LICENSE AGREEMENT
This License Agreement (this "Agreement") made and entered into the 14th
day of October 1996 by and between XXXXXXX X. CASULL, an individual also
doing business as Dick Casull Research and Development, as "Licensor,"
individually, and any entity owned or controlled by Licensor, and CASULL ARMS
CORPORATION, a Delaware corporation, as "Licensee."
RECITALS
WHEREAS, Licensor has been engaged in the business of designing high
quality and unique firearms for more than the past 30 years.
WHEREAS, Licensor is a party to a License Agreement, dated as of
February 4, 1994 (the "Freedom Arm License Agreement"), between Licensor and
Freedom Arms, Inc., a Wyoming corporation ("Freedom Arms"), pursuant to which
Licensor has granted certain exclusive and non-exclusive rights (including,
but not limited to the non-exclusive right to use the trademark "454 Casull")
to Freedom Arms (the "Freedom Arms Licensed Rights").
WHEREAS, Licensor is a party to an oral agreement between Licensor and
North American Arms pursuant to which Licensor has granted certain
non-exclusive rights to North American Arms to use certain intellectual
property to manufacture a "Black Powder Mini Gun" (the "NAA Licensed Rights").
WHEREAS, Licensor has agreed to become associated with Licensee and to
enter into this Agreement to grant Licensee an exclusive worldwide license to
all of Licensor's presently owned and later-acquired intellectual property,
with specific exceptions described more fully below respecting U.S. Xxx. No.
5,048,216 for barrel forcing cone bushing and tooling, the Freedom Arms
Licensed Rights and the NAA Licensed Rights, for which nonexclusive and/or
future rights are granted hereby to Licensee.
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. PATENTS, TRADEMARKS, ETC.
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(a) Excepting only the Freedom Arms Licensed Rights, and U.S. Xxx.
No. 5,048,216, Licensor warrants that he is the sole and lawful owner of each
patent, patent application, trademark, trademark application, trade name,
service xxxx, copyright, copyright application, trade secret, or other
intangible property or asset (collectively, "Intellectual Property") set
forth on Schedule A to this Agreement and he represents and warrants that no
interest of any kind in such Intellectual Property has been conveyed to
another or pledged, mortgaged, licensed, or encumbered in any manner.
(b) Excepting only the Freedom Arms Licensed Rights, the NAA
Licensed Rights and U.S. Xxx. No. 5,048,216, Licensor hereby grants to
Licensee the exclusive worldwide right to utilize any of the Intellectual
Property set forth on Schedule A. Licensor further grants to Licensee a
worldwide exclusive right to the Freedom Arms Licensed Rights, effective upon
expiration of the Freedom Arms License Agreement, at which time the Freedom
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Arms Licensed Rights will be included as Intellectual Property under this
Agreement. Licensor further grants to Licensee a worldwide non-exclusive
right to such Freedom Arms Licensed Rights that Licensor has not granted
exclusively to Freedom Arms prior to the date of this Agreement.
(c) Licensor hereby grants to Licensee the exclusive worldwide
right to utilize any patent, patent application, trademark, trademark
application, trade name, service xxxx, copyright, copyright application,
trade secret computer program (in object or source code), or other intangible
property or asset developed or otherwise acquired in any manner by Licensor
after the date of this Agreement. Licensor agrees that the same shall be
considered Intellectual Property under this Agreement and that Schedule A
hereto shall be deemed to be automatically amended to include such
Intellectual Property. Accordingly, Licensor acknowledges that he shall not
license or convey any interest in any Intellectual Property to any person or
entity other than Licensee.
(d) Licensee agrees that it will arrange payment of all fees to
renew patents, copyrights, designs and/or trademarks and trade names which
are the subject of this Agreement, including periodic renewals of the
trademarks/trade names and will exercise reasonable business judgment to
enforce and otherwise maintain the Intellectual Property.
(e) With respect to any of the Intellectual Property referred to
in this Agreement which Licensee has an exclusive or a non-exclusive right to
manufacture and sell, Licensee will defend, at its own cost, against
unlicensed use of the "454 Casull" trademark while
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Licensor will bear the responsibility for controlling the use of the "454
Casull" trademark.
