TRADEMARK LICENSE AGREEMENT
TRADEMARK LICENSE AGREEMENT, dated as of February 13, 2003 (the
"Agreement"), by and between BLONDIE ROCKWELL, INC., a New York corporation with
offices at c/o Erving Wonder Management, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ (the "Licensor") and INNOVO AZTECA APPAREL, INC., a California corporation
with offices at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ (the
"Licensee").
W I T N E S S E T H:
WHEREAS, the parties hereto have entered into that certain Deal
Memorandum, dated as of February 13, 2003 (the "Deal Memorandum");
WHEREAS, the parties wish to replace and supersede the Deal Memorandum
with this Agreement; and
WHEREAS, to the best of its knowledge, Licensor warrants that it is
the sole and exclusive owner of certain copyrights and trademarks, which
copyrights and trademarks and any registrations therefor are more particularly
described in Schedule A annexed hereto, and the parties desire to enter into
this Agreement with regard to the licensing to Licensee of the rights to utilize
such intellectual property.
In consideration of the mutual covenants and agreements hereinafter
contained on the part of each of the parties hereto to be kept, observed and
performed, and for such other good and valuable consideration, receipt of which
is hereby acknowledged, the parties hereto covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms and
phrases shall have the following meanings:
"Advance" shall mean an advance payment on account of Royalties
payable hereunder in accordance with Sections 4(a) and 4(d).
"Affiliate" shall mean any person, corporation or other entity which
directly or indirectly controls, is controlled by, or is under common control
with a party. "Control" shall mean possession, directly or indirectly, of power
to direct or cause the direction of management or policies of any such person,
corporation or entity, through ownership of voting securities, by contract or
otherwise.
"Annual Period" shall mean the period from the date of execution of
this Agreement through July 31, 2004, which shall be the first Annual Period
hereunder, and each consecutive 12-month period ending July 31st thereafter
during the Term.
"FOB" shall mean freight on board.
"FOB Out Sales" shall mean when Licensee's customer located in the
Territory takes title to any Licensed Products outside the Territory and/or
bears the risk of loss of Licensed Products manufactured and shipped to the
customer from outside the Territory.
"Guaranteed Minimum Royalty(ies)" or "GMR" shall mean the guaranteed
minimum royalties payable by Licensee under Section 4 hereof.
"Initial Marketing Date" shall mean August 1, 2003.
"Laws" shall have the meaning set forth in Section 7(f) hereof.
"Licensed Channels of Distribution" shall mean only those retail
stores listed in Schedules B-1 and B-2 annexed hereto and such other retail
stores, if any, as may be approved in writing by Licensor, in its sole
discretion. Licensed Channels of Distribution approved by Licensor, including
those set forth in Schedule B-1 and B-2, shall remain in effect from the date
hereof through July 31, 2004, and thereafter from August 1st in any Annual
Period through the following July 31st. All Licensed Channels of Distribution
for any following period must be approved in writing by Licensor in its sole
discretion. Licensor will not disapprove any channel of distribution which has
been previously approved unless Licensor has a reasonable basis to believe that
the continued approval of such channel of distribution will cause material
damage to Licensor's business or to the Trademarks or Property.
"Licensed Products" shall mean the item or items of merchandise
covered by the license granted under this Agreement, as set forth in Schedule C
annexed hereto.
"Manufacturer" shall mean any third party, including but not limited
to Innovo, Inc., Licensee's Affiliated subsidiary, who manufactures or produces
for Licensee any Licensed Products or Packaging, advertising or promotional
materials for Licensed Products or any components of any of the foregoing.
"Minimum Net Sales" shall mean the minimum amount of Net Sales of
Licensed Products for the related Annual Period specified in Section 4(e)
hereof.
"Net Sales" shall mean the gross invoice or contract price charged for
Licensed Products by Licensee, less only (1) refunds, credits and allowances
actually made or allowed to customers for returns or in lieu of returns, and (2)
customary trade discounts (including co-op advertising, volume discounts or
other allowances), excluding anticipations afforded to and actually taken by
customers in payment for Licensed Products; provided, however, that the
aggregate deductions for all of the aforesaid items as provided in subsections
(1) and (2) in any Annual Period shall in no event exceed (a) seventeen and one
half (17.5%) percent of sales of Licensed Products in the first year of the
Initial Term, and (b) twelve and one half (12.5%) percent during any year
thereafter during the term. In computing Net Sales, no costs incurred in
manufacturing, selling, advertising (except for co-op advertising as described
above) or distributing the Licensed Products and no indirect expenses shall be
deducted, nor shall there be any deduction for uncollectible accounts.
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In the event of sales by Licensee of Licensed Products to a marketing
organization or any individual or company in whole or in part controlled by
Licensee, or to one or more distributors for ultimate sale to a retailer, or in
any transaction other than an arm's length transaction, the invoice price used
to determine Net Sales hereunder shall be the invoice price at which the
Licensed Products are resold by any such entity to an unrelated retail customer
in an arm's length transaction. Licensed Products shall be deemed sold when
shipped, sold, distributed, billed or paid for, whichever occurs first.
"Packaging" shall mean all tags, labels, cartons or containers, and
packing or wrapping material used or to be used by Licensee in connection with
the Licensed Products.
"Prime Rate" shall mean the prime rate of interest announced from time
to time by JPMorgan Chase Bank, or any successor thereto, in New York, New York.
"Property" shall mean Licensor's right, title, and interest in and to
the Trademarks.
"Royalty(ies)" shall mean the royalties to be paid by Licensee to
Licensor for or in connection with the license to use the Property granted under
this Agreement, provided for in Section 4 and all other applicable portions of
this Agreement.
"Term" shall mean the Term of this Agreement, provided for and defined
in Section 3.
"Termination Inventory" shall mean the inventory provided for in
Section 12(d), consisting of finished products and work in process, Packaging,
and advertising and promotional material on hand at the time of the termination
of this Agreement.
"Territory" shall mean the United States of America, including, but
not limited to, the United States, its territories and possessions, and all
United States military exchanges wheresoever located, unless an additional
territory is listed in Schedule D.
"Trademarks" shall mean only Licensor's trademarks and copyrights
referred to in Schedule A annexed hereto.
2. Grant of License.
(a) Subject to the terms and conditions set forth herein and except as
provided in Section 2(e) below, Licensor hereby grants to Licensee, and Licensee
hereby accepts from Licensor, an exclusive license to utilize the Property
solely in the Territory described herein during the Term of this Agreement, and
solely in connection with the manufacture, distribution, advertising, promotion
and sale of the articles and merchandise described herein as the Licensed
Products and solely for sale at retail through the Licensed Channels of
Distribution.
(b) During the Term of this Agreement, except as provided in Section
2(e) below, Licensor shall not grant to any other person or entity a license to
utilize the Property in
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connection with the manufacture, distribution or sale of the articles and
merchandise described herein as the Licensed Products in the Territory.
(c) Unless Licensor consents in writing, Licensee shall not sell or
otherwise provide Licensed Products for use as premiums (including those in
purchase-with-purchase promotions), promotions, give aways, fund-raisers, or
entries in sweepstakes, by direct mail or other direct marketing methods,
including, without limitation, home shopping television programs, or to
customers for inclusion in another product. However, Licensee may solicit orders
by mail from those retailers included in the Licensed Channels of Distribution
which include the Licensed Products in their mail order catalogs, or otherwise
sell Licensed Products by direct marketing methods as well as at retail.
Licensee must obtain Licensor's prior written consent to sell Licensed Products
to customers for resale through mail order catalogs, via the Internet, direct
mail or direct marketing methods. Notwithstanding anything to the contrary
herein, Licensee shall not be in breach of this Section 2 if (i) Licensee sells
Licensed Products on its website controlled by Licensee, or (ii) a retailer
listed on Schedule B-1 sells the Licensed Products on its website, provided,
however, that Licensee may not sell the Licensed Products to any such retailer
for resale via the Internet unless such retailer has a retail store open to the
public as its primary mode of distribution.
(d) Except for the rights to use the Property in connection with the
manufacture and sale of the Licensed Products in the Territory through the
Licensed Channels of Distribution expressly provided for herein, Licensor
reserves all rights to the use of the Trademarks and the Property. The license
hereby granted shall be used for the marketing and sale of Licensed Products
only in the Territory through the Licensed Channels of Distribution as described
herein. Except as provided herein, the Licensee shall not make use of or
authorize the use of the Property outside the Territory nor will it manufacture
or sell any Licensed Products that bear reference to the Property or Licensor's
name in any form to anyone for resale outside the Territory, or to anyone that
Licensee has reason to believe will sell same outside the Territory.
Notwithstanding the foregoing, Licensee may, at its own risk, manufacture or
cause Licensed Products that bear reference to the Property in any form to be
manufactured outside the Territory solely for sale and distribution within the
Territory through the Licensed Channels of Distribution. In connection
therewith, subject to Section 7(f) hereof, Licensee may, at its own risk,
develop, manufacture and produce Packaging, advertising or promotional material
bearing reference to the Property outside the Territory solely for sale and
distribution of the Licensed Products within the Territory through the Licensed
Channels of Distribution. Any Manufacturer performing work and permitted to
perform such work pursuant to Section 7(f) for Licensee hereunder must execute
and deliver to Licensor a Manufacturer's Agreement in the form substantially
identical to that annexed hereto as Schedule E before commencing any such work.
(e) Licensee agrees to sell Licensed Products only through the
Licensed Channels of Distribution. For the avoidance of doubt, Licensee may only
sell Licensed Products sold at "close-out price" (as defined in Section 6(i)
below) to the retailers listed on Schedule B-2 annexed hereto. Licensor
expressly hereby reserves and retains the right to manufacture, distribute and
sell tour merchandise (in the nature of T-shirts, hats, sweat shirts, backpacks,
bags, etc.) on tour and at retail stores which sell tour merchandise which tour
merchandise does not utilize the `Fetish' marks. So long as Licensee is not in
default in this Agreement, the Licensor
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will not manufacture, distribute, sell or license others to sell the Licensed
Products or any other items or merchandise under another brand name competitive
with the `Fetish' line associated with the artist professionally known as Eve in
the Territory.
(f) Licensee agrees that it will ship a representative line in
commercially reasonable quantities of Licensed Products not later than the
Initial Marketing Date.
(g) Licensee acknowledges that Licensor may hereafter grant licenses
to other licensees ("Other Licensed Parties") for use of the Property in
connection with the manufacture and sale of various products and merchandise
other than the Licensed Products. If Licensee or any Other Licensed Party
advises Licensor that there is or may be an existing or potential conflict in
the respective definitions of Licensed Products in this Agreement and the
products or merchandise covered by Licensor's agreement with such Other Licensed
Party, or if Licensor determines that any such conflict may exist, Licensor will
use reasonable efforts to resolve or cause the affected parties to resolve the
conflict; provided, that Licensor may at any time determine to resolve such
conflict by written notice of its determination to the affected parties and any
such determination made in good faith by Licensor will be binding and
controlling upon Licensee.
