distribution of any
part
thereof, and Aronite and its stockholders have no other present intention
of
selling, granting any participation in or otherwise distributing the same.
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g. Restrictions
on Transfer.
Aronite
understands that the shares of Common Stock have not been registered under
the
Securities Act or registered or qualified under any foreign or state securities
law, and may not be, directly or indirectly, sold, transferred, offered for
sale, pledged, hypothecated or otherwise disposed of without registration
under
the Securities Act and registration or qualification under applicable state
securities laws or the availability of an exemption therefrom. In any case
where
such an exemption is relied upon by Aronite from the registration requirements
of the Securities Act and the registration or qualification requirements
of such
state securities laws, Aronite shall furnish Es3 with an opinion of counsel
stating that the proposed sale or other disposition of such securities may
be
effected without registration under the Securities Act and will not result
in
any violation of any applicable state securities laws relating to the
registration or qualification of securities for sale, such counsel and opinion
to be satisfactory to Es3.
h. Access
to Information.
Aronite
acknowledges that it has had access to and has reviewed all documents and
records relating to Es3 that it has deemed necessary in order to make an
informed investment decision with respect to an investment in Es3; that it
has
had the opportunity to ask representatives of Es3 certain questions and request
certain additional information regarding the terms and conditions of such
investment and the finances, operations, business and prospects of Es3 and
has
had any and all such questions and requests answered to its satisfaction;
and
that based on the foregoing it understands the risks and other considerations
relating to an investment in Es3. Aronite has made such investigations in
connection herewith as it deemed necessary or desirable so as to make an
informed investment decision without relying upon Es3 for legal or tax advice
related to this investment.
i. Reliance
on Representations.
Aronite
understands that the shares of Common Stock are being offered and sold to
it in
reliance on specific exemptions from the registration and/or public
offering requirements
of the U.S. federal and state securities laws and that Es3 is relying in
part
upon the truth and accuracy of, and Aronite's compliance with, the
representations, warranties, agreements, acknowledgments and understandings
of
Aronite set forth herein in order to determine the availability of such
exemptions and the eligibility of such Aronite to acquire the Common
Stock.
j. No
General Solicitation.
Aronite
is unaware of, and in deciding to participate in the transactions contemplated
hereby is in no way relying upon, and did not become aware of the transactions
contemplated hereby through or as a result of, any form of general solicitation
or general advertising including, without limitation, any article, notice,
advertisement or other communication published in any newspaper, magazine
or
similar media, or broadcast over television or radio or the internet, in
connection with the transactions contemplated hereby.
9. Further
Assurances.
Aronite
will, from time to time, promptly execute and deliver all further instruments
and documents, and take all further action, that Es3 may reasonably request
to
perfect and protect the assignment of the Rights to Es3 under this
Agreement.
10. Attorneys
Fees.
If any
action, including any arbitration proceeding, is instituted to enforce the
terms
or provisions of this Agreement, including an action instituted after the
bankruptcy of a party, the prevailing party in such action shall be entitled
to
collect as part of its recovery all reasonable costs, charges and fees,
including but not limited to its expert witness fees and attorneys’ fees and
costs, incurred in connection with such action.
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11. Choice
of Law and Venue. This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of California, without regard to the principles of conflict
of
laws. Any action arising out of this Agreement shall be brought and maintained
in the Court, the Federal District Court for the Southern District of California
or the California state courts located in San Diego County, and the
parties
hereto consent to the jurisdiction of such courts.
12. Binding
Effect. This
Agreement shall be binding upon, and shall inure to the benefit of, Es3 and
Aronite and their respective successors and assigns.
13. Assignment.
a. By
Aronite.
This
Agreement may be assigned by Aronite in its sole discretion without notice
to
any entity which assumes its obligations and acquires ownership of or the
right
to use, sell, distribute and license the Licensed Trademarks and Marketing
Collateral as herein contemplated.
b. By
Es3.
Aronite
makes this Agreement in reliance upon the reputation of Es3 and its management,
and accordingly this Agreement may not be assigned or encumbered by Es3 without
Aronite's prior written consent, which consent shall be in its sole discretion.
14. Entire
Agreement. This
Agreement contains the entire understanding of the parties hereto with regard
to
the subject matter contained herein, and supersedes all prior agreements
or
understandings between or among the parties hereto relating to such subject
matter. This Agreement may not be amended, modified or terminated except
in
writing signed by Es3 and Aronite.
15. Counterparts.
This
Agreement may be executed in one or more counterparts and by facsimile, each
of
which shall be considered an original instrument, but all of which shall
be
considered one and the same instrument, and shall become binding when one
or
more counterparts have been signed by each party hereto and delivered to
the
other party hereto.
IN
WITNESS WHEREOF, the parties hereto have signed this Agreement on the day
and
year first above written.
ARONITE
INDUSTRIES, INC.,
|
SPECIAL
STONE SURFACES, ES3 INC.,
|
|
a
Nevada corporation
|
a
Nevada corporation
|
|
/s/
XXXXXXX XXXXXXXX
|
/s/
XXXX XXXXXX-XXXXX
|
|
By:
Xxxxxxx Xxxxxxxx
|
By:
Xxxx Xxxxxx-Xxxxx
|
|
Its:
President
|
Its:
President
|
5
EXHIBIT
A
ROYALTIES,
MINIMUM FEES AND BUY OUT OPTION
ROYALTIES
Es3
shall
pay to Aronite a royalty for the Licensed Trademarks and Marketing Collateral
in
an amount equal to Es3's net sales of such products based on the following
scale:
Total
sales:
|
Royalty
|
$0
to $10 million
|
3%
|
$10
million to $25 million
|
2.5%
|
$25
million to $75 million
|
2%
|
$75
million to $150 million
|
1.5%
|
Over
$150 million
|
1%
|
For
these
purposes, "net sales" means the amount of revenue generated from the sale
of
such products, net of shipping, discounts, rebates, credits and
returns
MINIMUM
ANNUAL FEES
As
a
condition of retaining its rights under this Agreement, Es3 must pay royalties
to Aronite in the minimum annual amount of US $100,000 for sales made during
the
first full calendar year of this Agreement. Thereafter the minimum annual
royalty shall increase at the rate of twenty percent (20%) per annum for
each
year that this Agreement is in effect.
BUYOUT
OPTION
During
the term of this Agreement, Es3 shall have the option and right to acquire
all
of Aronite's right, title and interest in the Licensed Trademarks and the
Marketing Collateral in exchange for a cash payment of $1.25 million. Royalty
payments made during the term of the Agreement shall not be applied to the
Buy
Out Option.
Es3
shall
exercise the Buy Out Option by delivery of a written notice to Aronite.
Aronite
shall have 10 days from the date of Es3's Buy Out Option notice to demand
payment in registered, freely tradeable shares of the Common Stock of Es3,
at an
effective price of $.75 per share, in lieu of payment in cash.
The
closing of the Boy Out Option, whether through payment of cash or Common
Stock,
shall take place at the offices of the Es3 30 days following the date of
Es3's
Buy Out Option notice.