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Exhibit: 10.9FT
AGREEMENT
THIS AGREEMENT is made effective the 14th day of August, 1996, by and
between Futech Educational Products, Inc., an Arizona corporation ("Futech") and
Golden Books Family Entertainment, Inc., a Delaware corporation ("Golden").
R E C I T A L S:
A. Futech and Golden entered into that certain Joint Venture and
Limited Liability Company Agreement, dated August 14, 1996 (the "Joint Venture
Agreement") relating to the formation of a limited liability company to be
operated under the name "Golden Books Electronic Publishing Ventures, L.L.C."
(hereinafter referred to as the "Joint Venture LLC").
B. Certain other documents (collectively, with the Joint Venture
Agreement, referred to hereinafter as the "JV Documents") were executed in
connection with the formation of the Joint Venture LLC, namely that certain
License Agreement, dated August 14, 1996, Contribution Agreement, dated August
14, 1996, and Consulting and Non-Competition Agreement, dated August 14, 1996.
C. The parties desire to rescind and terminate the JV Documents, and
restructure the transaction and structure a new transaction, upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, for valuable consideration received, the parties hereto
agree as follows:
TERMS:
1. RECISION AND ASSIGNMENT. The JV Documents are hereby rescinded and
terminated, effective August 14, 1996. The parties to the JV Documents are
hereby forever released and fully discharged from any obligations thereunder.
Futech hereby assigns to Golden, effective the date of this Agreement,
any and all rights Futech may have in connection with the shell Joint Venture
LLC entity. Golden shall be responsible for any and all expenses associated with
the Joint Venture LLC, whether they are expenses associated with maintaining or
operating the LLC as a Golden entity or whether those expenses are associated
with dissolution of the entity. Golden shall indemnify and defend and hold
Futech harmless from any and all liabilities in connection with the Joint
Venture LLC.
2. LICENSE AGREEMENT. The parties shall, effective the date of this
Agreement, and simultaneously with the execution of this Agreement, execute a
License Agreement in the form of Exhibit "A" attached hereto and hereby made a
part hereof.
3. $2,000,000 TECHNOLOGY FEE. The $2,000,000 to be paid to Futech
pursuant to Section 3.4 of the Joint Venture Agreement has been paid to Futech,
and shall be the technology fee described in Section 7.1 of the License
Agreement.
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4. EQUIPMENT. The equipment identified on Schedule 1.6 attached to the
Joint Venture Agreement shall be available for use by Golden until demand for
return thereof is made by Futech. A copy of the equipment list is attached
hereto as Exhibit "B" and hereby made a part hereof. Upon said demand being made
by Futech, Golden will make the equipment available to Futech at Golden's
facilities, and Futech shall pay all shipping and reinstallation charges
associated with moving the equipment to Futech's facilities. When demand is made
by Futech for return of the equipment, the equipment will be in at least as good
a condition as its condition on August 14, 1996 (normal wear and tear excepted),
and any improvements or alterations to the equipment shall become part of the
equipment and shall become the property of Futech upon demand by Futech for
return of the equipment.
As and when requested by Futech, after reasonable notice and during
normal business hours, Futech shall be entitled to inspect the equipment at
Golden's facilities, for condition and completeness, and shall be entitled to be
available to supervise the loading, packaging and/or transport of the equipment.
No such inspection or supervision shall in any manner reduce Golden's
obligations under this Agreement with respect to the equipment.
5. $1,000,000 NOTE. Futech acknowledges receipt of the $250,000
described in Section 5.8 of the Joint Venture Agreement, and acknowledges that
there may be some losses (included some generated from attorneys' fees and
costs) associated with start-up operations for products covered by the License
Agreement. In consideration thereof, Futech shall execute and deliver to Golden,
simultaneously with the execution of this Agreement, a Promissory Note in the
form of Exhibit "C" attached hereto and hereby made a part hereof, and a UCC-1
Financing Statement in the form of Exhibit "D" attached hereto and hereby made a
part hereof.
6. PUBLIC ANNOUNCEMENTS. Except as may otherwise be required by law,
the parties agree not to make any public announcement with respect to the
transactions identified in this Agreement without the prior written consent of
the other party. This provision shall not however restrict either party in any
manner from disclosing this Agreement or the transactions identified herein in
connection with any SEC requirements (including any filing made in connection
with a Public Offering of Futech), or in connection with any financing
requirements; provided, however, that each party hereto shall have a prior
approval right regarding any such disclosure as to the description of this
transaction, the use of the party's name, and the description of the party and
its officers, directors and business operations.
7. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with the laws of the State of Delaware, without
giving effect to conflicts of law principles of such state.
8. COUNTERPARTS. This Agreement may be executed by the parties in one
or more counterparts, and any number of counterparts signed in the aggregate by
the parties shall constitute a single instrument.
9. EXPENSES. Each party shall bear its own attorneys' fees and costs
associated with
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binding upon, and enforceable against, that party.
16. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
17. HEADINGS. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
DATED the date first hereinabove written.
FUTECH: Futech Educational Products, Inc.,
an Arizona corporation
By /s/ Vincent W. Goett
------------------------------------
Vincent W. Goett, CEO
GOLDEN: Golden Books Family Entertainment, Inc.,
a Delaware corporation
By /s/ Philip Galanes
------------------------------------
Its General Counsel
---------------------------------
List of Exhibits
License Agreement "A"
Equipment List "B"
$1,000,000 Promissory Note "C"
UCC-1 Financing Statement "D"
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EXHIBIT "A"
LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 14th day of August, 1996, by
and between Futech Educational Products, Inc., an Arizona corporation
("Futech"), and Golden Books Family Entertainment, Inc., a Delaware corporation
("Golden").
R E C I T A L S:
A. Futech owns certain intellectual property rights.
B. Golden desires to obtain the right to use certain of those rights in
connection with the sale of certain products and/or services, subject to the
terms and conditions set forth herein.
C. Futech is willing to grant the requested rights to Golden, subject
to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the covenants and agreements
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
T E R M S:
1. DEFINITIONS. In addition to the various defined terms set forth in
this Agreement, the following terms shall have these meanings throughout this
Agreement:
1.1 "FUTECH TECHNOLOGY" means:
(a) general and specific knowledge, experience and
information, not in written or printed form, used by Futech and
applicable to the design, development, manufacture, assembly, servicing
or sale of products; and
(b) documents containing technical information, engineering or
production data, blueprints, drawings, plans, specifications,
descriptions of assembly and manufacturing procedures, quality and
inspection standards, test records and data and other written materials
owned and used by Futech and applicable to the design, development,
manufacturing, assembly, servicing or sale of products; and
(c) inventions (whether or not patentable), works of
authorship, mask works, products, manufacturing methods, processes,
concepts, designs, algorithms, computer hardware and software, models,
prototypes, automations, designs, and related information and things;
(d) with respect to which Futech owns at the date of this
Agreement intellectual property rights;
EXHIBIT "A", PAGE 1 OF 23
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(e) together with any and all Improvements to the foregoing
developed by Futech during the term of this Agreement.
1.2 "IMPROVEMENT" means any improvement or enhancement of the
manufacturing process or design of, and which operates similarly to, a device,
apparatus, product, process or invention described in the patent applications
and/or patents identified on Exhibit "A" attached hereto, in order to accomplish
an equivalent or related result as said initially listed patent or application,
so long as the Improvement: (i) relates to Licensed Products; and (ii) relates
to at least one claim of any patent or application directed to Licensed Products
already listed on Exhibit "A" attached hereto.
Should the parties be unable to agree on whether something is an
Improvement, the parties shall submit the issue to a licensed patent attorney
well versed in the applicable law, and the determination of said counsel shall
be deemed binding and final relative solely however to the issue of what is an
Improvement. Such counsel shall be appointed by agreement between the parties,
or failing such appointment within twenty (20) days after demand is made
therefor by either party, then either party may by written notice to the other
party appoint one such counsel, and the other party may within fifteen (15) days
after receipt of written notice of such appointment, appoint one such counsel,
by giving written notice thereof to the other party. If either party fails to so
appoint counsel, then the determination made by counsel appointed by the other
party shall be binding upon the parties. If two counsel are so appointed, they
shall promptly attempt to agree upon a third such counsel. If they cannot agree
within fifteen (15) days after appointment of the second counsel, then either
party may propose that the third counsel be appointed by a then presiding
officer of the American Arbitration Association office located in or nearest to
Wilmington, Delaware, and the third counsel shall thus be chosen. Said third
counsel alone shall determine the issue of what is an Improvement. If any
counsel resigns or becomes unavailable, replacement counsel shall be appointed
in the same manner as the counsel who has become unavailable. All counsel
selected shall be licensed patent attorneys well versed in the applicable law.
The parties shall make available to the single counsel appointed to
determine the issue all information available to the parties relating to the
issue to be determined. If any of said information is argued to be confidential,
it shall be delivered to such counsel on a confidential basis for his/her eyes
only, to be used solely in deciding the issue of what is an Improvement. Once
counsel is appointed to determine an Improvement issue, that counsel shall
decide all issues regarding what is an Improvement arising within two years
after the date of such appointment. All counsel appointed under this provision
shall be protected from liability for acting in the appointed role to the same
extent as a judge of civil court in Delaware would be protected in connection
with judicial determinations made by the judge.
1.3 "CONFIDENTIAL INFORMATION" means any and all Futech Technology,
information and/or data which is not readily ascertainable by proper means and
which derives economic value, actual or potential, from not being generally
known, and which has been the subject of efforts that are reasonable under the
circumstances to maintain its secrecy. All information relating to the products
or operations of Futech, which is provided to Golden, or to which Golden
otherwise obtains access, pursuant to, or as a result of, this Agreement shall
be considered Futech Confidential Information; Except such information which
Golden can clearly show: (a) at the time
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of this Agreement is publicly and openly known; (b) after the date of this
Agreement becomes publicly and openly known through no fault of Golden; (c)
comes into Golden's possession and lawfully obtained by Golden from a source
other than from Futech or a source deriving from Futech, and not subject to any
obligation of confidentiality or restrictions on use; or (d) is approved for
release by written authorization of Futech.
1.4 "FUTECH INTELLECTUAL PROPERTY" means: (i) any and all United
States and foreign patent, copyrights, trade secret and mask work rights held by
Futech as of the date of this Agreement, including but not limited to the
patents and patent applications, and copyright registrations identified on
Exhibit "A" attached hereto; and (ii) any and all United States and foreign
patent, copyrights, trade secret and mask work rights which Futech acquires
during the term of this Agreement. For purposes of clarity, trademark rights
shall be separately defined and treated.
1.5 "FUTECH MARKS" means any and all United States and foreign
trademark, service mark and trade name rights held by Futech as of the date of
this Agreement, including but not limited to, the trademarks, service marks, and
trade names identified on Exhibit "A" attached hereto, together with any and all
United States and foreign trademark, service mark and trade name rights which
Futech acquires during the term of this Agreement.
1.6 "LICENSED PRODUCTS" means products manufactured and/or sold by
Golden, incorporating, embodying or comprising the Futech Technology as allowed
by the licenses contained in this Agreement.
1.7 "SUBSIDIARY" means a corporation, company, partnership, or other
entity more than fifty percent (50%) of whose outstanding stock or interest
entitled to vote for the election of directors or similar management control
(other than preferred or other stock entitled to vote only upon failure of the
entity to pay dividends) is now or hereafter during the term of this Agreement
owned or controlled, directly or indirectly by Futech or Golden, as the case may
be in the specific provisions using the defined term "Subsidiary," provided that
any such entity which would be a Subsidiary by reason of the foregoing shall be
considered a Subsidiary only so long as such ownership or control exists.
1.8 "PRESS THE PAGE BOOK FORMAT" means books utilizing multiple
printed tactile points which are embedded inside the two ply lamination of each
page. The inside front and back covers of the book do not contain any embedded
tactile points. Finger tip pressure applied directly to the individual page
tactile points energizes a sound module control center attached to the back
cover of the book. "Quad Fold Technology" is not included in or part of Press
The Page Book Format.
1.9 "PRESS THROUGH THE PAGE FORMAT" means:
(i) books using a folded panel containing printed tactile
points embedded on the inside of the panel. The panel is adhered to the
inside front and back cover of the book. The actual pages are single
ply and do not contain any embedded tactile points. Interactive play is
obtained by finger pressure through the pages to the tactile points
located within the
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inside front and back cover. A sound module control center is attached
to the back cover of the book; and
(ii) game boards for children, sound pads for children, sound
games for children and puzzles for children containing printed tactile
points similar to those described in subparagraph (i) above.
"Quad Fold Technology" is not included in or part of Press Through The
Page Format.
1.10 "QUAD FOLD TECHNOLOGY" is not a book format but rather a
smaller version of a bi-fold board game mounted directly on a stiff back board
which also contains the sound module control center assembly. The printed
tactile points are embedded within the two ply lamination of the bi-fold game
board. Interactive play is obtained by applying pressure directly to the tactile
points within the game board.
2. GRANT OF LICENSES.
2.1 Golden's Right to Make and Sell. Subject to the terms and
conditions of this Agreement, Futech hereby grants to Golden and Golden's
Subsidiaries, for the term of this Agreement, a non-exclusive license to use the
Futech Technology relating to Press The Page Book Format, the Press Through The
Page Format, and the Quad Fold Technology, to make or have made for commercial
sale, and to sell Press The Page Book Format books, Press Through The Page
Format Licensed Products, and Quad Fold Technology Licensed Products. Neither
this Agreement, nor any other agreement between the parties, grants Golden any
licenses other than as are expressly provided for in this Section 2.1 and in
Section 4 below.
2.2 Futech's Right to Make and Sell. The license appearing in
Section 2.1 above is non-exclusive because Futech and Futech's Subsidiaries
shall be entitled to use the Futech Technology relating to Press The Page Book
Format, the Press Through The Page Format, and the Quad Fold Technology, to
make or have made for commercial sale, and to sell Press The Page Book Format
books, Press Through The Page Format products, and Quad Fold Technology
products. Except as expressly provided for in Section 3 below, nothing in this
Agreement, or in any other agreement between the parties, restricts in any
manner Futech's rights to use Futech Technology, Futech Intellectual Property,
and/or Futech Marks, including but not limited to the right to use the same in
connection with products competing with the Licensed Products, or in connection
with any other product.
2.3 No Duty in Golden to Work the License. Except as called for in
Section 3 below (i.e., as to third party deals Golden has elected to perform),
Golden shall have no duty to manufacture or sell Licensed Products.
3. GOLDEN'S RIGHT REGARDING THIRD PARTY LICENSES. Notwithstanding
Section 2.2 above, if Futech (or a Futech Subsidiary) desires to license to an
entity which is not a Futech Subsidiary, rights to use the Futech Technology
relating to Press the Page Book Format, the Press Through The Page Format as it
relates to books described in Section 1.9 (i) above, or the Quad Fold Technology
as it relates to the publishing of books, to make or have made for commercial
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sale, and/or sell Press The Page Book Format books, Press Through The Page
Format books, or Quad Fold Technology books, then Golden shall have the right to
elect to do the transaction offered to the third party to the exclusion of the
third party, as follows:
(a) Futech shall give Golden written notice of the license
rights Futech proposes to offer to the third party, along with an
outline summary of the transaction describing the "deal points" of the
proposed license arrangement, including but not limited to the name of
the publisher in the third party transaction, any time requirements for
bringing the products to market, and any production and/or sales
quantity requirements.
(b) Golden shall have five (5) business days from the giving
of said notice to give Futech written notice that Golden will publish
books the same or comparable to the books described in the third party
offer. If Golden so elects to publish the books, then Golden's
obligation to publish shall be covered by the terms of this Agreement,
including but not limited to the obligation to pay royalties (Net Sales
from said publishing shall apply against the $40,000,000 figure in
subparagraph 9(a) below) at the rate and on the terms appearing in
Section 9 below; provided, however, that notwithstanding the other
terms of this Agreement which do not require Golden to meet any timing,
production, or sales performance criteria, Golden shall be obligated to
meet any "time to market" and any production and/or sales quantity
requirements appearing in the third party offer. The parties expressly
agree that Golden shall not be required to pay an advance in connection
with publishing under this subparagraph (b), even if one appears in the
third party offer.
(c) The existence of and terms of any third party offer
described above shall be kept confidential by Golden as Confidential
Information subject to Section 15.1 below.
(d) If Golden does not elect (within the five (5) day period
described in subparagraph (b) above) to publish the books described in
the third party outline summary as allowed in subparagraph (b) above,
then Futech may for a period of sixty (60) days (after the expiration
of the five (5) day period) enter into a license arrangement with the
third party identified in the outline summary of the third party
transaction on the terms appearing in the outline summary provided to
Golden under subparagraph (a) above.
