This Exhibit contains confidential information which has been omitted and
filed separately with the Security and Exchange Commission pursuant to a
confidential treatment request under rule 24b-2 of the Securities and
Exchange Act of 1934. The confidential information has been replaced with
asterisks.
EXCLUSIVE FIELD OF USE LICENSE AGREEMENT
This Agreement, and any Exhibits, Schedules, and Appendices
(collectively, the "AGREEMENT"), effective as of September 30, 1999, is
entered into between Cragar Industries, Inc., a Delaware corporation having
its principal place of business at 0000 Xxxxx 00xx Xxxxxx, Xxxxxxx, Xxxxxxx
00000 (hereinafter "LICENSOR"), and Weld Racing, Inc., a Missouri corporation
having its principal place of business at 000 Xxxxxxxx Xxxxxx, Xxxxxx Xxxx,
Xxxxxxxx 00000 (hereinafter "LICENSEE").
WHEREAS, Licensor is the owner of the various trademark and/or
servicemark rights listed on the attached SCHEDULE A (hereinafter the
"TRADEMARK RIGHTS");
WHEREAS, Licensor is the owner of the various patent rights listed on
the attached SCHEDULE B (hereinafter the "PATENT RIGHTS");
WHEREAS, Licensee and Licensor have entered into a certain Agreement of
Sale and Purchase of Assets, dated as of September 30, 1999; and
WHEREAS, Licensee desires to obtain an exclusive license, in the field
of use designated herein, under the Trademark Rights, the Patent Rights, and
other intangible rights owned by Licensor.
NOW, THEREFORE, in consideration of the premises, the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. DEFINITIONS
1.1. "PATENTED PRODUCT" means any device or system covered by a claim
of any currently issued patent contained in the Patent Rights, or any patent
that issues from a currently pending patent application contained in the
Patent Rights.
1.2. "LICENSED PRODUCTS" means the products listed on the attached
SCHEDULE C and any Patented Product.
1.3. "LICENSED PRODUCT CLASS" means one of the categories of Licensed
Products set forth on the attached SCHEDULE C.
1.4. "LICENSED FIELD" means the Licensor's line of racing, automobile,
motorcycle and light truck wheels having a non-cast, wrought aluminum alloy
outer rim, and related accessories (whether currently offered by Licensor or
to be developed in the future).
1.5. "IMPROVEMENT" means any modification in the structure or design
of the Licensed Products, whether patentable or unpatentable, which depends
upon a Licensed
1
Product for its use or effectiveness or which increases the effectiveness or
manufacturability of a Licensed Product, including, without limitation, any
modification of a part, component, or process or apparatus for the
manufacture thereof.
1.6. "INTANGIBLE RIGHTS" means (i) any and all documents in whatever
form, including but not limited to writings, computer disks, computer tapes,
and electronic records, containing design and technical information,
engineering or production data, drawings, plans, specifications, techniques,
methods, processes, trade secrets, reports, models, market research data,
customer lists, and any and all other material or matter used by or in
possession of Licensor and applicable to the design, manufacture, assembly,
service, and sale of the Licensed Products, (ii) Licensor's general and
specific knowledge, experience, and information, not in written or printed
form, applicable to the design, manufacture, assembly, service, and sale of
the Licensed Products, and (iii) any other trade secret information, and
proprietary information that may be applicable to the design, manufacture,
assembly, service, and sale of the Licensed Products.
1.7. "LICENSED RIGHTS" means one or more of any of the Trademark
Rights, the Patent Rights, and the Intangible Rights.
2. LICENSE GRANT
2.1. TRADEMARKS. Licensor grants to Licensee a worldwide exclusive
license in the Licensed Field to use the Trademark Rights in connection with
the marketing and sale of the Licensed Products, subject to the terms of this
Agreement.
2.1.1. The parties agree that Licensee's use of the Trademark
Rights, including the goodwill arising from such use, shall inure to the
benefit of Licensor, and Licensee shall have no right whatsoever to the
Trademark Rights except as specifically set forth herein. Licensee agrees
to not use the Trademark Rights, or any simulation or variant thereof, or
any xxxx, name, logo, design, likeness, or other representation
confusingly similar to any of the marks included in the Trademark Rights,
except as specifically set forth herein.
