Exclusive Patent License Agreement - Tonyco Inc. and Build-A-Bear Workshop Inc.
EXCLUSIVE PATENT LICENSE AGREEMENT
This Agreement made as of the 12th day of March, 2001 by and between
Tonyco, Inc., a corporation duly organized and existing under the laws of the
state of Michigan, having its principal place of business at 181 West Marshall,
Ferndale, Michigan 48220 (hereinafter referred to as "Tonyco") and Build-A-Bear
Workshop, Inc., a corporation duly organized and existing under the laws of the
state of Delaware, having its principal place of business at 1954 Innerbelt
Business Center Drive, St. Louis, MO 63114 (hereinafter referred to as
"Build-A-Bear").
RECITALS
WHEREAS, Tonyco is the owner by assignment of U.S. Patent No. 6,109,196
entitled METHOD OF CLOSING A STUFFED TOY AFTER STUFFING;
WHEREAS, Build-A-Bear is, among other things, in the business of
providing goods and services wherein a customer selects a skin/shell toy for
stuffing via a multitude of different retail venues such as in a store
environment, via catalogs, over the internet, or other related venues and the
toy is thereafter stuffed and closed in the retail environment or by the
customer at home or elsewhere;
WHEREAS, Tonyco has charged Build-A-Bear with infringement of U.S.
Patent No. 6,109,196;
WHEREAS, Tonyco and Build-A-Bear are desirous of settling the
infringement issue between them relating to U.S. Patent No. 6,109,196 and, as a
result thereof, Build-A-Bear is desirous of obtaining an exclusive license
within a field of use defined hereafter under U.S. Patent No. 6,109,196 and
under any other divisional, continuation, continuation-in-part, reissued, or
re-examined applications based upon U.S. Patent No. 6,109,196 and any patents
that may result therefrom, including any foreign patents corresponding thereto
and any extensions or additions thereof and Tonyco is willing to grant to
Build-A-Bear such a license on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein, the parties agree as follows:
ARTICLE I. DEFINITIONS
For the purposes of this Agreement, unless the context clearly or
necessarily requires otherwise, the following terms shall have the meaning set
forth below:
1.1 "Parties" shall mean both Tonyco and Build-A-Bear, and the
"Party" shall mean either of them.
1.2 "Licensed Patent" shall mean U.S. Patent No. 6,109,196
entitled METHOD OF CLOSING A STUFFED TOY. AFTER STUFFING" and
any foreign patents or foreign patent applications
corresponding thereto, any continuations,
continuations-in-part, divisionals, reissues, re-examinations,
extensions or additions thereof, and any improvements thereto.
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1.3 "Licensed Method" shall mean any method or part thereof, the
manufacture, use, sale, offer for sale, or importation of
which is covered by one or more valid claims of the Licensed
Patent.
1.4 "Licensed Field of Use" shall mean any use of the Licensed
Method in retail stores or other Retail Venues wherein the
consumer selects the skin/shell toy for stuffing and the toy
is thereafter stuffed and closed in accordance with the
Licensed Method in the retail environment. Licensed Field of
Use will also include a kit including a skin/shell toy for
stuffing where said kit is provided in a retail store or
otherwise sold or provided to a consumer. Sales of any
plurality of unstuffed skin/shells alone or in kit form, to a
single customer, in a retail store or other Retail Venue,
shall fall within the Licensed Field of Use. Bulk sales of
unstuffed skin/shells alone or in kit form to retailers,
jobbers and wholesalers for stuffing by those parties for
resale in stuffed form shall not fall within the Licensed
Field of Use.
1.5 "Retail Venue(s)" shall mean, but is not limited to, any
location or medium for selecting a skin/shell toy for stuffing
including phone orders, mail order, catalogs,
on-line/internet/websites, kiosks, discount chains, buying
parties, buying clubs, direct marketing, door-to-door sales
and the like.
1.6 "Territory" shall mean worldwide.
1.7 "Improvement" shall mean any new, improved or modified method
or process relating to the Licensed Method.
ARTICLE 2. GRANT OF LICENSE
2.1 Tonyco hereby grants to Build-A-Bear an exclusive license, for
an initial term of three (3) years and with an option to
extend this exclusive license as set forth in Article 4 below,
with the right to sublicense, to manufacture, have
manufactured on its behalf, use, sell and offer to sell under
the Licensed Patent the Licensed Method in the Territory
within the Licensed Field of Use. Tonyco shall not grant other
licenses under the Licensed Patent within the Licensed Field
of Use. Build-A-Bear shall advise Tonyco in writing of the
grant of any sublicense under the Licensed Patent and shall
provide Tonyco with a copy of any such license.