(h) Should Licensor receive and desire to accept an offer ("Third
Party Offer") from a third party ("Third Party") to manufacture, distribute
and/or sell the Licensed Products during the Term hereof in Canada, Europe
(namely the 15 member nations of the "CTM", Norway and Switzerland) or anywhere
else throughout the world during the Term, Licensor shall promptly disclose the
terms of such Third Party Offer in writing to Licensee (the "Offer Notice") and
offer to Licensee the right to match the terms of the Third Party Offer as
described in the Offer Notice. Licensee shall have thirty (30) days ("Notice
Period") from the receipt of such Offer Notice to notify Licensor whether it
intends to match the Third Party Offer. In the event Licensee elects to match
the Third Party Offer, Licensor agrees to enter into an agreement with Licensee
and be bound by the terms of such Third Party Offer. In the event that Licensee
elects not to match the terms of the Third Party Offer, Licensor shall be free
to enter into a deal with the Third Party after the expiration of the Notice
Period.
3. Term.
(a) This Agreement shall commence as of the date hereof and shall
continue until July 31, 2006, unless sooner terminated in accordance with the
terms of this Agreement (the "Initial Term").
(b) Licensee shall have the right to renew this Agreement for an
additional term of three (3) years, from August 1, 2006 to July 31, 2009 (the
"First Renewal Term") upon written notice to Licensor which must be given not
sooner than nine (9) months or later than six (6) months prior to expiration of
the Initial Term, provided that such renewal right shall be subject to the
following terms and conditions:
(i) At the time Licensee exercises any such renewal right
and upon commencement of the First Renewal Term, Licensee shall not be
in default under
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any of the material terms, conditions or covenants contained in this
Agreement; and
(ii) At the time Licensee exercises any such renewal right
and upon commencement of the First Renewal Term, Licensee shall have
met all Minimum Net Sales, Guaranteed Minimum Royalties and Guaranteed
Minimum Advertising Payments (as defined in Section 4 below) then
applicable under the terms of this Agreement; and
(iii) During the Initial Term, Licensee shall have achieved
Net Sales of Licensed Products in the aggregate amount of at least
Thirty Million ($30,000,000.00) Dollars, unless Licensor waives the
Thirty Million ($30,000,000.00) Dollars aggregate Net Sales figure
requirement at the time the First Renewal Term is exercisable;
provided, however, that in the event that Licensee is not in default
and has achieved at least Twenty Million ($20,000,000.00) Dollars in
aggregate Net Sales during the Initial Term, Licensee shall have a
right of first refusal to renew the Agreement for the First Renewal
Term on material terms at least equal to a third party offer received
by Licensor, within fifteen (15) days notice to Licensee of such
offer; and if not, Licensee's right to sell Licensed Products during
the First Renewal Term shall thereupon be terminated for all purposes,
unless such right is reinstated by written agreement of Licensor in
its sole and absolute discretion.
(c) Licensee shall have the right to renew this Agreement for a second
additional term of three (3) years, from August 1, 2009 to July 31, 2012 (the
"Second Renewal Term") upon written notice to Licensor which must be given not
sooner than nine (9) months or later than six (6) months prior to expiration of
the First Renewal Term; provided that such renewal right shall be subject to the
following terms and conditions:
(i) At the time Licensee exercises any such renewal right
and upon commencement of the Second Renewal Term, Licensee shall not
be in default under any of the material terms, conditions or covenants
contained in this Agreement; and
(ii) At the time Licensee exercises any such renewal right
and upon commencement of the Second Renewal Term, Licensee shall have
met all Minimum Net Sales, Guaranteed Minimum Royalties and Guaranteed
Minimum Advertising Payments (as defined in Section 4 below) then
applicable under the terms of this Agreement; and
(iii) During the First Renewal Term, Licensee shall have
achieved Net Sales of Licensed Products in the aggregate amount of at
least Fifty-Two Million Five Hundred Thousand ($52,500,000.00)
Dollars, unless Licensor waives the Fifty-Two Million Five Hundred
Thousand ($52,500,000.00) Dollars aggregate Net Sales figure
requirement at the time the Second Renewal Term is exercisable,
provided, however, that in the event that Licensee is not in default
and has achieved at least
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Thirty Million ($30,000,000.00) Dollars in aggregate Net Sales during
the First Renewal Term, Licensee shall have a right of first refusal
to renew the Agreement for the Second Renewal Term on material terms
at least equal to a third party offer received by Licensor, within
fifteen (15) days notice to Licensee of such offer; and if not,
Licensee's right to sell Licensed Products during the Second Renewal
Term shall thereupon be terminated for all purposes, unless such right
is reinstated by written agreement of Licensor in its sole and
absolute discretion.
(d) In the event that Licensee is not in default and has achieved at
least Forty Million ($40,000,000.00) Dollars in aggregate Net Sales during the
Second Renewal Term, Licensee shall have a right of first refusal to renew the
Agreement following the end of the Second Renewal Term on material terms at
least equal to a third party offer received by Licensor, within fifteen (15)
days notice to Licensee of such offer; and if not, Licensee's right to sell
Licensed Products following the end of the Second Renewal Term shall thereupon
be terminated for all purposes, unless such right is reinstated by written
agreement of Licensor in its sole and absolute discretion.
Such renewal(s) shall be on the same terms and conditions as provided
herein for the Initial Term, except for the Minimum Net Sales, Guaranteed
Minimum Royalties, Advertising Payments, Advertising Expenses and GMAP payable
during the renewal(s) pursuant to Section 4.
4. Rate and Terms of Payment; Advances and Reports.
(a) The Licensee agrees to pay to the Licensor a Royalty payment equal
to eight percent (8%) of all Net Sales (the "Royalty Rate") of all Licensed
Products by Licensee to the retail stores listed on Schedule B-1 and B-2 during
the Term of this Agreement; one percent (1%) of which (including Advances on
account of GMR) shall be paid directly to ▇▇▇▇ ▇▇▇▇▇▇ as a management fee, c/o
Erving Wonder Management, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Licensee
will pay to Licensor a non-refundable Advance of One Hundred Thousand
($100,000.00) Dollars against Guaranteed Minimum Royalties payable during the
first Annual Period, which shall be payable by Licensee upon its execution and
delivery of this Agreement. If the Term is extended for the First Renewal Term
from August 1, 2006 to July 31, 2009, Licensee shall pay to Licensor a
non-refundable Advance of Three Hundred Thousand ($300,000.00) Dollars against
Royalties payable during the First Renewal Term, which shall be payable by
Licensee upon the exercise of its option for said First Renewal Term pursuant to
Section 3(b). If the Term is extended for the Second Renewal Term from August 1,
2009 to July 31, 2012, Licensee shall pay to Licensor a non-refundable Advance
of Five Hundred Thousand ($500,000.00) Dollars against Royalties payable during
the Second Renewal Term, which shall be payable by Licensee upon the exercise of
its option for said Second Renewal Term pursuant to Section 3(c).
(b) All Royalties provided for under this Agreement shall accrue
whenever the respective Licensed Products are shipped, sold, billed or paid for,
whichever occurs first. Royalties shall also accrue on all Licensed Products
even if not billed, including, but not limited to introductory offers,
promotions or distributions, made by or on behalf of Licensee only and any sales
or distributions to Affiliates of Licensee ("Affiliated Sales"). The Royalties
payable on
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Affiliated Sales of Licensed Products in any quarterly period shall be
calculated based upon the Royalty Rate computed on the aggregate Net Sales with
respect to sales of Licensed Products to non-Affiliated parties during the
previous quarterly periods; provided, however, that if an Affiliate of Licensee
is a reseller of Licensed Products, the sale to such Affiliate shall not be
counted as a sale for Royalty calculation purposes but rather, the relevant sale
and selling price for Royalty calculation purposes shall be that of such
Affiliate to its customer. FOB Out Sales are permitted hereunder only if a
specific FOB Out Sales Royalty rate has been specified on Schedule F. If no such
FOB Out Sales Royalty rate has been specified on Schedule F, and if Licensee
wishes to make FOB Out Sales, it must obtain Licensor's written approval prior
to making any FOB Out Sales, and an appropriate Royalty rate shall be negotiated
and documented for such sales.
(c) Royalties shall be paid quarterly within twenty (20) days
following the conclusion of each calendar quarter during the Term hereof,
commencing on the twentieth (20th) day of April 2003, and continuing on the
twentieth (20th) day of each July, October, January and April thereafter during
the Term hereof. The obligation of Licensee to pay Royalties is absolute
notwithstanding any claim which Licensee may assert against Licensor. Licensee
shall not have the right to setoff, or to make any deduction from Royalties due
pursuant to the provisions hereof for any reason whatsoever; provided, however,
that this subsection shall not prohibit a set off or deduction from Royalties in
the case of a claim by Licensee against Licensor which has become a liquidated
amount as the result of a decision by a court or an agreement of the parties.
(d) (i) During each Annual Period, Licensee shall pay to the Licensor
Royalties which are equal to the greater of (A) the Royalties provided by
Section 4(a) based on Licensee's Net Sales during each such year, or (B) the
minimum amount of Royalties set forth below (the "Guaranteed Minimum Royalties"
or "GMR" for each Annual Period).
(ii) Licensee shall pay to Licensor as an Advance on account of
Guaranteed Minimum Royalties due for each Annual Period described below, an
amount equal to twenty five (25%) percent of GMR payable for that Annual Period
on the first day of each calendar quarter during that Annual Period (i.e., on
each April 1, July 1, October 1 and January 1), commencing with the first
calendar quarter for that Annual Period, except that during the first Annual
Period such payments will be made in five installments, the first of which in
the amount of One Hundred Thousand ($100,000.00) Dollars shall be payable on
execution of this Agreement and the second installment in the amount of One
Hundred Thousand ($100,000.00) Dollars shall be due on April 13, 2003, and three
additional quarterly payments of One Hundred Forty-Six Thousand Six Hundred and
Sixty-Six Dollars and Sixty-Six Cents ($146,666.66) each due and payable
beginning with the first day of the first quarter following the Initial
Marketing Date. During the second Annual Period of the Initial Term, payment in
the amount of Two Hundred Thousand ($200,000.00) Dollars shall be made at the
start of each quarter in the second Annual Period of the Initial Term. During
the third Annual Period of the Initial Term, payment in the amount of Two
Hundred Forty Thousand ($240,000.00) Dollars shall be made at the start of each
quarter in the third Annual Period of the Initial Term. Such Advances on account
of GMR for any Annual Period will be payable only to the extent not earned by
Royalties or Advances otherwise paid to Licensor for that Annual Period.
Royalties payable for any Annual Period during the Initial Term which are in
excess of the GMR for that Annual Period may be applied to
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reduce the GMR for any subsequent Annual Period only during the Initial Term.
Thereafter, in no event will Royalties payable for any Annual Period during any
Renewal Term which are in excess of the GMR for that Annual Period be applied to
reduce the GMR for any subsequent Annual Period.
For example, in the event Licensee achieves Net Sales in the aggregate
amount of Thirty Million ($30,000,000.00) Dollars during the first Annual Period
of the Initial Term, Licensee may apply such excess Net Sales of Twenty-Two
Million ($22,000,000.00) Dollars to reduce the Guaranteed Minimum Net Sales to
zero in the second and third Annual Periods of the Initial Term. Moreover,
Licensee shall not be required to remit GMR payments to Licensee for the balance
of the Initial Term under the foregoing scenario, but would be required to remit
Royalty payments to Licensor based on Net Sales in the second and third Annual
Periods of the Initial Term. By way of further example, in the event Licensee
achieves Net Sales in the aggregate amount of Nine Million ($9,000,000.00)
Dollars during the first Annual Period of the Initial Term, Licensee's
Guaranteed Minimum Net Sales would be reduced in the second Annual Period of the
Initial Term from Ten Million ($10,000,000.00) Dollars down to Nine Million
($9,000,000.00) Dollars and Licensee's GMR Advance payments to Licensor in the
second Annual Period of the Initial Term would be reduced from Eight Hundred
Thousand ($800,000.00) Dollars down to Seven Hundred Twenty Thousand
($720,000.00) Dollars, payable in equal quarterly installments. Under this
scenario, the third Annual Period of the Initial Term would be unaffected by the
surplus Net Sales in the first Annual Period of the Initial Term. In no event
will GMR payable during the Initial Term which are in excess of the GMR for the
Initial Term be applied to reduce the GMR for any renewal term. Moreover, the
formulation described herein shall only be applicable to the Initial Term and
not to any renewal terms hereunder.