(e) If Futech enters into a license arrangement with a third
party under subparagraph (d) above, then Futech shall pay Golden forty
percent (40%) of the difference between: (i) all amounts actually
received by Futech under the license agreement, and (ii) Futech's
actual direct third-party costs associated therewith, including but not
limited to attorneys' fees and costs. Golden shall reimburse Futech for
any amounts so received by Golden if necessary to accomplish a 40%/60%
split of the net amounts received by Futech from the third party. An
amount equal to twenty (20) times all amounts paid to Golden under this
subparagraph shall be applied against and shall reduce the remaining
balance, if any, of the $40,000,000 Royalty-free Net Sales described in
subparagraph 9(a) below.
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Amounts payable to Golden under this subparagraph (e)
(hereinafter "Golden's Share") will be payable on a calendar quarter
basis, by the sixtieth day following the calendar quarter to which the
payments relate. All amounts not so paid shall bear interest from the
due date until the date of payment at the per annum rate of one (1)
percentage point above the prime rate of interest published by the Wall
Street Journal, as such rate may from time to time change.
On or before the due date of Golden's Share, and at least
quarterly on a calendar quarter basis, Futech shall make written
reports to Golden in form and with detail as shall reasonably be
requested by Golden, certified to be accurate by an authorized agent of
Futech, setting forth the detail relating to Golden's Share for the
period of time to which the reports relate; provided, however, that
Futech shall not be in breach of this provision for failure to provide
information unavailable to Futech (for example as a result of the
failure of the third party licensee to provide the information). Said
reports need only be furnished if there are payments due on Golden's
Share for the calendar quarter to which the reports relate. The failure
or refusal of Futech to timely furnish any such report, or the payment
due as shown in the report, shall be deemed a substantial and material
breach of this Agreement. The receipt and acceptance by Golden of any
of the reports furnished pursuant to this Agreement, or of any payments
made herein (or the cashing of any checks paid hereunder) shall not
preclude Golden from questioning the accuracy of any such report at any
time (within the two year period described below), and in the event
that any inconsistencies or mistakes are discovered in any such report
or payment, they shall immediately be rectified and the appropriate
payment made by Futech, together with interest on the overdue payments
at the per annum rate of one (1) percentage point above the prime rate
of interest published by the Wall Street Journal, as such rate may from
time to time change. Royalty statements and reports shall become
incontestable if not contested within two (2) years after receipt
thereof by Golden.
Futech shall keep at its principal place of business, such
books and records and other documents relating to Golden's Share during
the term of this Agreement as may be necessary or proper to enable the
amounts payable to Golden hereunder to be conveniently ascertained.
Golden shall have the right, from time to time during the term
of this Agreement, and for a period of two years thereafter (with
respect to any then-contestable statement), but not more than once
annually, upon thirty (30) days prior written notice, during regular
office hours, to cause a certified public accountant(s) on behalf of
Golden to audit or otherwise review the books and records of Futech,
and the following shall apply with respect thereto:
(i) If the audit or review discloses that Golden was
underpaid Golden's Share by five percent (5%) or more during
the period covered by the audit, Futech shall, within ten (10)
days after demand is made therefor, pay all costs relating to
said audit or review and pay Golden an amount equal to two (2)
times the amount of the underpayment. Golden shall further
have all other rights and remedies
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against Futech available at law, in equity, or under this
Agreement with respect to such underpayment.
(ii) If the audit or review fails to disclose an
underpayment to Golden of five percent (5%) or more, Golden
shall pay the cost of the audit or review.
(iii) If the audit or review discloses that Golden
was underpaid by less than five percent (5%), or overpaid, in
any period, Futech, or Golden, as the case may be, shall
within ten (10) days after demand made therefor, pay the
amount of the underpayment or overpayment.
Futech shall cooperate with such audit or review, and provide
requested information relating to royalties and other amounts due
Futech in connection with third party license agreements covered by
this subparagraph (e). The auditor shall be entitled to inspect all
accounts and records of Futech relating to said amounts and to take
extracts therefrom or copies thereof to the extent necessary to verify
the reports and payments required under the terms of this subparagraph
(e). The duration of any audit under this provision shall not exceed
thirty (30) days.
(f) If Golden elects to perform the third party offer, and
then defaults under its obligations to perform the third party offer as
described and limited in subparagraph (b) above, and said default
continues for a period of thirty (30) days after written notice of the
default is given to Golden, then Futech's obligation to provide Golden
notice of third party license arrangements, and Golden's right to
perform under those arrangements (other than arrangements for which
Golden has previously elected to perform), all as set out in this
Section 3 above, shall immediately and without further notice be
terminated.
4. LICENSE OF FUTECH MARKS. Subject to the terms and conditions of this
Agreement, Futech hereby grants to Golden and Golden's Subsidiaries an
non-exclusive license to use the Futech Marks in connection with, and only in
connection with, the Licensed Products. Golden agrees that it will use the
Futech Marks only in connection with the Licensed Products, and shall not use
the Futech Marks except as permitted by and in connection with this Agreement.
This license does not limit or otherwise effect in any manner Futech's rights of
use or other rights regarding the Futech Marks, including but not limited to the
right to use the Futech Marks in connection with products competing with the
Licensed Products, or in connection with any other product.
5. NO OWNERSHIP TRANSFER. Golden acknowledges and agrees that this
Agreement grants Golden no title or right of ownership in or to the Futech
Technology, the Futech Intellectual Property, the Futech Marks, or any goodwill
relating thereto. Golden expressly recognizes and acknowledges that the use of
the Futech Technology, the Futech Intellectual Property, and/or the Futech Marks
shall not confer upon Golden any proprietary rights thereto, and that all such
use by Golden shall inure to the benefit of Futech.
Golden agrees that during the term of this Agreement, or at any time
thereafter, Golden shall not dispute or contest Futech's rights to the Futech
Technology, the Futech Intellectual
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Property, the Futech Marks, or any goodwill relating thereto, or the validity
thereof or the validity of this Agreement, and shall not assist others in so
doing.
6. LICENSES NON-ASSIGNABLE.
(a) The licenses appearing in Sections 2 and 4 above are personal
and non-assignable, and include no right of sublicense. Any attempt by Golden to
assign or sublicense any right under this Agreement, without prior written
consent of Futech, shall be null and void.
Notwithstanding the foregoing, Golden shall have the right to grant
sublicenses of the licenses granted hereunder to and only to Golden
Subsidiaries. If the relationship of a Subsidiary of Golden changes so that such
entity ceases to be a "Subsidiary," the rights of the Subsidiary to the
sublicenses described above shall automatically terminate as of the date such
relationship changes.
(b) Notwithstanding the foregoing, Golden and Golden's Subsidiaries
may have Licensed Products, or portions thereof, made by other manufacturers for
the reassembly and/or sale of same by Golden or its Subsidiaries, as long as the
following conditions are met for such manufacturers:
(i) The designs, specifications and working drawings for the
manufacture of Licensed Products, or portions thereof, must be
furnished by, and originate with, Golden and/or its Subsidiaries,
and/or a third party specifically hired by Golden or its Subsidiaries
to design said Licensed Products; and
(ii) Said designs, specifications and working drawings are in
such detail that no additional designing by the other manufacturer is
required other than adaptation to those production processes and
standards normally used by the manufacturer which change the
characteristics of the Licensed Products only to a negligible extent.
7. TECHNOLOGY TRANSFER AND ASSISTANCE.
7.1 Technology Fee. Futech acknowledges payment by Golden of a
technology transfer fee in the amount of $2,000,000 for the license of the
technology rights as set out in this Agreement. The parties agree that said fee
shall be earned for all purposes on January 2, 1998. Said fee is non-refundable
and Futech shall have no obligation to repay said amount under any
circumstances.
7.2 Assistance - Immediate. Within a reasonable time following
execution of this Agreement, Futech will make available to Golden the technical
information then in its possession relating to the licenses granted in this
Agreement.
7.3 Assistance - At Futech's Facilities. Futech shall:
(i) Permit Golden from time to time to send a reasonable
number of Golden's technical representatives or engineers to Futech's
facility or other place designated by Futech, for the purpose of
receiving technical training and studying technical questions
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and problems relating to the manufacture, assembly, servicing and sale
of Licensed Products, and
(ii) Make its qualified technical personnel reasonably
available by telephone for the purposes referenced in subparagraph (i)
above.
Futech shall use its best efforts to make its qualified technical personnel
available for such training and assistance. Golden shall be solely responsible
for the travel and living expenses and salaries of its employees receiving
training or assistance at Futech's facilities, and Golden shall maintain, at its
sole expense, appropriate insurance coverage for such employees against
accident, injury or illness.
7.4 Assistance - At Golden's Facilities. Upon Golden's reasonable
request, but subject to availability, Futech will send its qualified technical
personnel to Golden's facility to provide such training and assistance as
reasonably required to enable Golden to manufacture, assemble, service and sell
the Licensed Products. Golden shall reimburse Futech for the reasonable travel
and living expenses incurred by Futech's technical personnel in rendering such
assistance or training, and Futech (or Newtech Consulting, Inc.) shall maintain,
at its sole expense, appropriate insurance coverage for such employees against
accident, injury or illness.
8. FURTHER RESEARCH AND DEVELOPMENT.
(a) Futech shall have no obligation to continue product development
or research and development relating to the Futech Technology.
(b) Futech shall, during the term of this Agreement, as appropriate,
promptly communicate to Golden all Improvements to the Futech Technology which
relate to the licenses contained in this Agreement.
(c) Golden will promptly notify Futech, in writing, of any
Improvements of which Golden becomes aware, relating to the Futech Technology
associated with the licenses contained in this Agreement.
9. ROYALTIES.
(a) Golden (Golden's Subsidiary may pay) agrees to pay Futech a
royalty (referred to in this Agreement as the "Royalty" or "Royalties") equal to
five percent (5%) of Net Sales (defined below); provided, however, that no
Royalties shall be payable on the first $40,000,000 of Net Sales.
Notwithstanding the foregoing, no Royalties shall be payable in connection with
any Net Sales occurring prior to January 1, 1998.
(b) The Royalties will be payable on a calendar quarter basis, by
the sixtieth day following the calendar quarter to which the Royalties relate.
(c) The term "Net Sales" as used in this Agreement means the gross
invoiced sales prices for each Licensed Product sold (an item is "sold" not
later than the earlier of the date shipped and the date invoiced) by or for
Golden or a Subsidiary of Golden, less only normal and
9 EXHIBIT "A", PAGE 9 OF 23
13
reasonable discounts actually given to customers, returns actually received and
allowances actually made and credited; provided, however, that the deduction for
discounts, returns and allowances for any calendar quarter may not exceed 9% of
the gross sales for Licensed Products for the preceding calendar quarter. No
additional set-offs or deductions of any kind will be allowed, without the prior
written consent of Futech, which consent may be given or withheld in Futech's
sole and absolute discretion. Golden shall have written verification for all
discounts, returns and allowances.
(d) All unpaid Royalties and other amounts due to Futech hereunder
shall bear interest from the due date until the date of payment at the per annum
rate of one (1) percentage point above the prime rate of interest published by
the Wall Street Journal, as such rate may from time to time change.
(e) If, during the term of this Agreement, Golden, or any Subsidiary
of Golden, offers any product or service in exchange for less than commercially
reasonable consideration, without the prior written approval of Futech, or if
Golden or any Subsidiary of Golden offers any product or service in exchange for
something other than cash equivalent, Futech shall nonetheless be entitled to
Royalties based upon the value of the product transferred or services performed.
Notwithstanding any provision of this Agreement, if any product or service is
sold or otherwise disposed of at less than fifteen percent (15%) below Golden's
normal established price, then "Net Sales" therefore shall be determined, and
Royalties payable thereon, assuming a sales price of fifteen percent (15%) below
Golden's normal established price.
(f) All taxes, levies, charges or duties imposed in connection with
Licensed Products shall be paid by Golden, and no deductions for any such
amounts or any other expenses, except as may expressly be provided for in this
Agreement, shall be deducted from Royalties payable hereunder, it being the
intent of the parties that Royalties shall be net amounts payable to Futech,
free and clear of any and all expenses of any type or nature other than as may
expressly be provided for herein to the contrary.
10. REPORTS, BOOKS AND RECORDS, SAMPLES.
(a) On or before the due date of the Royalties described herein, and
at least quarterly on a calendar quarter basis, Golden shall make written
reports to Futech in form and with detail as shall reasonably be requested by
Futech, certified to be accurate by an authorized agent of Golden, setting forth
the Net Sales and other detail relating to the Net Sales for the period to which
the Royalties relate. Said reports need only be furnished if there are Net Sales
during the calendar quarter. The failure or refusal of Golden to timely furnish
any such report, or the payment due as shown in the report, shall be deemed a
substantial and material breach of this Agreement. The receipt and acceptance by
Futech of any of the reports furnished pursuant to this Agreement, or of any
payments made herein (or the cashing of any checks paid hereunder) shall not
preclude Futech from questioning the accuracy of any such report at any time
(within the two year period described below), and in the event that any
inconsistencies or mistakes are discovered in any such report or payment, they
shall immediately be rectified and the appropriate payment made by Golden,
together with interest on the overdue payments at the per annum rate of one (1)
percentage point above the prime rate of interest published by the Wall Street
Journal, as such rate may from time to time
10 EXHIBIT "A", PAGE 10 OF 23
14
change. Royalty statements and reports shall become incontestable if not
contested within two (2) years after receipt thereof by Futech.
(b) Golden shall keep at its principal place of business, such books
and records and other documents relating to Net Sales during the term of this
Agreement as may be necessary or proper to enable the amounts payable to Futech
hereunder to be conveniently ascertained.
(c) Futech shall have the right, from time to time during the term
of this Agreement, and for a period of two years thereafter (with respect to any
then-contestable statement), but not more than once annually, upon thirty (30)
days prior written notice, during regular office hours, to cause a certified
public accountant(s) on behalf of Futech to audit or otherwise review the books
and records of Golden, and the following shall apply with respect thereto:
(i) If the audit or review discloses that Futech was underpaid
its Royalties by five percent (5%) or more during the period covered by
the audit, Golden shall, within ten (10) days after demand is made
therefor, pay all costs relating to said audit or review and pay Futech
an amount equal to two (2) times the amount of the underpayment. Futech
shall further have all other rights and remedies against Golden
available at law, in equity, or under this Agreement with respect to
such underpayment.
(ii) If the audit or review fails to disclose an underpayment
to Futech of five percent (5%) or more, Futech shall pay the cost of
the audit or review.
(iii) If the audit or review discloses that Futech was
underpaid by less than five percent (5%), or overpaid, in any period,
Golden, or Futech, as the case may be, shall within ten (10) days after
demand made therefor, pay the amount of the underpayment or
overpayment.
Golden shall cooperate with such audit or review, and provide
requested information relating to sales of Futech audio book products. The
auditor shall be entitled to inspect all accounts and records of Golden relating
to sales of Futech audio book products and to take extracts therefrom or copies
thereof to the extent necessary to verify the Royalty reports and payments
required under the terms of this Agreement. The duration of any audit under this
provision shall not exceed thirty (30) days.
(d) Golden will provide Futech with one hundred (100) free samples
of each product incorporating Futech Technology sold by or for Golden, within
thirty (30) days after the product first becomes available for sale.
11. PRODUCT LIABILITY; INSURANCE.
(a) Golden agrees to indemnify and defend and save harmless Futech
from every claim, demand, expense, and cost, including reasonable attorneys'
fees, which may arise by reason of the use by Golden of the Futech Technology or
the Futech Marks, and any injury or damage of any kind or nature to any person
or property caused by or resulting from or arising out of a defect in design,
workmanship, or material of any Licensed Product; provided, however, that the
foregoing
11 EXHIBIT "A", PAGE 11 OF 23
15
shall not apply to any such claim, etc. arising out of, relating to or caused by
the Futech Technology and/or the Futech Intellectual Property, to and only to
the extent so related or caused (this provision shall not limit Golden's
indemnification for liability for products defectively manufactured by or for
Golden, unless the liability results from defects inherent in the Futech
Technology and the defective product was manufactured substantially in
accordance with Futech instructions).
(b) Golden shall obtain at its own expense and maintain during the
term of this Agreement, and for a period of seven (7) years thereafter, general
liability insurance and product liability insurance with at least coverage of
$1,000,000 per occurrence and $3,000,000 in the aggregate. Golden shall also
obtain at its own expense and maintain during the term of this Agreement, and
for a period of seven (7) years thereafter (ten (10) years if the policy form is
"claims made") publishers liability insurance which provides coverage for claims
arising out of published materials, which shall include but not be limited to
the allegations of defamation, copyright infringement, invasion of right of
privacy, or other personal injury and breach of implied contract.
