EXHIBIT 10.1
ROYALTY CONTRACT
This contract ("Agreement") is made by and between PLANET POLYMER
TECHNOLOGIES, INC., a California corporation ("Planet"), and XXXX, INC., a
California corporation ("Xxxx") and is effective forthwith upon the execution
hereof by the parties.
RECITALS
WHEREAS,
X. Xxxx has contracted to acquire all of the assets of XXXX
ENTERPRISES LLC, a Nevada limited liability company ("Xxxx Enterprises"), and in
connection therewith has agreed to accept an assignment of the rights and
assumption of the duties of Xxxx Enterprises under a certain Purchase, Sale and
License Agreement with Planet, dated May 1, 2003 as amended pursuant to a First
Amendment dated January 31, 2004 ("Purchase Agreement"), including but not
limited to a Secured Promissory Note and Security Agreement executed concurrent
therewith.
B. PLANET is willing to accept Xxxx as assignee of such Purchase
Agreement and Xxxx agrees to assume and discharge all of the obligations
thereunder upon all of the following terms and conditions.
WHEREFORE, in consideration of the mutual terms and conditions herein set
forth, the parties agree as follows:
1. Warranties of Planet. Planet warrants as follows:
1.1. Planet is a corporation duly formed, existing and in good
standing under the laws of the State of California and duly authorized by its
board of directors to enter into and perform this Agreement and this Agreement
is effective against and binding upon Planet.
1.2. All of the obligations of Planet and to the best of Planet's
knowledge all of the obligations of Xxxx Enterprises under the Purchase
Agreement, including the Secured Promissory Note and Security Agreement, have
been fully performed to date and there are no claims asserted by either party
against the other for any breach of said agreement and there are no unperformed
obligations of either party thereunder.
1.3. Planet is the owner of the intellectual rights, subject only to
the exclusive license of Xxxx Enterprises under the Purchase Agreement, which
are set forth in Exhibit B to the Purchase Agreement.
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1.4. Except as set forth in the Purchase Agreement, Planet has not
assigned any of the intellectual rights to a third party.
1.5. All of Planet's representations and warranties set forth in
paragraph 7 and its subparts of the Purchase Agreement are true and correct as
of the date they were made.
2. Warranties of Xxxx. Xxxx warrants as follows:
2.1. Xxxx is a corporation duly formed, existing and in good
standing under the laws of the State of California and duly authorized by its
board of directors to enter into and perform this Agreement and this Agreement
is effective against and binding upon Xxxx.
2.2. Xxxx has full power and authority, together with all licenses,
permits and certificates from public authorities as are necessary to own its
properties and to conduct its business where the same is now located and being
conducted, and has full power and authority to accomplish the transactions
contemplated hereby and carry out the provisions hereof.
2.3. No broker or finder has been retained by Xxxx in connection
with this transaction.
2.4. As of the date hereof Xxxx has unincumbered cash assets of
approximately $400,000 and its financial condition is reasonably adequate to
perform its obligations contemplated by this Agreement. Xxxx shall have a net
worth of not less than $400,000 at the closing.
3. Final Payment under Purchase Agreement. The parties agree that Xxxx
shall pay to Planet and Planet shall accept from Xxxx the cash sum of $161,000
as and for full satisfaction of all of the monetary obligations of the buyer
under the Purchase Agreement, Secured Promissory Note and Security Agreement,
other than the obligation to pay royalties as provided in paragraph 4, below.
Such payment shall be made as follows:
3.1. The transaction whereby Xxxx is acquiring the assets of Xxxx
Enterprises is being handled through a Bulk Sale Escrow to be opened with New
Century Title Escrow. The escrow holder shall be instructed to furnish Planet,
through its attorney, a copy of the Bulk Sale Notice and Xxxx shall submit a
demand for $161,000 together with the following:
3.1.1. Duly executed releases in recordable form of all liens
and encumbrances against any and all of the assets subject to the Purchase
Agreement;
3.1.2. Duly executed assignments in recordable form of all of
the Aquamim technology, patent and other intellectual rights listed on
Exhibit B of the Purchase Agreement, assigning all of such rights to Xxxx.
All of Planet's obligations to maintain or defend the patents shall be
terminated at that time.
3.1.3. An instruction that the escrow holder shall deliver
such documents to
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Xxxx only when it holds for Planet's account the sum of $161,000 in
unencumbered cash.
4. Royalties payable from Xxxx to Planet. All provisions as they relate to
royalties in the Purchase Agreement shall be deemed null and void upon the
execution hereof and the payment by Xxxx of $161,000 cash to Planet, through
escrow as described in 3.1 of this Agreement. Such provisions shall be replaced
with the following provisions relating to the determination and payment of
royalties.