2.1.2. Licensee shall not at any time do or cause to be done
any act or thing contesting or in any way impairing or tending to impair
any part of Licensor's right, title, and interest respecting the Trademark
Rights. Licensee shall not in any manner represent that it has any
ownership in the Trademark Rights, and Licensee acknowledges that its use
of the Trademark Rights shall not create in Licensee's favor any right,
title, or interest in or to the Trademark Rights.
2.2. LICENSED PRODUCTS. Licensor grants to Licensee a worldwide
exclusive license in the Licensed Field to make, use, sell, and offer for
sale the Licensed Products, subject to the terms of this Agreement. In
connection with this grant, Licensor grants to Licensee a worldwide exclusive
license in the Licensed Field to use the Patent Rights and the Intangible
Rights to manufacture the Licensed Products.
2
2.2.1. Licensor makes no warranty related to the validity or
enforceability of any of the issued patents included in the Patent Rights.
2.2.2 Licensee may only disclose the Intangible Rights to
third parties if such disclosure is necessary for Licensee to perform its
obligations under this Agreement, PROVIDED, that no disclosure of the
Intangible Rights shall be made by Licensee unless Licensee has obtained
from the third party a signed nondisclosure agreement that affords
Licensor at least the same protection as set forth in PARAGRAPH 8 herein.
2.3. NO TRANSFER. The rights granted under this PARAGRAPH 2 may not
be sublicensed or transferred without the express prior written consent of
Licensor.
3. ROYALTIES AND PAYMENT TERMS
3.1. Licensee shall pay to Licensor the royalty on Annual Net Sales of
Licensed Products as specified in the attached SCHEDULE D. Licensee's
obligation to pay royalties under this Agreement will be triggered by the
invoice date or the shipping date of the Licensed Products, whichever occurs
first. Royalty payments are due thirty (30) days after the end of each
calendar quarter.
3.2. Licensee shall keep accurate and complete records containing all
information required for the computation and verification of the payments due
under Paragraph 3.1. Licensor shall have the right to inspect such records
during Licensee's ordinary business hours to verify the accuracy of any
royalty payments made under this Agreement. If an audit by Licensor uncovers
a deficiency in any royalty payment, Licensee must pay the cost of such audit
and immediately remit the amount due, including a two percent (2.0%) per
month finance charge.
3.3. Any past due royalty payments will carry an interest rate of two
percent (1.5%) per month commencing on the due date and compounding every
thirty (30) days thereafter.
3.4. Within thirty (30) days after the end of each calendar quarter,
Licensee will have paid to Licensor at least the following cumulative royalty
payment amounts:
First Quarter: [*] of the total minimum annual royalty for that year.
Second Quarter: [*] of the total minimum annual royalty for that year.
Third Quarter: [*] of the total minimum annual royalty for that year.
Fourth Quarter: [*] of the total minimum annual royalty for that year.
If any of the above cumulative royalty payment amounts is not met by
Licensee, or if Licensee is late for any quarterly royalty payment, Licensee
will be deemed to have defaulted. Upon written notice of such default,
Licensee shall have ninety (90) days to cure such default, otherwise Licensor
may immediately terminate this Agreement.
[*] Redacted Information
3
4. QUALITY CONTROL
4.1. Licensee shall use the Trademark Rights in connection with the
Licensed Products only upon employing quality standards that meet or exceed
each of the following: (a) the current standards under which such products
have in the past been manufactured by Licensor; and (b) the standards
recognized by the industry as acceptable for such products.
4.2. Licensee agrees that Licensor has the right to control the
quality of all Licensed Products manufactured, sold, and marketed by Licensee
under the Trademark Rights. If Licensor determines, in Licensor's sole
reasonable discretion, that the quality of the Licensed Products fail to meet
the quality control standards set forth herein, then such failure shall
constitute a material breach of this Agreement, permitting Licensor to
terminate this Agreement upon ninety (90) days' written notice to Licensee,
unless such breach is cured.
4.3. Licensee shall permit Licensor or Licensor's appointed agent to
inspect and to monitor Licensee's use of the Trademark Rights including,
without limitation, (a) allowing Licensor or Licensor's appointed agent, at
reasonable times, to review Licensee's advertisements and other materials
using the Trademark Rights, and (b) with reasonable advance notice, to enter
the premises of Licensee, or any premises under the control of Licensee,
where any Licensed Product is manufactured or sold, to inspect the Licensed
Products and the manner in which the Licensed Products are marketed.
Licensee shall also provide, upon request of Licensor, representative samples
of the Licensed Products and any advertising therefor.