All insurance must be provided by a recognized insurance company
having a Best's Rating of no less than "A." As proof of such insurance, a fully
paid certificate of insurance naming Futech as an additional insured shall be
submitted to Futech's office as and when requested by Futech, within thirty (30)
days after written request is made therefor. Futech shall be entitled throughout
the term of this Agreement, to a copy of the prevailing policies of insurance.
The policies of insurance must be non-cancelable except after thirty (30) days
prior written notice to Futech.
(c) Futech shall obtain at its own expense and maintain during the
term of this Agreement, and for a period of seven (7) years thereafter, general
liability insurance and product liability insurance with at least coverage of
$1,000,000 per occurrence and $3,000,000 in the aggregate. Futech shall also
obtain at its own expense and maintain during the term of this Agreement, and
for a period of seven (7) years thereafter (ten (10) years if the policy form is
"claims made") publishers liability insurance which provides coverage for claims
arising out of published materials, which shall include but not be limited to
the allegations of defamation, copyright infringement, invasion of right of
privacy, or other personal injury and breach of implied contract.
All insurance must be provided by a recognized insurance company
having a Best's Rating of no less than "A." As proof of such insurance, a fully
paid certificate of insurance naming Golden as an insured party shall be
submitted to Golden's office as and when requested by Golden, within thirty (30)
days after written request is made therefor. Golden shall be entitled throughout
the term of this Agreement, to a copy of the prevailing policies of insurance.
The policies of insurance must be non-cancelable except after thirty (30) days
prior written notice to Golden.
12. STANDARDS, QUALITY CONTROL. Golden shall maintain high standards of
quality, style, appearance and service with respect to all Licensed Products
made and/or sold, and all related advertising and promotional material
including, without limitation, the quality of physical material utilized. All
Licensed Products will be manufactured, sold, and distributed in accordance with
all applicable federal, state, local, and foreign laws and regulations.
12 EXHIBIT "A", PAGE 12 OF 23
16
13. PATENT INFRINGEMENT.
13.1 Infringement By a Third Party. In the event Golden becomes
aware of any information indicating that a third party may be infringing (or may
have infringed) any of the Futech Intellectual Property or Futech Marks with
respect to the Licensed Products, Golden shall give Futech notice of such
alleged infringement, identifying the country or countries in which the alleged
infringing product is sold and describing the alleged infringing product in
sufficient detail to enable Futech to determine whether such product infringes
any of the Futech Intellectual Property or Futech Marks. Futech shall assert the
Futech Intellectual Property or Futech Marks against the infringer within three
months of such notice, unless (a) Golden and Futech determine not to assert such
claim, or (b) Futech has received an opinion from qualified patent counsel that
the allegedly infringing product does not infringe the Futech Intellectual
Property or Futech Marks. All recoveries relating to losses of Golden in
connection with Licensed Products, including, but not limited to, awards of
damages, statutory damages, and awards of attorneys' fees, expenses and/or
costs, net of all costs, including attorneys' fees and costs, incurred by Futech
to obtain said recoveries, obtained by Futech in the course of any litigation
arising out of any notification of Futech by Golden pursuant to this
subparagraph shall be paid to Golden.
13.2 Infringement Alleged By a Third Party. In the event that any
third party alleges that any Licensed Product infringes any intellectual
property rights of such third party, and such intellectual property rights
reasonably relate to the Futech Technology on which the Licensed Product is
based, then Futech shall investigate and defend against such allegations at
Futech's expense. If the basis of the third party's infringement claim is for
any other reason, then Golden shall investigate and defend Futech and Golden
against such allegations at Golden's expense.
If a Licensed Product is held to infringe the intellectual property
rights of a third party and Golden is required to pay a royalty to such party
for the right to continue to manufacture and sell such Licensed Product, or if
settlement of any claim of rights similarly so requires (and Futech consents to
the settlement in writing), (i) Futech shall be required to make such payments
if the infringement is of intellectual property rights reasonably relating to
the Futech Technology on which the Licensed Product is based, and (ii) Golden
shall be required to make such payments if the infringement claim is for any
other reason.
Golden shall not knowingly infringe on the rights of any third party
in connection the manufacturing, marketing or sale of Licensed Products.
14. TRADEMARK USAGE; MARKING.
(a) This subparagraph (a) shall apply until December 31, 1997.
Any Licensed Product incorporating, embodying, or comprising Futech
Technology shall display in a plainly visible manner the Futech Mark "Talking
Pages" as a trademark in connection therewith on the back cover, in a manner
agreed upon beforehand by the parties; provided, however, that such display is
not required if precluded by any agreement after reasonable efforts are
exercised to modify or waive such agreement. Golden shall mark all Licensed
Products
13 EXHIBIT "A", PAGE 13 OF 23
17
with such appropriate patent and trademark marking and other proprietary legends
as reasonably requested by Futech.
(b) This subparagraph (b) shall apply only after December 31, 1997.
All Licensed Products incorporating, embodying, or comprising Futech
Technology or Futech Marks shall display in a plainly visible manner the Futech
Mark "Talking Pages," or "Talking Pages Plus," as the case may be, as a
trademark in connection therewith on the back cover, in a manner agreed upon
beforehand by the parties. Golden shall also mark all Licensed Products with
such other appropriate patent and trademark marking and other proprietary
legends as reasonably requested by Futech.
Unless otherwise agreed in writing by Futech, all Licensed Products
shall be clearly marked with type in readable size with the words "Talking Pages
[or Talking Pages Plus, as the case may be], Technology Provided by Futech
Educational Products, Inc.," and immediately thereafter shall appear the
then-current address and phone number of Futech provided by Futech to Golden. No
portion of the statement appearing within the quotation marks in the preceding
sentence shall be in larger type in or any way any more prominent than any other
part thereof.
15. CONFIDENTIALITY.
15.1 Futech's Confidential Information. Golden acknowledges that
Futech's Confidential Information is unique and valuable and was developed or
otherwise acquired by Futech at great expense, and that any unauthorized
disclosure or use of Futech's Confidential Information may cause Futech
irreparable injury loss for which damages would be an inadequate remedy. Golden
agrees to hold such Confidential Information in strictest confidence, to use all
efforts reasonable under the circumstances to maintain the secrecy thereof, and
not to make use thereof other than in accordance with this Agreement, and not to
make use of or to release or disclose Confidential Information to any third
party without Futech's prior written consent.
15.2 Golden's Confidential Information. Futech acknowledges that
various information regarding the business plans and product concepts of Golden
may comprise Confidential Information. Futech agrees to hold Golden's
confidential information (defined consistently with Section 1.3 above) in
strictest confidence, not to make use thereof other than in accordance with this
Agreement, to use all efforts reasonable under the circumstances to maintain the
secrecy thereof, and not to make use of or to release or disclose Golden's
confidential information to any third party without Golden's prior written
consent. Golden hereby acknowledges and consents to Futech's disclosure of
Golden's confidential information to Futech's consultant, Newtech Consulting,
Inc., an Arizona Corporation.
15.3 Injunctive Relief. The parties acknowledge that any violation
of this Section 15 shall constitute a material breach of this Agreement
resulting in irreparable injury to the non-breaching party, and agree that, in
addition to any and all other rights available to the nonbreaching party by law
or by this Agreement, the non-breaching party shall have the right to seek to
have an injunction entered against the breaching party to enjoin any further
violations of this Agreement.
14 EXHIBIT "A", PAGE 14 OF 23
18
16. WARRANTIES. Except as otherwise set forth on Exhibit "A" attached
hereto:
16.1 Ownership of Rights. Futech is the owner of all right, title
and interest in and to the currently existing Futech Intellectual Property and
currently existing Futech Marks, free and clear of any and all liabilities,
obligations, licenses, liens or assignments, whether written, oral or implied in
fact or law, and no use by Golden of the Futech Intellectual Property as
provided for in this Agreement will infringe upon or violate the rights of any
third party.
16.2 Validity of Rights. No holding, decision or judgment is pending
or threatened and none has been rendered by any governmental authority which
would limit, cancel or question the validity of any of the currently existing
Futech Intellectual Property or currently existing Futech Marks. Futech is not
aware of any information that would affect the validity of any of the currently
existing Futech Intellectual Property or current existing Futech Marks.
16.3 No Inconsistent Licenses. There are no outstanding licenses or
other agreements that relate to or restrict the use of the currently existing
Futech Intellectual Property or currently existing Futech Marks which are
inconsistent with the licenses granted in this Agreement.
16.4 Notices of Claims. Futech has no knowledge of and has received
no notice of any adversely held patent, patent right, trademark, service mark,
trade name, trade secret, copyright, franchise or other proprietary right of any
other person or notice of any claim of any other person, nor has Futech made a
claim against any person, relating to any of the current existing Futech
Intellectual Property, current existing Futech Marks, or any process or
Confidential Information of Futech, and Futech has no knowledge of any basis for
any such charge or claim.
17. INDEMNITIES.
17.1 Mutual. The parties hereto shall each indemnify and hold the
other harmless from and against any and all claims, liabilities, loss, expense
(including reasonable attorneys' fees) or damages arising out of any breach of
this Agreement, including without limitation any representation, warranty,
covenant or agreement of such party set forth in this Agreement, provided that
the indemnified party shall, with reasonable promptness, notify the indemnifying
party of any such claim, demand, or suit and shall fully cooperate in the
defense thereof.
17.2 By Golden. Golden shall defend, indemnify and hold Futech, and
its Subsidiaries, and associated and affiliated companies, harmless from and
against any liabilities (including reasonable attorneys' fees and costs) of any
kind or nature whatsoever which may be sustained or suffered by Futech: (i) in
connection with the Licensed Products or the packaging, distribution, promotion,
sale or exploitation of the Licensed Products, including but not limited to any
actual or alleged defect in the Licensed Products, or their packaging, whether
latent or patent, including failure of said Licensed Products or their
packaging, distribution, promotion, sale or exploitation to meet any federal,
state or local laws or standards; (ii) based upon or arising out of any actual
or alleged unauthorized use by Golden or its Subsidiaries of any patent, trade
secret, process, idea, method or device, or any copyright or trademark; or (iii)
any other actual or alleged unauthorized action of Golden. The foregoing
indemnification shall not however apply to any such liability arising out of,
relating to or caused by the Futech Technology and/or the Futech Intellectual
15 EXHIBIT "A", PAGE 15 OF 23
19
Property, to and only to the extent so related or caused (this provision shall
not limit Golden's indemnification for liability for products defectively
manufactured by or for Golden, unless the liability results from defects
inherent in the Futech Technology and the defective product was manufactured
substantially in accordance with Futech instructions).
17.3 By Futech. Futech shall defend, indemnify and hold Golden, and
its Subsidiaries harmless from and against any liabilities (including reasonable
attorneys' fees and costs) of any kind or nature whatsoever which may be
sustained or suffered by Golden arising out of, relating to or caused by the
Futech Technology and/or the Futech Intellectual Property, to and only to the
extent so related or caused (this indemnification shall not apply to liability
for products defectively manufactured by or for Golden, unless the liability
results from defects inherent in the Futech Technology and the defective product
was manufactured substantially in accordance with Futech instructions).
17.4 General Terms. The indemnifying party shall have the right to
designate counsel to defend against such claims and suits; however, at the
indemnified party's option, the indemnified party shall have the right to
participate in the defense with its own counsel at its own expense. In no event
shall any such claims or suits affecting the rights of a party be settled
without the prior written consent of that party.
18. TERM. This Agreement shall be effective as of August 14, 1996, and
shall continue thereafter until August 13, 2001, unless sooner terminated as
provided for in this Agreement. In addition to said term, Golden shall have one
(1) option (the "Option") to extend the term of this Agreement for a period of
one additional five year period (to the extent this Agreement is so extended,
the new term is sometimes hereinafter referred to as the "Extended Term"). The
Option is granted upon the following terms and conditions:
(a) Golden shall exercise the Option by delivering written notice to
Futech of such exercise not later than May 13, 2001;
(b) Golden shall not be in default under this Agreement on the date
the Option is exercised, or on the commencement date of the Extended Term;
(c) At the time the Option is exercised, Golden shall pay an advance
and guarantee in the amount of $2,000,000, payable in cash equivalent. Royalties
payable by Golden to Futech hereunder for Net Sales made during the Extended
Term shall be first applied against said advance and guarantee, until the
advance and guarantee is used in its entirety. In no event shall the advance and
guarantee be repayable by Futech to Golden, except against future Royalties as
described in the preceding sentence.
(d) All terms and conditions of this Agreement shall remain in full
force and effect, and apply to the Extended Term, including but not limited to
Golden's obligation to pay Futech Royalties under Section 9 above.
19. DEFAULT AND TERMINATION.
16 EXHIBIT "A", PAGE 16 OF 23
20
19.1 Termination For Default. Either party shall have the right to
terminate this Agreement upon thirty (30) days' written notice to the other
party, if such other party fails to comply in any material respect with any term
or condition of this Agreement and such failure to comply is not corrected
within the foregoing thirty (30) day notice period.
19.2 Termination For Golden's Bankruptcy. Futech shall have the
right to terminate this Agreement in the event Golden becomes bankrupt or
insolvent, suffers a receiver to be appointed, or makes an assignment for the
benefit of creditors.
19.3 Golden's Rights Cease at Termination. Upon termination of this
Agreement for any reason or cause, Golden's rights hereunder shall terminate
immediately and Golden shall immediately cease all use of Futech Technology and
Futech Marks and all marketing, distribution and sale of Licensed Products;
provided, however, that Golden shall be entitled, for and only for a period of
one hundred twenty (120) days, to complete, market, distribute and sell all
work-in-progress inventory, and market, distribute and sell all completed
inventory, existing on the date of termination (this Agreement shall continue to
apply to such inventory, including Golden's obligation to pay Royalties on all
such sales).
Within thirty (30) days after the expiration or termination of this
Agreement, Golden shall issue a statement executed by an authorized
representative of Golden certifying the number and description of the Licensed
Products in inventory or in process.
19.4 Rights Which Survive Termination. The termination or expiration
of this Agreement shall not release any party of any obligation to pay monies or
perform any other obligation that became due or owing or arose out of any
transaction prior to the date of said termination or expiration, including but
not limited to an obligation to pay Royalties. Also, Sections 5 (ownership), 7.1
(technology fee), 9 (Royalties), 10 (records), 11 (insurance), 12.4 (customer
complaints), 14.2 (approval for product markings), 15 (confidentiality), 16
(Futech's representations and warranties), 17 (indemnities), and 19.5 (return of
artwork) hereof shall survive termination (for any reason) and expiration of
this Agreement.
19.5 Return to Futech of Artwork, etc. Within thirty (30) days after
termination or expiration of this Agreement, Golden shall deliver to Futech any
and all original artwork relating to the Futech Marks, and all technical
information, materials, samples, formulas, drawings, and know-how in tangible
form furnished by or for Futech.
20. EXPORT. Regardless of any disclosure by Golden to Futech of the
ultimate destination of any Licensed Product, Golden shall not knowingly use or
transport any Futech Technology or Futech Mark, directly or indirectly, in a
manner contrary to U.S. Export Administration Regulations.
21. FORCE MAJEURE. If the performance of this Agreement, or any
obligation under this Agreement, is prevented, restricted or interfered with by
reason of fire, flood, earthquake, explosion or other casualty or accident,
strikes or labor disputes, inability to procure or obtain delivery of parts,
supplies or power, war or other violence, any law, order, proclamation,
regulation, ordinance, demand or requirement of any governmental agency, or any
other act or condition whatsoever beyond the reasonable control of the affected
party, the party so affected, upon giving prompt notice
17 EXHIBIT "A", PAGE 17 OF 23
21
to the other party, shall be excused from such performance to the extent of such
prevention, restriction or interference; provided, however, that the party so
affected shall take all reasonable steps to avoid or remove such cause of
nonperformance and shall resume performance under this Agreement with dispatch
whenever such causes are removed.
If a party was required to meet a scheduled date of performance of
an obligation during such period of nonperformance, then the date for
performance shall be extended by a period equal to the period of nonperformance.
22. ASSIGNMENT. Neither party may assign or otherwise transfer this
Agreement, or any rights under it, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that Futech and/or Golden shall be entitled to assign its rights, or
any portion thereof, under this Agreement without the consent of the other
party, so long as such assignment is to a Subsidiary of Futech or Golden, as
applicable. Any attempted assignment in violation of this Section shall be null
and void. All terms and conditions of this Agreement shall be binding upon and
shall inure to the benefit of the parties to this Agreement and their respective
permitted successors and assigns.
