EXHIBIT 10.1
YANUK JEANS, LLC
LICENSE AGREEMENT
This Agreement entered into by and between YANUK JEANS, LLC, a
California limited liability company, having its principal office at ▇▇▇▇ ▇.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇ ("LICENSOR") and BLUE HOLDINGS, INC., having
its principal office at ▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
("LICENSEE") with reference to the following recitals:
A. Licensor is the owner of certain proprietary rights identified in
Exhibit D (the "Trademark") and a design patent (the "Patent"). The Trademarks
and Patents are collectively referred to herein as the "Property". Licensor
desires to license the "Property";
B. Licensee wishes to use the "Property" upon and in connection with
the manufacture, sale, marketing and distribution of the products described in
the attached Exhibit A. The products described in the attached Exhibit A on
which or in connection with which Licensee uses the "Property" shall hereinafter
be referred to as "Licensed Product(s)";
NOW, THEREFORE, in consideration of the mutual promises of this
Agreement, the parties agree as follows:
1. GRANT OF LICENSE
(a) Licensor grants to Licensee, subject to the terms and
conditions of this Agreement, and (subject to Section 1(b) below), the exclusive
right within the Territory: (i) to use the Property upon the Licensed Products
described in the attached Exhibit A and in connection with the Licensed
Products' design, development, manufacture, sale, marketing and distribution to
the general wholesale and retail trade; (ii) to use the brand names trademarked
to Licensor to merchandise the Licensed Products; and (iii) to adopt existing
styles and designs of Licensed Products presently being sold by Licensor and to
design, develop, manufacture, sale, market and distribute such Licensed Products
to Licensor and to Licensor's parent, affiliate and subsidiary corporations, and
to the general wholesale and retail trade. Licensor reserves any rights,
benefits and opportunities not expressly granted to Licensee under this
Agreement.
(b) Licensee shall have the immediate right to use the
Property in connection with the marketing, sale and distribution of the Licensed
Products within those countries in which the Trademarks are presently registered
or where applications for registration are pending (as more fully set forth in
Exhibit C) (collectively "Registered Territory"). In the event Licensee wishes
to use the Property in connection with the marketing, sale and/or distribution
of the Licensed Products outside of the Registered Territory, Licensee shall
request that Licensor register the Trademarks in such territory. Licensor, at
its sole costs and expense, agrees to file an application for registration of
the Trademarks in the requested territory within fifteen (15) days of receipt of
Licensee's request, and to respond to any trademark examiner's inquiries or
request for additional information within a timely manner. In the event that
Licensor is unable to register a Trademark in a requested territory because of
the prior existence of a pending application or registration of that Trademark
in the requested
1
territory which is not owned by Licensor, then Licensor shall immediately notify
Licensee in writing and such inability to register the Trademark shall not be
deemed a breach of this Agreement by Licensor; provided, however, that Licensor
attempted to file any such application for registration of the Trademark within
fifteen (15) days of receipt of Licensee's request therefor.
2. TERRITORY
The license granted under this Agreement shall be worldwide
(the "Territory").
3. TERM
The term of this Agreement (the "Term") shall begin on July 1,
2005 and end on June 30, 2015, unless sooner terminated in accordance with
Paragraph 20.
4. ROYALTIES
(a) Licensee shall pay to Licensor as royalty ("Royalty" or
"Royalties") a sum equal to six percent (6%) of all Net Sales of the Licensed
Products. Such Royalty shall accrue when the Licensed Products are sold,
distributed, billed and/or paid for whichever occurs earlier. "Net Sales" shall
mean gross sales (the gross invoice amount billed customers) of the Licensed
Products, less discounts, freight charges and allowances actually shown on the
invoice and, further, less any bona fide returns (net of all returns actually
made or allowed as supported by credit memorandum actually issued to the
customers) provided such returns do not exceed ten percent (10%) of gross sales
per quarterly period. Costs incurred in the manufacturing, selling, advertising
and distribution of the Licensed Products shall not be deducted nor shall any
deduction be allowed for any uncollectible accounts or allowances. No deductions
shall be made for any discounts not reflected on the invoice(s), or commissions,
for taxes, fees, assessments, impositions, payments or expenses of any kind
which may be incurred or paid by Licensee in connection with the transfer of
funds or royalties or with the conversion of any currency into United States
dollars.