4.4. Licensee agrees not to use the Trademark Rights in connection
with any Licensed Products where the character, appearance, quality, or
suitability thereof is disapproved by Licensor. The Licensed Products sold
and manufactured under the Trademark Rights shall be in compliance with all
applicable national, state, and local laws and regulations governing the
Licensed Products.
4.5. LEVERAGING OF THE TRADEMARK RIGHTS
4.5.1. Subject to approval of Licensor and subject to the
quality control standards set forth herein, Licensee may utilize the
Trademark Rights in conjunction with any marks owned or created by
Licensee, but only to the extent that such use of the Trademark Rights is
reasonably intended to promote the Licensed Products, and only to the
extent that such use does not dilute any of the Trademark Rights.
4.5.2. Subject to approval of Licensor and subject to the
quality control standards set forth herein, Licensee shall use the word
xxxx XXXXXX to create new trademark or service xxxx designs on behalf of
Licensor (hereinafter "NEW MARKS"). Such New Marks are only to be used in
connection with the sales,
4
promotion, or marketing of the Licensed Products and such New Marks
must be distinctive over all other New Marks that are created by
additional Licensees of Licensor under similar terms. The parties agree
that Licensee's use of such New Marks, including the goodwill arising
from such use, shall inure to the benefit of Licensor, and Licensee shall
have no right whatsoever to the New Marks except as specifically set
forth herein. Licensee agrees to not use the New Marks, or any
simulation or variant thereof, or any xxxx, name, logo, design, likeness,
or other representation confusingly similar to any of the New Marks,
except as specifically set forth herein.
4.5.3 Licensee agrees to use the New Marks whenever the Cragar
name or logo is used.
4.5.4. Licensee's right to use the Trademark Rights, any marks
derived from or including any of the Trademark Rights, and any New Marks,
as contemplated by this PARAGRAPH 4.5, shall immediately cease upon
termination of this Agreement for any reason.
4.6. Notwithstanding the foregoing, Licensee shall be responsible for
assuring that the Licensed Products sold under this Agreement are free from
defects in materials or workmanship, are of merchantable quality, and are fit
for the purposes intended by Licensee's customers.
5. MARKINGS
5.1. Licensee shall xxxx each Patented Product and its associated
packaging with the applicable patent number.
5.2. Licensee shall place the trademark registration symbol
"-Registered Trademark-" immediately following each use of a federally
registered trademark included in the Trademark Rights. Licensee shall place
the trademark symbol "-TM-" immediately following each use of a
non-federally-registered trademark included in the Trademark Rights.
5.3. Licensee shall xxxx each Licensed Product it manufactures with
the actual manufacturing date of such Licensed Product, along with any other
government-mandated, statutory, or other regulatory markings that may be
required. Licensee shall be fully responsible for, and agrees to indemnify
Licensor for, any and all product liability and product warranty claims (and
any associated costs and damages) caused by Licensee's failure to properly
xxxx the Licensed Products under this Paragraph 5.3.
6. IMPROVEMENTS
6.1. If Licensee develops an Improvement, Licensee shall immediately
disclose such Improvements to Licensor prior to incorporation or
implementation of such Improvement into any Licensed Product. Licensee shall
obtain written approval from
5
Licensor, which shall not be unreasonably denied by Licensor, before any such
Improvement is incorporated or implemented into any Licensed Product.
6.2. Upon termination of this Agreement, Licensee shall grant to
Licensor a non-exclusive and royalty-free license to make, use, sell, offer
for sale, and import products that embody or utilize any Improvement
developed by Licensor.
6.3. Licensor shall retain all rights in and to any Improvement
developed or acquired by Licensor. Licensor agrees to grant to Licensee
licenses of the scope specified in Paragraph 2 herein for any Improvements
developed by Licensor, and the terms of this Agreement shall also apply to
such Improvements. No additional royalty shall be due for such additional
licenses for such Improvements. Licensee agrees to cooperate with Licensor,
without further consideration, during the preparation and prosecution of any
patent applications filed in connection with Improvements developed by
Licensor.
7. BEST EFFORTS
7.1. Licensee shall use its best efforts to promote the sale of the
Licensed Products, including making commercially reasonable advertising and
marketing expenditures, prospecting and contacting customers and potential
customers of the Licensed Products, and striving to achieve a cost-efficient
manufacturing process while maintaining a high quality of Licensed Products.