23. CHOICE OF LAW. This Agreement is made under, and shall be governed
by and construed in accordance with the laws of the State of Delaware, without
reference to principles of conflicts of law.
24. RELATIONSHIP OF THE PARTIES. The relationship between the parties
hereto is that of licensor and licensee, and this Agreement is not to be
construed as creating a partnership, joint venture, master-servant,
principal-agent, or other relationship for any purpose whatsoever. Except as may
be expressly provided herein, neither party may be held for the acts of omission
or commission of the other party, and neither party is authorized to or has the
power to obligate or bind the other party by contract, agreement, warranty,
representation or otherwise in any manner whatsoever.
25. GENERAL.
25.1 Entire Agreement. Except as otherwise set forth in this
Agreement or in that certain "Agreement" dated the same date as this Agreement
and entered into by Futech and Golden, this Agreement (including the Exhibits
attached hereto) constitutes the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior understandings,
proposals, representations, negotiations and communications, oral or written, if
any, with respect thereto. No variation from these provisions shall be binding
unless in writing and signed by both parties. There are no oral promises,
conditions, representations, understandings, interpretations, or terms of any
kind as conditions or inducements to the execution hereof, or in affect between
the parties, except as may otherwise be expressly provided herein or in the
Agreement referred to in the first sentence of this Section 25.1.
The parties do not intend to confer any benefit hereunder to any
person, firm, or corporation other than the parties hereto. No representation,
warranty, or agreement herein may be relied upon by any person not a party to
this Agreement.
18 EXHIBIT "A", PAGE 18 OF 23
22
The parties agree that this Agreement relates only to the technology
and products specifically identified herein, and does not apply to or create any
obligations of Futech, or rights of Golden, with respect to any other technology
or products.
25.2 Sales Tax. Golden shall be responsible for, and shall pay, all
sales, value added and similar taxes, if any, which may be imposed on any sales
of the Licensed Products, as well as any other tax based upon Golden's use,
sale, or possession of the Futech Technology, Futech Marks, and the Licensed
Products.
25.3 Partial Validity. In the event any provision of this Agreement
or the application of any provision shall be held by a tribunal of competent
jurisdiction to be contrary to law, then the remaining provisions of this
Agreement shall be unimpaired, and the illegal, invalid or unenforceable
provision shall be replaced by a provision, which, being legal, valid and
enforceable, comes closest to the intent of the parties underlying the illegal,
invalid or unenforceable provision.
25.4 Notices. All notices required or permitted under this Agreement
shall be in writing and shall be deemed to have been given upon personal
delivery or upon deposit in the U.S. mail, first-class, postage prepaid. The
addresses of the parties (until written notice of change shall have been given)
shall be as follows:
Futech: Futech Educational Products, Inc.
2999 North 44th Street, Suite 225
Phoenix, Arizona 85018
Attn: Vincent Goett, CEO
Golden: Golden Books Family Entertainment, Inc.
888 Seventh Avenue
New York, New York 10106-4100
Attn: Philip Galanes
25.5 No Waiver. None of the provisions hereof shall be deemed to be
waived or modified, nor shall they be renewed, extended, altered, changed or
modified in any respect, except by an express agreement in writing duly executed
by the party against whom enforcement of such waiver, modification, etc. is
sought. The failure of either party hereto to object to the failure on the part
of the other party to perform any of the terms, provisions or conditions hereof,
or to exercise any option herein given, or to require performance on the part of
the other party of any term, provision or condition hereof, or any delay in
doing so, or any custom or practice of the parties at variance therewith, shall
not constitute a waiver or modification of this Agreement or any provision
hereof, or of any subsequent breach or default of the same or a different
nature, nor affect the validity of any part hereof, nor the right of either
party thereafter to enforce the same, nor constitute a novation.
19 EXHIBIT "A", PAGE 19 OF 23
23
25.6. Headings. The headings in this Agreement are for reference
purposes only and shall not in any way affect the meaning or interpretation of
this Agreement.
25.7. Counterparts. This Agreement may be executed by the parties in
one or more counterparts, and any number of counterparts signed in the aggregate
by the parties shall constitute a single instrument.
25.8 Other. All rights and remedies conferred under this Agreement
or by any other instrument or by law shall be cumulative, and may be exercised
singularly or concurrently.
DATED as of the date first hereinabove written.
FUTECH: Futech Educational Products, Inc., an Arizona
corporation
By___________________________________________
Vincent W. Goett, CEO
GOLDEN: Golden Books Family Entertainment, Inc., a
Delaware corporation
By___________________________________________
Its________________________________________
List of Exhibits
Existing Futech Intellectual Property and Existing Futech Marks "A"
20 EXHIBIT "A", PAGE 20 OF 23
24
EXHIBIT "A"
Existing Patents
Patent Number Serial Number Country Filing Date Grant Date
57656 78210811 Taiwan August 21, 1989 September 1, 1990
5,167,508 07/685,278 USA April 15, 1991 December 1, 1992
664,701 17841/92 Australia April 14, 1992 March 19, 1996
2,108,554 Canada April 14, 1992
EP 92911059.1 EPO April 14, 1992
4-510057 Japan April 14, 1992
18887 South Korea April 14, 1992
(Republic of Korea) April 14, 1992
178299 925737 Mexico April 14, 1992 June 7, 1995
PCT/US92/03056 PCT April 14, 1992
Not yet received Russian Federation April 14, 1992
92 1 11051.0 China April 14, 1992
886/Del/92 India April 14, 1992
5,417,575 08/137,063 USA April 14, 1992 May 23, 1995
Not yet assigned Kazakhstan Not yet confirmed
5,484,292 07/980,649 USA November 24, 1992 January 16, 1996
PCT/US93/10705 PCT November 11, 1993
08/195,755 USA February 11, 1994
93120335.X China November 24, 1993
1253/Del/93 India November 9, 1993
Exhibit "A", Page 21 of 23
25
===================================================================================================
Patent Number Serial Number Country Filing Date Grant Date
===================================================================================================
55940/94 Australia November 4, 1993
- ---------------------------------------------------------------------------------------------------
2,150,013 Canada November 4, 1993
- ---------------------------------------------------------------------------------------------------
Not yet assigned EPO November 4, 1993
- ---------------------------------------------------------------------------------------------------
952545 Finland November 4, 1993
- ---------------------------------------------------------------------------------------------------
6-513158 Japan November 4, 1993
- ---------------------------------------------------------------------------------------------------
702092/1995 Korea November 4, 1993
- ---------------------------------------------------------------------------------------------------
258342 New Zealand November 4, 1993
- ---------------------------------------------------------------------------------------------------
952042 Norway November 4, 1993
- ---------------------------------------------------------------------------------------------------
95118875 Russian Federation November 4, 1993
- ---------------------------------------------------------------------------------------------------
10815 10815 Sri Lanka November 4, 1993 February 23, 1996
- ---------------------------------------------------------------------------------------------------
PCT November 5, 1996
- ---------------------------------------------------------------------------------------------------
India November 6, 1996
- ---------------------------------------------------------------------------------------------------
08/474,707 USA November 4, 1993
- ---------------------------------------------------------------------------------------------------
08/554,734 USA November 7, 1995
===================================================================================================
Registered Trademarks and Copyrights
=====================================================================================================
Type Registration Serial Number Country/ Filing Date Grant Date
Number State
=====================================================================================================
Trademark 1,923,092 74/431,014 USA August 30, 1993 September 26, 1995
- -----------------------------------------------------------------------------------------------------
Trademark 7-80127 Japan August 2, 1995
- -----------------------------------------------------------------------------------------------------
Trademark 028881 Arizona October 5, 1990
- -----------------------------------------------------------------------------------------------------
Trademark not yet November 15, 1996
received
=====================================================================================================
Exhibit "A", Page 22 of 23
26
=====================================================================================================
Type Registration Serial Number Country/ Filing Date Grant Date
Number State
=====================================================================================================
Trademark not yet November 15, 1996
received
- -----------------------------------------------------------------------------------------------------
Trademark not yet November 15, 1996
received
- -----------------------------------------------------------------------------------------------------
Tradename 103552 Arizona June 14, 1991
- -----------------------------------------------------------------------------------------------------
Tradename 096432 Arizona July 12, 1990
- -----------------------------------------------------------------------------------------------------
Tradename 096284 Arizona July 5, 1990
- -----------------------------------------------------------------------------------------------------
Tradename 103550 Arizona June 14, 1991
- -----------------------------------------------------------------------------------------------------
Tradename 096434 Arizona July 12, 1990
- -----------------------------------------------------------------------------------------------------
Tradename 103551 Arizona June 14, 1991
- -----------------------------------------------------------------------------------------------------
Tradename 093474 Arizona March 8, 1990
- -----------------------------------------------------------------------------------------------------
Tradename 096433 Arizona July 12, 1990
- -----------------------------------------------------------------------------------------------------
Copyright VAu 241-157 USA November 9, 1992
- -----------------------------------------------------------------------------------------------------
Copyright VAu 244-017 USA January 7, 1993
=====================================================================================================
Exhibit "A", Page 23 of 23
27
EXHIBIT "B"
PRODUCTION EQUIPMENT INVENTORY
ITEM# MANUFACTURER MODEL/TYPE SERIAL NO. MFR. DATE FUNCTION
- ----- ------------ ---------- ---------- --------- --------
1 Sakurai SC112A RJO11293 1993 Screen cylinder press
SPE Inc HPGH2-4/30/16ACR 4684-0695 1995 High profile gas drying sys.
SPE Inc DS-48HP 4685-0695 1995 Descending pile stacker
2 Sakurai SC112A RJ004887 1987 Screen cylinder press
SPE Inc 3PI-482CS/AC 2388-1287 1987 Ultra-violet curing reactor
SPE Inc WRS-50 2389-1287 1987 Water recirculating system
SPE Inc ST112H VJ010187 1987 Descending pile stacker
3 Amer. Graphic Arts Custom Built 001 1994 Pattern gluer (Pageline)
4 Muller Martini 240 924869 1975 Three knife trimmer
5 Fasteck 110MDA - 1994 Defects analysis board tester
6 Rosback 202 1975 1975 (rebuilt Auto-stitcher w/Acme heads
1993)
7 Kolbus DA367 J-28 1975 (rebuilt Casemaker (double headed)
1994)
8 Kolbus EMP45/530 J-800 rebuilt 1994 Encasing machine
28
EXHIBIT "C"
PROMISSORY NOTE
$1,000,000.00 As of August 14, 1996
Phoenix, Arizona
THIS NOTE is made as of the date stated above by Futech Educational
Products, Inc., an Arizona corporation ("Maker") to the order of Golden Books
Family Entertainment, Inc., a Delaware corporation ("Payee").
1. PAYMENT. For value received, Maker promises to pay to Payee or
Payee's order, without offset (other than offsets for non-payment of royalties
under that certain License Agreement, dated August 14, 1996, between Maker and
Payee), the principal sum of One Million Dollars ($1,000,000.00), together with
interest calculated at prime rate (as announced in the Wall Street Journal) plus
1%, as hereinafter set forth; provided, however, that the outstanding balance
shall be interest free, and no interest shall in any event accrue, until January
1, 1998. Principal and interest are payable in lawful money of the United States
of America at 888 Seventh Avenue, New York, New York 10106-4100, or at such
other address as the holder hereof may from time to time designate in writing,
in full on or before June 1, 1999, and on June 1, 1999 the outstanding principal
amount of this Note, together with all accrued and unpaid interest, shall be
paid in full. All payments made hereunder shall be applied to interest and
principal in that order.
2. PREPAYMENT. Maker has the privilege, at any time, to prepay the
whole or any part of the unpaid balance hereof without penalty or forfeiture.
3. INTEREST. All interest payable pursuant to this Note shall be
computed on the basis of a 365-day year. In no event shall the aggregate of the
interest herein provided to be paid over the contractual term of the loan exceed
the highest rate to which a borrower and lender may agree in writing under
applicable laws.
4. DEFAULT. If any one or more of the following events (each, an "Event
of Default" and collectively, called "Events of Default") shall occur for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default shall be made in the payment of the principal of
this note when and as the same shall become due and payable, whether
pursuant to the terms hereof or at a date fixed for prepayment or by
acceleration or otherwise; or
(b) Maker shall (i) be unable to pay its debts generally as
they become due; (ii) file a petition to take advantage of any
insolvency act; (iii) make an assignment for the benefit of its
creditors; (iv) commence a proceeding for the appointment of a
receiver, trustee, liquidator or conservator of itself or of a whole or
any substantial part of its property; (v) file a petition
EXHIBIT "C", PAGE 1 OF 4
29
or answer seeking reorganization or arrangement or similar relief
under the Federal Bankruptcy Code or any other applicable law or
statute of the United States of America or any state; or (vi) by
appropriate proceedings of the board of directors of Maker, authorize
the filing of any such petition, making such assignment or commencement
of such a proceeding; or
(c) a court of competent jurisdiction shall enter an order,
judgment or decree appointing a custodian, receiver, trustee,
liquidator or conservator of Maker or of the whole or any substantial
part of its properties, or approve a petition filed against Maker
seeking reorganization or arrangement or similar relief under the
Federal Bankruptcy Code or any other applicable law or statute of the
United States of America or any state; or if, under the provision of
any other law for the relief or aid of debtors, a court of competent
jurisdiction shall assume custody or control of Maker or of the whole
or any substantial part of its properties; or if there is commenced
against Maker any proceeding for any of the foregoing relief and such
proceeding or petition remains undismissed for a period of sixty (60)
days; or if Maker by any act indicates its consent to or approval of
any such proceeding or petition;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing, the Payee shall have the right,
without presentment, demand or notice of any kind, to accelerate this Note and
to declare the entire unpaid balance hereof and the obligations evidenced hereby
immediately due and payable and to seek and obtain payment of this Note.
5. WAIVER; CONSENT. Maker and each endorser, guarantor or other party
that may be liable under this Note hereby severally waive diligence, demand,
presentment for payment, notice of dishonor, acceleration, protest and all other
demands and notices in connection with the delivery, acceptance, performance or
enforcement of this Note. No delay by the holder in exercising any rights
hereunder shall operate as a waiver thereof. The non-exercise or partial
exercise by the holder of any rights hereunder in any particular instance shall
not constitute a waiver thereof in that or any subsequent instance or preclude
other or further exercise thereof.
6. SEVERABILITY. If any provision of this Note or any application of
such provision shall be declared by a court of competent jurisdiction to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other application of such provision nor the balance of the provisions hereof
which shall, to the fullest extent possible, remain in full force and effect,
and such court shall reform such unenforceable provision so as to give maximum
permissible effect to the intentions of the parties as expressed therein.
7. SECURITY. As security for Maker's performance under this Note, Maker
hereby grants Payee a security interest in the assets identified on Exhibit "A"
attached hereto and hereby made a part hereof. In the event of default by Maker
hereunder, Payee shall have all rights with respect to such collateral as are
available to a secured party under applicable laws, as the same may from time to
time be changed.
8. MISCELLANEOUS. The provisions of this Note shall be binding upon
Maker and Maker's successors and assigns, and shall inure to the benefit of
Payee and Payee's successors and assigns. This Note shall be governed by and
construed and enforced in accordance with the laws of the State of Arizona. This
Note shall be construed according to its fair meaning and neither for nor
against the
2 EXHIBIT "C", PAGE 2 OF 4
30
drafting party. Time is of the essence of this Note and each and every term and
provision hereof.
DATED the date first hereinabove written.
Futech Educational Products, Inc.,
an Arizona corporation
By_________________________________
Vincent W. Goett, CEO
List of Exhibits:
Equipment List "A"
GUARANTY: The faithful and timely performance by the Maker under the
above-described Note is hereby unconditionally guaranteed by the undersigned.
This is a guarantee of performance and not of collection. The undersigned
further agrees that any action may be bought and prosecuted by the Payee against
the undersigned guarantor whether or not any action is brought against the
Maker, and whether or not the Maker or any other parties are joined in such
action. The undersigned guarantor specifically agrees to be liable to Payee for
the obligations of Maker as set out above, even if Payee or any successor-
in-interest releases any or all rights of any sort against the Maker. The
undersigned guarantor hereby consents to any such release, which release shall
be without effect on the undersigned guarantor's liability for said obligations.
