U.S. LICENSE AGREEMENT
This Agreement, effective as of the date of execution by both parties,
is by and between THE PROCTER & XXXXXX COMPANY, an Ohio Corporation having a
principal place of business at Xxx Xxxxxxx & Xxxxxx Xxxxx, Xxxxxxxxxx, Xxxx
00000, (hereinafter referred to as "P&G") and PARAGON TRADE BRANDS, INC., a
Delaware Corporation having a principal place of business at 000 Xxxxxxxxxx
Xxxxxxx, Xxxxxxxx, Xxxxxxx 00000 (hereinafter referred to as "Paragon"). P&G and
Paragon will be jointly referred to as the "parties".
WHEREAS, P&G is the owner of U.S. Patent 4,695,278 issued to Xxxxxx on
September 22, 1987 relating to an absorbent article having dual cuffs;
WHEREAS, P&G owns patents corresponding to U.S. 4,695,278 in a number
of other countries;
WHEREAS, Paragon is aware that the presently extant claims of U.S.
Patent 4,695,278 to Xxxxxx are 3,8,9,13,15,17,21,25,27 and 28.
WHEREAS, P&G is the owner of U.S. Patent 4,795,454 issued to Xxxxxx on
January 3, 1989 relating to an absorbent article having dual leakage resistant
cuffs;
WHEREAS, P&G owns patents corresponding to U.S. Patent 4,795,454 in a
number of other countries;
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WHEREAS, P&G is the owner of U.S. Patent Re. 34,920 issued to Aziz
et al. on April 25, 1995 relating to a disposable absorbent article having
elasticized flaps provided with leakage resistant portions;
WHEREAS, P&G owns patents corresponding to U.S. Patent Re. 34,920 in a
number of other countries;
WHEREAS, P&G is the owner of U.S. Patent 5,085,654 issued to Buell on
February 4, 1992 relating to a disposable absorbent article having breathable
leg cuffs;
WHEREAS, P&G owns patents corresponding to U.S. Patent 5,085,654 in
a number of other countries;
WHEREAS, Paragon makes, uses, offers for sale and sells integral
disposable infant diapers having barrier cuffs throughout the United States;
WHEREAS, P&G believes that the diapers made and sold by Paragon fall
within the scope of one or more of the extant claims of U.S. Patent 4,695,278
to Xxxxxx, U.S. Patent 4,795,454 to Xxxxxx, U.S. Patent Re. 34,920 to Aziz
et al. and U.S. Patent 5,085,654 to Buell;
WHEREAS, the United States District Court for the District of Delaware
has held that certain diapers made and sold by Paragon fall within the scope of
one or more of the extant claims of U.S. Patent 4,695,278 to Xxxxxx, and U.S.
Patent 4,795,454 to Xxxxxx; and
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WHEREAS, Paragon desires to obtain from P&G and P&G is willing to grant
to Paragon a royalty bearing, non-exclusive right to make, to have made for
Paragon with the prior written consent of P&G, to use, to offer for sale and to
sell in the United States integral disposable absorbent articles which are
within the scope of one or more of the extant claims of U.S. Patent 4,695,278 to
Xxxxxx, U.S. Patent 4,795,454 to Xxxxxx, U.S. Patent Re. 34,920 to Aziz et al.
and U.S. Patent 5,085,654 to Buell;
NOW THEREFORE, in consideration of the promises, mutual covenants, and
agreements contained herein, the parties agree as follows:
DEFINITIONS
"Licensed Product" as used herein, shall mean an integral disposable absorbent
article comprising an infant diaper, an adult diaper, or a training pant falling
within the scope of one or more, valid and enforceable claims of U.S. Patent
4,695,278 to Xxxxxx, U.S. Patent 4,795,454 to Xxxxxx, U.S. Patent Re. 34,920 to
Aziz et al., or U.S. Patent 5,085,654 to Buell, including any continuations,
continuations-in-part, divisionals, reexaminations, reissues or extensions
thereof.