(iii) Notwithstanding anything to the contrary herein, the GMR payable
for each Annual Period of the Initial Term, including the Renewal Term if the
Initial Term is extended, will be due and payable in full whether or not this
Agreement is hereafter terminated before completion of such Annual Period. In
the event of termination and except as otherwise expressly provided herein, the
entire unpaid amount of the GMR payable for the twelve (12) month period
following the date of such termination will be due and payable on the date of
such termination of this Agreement, notwithstanding that surplus Net Sales had
been achieved in any prior year of the Initial Term. Notwithstanding the
foregoing, if this agreement is wrongfully terminated by Licensor, or validly
terminated by Licensee based upon a material breach by Licensor of the terms
hereof which has not been cured after thirty (30) days prior written notice of
such breach has been given by Licensee to Licensor, then and only in such
events: (x) Licensee shall only be obligated for payment of Royalties on Net
Sales realized by it in the Annual Period in which such termination takes place
and for any prior period, and (y) Licensee shall not be obligated for payment of
any unpaid GMR for that Annual Period which relates to any payment due beyond
the date of termination, or for any subsequent Annual Period.
(e) (i) During each Annual Period of the Term hereof, Licensee must
realize Net Sales of Licensed Products ("Minimum Net Sales"), and pay Guaranteed
Minimum Royalties, equal to or in excess of the following:
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Annual Periods During Term Minimum Net Sales GMR
-------------------------- ----------------- ---
Initial Term
------------
February 13 2003 - July 31, 2004 $ 8,000,000 $ 640,000
August 1, 2004 - July 31, 2005 10,000,000 800,000
August 1, 2005 - July 31, 2006 12,000,000 960,000
First Renewal Term
------------------
August 1, 2006 - July 31, 2007 15,000,000 1,200,000
August 1, 2007 - July 31, 2008 17,500,000 1,400,000
August 1, 2008 - July 31, 2009 20,000,000 1,600,000
Second Renewal Term
-------------------
August 1, 2009 - July 31, 2010 25,000,000 2,000,000
August 1, 2010 - July 31, 2011 25,000,000 2,000,000
August 1, 2011 - July 31, 2012 25,000,000 2,000,000
(ii) If during the first or second Annual Period hereunder (ending
July 31, 2004, and July 31, 2005, respectively), Licensee's Minimum Net Sales
for the first Annual Period are not greater than or equal to Eight Million
($8,000,000.00) Dollars or for the second Annual Period are not greater than or
equal to Ten Million ($10,000,000.00) Dollars, Licensee shall not be deemed to
be in default hereunder for such first or second Annual Period, so long as
Licensee timely pays to Licensor Six Hundred Forty Thousand ($640,000.00)
Dollars GMR required for the first Annual Period and Eight Hundred Thousand
($800,000.00) Dollars GMR required for the second Annual Period, as provided
under this Section.
(iii) If, in any Annual Period subsequent to the second Annual Period,
Licensee fails to meet the Minimum Net Sales requirement set forth above for
such subsequent Annual Period, whether or not Licensee has paid the GMR with
respect to such Annual Period, Licensor shall have the right to terminate this
Agreement by written notice to Licensee at any time during the 45-day period
commencing on the date on which Licensor has received Licensee's quarterly
statements under Section 4(g) for all of the quarters contained in the Annual
Period during which Licensee fails to meet its Minimum Net Sales requirements.
(iv) Notwithstanding Section 4(e)(iii) above, if in any Annual Period
subsequent to the second Annual Period Licensee fails to meet the Minimum Net
Sales requirement for such subsequent Annual Period but achieves at least ninety
percent (90%) of Minimum Net Sales requirements for such Annual Period, then, in
only such event, Licensee shall not be deemed to be in default hereunder for
such Annual Period, so long as Licensee timely pays to Licensor the GMR required
for such Annual Period; further provided, that Licensee may only utilize this
Section 4(e)(iv) once during the Term. In the event that Licensee utilizes this
Section 4(e)(iv), this Section 4(e)(iv) shall become null and void and shall be
of no force and effect during the remainder of the Term hereof.
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(f) (i) In addition to the Royalty payments provided hereby, Licensee
shall pay to Licensor during each Annual Period of the Term hereof, except as
otherwise expressly provided in paragraph 4 (f) (ii), a payment on account of
advertising expenses incurred by Licensor (the "Advertising Payment") equal to
the greater of one (1%) percent of the Minimum Net Sales for that Annual Period,
as provided by paragraph 4(e)(i) ("Guaranteed Minimum Advertising Payment" or
"GMAP"), or one (1%) percent of Licensee's actual Net Sales in such Annual
Period. The Advertising Payments shall be made on a quarterly basis, within
twenty (20) days following the end of each calendar quarter during the Term, at
the same time Royalty payments are made. Licensor shall spend the Advertising
Payments received by it from Licensee for the services of ▇▇▇▇ ▇▇▇▇▇▇, and/or
marketing, advertising and promoting the Property and Trademarks in general in
any manner determined by Licensor in its discretion. All such promotional
expenditures shall be made by Licensor in such manner and in such forms of
promotion and advertising as Licensor deems to be appropriate, in its
discretion, and may include, without limitation, payments for marketing,
advertising, public relations, special events and promotions, and production,
administration and other costs related thereto.
(ii) The Advertising Payment for the first Annual Period will be
Eighty Thousand ($80,000.00) Dollars, payable in five installments, as follows:
Twelve Thousand Dollars ($12,000.00) on execution of this Agreement, Twelve
Thousand Dollars ($12,000.00) on April 13, 2003, and three additional payments
of Eighteen Thousand Six Hundred Sixty Six Dollars and Sixty Six Cents
($18,666.66) on August 1, 2003, each due and payable beginning with the first
day of the first quarter following the Initial Marketing Date, unless such
payments are due earlier as a result of Licensee's Net Sales as provided in
subsection 4(f)(i). For each calendar quarter thereafter, Licensee shall pay to
Licensor the greater of the GMAP (on a quarterly basis), or the Advertising
Payment otherwise due, until the GMAP for that Annual Period is paid in full.
Thereafter, Licensee shall make regular Advertising Payments for the remainder
of the Annual Period, if any is due, based on its Net Sales. If the Advertising
Payment of Eighty Thousand ($80,000.00) Dollars to be made by Licensee for the
first Annual Period hereunder exceeds one (1%) percent of Licensee's Net Sales
during such Annual Period, any such excess paid by Licensee may be applied by
Licensee to reduce the Advertising Payments payable by Licensee during any
subsequent Annual Period; provided that any such excess Advertising Payment made
by Licensee for any Annual Period after the first Annual Period may not be so
applied by Licensee.
(iii) In addition to the Royalty Payments and Advertising Payments
provided hereby, Licensee agrees to spend during each Annual Period of the Term
hereof, funds on account of advertising expenses for purposes of advertising and
promoting the Licensed Products in the Territory equal to the greater of one
(1%) percent of the Minimum Net Sales for that Annual Period, as provided by
paragraph 4(e)(i), or one (1%) percent of Licensee's actual Net Sales in such
Annual Period (the "Advertising Expenses"). All advertising materials shall be
subject to the same approval process as Licensed Products set forth in Section
7(a) below. Licensor and Licensee hereby acknowledge and agree that Licensee
shall not be responsible for any payments in connection with the services of
▇▇▇▇ ▇▇▇▇▇▇.
11
(g) Simultaneously with the submission of all payments, and not later
than the thirty (30) days after the end of each calendar quarter, but regardless
of whether any payment is due, Licensee shall submit a quarterly report in a
form acceptable to Licensor setting forth the number, description and invoice
price of each of the Licensed Products sold (by Style Number), the gross sales
price, returns actually received, and discounts and allowances actually granted,
the Net Sales, names and addresses of customers and quantities sold to each
customer and any other information that may be reasonably required by Licensor
for each month during the previous calendar quarter. Any Royalty payment and/or
any Advertising Payment or Advertising Expense which is not paid or expended on
or before the due date thereof shall thereafter bear interest at the Prime Rate,
plus four (4%) percent, which shall be payable on demand.
(h) The receipt or acceptance by Licensor of any Royalty statements
furnished pursuant to this Agreement, or the receipt or acceptance of any
Royalties, shall not preclude the Licensor from questioning the correctness
thereof at any time thereafter for a period of three (3) years after termination
of this Agreement.
(i) All payments made by the Licensee under this Agreement shall be
made free and clear of, and without deduction or withholding for or on account
of, any present or future income, turnover, sales, value added stamp or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
(individually or collectively, "Taxes"), now or hereafter imposed, levied,
collected, withheld or assessed by any tax or other governmental authority (a
"Governmental Authority"), excluding all present and future income taxes imposed
on the Licensor or any of its direct or indirect members by their respective
countries of residence ("Excluded Taxes"). In the event that any Taxes (other
than any Excluded Taxes) are now or hereafter required to be imposed, levied,
collected, withheld, paid and/or assessed under applicable law from, or in
respect of, any amount otherwise payable to the Licensor hereunder (including
any turnover, sales, value-added or similar type of Taxes imposed by any
Governmental Authority and for which the Licensor and/or any of its direct or
indirect members or beneficial owners are liable)(individually or collectively,
the "Non-Excluded Taxes"), then the amount so payable by the Licensee to the
Licensor shall be increased and grossed-up to the extent necessary to yield to
the Licensor and its direct and indirect members and beneficial owners (after
payment, and/or the taking into account, of all such Non-Excluded Taxes) the
amount specified in the Agreement as being payable to the Licensor. Whenever any
Non-Excluded Taxes are payable by the Licensee, as promptly as possible
thereafter the Licensee shall send to the Licensor a certified copy of an
original official receipt received or other documentary evidence by such
Licensee showing payment thereof. If the Licensee fails to pay any Non-Excluded
Taxes when due to the appropriate Government Authority or fails to remit to the
Licensor the required receipts or other required documentary evidence, the
Licensee shall indemnify the Licensor and all of its direct and indirect members
and other beneficial owners for any incremental Taxes and any interest or
penalties that may become payable by the Licensor or any of its direct or
indirect members or beneficial owners as a result of any such failure. The
agreements in this subsection shall survive the termination of this Agreement
and the payment of all amounts payable hereunder.
(j) Licensee shall be entitled to receive fifteen percent (15%) of
royalties received by Licensor from any other licensee of Licensor of the
Licensed Property only if Licensee first
12
introduces such third party licensee to Licensor and Licensor enters into a
license agreement with such third party licensee during the Term of this
Agreement.
5. Licensee's Books and Records.
(a) Licensee shall maintain separate and appropriate books of account
and records, of all its operations under or in connection with this Agreement
all in accordance with generally accepted accounting principles (including,
without limitation, a sales journal, sales return journal, cash receipt book,
general ledger, purchase orders, cutting tickets, and inventory records) and
shall make accurate entries concerning all transactions relevant to this
Agreement.
