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EXHIBIT 10.5
XXXXX XXXXXX/SPECTRUM DESIGN
ROYALTY AGREEMENT
This ROYALTY AGREEMENT (the "AGREEMENT") is entered into as of this
20th day of March, 1995 by and between Xxxxx Xxxxxx/Spectrum Design (sometimes
hereinafter collectively referred to as "KIMMELL and/or SPECTRUM"), on the one
hand, and ROLLERBALL INTERNATIONAL INC., a corporation organized under the laws
of the State of Delaware ("ROLLERBALL"), on the other hand.
RECITALS
A. Rollerball is engaged in the business of developing, manufacturing
and distributing In-line skates and accessories principally, but not
exclusively, in the United states.
X. Xxxxxxx has performed services to Rollerball related to the
development and introduction of Rollerball Skate Products to the market.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and on the
basis of the representations, warranties, covenants and agreements set forth
below Kimmell and Rollerball agree as follows:
1. COMPENSATION TO KIMMELL
1.1 As total compensation to Kimmell as consideration for the transfer
of the Rights, Rollerball shall pay to Kimmell a royalty (the "Royalty") which
is equal to one percent (1%) of worldwide Net Sales, with the exception of
letter of credit sales, of all Rollerball Skate products which are listed on
Schedule A to this Agreement (the "Rollerball Skate Products"). For purposes of
this Agreement, "Net Sales" shall mean gross sales minus all returns, trade
discounts and allowances. On Net Sales generated by letter of credit sales,
Kimmell shall be paid a Royalty of .6% of worldwide Net Sales of the Rollerball
Skate Products. The Royalty shall be paid in perpetuity, unless adjusted
pursuant to Section 1.3 below.
1.2 Kimmell shall not be paid a royalty in connection with any
products, other than the Rollerball Skate Products as listed in Schedule A,
developed, manufactured, distributed and marketed by Rollerball.
1.3 In the event that Rollerball shall file a Registration Statement
with the Securities and Exchange Commission for purposes of registering the
common stock of Rollerball under the Securities Act of 1933, all royalties due
to Kimmell in connection with the manufacturer and distribution of the
Rollerball Skate Products shall be reduced proportionately with all other
Rollerball royalty recipients if deemed necessary, in
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the good faith determination of Rollerball and its advisors, to facilitate an
initial public offering of Rollerball's common stock, and such reductions, if
any, will be negotiated by the parties in good faith.
1.4 The Royalty shall be paid in U. S. currency once every six (6)
months, not later than forty (40) days following the last day of Rollerball's
second and fourth fiscal quarters. The royalty payments are retroactive to the
first shipments by Rollerball in 1994.
1.5 Kimmell shall be responsible for payment of any and all state and
federal taxes owed on a Royalty payment from Rollerball. The parties acknowledge
and agree that any compensation paid by Rollerball to Kimmell shall be reported
to the Internal Revenue Service and appropriate state taxing authorities by
Rollerball in accordance with U.S. tax laws and regulations.
2. REPRESENTATIONS AND WARRANTIES
Rollerball hereby represents and warrants to Kimmell that:
2.1 Rollerball is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware, and has full corporate
power and authority to enter into this Agreement and to carry out its
obligations hereunder.
2.2 Rollerball has taken all requisite corporate action to authorize
and approve the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and this Agreement constitutes a legal,
valid and binding agreements of Rollerball, except as such enforcement may be
limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the scope of equitable remedies which may be available.
2.3 The execution an delivery of this Agreement and the consummation of
the transactions contemplated hereby will not violate the Articles of
Incorporation or the bylaws of Rollerball or any agreement, contract or other
instrument to which Rollerball is a party, or any statue, rule, regulation,
order, judgment, award or decree.
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2.4 There is no litigation, proceeding or investigation pending or, to
the knowledge of Rollerball, threatened against Rollerball affecting any of its
assets or properties that could result, either in any case or in the aggregate,
in any material adverse change in the assets, properties or business of
Rollerball, or than could impair the validity of this Agreement or any action to
be taken pursuant to this Agreement.
3. AUDIT RIGHTS
3.1 Upon ten (10) days written notice by Kimmell to Rollerball, Kimmell
shall be given the right to audit Rollerball's accounting books and financial
records as they pertain to payment of the Royalty, together with appropriate
backup documentation related to the production and manufacturer of the
Rollerball Skate Products.
3.2 in the event that Xxxxxxx'x audit as provided for by Section 3.1
above demonstrates, in the good faith judgment of Rollerball and its advisors,
that Kimmell is owed an additional Royalty payment, upon written notice of the
deficiency by Kimmell to Rollerball, Rollerball shall have forty-five (45) days
to pay the balance owing to Kimmell without penalty.