The undersigned guarantor waives any right to require Payee to proceed against
Maker or pursue any other remedy in Payee's power. The undersigned guarantor
waives any defense arising by reason of any disability or other defense of Maker
by reason of the cessation from any cause whatsoever (other than performance in
full) of the liability of Maker under the above-described Note. This guaranty is
made for performance without offset, other than offsets for non-payment of
royalties under that certain License Agreement, dated August 14, 1996, between
Maker and Payee. The undersigned guarantor shall have forty-five (45) days after
notice of default is given to the undersigned guarantor in which to perform
Maker's obligations under the Note.
No delay, failure, forbearance or omission by Payee in exercising any
right or remedy hereunder or otherwise guaranteed by law or another agreement
shall effect or release the liability of the undersigned or operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right or remedy. All rights and remedies of Payee hereunder are
cumulative. No modification or amendment of any provision of this guaranty shall
be effective unless in writing and subscribed by a duly authorized officer of
Payee. This guaranty inures to and shall be enforceable by payee and Payee's
successors and assigns, and shall bind the successors and assigns of the
undersigned.
This guaranty shall be governed by and construed and enforced in
accordance with the laws
3 EXHIBIT "C", PAGE 3 OF 4
31
of the State of Arizona.
DATED the date first hereinabove written:
______________________________________
Vincent W. Goett
4 Exhibit "C", Page 4 of 4
32
EXHIBIT "D"
- ------------------------------------------------------------------------------------------------------------
This instrument was recorded at request of: |
|
Golden Books Family Entertainment, Inc. |
888 Seventh Avenue |
New York, New York 10106-4100 |
|
The recording official is directed to return this |
instrument or a copy to the above person. | Space Reserved For Recording Information
- -------------------------------------------------------------------------------------------------------------
UNIFORM
COMMERCIAL CODE
FINANCING STATEMENT
Loan No. Form UCC-1 F O R F I L I N G
---------------------
- -------------------------------------------------------------------------------------------------------------
Effective Date | County and State of Transaction
As of August 14, 1996 | Maricopa County, Arizona
- -------------------------------------------------------------------------------------------------------------
DEBTOR (Name, Address and ZIP Code) | SECURED PARTY (Name, Address and ZIP Code)
Futech Educational Products, Inc. | Golden Books Family Entertainment, Inc.
2999 North 44th Street, Suite 225 | 888 Seventh Avenue
Phoenix, Arizona 85018-7247 | New York, New York 10106-4100
- -------------------------------------------------------------------------------------------------------------
Assignee of Secured Party | Record Owner of Real Property, If Not Debtor
(Name, Address and ZIP Code) | (Name, Address and ZIP Code)
- -------------------------------------------------------------------------------------------------------------
Counties Where Collateral is Located | / / Products of Collateral are also covered
Maricopa County, Arizona | / / Proceeds of Collateral are also covered
- -------------------------------------------------------------------------------------------------------------
If collateral is timber to be cut, crops growing or to be grown, minerals or the like, accounts to be financed
at the wellhead or minehead of the well or mine, or goods which are or are to become fixtures, the real
property to which these are affixed or concerned is legal described:
/ / This financing statement is to be filed in the office where a mortgage on the real property would be
recorded.
- -------------------------------------------------------------------------------------------------------------
Financing Statement covers the following types or items of property:
See Exhibit "A" attached hereto and hereby made a part hereof.
- -------------------------------------------------------------------------------------------------------------
This Financing Statement is filed or recorded without Debtor's signature to perfect a security interest in
collateral in which
/ / Is already subject to a security interest in another jurisdiction when it was brought into the state or which
Debtor changes location to this State;
/ / Are proceeds of the original collateral described above in which a security interest was perfected;
/ / Was acquired four months or less after Debtor has changed its name, identity or corporate structure;
/ / Is no longer effective due to lapse of the original filing.
- -------------------------------------------------------------------------------------------------------------
Futech Educational Products, Inc., an Arizona | Golden Books Family Entertainment, Inc., a
Corporation | Delaware corporation
|
By | By
- -------------------------------------------------------------------------------------------------------------
Vincent W. Goett, CEO | Its
| -----------------------------------------------
- -------------------------------------------------------------------------------------------------------------
|
|
Signatures of Debtor or Assignor | Signatures of Secured Party or Assignee
33
LICENSE AGREEMENT
THIS AGREEMENT is entered into as of the 14th day of August, 1996, by
and between Futech Educational Products, Inc., an Arizona corporation
("Futech"), and Golden Books Family Entertainment, Inc., a Delaware corporation
("Golden").
R E C I T A L S:
A. Futech owns certain intellectual property rights.
B. Golden desires to obtain the right to use certain of those
rights in connection with the sale of certain products and/or services, subject
to the terms and conditions set forth herein.
C. Futech is willing to grant the requested rights to Golden,
subject to the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the covenants and
agreements contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
TERMS:
1. DEFINITIONS. In addition to the various defined terms set
forth in this Agreement, the following terms shall have these meanings
throughout this Agreement:
1.1 "FUTECH TECHNOLOGY" means:
(a) general and specific knowledge, experience
and information, not in written or printed form, used by Futech and
applicable to the design, development, manufacture, assembly, servicing
or sale of products; and
(b) documents containing technical information,
engineering or production data, blueprints, drawings, plans,
specifications, descriptions of assembly and manufacturing procedures,
quality and inspection standards, test records and data and other
written materials owned and used by Futech and applicable to the
design, development, manufacturing, assembly, servicing or sale of
products; and
(c) inventions (whether or not patentable),
works of authorship, mask works, products, manufacturing methods,
processes, concepts, designs, algorithms, computer hardware and
software, models, prototypes, automations, designs, and related
information and things;
(d) with respect to which Futech owns at the
date of this Agreement intellectual property rights;
34
(e) together with any and all Improvements to
the foregoing developed by Futech during the term of this Agreement.
1.2 "IMPROVEMENT" means any improvement or enhancement of
the manufacturing process or design of, and which operates similarly to, a
device, apparatus, product, process or invention described in the patent
applications and/or patents identified on Exhibit "A" attached hereto, in order
to accomplish an equivalent or related result as said initially listed patent or
application, so long as the Improvement: (i) relates to Licensed Products; and
(ii) relates to at least one claim of any patent or application directed to
Licensed Products already listed on Exhibit "A" attached hereto.
Should the parties be unable to agree on whether something is
an Improvement, the parties shall submit the issue to a licensed patent attorney
well versed in the applicable law, and the determination of said counsel shall
be deemed binding and final relative solely however to the issue of what is an
Improvement. Such counsel shall be appointed by agreement between the parties,
or failing such appointment within twenty (20) days after demand is made
therefor by either party, then either party may by written notice to the other
party appoint one such counsel, and the other party may within fifteen (15) days
after receipt of written notice of such appointment, appoint one such counsel,
by giving written notice thereof to the other party. If either party fails to so
appoint counsel, then the determination made by counsel appointed by the other
party shall be binding upon the parties. If two counsel are so appointed, they
shall promptly attempt to agree upon a third such counsel. If they cannot agree
within fifteen (15) days after appointment of the second counsel, then either
party may propose that the third counsel be appointed by a then presiding
officer of the American Arbitration Association office located in or nearest to
Wilmington, Delaware, and the third counsel shall thus be chosen. Said third
counsel alone shall determine the issue of what is an Improvement. If any
counsel resigns or becomes unavailable, replacement counsel shall be appointed
in the same manner as the counsel who has become unavailable. All counsel
selected shall be licensed patent attorneys well versed in the applicable law.
The parties shall make available to the single counsel
appointed to determine the issue all information available to the parties
relating to the issue to be determined. If any of said information is argued to
be confidential, it shall be delivered to such counsel on a confidential basis
for his/her eyes only, to be used solely in deciding the issue of what is an
Improvement. Once counsel is appointed to determine an Improvement issue, that
counsel shall decide all issues regarding what is an Improvement arising within
two years after the date of such appointment. All counsel appointed under this
provision shall be protected from liability for acting in the appointed role to
the same extent as a judge of civil court in Delaware would be protected in
connection with judicial determinations made by the judge.
1.3 "CONFIDENTIAL INFORMATION" means any and all Futech
Technology, information and/or data which is not readily ascertainable by proper
means and which derives economic value, actual or potential from not being
generally known, and which has been the subject of efforts that are reasonable
under the circumstances to maintain its secrecy. All information relating to the
products or operations of Futech, which is provided to Golden, or to which
Golden otherwise obtains access, pursuant to, or as a result of, this Agreement
shall be considered Futech Confidential Information; Except such information
which Golden can clearly show: (a) at the time
2
35
of this Agreement is publicly and openly known; (b) after the date of this
Agreement becomes publicly and openly known through no fault of Golden; (c)
comes into Golden's possession and lawfully obtained by Golden from a source
other than from Futech or a source deriving from Futech, and not subject to any
obligation of confidentiality or restrictions on use; or (d) is approved for
release by written authorization of Futech.
1.4 "FUTECH INTELLECTUAL PROPERTY" means: (i) any and all
United States and foreign patent, copyrights, trade secret and mask work rights
held by Futech as of the date of this Agreement, including but not limited to
the patents and patent applications, and copyright registrations identified on
Exhibit "A" attached hereto; and (ii) any and all United States and foreign
patent, copyrights, trade secret and mask work rights which Futech acquires
during the term of this Agreement. For purposes of clarity, trademark rights
shall be separately defined and treated.
1.5 "FUTECH MARKS" means any and all United States and
foreign trademark, service mark and trade name rights held by Futech as of the
date of this Agreement, including but not limited to, the trademarks, service
marks, and trade names identified on Exhibit "A" attached hereto, together with
any and all United States and foreign trademark, service mark and trade name
rights which Futech acquires during the term of this Agreement.
1.6 "LICENSED PRODUCTS" means products manufactured
and/or sold by Golden, incorporating, embodying or comprising the Futech
Technology as allowed by the licenses contained in this Agreement.
1.7 "SUBSIDIARY" means a corporation, company,
partnership, or other entity more than fifty percent (50%) of whose outstanding
stock or interest entitled to vote for the election of directors or similar
management control (other than preferred or other stock entitled to vote only
upon failure of the entity to pay dividends) is now or hereafter during the term
of this Agreement owned or controlled, directly or indirectly by Futech or
Golden, as the case may be in the specific provisions using the defined term
"Subsidiary," provided that any such entity which would be a Subsidiary by
reason of the foregoing shall be considered a Subsidiary only so long as such
ownership or control exists.
1.8 "PRESS THE PAGE BOOK FORMAT" means books utilizing
multiple printed tactile points which are embedded inside the two ply lamination
of each page. The inside front and back covers of the book do not contain any
embedded tactile points. Finger tip pressure applied directly to the individual
page tactile points energizes a sound module control center attached to the back
cover of the book. "Quad Fold Technology" is not included in or part of Press
the Page Book Format.
1.9 "PRESS THROUGH THE PAGE FORMAT" means:
(i) books using a folded panel containing
printed tactile points embedded on the inside of the panel. The panel
is adhered to the inside front and back cover of the book. The actual
pages are single ply and do not contain any embedded tactile points.
Interactive play is obtained by finger pressure through the pages to
the tactile points located within the
3
36
inside front and back cover. A sound module control center is attached
to the back cover of the book; and
(ii) game boards for children, sound pads for
children, sound games for children and puzzles for children containing
printed tactile points similar to those described in subparagraph (i)
above.
"Quad Fold Technology" is not included in or part of Press Through The
Page Format.
1.10 "QUAD FOLD TECHNOLOGY" is not a book format but
rather a smaller version of a bi-fold board game mounted directly on a stiff
back board which also contains the sound module control center assembly. The
printed tactile points are embedded within the two ply lamination of the bi-fold
game board. Interactive play is obtained by applying pressure directly to the
tactile points within the game board.
2. GRANT OF LICENSES.
2.1 Golden's Right to Make and Sell. Subject to the terms
and conditions of this Agreement, Futech hereby grants to Golden and Golden's
Subsidiaries, for the term of this Agreement, a non-exclusive license to use the
Futech Technology relating to Press The Page Book Format, the Press Through the
Page Format, and the Quad Fold Technology, to make or have made for commercial
sale, and to sell Press The Page Book Format books, Press Through The Page
Format Licensed Products, and Quad Fold Technology Licensed Products. Neither
this Agreement, nor any other agreement between the parties, grants Golden any
licenses other than as are expressly provided for in this Section 2.1 and in
Section 4 below.
2.2 Futech's Right to Make and Sell. The license
appearing in Section 2.1 above is non-exclusive because Futech and Futech's
Subsidiaries shall be entitled to use the Futech Technology relating to Press
The Page Book Format, the Press Through The Page Format, and the Quad Fold
Technology, to make or have made for commercial sale, and to sell Press The Page
Book Format books, Press Through The Page Format products, and Quad Fold
Technology products. Except as expressly provided for in Section 3 below,
nothing in this Agreement, or in any other agreement between the parties,
restricts in any manner Futech's rights to use Futech Technology, Futech
Intellectual Property, and/or Futech Marks, including but not limited to the
right to use the same in connection with products competing with the Licensed
Products, or in connection with any other product.
2.3 No Duty in Golden to Work the License. Except as
called for in section 3 below (i.e., as to third party deals Golden has elected
to perform), Golden shall have no duty to manufacture or sell Licensed Products.
3. GOLDEN'S RIGHT REGARDING THIRD PARTY LICENSES. Notwithstanding
Section 2.2 above, if Futech (or a Futech Subsidiary) desires to license to an
entity which is not a Futech Subsidiary, rights to use the Futech Technology
relating to Press the Page Book format, the Press Through The Page Format as it
relates to books described in Section 1.9 (i) above, or the Quad Fold Technology
as it relates to the publishing of books, to make or have made for commercial
4
37
sale, and/or sell Press The Page Book Format books, Press Through The Page
Format books, or Quad Fold Technology books, then Golden shall have the right to
elect to do the transaction offered to the third party to the exclusion of the
third party, as follows:
(a) Futech shall give Golden written notice of
the license rights Futech proposes to offer to the third party, along
with an outline summary of the transaction describing the "deal points"
of the proposed license arrangement, including but not limited to the
name of the publisher in the third party transaction, any time
requirements for bringing the products to market, and any production
and/or sales quantity requirements.
(b) Golden shall have five (5) business days
from the giving of said notice to give Futech written notice that
Golden will publish books the same or comparable to the books described
in the third party offer. If Golden so elects to publish the books,
then Golden's obligation to publish shall be covered by the terms of
this agreement, including but not limited to the obligation to pay
royalties (Net Sales from said publishing shall apply against the
$40,000,000 figure in subparagraph 9(a) below) at the rate and on the
terms appearing in Section 9 below; provided, however, that
notwithstanding the other terms of this Agreement which do not require
Golden to meet any timing, production, or sales performance criteria,
Golden shall be obligated to meet any "time to market" and any
production and/or sales quantity requirements appearing in the third
party offer. The parties expressly agree that Golden shall not be
required to pay an advance in connection with publishing under this
subparagraph (b), even if one appears in the third party offer.
(c) The existence of and terms of any third
party offer described above shall be kept confidential by Golden as
Confidential Information subject to Section 15.1 below.
(d) If Golden does not elect (within the five
(5) day period described in subparagraph (b) above) to publish the
books described in the third party outline summary as allowed in
subparagraph (b) above, then Futech may for a period of sixty (60) days
(after the expiration of the five (5) day period) enter into a license
arrangement with the third party identified in the outline summary of
the third party transaction on the terms appearing in the outline
summary provided to Golden under subparagraph (a) above.
(e) If Futech enters into a license arrangement
with a third party under subparagraph (d) above, then Futech shall pay
Golden forty percent (40%) of the difference between: (i) all amounts
actually received by Futech under the license agreement, and (ii)
Futech's actual direct third-party costs associated therewith,
including but not limited to attorneys' fees and costs. Golden shall
reimburse Futech for any amounts so received by Golden if necessary to
accomplish a 40%/60% split of the net amounts received by Futech from
the third party. An amount equal to twenty (20) times all amounts paid
to Golden under this subparagraph shall be applied against and shall
reduce the remaining balance, if any, of the $40,000,000 Royalty-free
Net Sales described in subparagraph 9(a) below.
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Amounts payable to Golden under this subparagraph (e)
(hereinafter "Golden's Share") will be payable on a calendar quarter basis, by
the sixtieth day following the calendar quarter to which the payments relate.
All amounts not so paid shall bear interest from the due date until the date of
payment at the per annum rate of one (1) percentage point above the prime rate
of interest published by the Wall Street Journal, as such rate may from time to
time change.