7.2. Licensor may request Licensee to prepare a written quarterly
summary of promotional, marketing, and sales activity related to the Licensed
Products.
7.3. If, for any two (2) year period, Licensee does not market and
promote a particular Licensed Product Class, Licensor shall have the right to
exclude from this Agreement any and all products contained in such Licensed
Product Class. Licensor shall have the right to offer the Licensed Rights
for products contained in any excluded Licensed Product Class to any third
party.
7.4. If, for any reason, Licensee ceases to actively market and
promote the Licensed Products for any continuous ninety (90) day period,
Licensee shall promptly notify Licensor and Licensor shall have the right to
immediately terminate this Agreement.
8. CONFIDENTIALITY
8.1. During the term of this Agreement, one party (the "DISCLOSING
PARTY") may disclose to another party (the "RECEIVING PARTY") confidential
information, proprietary information, trade secret information, marketing
data, and the like (hereinafter "CONFIDENTIAL INFORMATION"). The Receiving
Party shall not use or disclose any Confidential Information, except for the
purpose of complying with its obligations under this Agreement.
6
8.2. The Receiving Party agrees to keep all Confidential Information
strictly confidential, subject to the limited disclosure to a selected number
of employees as may be reasonably necessary to enable the Receiving Party to
comply with its obligations under this Agreement.
8.3. Upon termination of this Agreement, the Receiving Party shall
return (or destroy if requested by the Disclosing Party) all Confidential
Information in its possession. Notwithstanding the foregoing, the
confidentiality provisions set forth herein shall survive any termination of
this Agreement.
9. INFRINGEMENT
9.1. If either party discovers an infringing use of any of the
Licensed Rights by any third party, the discovering party shall promptly
notify the other party. If Licensor elects to institute an action to end
such third party infringement, Licensee shall provide all reasonable
assistance to Licensor in connection with such action. If Licensor elects to
not institute such an action, Licensee may initiate such action, and Licensor
agrees to provide reasonable assistance to Licensee in connection with such
action.
9.2 Any lawsuit or action initiated pursuant to Paragraph 9.1 shall
be prosecuted at the sole expense of the party bringing suit and all sums
recovered shall be divided equally between the parties after deduction of all
reasonable expenses and attorney fees.
10. TERM AND TERMINATION
10.1. This Agreement shall have a term of [*] from its effective date,
with perpetual renewal rights. Any renewal of this Agreement shall have a
term of [*].
10.2. At least two hundred seventy (270) days prior to the termination
date of the original Agreement or any subsequently renewed Agreement,
Licensee shall provide written notice to Licensor of Licensee's intent to
terminate or renew the current Agreement.
10.3. If Licensee fails to comply with any of the terms of this
Agreement or of the Agreement of Sale and Purchase of Assets, then Licensee
will be deemed to have defaulted. Upon written notice of such default,
unless otherwise specified herein, Licensee shall have ninety (90) days to
cure such default, otherwise Licensor may immediately terminate this
Agreement.
10.4. In the event of failure, receivership, or seizure of Licensee,
this Agreement shall terminate immediately.
[*] Redacted Information
7
10.5. If this Agreement is terminated for any reason, Licensee shall
not be relieved of any duties or obligations owing as of the date of
termination, including without limitation, accounting for any outstanding
royalties, responsibility for product warranties and product liability for
any Licensed Products, and the duty to maintain confidentiality in accordance
with Paragraph 8 herein. Any royalty payments due upon termination of this
Agreement must be paid by Licensee within sixty (60) days of the termination
date.
10.6. Upon termination of this Agreement for any reason, Licensee shall
immediately cease and desist from any use whatsoever of the Licensed Rights.
Licensee or primary lender may, however, liquidate all remaining inventory in
its possession at time of termination, provided that (i) Licensor shall be
given the right of first refusal to purchase any or all of the inventory upon
the same terms as Licensee offers to third parties, (ii) royalties shall be
payable to Licensor on all liquidated inventory. Further, upon termination
of this Agreement for any reason, Licensee shall immediately transfer to
Licensor or destroy, at Licensor's election, any and all documents and things
bearing any xxxx included within the Trademark Rights.
11. ARBITRATION
Any controversy or claim arising out of or relating to this Agreement,
or its breach, shall be settled by binding arbitration in accordance with the
rules of the American Arbitration Association with all proceedings conducted
in Phoenix, Arizona. Judgement upon the award rendered by the arbitrator(s)
may be entered in any court having competent jurisdiction.