(f) Licensee agrees to use its best efforts to maintain and to
improve the quality of the products which bear the "Casull" name. Licensor
shall not use the "Casull" name in any manner which could be deemed
competitive to or confused with Licensee.
(g) Licensor acknowledges that he shall not use the "Casull" name,
or any derivation thereof, for any commercial purpose.
(h) Licensor shall provide technical assistance to Licensee with
respect to the use of the Intellectual Property to ensure the highest quality
control, which assistance shall be provided promptly upon request.
(i) Licensor shall provide, at his own expense, prototypes to
Licensee for inspection, evaluation and manufacturing purposes. All
prototypes shall remain the property of the Licensor.
(j) As reasonable, Licensor shall work with Licensee to develop
such new or modified products as are reasonably requested by Licensee.
(k) From time to time Licensor, at the request of Licensee, shall
attend various industry shows and meetings, provided that Licensee shall pay
all of Licensor's reasonable out-of-pocket expenses in connection with such
attendance.
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(l) Upon prior notice and consent, which consent shall not be
unreasonably withheld, Licensor shall make himself available to participate
in meetings with potential investors and to otherwise be interviewed for the
benefit of Licensee.
(m) While not being used for productive purposes, Licensee shall
allow Licensor to utilize its equipment for research and development of new
Intellectual Property.
(n) Upon death of Licensor, ownership of all Intellectual Property
passes to and shall vest in Licensee.
2. ROYALTY PAYMENTS. Licensee shall pay to Licensor a sum of five
percent (5%) of Licensee's revenues from products utilizing the Intellectual
Property or bearing the "Casull" name; provided that Licensor shall be paid a
minimum annual royalty of $40,000 and a maximum annual royalty of $400,000
per calendar year, which amounts shall be pro rated for the calendar year
ending December 31, 1996 based upon the number of days remaining in such
calendar year from and after the date of funding of Licensee's initial public
offering of securities resulting in gross proceeds of at least $5,000,000.
On or before the 20th of each month for the period set forth in this Section
2, Licensee shall pay Licensor 5% of the prior month's net revenues (sales
less returns) from products utilizing the Intellectual Property; provided
that no such monthly payment shall be less than $3,333. This fee shall be
payable to Licensor for the remainder of his life. The royalty payments due
hereunder shall cease upon the death of Licensor, however, if the Licensor's
wife, Mrs. Xxxxxxxxx Casull, should survive
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him the royalty payments shall continue until the earlier of ten years from
the date the first royalty payment is made to the Licensor pursuant to this
Agreement or the death of Mrs. Xxxxxxxxx Casull.
3. SALARY PAYMENTS. Licensee shall pay to Licensor a salary of
$100,000 per year (the "Salary"). In the event that the Licensor's
employment with the Licensee shall be terminated for any reason, Licensee
shall cease payment of the Salary to the Licensor, however, the minimum and
maximum annual royalties which the Licensor shall then be eligible to receive
pursuant to Section 2 of this Agreement shall increase from $40,000 to
$120,000 and from $400,000 to $500,000, respectively.
4. BARREL FORCING CONE BUSHING. Licensor represents and warrants that
he is the sole owner of U.S. Xxx. No. 5,048,216, generally referred to as the
"barrel forcing cone bushing." Licensor hereby grants to Licensee a
worldwide non-exclusive license to manufacture and produce the barrel forcing
cone bushing after January 31, 1998 through the expiration of the patent for
the barrel forcing cone bushing in September 2008.
5. AUDIT. A statement of net revenues will accompany each monthly
royalty payment. Licensor, may upon reasonable notice, review the books
along with a Licensee representative in order to reconcile a monthly
statement. Additionally, Licensor, may at his own cost, and not more than
once per year, provide for a formal audit of Licensee's books as they pertain
to royalty payments due hereunder. No audit shall be made to encompass a
period of time more than three years prior to the date of the audit. In the
event that any audit shows that
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payments to Licensor are substantially less than that shown on the books,
Licensee shall reimburse Licensor for the cost of the audit.