2.2 Tonyco hereby retains the right to grant other licenses
outside of the Licensed Field of Use granted to Build-A-Bear.
However, in this regard, Tonyco further agrees that it will
not grant any rights to any other licensees under the Licensed
Patent for use outside of the Licensed Field of Use granted to
Build-A-Bear which will allow such licensees to directly or
indirectly sell or otherwise provide pre-laced unstuffed
skin/shell toys made in accordance with the teachings of the
Licensed Patent to competitors of Build-A-Bear or to anyone or
any entity who
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Exclusive Patent License Agreement
Tonyco, Inc. - Build-A-Bear Workshop, Inc.
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will complete or allow completion of the stuffing process in a
retail store or other Retail Venue pursuant to the Licensed
Method (hereinafter collectively "Retail Operator") or to
anyone or entity who in turn will sell or distribute such
products to another party or parties in the chain of
distribution that will ultimately result in sale or
distribution to a Retail Operator. Tonyco will not grant
rights to such licensees which would allow them to directly or
indirectly sell or otherwise provide pre-laced unstuffed
skin/shell toys in kit form for ultimate purchase by
consumers. Tonyco further agrees that it will not sell
unstuffed skin/shell toys alone or in kit form to retailers.
ARTICLES. CONSIDERATION
3.1 In consideration of the rights and license granted to
Build-A-Bear by Tonyco under this Agreement, Build-A-Bear
agrees to pay Tonyco a total sum of seven-hundred
fifty-thousand dollars ($750,000) as follows:
3.1.1 Within ten (10) days from the execution of this
Agreement, at least two-hundred fifty-thousand
dollars ($250,000) of such total sum;
3.1.2 Within one (1) year from the execution of this
Agreement, at least two-hundred fifty-thousand
dollars ($250,000), or the remaining balance, of such
total sum; and
3.1.3 Within two (2) years from the execution of this
Agreement, the remaining balance of such total sum,
if any.
3.2 Build-A-Bear agrees that each payment provided in paragraphs
3.1.2 and 3.1.3 above shall include interest on the unpaid
balance of the total sum due at the rate of ten percent (10%)
per year simple interest until the total amount of
seven-hundred fifty-thousand dollars ($750,000) has been paid.
3.3 Build-A-Bear has the right to accelerate payments and pay off
the total amount due, including interest, at any time within
the payment period.
ARTICLE 4. OPTION TO EXTEND EXCLUSIVE LICENSE
4.1 Subject to the terms and conditions of this agreement, Tonyco
hereby grants to Build-A-Bear an option to extend this
exclusive license subject to the conditions of Article 2 above
for the full life of the Licensed Patent or any improvements
thereof. Build-A-Bear may exercise this option by providing
Tonyco with written notice thereof within one (1) year from
the date of payment made pursuant to Article 3.1.3 (the
"Option Term"). Any such license shall be subject to all of
the terms and conditions of this Agreement except for the
terms and conditions set forth in Article 3.
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4.2 In consideration of the rights and license granted under the
option, Build-A-Bear agrees to pay Tonyco an additional sum of
$10,000 in exchange for such extension of this license, such
payment to accompany the written notice to Tonyco exercising
this option. The exercise of this option shall be at the sole
discretion of Build-A-Bear.
ARTICLES. IMPROVEMENTS
5.1 Tonyco may from time to time make and/or acquire improvements
to the methods or processes described in the Licensed Patent,
Any such improvements will be disclosed to Build-A-Bear and
shall be included herein as pan of the license grant without
any other compensation on the part of Build-A-Bear.
ARTICLE 6. LIMITED WARRANTY
6.1 Tonyco represents and warrants as follows:
6.1.1 That Tonyco is the sole and exclusive owner of the
entire right, title and interest in and to the
Licensed Patent and that Tonyco has full legal right,
authority and power to enter into this Agreement and
to grant the exclusive paid up license to
Build-A-Bear as set forth herein;
6.1.2 That Tonyco is not aware of any existing or
threatened litigation concerning the Licensed Patent;
6.1.3 That Tonyco has not granted any licenses under the
Licensed Patent within the Licensed Field of Use or
elsewhere that would be in conflict with the rights
granted in this Agreement; and
6.1.4 That to the best knowledge of Tonyco the Licensed
Patent is valid and enforceable.
6.2 Build-A-Bear represents and warrants as follows:
6.2.1 That Builder-A-Bear has the full legal right,
authority and power to enter into this Agreement;
6.2.2 That Build-A-Bear will cooperate with Tonyco for the
protection of its rights in the Licensed Patent and
will furnish Tonyco with any information that it may
require, within reason, in protecting the Licensed
Patent.