"Training Pant", as used herein, shall mean a disposable absorbent pant marketed
for use in transitioning children from diapers to underwear.
"Net Sales Price", as used herein, shall mean the revenue received by Paragon
from the sale of Licensed Products to independent third parties in the United
States less the following amounts: (i) discounts, including cash discounts, or
rebates actually allowed or granted, (ii) credits or
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allowances actually granted upon claims or returns regardless of the party
requesting the return, (iii) freight charges paid for delivery, (iv) revenue for
defective articles sold exclusively as scrap, and (v) taxes or other
governmental charges levied on or measured by the invoiced amount whether
absorbed by the billing or the billed party.
"Settlement Agreement", as used herein, shall mean the Settlement Agreement
entered into between Paragon and P&G concurrently with this License Agreement.
REPRESENTATIONS AND WARRANTIES
With the exception of non-exclusive license rights granted to others, P&G
represents and warrants that: 1) it is the owner of all right, title and
interest in and to U.S. Patent 4,695,278 to Xxxxxx, U.S. Patent 4,795,454 to
Xxxxxx, U.S. Patent Re. 34,920 to Aziz et al., and U.S. Patent 5,085,654 to
Buell; and 2) it has the right to enter this Agreement without breaching any
other agreement or obligation to a third party.
Paragon represents and warrants that it is an independent entity and that it has
the right to enter into this Agreement without breaching any other agreement or
obligation to a third party.
LICENSE GRANT
1. Upon execution of this License Agreement by both parties, and in
consideration of Paragon's agreement to pay prospective running royalties on
Licensed Products in accordance with Paragraph (2) below, P&G agrees to
grant and hereby does grant to Paragon, as of January 7, 1999, a
non-exclusive license to make, to have made for Paragon with the prior
written
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consent of P&G, to use, to offer for sale and to sell in the United States,
without the right to grant sublicenses, Licensed Products.
2. As consideration for the prospective license rights herein granted by P&G,
Paragon agrees that it will, commencing upon January 7, 1999, begin to pay
to P&G a running royalty in accordance with each applicable provision of the
following schedule:
(A) For a restricted, non-exclusive license in the United States
under P&G's U.S. Patent 4,695,278 to Xxxxxx to make, to have made
for Paragon with the prior written consent of P&G, to use, to
offer for sale and to sell, without the right to grant
sublicenses, Licensed Products restricted to the configuration
and characteristics specifically depicted in attached Drawing No.
105674-2 identified as Appendix No. 1 -- One Percent (1.00%) of
the Net Sales Price of Licensed Products;
(B) For an unrestricted, non-exclusive license in the United States
under P&G's U.S. Patent 4,695,278 to Xxxxxx to make, to have made
for Paragon with the prior written consent of P&G, to use, to
offer for sale and to sell, without the right to grant
sublicenses, Licensed Products which fall within the scope of one
or more valid and enforceable claims of U.S. Patent 4,695,278 to
Xxxxxx, other than those exhibiting the configurations and
characteristics specifically depicted in attached Drawing No.
105674-2 identified as Appendix No. 1 -- One and One Quarter
Percent (1.25%) of the Net Sales Price of Licensed Products;
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(C) For an unrestricted, non-exclusive license in the United States
to make, to have made for Paragon with the prior written consent
of P&G, to use, to offer for sale and to sell, without the right
to grant sublicenses, Licensed Products which are within the
scope of the license granted in section (B) above, but which also
fall within the scope of one or more valid and enforceable claims
of U.S. Patent 4,795,454 to Xxxxxx -- Two percent (2.00%) of the
Net Sales Price of Licensed Products;
(D) For an unrestricted, non-exclusive license in the United States
under P&G's U.S. Patent Re. 34,920 to Aziz et al. to make, to
have made for Paragon with the prior written consent of P&G, to
use, to offer for sale and to sell, without the right to grant
sublicenses, Licensed Products:
(i) No additional royalty for Licensed Products for which
Paragon has paid a royalty to P&G pursuant to Section (A),
(B) or (C) above, for the period in question; or
(ii) Three Eighths of One Percent (0.375%) of the Net Sales
Price of Licensed Products which Licensed Products are
within the scope of one or more valid and enforceable
claims of the aforementioned Aziz et al. Patent, U.S.