On or before the due date of Golden's Share, and at least
quarterly on a calendar quarter basis, Futech shall make written reports to
Golden in form and with detail as shall reasonably be requested by Golden,
certified to be accurate by an authorized agent of Futech, setting forth the
detail relating to Golden's Share for the period of time to which the reports
relate; provided, however, that Futech shall not be in breach of this provision
for failure to provide information unavailable to Futech (for example as a
result of the failure of the third party licensee to provide the information).
Said reports need only be furnished if there are payments due on Golden's Share
for the calendar quarter to which the reports relate. The failure or refusal of
Futech to timely furnish any such report, or the payment due as shown in the
report, shall be deemed a substantial and material breach of this Agreement. The
receipt and acceptance by Golden of any of the reports furnished pursuant to
this Agreement, or of any payments made herein (or the cashing of any checks
paid hereunder) shall not preclude Golden from questioning the accuracy of any
such report at any time (within the two year period described below), and in the
event that any inconsistencies or mistakes are discovered in any such report or
payment, they shall immediately be rectified and the appropriate payment made by
Futech, together with interest on the overdue payments at the per annum rate of
one (1) percentage point above the prime rate of interest published by the Wall
Street Journal, as such rate may from time to time change. Royalty statements
and reports shall become incontestable if not contested within two (2) years
after receipt thereof by Golden.
Futech shall keep at its principal place of business, such
books and records and other documents relating to Golden's Share during the term
of this Agreement as may be necessary or proper to enable the amounts payable to
Golden hereunder to be conveniently ascertained.
Golden shall have the right, from time to time during the term
of this Agreement, and for a period of two years thereafter (with respect to any
then-contestable statement), but not more than once annually, upon thirty (30)
days prior written notice, during regular office hours, to cause a certified
public accountant(s) on behalf of Golden to audit or otherwise review the books
and records of Futech, and the following shall apply with respect thereto:
(i) If the audit or review discloses
that Golden was underpaid Golden's Share by five percent (5%)
or more during the period covered by the audit, Futech shall,
within ten (10) days after demand is made therefor, pay all
costs relating to said audit or review and pay Golden an
amount equal to two (2) times the amount of the underpayment.
Golden shall further have all other rights and remedies
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39
against Futech available at law, in equity, or under this
Agreement with respect to such underpayment.
(ii) If the audit or review fails to
disclose an underpayment to Golden of five percent (5%) or
more, Golden shall pay the cost of the audit or review.
(iii) If the audit or review discloses
that Golden was underpaid by less than five percent (5%), or
overpaid, in any period, Futech, or Golden, as the case may
be, shall within ten (10) days after demand made therefor, pay
the amount of the underpayment or overpayment.
Futech shall cooperate with such audit or review, and
provide requested information relating to royalties and other amounts
due Futech in connection with third party license agreements covered by
this subparagraph (e). The auditor shall be entitled to inspect all
accounts and records of Futech relating to said amounts and to take
extracts therefrom or copies thereof to the extent necessary to verify
the reports and payments required under the terms of this subparagraph
(e). The duration of any audit under this provision shall not exceed
thirty (30) days.
(f) If Golden elects to perform the third party
offer, and then defaults under its obligations to perform the third
party offer as described and limited in subparagraph (b) above, and
said default continues for a period of thirty (30) days after written
notice of the default is given to Golden, then Futech's obligation to
provide Golden notice of third party license arrangements, and Golden's
right to perform under those arrangements (other than arrangements for
which Golden has previously elected to perform), all as set out in this
Section 3 above, shall immediately and without further notice be
terminated.
4. LICENSE OF FUTECH MARKS. Subject to the terms and conditions
of this Agreement, Futech hereby grants to Golden and Golden's Subsidiaries a
non-exclusive license to use the Futech Marks in connection with, and only in
connection with, the Licensed Products. Golden agrees that it will use the
Futech Marks only in connection with the Licensed Products, and shall not use
the Futech Marks except as permitted by and in connection with this Agreement.
This license does not limit or otherwise effect in any manner Futech's rights of
use or other rights regarding the Futech Marks, including but not limited to the
right to use the Futech Marks in connection with products competing with the
Licensed Products, or in connection with any other product.
5. NO OWNERSHIP TRANSFER. Golden acknowledges and agrees that
this Agreement grants Golden no title or right of ownership in or to the Futech
Technology, the Futech Intellectual Property, the Futech Marks, or any goodwill
relating thereto. Golden expressly recognizes and acknowledges that the use of
the Futech Technology, the Futech Intellectual Property, and/or the Futech Marks
shall not confer upon Golden any proprietary rights thereto, and that all such
use by Golden shall inure to the benefit of Futech.
Golden agrees that during the term of this Agreement, or at
any time thereafter, Golden shall not dispute or contest Futech's rights to the
Futech Technology, the Futech Intellectual
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40
Property, the Futech Marks, or any goodwill relating thereto, or the validity
thereof or the validity of this Agreement, and shall not assist others in so
doing.
6. LICENSES NON-ASSIGNABLE.
(a) The licenses appearing in Sections 2 and 4 above are
personal and nonassignable, and include no right of sublicense. Any attempt by
Golden to assign or sublicense any right under this Agreement, without prior
written consent of Futech, shall be null and void.
Notwithstanding the foregoing, Golden shall have the right to
grant sublicenses of the licenses granted hereunder to and only to Golden
Subsidiaries. If the relationship of a Subsidiary of Golden changes so that such
entity ceases to be a "Subsidiary," the rights of the Subsidiary to the
sublicenses described above shall automatically terminate as of the date such
relationship changes.
(b) Notwithstanding the foregoing, Golden and Golden's
Subsidiaries may have Licensed Products, or portions thereof, made by other
manufacturers for the reassembly and/or sale of same by Golden or its
Subsidiaries, as long as the following conditions are met for such
manufacturers:
(i) The designs, specifications and working
drawings for the manufacture of Licensed Products, or portions thereof,
must be furnished by, and originate with, Golden and/or its
Subsidiaries, and/or a third party specifically hired by Golden or its
Subsidiaries to design said Licensed Products; and
(ii) Said designs, specifications and working
drawings are in such detail that no additional designing by the other
manufacturer is required other than adaptation to those production
processes and standards normally used by the manufacturer which change
the characteristics of the Licensed Products only to a negligible
extent.
7. TECHNOLOGY TRANSFER AND ASSISTANCE.
7.1 Technology Fee. Futech acknowledges payment by Golden
of a technology transfer fee in the amount of $2,000,000 for the license of the
technology rights as set out in this Agreement. The parties agree that said fee
shall be earned for all purposes on January 2, 1998. Said fee is non-refundable
and Futech shall have no obligation to repay said amount under any
circumstances.
7.2 Assistance - Immediate. Within a reasonable time
following execution of this Agreement, Futech will make available to Golden the
technical information then in its possession relating to the licenses granted in
this Agreement.
7.3 Assistance - At Futech's Facilities. Futech shall:
(i) Permit Golden from time to time to send a
reasonable number of Golden's technical representatives or engineers to
Futech's facility or other place designated by Futech, for the purpose
of receiving technical training and studying technical questions
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41
and problems relating to the manufacture, assembly, servicing and sale
of Licensed Products, and
(ii) Make its qualified technical personnel
reasonably available by telephone for the purposes referenced in
subparagraph (i) above.
Futech shall use its best efforts to make its qualified technical personnel
available for such training and assistance. Golden shall be solely responsible
for the travel and living expenses and salaries of its employees receiving
training or assistance at Futech's facilities, and Golden shall maintain, at its
sole expense, appropriate insurance coverage for such employees against
accident, injury or illness.
7.4 Assistance - At Golden's Facilities. Upon Golden's
reasonable request, but subject to availability, Futech will send its qualified
technical personnel to Golden's facility to provide such training and assistance
as reasonably required to enable Golden to manufacture, assemble, service and
sell the Licensed Products. Golden shall reimburse Futech for the reasonable
travel and living expenses incurred by Futech's technical personnel in rendering
such assistance or training, and Futech (or Newtech Consulting, Inc.) shall
maintain, at its sole expense, appropriate insurance coverage for such employees
against accident, injury or illness.
8. FURTHER RESEARCH AND DEVELOPMENT.
(a) Futech shall have no obligation to continue product
development or research and development relating to the Futech Technology.
(b) Futech shall, during the term of this Agreement, as
appropriate, promptly communicate to Golden all Improvements to the Futech
Technology which relate to the licenses contained in this Agreement.
(c) Golden will promptly notify Futech, in writing, of
any Improvements of which Golden becomes aware, relating to the Futech
Technology associated with the licenses contained in this Agreement.
9. ROYALTIES.
(a) Golden (Golden's Subsidiary may pay) agrees to pay
Futech a royalty (referred to in this Agreement as the "Royalty" or "Royalties")
equal to five percent (5%) of Net Sales (defined below); provided, however, that
no Royalties shall be payable on the first $40,000,000 of Net Sales.
Notwithstanding the foregoing, no Royalties shall be payable in connection with
any Net Sales occurring prior to January 1, 1998.
(b) The Royalties will be payable on a calendar quarter
basis, by the sixtieth day following the calendar quarter to which the Royalties
relate.
(c) The term "Net Sales" as used in this Agreement means
the gross invoiced sales prices for each Licensed Product sold (an item is
"sold" not later than the earlier of the date shipped and the date invoiced) by
or for Golden or a Subsidiary of Golden, less only normal and
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42
reasonable discounts actually given to customers, returns actually received and
allowances actually made and credited; provided, however, that the deduction for
discounts, returns and allowances for any calendar quarter may not exceed 9% of
the gross sales for Licensed Products for the preceding calendar quarter. No
additional set-offs or deductions of any kind will be allowed, without the prior
written consent of Futech, which consent may be given or withheld in Futech's
sole and absolute discretion. Golden shall have written verification for all
discounts, returns and allowances.
(d) All unpaid Royalties and other amounts due to Futech
hereunder shall bear interest from the due date until the date of payment at the
per annum. rate of one (1) percentage point above the prime rate of interest
published by the Wall Street Journal, as such rate may from time to time change.
(e) If, during the term of this Agreement, Golden, or any
Subsidiary of Golden, offers any product or service in exchange for less than
commercially reasonable consideration, without the prior written approval of
Futech, or if Golden or any Subsidiary of Golden offers any product or service
in exchange for something other than cash equivalent, Futech shall nonetheless
be entitled to Royalties based upon the value of the product transferred or
services performed. Notwithstanding any provision of this Agreement, if any
product or service is sold or otherwise disposed of at less than fifteen percent
(15%) below Golden's normal established price, then "Net Sales" therefore shall
be determined, and Royalties payable thereon, assuming a sales price of fifteen
percent (15%) below Golden's normal established price.
(f) All taxes, levies, charges or duties imposed in
connection with Licensed Products shall be paid by Golden, and no deductions for
any such amounts or any other expenses, except as may expressly be provided for
in this Agreement, shall be deducted from Royalties payable hereunder, it being
the intent of the parties that Royalties shall be net amounts payable to
Futech, free and clear of any and all expenses of any type or nature other than
as may expressly be provided for herein to the contrary.
10. REPORTS, BOOKS AND RECORDS, SAMPLES.
(a) On or before the due date of the Royalties described
herein, and at least quarterly on a calendar quarter basis, Golden shall make
written reports to Futech in form and with detail as shall reasonably be
requested by Futech, certified to be accurate by an authorized agent of Golden,
setting forth the Net Sales and other detail relating to the Net Sales for the
period to which the Royalties relate. Said reports need only be furnished if
there are Net Sales during the calendar quarter. The failure or refusal of
Golden to timely furnish any such report, or the payment due as shown in the
report, shall be deemed a substantial and material breach of this Agreement. The
receipt and acceptance by Futech of any of the reports furnished pursuant to
this Agreement, or of any payments made herein (or the cashing of any checks
paid hereunder) shall not preclude Futech from questioning the accuracy of any
such report at any time (within the two year period described below), and in the
event that any inconsistencies or mistakes are discovered in any such report or
payment, they shall immediately be rectified and the appropriate payment made by
Golden, together with interest on the overdue payments at the per annum rate of
one (1) percentage point above the prime rate of interest published by the Wall
Street Journal, as such rate may from time to time
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43
change. Royalty statements and reports shall become incontestable if not
contested within two (2) years after receipt thereof by Futech.
(b) Golden shall keep at its principal place of business,
such books and records and other documents relating to Net Sales during the term
of this Agreement as may be necessary or proper to enable the amounts payable to
Futech hereunder to be conveniently ascertained.
(c) Futech shall have the right, from time to time during
the term of this Agreement, and for a period of two years thereafter (with
respect to any then-contestable statement), but not more than once annually,
upon thirty (30) days prior written notice, during regular office hours, to
cause a certified public accountant(s) on behalf of Futech to audit or otherwise
review the books and records of Golden, and the following shall apply with
respect thereto:
(i) If the audit or review discloses that Futech
was underpaid its Royalties by five percent (5%) or more during the
period covered by the audit, Golden shall, within ten (10) days after
demand is made therefor, pay all costs relating to said audit or review
and pay Futech an amount equal to two (2) times the amount of the
underpayment. Futech shall further have all other rights and remedies
against Golden available at law, in equity, or under this Agreement
with respect to such underpayment.
(ii) If the audit or review fails to disclose an
underpayment to Futech of five percent (5%) or more, Futech shall pay
the cost of the audit or review.
(iii) If the audit or review discloses that Futech
was underpaid by less than five percent (5%), or overpaid, in any
period, Golden, or Futech, as the case may be, shall within ten (10)
days after demand made therefor, pay the amount of the underpayment or
overpayment.
Golden shall cooperate with such audit or review, and provide
requested information relating to sales of Futech audio book products. The
auditor shall be entitled to inspect all accounts and records of Golden relating
to sales of Futech audio book products and to take extracts therefrom or copies
thereof to the extent necessary to verify the Royalty reports and payments
required under the terms of this Agreement. The duration of any audit under this
provision shall not exceed thirty (30) days.
(d) Golden will provide Futech with one hundred (100)
free samples of each product incorporating Futech Technology sold by or for
Golden, within thirty (30) days after the product first becomes available for
sale.
11. PRODUCT LIABILITY; INSURANCE.
(a) Golden agrees to indemnify and defend and save
harmless Futech from every claim, demand, expense, and cost, including
reasonable attorneys' fees, which may arise by reason of the use by Golden of
the Futech Technology or the Futech Marks, and any injury or damage of any kind
or nature to any person or property caused by or resulting from or arising out
of a defect in design, workmanship, or material of any Licensed Product;
provided, however, that the foregoing
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shall not apply to any such claim, etc. arising out of, relating to or caused by
the Futech Technology and/or the Futech Intellectual Property, to and only to
the extent so related or caused (this provision shall not limit Golden's
indemnification for liability for products defectively manufactured by or for
Golden, unless the liability results from defects inherent in the Futech
Technology and the defective product was manufactured substantially in
accordance with Futech instructions).
(b) Golden shall obtain at its own expense and maintain
during the term of this Agreement, and for a period of seven (7) years
thereafter, general liability insurance and product liability insurance with at
least coverage of $1,000,000 per occurrence and $3,000,000 in the aggregate.
Golden shall also obtain at its own expense and maintain during the term of this
Agreement, and for a period a seven (7) years thereafter (ten (10) years if the
policy form is "claims made") publishers liability insurance which provides
coverage for claims arising out of published materials, which shall include but
not be limited to the allegations of defamation, copyright infringement,
invasion of right of privacy, or other personal injury and breach of implied
contract.
All insurance must be provided by a recognized insurance
company having a Best's Rating of no less than "A." As proof of such insurance,
a fully paid certificate of insurance naming Futech as an additional insured
shall be submitted to Futech's office as and when requested by Futech, within
thirty (30) days after written request is made therefor. Futech shall be
entitled throughout the term of this Agreement, to a copy of the prevailing
policies of insurance. The policies of insurance must be non-cancelable except
after thirty (30) days prior written notice to Futech.
(c) Futech shall obtain at its own expense and maintain
during the term of this Agreement, and for a period of seven (7) years
thereafter, general liability insurance and product liability insurance with at
least coverage of $1,000,000 per occurrence and $3,000,000 in the aggregate.
Futech shall also obtain at its own expense and maintain during the term of this
Agreement, and for a period a seven (7) years thereafter (ten (10) years if the
policy form is "claims made") publishers liability insurance which provides
coverage for claims arising out of published materials, which shall include but
not be limited to the allegations of defamation, copyright infringement,
invasion of right of privacy, or other personal injury and breach of implied
contract.