(b) Royalty payments shall be made by Licensee to Licensor on
all Net Sales. In the event that Licensee sells any or all of the Licensed
Products to any Affiliate of Licensee, including, without limitation, any
individual(s), entity or entities in whole or in part controlled by Licensee, or
having any relationship, contract or arrangement with Licensee with respect to
any matter which affects, or is affected by, this Agreement, the invoice price
used to determine Net Sales hereunder shall be the greater of either (a) the
highest wholesale price that Licensee receives for such styles from independent
third parties, or (b) the invoice price at which the Licensed Products are
resold by such individual or entity to an unrelated customer in an arm's-length
transaction.
(c) Licensee shall, during each Annual Period, pay to Licensor
the non-refundable "Guaranteed Minimum Royalty" listed below, payable in
quarterly installments within thirty (30) days after the end of each quarter.
2
"ANNUAL PERIOD" AMOUNT
--------------- ------
YEAR ONE $600,000
YEAR TWO $660,000
YEAR THREE $726,000
YEAR FOUR $798,600
YEAR FIVE $878,460
YEAR SIX $966,306
YEAR SEVEN $1,062,937
YEAR EIGHT $1,169,230
YEAR NINE $1,286,153
YEAR TEN $1,414,769
Upon execution of this Agreement, Licensee shall
pay Licensor One Hundred Fifty Thousand Dollars ($150,000.00) as an advance to
be applied by Licensor against the first year's Guaranteed Minimum Royalty due
to Licensor hereunder. If, for any reason or no reason, this Agreement is
terminated prior to full application of the Advance delivered to Licensor
hereunder, within ten (10) days following the termination of this Agreement,
Licensor shall deliver an amount equal to the unused portion of any the Advance
to Licensee. The balance of the Guarantee for the first year shall be paid in
three (3) equal quarterly installments, with the first installment due for the
quarter ending December 31, 2005.
If upon termination or expiration of this Agreement
the royalties paid and/or payable by Licensee to Licensor during the Annual
Period is less than the Guaranteed Minimum Royalty for such Annual Period,
Licensee shall pay such difference to Licensor; provided, however, if this
Agreement is terminated due to Licensor's default, in addition to any rights and
remedies available to Licensee, Licensee shall only be responsible for Royalties
earned under Section 4(a) hereof up to the date of termination of this
Agreement. Royalty payments shall be credited against the Guaranteed Minimum
Royalty. In the event that during any Annual Period, the actual payments for
Royalties under Section 4(a) hereof exceed the Guarantee with respect to that
Annual Period, no further Guaranteed Minimum Royalty Payments need be made for
such Annual Period.
(d) Licensor may impose a charge on all overdue payments at a
rate equal to the lesser of one and one-half percent (1 1/2%) per month or the
maximum rate allowed by law, without prejudice to any other rights of Licensor
under this Agreement.
(e) All of Licensee's obligations under this Paragraph 4 shall
be performed without any right of Licensee to invoke set-offs, deductions and
other similar rights.
5. ROYALTY PAYMENT AND REPORTING
(a) Licensee shall pay the royalties based upon Net Sales in
quarterly periods ending on the last days of March, June, September, and
December. Payments shall be received by Licensor within thirty (30) days after
the end of each quarterly period. At the time of payment, Licensee will also
furnish Licensor on forms provided or approved by Licensor with a statement of
3
Net Sales and number of units of all Licensed Products sold by territory
(whether or not subject to a royalty) during the immediately preceding quarterly
period and statements of other information as the forms may require. Such
statements shall be furnished to the Licensor whether or not any Licensed
Products have been shipped, distributed and/or sold and whether or not actual
royalties have been earned during the preceding royalty period. Royalty
statements will be certified true and correct by a duly authorized officer of
Licensee if Licensee is a corporation or by a principal of Licensee if Licensee
is a partnership or sole proprietor. Licensee shall send all payments and
statements required by this Paragraph to Licensor at the address in Paragraph
24. Neither the expiration nor the termination of this Agreement shall relieve
Licensee from its royalty payment obligations.