(b) The Licensed Products shall be assigned style numbers unique from
any products other than the Licensed Products which Licensee may manufacture
and/or sell. The style number assigned to each Licensed Product shall be
identical to the style number utilized to identify the Licensed Products in all
of Licensee's books and records.
(c) All sales of the Licensed Products shall be made on numbered
invoices and shall:
(i) contain a statement that it shall only be paid to an account
credited by Licensee or its assignee; and
(ii) be recorded monthly on a computer printout analysis containing
sales related only to the Licensed Products so as to easily trace the source of
the reported sales.
(d) During the Term and for three (3) years thereafter, Licensor, and
its employees, agents and representatives, shall have the right, at its own
expense, on reasonable notice to Licensee (but in no event need such notice be
more than ten (10) business days) and during regular business hours, to examine,
photocopy, and make extracts from such books of account and other records,
documents and materials (including, but not limited to, invoices, purchase
orders, sales records, and reorders) to the extent needed to confirm sales,
Royalties, Advertising Payments, Advertising Expenses and other matters relating
to compliance with this Agreement, which shall be maintained and kept by
Licensee during the period specified herein.
(e) All such books of account and records shall be kept available by
Licensee at the address referred to herein for three (3) years after the
termination, expiration, or mutual release from this Agreement.
(f) If any examination or audit by Licensor for any period discloses
that the actual Net Sales for that period exceeded those reported by more than
three percent (3%), Licensee shall pay the cost of such examination or audit in
addition to the amount of Royalties and Advertising Payments that such
examination or audit discloses is owed to Licensor together with interest on the
unreported amount at a rate equivalent to the Prime Rate plus four (4%) percent.
All payments due pursuant to this Section must be made within fifteen (15) days
after Licensee receives notice thereof. Licensor shall not have the right to
examine or audit Licensee's books and records more than once in any twelve (12)
month period during the Term hereof, except that
13
if any such examination or audit discloses that actual Net Sales for the period
reported exceeds the Net Sales reported by more than three (3%) percent,
Licensor will thereafter have an unlimited right to examine or audit Licensee's
books and records in accordance herewith.
(g) As soon as practicable, but in no event later than one hundred
twenty (120) days after the end of each fiscal or calendar year (as applicable)
of Licensee, Licensee shall furnish Licensor with a copy of Licensee's financial
statements for such fiscal or calendar year (as applicable), which shall be
certified by an independent certified public accountant or, if Licensee does not
issue audited financial statements, by Licensee's chief financial officer or
chief executive officer.
6. Exploitation of License.
(a) (i) During the Term hereof, Licensee agrees to use its best
efforts and diligence to continuously sell, distribute, advertise and promote
the Licensed Products throughout the entire Territory. Licensee agrees that its
policy of sale and distribution of the Licensed Products will be of a high
standard and to the best advantage of the Licensed Products.
(ii) Should Licensee fail to launch and/or to sell commercially
reasonable quantities of any category of Licensed Products throughout the
Territory during the first twenty four (24) months following execution hereof,
all rights granted to Licensee hereunder with respect to such category of
Licensed Product shall revert back to Licensor in all respects.
(b) Licensee shall at all times maintain, or contract for, facilities
and personnel adequate to fulfill its obligations under this Agreement.
(c) During each Annual Period, Licensee shall timely fill all orders
and ship all Licensed Products for which Licensee has accepted and confirmed
purchase orders, other than canceled orders or orders from those customers that
do not receive appropriate credit approval.
(d) Licensee shall have the exclusive right to establish prices and
terms for the sale of Licensed Products. Licensee shall provide Licensor, in
advance of each selling season, with line sheets and price lists, and Licensee
shall promptly notify Licensor of any change in pricing.
(e) Licensee shall provide Licensor, upon request, with the names and
addresses of all facilities at which the Licensed Products are stored, and
Licensee shall use its best efforts to make all necessary arrangements to allow
Licensor or its representatives to have reasonable access to all such facilities
upon reasonable advance notice during regular business hours for the purposes of
conducting inspections to insure that Licensee is in compliance with this
Agreement.
(f) intentionally deleted.
(g) Licensee shall include in all of its written orders to
manufacturers, distributors and retailers for the sale of Licensed Products such
language as is necessary to seek to prevent diversion of the Licensed Products
from the Licensed Channels of Distribution. Licensor
14
acknowledges that the following language is reasonable:
"Manufacturers and Distributors authorized to manufacture,
distribute or otherwise act pursuant to the License Agreement with
Licensor:
1. Shall not manufacture or distribute the authorized
Licensed Products to the order of anyone but the Licensee, will
invoice only the Licensee, will not ship to anyone other than the
Licensee and will not ship after the expiration date of the License
Agreement.
2. Shall not distribute or sell the authorized Licensed
Products to anyone other than authorized distributors or retailers as
designated by Licensee from time to time.
3. Shall not subcontract production or distribution of the
authorized Licensed Products or components which contain any of the
specified marks and property without Licensee's written consent.
4. Shall not (without Licensee's written consent)
manufacture merchandise utilizing any of the specified marks and
property and/or tradenames owned or otherwise authorized for use by
Licensee other than the authorized Licensed Products."
(h) Licensee shall include in all of its written orders for the
purchase of materials and/or finished goods from third parties such language as
is necessary for the purpose of prohibiting the sale or other disposition of any
products bearing the Trademarks by such suppliers other than to Licensee.
(i) Licensee must obtain Licensor's prior written consent to sell any
Licensed Products for a price ("close-out price") less than seventy-five percent
(75%) of the established sales price (but excluding make-up orders, sales by
Licensee to the Licensor and cancellations); provided, however, that in the
event Licensee obtains Licensor's prior written consent to sell Licensed
Products at a close out price, such sales in any event shall not in the
aggregate during any Annual Period hereunder comprise more than twenty percent
(20%) of all Net Sales during any such Annual Period, and my only be sold to
those retailers listed on Schedule B-2 annexed hereto. For the purpose of this
provision, make-up orders means special direct shipments to national retailers
and cancellations means specially produced goods for which orders were canceled.
(j) Licensee agrees to participate by, among other things, providing
an adequate number of samples for display for the MAGIC Show at least once per
year, and at least one other major trade show and other reasonably appropriate
trade shows, to be mutually agreed upon by the parties hereto, utilizing booths
approved by Licensor. Licensee shall be responsible for all costs associated
with such trade shows. Licensee's payment and expenses in connection with such
shows may not be applied to reduce any other payment due to Licensor hereunder.
15
(k) Licensee shall attend meetings called by Licensor from time to
time to discuss any matters relating to this Agreement. All such meetings will
be held at Licensor's offices and may be called by Licensor upon at least thirty
(30) days prior written notice to Licensee, but not more frequently than one
time in each calendar quarter.
(l) Licensee shall cooperate with Licensor and other licensees of
Licensor (domestic and international) in connection with the exchange of ideas,
design and other information relative to the manufacture, sale and distribution
of Licensed Products (including, but not limited to, furnishing a reasonable
quantity of items in current production and related incidental materials to be
distributed among such other licensees), but nothing shall require Licensee to
divulge any of its trade secrets or other confidential information.
(m) All advertising and promotion is subject to the prior approval of
Licensor as provided in Section 7(a).
(n) (i)Licensee shall at all times employ at least one full-time
employee who shall devote his or her full business time to the sale and
marketing of the Licensed Products. Such employee shall be reasonably qualified
and experienced to carry out his or her duties.
(ii) Licensee shall at all times maintain adequate space at its
showroom for the attractive display of the Licensed Products, which shall be
separate and distinct from the space allocated to any other products marketed by
Licensee. On or before December 31, 2004, Licensor may secure a showroom
("Licensor Showroom") for the advertising, promotion, display and sale of the
Licensed Products as well as other products and merchandise to be sold by other
licensees of Licensor. At such time, Licensee agrees to occupy, during the
remainder of the Term of this Agreement, at least six thousand (6,000) square
feet of such showroom, designated by Licensor in Licensor's sole discretion, for
the advertising, promotion, display and sale of the Licensed Products and shall
remit to the Licensor payments, based on its pro rata usage of the Licensor
Showroom of the rent, which shall include, without limitation, any and all
charges that Licensor is required to pay in connection with such showroom (the
"Rent"). By way of example only, if the Licensor Showroom is 20,000 square feet,
and the Rent is $20,000 per month, then Licensee shall remit to Licensor $6,000
per month. Such payments to Licensor shall be due at least five (5) business
days prior to the date that Licensor is required to pay the Rent for the
Licensor Showroom. In the event of a breach of this Subsection or in the event
of expiration or termination of this Agreement for any reason, Licensee shall no
longer have the right to occupy the Licensor Showroom.
7. Quality Control.
Licensee shall cause the Licensed Products to meet and conform to high
standards of style, quality and appearance. In order to assure Licensor that it
is meeting such standards and other provisions of this Agreement, Licensee shall
comply with the following:
(a) Pre-Productions: Before commercial production and distribution of
any product bearing any reference to the Property or Trademarks, Licensee shall
submit to Licensor
16
and Licensor shall have the right to inspect and approve, all preliminary and
proposed final artwork, prototypes, mock-ups, design concepts, pre-production
and first-run production samples of each Licensed Product, including all styles,
colors and variations, together with its labels, tags, cartons and containers
and including Packaging and wrapping materials and all advertising and
promotional materials. All Licensee's submissions under this Section 7 shall be
accompanied by forms supplied by Licensor, using one (1) form for each
submission and filling in all necessary information. Licensor must approve in
writing all submissions, in its sole discretion, before Licensee shall be
entitled to distribute, advertise, use, produce commercial quantities of or sell
any item relating to any such submission. Licensor shall approve or disapprove
any submitted item within five (5) business days after receipt by Licensor. If
Licensor has not notified Licensee of its approval or disapproval within such
five (5) business day period, the item shall be deemed disapproved by Licensor.
In such event, however, following such five (5) business day period, Licensee
shall be entitled to provide to Licensor a written reminder as to the Licensor's
failure to approve or disapprove such submitted item and in the event that
Licensor fails to notify Licensee of its approval or disapproval of the
submission referred to in such reminder within three (3) business days of its
receipt thereof, then such submission shall be deemed to be approved. Approval
of an item or Licensed Product which uses particular artwork does not imply
approval of such artwork with a different item or Licensed Product or of such
item or Licensed Product with different artwork. Licensee acknowledges that
Licensor's approval of an item or Licensed Product does not imply approval of,
or license to use, any non-Licensor controlled elements contained in any item or
Licensed Product. After a sample of an item has been approved, Licensee shall
not make any changes without resubmitting the modified item for Licensor's
written approval. All decisions by Licensor relating to disapproval of any
Licensed Product shall be made in its sole discretion, and shall be final and
binding on Licensee and shall not be subject to review in any proceeding.
Licensor shall have the approval rights over the selection of the head designer
of the Licensed Products, which approval may be withheld in its sole discretion.
