Exhibit 10.6
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ROYALTY AGREEMENT
AGREEMENT made this 30th day of May, 1997, by and between
MODERN LEARNING PRESS, INC., a Delaware corporation with its
principal place of business at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Modern Learning") and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an
individual with his principal residence at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇▇▇").
WHEREAS, pursuant to an Asset Purchase Agreement and the
exhibits and schedules thereto (collectively, the "Asset Purchase
Agreement") entered into on the date hereof between Modern Learning
and Programs for Education, Inc., a New Jersey corporation
("Programs"), the assets of Programs were sold and assigned to
Modern Learning;
WHEREAS, ▇▇▇▇▇▇▇ was employed by Programs and was instrumental
in the development of several recent author/publisher contracts and
the resulting successful publications which are now assets of
Modern Learning.
NOW THEREFORE, the parties hereto agree as follows:
1. Definitions
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1.1 Products
"Products" means the publications of Modern Learning identified on
Exhibit A hereto.
1.2 Product Sales
"Product Sales" means the sale or distribution of the Products
directly to or for public and private educational institutions,
retail outlets, wholesalers to retailers, and mail order or
catalogs.
1.3 Net Sales
"Net Sales" means the gross amount of Product Sales of Products
made by Modern Learning in the Territory at the invoiced selling
price (in U.S. dollars), net normal and reasonable quantity and
cash discounts and returns for credit, uncollectible accounts and
allowances. No deductions shall be made for costs incurred in
manufacturing, selling, distributing and advertising. For purposes
of this Agreement, Net Sales resulting from sales to any affiliated
entity of Modern Learning shall be computed utilizing publisher's
discounts standard in the industry.
1.4 Territory
"Territory" means the world.
2. Term
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The term of this Agreement shall commence as of the date hereof and
continue for seven (7) years, whereupon the Agreement shall expire.
3. Royalties
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3.1 Modern Learning agrees to pay to ▇▇▇▇▇▇▇ a Royalty of eight
(8%) percent of annual Net Sales, subject to the limitations set
forth in Exhibit B hereto.
3.2 No Royalties shall be owed or paid with respect to copies of
the Product distributed as "free," "complementary," or "no charge,"
provided that the total number of such copies distributed in any
quarter shall not exceed one percent (1%) of the total number of
copies sold by Modern Learning for such quarter.
3.3 On or before the forty-fifth (45th) day following each quarter
of the Term (the first such quarter ending August 31, 1997), Modern
Learning shall submit to ▇▇▇▇▇▇▇ a full and accurate statement
showing, the quantity, description and Net Sales of each of the
Products sold or distributed during such quarter. The first
quarter shall be prorated from the Closing Date as defined in the
Asset Purchase Agreement. Unless subject to the setoff provisions
of the Asset Purchase Agreement, Modern Learning shall remit with
the quarterly statement all Royalties due on Net Sales for each
such quarter (or pro rata portion thereof) by check or electronic
funds delivered directly to ▇▇▇▇▇▇▇ or in accordance with written
instructions given to Modern Learning by ▇▇▇▇▇▇▇.
3.4 The final quarterly payment for each year of the Term shall be
adjusted for actual annual Net Sales.
4. Guaranteed Minimum Royalty; Security
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4.1 In no event shall the Royalty paid to ▇▇▇▇▇▇▇ in each year of
this Agreement be less than Eighty Thousand Dollars ($80,000.00)
per year, regardless of the amount of annual Net Sales.
4.2 To secure the prompt payment and performance by Modern
Learning of its obligations to ▇▇▇▇▇▇▇ pursuant to this Agreement,
Modern Learning has executed and delivered to ▇▇▇▇▇▇▇ a Security
Agreement dated the date hereof and Touchstone Applied Science
Associates, Inc. ("TASA") has executed and delivered a Stock Pledge
Agreement and Guaranty, each dated the date hereof. Such
capitalized terms are defined as set forth in the Asset Purchase
Agreement.
5. Quality Control
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Modern Learning shall maintain high quality and standards
commensurate with the quality and standards of Programs in
connection with the production of the Product including the minimum
quality production specifications currently utilized by Programs.