Patent Re. 34,920, and for which Paragon has paid no
royalty to P&G under Section (A), (B) or (C), above, for
the period in question.
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(E) For an unrestricted, non-exclusive license in the United States
under P&G's U.S. Patent 5,085,654 to Buell, to make, to have made
for Paragon with the prior written consent of P&G, to use, to
offer for sale and to sell, without the right to grant
sublicenses, Licensed Products:
(i) No additional royalty for Licensed Products for which
Paragon has paid a royalty to P&G pursuant to Section (A),
(B) or (C) above, for the period in question; or
(ii) Three Eighths of One Percent (0.375%) of the Net Sales
Price of Licensed Products for Licensed Products which are
within the scope of one or more valid and enforceable
claims of the aforementioned Buell Patent, U.S. Patent
5,085,654, and for which Paragon has paid no royalty to
P&G under Section (A), (B) or (C) above, for the period in
question.
The parties agree that non-limiting examples of Licensed Products falling
within subsection (C) are Paragon's Ultra products sold prior to July 6,
1998 (a sample of which is attached hereto as Appendix 2). In addition, it
is Paragon's intention to transition from its current product design with
a unitary cuff design, which it began manufacturing for sale on or about
July 6, 1998 (a sample of which is attached hereto as Appendix 3), to the
Ultra product design as described above. The parties, therefore, agree
that Paragon will pay to P&G a royalty of two percent (2%) of the Net Sales
Price for sales of the current Paragon product line with a unitary cuff
design from January 7, 1999 until the transition to
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the Ultra product design is complete and Paragon no longer sells such
unitary cuff design product. Paragon agrees to notify P&G in writing within
ten (10) days if it changes any of its product lines in such a way that it
no longer intends to make running royalty payments pursuant to subsections
(A), (B) or (C) hereof.
3. The license rights granted in Paragraph (1) under U.S. Patent 4,695,278
to Xxxxxx shall automatically expire on the date of expiration of said
patent, including any continuations, continuations-in-part, divisionals,
reexaminations, reissues or extensions thereof. The license rights granted
in Paragraph (1) under U.S. Patent 4,795,454 to Xxxxxx shall automatically
expire on the date of expiration of said patent, including any
continuations, continuations-in-part, divisionals, reexaminations, reissues
or extensions thereof. The license rights granted in Paragraph (1) under
U.S. Patent Re. 34,920 to Aziz et al. shall automatically expire on the date
of expiration of said patent, including any continuations,
continuations-in-part, divisionals, reexaminations, reissues or extensions
thereof. The license rights granted in Paragraph (1) under U.S. Patent
5,085,654 to Buell shall automatically expire on the date of expiration of
said patent, including any continuations, continuations-in-part,
divisionals, reexaminations, reissues or extensions thereof. Should any
patent licensed hereunder be held to have lapsed for the failure to pay
maintenance fees, royalties for said patent shall not be due for the period
of any such lapse. However, should any such lapsed patent subsequently be
considered by the U.S. Patent and Trademark Office as not having expired
by its acceptance of delayed payment of the maintenance fee, the license
rights granted under said patent shall automatically revive and royalties
shall again accrue beginning on the date that the term of the patent has
been maintained as a result of the acceptance of a payment of the
maintenance fee by the U.S.
9
Patent and Trademark Office. P&G agrees to provide written notice to
Paragon of the lapse of any such patent, and if applicable, the date that
the patent has been maintained as a result of the acceptance by the U.S.