4.1. Royalties. During the 8-year term commencing June 1,2004 and
ending May 31, 2012 (the "Term"), Xxxx shall pay to Planet royalties
("Royalties") on feedstocks or sintered products manufactured and sold to third
parties using the Aquamim water debind method or solvent debind Tungsten-Carbide
technology (the "Products"). During the term, Royalties shall be payable on or
before the 15th day of each month for Products sold by Xxxx and for which Xxxx
received the purchase price (in whole or in part) from the third party buyer
during the preceding calendar month. The obligation for the payment of Royalties
shall terminate at the expiration of the Term, provided that payment shall be
made on all pending orders from customers actually received by Xxxx during the
term. In the event that Xxxx extends credit to a customer for a period longer
than 45 days from the date of invoice, the royalty shall be due and payable on
the entire invoice as if the purchase price was received 45 days after the date
of invoice.
4.2. Computation of Royalties. Royalties payable hereunder shall be
computed as follows:
4.2.1. The Royalties on any Water De-bound Feedstock or
Solvent De-bound Feedstock sold to a third party shall be computed by
multiplying the total purchase price received by Xxxx for the feedstock
(excluding taxes, shipping, handling and similar charges not related to the
actual manufactured price of the feedstock) by 6% (.06). The price of feedstock
sold to Micromold, Inc., or any other affiliate of Xxxx, shall be fair and not
less than the price offered to unaffiliated third parties for like feedstock in
like quantities.
4.2.2. The royalty on any Water De-bound Feedstock or Solvent
De-bound Tungsten-Carbide Feedstock manufactured into a finished product and
sold to a third party shall be computed by dividing the sintered shipped weight
(as that term is defined in Section 4.2.2.1 of this Agreement) by 94% (.94) and
then multiplying that sum by the lowest feedstock sales price offered to
unaffiliated third parties for similar quantities and then multiplying that sum
by 6% (.06), as follows:
(Shipped Weight / .94) x Lowest Published Price x .06 =Royalty Payable
4.2.2.1. "Shipped weight" as used in this Agreement shall mean
the weight of the actual product less packaging materials, pallets, bags, cans
and/or similar materials used to package, transport or protect shipped products
("Shipped Weight").
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4.2.3. The Shipped Weight of any sintered Products shall be
documented by the weighing of the Products and recordation on the invoice to the
buyer by line item. This weight shall be used for the calculation set forth in
Section 4.2.2 of this Agreement.
4.2.4. Royalties payable by Xxxx to Planet under Section 4.1
of this Agreement shall be based on Products sold, delivered, invoiced and paid
for during the Term. Copies of the Invoices together with an accounting
of outstanding invoices (whether or not paid), orders received for Product and
in process and the payments received from the third party buyers thereon shall
accompany each monthly payment of royalties.
4.2.5. Planet shall have the right to conduct a compliance
audit at any time during the Term up to 60 days following its expiration. The
records will be stored at Micromold, Inc., 0000 Xxxx Xxxxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000 (909) 684-7130 (or at such other place as may be designated in
writing by Xxxx) and written notice of audit shall be directed to Xxxx'x CFO
(presently Xxxxxx Xxxxxxxxx) at least five work days in advance of the audit.
4.2.6. Royalties will be payable only on Products sold,
delivered and paid for by the buyer. No Royalties shall be paid or payable on
account of scrap, testing, samples, inventory shrink or loss of Product, or for
Product sold but not paid for in whole or in part. The Royalty shall become
payable only upon receipt by Xxxx of the purchase price therefor.
Notwithstanding the foregoing, where the customer is Micromold, Inc., the right
to payment of the Royalty will accrue to Planet upon invoicing, whether or not
payment has been made thereon, provided, however, that no royalty shall be
payable on account of Xxxx'x reprocessing of green runners into pellets for
Micromold, Inc.
5. Confidential Information. Both parties shall maintain in confidence all
proprietary information received or disclosed to the other in connection with
this Agreement. Neither party shall disclose any proprietary information for its
own use or for any other persons' benefit other than as is expressly permitted
by this Agreement without the prior written consent of the owner of the
proprietary information. Both parties shall abide by the reasonable
confidentiality restrictions imposed by the other party from time to time for
proprietary information.
6. General provisions.
6.1. Jurisdiction. Each party consents to the exclusive jurisdiction
of the state and federal courts sitting in either San Diego or Riverside County,
California in any action or claim arising out of or under this Agreement or the
transactions contemplated by this Agreement. Each party further agrees that
personal jurisdiction over it may be effected by service of process by
registered or certified mail addressed as provided in section 6.2 of this
Agreement, and that when so made shall be as if served upon it personally within
the State of California.
6.2. Notices. All notices, requests, consents and other
communications between the parties required or permitted under this Agreement
shall be in writing and shall be personally
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delivered or mailed by using first-class, registered or certified mail, postage
prepaid, to the following addresses or to such other address as the parties
hereto may designate in writing, or by facsimile to the numbers set forth below.