(b) Production Samples: Before selling or distributing any Licensed
Product, Licensee shall furnish Licensor with, at no charge, for its permanent
use, three (3) complete samples of each such product from the first production
run of each Manufacturer of the Licensed Products, including all styles and
colors, together with its labels, tags, cartons and containers (including
Packaging and wrapping materials) . If such samples do not conform to all
aspects of the Licensed Product as approved or if the quality of any such sample
does not meet the requirements of this Section 7, Licensor shall notify Licensee
and such item shall be deemed disapproved and all such items shall be promptly
destroyed. Licensee shall also furnish Licensor, upon request and free of
charge, with such reasonable number of additional samples of each Licensed
Product per Annual Period (in the minimum amount of three (3) additional samples
of each Licensed Product) for Licensor's promotional and other purposes, or for
comparison with earlier samples.
(c) Rejections and Non-Compliance: The rights granted under this
Agreement do not permit the sale of "seconds" or "irregulars". All submissions
or samples not approved by Licensor shall promptly be destroyed by Licensee.
Licensee shall advise Licensor regarding the time and place of such destruction
(in sufficient time to arrange for a Licensor representative to witness such
destruction, if Licensor so desires) and such destruction shall be attested to
in a certificate signed by one of Licensee's executive officers and submitted to
Licensor within fifteen
17
(15) days of the date on which the sample was not approved.
(d) Testing: Both before and after Licensed Products are put on the
market, Licensee shall follow reasonable and proper procedures for testing the
Licensed Products for compliance with laws, regulations, standards and
procedures, and shall permit Licensor (upon reasonable notice) to inspect its
and its authorized Manufacturer's testing, manufacturing and quality control
records, procedures and facilities and to test or sample Licensed Products for
compliance with this subsection and the other terms and conditions of this
Agreement. Licensed Products found by Licensor at any time not to comply with
applicable laws, regulations, standards and procedures shall be deemed
disapproved, even if previously approved by Licensor, and shall not be shipped
unless and until Licensee can demonstrate to Licensor's satisfaction that such
Licensed Products have been brought into full compliance.
(e) Revocation of Approval: In the event that (i) Licensee uses the
Property or Trademarks improperly or violates any term of this Section 7, or
(ii) Licensor becomes aware of (x) any material or content in any Licensed
Product, Packaging, advertising or marketing material relating to the Licensed
Products which is pornographic or promotes or depicts gambling, excessive
violence or the use of controlled substances that had not been previously
disclosed to Licensor, or (y) any material or content in any Licensed Product
that was not presented to Licensor for its approval, or (z) a ruling, decision,
finding or other occurrence or factor connected with any Licensed Product (e.g.,
an adverse ruling by the U.S. Consumer Products Safety Commission), which, in
the reasonable opinion of Licensor, reflects unfavorably upon the professional,
business or reputation of Licensor, then, in any such event, Licensor shall have
the right, in its sole discretion, to withdraw its approval of such Licensed
Product. In the event of such withdrawal, Licensor shall provide written notice
to Licensee and Licensee shall promptly thereupon cease the use of the Property
in connection with the manufacture, sale, distribution, advertisement or use of
such Licensed Product and all Licensee's inventory of such Licensed Product
shall be promptly destroyed.
(f) All the Licensed Products shall be manufactured, sold, marketed
and advertised in compliance with all applicable laws, rules and regulations
(collectively, "Laws"). Manufacture of Licensed Products may only be undertaken
directly by Licensee. No sublicensing is permitted under any circumstances
without the prior written approval of Licensor. Notwithstanding the immediately
preceding sentence, Licensee shall have the right to sublicense the accessory
category of Licensed Products to Innovo, Inc., its Affiliate subsidiary,
provided that: (1) such sublicensee shall be subject to all of the terms and
conditions of this Agreement and execute all documents reasonably required by
Licensor in connection therewith, (2) Licensee covenants on behalf of such
sublicensee that all manufacture of Licensed Products shall be in accordance
with all applicable Laws, and (3) no amounts due and payable to Licensor by
Licensee shall be reduced in any way due to such sublicense. Licensee shall
pretest all proposed and approved Licensed Products and shall cause truthful
labeling regarding the care, maintenance, and use to be affixed to the Licensed
Products as required by the Laws. Licensee shall immediately inform Licensor in
writing of any complaint by any consumer, governmental or other regulatory or
self regulatory body relevant to the Licensed Products, and the status and
resolution thereof. Licensee shall act expeditiously to resolve any such
complaint. Without limiting the provisions of this Section 7(f), Licensee
covenants on behalf of itself and on behalf
18
of all of Licensee's Manufacturers, as follows:
(i) Licensee and Manufacturers shall not use child labor in
the manufacturing, packaging or distribution of Licensed Products or
Packaging or advertising or promotional materials hereunder. The term
"child" refers to a person younger than the age for completing
compulsory education, but in no case shall any person younger than
fourteen (14) years of age be employed in the manufacturing, packaging
or distribution of Licensed Products or Packaging or advertising or
promotional materials hereunder.
(ii) Licensee and Manufacturers shall provide employees with
a safe and healthy workplace in compliance with all applicable Laws.
Licensee and Manufacturers agree to provide Licensor with all
information Licensor may reasonably request about manufacturing,
packaging and distribution facilities for the Licensed Products.
(iii) Licensee and Manufacturers shall only employ persons
whose presence is voluntary. Licensee and Manufacturers shall not use
prison labor, or use corporal punishment or other forms of mental or
physical coercion as a form of discipline of employees.
(iv) Licensee and Manufacturers shall comply with all
applicable wage and hour Laws, including minimum wage, overtime, and
maximum hours. Licensee and Manufacturers agree to utilize fair
employment practices as defined by applicable Laws.
(v) Licensee and Manufacturers shall comply with all
applicable environmental and other Laws.
(g) Licensee agrees that Licensor may make unannounced on-site
inspections of manufacturing, packaging and distribution facilities, upon 24
hours prior notice to Licensee, in order to monitor compliance with applicable
Laws. Licensee shall obtain an agreement with each third party Manufacturer and
supplier to comply with the provisions of Section 7(f).
(h) In the event of Licensee's unapproved or unauthorized manufacture,
distribution, use or sale of any Licensed Products or any Packaging or materials
bearing any reference to the Property, including promotional and advertising
materials, or the failure of Licensee to comply with any provisions of this
Section 7, Licensor shall have the right to: (i) immediately revoke Licensee's
rights with respect to any such Licensed Product licensed under this Agreement,
and/or (ii) at Licensee's expense, confiscate or order the destruction of such
unapproved, unauthorized or non-complying products, Packaging or materials. Such
right(s) shall be in addition to and without prejudice to any other rights
Licensor may have under this Agreement or otherwise.
Notwithstanding the foregoing, Licensee shall have an opportunity to
cure an instance of non-compliance contained in subsection (f) or (g) of this
Section within fifteen (15)
19
days of notice from Licensor if, in Licensor's good faith judgment, such
non-compliance (x) was done inadvertently, and (y) is correctable so that there
will be no damages caused to Licensor; provided, however, that Licensee shall
not have the right to cure any subsequent instances of such similar type
non-compliance.
(i) (i) All Licensed Products manufactured, sold and distributed
hereunder will be merchantable and fit for the purpose for which they are
intended.
(ii) The Licensed Products will conform at all times to all
applicable federal, state and local laws, rules, regulations,
ordinances and other enactments provided in the Territory or otherwise
applicable, and all applicable industry standards, including but not
limited to, those relating to product safety.
(iii) All Licensed Products will conform in all respects to
the samples approved by Licensor and that Licensee will not distribute
or sell any Licensed Products which are of a quality or standard
inferior to or different from the approved quality or are injurious to
the reputation and goodwill associated with the Property.
8. Trademarks and Trademark Protection.
(a) Licensee, from covenants of Licensor, acknowledges that Licensor
is the owner of all right, title and interest in and to the Property in any form
or embodiment and is also the owner of the goodwill attached or which shall
become attached to the Property in connection with the Licensed Products. Sales
by Licensee shall be deemed to have been made for purposes of trademark
registration for the benefit of Licensor, and all uses of the Property by
Licensee shall inure to the benefit of Licensor.
(b) At Licensor's request and expense, Licensee shall execute any
documents, including registered users agreements, reasonably required by
Licensor to confirm its ownership of all rights in and to the Property in the
Territory and the respective rights of Licensor and Licensee under this
Agreement. Licensee shall cooperate with Licensor at Licensor's expense, in
connection with the filing and prosecution by Licensor of applications in
Licensor's name relating to the use of the Property for Licensed Products in the
Territory.
(c) Licensee shall never challenge or encourage anyone to challenge
Licensor's ownership of or the validity of the Property or any application for
registration thereof or any trademark, copyright or other registration thereof
or any rights of Licensor thereto.
(d) Licensee shall not, at any time or in any manner, knowingly or
intentionally, engage in any activity or perform or permit any act which may in
any way adversely affect any rights of Licensor to the Property or any
registrations or applications for registration thereof or which may directly or
indirectly reduce the value of the Property or derogate or detract from the
repute thereof. To the extent that Licensee should have known that the
consequences of the aforesaid action taken by or on behalf of Licensee, or
caused by Licensee, was likely to materially adversely affect the interests of
Licensor, such action shall be deemed to be a breach of this subsection, whether
or not the Licensee engaged in such action knowingly and/or
20
intentionally.
(e) Licensee shall not use any other tradenames, trademarks or other
designations including, without limitation, Licensee's own corporate name or
tradename in connection with the Property in any consumer advertising and
publicity, labeling, packaging or printed matter utilized by Licensee in
connection with the Licensed Products. Licensee may, however, use its own
corporate name or tradename in connection with the Property in transactions
between and among the parties hereto, and with Manufacturers, merchants,
wholesale customers and others relating to: the manufacture of Licensed
Products; the creation and development of designs, styles, advertising,
promotional materials, packaging, printed matter and labeling of the Licensed
Products; and the wholesale sale of the Licensed Products. Licensee shall not
use the Property in combination with any other names or marks to form a new ▇▇▇▇
and shall not use the Property as a tradename or in any other manner other than
in connection with the manufacture, distribution, sale and promotion of Licensed
Products under this Agreement. Licensee will at all times make reference on the
Licensed Products and on all packaging and promotional materials used in
connection therewith that the Property is under license from the Licensor.
(f) Licensee recognizes the great value of the goodwill associated
with the Trademarks and acknowledges that such goodwill belongs exclusively to
Licensor, and that Licensee shall acquire no proprietary rights in the
Trademarks or their goodwill by virtue of this Agreement. Licensee further
recognizes that the Trademarks have acquired secondary meaning in the mind of
the public. Accordingly, Licensee agrees that the breach of its obligations
under this Agreement (other than breaches relating to the payment of monetary
sums) will cause Licensor irreparable damages which may not be compensable by
monetary damages, and that in the event of such breach, in addition to any other
rights or remedies which Licensor may have, Licensor may seek and obtain
injunctive relief, without the necessity of posting bond (unless otherwise
required by law).
(g) Licensee shall prominently display on all Licensed Products, all
Packaging materials, and in all advertising and promotional materials using the
Trademarks, such trademark and/or copyright notices as are reasonable and
customary.
(h) Licensee shall promptly notify Licensor if any legal action is
instituted against Licensee relating to Licensee's use of the Trademark.
