CANADIAN 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, and its wholly-owned subsidiary, Paragon Trade
Brands (Canada) Inc., a Canadian corporation having a principal place of
business at 0000 Xxxxx Xxxxxxxxx, Xxxxxxxx, Xxxxxxx, Xxxxxx X0X 0X0 (hereinafter
collectively referred to as "Paragon"). P&G and Paragon will be jointly referred
to as the "parties".
WHEREAS, P&G is the owner of Canadian Patent Application 585,807,
"Mechanical Fastening Means With Disposal Means For Disposable Absorbent
Articles" filed on December 13, 1988 to Xxxxxxxxx et al. (the Canadian
counterpart of U.S. Patent 4,963,140) relating to an absorbent article having a
mechanical fastening system with disposal means;
WHEREAS, P&G owns patents corresponding to Canadian Patent Application
585,807 in a number of other countries;
WHEREAS, Paragon makes, uses, offers for sale and sells a Supreme line
of disposable infant diapers having a mechanical fastening system with a
nonwoven outer cover;
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WHEREAS, P&G believes that the Supreme diapers made and sold by Paragon
fall within the scope of one or more of the pending claims of Canadian Patent
Application 585,807 to Xxxxxxxxx et al.; and
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 Canada certain integral disposable absorbent articles with a mechanical
fastening system having a disposal means consisting of a nonwoven outer cover
which are within the scope of one or more of any issued claims of any patent
issuing from Canadian Patent Application 585,807 to Xxxxxxxxx et al.;
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 or an adult diaper having a mechanical
fastening system consisting of (i) a closure member of a hook fastening member;
(ii) a landing member of a loop fastening member; and (iii) disposal means
consisting of a nonwoven outer cover having a limited degree of engageability
with the hook fastening member of less than 750 grams as defined by the Test
Method designated "Strength Of Attachment Of Mechanical Fastening Member To
Diaper Backsheet" (attached hereto as Appendix 1) and falling within the scope
of one or more of any valid and enforceable claims of any patent issuing from
Canadian Patent Application 585,807 to Xxxxxxxxx et al.
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including any continuations, continuation-in-part, divisionals, reissues,
reexaminations, or extensions thereof.
"Net Sales Price", as used herein, shall mean the revenue received by Paragon
from the sale of Licensed Products to independent third parties in Canada less
the following amounts: (i) discounts, including cash discounts, or rebates
actually allowed or granted, (ii) credits or 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 Canadian Patent Application 585,807 to Xxxxxxxxx et al. 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
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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 consent of P&G, to use, to offer for sale and to sell in
Canada, 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 the issuance of any
patent issuing from Canadian Patent Application 585,807 to Xxxxxxxxx et
al., 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 Canada under P&G's
Canadian Patent Application 585,807 to Xxxxxxxxx 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 which fall within the scope of
one or more valid and enforceable claims of any patent issuing
from Canadian Patent Application 585,807 to Xxxxxxxxx et al.
having an engageability between the hook fastening member and
the nonwoven outer cover, as defined by the Test Method attached
hereto, of less than 500 grams - Three Eighths of One Percent
(0.375%) of the Net Sales Price of Licensed Products;
(B) For a restricted, non-exclusive license in Canada under P&G's
Canadian Patent Application 585,807 to Xxxxxxxxx et al. to make,
to have made for Paragon with
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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 any patent issuing from Canadian Patent
Application 585,807 to Xxxxxxxxx et al. having an engageability
between the hook fastening member and the nonwoven outer cover,
as defined by the Test Method attached hereto, of between 500
grams and 750 grams -- One Half of One Percent (0.5%) of the Net
Sales Price of Licensed Products.
Subject to Paragraph 6.5 of the Settlement Agreement, the parties agree
that a non-limiting example of Licensed Products falling within
subsection (A) is Paragon's Supreme product (a sample of which is
attached hereto as Appendix 2). Paragon agrees to notify P&G in writing
within ten (10) days if it changes any of its products in such a way
that it no longer intends to make running royalty payments pursuant to
subsections (A) or (B) hereof.
3. The license rights granted in Paragraph (1) under Canadian Patent
Application 585,807 to Xxxxxxxxx et al. shall automatically expire on
the date of expiration of any said patent issuing therefrom, 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 as not having expired by the acceptance by the relevant
Canadian Patent Authority of delayed payment of the maintenance fee,
the license rights granted under said patent shall automatically revive
and royalties shall again accrue
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beginning on the date that the term of the patent has been maintained as
a result of the acceptance by the relevant Canadian Patent Authority of
a payment of the maintenance fee. 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
relevant Canadian Patent Authority 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) and (B) 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
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shared within P&G with such persons at P&G who need to know such
information for the 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) or (B) 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
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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 after the issuance
of any patent from Canadian Patent Application 585,807 to Xxxxxxxxx et
al. has been exhausted, to xxxx the packages of its Licensed Products
to be sold within Canada with the following statement: "Licensed under
one or more of the following Canadian 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
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reference to "The 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 Canada 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 Canadian
Patent Application 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. 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 Canada, 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.
12. 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:
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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
13. 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 Canada 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 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
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partner to obtain the prospective right to make, import, use, offer for
sale and/or sell Licensed Products in Canada 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".
14. 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.
15. P&G agrees to give Paragon notice of all future running royalty based
private label or brand manufacturer licenses granted under the P&G
Canadian Patent Application 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 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
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grants any license under any of the P&G Canadian Patent Applications
herein under terms more favorable than those set forth herein.
16. 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.
17. This Agreement may be executed in counterparts. Each part shall
constitute an original.
18. 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
------------------------------ ------------------------------
Date FEBRUARY 2, 1999 Date FEBRUARY 2, 1999
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FOR: PARAGON TRADE BRANDS (CANADA), INC.
By /S/ XXXXX XXXXXX
--------------------------------
Title PRESIDENT
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Date FEBRUARY 2, 1999
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