Exhibit 10.1
SETTLEMENT AND LICENSE AGREEMENT
--------------------------------
This Settlement and License Agreement (hereinafter, this "Agreement") is entered
into between:
Answer Products, Inc., a California corporation, having its principal place of
business at 00000 Xxxxxx Xxxxxxxx, Xxxxxxxx, Xxxxxxxxxx 00000 (hereinafter
"Answer"); and
RockShox, Inc., a Delaware corporation, having its principal place of business
at 1610 Garden of the Xxxx Xxxx, Xxxxxxxx Xxxxxxx, Xxxxxxxx 00000 (hereinafter
"RockShox").
This Agreement shall be effective as of February 11, 2002 (hereinafter, "the
Effective Date").
In consideration of the following recitals, mutual promises, and agreements, and
for other good and valuable consideration, the parties agree as follows:
RECITALS
Answer is buying from Manitou Mountain Cycles, Inc. and E. Xxxxxxx Xxxxxxxx all
rights in and to United States Patent No. 5,470,090 (hereinafter, the "'090
Patent"), as a result of a Manitou Licensing Agreement Buy-Out effective January
1, 1997. Answer is also the owner of all rights in and to United States Patent
No. 5,848,675 (hereinafter, the "'675 Patent") and United States Patent No.
6,241,060 (hereinafter, the "'060 Patent").
Answer and RockShox are currently engaged in litigation in the United States
District Court for the Central District of California in a case captioned Answer
Products, Inc. v. RockShox, Inc., Case No. CV 01-2635 ER (RZx) (hereinafter, the
"Patent Case"), where Answer initially asserted that RockShox was infringing
various claims of the '060 Patent, the '090 Patent and the '675 Patent, and is
now asserting that RockShox has infringed and continues to infringe the '090
Patent and the '675 Patent.
Answer has a valid claim against RockShox for $1,000,000 in the Patent Case for
past infringement of the '090 Patent and '675 Patent. Answer is compromising
this claim in this Agreement.
Answer and RockShox have agreed to settle the Patent Case between them on the
terms and conditions set forth below.
The preamble and these recitals are intended to be an integral part of this
Agreement.
Definitions
The term "Patents" as used in this Agreement means (a) the '090 Patent; (b) the
'675 Patent; and (c) any and all continuations, divisionals, reissues,
reexaminations or foreign counterpart patents that claim priority to or from the
original applications upon which the '090 Patent or the '675 Patent are based,
and that add no new matter to those original applications. The term "Patents"
expressly excludes those claims of any patent issuing from a
continuation-in-part, which claims have a priority date that is the same as the
application date of such continuations-in-part from, or any other applications
otherwise adding new matter to, the original applications for the '090 Patent or
the '675 Patent. The term "Patents" expressly includes those claims of any
patent issuing from a continuation-in-part application which have a priority
date of the original applications filed for the '090 Patent and the '675 Patent.
Dismissal of Suit
Filing Dismissal. Contemporaneous with the execution and delivery of this
Agreement, the parties shall jointly move the Court to dismiss with prejudice
all pending claims and counterclaims against each other in the Patent Case. The
parties agree to do so by immediately executing and filing with the court the
dismissal with prejudice of the Patent Case in the form attached hereto as
Exhibit A.
13
Each Party to Bear Own Costs. The parties agree that each party will bear its
own costs, expenses, and attorneys' fees, whether taxable or otherwise, incurred
in, relating to, arising out of, or connected with the Patent Case.
No Admission of Liability. The parties agree that neither the execution of this
Agreement, nor the performance of this Agreement, shall constitute or be
construed as an admission of any liability, or strength or weakness of any
allegations made, by either party, or their subsidiaries, affiliates, parents,
joint ventures, partners, insurance carriers, and all of their past, present and
future officers, directors, current and former employees, shareholders, agents,
predecessors, successors, assigns, insurers and attorneys.
ROYALTY
Payments
Amount and Payments. In consideration for the license granted in Article 7 and
the other rights and releases granted hereunder, and unless prepaid in
accordance with Section 4.2 or accelerated in accordance with Section 4.3,
RockShox shall pay Answer ONE MILLION DOLLARS ($1,000,000 U.S.) in four equal
installments of TWO HUNDRED AND FIFTY THOUSAND DOLLARS ($250,000 U.S.). The
first installment is due on June 30, 2002. The remaining installments are due
by June 30, 2003; June 30, 2004; and June 30, 2005, respectively.
Prepayment Option. At RockShox's option, and in lieu of paying the amount of
$1,000,000, RockShox may pay to Answer $750,000 on or before June 30, 2002,
instead of the first installment of $250,000 due on June 30, 2002, which
prepayment will eliminate any further payment obligation to Answer.