Planet: X. X. Xxxxx
Planet Polymer Technologies, Inc.
0000 Xxxxxxxx Xxxx Xxxxxx
Xxx Xxxxx, XX 00000
W/copy to: Xxxxxxxxx, Xxxxxxx & Flinch, P.C.
000 Xxxxxxxxx Xxxxxx, 0xx Xxxxx
Xx Xxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx
Xxxx: Xxxx, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxx
W/copy to: Xxxxxxx X. Xxxxx
Law Offices of Xxxxxxx X. Xxxxx
00000 Xxxxxxxxxx Xxxxxx Xxxxx, Xxx 000
Xxxxxxxx, XX 00000
All such notices, requests, consents and other communications shall be deemed to
be properly given if delivered personally, via facsimile or, if sent by mail,
three business days after the same has been deposited with the U.S. Mail,
addressed as above, postage prepaid.
6.3. Counterparts. This Agreement may be executed in counterparts
and all counterparts so executed shall constitute one agreement which shall be
binding on all of the parties hereto, notwithstanding that all of the parties
are not signatory to the original or same counterpart.
6.4. Entire Agreement. This Agreement shall constitute the entire
agreement of the parties and shall supersede all prior agreements, written or
oral, concerning the subject matter hereof This Agreement was drafted through
the joint efforts and participation of the parties and their attorneys, and
shall be construed neither in favor of, nor against, either party hereto, but in
accordance with the fair and reasonable meaning hereof. The parties further
agree that this Agreement will be construed to effectuate the normal and
reasonable expectations of a sophisticated buyer and seller.
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6.5. Waivers and amendments. No amendment, modification, supplement,
termination or waiver of any provision of this Agreement, and no consent to any
departure therefrom, may in any event be effective unless in writing and signed
by the party or parties affected thereby, and then only in the specific instance
and for the specific purpose given.
6.6. Attorneys' fees. Each party to this Agreement shall bear its
own legal fees and any and all other expenses relating to the transactions
contemplated in this Agreement. If any party institutes any arbitration, action
or proceeding to enforce this Agreement or any provision hereof or for damages
by reason of any alleged breach of this Agreement or of any provision hereof or
for a declaration of rights hereunder, then the prevailing party in any such
arbitration, action or proceeding shall be entitled to receive from the other
party all costs and expenses, including reasonable attorneys' fees, incurred by
the prevailing party in connection with such action or proceeding.
6.7. Headings. The headings of this Agreement are for convenience of
reference only and shall not affect the construction of any provision of this
Agreement.
6.8. Successors and Assigns. This Agreement and the provisions
hereof shall be binding upon and inure to the benefit of each of the parties and
their successors and assigns. Either party may assign its rights under this
Agreement only with the written consent of the other, which consent shall not be
unreasonably withheld.
6.9. Opportunity to Consult Counsel. Each party hereto acknowledges
that it has had a sufficient opportunity to consult independent legal counsel
and independent accountants concerning the provisions of this Agreement and
entered into this Agreement intending to be legally bound. The parties hereto
are relying solely upon the advice of their own independent counsel and
accountants and are not relying in any manner or way on the advice or counsel of
the other party's counsel, accountants, or other advisors.
6.10. Time is of the Essence. All dates and times in this Agreement
are of the essence.
6.11. Severability. If any provision of this Agreement or the
application of such provision to any person or circumstance shall be held
invalid, the remainder of this Agreement or the application of such provision to
persons or circumstances other than those to which it is held invalid shall not
be affected thereby.
6.12. Contingency. This Agreement is contingent upon the close of
the New Century Title Escrow through which Xxxx is acquiring the assets of Xxxx
Enterprises, on or before June 30, 2004. In the event the close does not occur
within such period, then this contingency shall be satisfied if the said Escrow
closes thereafter and before either party has given a written notice of
termination of this Agreement to the other.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed
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as of the date first set forth above.
PLANET POLYMER TECHNOLOGIES, INC., a
California corporation,
By: /s/ X. X. Xxxxx
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X. X. Xxxxx, President
XXXX, INC., a California Corporation
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, Chief Executive Officer
GUARANTY
Micromold, Inc., a California corporation, does hereby guarantee to Planet the
due and prompt performance of all of the obligations of Xxxx, Inc. under the
foregoing agreement. Pursuant to California Civil Code Section 2856, Micromold,
Inc., as Guarantor, waives all rights and defenses that are or may become
available to Guarantor by reason of California Civil Code Sections 2787 to 2855,
inclusive, including without limitation, any rights or defenses arising out of
an election of remedies by Planet, This Guaranty and the provisions hereof shall
be binding upon and inure to the benefit of each of the parties and their
successors and assigns. Either party may assign its rights and benefits under
this Guaranty only upon the written approval of the other first had and
received, which approval shall not be unreasonably withheld.
MICROMOLD, INC., a California corporation
By: /s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx, President