6.3 All warranties will survive termination of this Agreement.
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ARTICLE 7. INDEMNIFICATION BY TONYCO
7.1 Tonyco shall defend, indemnify and hold harmless Build-A-Bear
and their respective directors, officers, employees, agents,
successors and assigns (each an "indemnitee") from and against
any and all claims, damages, losses and expenses suffered or
incurred by any such indemnitee arising from, relating to or
otherwise in respect of any breach of any representation or
warranty of Tonyco set forth above in Article 6.1 hereof.
7.2 If a claim of infringement by a third party is made against an
Indemnitee hereunder based upon use of the Licensed Method set
forth in the Licensed Patent, the reasonable costs of
defending such infringement action shall be borne equally by
the Parties hereto. The parties agree to cooperate with each
other to bring any such third party suit to a successful
conclusion. The parties shall have the right to be represented
in any such suit by counsel of their own selection and no
settlement agreement will be entered into without the mutual
consent of the parties.
ARTICLES. INFRINGEMENT
8.1 In the event that Build-A-Bear has reason to believe that a
third party is infringing upon the Licensed Patent,
Build-A-Bear will promptly notify Tonyco in writing of such
alleged infringement In the event that Tonyco has reason to
believe that a third party is infringing upon the Licensed
Patent and that the infringement could have an adverse impact
on Build-A-Bear's use of the Licensed Method in the Licensed
Field of Use, Tonyco will promptly notify Build-A-Bear in
writing of such alleged infringement. If a third party alleges
or asserts that one or more claims of the Licensed Patent is
invalid, this event shall be deemed to potentially impact
Build-A-Bear's use of the Licensed Method within the Licensed
Field of Use and Tonyco will promptly notify Build-A-Bear in
writing of such event.
8.2 After notification as set forth above in Article 8.1 or after
Tonyco otherwise learns of a potential infringement, Tonyco
will investigate such third party infringement and will obtain
sufficient facts and information concerning the same in
sufficient detail to permit a complete infringement
determination to be made. If such third party is infringing
the Licensed Patent, Tonyco will, at its own expense, endeavor
to abate such infringement. In this regard, Tonyco will
provide Build-A-Bear with copies of all correspondence
relating to its efforts to abate such infringement.
8.3 In the event that Tonyco is unable to terminate such
infringement within a reasonable period of time, Tonyco shall
have the right to commence a patent infringement action
against such infringer at its own expense and will retain any
recovery from such litigation. In this regard, Build-A-Bear
agrees to cooperate
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Exclusive Patent License Agreement
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with Tonyco to bring any such suit to a successful conclusion.
Tonyco will consult with Build-A-Bear throughout the
litigation as to its course of action with respect thereto and
will not enter into any settlement agreement with any third
party without first obtaining the mutual consent of
Build-A-Bear to such settlement agreement. In the event that
Tonyco determines that such third party is infringing the
Licensed Patent but chooses not to commence a patent
infringement action against such infringer, Build-A-Bear shall
have the right to bring suit at its. own expense to terminate
such infringement. Tonyco agrees to join such suit as a party
plaintiff and to cooperate with Build-A-Bear, at its own
expense, in connection with the conduct of such litigation.
Build-A-Bear shall retain all recovery from such litigation.
8.4 Build-A-Bear shall have the right to be represented in any
such action which will affect or impact its use of the
Licensed Method within the Licensed Field of Use by counsel of
its own selection and at its own expense.
ARTICLE 9. INVALIDITY FINDING
9.1 If, during the payment period set forth above in Article 3, as
a result of any litigation or re-examination or reissue
proceeding involving the Licensed Patent, claim 1 of the
Licensed Patent is declared to be finally invalid, no further
payments of any remaining balance due on the total sum set
forth in Article 3 shall become due and payable to Tonyco as a
result of such finding of invalidity. Claim 1 will be
considered finally invalid at such time as no further appeal
is possible within the U.S. Patent and Trademark Office or the
U.S. Courts from the decision, judgement or decree of
invalidity.
ARTICLE 10. PATENT MAINTENANCE FEES
10.1 Tonyco hereby agrees that it will pay all maintenance taxes
and fees for the Licensed Patent as they come due, throughout
the entire term of the Licensed Patent. If the Licensed Patent
is allowed to lapse due to the non-payment of a particular
maintenance fee, Tonyco further agrees that Build-A-Bear will
be entitled to reimbursement of a pro-rata share of its
seven-hundred fifty-thousand dollar ($750,000) payment based
upon the following schedule:
Failure to Pay Maintenance Fee Amount Recoverable
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(1) 3 1/2 year maintenance fee $583,300
(2) 7 1/2 year maintenance fee $416,700
(3) 11 1/2 year maintenance fee $250,000
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Exclusive Patent License Agreement
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10.2 Payment of the reimbursable amount will be on terms and
conditions mutually agreeable to the Parties hereto.