Acceleration of Payment Obligations. Upon the occurrence of any of the
following events, all remaining unpaid installments shall become due
immediately, and RockShox shall then immediately pay Answer the sum of all
remaining unpaid installments (RockShox shall then have no further obligation to
Answer):
(a) more than 50% of the outstanding voting shares of RockShox become owned by a
person or entity who is different from any person or entity owning, at January
1, 2002, more than 1% of the outstanding voting shares of RockShox;
(b) the sale of substantially all of RockShox's assets related to its design or
production of suspension forks and their components for use in mountain bikes;
or
(c) if RockShox fails to pay any required installment payment when due.
In the event of the occurrence of any of such acceleration events on or prior to
June 30, 2002, RockShox shall only be required to pay immediately the amount of
$750,000 in full and final payment
Releases
Answer's Releases. As of the Effective Date, Answer does hereby release and
forever discharge RockShox, all of its past, present, and future officers,
directors, current, and former employees, shareholders, agents, predecessors,
successors, assigns, insurers, attorneys, subsidiaries, affiliates, parents,
joint ventures, partners, insurance carriers, and customers, and each of them
(collectively hereinafter, the "Answer Releasees"), from any and all claims,
demands or liabilities of any nature whatsoever asserted in the Patent Case and
otherwise regarding the infringement of any one or more claims (except claims 16
and 17 of the '090 Patent which are previously licensed to RockShox) of the '090
Patent and the '675 Patent.
ANSWER ACKNOWLEDGES THAT IT IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL
CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
14
ANSWER, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS IT
MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW
PRINCIPLES OF SIMILAR EFFECT.
RockShox's Releases. As of the Effective Date, RockShox does hereby release and
forever discharge Answer, all of its past, present, and future officers,
directors, current, and former employees, shareholders, agents, predecessors,
successors, assigns, insurers, attorneys, subsidiaries, affiliates, parents,
joint ventures, partners, insurance carriers, and customers, and each of them
(collectively hereinafter, the "RockShox Releasees"), from any and all claims,
demands or liabilities of any nature whatsoever asserted in the Patent Case,
including without limitation the counterclaims and affirmative defenses for
invalidity and/or unenforceability with respect to the '090 Patent and the '675
Patent.
ROCKSHOX ACKNOWLEDGES THAT IT IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA
CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH, IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
ROCKSHOX, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS
IT MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW
PRINCIPLES OF SIMILAR EFFECT.
No Prior Assignment of Released Claims. The parties, and each of them,
represent that there has been no assignment or other transfer of any interest in
any claim or counterclaim released hereunder, and covenant not to assign or
transfer any interest in any claim or counterclaim asserted in the Patent Case
and otherwise being released in Sections 5.1 and 5.2.
HOLD HARMLESS
The parties, and each of them, also agree to indemnify and hold the Answer
Releasees and RockShox Releasees harmless from any liability or claims, demands,
damages, costs, expenses, and attorneys' fees arising as a result of (i) any
assignment or transfer of any interest by a releasing party, (ii) litigation or
administrative proceedings by or before a third party or governmental entity
against the Answer Releasees or RockShox Releasees arising out of any rights
granted or purported to be granted under or in connection with this Agreement or
(iii) litigation or administrative proceedings by Manitou Mountain Cycles, Inc.
and/or E. Xxxxxxx Xxxxxxxx against RockShox Releasees arising out of any rights
relating to the '090 Patent. It is the intention of the parties that this
indemnity does not require payment as a condition precedent to relief under this
indemnity.
License
License Grant. As of the Effective Date, Answer grants to RockShox a
nonexclusive, worldwide right and license under each of the Patents to make,
have made, use, sell, advertise for sale, offer for sale, distribute and/or
import suspension forks and their components for use in off-road and all-terrain
bicycles and tricycles. The license, which is irrevocable and fully paid-up,
shall remain in effect until the last of the Patents expires.
No Other Rights. Answer does not grant, and RockShox does not have, the right
to grant sublicenses to any party. Any rights not explicitly granted in Section
7.1 are expressly reserved by Answer and are not granted to RockShox.
Marking. RockShox shall xxxx all products that fall within the scope of any
claim of the Patents, in compliance with the requirements set forth in 35 U.S.C.
Sec. 287(a).
General Provisions
15
Duly Authorized. Each party represents, warrants and covenants that it has the
full right and authority to enter into this Agreement.
Governing Law. This Agreement shall be construed and enforced according to the
laws of the State of California.
Jurisdiction and Venue. Any dispute concerning this Agreement shall be brought
in the State or Federal courts within Los Angeles County, California. The
parties, and each of them, expressly consent to the personal jurisdiction and
venue of such courts for the purpose of hearing any dispute concerning this
Agreement.
