EXHIBIT 10.21
Page 1
ROYALTY AGREEMENT
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THIS AGREEMENT is made this 4th day of October,
1988, by and between XXX PHARMACEUTICALS, INC., a California
corporation ("Xxx") and XXXXXXX PROPRIETARIES, INC., a New
York corporation ("Xxxxxxx").
RECITALS
WHEREAS, Xxx has acquired certain Assets, including
the Products from Xxxxxxx pursuant to a Purchase and Sale
Agreement between Xxx, Xxxxxxx and Xxxxx Xxxxxxx, dated
September 30, 1988 (the "Purchase Agreement"); and
WHEREAS, in connection with the acquisition of such
Assets, Xxx is to pay to Xxxxxxx the Royalties provided for
herein.
NOW, THEREFORE, it is agreed by and between the
parties hereto as follows:
1. DEFINITIONS.
(a) "Products" means those depilatory drug
products listed on Schedule A hereto and any developments,
innovations or improvements made thereon marketed under the
tradename or trademark "Zip" or "Zip Wax." The Products
shall include all hot wax and cold wax depilatory drug
producs. The Products shall not include any depilatory drug
products currently being sold under the "Bikini Bare"
trademark or any other non-hot wax or non -cold wax
depilatory drug products which Xxx acquires or develops after
the date hereof unless subsequently sold under the "Zip" or
"Zip Wax" tradename or trademark.
(b) "Net Sale Price" means the actual price
received from the domestic or international sale of the
Products (less the actual sale prices of any Products
returned), exclusive of freight, handling, insurance, custom
duties and any sales, use or value added or similar taxes
levied on the sale of the Products. "Net Sales" shall not
include (i) receipts through salon operations by Xxx, its
Subsidiaries or its licensees for treatment of the Products
directly through or in connection with a salon or salons
owned or operated by Xxx, such Subsidiaries or such licensees
and (ii) sales by Xxx to its Subsidiaries or licensees or its
Subsidiaries to licensees for resale, but in such instances
the obligations to pay Royalties shall arise upon the sale by
Xxx'x Subsidiaries or licensees to third parties.
(c) "Xxx" shall mean Xxx Pharmaceuticals,
Inc., its permitted successors and assigns and any
Subsidiaries thereof.
(d) "Minimum Royalty" shall mean the payments
of Royalties for each Fiscal Period hereof equal to Five
Hundred Thousand Dollars ($500,000).
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EXHIBIT 10.21
Page 2
(e) "Fiscal Period" shall mean (i) the period
from the Closing of the Agreement to September 30, 1989, and
(ii) a fiscal year beginning October 1 each year (commencing
with October 1, 1989) until the termination of the Royalty
Period.
(f) "Maximum Royalty" shall mean Five Million
Dollars ($5,000,000).
(g) "Royalty Period" shall mean the ten (10)
Fiscal Periods beginning on the Closing and ending on
September 30, 1998.
(h) "Subsidiary" shall mean a company in
which at least fifty percent (50%) of the voting stock of
which at the time of reference is legally, equally or
factually owned, directly or indirectly, by Xxx or an entity
controlling, controlled by or under common control with Xxx.
(i) Other terms not defined herein shall have
the meaning set forth in the Purchase Agreement.
2. ROYALTIES.
(a) ROYALTY RATE. Xxx shall pay royalties to
Xxxxxxx for all Products sold or otherwise disposed of
subsequent to the date of this Agreement by Xxx, its
Subsidiaries and its licensees at the rate equal to ten
percent (10%) of the Net Sales Price of each Product sold
during the Royalty Period ("Royalty" or "Royalties").
(b) QUARTERLY ROYALTY PAYMENT. The aggregate
amount of Royalties accruing during each fiscal quarter of
each Fiscal Period pursuant to Section 2(a) hereof is
hereinafter referred to as the "Quarterly Royalty Payment."
The Quarterly Royalty Payment shall be made by Xxx to Xxxxxxx
within forty-five (45) days of the end of each such fiscal
quarter in which a sale or other disposition of a Product
takes place, at which time there shall be delivered to
Xxxxxxx an accounting of the operations upon which such
Quarterly Royalty Payment is based, certified by an officer
of Xxx, which accounting and certification shall be in form
and substance reasonably satisfactory to Xxxxxxx. The first
such accounting shall include all Products sold or otherwise
disposed of pursuant to this Agreement between the Closing
and the date of such accounting. The aggregate of Quarterly
Royalty Payments is hereinafter referred to as "Royalty
Payment."