Patent and Trademark Office of a delayed payment of the maintenance fee.
4. Within thirty (30) days of June 28, 1999, Paragon shall provide P&G with an
initial statement reporting Paragon's Net Sales Price of Licensed Products
covered by this License Agreement for the period beginning on January 7,
1999 and ending on June 27, 1999 and be accompanied by the appropriate
royalty payment. On an ongoing basis, the Paragon fiscal year ends on the
last Sunday of December. Therefore, after making said initial report,
Paragon shall, within 30 days after the end of each subsequent Paragon
fiscal year, commencing on December 26, 1999, provide P&G with an annual
statement reporting Paragon's Net Sales Price of Licensed Products covered
by this License Agreement for the preceding one year period. The parties
recognize that the report and payment for the 1999 fiscal year will cover
only the six month period commencing on June 28, 1999 and ending on December
26, 1999 in light of the previous initial report and payment. Each report
shall specify the Net Sales Price of Licensed Products attributable on an
individual basis to each of the categories (A), (B), (C), (D)(i) and (ii)
and (E)(i) and (ii) set forth in Paragraph (2) of this License Agreement.
Each such report is due within thirty (30) days of the close of the fiscal
year for which the report is made, and shall be accompanied by the royalty
payment owed to P&G by Paragon.
Each such report shall be treated as confidential and proprietary
information of Paragon and shall only be used for the purposes set forth
herein. The report shall only be shared within P&G with such persons at P&G
who need to know such information for the
10
purposes set forth herein. Each such report may be shared with P&G's outside
counsel or auditors who need to know such information for the purpose of
verifying such report.
5. Once each year, at P&G's election and expense, Paragon's independent
public accountant shall certify to P&G that the annual report for the
previous period or year is true, complete and that royalties have been paid
for Licensed Products sold during the previous year. Paragon shall keep
correct and complete records containing all information required for
computation and verification of the amounts to be paid hereunder for a
period of at least three (3) years after making each such report. Upon
reasonable notice, during regular business hours, independent "Big Six"
public accountants selected by P&G, and paid for by P&G in the event the
Paragon payment being verified proves accurate to within two percent
(2.00%), may make such examinations of Paragon's records, not more
frequently than once a year, as P&G deems necessary to verify such reports
and payments provided for hereunder. Such examination shall occur at
such location as designated by Paragon, and such verification shall only
state the amount of payments due in each of categories (A), (B), (C), (D)(i)
and (ii) and (E)(i) and (ii) of Paragraph (2) of this License Agreement.
If the Paragon payment does not prove accurate to within two percent
(2.00%), royalties being underpaid, then Paragon shall pay for such
independent public accountants.
6. If Paragon shall be in default in making any payments hereunder at the times
and in the manner herein provided or in complying with the financial
obligations it assumed pursuant to the concurrently executed Settlement
Agreement with P&G, P&G may give written notice to Paragon specifying the
particulars of such default, and in the event Paragon does
11
not fully remedy such default within thirty (30) days after such notice,
P&G may at its option, terminate this License Agreement by giving ten
(10) days prior written notice to Paragon to that effect. In addition, P&G
may proceed to enforce the defaulted obligation of Paragon by any legally
available means. No waiver on the part of P&G in respect to a default by
Paragon shall be construed as a waiver of P&G's right to proceed under this
Paragraph with respect to subsequent defaults.
7. Neither expiration of this License Agreement in accordance with its
provisions nor termination of this License Agreement shall relieve Paragon
of its obligations for payment of unpaid royalties under Paragraph (2)
or for enforcement of any other obligation or liability accrued hereunder
prior to the effective date of such expiration or termination.
8. The failure of either party to strictly enforce this License Agreement, or
to insist upon the strict compliance with its terms shall not at any time be
considered a waiver or condonation by such party of the default or failure
by the other party to strictly perform the covenants, conditions and
agreements on its part to be performed.