6. TOOLING, DESIGNS, ETC. Licensor shall provide Licensee with any
and all intellectual property and technology regarding tooling, designs,
procedures and other intellectual property in his possession which may be
used by Licensee on a royalty free, exclusive basis.
7. LIABILITY AND INDEMNITY.
(a) Licensee agrees to provide liability coverage to Licensor for
legal actions brought against Licensee and/or Licensor with regard to
products produced and sold by Licensee, that were designed by Licensor, and
for any legal actions brought against Licensee and/or Licensor with regard to
products produced and sold by a third party sub-licensed hereunder by
Licensee. Specifically, this means that Licensor will be covered under
Licensee's product liability insurance for the products listed in that
insurance policy only. In the event that legal action is brought against
Licensee and/or Licensor for a product built and sold by Licensee not covered
under the product liability insurance, or for any legal actions brought
against Licensee and/or Licensor with regard to products produced and sold by
a third party sub-licensed hereunder by Licensee, Licensee shall indemnify
and defend Licensor in such action with counsel of Licensee's choosing.
Licensee will pay the cost of the defense that they retain. In the event of
a judgment against Licensee and/or Licensor, Licensee will pay the total
judgment.
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(b) Licensee shall not be responsible for paying the cost of
separate or independent legal counsel for Licensor, although Licensor shall
have the right to retain counsel of his own choosing, at his own cost, and
the right to retain and pay for his own independent consultants or other
experts.
(c) In any lawsuit filed against Licensee and Licensor, Licensor
shall cooperate in every reasonable manner to assist Licensee in the
preparation of its defense. Licensor shall be compensated for costs and
expenses incurred by Licensor in assisting with the defense.
(d) In the event that a lawsuit is filed against Licensee for a
product designed by Licensor but not manufactured by Licensee, then Licensor
shall pay for all reasonable attorney's fees and other out-of-pocket costs
incurred by Licensee in connection with that lawsuit, including any judgment
that may be entered against Licensee. Licensor shall not be responsible for
paying the cost of separate or independent legal counsel for Licensee,
although Licensee shall have the right to retain counsel of its own choosing,
at its own cost, and the right to retain and pay for its own independent
consultants or other experts.
(e) Licensee and Licensor (including spouses and related entities)
agree to hold each other harmless for any and all liabilities arising from
actions of the other occurring before the signing of this Agreement.
8. TERMINATION; DEFAULT. If Licensee fails to pay to Licensor the
royalties payable under the terms hereof (unless a bona fide dispute exists
with respect to the payment of such royalty), or if Licensee violates or
fails to keep or perform any other material
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provision hereof, or if Licensee files for protection under federal or state
bankruptcy laws, or is placed in the hands of a receiver or trustee in
bankruptcy, then Licensor may, at his option, cancel and terminate this
agreement giving sixty (60) days' written notice, specifying the default
complained of; provided, however, that if Licensee, within such sixty (60)
days, cures the default complained of, then the notice shall cease to be
operative and this license agreement shall continue in full force and effect
as though such default had not occurred. In the event this agreement is
canceled by Licensor with cause which shall include but not be limited to an
uncured default following sixty (60) days' notice, the licenses granted to
Licensee under this License Agreement shall terminate. Additionally Licensor
shall be entitled to payments of all sums owing him in addition to any other
rights afforded by law. Nothing hereunder is intended to limit his rights
and remedies.
9. INJUNCTION. The parties acknowledge and agree that a breach of the
rights and obligations under this License Agreement is not susceptible to
remedy by money damages alone. Accordingly, should any dispute arise
concerning the enforcement of the terms and conditions of this agreement, the
parties agree that either shall have the right to seek and obtain an
injunction or to restrain a violation by the other party of any covenant
contained in this agreement, anything to the contrary herein notwithstanding.
In no case shall a waiver by either party of the right to seek relief under
this provision constitute a waiver of any other or further violation.