(c) MINIMUM ROYALTY. If the total amount of
earned Royalty Payments for a Fiscal Period pursuant to
Section 2(a) hereof is less than the Minimum Royalty, then
with the payment for the fourth fiscal quarter of such Fiscal
Period, Xxx shall pay to Xxxxxxx an additional amount (the
"Additional Amounts") so that Xxxxxxx receives for such
Fiscal Period the Minimum Royalty. Any Royalty Payments due
for a Fiscal Period in excess of the Minimum Royalty shall be
reduced by any Additional Amounts for any prior Fiscal Period
that has not been previously offset until all such Additional
Amounts have been so offset and then shall be credited
against any Additional Amounts due in subsequent Fiscal
Periods.
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EXHIBIT 10.21
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(d) MAXIMUM ROYALTY. Notwithstanding any
other provisions of this Agreement, in no case shall the
aggregate of all Royalty Payments (including any Additional
Amounts paid pursuant to the Minimum Royalties) exceed the
Maximum Royalty. Upon payment of the Maximum Royalty, this
Agreement and all obligations of Xxx to pay further Royalties
shall terminate.
(e) ROYALTY PERIOD. Unless otherwise
terminated sooner, this Agreement and all obligations of Xxx
to pay Royalties shall terminate on the last day of the
Royalty Period.
(f) LATE PAYMENT. Any Royalty Payment
(including any Additional Amounts) or part thereof which is
not made on or before the date when due shall accrue interest
thereon from and after such date and until the date of
payment at the rate of one percent (1%) above the published
prime rate of Bank of America NT&SA, from time to time in
effect, compounded quarterly, but in no event shall such rate
exceed the rate permitted by applicable law.
3. FUTURE PATENTS. All inventions registered
with the United States or any foreign patent office and any
and all rights thereunder, both domestic and international,
relating to the Products or the method of manufacturing,
using or selling the Products that may be obtained,
discovered or made by Xxx during the term of this Agreement
shall be the property of Xxx and Xxxxxxx shall have no rights
therein, except the rights to the Royalties provided for in
Section 2 hereof relating to the Products.
4. DUTY TO EXPLOIT. Xxx shall use its best
efforts to market, manufacture and otherwise commercially
exploit the Products. Xxx will take no action the effect of
which is to reduce the amount of the Royalties payable under
Section 2 hereof.
5. PROTECTION OF CONFIDENTIAL INFORMATION. Xxx
and Xxxxxxx shall each take all steps which are necessary or
reasonable to safeguard the secrecy and confidentiality of
information related to the Products.
6. TERM AND TERMINATION. Accrual of Royalties
under this Royalty Agreement shall continue in effect from
the date of this Agreement until the later to occur of: (i)
payment of the Maximum Royalty or (ii) the last day of the
Royalty Period. Thereafter, Xxx shall have the right to
manufacture and sell anywhere in the world the Products
without payment of any further Royalties and the provisions
hereof concerning reports, records and disclosure shall no
longer apply. Royalties accrued as of the date of the
termination of this Agreement shall remain due and payable
notwithstanding termination of this Agreement.
7. SECURITY. Payment of the Royalties is secured
by a Security Agreement attached to the Purchase Agreement
hereto as Exhibit "D."
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EXHIBIT 10.21
Page 4
8. ASSIGNMENT.
(a) In the event that Xxx shall sell, assign
or transfer the business relating to all or any of the
Products or to the trademarks or tradenames "Zip" or "Zip
Wax", Xxx shall, within five (5) days after such sale,
assignment or transfer, send a written notice thereof to
Xxxxxxx, stating the date thereof, a description of that
which was sold, assigned or transferred, and the name and
post office address of the purchaser, assignee or transferee,
and shall, as a condition to such sale, assignment or
transfer, obtain an undertaking of the purchaser, assignee or
transferee to continue to pay the Royalties specified herein
in Section 2 hereof, with respect to such Product or
Products, to Xxxxxxx in accordance with the terms hereof and
upon obtaining such undertaking, Xxx shall be released of its
obligations hereunder with respect to such Product(s) which
were sold, assigned or transferred.
(b) In the event all or any part of the
rights to receive Royalties payable hereunder are sold,
assigned or transferred by Xxxxxxx or its successors or
assigns, payment of the Royalties relating to the Royalties
so sold, assigned or transferred shall thereafter be made to
such purchaser, assignee or transferee, provided that the
party making such sale, assignment or transfer shall have
given due written notice to Xxx of such sale, assignment or
transfer, stating in such notice the proportion of the
Royalty and the name and address of the person to whom such
sale, assignment or transfer is made. Thereafter, all
payment of the Royalties pursuant to Section 2 above, and all
reports required by Section 2(b) above, shall be made to such
purchaser, assignee or transferee. In the event any such
purchaser, assignee or transferee shall desire to exercise
the rights of Xxxxxxx under Section 9 hereof, Xxx shall not
be required to comply with such request except at the request
of a person having a right to receive not less than twenty-
five percent (25%) of the Royalties payable hereunder.