9. Paragon agrees, when its existing supply of packaging has been exhausted, to
xxxx the packages of its Licensed Products to be sold within the United
States with the following statement: "Licensed under one or more of the
following U.S. Patents (with appropriate patent numbers filled in per
Paragraph (2))", and if a reexamination certificate or a reissue of any
such patent occurs, to place on its packages appropriate statements
relating to that reexamination certificate and/or that reissue patent. There
shall be no reference to "The
12
Procter & Xxxxxx Company", "Procter & Xxxxxx", "P&G", any variation
or affiliate thereof, or any trademark or tradename owned or controlled by
P&G on the packaging.
10. No patent rights outside the United States are granted by P&G in this
License Agreement. However, P&G agrees that it will, upon request by
Paragon, negotiate in good faith in an attempt to establish mutually
acceptable terms and conditions for Paragon to obtain non-exclusive royalty
bearing license rights under P&G's foreign patents corresponding to the U.S.
Patents licensed herein on a case by case basis. The parties recognize that
the terms and conditions, including the royalty rates, for said foreign
license rights may not be the same as those herein set forth nor the same
with respect to one another.
11. Should U.S. Patent No. 4,695,278 to Xxxxxx expire or all extant claims
covering Licensed Products be held invalid or unenforceable in a decision
by a court of competent jurisdiction from which no appeal can or has been
taken, each provision of Paragraph (2) shall remain valid and enforceable
with a royalty rate reduction of One Percent for Licensed Products in
category (A) and One and One Quarter Percent (1.25%) for Licensed Products
in category (B) or (C). Should U.S. Patent No. 4,795,454 to Xxxxxx expire
or all claims covering Licensed Products be held invalid or unenforceable in
a decision by a court of competent jurisdiction from which no appeal can or
has been taken, each provision of Paragraph (2) shall remain valid and
enforceable with a royalty rate reduction for Licensed Products in category
(C) of Three Quarters of One Percent (.75%). Should U.S. Patent Re. 34,920
to Aziz et al. expire or all claims covering Licensed Products be held
invalid or unenforceable in a decision by a court of competent jurisdiction
from which no appeal can or has been taken, the royalty rate will be reduced
13
Three Eighths of One Percent (0.375%) for Licensed Products in category
(D)(ii). Should U.S. Patent 5,085,654 to Buell expire or all claims covering
Licensed Products be held invalid or unenforceable in a decision by a court
of competent jurisdiction from which no appeal can or has been taken, the
royalty rate will be reduced Three Eighths of One Percent (0.375%) for
Licensed Products in category (E)(ii). Should all claims of the patents
covering Licensed Products expire or be held invalid or unenforceable in a
decision by a court of competent jurisdiction from which no appeal can or
has been taken this License Agreement will terminate. Any such decision
shall have no impact upon Paragon's liability to pay any running royalties
accrued prior thereto pursuant to Paragraph (2), nor shall Paragon have any
right to recover any portion of the running royalties already paid to P&G.
Other than as expressly set forth in this License Agreement, P&G makes no
warranties whatsoever with respect to Paragon's manufacture, use, offer for
sale or sale of Licensed Products pursuant to this License Agreement.
12. P&G hereby waives any and all rights to xxx (including, but not limited to,
actions to enjoin and/or recover damages from) Paragon for making, having
made for Paragon with the prior written consent of P&G, using, offering
for sale, and/or selling Licensed Products in the United States, provided:
(1) this License Agreement has not been terminated by either party; (2)
Paragon is in full compliance with all material terms of the concurrently
executed Settlement Agreement with P&G and is current in meeting its
obligation to pay the running royalties provided in Paragraph (2) hereof;
and (3) Paragon is otherwise in full compliance with the material terms
of this License Agreement.