6. Proprietary Rights
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6.1 ▇▇▇▇▇▇▇ acknowledges that Modern Learning has acquired all
right, title and interest to the Products and is the exclusive
owner of the Products, including any and all intellectual property
rights therein, except as may have been reserved to the author of
such work pursuant to separate agreement with such author.
6.2 If ▇▇▇▇▇▇▇ becomes aware of the manufacture or sale by anyone
other than Modern Learning of the Products or of such products as
would be confusingly similar in the minds of the public, ▇▇▇▇▇▇▇
shall promptly notify Modern Learning thereof in writing. Modern
Learning shall, in its sole discretion, take steps to enjoin any
such manufacture or sale, in its own name.
7. Product Orders
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Modern Learning shall produce and distribute the Products pursuant
to purchase orders therefor approved by the President of Modern
Learning or his agent, in their sole discretion, and shall have no
obligation to produce and distribute in the absence of such an
approved purchase order.
8. Goodwill
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▇▇▇▇▇▇▇ recognizes the great value of the reputation and goodwill
associated with the Product, and, in such connection, acknowledges
that such goodwill exclusively belongs to Modern Learning.
9. Representations and Warranties of ▇▇▇▇▇▇▇; Injunction
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9.1 ▇▇▇▇▇▇▇ hereby represents and warrants to Modern Learning
that:
(i) he has the power and authority to enter into this
Agreement and to perform his obligations hereunder and, upon
execution and delivery hereof, this Agreement shall constitute the
valid and binding obligations of ▇▇▇▇▇▇▇ enforceable in accordance
with its terms.
(ii) he shall not solicit any author or authors of the
Products with the intent of or result of interference with the
relationship of any such author or authors with Modern Learning;
nor shall he interfere with, disrupt or attempt to disrupt the
relationship between the Company and any author or authors of the
Product.
9.2 ▇▇▇▇▇▇▇ acknowledges and agrees that any breach or threatened
breach by ▇▇▇▇▇▇▇ of the representations and warranties of
Paragraph 9.1(ii) will cause such damage to the Company as will be
irreparable and the exact amount of which will be impossible to
ascertain, and for that reason further agrees that the Company
shall be entitled to apply to any Court of competent jurisdiction
to enjoin or restrain such breach or threatened breach of such
representations and warranties. Nothing contained herein shall be
construed as prohibiting the Company from pursuing any other remedy
available to it for such breach or threatened breach. This
covenant shall terminate upon the occurrence and continuance of an
Event of Default and the exercise of rights of ▇▇▇▇▇▇▇ to foreclose
the security granted him pursuant to the Security Agreement between
▇▇▇▇▇▇▇, Modern Learning and Programs executed the date hereof.
10. Representations and Warranties of Modern Learning
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Modern Learning hereby represents and warrants to ▇▇▇▇▇▇▇ that
Modern Learning has the power and authority to enter into this
Agreement and to perform its obligations hereunder and, upon
execution and delivery hereof this Agreement shall constitute the
valid and binding obligations of Modern Learning enforceable in
accordance with its terms.
11. Audits
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Modern Learning shall keep accurate books of account and records
covering all transactions relating to the Products. The amount of
annual Net Sales shall be determined by the regular accountants of
Modern Learning. ▇▇▇▇▇▇▇ and his authorized representatives shall
have the right, at reasonable, and agreed dates and times and upon
reasonable prior notice to examine and audit such books of account
and records of sales of Product which relate to this Agreement.
Such audits shall not be conducted more than once annually. All
such books of account and records shall be kept available for at
least three (3) years after the termination of this Agreement.
12. Notices
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All notices and other communications hereunder shall be in writing
and shall be deemed to have been given when personally delivered by
courier or overnight mail service, with signed receipt, or three
(3) business days after deposited in the United States mail and
sent postage prepaid by registered or certified mail, return
receipt requested, addressed to the following addresses, or to such
other address which any party shall have given to the other parties
for such purpose by notice hereunder:
If to Modern Learning: Modern Learning Press, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Att: ▇▇▇▇▇▇ ▇▇▇▇▇, Publisher
with copy to ▇▇▇▇▇▇▇ Crush, Esq., Rider, Weiner, ▇▇▇▇▇▇▇ &
Calhelha, P.C., ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇,
If to ▇▇▇▇▇▇▇: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
with copy to ▇▇▇▇▇▇ ▇▇▇▇▇, Esq., Pluese, Lihotz, ▇▇▇▇▇▇▇▇▇▇ &
Leone, ▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇.