All insurance must be provided by a recognized insurance
company having a Best's Rating of no less than "A." As proof of such insurance,
a fully paid certificate of insurance naming Golden as an insured party shall be
submitted to Golden's office as and when requested by Golden, within thirty (30)
days after written request is made therefor. Golden shall be entitled throughout
the term of this Agreement, to a copy of the prevailing policies of insurance.
The policies of insurance must be non-cancelable except after thirty (30) days
prior written notice to Golden.
12. STANDARDS, QUALITY CONTROL. Golden shall maintain high
standards of quality, style, appearance and service with respect to all Licensed
Products made and/or sold, and all related advertising and promotional material
including, without limitation, the quality of physical material utilized. All
Licensed Products will be manufactured, sold, and distributed in accordance with
all applicable federal, state, local, and foreign laws and regulations.
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13. PATENT INFRINGEMENT.
13.1 Infringement By a Third Party. In the event Golden
becomes aware of any information indicating that a third party may be infringing
(or may have infringed) any of the Futech Intellectual Property or Futech Marks
with respect to the Licensed Products, Golden shall give Futech notice of such
alleged infringement, identifying the country or countries in which the alleged
infringing product is sold and describing the alleged infringing product in
sufficient detail to enable Futech to determine whether such product infringes
any of the Futech Intellectual Property or Futech Marks. Futech shall assert the
Futech Intellectual Property or Futech Marks against the infringer within three
months of such notice, unless (a) Golden and Futech determine not to assert such
claim, or (b) Futech has received an opinion from qualified patent counsel that
the allegedly infringing product does not infringe the Futech Intellectual
Property or Futech Marks. All recoveries relating to losses of Golden in
connection with Licensed Products, including, but not limited to, awards of
damages, statutory damages, and awards of attorneys' fees, expenses and/or
costs, net of all costs, including attorneys' fees and costs, incurred by Futech
to obtain said recoveries, obtained by Futech in the course of any litigation
arising out of any notification of Futech by Golden pursuant to this
subparagraph shall be paid to Golden.
13.2 Infringement Alleged By a Third Party. In the event
that any third party alleges that any Licensed Product infringes any
intellectual property rights of such third party, and such intellectual property
rights reasonably relate to the Futech Technology on which the Licensed Product
is based, then Futech shall investigate and defend against such allegations at
Futech's expense. If the basis of the third party's infringement claim is for
any other reason, then Golden shall investigate and defend Futech and Golden
against such allegations at Golden's expense.
If a Licensed Product is held to infringe the intellectual
property rights of a third party and Golden is required to pay a royalty to such
party for the right to continue to manufacture and sell such Licensed Product,
or if settlement of any claim of rights similarly so requires (and Futech
consents to the settlement in writing), (i) Futech shall be required to make
such payments if the infringement is of intellectual property rights reasonably
relating to the Futech Technology on which the Licensed Product is based, and
(ii) Golden shall be required to make such payments if the infringement claim is
for any other reason.
Golden shall not knowingly infringe on the rights of any third
party in connection the manufacturing, marketing or sale of Licensed Products.
14. TRADEMARK USAGE; MARKING.
(a) This subparagraph (a) shall apply until December 31,
1997.
Any Licensed Product incorporating, embodying, or comprising
Futech Technology shall display in a plainly visible manner the Futech Mark
"Talking Pages" as a trademark in connection therewith on the back cover, in a
manner agreed upon beforehand by the parties; provided, however, that such
display is not required if precluded by any agreement after reasonable efforts
are exercised to modify or waive such agreement. Golden shall mark all Licensed
Products
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with such appropriate patent and trademark marking and other proprietary legends
as reasonably requested by Futech.
(b) This subparagraph (b) shall apply only after December
31, 1997.
All Licensed Products incorporating, embodying, or comprising
Futech Technology or Futech Marks shall display in a plainly visible manner the
Futech Mark "Talking Pages," or "Talking Pages Plus," as the case may be, as a
trademark in connection therewith on the back cover, in a manner agreed upon
beforehand by the parties. Golden shall also mark all Licensed Products with
such other appropriate patent and trademark marking and other proprietary
legends as reasonably requested by Futech.
Unless otherwise agreed in writing by Futech, all Licensed
Products shall be clearly marked with type in readable size with the words
"Talking Pages [or Talking Pages Plus, as the case may be], Technology Provided
by Futech Educational Products, Inc.," and immediately thereafter shall appear
the then-current address and phone number of Futech provided by Futech to
Golden. No portion of the statement appearing within the quotation marks in the
preceding sentence shall be in larger type in or any way any more prominent than
any other part thereof.
15. CONFIDENTIALITY.
15.1 Futech's Confidential Information. Golden
acknowledges that Futech's Confidential Information is unique and valuable and
was developed or otherwise acquired by Futech at great expense, and that any
unauthorized disclosure or use of Futech's Confidential Information may cause
Futech irreparable injury loss for which damages would be an inadequate remedy.
Golden agrees to hold such Confidential Information in strictest confidence, to
use all efforts reasonable under the circumstances to maintain the secrecy
thereof, and not to make use thereof other than in accordance with this
Agreement, and not to make use of or to release or disclose Confidential
Information to any third party without Futech's prior written consent.
15.2 Golden's Confidential Information. Futech
acknowledges that various information regarding the business plans and product
concepts of Golden may comprise Confidential Information. Futech agrees to hold
Golden's confidential information (defined consistently with Section 1.3 above)
in strictest confidence, not to make use thereof other than in accordance with
this Agreement, to use all efforts reasonable under the circumstances to
maintain the secrecy thereof, and not to make use of or to release or disclose
Golden's confidential information to any third party without Golden's prior
written consent. Golden hereby acknowledges and consents to Futech's disclosure
of Golden's confidential information to Futech's consultant, Newtech Consulting,
Inc., an Arizona Corporation.
15.3 Injunctive Relief. The parties acknowledge that any
violation of this Section 15 shall constitute a material breach of this
Agreement resulting in irreparable injury to the non-breaching party, and agree
that, in addition to any and all other rights available to the non-breaching
party by law or by this Agreement, the non-breaching party shall have the right
to seek to have an injunction entered against the breaching party to enjoin any
further violations of this Agreement.
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16. WARRANTIES. Except as otherwise set forth on Exhibit "A"
attached hereto:
16.1 Ownership of Rights. Futech is the owner of all
right, title and interest in and to the currently existing Futech Intellectual
Property and currently existing Futech Marks, free and clear of any and all
liabilities, obligations, licenses, liens or assignments, whether written, oral
or implied in fact or law, and no use by Golden of the Futech Intellectual
Property as provided for in this Agreement will infringe upon or violate the
rights of any third party.
16.2 Validity of Rights. No holding, decision or judgment
is pending or threatened and none has been rendered by any governmental
authority which would limit, cancel or question the validity of any of the
currently existing Futech Intellectual Property or currently existing Futech
Marks. Futech is not aware of any information that would affect the validity of
any of the currently existing Futech Intellectual Property or current existing
Futech Marks.
16.3 No Inconsistent Licenses. There are no outstanding
licenses or other agreements that relate to or restrict the use of the currently
existing Futech Intellectual Property or currently existing Futech Marks which
are inconsistent with the licenses granted in this Agreement.
16.4 Notices of Claims. Futech has no knowledge of and has
received no notice of any adversely held patent, patent right, trademark,
service mark, trade name, trade secret, copyright, franchise or other
proprietary right of any other person or notice of any claim of any other
person, nor has Futech made a claim against any person, relating to any of the
current existing Futech Intellectual Property, current existing Futech Marks, or
any process or Confidential Information of Futech, and Futech has no knowledge
of any basis for any such charge or claim.
17. INDEMNITIES.
17.1 Mutual. The parties hereto shall each indemnify and
hold the other harmless from and against any and all claims, liabilities, loss,
expense (including reasonable attorneys' fees) or damages arising out of any
breach of this Agreement, including without limitation any representation,
warranty, covenant or agreement of such party set forth in this Agreement,
provided that the indemnified party shall, with reasonable promptness, notify
the indemnifying party of any such claim, demand, or suit and shall fully
cooperate in the defense thereof.
17.2 By Golden. Golden shall defend, indemnify and hold
Futech, and its Subsidiaries, and associated and affiliated companies, harmless
from and against any liabilities (including reasonable attorneys' fees and
costs) of any kind or nature whatsoever which may be sustained or suffered by
Futech: (i) in connection with the Licensed Products or the packaging,
distribution, promotion, sale or exploitation of the Licensed Products,
including but not limited to any actual or alleged defect in the Licensed
Products, or their packaging, whether latent or patent, including failure of
said Licensed Products or their packaging, distribution, promotion, sale or
exploitation to meet any federal, state or local laws or standards; (ii) based
upon or arising out of any actual or alleged unauthorized use by Golden or its
Subsidiaries of any patent, trade secret, process, idea, method or device, or
any copyright or trademark; or (iii) any other actual or alleged unauthorized
action of Golden. The foregoing indemnification shall not however apply to any
such liability arising out of, relating to or caused by the Futech Technology
and/or the Futech Intellectual
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Property, to and only to the extent so related or caused (this provision shall
not limit Golden's indemnification for liability for products defectively
manufactured by or for Golden, unless the liability results from defects
inherent in the Futech Technology and the defective product was manufactured
substantially in accordance with Futech instructions).
17.3 By Futech. Futech shall defend, indemnify and hold
Golden, and its Subsidiaries harmless from and against any liabilities
(including reasonable attorneys' fees and costs) of any kind or nature
whatsoever which may be sustained or suffered by Golden arising out of, relating
to or caused by the Futech Technology and/or the Futech Intellectual Property,
to and only to the extent so related or caused (this indemnification shall not
apply to liability for products defectively manufactured by or for Golden,
unless the liability results from defects inherent in the Futech Technology and
the defective product was manufactured substantially in accordance with Futech
instructions).
17.4 General Terms. The indemnifying party shall have the
right to designate counsel to defend against such claims and suits; however, at
the indemnified party's option, the indemnified party shall have the right to
participate in the defense with its own counsel at its own expense. In no event
shall any such claims or suits affecting the rights of a party be settled
without the prior written consent of that party.
18. TERM. This Agreement shall be effective as of August 14, 1996,
and shall continue thereafter until August 13, 2001, unless sooner terminated as
provided for in this Agreement. In addition to said term, Golden shall have one
(1) option (the "Option") to extend the term of this Agreement for a period of
one additional five year period (to the extent this Agreement is so extended,
the new term is sometimes hereinafter referred to as the "Extended Term"). The
Option is granted upon the following terms and conditions:
(a) Golden shall exercise the Option by delivering
written notice to Futech of such exercise not later than May 13, 2001;
(b) Golden shall not be in default under this Agreement
on the date the Option is exercised, or on the commencement date of the Extended
Term;
(c) At the time the Option is exercised, Golden shall pay
an advance and guarantee in the amount of $2,000,000, payable in cash
equivalent. Royalties payable by Golden to Futech hereunder for Net Sales made
during the Extended Term shall be first applied against said advance and
guarantee, until the advance and guarantee is used in its entirety. In no event
shall the advance and guarantee be repayable by Futech to Golden, except against
future Royalties as described in the preceding sentence.
(d) All terms and conditions of this Agreement shall
remain in full force and effect, and apply to the Extended Term, including but
not limited to Golden's obligation to pay Futech Royalties under Section 9
above.
19. DEFAULT AND TERMINATION.
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19.1 Termination For Default. Either party shall have the
right to terminate this Agreement upon thirty (30) days' written notice to the
other party, if such other party fails to comply in any material respect with
any term or condition of this Agreement and such failure to comply is not
corrected within the foregoing thirty (30) day notice period.
19.2 Termination For Golden's Bankruptcy. Futech shall
have the right to terminate this Agreement in the event Golden becomes bankrupt
or insolvent, suffers a receiver to be appointed, or makes an assignment for the
benefit of creditors.
19.3 Golden's Rights Cease at Termination. Upon
termination of this Agreement for any reason or cause, Golden's rights hereunder
shall terminate immediately and Golden shall immediately cease all use of Futech
Technology and Futech Marks and all marketing, distribution and sale of Licensed
Products; provided, however, that Golden shall be entitled, for and only for a
period of one hundred twenty (120) days, to complete, market, distribute and
sell all work-in-progress inventory, and market, distribute and sell all
completed inventory, existing on the date of termination (this Agreement shall
continue to apply to such inventory, including Golden's obligation to pay
Royalties on all such sales).
Within thirty (30) days after the expiration or termination of
this Agreement, Golden shall issue a statement executed by an authorized
representative of Golden certifying the number and description of the Licensed
Products in inventory or in process.
19.4 Rights Which Survive Termination. The termination or
expiration of this Agreement shall not release any party of any obligation to
pay monies or perform any other obligation that became due or owing or arose out
of any transaction prior to the date of said termination or expiration,
including but not limited to an obligation to pay Royalties. Also, Sections 5
(ownership), 7.1 (technology fee), 9 (Royalties), 10 (records), 11 (insurance),
12.4 (customer complaints), 14.2 (approval for product markings), 15
(confidentiality), 16 (Futech's representations and warranties), 17
(indemnities), and 19.5 (return of artwork) hereof shall survive termination
(for any reason) and expiration of this Agreement.
19.5 Return to Futech of Artwork, etc. Within thirty (30)
days after termination or expiration of this Agreement, Golden shall deliver to
Futech any and all original artwork relating to the Futech Marks, and all
technical information, materials, samples, formulas, drawings, and know-how in
tangible form furnished by or for Futech.
20. EXPORT. Regardless of any disclosure by Golden to Futech of
the ultimate destination of any Licensed Product, Golden shall not knowingly use
or transport any Futech Technology or Futech Mark, directly or indirectly, in a
manner contrary to U.S. Export Administration Regulations.
21. FORCE MAJEURE. If the performance of this Agreement, or any
obligation under this Agreement, is prevented, restricted or interfered with by
reason of fire, flood, earthquake, explosion or other casualty or accident,
strikes or labor disputes, inability to procure or obtain delivery of parts,
supplies or power, war or other violence, any law, order, proclamation,
regulation, ordinance, demand or requirement of any governmental agency, or any
other act or condition whatsoever beyond the reasonable control of the affected
party, the party so affected, upon giving prompt notice
17
50
to the other party, shall be excused from such performance to the extent of such
prevention, restriction or interference; provided, however, that the party so
affected shall take all reasonable steps to avoid or remove such cause of
nonperformance and shall resume performance under this Agreement with dispatch
whenever such causes are removed.
If a party was required to meet a scheduled date of
performance of an obligation during such period of nonperformance, then the date
for performance shall be extended by a period equal to the period of
nonperformance.
22. ASSIGNMENT. Neither party may assign or otherwise transfer
this Agreement, or any rights under it, without the prior written consent of the
other party, which consent shall not be unreasonably withheld; provided,
however, that Futech and/or Golden shall be entitled to assign its rights, or
any portion thereof, under this Agreement without the consent of the other
party, so long as such assignment is to a Subsidiary of Futech or Golden, as
applicable. Any attempted assignment in violation of this Section shall be null
and void. All terms and conditions of this Agreement shall be binding upon and
shall inure to the benefit of the parties to this Agreement and their respective
permitted successors and assigns.
23. CHOICE OF LAW. This Agreement is made under, and shall be
governed by and construed in accordance with the laws of the State of Delaware,
without reference to principles of conflicts of law.
24. RELATIONSHIP OF THE PARTIES. The relationship between the
parties hereto is that of licensor and licensee, and this Agreement is not to be
construed as creating a partnership, joint venture, master-servant,
principal-agent, or other relationship for any purpose whatsoever. Except as may
be expressly provided herein, neither party may be held for the acts of
omission or commission of the other party, and neither party is authorized to or
has the power to obligate or bind the other party by contract, agreement,
warranty, representation or otherwise in any manner whatsoever.
25. GENERAL.
25.1 Entire Agreement. Except as otherwise set forth in
this Agreement or in that certain "Agreement" dated the same date as this
Agreement and entered into by Futech and Golden, this Agreement (including the
Exhibits attached hereto) constitutes the entire agreement between the parties
with respect to the subject matter hereof and supersedes all prior
understandings, proposals, representations, negotiations and communications,
oral or written, if any, with respect thereto. No variation from these
provisions shall be binding unless in writing and signed by both parties. There
are no oral promises, conditions, representations, understandings,
interpretations, or terms of any kind as conditions or inducements to the
execution hereof, or in affect between the parties, except as may otherwise be
expressly provided herein or in the Agreement referred to in the first sentence
of this Section 25.1.
The parties do not intend to confer any benefit hereunder to
any person, firm, or corporation other than the parties hereto. No
representation, warranty, or agreement herein may be relied upon by any person
not a party to this Agreement.