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13. Notices relating to this Agreement shall be in writing and shall be
considered served when deposited as certified or registered U.S. mail,
return receipt requested, in a sealed envelope with sufficient postage
affixed, addressed as follows:
P&G: Attention: Vice President & General Counsel - Patents
The Procter & Xxxxxx Company
Xxxxxx Xxxx Technical Center
0000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxx 00000
Paragon: Attention: Vice President & General Counsel
Paragon Trade Brands, Inc.
000 Xxxxxxxxxx Xxxxxxx
Xxxxxxxx, XX 00000
14. The parties agree that this License shall be personal to Paragon and
shall be nontransferable and nonassignable to third parties without the
prior written consent of P&G, which consent P&G agrees not to unreasonably
withhold or unreasonably delay. In this context, the parties agree that it
is not an unreasonable ground for P&G to withhold or delay its consent if
the effect of the proposed transfer or assignment would be to allow a
transferee or assignee to obtain the prospective right to make, import, use,
offer for sale and/or sell Licensed Products in the United States without
entering into a mutually agreeable settlement agreement for any past
infringing activity by the transferee or assignee with respect to the
patents included in the definition of "Licensed Products". In addition,
the parties agree that this License shall not apply to the manufacture,
import, use or sale of Licensed Products by any other business entity
acquired by Paragon, by which Paragon is acquired, merged with Paragon,
consolidated with Paragon, partnered with Paragon, or in any other business
arrangement with Paragon after the effective date of this Agreement without
the prior written consent of P&G, which consent P&G agrees not to
15
unreasonably withhold or unreasonably delay. In this context, the parties
agree that it is not an unreasonable ground for P&G to withhold or delay
its consent if the effect of the proposed transaction would be to allow
an acquiring, merging or consolidating entity or partner to obtain the
prospective right to make, import, use, offer for sale and/or sell Licensed
Products in the United States without entering into a mutually agreeable
settlement agreement with P&G for any past infringing activity by the
acquiring, merging or consolidating entity or partner with respect to the
patents included in the definition of "Licensed Products".
15. In the event the Settlement Agreement executed concurrently herewith is not
approved by the Bankruptcy Court (as defined in the Settlement Agreement) or
in the event that the order approving the Settlement Agreement does not
become a Final Order by July 31, 1999 (as defined in the Settlement
Agreement), this License Agreement shall be terminable by P&G, at P&G's
option. Termination in such circumstance shall not relieve Paragon of its
obligation to pay royalties accrued hereunder for the period before
termination. P&G agrees to provide Paragon with a three month conversion
period after the date of termination. Royalties, as set forth above, shall
be due on the Licensed Products manufactured and/or sold during the
conversion period and such royalties shall be payable within 30 days of the
end of the conversion period.
16. P&G agrees to give Paragon notice of all future running royalty based
private label or brand manufacturer licenses granted under any of the P&G
U.S. patents herein, and, upon written request, provide Paragon copies
of all such subsequent running royalty based agreements within thirty (30)
days of execution of any such agreements. Paragon shall be
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entitled, upon thirty (30) days written request to P&G, to have this License
Agreement brought into conformity with any such subsequent running royalty
based license to any private label or brand manufacturer other than Paragon
in the event P&G grants any license under any of the P&G U.S. patents herein
under terms more favorable than those set forth herein.
17. This Agreement and the Settlement Agreement set forth the entire
understanding of the parties with respect to the subject matter herein set
forth. There are no ancillary understandings or agreements with respect to
the subject matter of this License Agreement.
18. This Agreement may be executed in counterparts. Each part shall constitute
an original.
19. This Agreement shall become effective as of the date of acceptance by the
last party to sign.
FOR: PARAGON TRADE BRANDS, INC. FOR: THE PROCTER & XXXXXX COMPANY
By /S/ B.V. XXXXXXX By /S/ XXXX X. XXXXXXX
-------------------------------- --------------------------------
Title CHAIRMAN AND CEO Title PRESIDENT - GLOBAL BABY CARE
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Date FEBRUARY 2, 1999 Date FEBRUARY 2, 1999
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