9. RECORDS. Xxx shall keep complete and accurate
records of all sales of the Products for at least three (3)
years after the date of each report of such sales, which
records shall be open during reasonable business hours at
Xxx'x place of business to a certified public accountant
selected by Xxxxxxx and reasonably acceptable to Xxx who
shall, at Xxxxxxx' expense, have access to such records for
the sole purpose of verifying for Xxxxxxx, not more often
than once each year (except in the event a claim is filed),
the sales and payments accrued as herein provided. Such
accountant shall treat as confidential and shall not disclose
to Xxxxxxx any information other than information relating
solely to the sales payments accrued and the accuracy of the
reports and payments required to be made under this Agreement
and, in no event, are the quantities or prices to the
individual customers to be disclosed to Xxxxxxx by said
accountant, provided, however, that in the event any claim by
Xxxxxxx be asserted during the three (3) year period, then
Xxx shall preserve all relevant records until the resolution
of the claim.
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EXHIBIT 10.21
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10. CURRENCIES. The payments provided for in
Section 2 hereof, to be made by Xxx to Xxxxxxx, shall accrue
and be payable in the currency of the country where the sale
is made or the currency in which the payment is received by
Xxx, a Subsidiary or a licensee. In the case of sales made
or payments received outside the United States of America,
Xxx will, for the convenience and account of Xxxxxxx, make
diligent efforts, subject to pertinent laws and regulations,
to secure the transfer and conversion of the payments due
hereunder into the equivalent of United States dollars at the
applicable rate of exchange at the date of payment and the
remittance thereof to Xxxxxxx in United States dollars in the
United States, less all necessary related taxes, assessments,
charges and expenses incurred or required by any local
government in order to convert said foreign currency into
United States dollars. In the event such transfer or
conversion is not lawful or practicable, the payment shall be
made by deposit thereof in the national currency of the
country where said sales are made or payment or royalties
received, to the credit and account of Xxxxxxx or their
nominee in any commercial bank or trust company of Xxxxxxx'
choice in said country and prompt written notice of each
deposit shall be given to Xxxxxxx.
11. OFFSET. Payments of Royalties hereunder may
be reduced by amounts due Xxx pursuant to Section 20 of the
Purchase agreement. Amount to be so offset against further
Royalties shall bear simple interest equal to the reference
(prime rate) charged by the Bank of America NT&SA from time
to time (but in no case shall the interest rate at any time
exceed maximum rate permitted by law) until the Royalty being
offset is otherwise due and payable.
12. GOVERNING LAW. This Agreement will be
governed by and construed in accordance with the laws of the
State of California.
13. ENTIRE AGREEMENT. This Agreement, the
Security Agreement and the Purchase Agreement contain the
entire agreement of the parties with respect to the subject
matter hereof. This Agreement may not be changed orally, but
only by written agreement of both parties hereto.
14. SEVERABILITY. In the event that any provision
of this Agreement is adjudicated invalid, illegal or
unenforceable, such adjudication will not affect the
validity, legality or enforceability of any other provision,
and this Agreement will be construed as though such invalid,
illegal or unenforceable provision had never been contained
herein.
15. RELATIONSHIP OF PARTIES. Nothing in this
Agreement will be deemed to create a relationship of
employment or agency or to constitute the parties as partners
or joint venturers.
16. CAPTIONS. The underlined captions are
included herein for convenience and do not constitute a part
of this Agreement.
17. EXECUTION IN COUNTERPARTS. This Agreement may
be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together
constitute but one and the same instrument.
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EXHIBIT 10.21
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18. NOTICES. Notices will be deemed given when
received if sent by telecopy, hand delivery, or mailed, first
class and postage prepaid to the following address or to such
other address as either party may notify the other in
writing:
If to Xxx:
XXX PHARMACEUTICALS, INC.
0000 Xxxxx Xxxxx Xxxxxx
Xxxxx Xx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxx, President
If to Xxxxxxx:
XXXXXXX PROPRIETARIES INC.
000 Xxxxx 00 Xxxxx
Xxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxx Xxxxxxx, President
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date first written above.
XXX PHARMACEUTICALS, INC.
By: XXXXXX X. XXX
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Xxxxxx X. Xxx, President
XXXXXXX PROPRIETARIES, INC.
By: XXXXX XXXXXXX
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Xxxxx Xxxxxxx, President
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EXHIBIT 10.21
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SCHEDULE "A"
THE PRODUCTS
Products include:
(1) Zip Wax Hair Remover
(2) Zip Wax Tube For Face
(3) Zip Wax Tube For Body
(4) Zip Creme Bleach