12. MISCELLANEOUS TERMS
12.1. Licensor may assign its rights under this Agreement to any third
party, without prior notice or consent of Licensee.
12.2. Licensee agrees to indemnify and hold Licensor and its officers,
directors, representatives, agents, and employees harmless from and against
any and all liability, damage, loss, or expense, which Licensor may sustain
or incur in any action brought or claim made by any person, organization, or
governmental entity or agency (including Licensee), irrespective of the legal
theory on which such action or claim may be based, to the extent such
liability relates to this Agreement.
12.3. EXCEPT AS EXPRESSLY SET FORTH HEREIN, LICENSOR, AND ANY RELATED
ENTITIES INCLUDING LICENSOR'S DIRECTORS, OFFICERS, EMPLOYEES, AND AFFILIATES
MAKE NO REPRESENTATIONS AND EXTEND NO WARRANTIES OF ANY KIND, EITHER
EXPRESSED OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, VALIDITY OF ISSUED OR
PENDING PATENT CLAIMS, IN THE ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR
NOT DISCOVERABLE. NOTHING IN THIS AGREEMENT SHALL
8
BE CONSTRUED AS A REPRESENTATION MADE OR WARRANTY GIVEN BY LICENSOR THAT THE
PRACTICE BY LICENSEE OF THE LICENSES GRANTED HEREUNDER SHALL NOT INFRINGE THE
PATENT OR TRADRMARK RIGHTS OF ANY THIRD PARTY. IN NO EVENT SHALL LICENSOR,
ITS DIRECTORS, OFFICERS, EMPLYEEES, OR AFFILIATES BE LIABLE FOR INCIDENTAL OR
CONSEQUENTIAL DAMAGES OF ANY KIND, INCLUDING ECONOMIC DAMAGE OR INJURY TO
PROPERTY OR LOST PROFITS, REGARDLESS OF WHETHER LICENSOR SHALL BE ADVISED,
SHALL HAVE OTHER REASON TO KNOW, OR IN FACT SHALL KNOW OF THE POSSIBILITY.
12.4. Subject to PARAGRAPH 2.3 herein, this Agreement shall be binding
upon the successors, assigns, and legal representatives of the parties.
12.5. Any payment, notice, or other communication required or permitted
to be made or given to either party pursuant to this Agreement shall be
sufficiently made or given upon actual receipt if hand-delivered or by
telecopy, or three days after the date of mailing if sent by certified or
registered mail, postage prepaid, addressed to such party at its address set
forth above or to any other address as it shall designate by written notice
to the other party.
12.6. The parties agree that if any part, term, or provision of this
Agreement is found to be illegal, invalid, or unenforceable, the validity of
the remaining provisions shall not be affected thereby.
12.7. This Agreement shall be governed by, construed, and interpreted
in accordance with the laws of the State of Arizona.
12.8. The failure of any party to exercise any right, power, or remedy
hereunder shall not constitute a waiver thereof, nor shall any single or
partial exercise of any right, power, or remedy hereunder preclude any other
or further exercise thereof or the exercise of any other right, power, or
remedy.
12.9. This Agreement constitutes the entire understanding between the
parties as to the subject matter hereof. No amendments to this
Agreement shall be effective unless in writing and signed by the
parties.
Buyer and Seller have executed this Agreement on the date first written
above. By signing below, each individual represents that he or she is a duly
elected officer of the company and is authorized to sign in that capacity.
CRAGAR INDUSTRIES, INC., WELD RACING, INC.
a Delaware corporation a Missouri corporation
By: By:
Name:_________________________ Name:_______________________
Title: _______________________ Title:______________________
9
SCHEDULE A - LICENSOR'S TRADEMARK RIGHTS
THIS SCHEDULE A ACCOMPANIES THE EXCLUSIVE FIELD OF USE LICENSE
AGREEMENT, EFFECTIVE ________________________________, BETWEEN CRAGAR
INDUSTRIES, INC. ("LICENSOR") AND WELD RACING, INC. ("LICENSEE"). THE
PARTIES AGREE THAT THIS SCHEDULE A MAY NOT BE AMENDED UNLESS SUCH AMENDMENT
IS IN WRITING AND IS SIGNED BY BOTH PARTIES.