13. No Assignment, Pledge or Encumbrance
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This Agreement is personal to ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ shall not assign,
transfer or sell any or all of the rights granted herein to any
third party without the prior written consent of Modern Learning.
Notwithstanding the prior sentence, ▇▇▇▇▇▇▇, shall have the right
to transfer all rights hereunder to such family member or members,
or trust for the benefit of such family member or members, as
▇▇▇▇▇▇▇ may by written notice to Modern Learning direct, or, in the
event of his death, by his Last Will and Testament shall direct, or
the laws of intestacy shall provide. ▇▇▇▇▇▇▇ shall not pledge or
encumber his rights hereunder as security or collateral for any
obligation of ▇▇▇▇▇▇▇.
14. No Partnership or Joint Venture
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This Agreement does not constitute and shall not be construed as
constituting a partnership, joint venture or agency between ▇▇▇▇▇▇▇
and Modern Learning. Neither party shall have any right to
obligate or bind the other party in any manner whatsoever, and
nothing herein contained shall give, or is intended to give, any
rights of any kind to any third persons.
15. Entire Agreement; Modification
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This Agreement and the Asset Purchase Agreement with its exhibits
and schedules, represents the entire agreement and understanding of
the parties hereto with respect to the subject matter hereof and
supersedes all previous representations, understandings or
agreements between the parties hereto. No waiver, modification or
cancellation of any term or condition of this Agreement shall be
effective unless executed in writing by the party charged
therewith.
16. Binding Effect
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Subject to the limitations herein before expressed, this Agreement
will inure to the benefit of and be binding upon the parties their
successors and permitted assigns.
17. Governing Law; Attorneys' Fees
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17.1 This Agreement shall be governed by and construed under
the laws of the State of New Jersey.
17.2 If either party employs attorneys to enforce any rights
arising out of or relating to this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees and costs.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the dates indicated below.
MODERN LEARNING PRESS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇, President
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
EXHIBIT "A"
TO
ROYALTY AGREEMENT
The Products covered by this Agreement are all
publications in the "Words I Use" series, listed below:
WORDS I USE WHEN I WRITE
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WORDS I USE WHEN I WRITE - Student Book for Grades 1 and 2
WORDS I USE WHEN I WRITE - Help at Home Guide for Parents -
Grades 1 and 2
Set of three (3) Classroom Posters
PALABRAS QUE YO USO CUANDO ESCRIBO - Spanish version of Words I
Use When I Write
GUIA PARA LOS PADRES - Help at Home Guides for Parents - Grades 1
and 2
MORE WORDS I USE WHEN I WRITE
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MORE WORDS I USE WHEN I WRITE - Student Book for Grades 3 and 4
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MORE WORDS I USE WHEN I WRITE - Help at Home Guide for Parents
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MY WORD BOOK
MY WORD BOOK - Student Book for Kindergarten
MY WORD BOOK - Help at Home Guides for Parents
TEACHER GUIDE
MI LIBRO DE PALABRAs - Spanish version of My Word Book
GUIA PARA LOS PADRES - Help at Home Guides for Parents in Spanish
- Kindergarten
WORD POWER
WORD POWER! - Student Book or Grades 3-5
Teacher Guide
MY WORD WORKS
MY WORD WORKS
MORE WORD WORKS
Teacher Guides
Posters
Black-Line Masters
Help at Home Guides
Training Film/Video
EXHIBIT "B"
ROYALTY SCHEDULE
The Royalty paid shall be not less than $80,000 each year and not
more than the following sum for the year indicated:
Year 1 $120,000
Year 2 $140,000
Year 3 $160,000
Year 4 $180,000
Year 5 $200,000
Year 6 $220,000
Year 7 $240,000