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51
The parties agree that this Agreement relates only to the
technology and products specifically identified herein, and does not apply to or
create any obligations of Futech, or rights of Golden, with respect to any other
technology or products.
25.2 Sales Tax. Golden shall be responsible for, and shall
pay, all sales, value added and similar taxes, if any, which may be imposed on
any sales of the Licensed Products, as well as any other tax based upon Golden's
use, sale, or possession of the Futech Technology, Futech Marks, and the
Licensed Products.
25.3 Partial Validity. In the event any provision of this
Agreement or the application of any provision shall be held by a tribunal of
competent jurisdiction to be contrary to law, then the remaining provisions of
this Agreement shall be unimpaired, and the illegal, invalid or unenforceable
provision shall be replaced by a provision, which, being legal, valid and
enforceable, comes closest to the intent of the parties underlying the illegal,
invalid or unenforceable provision.
25.4 Notices. All notices required or permitted under this
Agreement shall be in writing and shall be deemed to have been given upon
personal delivery or upon deposit in the U.S. mail, first-class, postage
prepaid. The addresses of the parties (until written notice of change shall have
been given) shall be as follows:
Futech: Futech Educational Products, Inc.
2999 North 44th Street, Suite 225
Phoenix, Arizona 85018
Attn: Vincent Goett, CEO
Golden: Golden Books Family Entertainment, Inc.
888 Seventh Avenue
New York, New York 10106-4100
Attn: Philip Galanes
25.5 No Waiver. None of the provisions hereof shall be
deemed to be waived or modified, nor shall they be renewed, extended, altered,
changed or modified in any respect, except by an express agreement in writing
duly executed by the party against whom enforcement of such waiver,
modification, etc. is sought. The failure of either party hereto to object to
the failure on the part of the other party to perform any of the terms,
provisions or conditions hereof, or to exercise any option herein given, or to
require performance on the part of the other party of any term, provision or
condition hereof, or any delay in doing so, or any custom or practice of the
parties at variance therewith, shall not constitute a waiver or modification of
this Agreement or any provision hereof, or of any subsequent breach or default
of the same or a different nature, nor affect the validity of any part hereof,
nor the right of either party thereafter to enforce the same, nor constitute a
novation.
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52
25.6. Headings. The headings in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
25.7. Counterparts. This Agreement may be executed by the
parties in one or more counterparts, and any number of counterparts signed in
the aggregate by the parties shall constitute a single instrument.
25.8 Other. All rights and remedies conferred under this
Agreement or by any other instrument or by law shall be cumulative, and may be
exercised singularly or concurrently.
DATED as of the date first hereinabove written.
FUTECH: Futech Educational Products, Inc., an Arizona
corporation
By /s/ Vincent W. Goett
------------------------------------------
Vincent W. Goett, CEO
GOLDEN: Golden Books Family Entertainment, Inc., a
Delaware corporation
By /s/ Philip Galanes
------------------------------------------
Its General Counsel
---------------------------------------
List of Exhibits
Existing Futech Intellectual Property and Existing Futech Marks "A"
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53
EXHIBIT "A"
Existing Patents
Patent Number Serial Number Country Filing Date Grant Date
57656 78210811 Taiwan August 21, 1989 September 1, 1990
5,167,508 07/685,278 USA April 15, 1991 December 1, 1992
664,701 17841/92 Australia April 14, 1992 March 19, 1996
2,108,554 Canada April 14, 1992
EP 92911059.1 EPO April 14, 1992
4-510057 Japan April 14, 1992
18887 South Korea April 14, 1992
(Republic of Korea) April 14, 1992
178299 925737 Mexico April 14, 1992 June 7, 1995
PCT/US92/03056 PCT April 14, 1992
Not yet received Russian Federation April 14, 1992
92 1 11051.0 China April 14, 1992
886/Del/92 India April 14, 1992
5,417,575 08/137,063 USA April 14, 1992 May 23, 1995
Not yet assigned Kazakhstan Not yet confirmed
5,484,292 07/980,649 USA November 24, 1992 January 16, 1996
PCT/US93/10705 PCT November 11, 1993
08/195,755 USA February 11, 1994
93120335.X China November 24, 1993
1253/Del/93 India November 9, 1993
55940/94 Australia November 4, 1993
54
DEMAND, ACKNOWLEDGMENT AND AGREEMENT
THIS AGREEMENT is made as of and effective the 2nd day of January,
1998, by and between Futech Educational Products, Inc., an Arizona corporation
("Futech") and Golden Books Family Entertainment, Inc., a Delaware corporation
("Golden").
1. Futech hereby makes demand of Golden for return of Futech's
equipment, in accordance with Section 4 of that certain Agreement, by and
between Futech and Golden, dated August 14, 1996 (the "1996 Agreement"). Golden
acknowledges such demand and agrees that said equipment shall be available for
Futech at Golden's facilities on or before February 10, 1998. The equipment
shall be in the condition as required by the 1996 Agreement.
2. Futech and Golden acknowledge and agree that the technology fee
identified in Section 7.1 of the License Agreement ("License Agreement")
attached as an Exhibit to the 1996 Agreement is fully earned by Futech effective
January 2, 1998.
3. Futech and Golden have jointly been handling a litigation matter
filed by Publications International. Golden shall obtain from Darby and Darby a
detailed summary of the status and history of the litigation, and provide the
same, and complete copies of all invoices of Darby and Darby relating to said
case, to Futech by January 20, 1998 (copies of invoices received by Golden after
January 20, 1998 shall be provided to Futech within ten days after receipt).
Futech shall pay the approximately $11,000.00 bill recently issued by Squire,
Sanders and Dempsey. Golden shall pay all other legal fees and costs associated
with said case relating to time periods prior to January 2, 1998, and all fees
and costs of Darby and Darby regardless of when incurred. Effective January 2,
1998, Futech shall take full control of and responsibility for said case, and
pay all fees and costs associated therewith accruing after said date (other than
Darby and Darby fees and costs). The parties acknowledge that the fees and cost
of the Publications International litigation were part of the losses identified
in Section 5 of the 1996 Agreement.
4. Golden's obligation to provide free samples of products as set out
in Section 10(d) of the License Agreement shall apply only after January 1,
1998. One hundred (100) free samples of each product available for sale prior to
said date shall be delivered to Futech, to the extent not already so delivered,
by January 30, 1998.
5. Except as otherwise set forth in this Agreement, the 1996 Agreement
and its Exhibits constitute the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior understandings, if
any, with respect thereto. There are no oral promises, conditions,
representations, understandings, interpretations, or terms of any kind as
conditions or inducements to the execution hereof, or in effect between the
parties, except as may otherwise be expressly provided herein.
The parties do not intend to confer any benefit hereunder to any
person, firm, or corporation other than the parties hereto. No representation,
warranty, or agreement herein may be relied upon by any person not a party to
this Agreement.
The parties expressly acknowledge and agree that there are no
obligations of any type or nature whatsoever, existing as of the date of this
Agreement, after the execution of this Agreement, other than the obligations
expressly set out in this Agreement and in the 1996 Agreement and its Exhibits.
The foregoing sentence applies to and includes any obligation of any nature
whatsoever, not just obligations relating to the subject matter of this
Agreement.
This Agreement may be executed by the parties in one or more
counterparts, and any number of
55
Patent Number Serial Number Country Filing Date Grant Date
2,150,013 Canada November 4, 1993
Not yet assigned EPO November 4, 1993
952545 Finland November 4, 1993
6-513158 Japan November 4, 1993
702092/1995 Korea November 4, 1993
258342 New Zealand November 4, 1993
952042 Norway November 4, 1993
95118875 Russian Federation November 4, 1993
10815 10815 Sri Lanka November 4, 1993 February 23, 1996
PCT November 5, 1996
India November 6, 1996
08/474,707 USA November 4, 1993
08/554,734 USA November 7, 1995
Registered Trademarks and Copyrights
Type Registration Serial Number Country/ Filing Date Grant Date
Number State
Trademark 1,923,092 74/431,014 USA August 30, 1993 September 26, 1995
Trademark 7-80127 Japan August 2, 1995
Trademark 028881 Arizona October 5, 1990
Trademark not yet November 15, 1996
received
Trademark not yet November 15, 1996
received
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Type Registration Serial Number Country/ Filing Date Grant Date
Number State
Trademark not yet November 15, 1996
received
Tradename 103552 Arizona June 14, 1991
Tradename 096432 Arizona July 12, 1990
Tradename 096284 Arizona July 5, 1990
Tradename 103550 Arizona June 14, 1991
Tradename 096434 Arizona July 12, 1990
Tradename 103551 Arizona June 14, 1991
Tradename 093474 Arizona March 8, 1990
Tradename 096433 Arizona July 12, 1990
Copyright VAu 241-157 USA November 9, 1992
Copyright VAu 244-017 USA January 7, 1993
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57
counterparts signed in the aggregate by the parties shall constitute a single
instrument.
DATED the date first hereinabove written.
FUTECH: Futech Educational Products, Inc.,
an Arizona corporation
By /s/ Vincent W. Goett
--------------------------------------
Vincent W. Goett
GOLDEN: Golden Books Family Entertainment, Inc.,
a Delaware corporation
By /s/ Philip Galanes
--------------------------------------
Its General Counsel
--------------------------------------
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58
PROMISSORY NOTE
$1,000,000.00 As of August 14, 1996
Phoenix, Arizona
THIS NOTE is made as of the date stated above by Futech Educational
Products, Inc., an Arizona corporation ("Maker") to the order of Golden Books
Family Entertainment, Inc., a Delaware corporation ("Payee").
1. PAYMENT. For value received, Maker promises to pay to Payee or
Payee's order, without offset (other than offsets for non-payment of royalties
under that certain License Agreement, dated August 14, 1996, between Maker and
Payee), the principal sum of One Million Dollars ($1,000,000.00), together with
interest calculated at prime rate (as announced in the Wall Street Journal) plus
1%, as hereinafter set forth; provided, however, that the outstanding balance
shall be interest free, and no interest shall in any event accrue, until January
1, 1998. Principal and interest are payable in lawful money of the United States
of America at 889 Seventh Avenue, New York, New York 10106-4100, or at such
other address as the holder hereof may from time to time designate in writing,
in full on or before June 1, 1999, and on June 1, 1999 the outstanding principal
amount of this Note, together with all accrued and unpaid interest, shall be
paid in full. All payments made hereunder shall be applied to interest and
principal in that order.
2. PREPAYMENT. Maker has the privilege, at any time, to prepay the
whole or any part of the unpaid balance hereof without penalty or forfeiture.
3. INTEREST. All interest payable pursuant to this Note shall be
computed on the basis of a 365-day year. In no event shall the aggregate of the
interest herein provided to be paid over the contractual term of the loan exceed
the highest rate to which a borrower and lender may agree in writing under
applicable laws.
4. DEFAULT. If any one or more of the following events (each, an "Event
of Default" and collectively, called "Events of Default") shall occur for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(a) default shall be made in the payment of the principal of this note
when and as the same shall become due and payable, whether pursuant to the
terms hereof or at a date fixed for prepayment or by acceleration or
otherwise; or
(b) Maker shall (i) be unable to pay its debts generally as they become
due; (ii) file a petition to take advantage of any insolvency act; (iii)
make an assignment for the benefit of its creditors; (iv) commence a
proceeding for the appointment of a receiver, trustee, liquidator or
conservator of itself or of a whole or any substantial part of its
property; (v) file a petition or answer seeking reorganization or
arrangement or similar relief under the Federal Bankruptcy Code or any
other applicable law or statute of the United States of America or any
state; or
59
(vi) by appropriate proceedings of the board of directors of Maker,
authorize the filing of any such petition, making such assignment or
commencement of such a proceeding; or
(c) a court of competent jurisdiction shall enter an order, judgment or
decree appointing a custodian, receiver, trustee, liquidator or conservator
of Maker or of the whole or any substantial part of its properties, or
approve a petition filed against Maker seeking reorganization or
arrangement or similar relief under the Federal Bankruptcy Code or any
other applicable law or statute of the United States of America or any
state; or if, under the provision of any other law for the relief or aid of
debtors, a court of competent jurisdiction shall assume custody or control
of Maker or of the whole or any substantial part of its properties; or if
there is commenced against Maker any proceeding for any of the foregoing
relief and such proceeding or petition remains undismissed for a period of
sixty (60) days; or if Maker by any act indicates its consent to or
approval of any such proceeding or petition;
then, and in any such event and at any time thereafter, if such or any other
Event of Default shall then be continuing, the Payee shall have the right,
without presentment, demand or notice of any kind, to accelerate this Note
and to declare the entire unpaid balance hereof and the obligations evidenced
hereby immediately due and payable and to seek and obtain payment of this Note.
5. WAIVER; CONSENT. Maker and each endorser, guarantor or other party
that may be liable under this Note hereby severally waive diligence, demand,
presentment for payment, notice of dishonor, acceleration, protest and all other
demands and notices in connection with the delivery, acceptance, performance or
enforcement of this Note. No delay by the holder in exercising any rights
hereunder shall operate as a waiver thereof. "The non-exercise or partial
exercise by the holder of any rights hereunder in any particular instance shall
not constitute a waiver thereof in that or any subsequent instance or preclude
other or further exercise thereof.
6. SEVERABILITY. If any provision of this Note or any application of
such provision shall be declared by a court of competent jurisdiction to be
invalid or unenforceable, such invalidity or unenforceability shall not affect
any other application of such provision nor the balance of the provisions hereof
which shall, to the fullest extent possible, remain in full force and effect,
and such court shall reform such unenforceable provision so as to give maximum
permissible effect to the intentions of the parties as expressed therein.
7. SECURITY. As security for Maker's performance under this Note, Maker
hereby grants Payee a security interest in the assets identified on Exhibit "A"
attached hereto and hereby made a part hereof. In the event of default by Maker
hereunder, Payee shall have all rights with respect to such collateral as are
available to a secured party under applicable laws, as the same may from time to
time be changed.
8. MISCELLANEOUS. The provisions of this Note shall be binding upon
Maker and Maker's successors and assigns, and shall inure to the benefit of
Payee and Payee's successors and assigns. This Note shall be governed by and
construed and enforced in accordance with the laws of the State of Arizona. This
Note shall be construed according to its fair meaning and neither for nor
against the
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60
drafting party. Time is of the essence of this Note and each and every term and
provision hereof.
DATED the date first hereinabove written.
Futech Educational Products, Inc.,
an Arizona corporation
By /s/ Vincent W. Goett
------------------------------------
Vincent W. Goett
List of Exhibits:
Equipment List "A"
GUARANTY: The faithful and timely performance by the Maker under the
above-described Note is hereby unconditionally guaranteed by the undersigned.
This is a guarantee of performance and not of collection. The undersigned
further agrees that any action may be bought and prosecuted by the Payee against
the undersigned guarantor whether or not any action is brought against the
maker, and whether or not the Maker or any other parties are joined in such
action. The undersigned guarantor specifically agrees to be liable to Payee for
the obligations of Maker as set out above, even if Payee or any
successor-in-interest releases any or all rights of any sort against the Maker.
The undersigned guarantor hereby consents to any such release, which release
shall be without effect on the undersigned guarantor's liability for said
obligations. The undersigned guarantor waives any right to require Payee to
proceed against Maker or pursue any other remedy in Payee's power. The
undersigned guarantor waives any defense arising by reason of any disability or
other defense of Maker by reason of the cessation from any cause whatsoever
(other than performance in full) of the liability of Maker under the
above-described Note. This guaranty is made for performance without offset,
other than offsets for non-payment of royalties under that certain License
Agreement, dated August 14, 1996, between Maker and Payee. The undersigned
guarantor shall have forty-five (45) days after notice of default is given to
the undersigned guarantor in which to perform Maker's obligations under the
Note.
No delay, failure, forbearance or omission by Payee in exercising any
right or remedy hereunder or otherwise guaranteed by law or another agreement
shall effect or release the liability of the undersigned or operate as a waiver
thereof or of any other right or remedy, and no single or partial exercise
thereof shall preclude any other or further exercise thereof or the exercise of
any other right or remedy. All rights and remedies of Payee hereunder are
cumulative. No modification or amendment of any provision of this guaranty shall
be effective unless in writing and subscribed by a duly authorized officer of
Payee. This guaranty inures to and shall be enforceable by payee and Payee's
successors and assigns, and shall bind the successors and assigns of the
undersigned.
This guaranty shall be governed by and construed and enforced in
accordance with the laws
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of the State of Arizona.
DATED the date first hereinabove written:
/s/ Vincent W. Goett
- ----------------------------------
Vincent W. Goett
4