LIST ALL APPLICABLE STATE, FEDERAL, AND FOREIGN REGISTERED TRADEMARKS AND
SERVICE MARKS, INCLUDING THE REGISTRATION NUMBERS AND APPROPRIATE EXHIBITS
SHOWING DESIGN MARKS. ALSO LIST ALL APPLICABLE COMMON LAW TRADEMARKS AND
SERVICE MARKS, AND ALL APPLICABLE STATE, FEDERAL, AND FOREIGN TRADEMARK
APPLICATIONS.
10
SCHEDULE B - LICENSOR'S PATENT RIGHTS
THIS SCHEDULE B ACCOMPANIES THE EXCLUSIVE FIELD OF USE LICENSE
AGREEMENT, EFFECTIVE ________________________________, BETWEEN CRAGAR
INDUSTRIES, INC. ("LICENSOR") AND WELD RACING, INC. ("LICENSEE"). THE
PARTIES AGREE THAT THIS SCHEDULE B MAY NOT BE AMENDED UNLESS SUCH AMENDMENT
IS IN WRITING AND IS SIGNED BY BOTH PARTIES.
NONE
11
SCHEDULE C - CRAGAR PRODUCTS
THIS SCHEDULE C ACCOMPANIES THE EXCLUSIVE FIELD OF USE LICENSE
AGREEMENT, EFFECTIVE ________________________________, BETWEEN CRAGAR
INDUSTRIES, INC. ("LICENSOR") AND WELD RACING, INC. ("LICENSEE"). THE
PARTIES AGREE THAT THIS SCHEDULE C MAY NOT BE AMENDED UNLESS SUCH AMENDMENT
IS IN WRITING AND IS SIGNED BY BOTH PARTIES.
The Licensed Product Classes for the License Agreement shall be as
follows:
1. One piece non-cast, wrought aluminum alloy wheels and related
accessories;
2. Two piece aluminum alloy wheels having a non-cast, wrought aluminum
alloy outer rim, and related accessories;
3. Three (or more) piece alloy wheels having non-cast, wrought aluminum
alloy outer rims, and related accessories.
4. Any type of aluminum or magnesium racing wheel built and marketed
for the purposes of racing.
5. Any type of non-cast, wrought aluminum alloy wheel built and
marketed for motorcycles.
For purposes of the License Agreement, the Licensed Products that are
currently part of Licensor's product offering are strictly limited to the
following wheel series (and corresponding accessories). The following wheel
series identification numbers are contained in the Cragar Industries, Inc.
Warehouse Distributor Workbook dated January 1, 1999:
1. 41/42 (Drag Star);
2. 44 (Super Star);
3. 46/47 (Superlite II);
4. 48 (Super Race);
5. 280;
6. 333; and
7. 49 (Super Truck).
12
SCHEDULE D - ROYALTY PAYMENTS
This Schedule D accompanies the Exclusive Field of Use License
Agreement, effective ________________________________, between Cragar
Industries, Inc. ("LICENSOR") and Weld Racing, Inc. ("LICENSEE"). The parties
agree that this Schedule D may not be amended unless such amendment is in
writing and is signed by both parties.
1. On the effective date of the License Agreement, Licensee shall
pay to Licensor a royalty prepayment of [*], which is to be applied to future
royalty payments due to Licensor.
2. On the effective date of the License Agreement, Licensee shall
provide to Licensor a non-interest bearing promissory note guaranteed by
Xxxxxxx X. Xxxx which will be in the amount of the minimum annual royalty
payment for the second year. Such promissory note shall be updated annually
on or before January 30 of the next year such that the amount of such
promissory note is equal to the minimum annual royalty payment for the next
year. Licensor acknowledges that Licensee may have certain current
obligations with respect to securing Licensee's assets and Licensor will
endeavor to create a secured promissory note that will not adversely impact
the operation of Licensee's business.
3. Licensee agrees to pay Licensor the greater of a minimum annual
royalty of [*] or the amount due under Paragraph 5 below.
4. Until the aggregate royalty paid by Licensee to Licensor under
the License Agreement and any renewals thereof reaches [*], the parties agree
that the minimum annual royalty payment and the percentage royalty rate shall
be determined in accordance with the following table, where "ANNUAL NET
SALES" means the total gross sales price for all Licensed Products sold
during that year less the total gross sales price for all Licensed Products
returned to Licensee during that year, except where warranty returns are paid
for by Licensor as set forth in Paragraph 2.3 of the Agreement of Sale and
Purchase of Assets.
[*] Redacted Information
13
[*] [*]
5. [*]
[*] Redacted Information
14