3.3 In the event that an audit conducted by Kimmell pursuant to Section
4.1 above results in a good faith dispute between Rollerball and Kimmell as to
whether Kimmell is owed an additional Royalty payment, the parties hereto agree
to abide by the results of a second audit to be conducted by an independent
auditor to be mutually agreed upon by Rollerball and Kimmell (the "Independent
Audit"). Prior to the commencement of an Independent Audit, Kimmell will provide
a written notice (the "Audit Notice") to Rollerball which will request that the
Independent Audit be conducted and will state the amount of additional Royalty
payment which is alleged by Kimmell to be owed by Rollerball. In the event that
the Independent Audit demonstrated that Kimmell is not owed an additional
Royalty payment, Kimmell will pay the costs and professional fees associated
with the Independent Audit. In the event that the Independent Audit demonstrates
that Kimmell is owed an additional Royalty payment,, in addition to Xxxxxxx'x
other remedies provided by California Law and by this agreement, Rollerball
shall pay Kimmell the additional Royalty payment and interest at the rate of ten
percent (10%) per annum on the principal
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balance due and owing from the date for payment of the Royalty set forth in
Section 2.4 to the date that the Royalty is paid in full. In the event that the
Independent Audit demonstrates that Kimmell is owed an additional Royalty
payment, the costs of the Independent Audit shall be borne by the parties in
proportion to the amount determined by the Independent Audit to be owed by
Rollerball as compared to the amount of additional Royalty payment demanded by
Kimmell in the Audit Notice. For example only, if the Audit Notice states that
an additional Royalty payment of $50,000 is owed by Rollerball and the
Independent Audit determines that, in fact, Kimmell is owed $25,000, and the
Independent Audit costs $20,000 to conduct, the parties will each pay $10,000 of
Independent Audit expense. If the parties are required by the firm conducting
the Independent Audit to pay an advance retainer or fee, the parties will share
that obligation equally, and an adjustment and/or reimbursement will be made at
the conclusion of the Independent Audit to reflect the proportional obligation
of the parties as determined above.
3.4 Any audit of Rollerball's accounting books and financial records
conducted in connection with the payment of the Royalty shall occur at
Rollerball's corporate headquarters in Los Angeles, California.
3.5 Except as otherwise provided by this Agreement, Kimmell shall be
solely responsible for paying the cost of any audit conducted by Kimmell
pursuant to Section 3.1, except that Rollerball shall produce relevant
accounting records as its own costs.
4. ARBITRATION
4.1 In the event of a default in terms and provisions of this
Agreement, the parties hereto agree that they shall submit their dispute to
arbitration pursuant to the rules of the American Arbitration Association.
Furthermore, during the arbitration process, Kimmell shall have the right to
conduct discovery, including but not limited to obtaining copies of all
pertinent accounting documents and deposing any and all witnesses regarding
relevant accounting issues.
5. ATTORNEY'S FEES
In the event any party takes legal action to enforce any of the terms
of this Agreement, the unsuccessful party to such action shall pay the
successful party's expenses, including attorneys' fees, incurred in such action.
6. MISCELLANEOUS PROVISIONS
6.1 Successors and Assigns. All of the terms, provisions and
obligations of this Agreement shall inure to the benefit of
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and shall be binding upon the parties hereto and their respective heirs,
representatives, successors and assigns. Notwithstanding the foregoing, neither
this Agreement nor any rights hereunder shall be assigned, pledged, hypothecated
or otherwise transferred by Kimmell without the prior written consent of
Rollerball in each instance.
6.2 Governing Law. The validity, construction and interpretation of
this Agreement shall be governed in all respects by the laws of the State of
California.
6.3 Headings. Sections and subsections headings are not to be
considered part of this Agreement and are include solely for convenience and
reference and in no way define, limit or describe the scope of this Agreement or
the intent of any provision hereof.
6.4 Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto pertaining to the subject matter hereof, and
supersedes all prior agreements, understanding, negotiations and discussions,
whether oral or written, relating to the subject matter of this Agreement. No
supplement, modification, waiver or termination of this Agreement shall be valid
unless executed by the party to be bound thereby. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
6.5 Notice. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed to have been given (i) if
personally delivered, when so delivered, (ii) if mailed, one (1) week after
having been placed in the United States mail, registered or certified, postage
prepaid, addressed to the party to whom it is directed at the address set forth
below or (iii) if given by telex or telecopier, when such notice or other
communication is transmitted to the telex or telecopier number specified below
and the appropriate answer back or telephonic confirmation is received:
If to Rollerball:
Rollerball International Inc.
0000 Xxxxxx Xxxx, Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxxx, President & CEO
Telecopier Number: 000-000-0000
If to Xxxxx Xxxxxxx/Spectrum Design
Xxxxx Xxxxxxx
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Spectrum Design
00000 Xxxx Xxxxx
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Either party may change the address to which such notices are to be addressed by
giving the other party notice in the manner herein set forth.
7.6 Third Parties. Nothing in this Agreement, expressed or implied, is
intended to confer upon any person other than Rollerball or Forcelledo any
rights or remedies under or by reason of this Agreement.
7.7 Execution and Delivery of Restatement of Assignment of Rights and
Royalty Agreement. This Agreement shall become binding upon and enforceable by
the parties hereto only upon the full execution and delivery (by all named
parties hereto) of the Restatement of FMG Royalty Agreement dated August 7,
1992, dated as of the date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year set forth above;
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XXXXX XXXXXXX/SPECTRUM DESIGN
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ROLLERBALL INTERNATIONAL INC.
Xxxx Xxxxxxxxxx, President & CEO
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SCHEDULE A
ROLLERBALL SKATE PRODUCTS
1. All products currently manufactured by Rollerball using the two or more
spherical balls Rollerball technology and all products to be developed
manufactured and distributed by Rollerball or authorized third parties
using the two or four ball technology.
2. Accessory equipment including replacement balls, knee pads, elbow pads,
wrist guards, helmets which bear the Rollerball trademark; provided,
however, that this category 2 shall not include clothing.