Binding Effect on Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
Assignment. The license granted in this Agreement is personal to RockShox and
shall not be assigned or transferred, in whole or in part, by RockShox or by
operation of law without the prior written consent of Answer; provided, however,
that RockShox may transfer or assign its rights under this Agreement in
connection with the merger, sale or transfer of all or substantially all of its
assets related to its design or production of suspension forks and their
components for use in mountain bicycles.
Publicity. The parties agree to issue a joint press release in the form
attached hereto as Exhibit B. The parties further agree that they shall not
make any further statements regarding the terms of this Agreement beyond those
set forth in Exhibit B except as may be required or appropriate in connection
with the legal obligations of a public company, or as may be legally required in
connection with any matter before a court, pursuant to process or pursuant to
other proceedings before any governmental agency.
Confidentiality of Terms. Other than as provided in Section 8.6, the parties
acknowledge and agree that, except by order of a court or process of competent
jurisdiction, the terms of this Agreement shall remain confidential and shall
not be disclosed to any third party without the prior written consent of the
other parties, which consent shall not be unreasonably withheld. This provision
shall not preclude either party from disclosing such terms to the party's
attorneys, accountants, or tax advisors as required to obtain legal, accounting,
or tax advice, respectively, or in connection with the proceedings before a
court or agency (or, under the terms of a confidentiality agreement, to
potential or actual lenders or purchasers of the business or stock of the
party).
No Construction Against Drafting Party. The parties have cooperated in the
drafting and preparation of this Agreement. Hence, in any construction to be
made of this Agreement, this Agreement shall not be construed for or against any
party based on the fact of the party having drafted the portion being construed.
Modification and Amendments. Any modification or amendment to this Agreement
must be in a writing and signed by duly authorized representatives of the
parties hereto and stating the intent of the parties to amend this Agreement.
Severability. If any term or provision of this Agreement or any application
thereof shall be invalid or unenforceable, the remainder of this Agreement or
any other application of such term or provision shall not be affected thereby;
provided, however, this entire Agreement shall be invalid and void if any of the
following provisions is determined by a court of competent jurisdiction to be
invalid or unenforceable: Sections 3.1, 5.1, 5.2 and 7.1.
Headings. Section and article headings are provided for convenience of the
parties only and shall not be construed as a part of this Agreement or a
limitation on the scope of the particular paragraph and articles to which they
refer.
Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall constitute an original, and all of which together shall
constitute a single instrument.
Entire Agreement. This Agreement constitutes the full understanding of the
parties and is a complete and exclusive statement of the terms of their
agreement. All prior agreements, negotiations, dealings and understandings,
whether written or oral, regarding the subject matter hereof, are hereby
superseded and merged into this Agreement; except for the existing Stipulated
Protective Order entered in this Patent Case.
16
Complete Evaluation of Terms. The parties represent and warrant that they have
read this Agreement, that they have had adequate time to consider it, that they
have consulted with an attorney prior to executing this Agreement, that they
understand the meaning and application of this Agreement, and that they have
signed this Agreement knowingly, voluntarily, and of their own free will with
the intent of being bound by it. This Agreement shall not be subject to any
mistake of fact, and there is absolutely no agreement or reservation that is not
clearly expressed herein.
Attorneys' Fees. In the event of any dispute concerning or arising out of this
Agreement, the prevailing party shall be entitled to recover its reasonable
attorneys' fees and costs.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered in duplication originals as of the dates set forth below.
ANSWER PRODUCTS, INC. ROCKSHOX, INC.
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxx
Name: Xxxxx X. Xxxxxx Name: Xxxxx X. Xxxxx
Title: President Title: President and CEO
Dated: February 11, 2002 Dated: February 13, 2002
17
ANSWER PRODUCTS AND ROCKSHOX SETTLE PATENT DISPUTE
Answer Products, Inc. and RockShox, Inc. announced today a settlement in their
patent infringement lawsuit currently before the United States District Court
for the Central District of California in Los Angeles. In March 2001, Answer
filed a complaint against RockShox alleging infringement of U.S. Patent Nos.
5,470,090 and 5,848,675. RockShox disputed the complaint and alleged, among
other things, that the patents were invalid and not infringed.
Under the terms of the settlement, Answer and RockShox have agreed to dismiss
with prejudice all pending claims and counterclaims. In addition, Answer has
granted RockShox a license to the patents. In return, RockShox has agreed to
make an undisclosed payment in annual installments to Answer over a four-year
period. All other terms of the parties' settlement are confidential.
Answer and RockShox have agreed that their settlement does not constitute and
should be construed as an admission of any strength or weakness of either
party's allegations in the suit.
18