Licensee shall also promptly notify Licensor of any counterfeiting or other
infringement of the Trademarks, or any diversion of the Licensed Products from
the Licensed Channels of Distribution, of which Licensee becomes aware. Licensor
shall have the right, but not the obligation, to institute legal action or take
any other actions which it deems necessary to protect its interest in the
Trademarks, and Licensee shall fully cooperate with Licensor in any such action,
provided that any out-of-pocket expenses of Licensee incurred in connection
therewith are paid or reimbursed by Licensor. Any monetary recovery resulting
from any such action shall belong solely to Licensor. If Licensor declines to
institute or continue any legal action, Licensee may, with the consent of
Licensor, which will not be unreasonably withheld, institute or continue same in
its name, at its sole expense, in which event any monetary recovery resulting
therefrom shall belong solely to Licensee; provided, however, that Licensee
shall pay to Licensor eight percent (8%) of any such recovery; and further
provided, that in such event Licensee shall not agree to any settlement or make
any admissions
21
on behalf of Licensor with respect to the Trademarks, Property or otherwise,
without the prior written consent of Licensor, which may withheld in its sole
discretion.
(i) Ownership of all intellectual property rights, whether recognized
currently or in the future, including, without limitation, copyright, patent and
trademark rights, in the Licensed Products and in all artwork, packaging, copy,
literary text, advertising material and promotion material of any sort utilizing
the Property, including all such material developed by Licensee, shall vest in
Licensor, and title thereof shall be in the name of Licensor. All such items and
all Licensed Products shall bear the copyright and trademark notices as are
reasonable and customary and any other legal notices, which Licensor may from
time to time prescribe. Any and all additions to, and new renderings,
modifications or embellishments of the artwork shall, notwithstanding their
invention, creation and use by Licensee and/or its representatives, affiliates
and/or sub-licensees, if applicable, be and remain the property of Licensor, and
Licensor may use, and license others to use the same, subject only to the
provisions of this Agreement. Licensee and/or its representatives, affiliates
and/or sub-licensees, if applicable, shall enter into written agreements (the
"Work For Hire Agreements") with all of its employees and independent
contractors (i) providing that all artwork and designs created by them in the
course of Licensee's performance under this Agreement shall be the property of
Licensee either as works for hire under United States copyright law or
otherwise, and (ii) obligating them to assign all rights in such artwork and
designs to Licensee. Upon the request of Licensor, Licensee shall submit to
Licensor for Licensor's approval copies of all such agreements prior to use
thereof. Licensee and/or its representatives, affiliates and/or sub-licensees,
if applicable shall not permit any of its employees or independent contractors
to obtain or reserve, by written or oral agreement or otherwise, any rights as
"authors" or "inventors" of any such artwork or designs (as such terms are used
in present or future United States copyright and/or patent statutes or judicial
decisions). Licensee shall furnish to Licensor at Licensor's request, full
information concerning the invention and creation of such artwork and designs,
together with the originals of assignments of all rights therein obtained from
all such third parties to Licensor. All such Work For Hire Agreements shall be
for the benefit of Licensor, and Licensee hereby assigns all of its rights in
and to such Work For Hire Agreements to Licensor. In the event that Licensor
wrongfully terminates this License Agreement, than all such items referred to in
this Subsection for which the rights have been vested in Licensor or assigned to
Licensor shall revert back to Licensee.
(j) Licensor may withdraw any or all elements of the Property, or any
component part thereof, from the terms of this Agreement if Licensor determines
that the exploitation thereof would or might violate or infringe the copyright,
trademark or other proprietary rights of third parties, or subject Licensor to
any liability or violate any law, court order, government regulation or other
ruling of any governmental agency, or if, on account of the expiration or sooner
termination of an agreement between Licensor and a third party from whom
Licensor has obtained certain underlying rights relating to the exploitation of
the Property hereunder or otherwise, Licensor shall no longer have the right to
act in the capacity herein contemplated on behalf of any third party or parties,
or if Licensor determines that it cannot adequately protect its rights in the
Property under the copyright, trademark or other laws of the Territory. Such a
withdrawal shall not be deemed a breach of this Agreement. Within five (5)
business days of such withdrawal, Licensee shall, at Licensor's sole discretion,
(a) destroy or (b) deliver to Licensor at Licensor's expense, any Licensed
Products which are in Licensee's inventory.
22
Licensor shall indemnify Licensee for the direct production cost of such
destroyed or returned Licensed Products; provided, however, that Licensee
furnishes Licensor with (i) a detailed inventory of such Licensed Products, (ii)
source documentation supporting such direct production costs, and (iii) an
affidavit of destruction, if applicable, in a form acceptable to Licensor,
evidencing the same. Notwithstanding the foregoing, in the event that Licensor
withdraws a significant element of the Property or Trademarks or Licensee is
precluded from selling the Licensed Products in a substantial portion of the
Territory as a result of Licensor substantially limiting the market in which
Licensee may sell the Licensed Products by limiting the Licensed Channels of
Distribution in accordance with this Agreement, then the parties shall negotiate
in good faith to amend the provisions of this Agreement as is necessary.
9. Representations and Warranties.
(a) Licensee warrants and represents that throughout the Term of this
Agreement:
(i) Licensee is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the full right, power and authority to enter
into this Agreement and to perform all of its obligations hereunder.
(ii) Neither the execution, delivery nor performance of this
Agreement by Licensee shall, with or without the giving of notice or
passage of time, or both, conflict with, or result in a default or
loss of rights under, any material agreement or understanding to which
Licensee or any of its affiliates is a party or by which it or any of
its properties may be bound.
(iii) The execution, delivery and performance of this
Agreement by Licensee has been duly and properly authorized by all
necessary corporate actions; and this Agreement constitutes the valid
and binding obligation of Licensee enforceable in accordance with its
terms.
(b) Licensor expressly disclaims any liability arising by virtue of
any right of consent or approval to, or any act, product or practice of
Licensee.
(c) Licensor represents and warrants to Licensee as follows: (i) that
it is a limited liability company duly organized, validly existing and in good
standing under the laws of New York and has full right, power and authority to
enter into this Agreement and to grant the rights provided hereunder to Licensee
in accordance with and as contemplated by this Agreement; (ii) it is the sole
and exclusive owner of all right, title and interest in and to the Property in
the Territory free and clear of any and all liens, claims, charges and other
encumbrances of any nature which conflict with the license granted herein; (iii)
the execution, delivery and performance of this Agreement by Licensor have been
duly and properly authorized by all necessary corporate actions; (iv) the
license granted herein does not conflict with, breach, or require the consent of
any person pursuant to any license or other agreement to which Licensor is a
party; and (iv) this Agreement constitutes the valid and binding obligation of
Licensor enforceable in accordance with its terms.
23
10. Indemnification.
(a) Except as provided in Section 10(b), the Licensee shall indemnify
and hold the Licensor, and its subsidiaries and affiliates, and their officers,
directors, shareholders, employees, representatives and agents, harmless against
any and all settlements, claims, demands, causes of action, judgments, damages,
losses, costs and expenses (including but not limited to attorney's fees and
litigation costs) of any kind whatsoever actually or allegedly suffered by any
person, persons, product, customers or property arising in any way out of, or
incidental to, any Licensed Products manufactured, sold or distributed by
Licensee or suffered or incurred by the Licensor in connection with any
allegedly unauthorized use of any trademark, patent, process, idea, method, or
device in connection with the Licensed Products except as authorized by this
Agreement, and also from any claims, suits, losses and damages arising out of
alleged defects in any Licensed Products manufactured, sold or distributed by
Licensee or resulting from any failure of Licensee, or any person, firm, or
entity acting under or through Licensee, to comply with the provisions of this
Agreement or to comply with any applicable Laws including, without limitation of
the foregoing, accidental death of, or injury to, persons or damage to property,
and claims of infringement of intellectual property rights, including
copyrights, trademark, trade dress and/or patent claims. The Licensee shall
obtain, at its own expense, product liability insurance from a recognized
insurance company qualified to do business in the State of New York, providing
adequate protection with a limit of liability (in addition to costs of defense)
of not less than Three Million ($3,000,000.00) Dollars per occurrence, insuring,
without limitation, against any claims, suits, losses or damages arising out of
any alleged defects in the Licensed Products, including actions for negligence
and strict liability in tort. Said product liability insurance shall be issued
by a company reasonably satisfactory to the Licensor, and a certificate
evidencing the paid policy naming the Licensor as an insured party will be
submitted to the Licensor by the Licensee within forty-five (45) days following
the commencement of this Agreement. Said policy will provide that the insurer
may not terminate it or materially modify it without thirty (30) day's prior
written notice to the Licensor. Payment for any indemnification due hereunder
will be made on demand. Excluded from this indemnity shall be all obligations
for indemnity arising out of claims that Licensee's use of the Property,
strictly in accordance with the terms of this Agreement, constitutes an
infringement or like violation of intellectual property rights of others.
(b) The Licensor shall indemnify, defend and hold the Licensee and its
subsidiaries and affiliates, and their officers, directors, shareholders,
employees, representatives and agents, harmless against any and all claims,
settlements, judgments, damages, losses, costs and expenses (including but not
limited to reasonable attorney fees and litigation costs) incurred by the
Licensee solely as a result of any claim by any person, firm or entity that
Licensee's use of the Property strictly in accordance with this Agreement
infringes upon any rights granted to such person, firm or entity by Licensor, to
the extent such claim arises in a jurisdiction that is covered by Licensor's
representations and warranties as specifically set forth in Section 9(c)(ii)
hereof, and solely in connection with advertising and promotional materials that
are developed or purchased by Licensor. Licensee shall not, however, be entitled
to any recovery for lost profits. Additionally, if by reason of any claims
referred to in this subsection Licensee is precluded from selling any stock of
Licensed Products or utilizing any materials in its possession or which come
24
into its possession by reason of any required recall, Licensor shall be
obligated to purchase such Licensed Products and materials from Licensee at
their out-of-pocket cost to Licensee, excluding overhead, but Licensor shall
have no other responsibility or liability with respect to such Licensed Product
or materials.
(c) Any party claiming a right to indemnification under this Section
10 ("indemnitee") shall give prompt written notice to the other party
("indemnitor") of any claim or legal proceeding which may give rise to such
right to indemnification (a "Claim"). Without limiting the foregoing, Licensee
agrees to give Licensor written notice of any product liability Claim made
against Licensee with respect to any Licensed Product within fifteen (15) days
of Licensee's receipt of the Claim. Without limiting the foregoing, Licensee
agrees to give Licensor written notice of any product liability Claim made or
suit filed with respect to any Licensed Product, any investigations or
directives regarding the Licensed Products issued by the Consumer Product Safety
Commission ("CPSC") or other federal, state or local consumer safety agency, and
any notices sent by Licensee to, or received by Licensor from, the CPSC or other
consumer safety agency regarding the Licensed Products within ten (10) days of
Licensee's receipt or promulgation of the Claim, suit, investigation, directive,
or notice. Without limiting the foregoing, Licensee agrees not to communicate
with the press regarding any product liability Claim, and not to confirm or deny
any information relating to such Claim without Licensor's prior written consent.
The indemnitor shall have the right to defend any Claim or action at its sole
cost and expense with counsel of the indemnitor's choice reasonably satisfactory
to the indemnitee. The indemnitee will at all times cooperate in all reasonable
respects with the indemnitor and counsel in the conduct of the defense of any
Claim or action giving rise to indemnification hereunder.
(d) Notwithstanding any provisions of this Section 10 or any other
provisions of this Agreement, Licensee will in no event have the right, in any
Claim or action or proceeding hereunder, to settle any claims or issues relating
to any Trademarks or the rights to ownership or utilization thereof.