ARTICLE 11. TERM AND TERMINATION
11.1 Unless otherwise terminated earlier as provided herein, the
term of this Agreement shall commence on the effective date of
this Agreement and extend for a period of three years from the
effective date of this Agreement. Upon exercising the option
set forth in Article 4 above during the Option Term, the term
of this Agreement shall be extended for the life of the
Licensed Patent or any improvement thereon.
11.2 Notwithstanding any other provisions herein to the contrary,
this Agreement may be terminated by either party upon written
notice to the other party in the event that any one of the
following conditions occurs:
11.2.1 If Build-A-Bear fails to meet its payment obligations
pursuant to Article 3 above and such failure to pay
is not remedied within a period of thirty (30) days
after written notice is given by Tonyco;
11.2.2 If the Licensed Patent lapses due to non-payment of a
maintenance fee pursuant to Article 10 above;
11.2.3 If claim 1 of the Licensed Patent is declared invalid
during the payment period.
11.2.4 At the end of three (3) years from the effective date
of this Agreement if the option set forth in Article
4 is not exercised.
ARTICLE 12. ASSIGNMENT
12.1 Either party may assign this Agreement to a third party
acquiring substantially the entire business or substantially
all of the assets of a party hereto to which this Agreement
pertains. In such event, this Agreement will be binding upon
and inure to the benefit of all of the panics and their
respective successors and legal assigns. Tonyco agrees not to
assign this Agreement to any competitor of Build-A-Bear. The
party so assigning shall notify the other party in writing of
such assignment.
ARTICLE 13. GOVERNING LAW
13.1 This Agreement shall be governed by and construed in
accordance with the laws of the State of Missouri.
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Exclusive Patent License Agreement
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ARTICLE 14. NOTICES
14.1 All notices and other communications hereunder shall be in
writing and sent by facsimile with confirmation sent by
courier requiring acknowledgement of receipt by the respective
parties as follows:
14.1.1 To Tonyco: Tonyco, Inc.
181 West Marshall Ferndale, MI 48220
Attention: Mr. Dennis Silber
Telephone:
Facsimile:
With a Copy To: Allen M. Krass, Esq.
Gifford, Krass, Groh, Sprinkle,
Anderson & Citkowski, P.C.
250 N. Old Woodward Avenue, Suite 400
Birmingham, MI 48009-5394
Telephone:
Facsimile: (248)647-5210
14.1.2 To Build-A-Bear: Build-A-Bear Workshop, Inc.
1954 Innerbelt Business Center Drive
St. Louis, MO 63114
Attention: Maxine Clark
Telephone: (314)423-8000
Facsimile: (314)423-8188
With a Copy To: Samuel Digirolamo, Esq.
Blackwell Sanders Peper Martin LLP
720 Olive Street, 24th Floor
St. Louis, MO 63101
Telephone: (314)345-6225
Facsimile: (314)345-6060
14.2 Either party may change the registered address to which such
notices shall be sent by giving written notice to the other
party.
ARTICLE 15. MISCELLANEOUS
15.1 This Agreement contains the entire agreement of the parties
concerning the subject matter hereof and supercedes all prior
written and oral agreements, understandings and negotiations
with regard to the subject matter contained therein.
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15.2 This Agreement, including this provision, may not be amended
without a written instrument signed by duly authorized
representatives of both parties.
15.3 If any of the provisions of this Agreement shall be found to
be invalid or unenforceable, such invalidity or
unenforceability shall not invalid or render unenforceable the
entire agreement, but rather the entire agreement shall be
construed as if not containing the particular invalid or
unenforceable provision or provisions, and the rights and
obligations of the party shall be construed and enforced
accordingly.
15.4 IN WITNESS WHEREOF, THE PARTIES HERETO HAVE DULY EXECUTED THE
FOREGOING AGREEMENT AS OF THE DAY AND YEAR FIRST WRITTEN
ABOVE.
Build-A-Bear Workshop, Inc. Tonyco, Inc.
By: /s/ Maxine Clark By: /s/ Anthony C. Silber
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Name: Maxine Clark Name: Anthony C. Silber
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Title: President Title: President
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Date: 3/12/01 Date: 3/15/01
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