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10. NOTICE. Any written notice necessary or appropriate under this
agreement shall be in writing and shall be deemed to be properly given if
hand delivered or if sent by United States Certified Mail to the party to be
notified at the address of such party below (or to such other address as the
party may hereafter designate in writing):
Licensor: Xx. Xxxxxxx Casull
X.X. Xxx 000
Xxxxxxx, Xxxxxxx 00000
Licensee: Board of Directors
Casull Arms Corporation
c/o Xx. Xxxxx X. Xxxxxxx
Chairman of the Board
c/o IFG of Wyoming
0000 Xxxxx Xxxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxx 00000
Xxxx X. Annex, Esq.
Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
The date of service of any notice so sent by certified mail shall be deemed
to be three (3) days after the mailing thereof.
All payments due under this agreement shall be made payable to Dick
Casull Research and Development, whose address is P. O. Xxx 000, Xxxxxxx,
Xxxxxxx 00000.
11. ATTORNEY'S FEES. In the event that either party commits a breach
or default pursuant to this agreement, then the non-breaching or
non-defaulting party shall be entitled to recover attorney's fees and other
out-of-pocket costs incurred as a result of the breach or default regardless
of whether an action is filed or not.
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12. CONFIDENTIALITY. Licensor agrees that he shall not disclose,
communicate, disseminate, distribute or in any way make available to anyone
or any entity, any financial information, or other information not otherwise
available to the public obtained pursuant to this agreement, whether directly
or indirectly, or otherwise gained through contact between Licensor and
Licensee in connection with their ongoing relationship and that he shall take
all reasonable precautions to prevent inadvertent disclosure of such
information. Licensee agrees that it shall not disclose, communicate,
disseminate, distribute or in any way make available to anyone or any entity,
any designs, ideas, inventions, developments, or trademarks of Licensor, not
otherwise available to the public other than those already subject to this
agreement, and that Licensee shall take all reasonable precautions to avoid
inadvertent disclosure of such information.
13. BINDING EFFECT. This agreement shall be binding upon the heirs,
successors, and assigns of the parties.
14. COUNTERPART. This agreement shall be executed in two counterparts,
each of which shall constitute an original.
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IN WITNESS WHEREOF, the parties have executed this agreement at Freedom,
Wyoming, on the day and year first above written.
CASULL ARMS CORPORATION
By:_____________________________
Name: Xxxxx X. Xxxxxxx
Title: Chairman of the Board
________________________________
XXXXXXX X. CASULL
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Schedule A
DATE PATENT NUMBER DESCRIPTION
---- ------------- -----------
5/16/67 3,319,523 Drum Cartridge Feeding
Mechanism
01/30/68 3,366,010 Gin Firing Mechanism
10/05/71 3,609,902 Handgun Support
08/14/73 3,751,840 Cap and Ball Rifle
03/26/74 3,798,818 Means for Coupling a
Hand Gun to A Stock
08/27/74 3,831,305 Revolver Cylinder Lock
11/28/78 4,126,953* Single Action Revolver
With Safety
07/03/79 1,121,386 Trademark - 454 Casull
10/21/80 4,228,606 Means for Mounting
Cylinder to Small Gun
10/21/80 4,228,608 Cylinder Locking
Mechanism for Revolver
10/21/80 4,228,607 Single Action
Revolver/Locking
Cylinder
05/31/83 4,385,463 Floating Firing Pin
for Small Revolver
05/31/83 4,385,464 Mounting of Barrel and
Action to Stock
07/05/83 4,391,058 Firing Mechanism for
Bolt Action Rifle
09/06/83 4,402,152 Bolt Mechanism and
Receiver for Rifle
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05/29/84 4,450,992 Belt Buckle-Mini-
Revolver Combination
09/10/85 280,464 Belt Buckle
03/19/91 1,638,309** Trademark - 454 Casull
09/17/91 5,048,216*** Barrel Forcing Cone
Bushing and Tooling
07/16/96 08/683,076**** Extractor and System
for Extracting a
Cartridge From a
Firearm
07/16/96 08/683,077**** Cartridge and Method
of Manufacturing a
Cartridge for a
Firearm
_______________________________________
* Covered by the Freedom Arms License Agreement on an
exclusive basis.
** Covered by the Freedom Arms License Agreement on a non-
exclusive basis.
*** Currently licensed to Freedom Arms.
**** Patent application pending.
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