11. Termination of Agreement. Licensor shall have the right to
terminate this Agreement without prejudice to any rights which it may have,
whether pursuant to the provisions of this Agreement or at law, or in equity, or
otherwise, upon the occurrence of any one or more of the following events:
(a) Licensor may terminate this Agreement, effective upon giving
Licensee written notice of termination, if (i) Licensee knowingly sells Licensed
Products outside of the Territory, (ii) Licensee is at any time in default under
subsection (f) of Section 7, or is at any time knowingly in default under any
other subsection of Section 7, or knowingly distributes Licensed Products to
non-licensed channels of distribution, (iii) any Transfer, merger or
consolidation of the Licensee or its parent company shall takes place so as to
change the actual control and management of Licensee or an assignment prohibited
by Section 15 shall take place, (iv) Licensee defaults on any obligations
secured by a security interest in or other lien or encumbrance on any Licensed
Products and fails to cure such default prior to the time the secured party acts
with respect to such Licensed Products, (v) Licensee fails to maintain in effect
any insurance required by the provisions of Section 10(a), (vi) Licensee ceases
manufacture or
25
sale of the Licensed Products for more than six (6) months during the Term;
(vii) Licensee is at any time in default under subsection 6(a)(i), unless such
breach if with respect to subsection (iv) or (v) hereof is cured, if curable,
within fifteen (15) business days after written notice thereof.
(b) Licensor may also terminate this Agreement, effective immediately
upon giving Licensee written notice of termination, if (i) Licensee fails to
make any payment due to Licensor under this Agreement when such payment is due
and fails to cure such default for five (5) business days or more after written
notice thereof from Licensor to Licensee, (ii) Licensee fails three (3) or more
times during any period of one year during the term of this Agreement to make
any payment due to Licensor for a period of ten (10) days or more after such
payment is due, (iii) the Licensee breaches or fails to perform any other terms
or provisions of this Agreement not otherwise provided for above, and such
breach or failure is not curable or, if curable, is not cured within twenty (20)
days after written notice thereof from Licensor, or (iv) Licensee files a
voluntary petition or proceeding in bankruptcy or under any federal or state
bankruptcy or insolvency or other law for the relief of debtors; consents to the
appointment of a receiver, custodian or liquidator for a portion of its business
or property; has filed against it and not dismissed within forty-five (45) days
an involuntary proceeding under any federal or state bankruptcy or insolvency or
other law for the relief of debtors or for the appointment of a receiver,
custodian or liquidator; (v) Licensee makes an assignment for the benefit of its
creditors; or (vi) Licensee ceases or admits in writing its intention to cease,
the manufacture, sale or distribution of Licensed Products or the conduct of its
business in the ordinary course.
12. Effect of Expiration or Termination.
(a) Upon the expiration or termination of this Agreement for any
reason whatsoever, all rights of Licensee under this Agreement shall terminate
and automatically revert to Licensor, except as otherwise provided herein. Upon
expiration or termination, Licensee shall immediately discontinue all use of the
Property and shall no longer have any right to use the Property or any variation
or simulation thereof in any manner or for any purpose whatsoever, except as
provided in Section 12(d). Licensee shall transfer to Licensor by such
documentation as Licensor may require all registrations, filings, trademarks,
copyrights and other rights with regard to the Property which Licensee may have
possessed at any time. Subject to the provisions of Section 12(e) concerning the
sale of Termination Inventory (as defined below), Licensee shall deliver to
Licensor, at Licensee's expense, all sketches, samples, designs or other matters
belonging to Licensor and relating to Licensed Products, and all Licensed
Products, packaging materials and advertising and promotional materials bearing
reference to the Property in any form.
(b) Upon termination or expiration of this Agreement for any reason,
including termination under Section 11(b), no trustee in bankruptcy, assignee
for the benefit of creditors, custodian, receiver, sheriff or court officer or
other successors to Licensee or its assets or business shall have any right to
continue this Agreement or to use or exploit the Property in any manner
whatsoever.
(c) Notwithstanding the provisions of Section 11(b), in the event that
under the United States Bankruptcy Code or any amendment or successor thereto
(collectively the
26
"Bankruptcy Code"), the trustee in bankruptcy of Licensee, as bankruptcy debtor,
is permitted to and does assume this Agreement and thereafter proposes to assign
this Agreement by an assignment which fulfills the applicable requirements of
the Bankruptcy Code, the trustee or Licensee shall notify Licensor of the
proposed assignment in advance, in writing, setting forth the name and address
of the proposed assignee, the proposed consideration for the assignment and all
other material terms and conditions of the proposed assignment. Such notice
shall be considered an offer to Licensor to have this Agreement assigned to
Licensor or its designee for the consideration (or its reasonable equivalent in
money) and under the other material terms in the notice. Licensor may exercise
the option and accept the offer by giving the trustee or Licensee, as
appropriate, written notice of exercise and acceptance within twenty (20) days
after Licensor receives the notice from the trustee or Licensee. If Licensor
fails to give notice and exercise the option within such twenty (20) day period,
the trustee or Licensee may complete the proposed assignment, but only to the
party and for the consideration and under the terms described in the notice.
(d) Within twenty (20) days after the expiration or termination of
this Agreement, Licensee shall prepare and deliver to Licensor a written
statement of Licensed Products and inventory on hand bearing reference to the
Property or Licensor's name in any form (the "Termination Inventory"), including
a complete and accurate schedule as of the date of expiration or termination of
all completed Licensed Products on hand that bear reference to the Property or
Licensor's name in any form; all work in process that bears reference to the
Property or Licensor's name in any form relating to Licensed Products on hand,
including uncut piece goods and products and materials in the process of
manufacture; all Packaging, advertising and promotional materials and other
documents or items that bear reference to the Property or Licensor's name in any
form in Licensee's possession or control or in the process of manufacture for
Licensee and the cost of each item included in such Termination Inventory.
Provided that this Agreement has not been terminated by Licensor as a result of
(i) Licensee's failure to make payments as agreed, or (ii) failure of the
Licensed Products to comply with governmental requirements, or (iii) violation
of any provision of this Agreement by Licensee regarding approval as to quality
or a violation which could result in jeopardy to Licensor's rights in the
Property by the continued sale of Licensed Products, Licensee shall be free to
sell the Termination Inventory to Licensor or to third parties for a period of
one hundred eighty (180) days after expiration or termination of this Agreement.
Any items in the Termination Inventory bearing reference to the Property or
Licensor's name in any form that have not been sold and remain after the one
hundred eighty (180) day selling period provided for in this Section shall have
all uses of the Property removed by Licensee, including but not limited to, all
tags and labels bearing any reference to the Property, from the Licensed
Products and shall thereafter deliver to Licensor, dispose of or destroy the
remainder of the packaging materials in accordance with Licensor's instructions.
(e) Immediately upon the expiration or termination of this Agreement
for any reason, Licensor shall have the free and unrestricted right to grant
other parties one or more licenses to use the Property in connection with the
manufacture, sale, distribution or advertising and promotion of Licensed
Products in the Territory or to enter into such other transactions as it desires
for the use of the Property with Licensed Products or in any other manner,
without any obligation of any kind to Licensee. The right of Licensee to sell
items of Termination Inventory
27
under Section 12 (d) is non-exclusive only and shall not in any manner limit
Licensor's right to enter into other licenses or transactions.
(f) Notwithstanding any termination of this Agreement, Licensor hereby
reserves all rights and remedies which are granted or available to it under this
Agreement or applicable law, and termination shall not be deemed to be an
exclusive remedy or to limit Licensor in any manner from enforcing any other
rights or remedies.
13. Submission of Agreement.
Submission of this Agreement to Licensee does not constitute an offer
to license; this Agreement, and the license referred to herein, shall become
effective only upon the execution thereof by Licensor and delivery to Licensee.
14. Notices.
Any notices or other communications required or permitted hereunder
shall be sufficiently given if delivered in hand to the party addressed, when
delivered by express courier or overnight mail, or three (3) days after being
sent by certified mail, return receipt requested, postage prepaid, addressed to
the parties at the addresses set forth below or at such other address or number
as any party entitled to notice hereunder may in a like manner from time to time
notify the other parties in writing. Approvals need not be sent to the parties
to whom copies are sent.
If to Licensor:
Blondie Rockwell, Inc.
c/o Erving Wonder Management
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq.
If to Licensee:
Innovo Azteca Apparel, Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇ ▇▇▇▇▇▇
28
with a copy to:
Innovo Group Inc.
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
15. Assignment.
This Agreement shall be binding upon and inure to the benefit of
Licensor, its successors and assigns. Notwithstanding the immediately preceding
sentence, this Agreement may be assigned by Licensor provided that prior written
consent is provided by Licensee. This Agreement and the rights hereunder are
personal to Licensee and shall not be transferred, assigned, sublicensed,
pledged or otherwise encumbered by Licensee, whether voluntarily, involuntarily,
by operation of law or otherwise ("Transfer"), without the prior written consent
of Licensor. Any Transfer shall be void and of no force and effect unless
permitted in accordance with the express provisions hereof.
16. No Joint Venture.
Nothing herein contained shall be construed to have the effect of
placing the parties hereto in the relationship of partners or joint venturers,
or create any agency, or any other relationship other than that of Licensor and
Licensee. No party shall have the power to obligate or bind any other party in
any manner whatsoever except as expressly provided for herein.
17. Modifications of Agreement; Previous Agreement.
This Agreement can only be extended, waived or modified by a writing
signed by both parties. There are no representations, promises, warranties,
covenants or undertakings other than those contained in this Agreement. This
Agreement, including the Schedules attached hereto, contains the entire
agreement between the parties concerning the subject matter hereof, and
supersedes any pre-existing agreement and any oral or written communications
between the parties concerning the subject matter hereof.
18. Enforcement.
Any provisions of this Agreement which are unenforceable in any
jurisdiction in which this Agreement is sought to be enforced, or are invalid or
contrary to the law of such jurisdiction, or the inclusion of which would affect
the validity, legality or enforcement of this Agreement, shall be of no effect,
and in such case all remaining terms and provisions of this Agreement shall
subsist and be fully effective according to the tenor of this Agreement as
though no such invalid portion had ever been included herein. It is the intent
of the parties to create a valid license to the Property, and all provisions of
this Agreement should be read to give this intent legal force and effect. In any
action or proceeding brought by Licensor to enforce any
29
rights under, or pursuant to, this Agreement, Licensor shall be entitled to
recover all reasonable costs and expenses incurred in connection therewith,
including all legal fees and disbursements.
19. Governing Law.
This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York applicable to contracts made
and to be performed in the State of New York, without regard to conflicts of law
principles.
20. JURISDICTION.
EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY CONSENTS TO THE
JURISDICTION OF THE SUPREME COURT OF THE STATE OF NEW YORK, NEW YORK COUNTY AND
THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, IN ANY
ACTION TO ENFORCE, INTERPRET OR CONSTRUE ANY PROVISION OF THIS AGREEMENT, AND
ALSO HEREBY IRREVOCABLY WAIVES ANY DEFENSE OF IMPROPER VENUE OR FORUM NON
CONVENIENCE TO ANY SUCH ACTION BROUGHT IN THOSE COURTS. EACH PARTY HERETO
CONSENTS TO SERVICE OF PROCESS BY CERTIFIED MAIL AT ITS ADDRESS SET FORTH ON THE
FIRST PAGE OF THIS AGREEMENT. EACH PARTY FURTHER IRREVOCABLY AGREES THAT, ANY
ACTION TO ENFORCE, INTERPRET OR CONSTRUE ANY PROVISION OF THIS AGREEMENT WILL BE
BROUGHT ONLY IN ONE OF SUCH COURTS AND NOT IN ANY OTHER COURT.
21. Equitable Relief.
Licensor and Licensee acknowledge that their performance and
obligations hereunder are unique, of extraordinary value, and that a material
breach by either such party of any material obligation hereunder will cause the
other such party irreparable damage which cannot be compensated with money only.
Therefore, each such party agrees that the other such party, as a matter of
right, shall be entitled to an injunction or other equitable relief, in addition
to all other rights at law to prevent the material breach of any material terms
or conditions hereof, and to enforce any rights of the party seeking equitable
relief hereunder.
22. Payments.
All payments hereunder shall (i) be made in the U.S., in U.S. currency
or by good check in U.S. dollars drawn on a bank approved by Licensor, and (ii)
be deemed made on the date of receipt of checks by Licensor at Licensor's
address set forth above or at such other address as Licensor shall specify in
writing.
23. Waiver of Jury Trial.
Licensor and Licensee waive any right to trial by jury in any action,
proceedings or counterclaim concerning this Agreement and any rights thereunder
or any other argument delivered in connection herewith, if any, and agree that
any such action, proceedings or
30
counterclaim shall be tried before a court and not before a jury.
24. Force Majeure.
If the performance of any provision of this Agreement by another party
is prevented or delayed by reason of war, mobilization, revolution, civil
commotion, riot, flood, hurricane, act of God, or the public enemy, the party
affected, shall promptly provide notice thereunder to the other party and shall
be excused from such performance to the extent that it is prevented or delayed
thereby during the continuance of any such happening of such event until sixty
(60) days after the date that the affected party is no longer prevented or
delayed from performing the provisions of this Agreement by reason of the above
events.
25. Personal Appearance, etc.
(a) Licensor shall use commercially reasonable efforts to cause the
artist professionally known as Eve ("Eve") to be available at reasonable times
for the purpose of appearing at trade shows, photo shoots, openings or other
special events, jointly selected by the parties hereto, to endorse and promote
the sale of Licensed Products, subject to Eve's professional or personal
schedule and no more than three (3) times per year. The parties hereto shall
cooperate with each other to arrange such personal appearances at times and
places reasonably acceptable to Eve, provided Eve is in good health and provided
further that Licensee shall provide Licensor and Eve with at least twenty (20)
days prior written notice to request that Eve make an appearance in accordance
with this Section.
(b) In such instances in which Licensee shall request Eve to travel to
a location outside of New York, or to a location other than the location where
she is located immediately prior to her appearance, Licensee shall provide Eve
and at least one representative first class airfare, five-star hotel
accommodations and local transportation.
(c) Licensor shall use its commercially reasonable efforts to cause
Eve to wear the Licensed Products at reasonably appropriate professional
engagements and personal appearances, subject to any limits placed upon her by
any third party. Licensor covenants on behalf of Eve that Eve shall not endorse
or promote any other apparel brand. Licensor shall not be in breach of this
Agreement in the event any sponsors of any events in which Eve participates,
including but not limited to tours, television programs, special events, etc.,
are apparel brands or companies or in the event Eve has a passive, de minimus
interest in any competitive brand or company.
(d) If (i) during the five (5) years following execution of this
Agreement, Eve retires; or (ii) during the Initial Term Eve is convicted of a
felony which involves a violent crime, the Licensee will have the right, for a
period of ninety (90) days after such conviction or retirement, to terminate
this Agreement, effective upon fifteen (15) days advance written notice to the
Licensor. After the expiration of such ninety (90) day period, Licensee shall no
longer have the right to terminate this Agreement pursuant to this Section. For
purposes hereof, Eve shall be deemed to have "retired" (i) twelve (12)
consecutive months following Eve's announcement to the public of Eve's intention
to discontinue all future music recordings and musical performances, during
which twelve (12) month period Eve neither performs nor records
31
music or participates in first run television performances or feature film
performances or (ii) twelve (12) consecutive months following the later of Eve's
last music recording or musical, television or feature film performance,
provided such failure by Eve to record or perform is not as a result of her
incapacity due to illness or similar considerations.
26. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which shall together constitute
one instrument.
27. Replacement of Deal Memorandum. The parties hereto acknowledge and
agree that this Agreement replaces and supersedes the terms of the Deal
Memorandum and as of the date hereof the Deal Memorandum shall be null and void
and the terms of this Agreement shall govern the relationship between the
parties hereto.
[Signature page follows, remainder of page intentionally left blank]
32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
LICENSOR:
BLONDIE ROCKWELL, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇▇
---------------
Name: ▇▇▇ ▇▇▇▇▇▇▇
Title: President
LICENSEE:
INNOVO AZTECA APPAREL, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
--------------
Name: ▇▇▇ ▇▇▇▇▇▇
Title: CEO
33
LIST OF SCHEDULES
A Trademark(s), Copyright(s) and Registration(s)
B-1 and B-2 Licensed Channels of Distribution
C Licensed Products
D Additional Territory (if any)
E Manufacturers Agreement
F FOB Out Sales Royalty Rate
G Approved Sample Line for First Season
34
SCHEDULE A
----------
United States and Canadian Trademark(s), Copyright(s) and Registration(s),
--------------------------------------------------------------------------
if any
------
1. FETISH CLOTHING(R), U.S. Supplemental Reg. No. 2,652,841 in cl. 25;
registered, November 19, 2002.
2. FETISH, U.S. Appl. Serial No. 78/112,017 in cl. 18; intent-to-use trademark
application filed in the United States Patent and Trademark Office on March
1, 2002; Published, September 10, 2002.
3. FETISH, U.S. Appl. Serial No. 78/112,012 in cl. 25; intent-to-use trademark
application filed in the United States Patent and Trademark Office on March
1, 2002; suspension letter issued, February 5, 2003.
4. FETISHTM in cl. 18
5. FETISHTM in cl. 25.
35
SCHEDULE B-1 and B-2
--------------------
Licensed Channels of Distribution
---------------------------------
SCHEDULE B-1
------------
Better Department Stores Better Specialty Stores
------------------------ -----------------------
Federated Department Stores E&J ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Department Stores Dr. Jay's
Dillard Department Stores ▇▇▇▇▇▇▇/Transit
Nordstrom's ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇'▇ D.E.M.O.
Saks, Incorporated Unica
Neiman ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇'▇
May Co. Hang Up Shoppes
Bon Ton Up Against the Wall
City Blues/Lady Blue
▇▇▇▇▇ Jazz
Wet Seal
Claires (only for Accessories as
defined herein)
SCHEDULE B-2 (Off-price Stores)
------------
TJ Maxx
Burlington Coat Factory
▇▇▇▇ Stores
Century 21
Loehmans
Licensee may also sell Licensed Products to other better specialty and
department stores (not including ▇.▇. Penney and Sears) by first obtaining
Licensor's prior written approval in accordance with the approval and notice
procedures set forth in paragraphs 7(a) and 14, respectively, of this Agreement.
36
SCHEDULE C
----------
Licensed Products
-----------------
1. Casual apparel for women and juniors sizes 0-14, but excluding infants,
namely, bottoms, tops, sweaters, activewear, sportswear, headbands, headwear,
bandanas, scarves, jackets and outerwear, in all fabric contents including,
knits, wovens, leather and denim. Notwithstanding the immediately preceding
sentence, the following categories are excluded: all swimwear, lingerie and
footwear.
2. Accessory items ("Accessories") in the nature of all-purpose sports and
athletic bags, backpacks, knapsacks, hand bags, purses, key cases, coin pouches,
wallets, billfolds, attaches and briefcase-type portfolios.
Notwithstanding 1. and 2. above, Licensor hereby reserves the right to
manufacture, distribute and sell tour merchandise (in the nature of T-shirts,
hats, sweat shirts, backpacks, bags, etc.) on tour and at retail stores which
sell tour merchandise.
The definition of Licensed Products shall be expanded to include barrettes, hair
pins, clasps and ponytail holders at such time as Licensor notifies Licensee
that such items are cleared for exploitation in the Territory in connection with
the Property.
37
SCHEDULE D
----------
Additional Territory, if Any
----------------------------
None
38
SCHEDULE E
----------
Manufacturer's Agreement
------------------------
Address of Manufacturer:
Territory of Manufacture:
Licensor: Blondie Rockwell, Inc.
Licensee:
Expiration Date of License
(unless Sooner Terminated
or Extended):
Authorized Licensed Products:
See attached schedule.
Marks and Property
See attached schedule.
In order to induce Licensor to consent to the manufacture of the above
specified Authorized Licensed Products using any of the above specified Marks
and Property by the undersigned, the undersigned agrees that:
It will not manufacture the Authorized Licensed Products to
the order of anyone but the Licensee, will invoice only the Licensee,
will not ship to anyone other than the Licensee and will not ship
after the expiration date of the License.
It will not subcontract production of the Authorized
Licensed Products or components which contain any of the above
specified Marks and Property without Licensee's written consent.
It will not (without Licensee's written consent) manufacture
merchandise utilizing any of the above specified Marks and Property
and/or tradenames owned or otherwise authorized for use by Licensee
other than the Authorized Licensed Products.
It will not publish or cause the publication of pictures of
the Authorized Licensed Products in any publication or promotional
material, nor advertise the fact that it is permitted to manufacture
Licensed Products.
Upon expiration or termination of the Trademark License
Agreement, by
39
and between the Licensor and Licensee, or upon notification by the
Licensee or the Licensor, the undersigned Manufacturer will
immediately cease manufacturing the Authorized Licensed Products and
deliver to Licensee or its authorized representative that portion of
any and all molds, plates, engravings or other devices used to
reproduce the copyrighted materials and/or trademarks or will provide
Licensee with evidence that the Marks and Property have been erased.
The Manufacturer further agrees as follows:
(i) It shall not use child labor in the manufacturing,
packaging or distribution of Licensed Products or Packaging or
advertising or promotional materials hereunder. The term "child"
refers to a person younger than the age for completing compulsory
education, but in no case shall any person younger than fourteen (14)
years of age be employed in the manufacturing, packaging or
distribution of Licensed Products or Packaging or advertising or
promotional materials hereunder.
(ii) The Manufacturer shall provide employees with a safe
and healthy workplace in compliance with all applicable laws. The
Manufacturer agrees to provide Licensor with all information Licensor
may request about manufacturing, packaging and distribution facilities
for the Licensed Products.
(iii) The Manufacturer shall only employ persons whose
presence is voluntary. The Manufacturer shall not use prison labor, or
use corporal punishment or other forms of mental or physical coercion
as a form of discipline of employees.
(iv) The Manufacturer shall comply with all applicable wage
and hour laws, including minimum wage, overtime, and maximum hours.
The Manufacturer agrees to utilize fair employment practices as
defined by applicable laws.
(v) The Manufacturer shall not discriminate in hiring and
employment practices on grounds of race, religion, national origin,
political affiliation, sexual preference, gender or age.
(vi) The Manufacturer shall comply with all applicable
environmental laws.
________, 20__
MANUFACTURER:
By:
----------------------------
Name:
Title:
40
SCHEDULE F
----------
FOB Out Sales Royalty Rate
--------------------------
FOB Out Sales require Licensor's prior written consent.
41
SCHEDULE G
----------
Approved Sample Line For First Season, Etc.
-------------------------------------------
[To Be Supplied]
42