(b) All amounts to be paid by Licensee to Licensor under this
Agreement shall be payable in United States currency according to a method
directed by Licensor (including by electronic transfer) without deduction for
taxes (including withholding taxes), levies, duties, imports, commissions,
expenses or charges of any kind.
(c) Neither the receipt nor acceptance by Licensor of any
royalty payment or royalty statement shall prevent Licensor from subsequently
challenging the accuracy or validity of such payment or statement.
(d) During the term of this Agreement and for at least two (2)
years following the termination or expiration of this Agreement, Licensee shall
maintain at Licensee's principal office such books and records including but not
limited to production, inventory and sales records (collectively "Books and
Records") as are necessary to substantiate that (i) all statements submitted to
Licensor hereunder were true, complete and accurate, (ii) all royalties and
other payments due Licensor hereunder shall have been paid to Licensor in
accordance with the provisions of this Agreement, and (iii) no payments have
been made, directly or indirectly, by or on behalf of Licensee to or for the
benefit of any Licensor employee or agent who may reasonably be expected to
influence Licensor's decision to enter this Agreement or the amount to be paid
by Licensee under this Agreement. (As used in this Paragraph, "payment" shall
include money, property, services, and all other forms of consideration.) All
Books and Records shall be maintained in accordance with generally accepted
accounting principles consistently applied. During the term of, and for two (2)
years after the termination or expiration of this Agreement, the Books and
Records shall be open to inspection, audit and copy by or on behalf of Licensor
during business hours. If any such audit reveals a discrepancy between the
royalties owed Licensor and the royalties Licensee paid, Licensee shall pay such
discrepancy, plus interest calculated at the lesser of one and one-half percent
(1 1/2%) per month or the maximum rate allowed by law. If such discrepancy is
more than fifteen percent (15%), Licensee shall reimburse Licensor upon demand
for the cost of such audit including any reasonable attorneys' fees in
connection therewith.
6. MARKETING AND DISTRIBUTION
(a) The sale and distribution of the Licensed Products in the
Territory shall be performed exclusively by Licensee or under its supervision or
control. Notwithstanding the foregoing, Licensor shall be entitled to attend and
participate in any meetings and/or negotiations that Licensee may have with
Licensor's existing sales agents.
4
(b) Licensee acknowledges that in order to preserve the
goodwill attached to the Trademark, the Licensed Products are to be sold at
prices and terms reflecting the prestigious nature of the Trademark, it being
understood, however, that Licensor is not empowered to fix or regulate the
prices at which the Licensed Products are to be sold, either at the wholesale or
retail level.
(c) Licensee shall maintain the high standards of the
Trademark and the Licensed Products, in all advertising, packaging and promotion
of the licensed Products. Licensee shall not employ or otherwise release any of
such advertising or packaging or other business materials relating to any
Licensed Products or bearing the Trademark, unless and until Licensee shall have
received approval by Licensor. Licensee may include on it business materials an
indication of the relationship of the parties hereto in a form approved by
Licensor. All usage by Licensee of the Trademark, other than in embroidered form
or on labels affixed to the exterior of a Licensed Product incorporated into the
design of a Licensed Product, shall include the (R) trademark symbol or (TM)
trademark symbol, as appropriate.
(d) Consistent with the high quality and prestige of the
Trademark and products manufactured by, or under license from, Licensor and its
affiliates, Licensee undertakes, during the Term, to diligently manufacture and
sell all Licensed Products, to use its best efforts to create a demand
therefore, supply such demand, and maintain adequate arrangements and facilities
for the distribution of Licensed Products throughout the Territory. As an
essential part of its distribution program, Licensee shall cause to be
manufactured adequate quantities (consistent with good industry practice) of all
Licensed Products to satisfy the requirements of its customers for a full line
of such Licensed Products and to expedite the delivery thereof.
7. SALE OF LICENSED PRODUCTS TO LICENSOR
(a) Licensee agrees to sell to Licensor the Licensed Products
in such quantities, as Licensor may need in connection with its wholesale and
retail activities. All sales by Licensee to Licensor of Licensed Product(s)
shall be on terms at least as good as those given by Licensee to any of its
customers such that the Licensor can purchase the Licensed Product(s) from the
Licensee at a price never to exceed the lowest price offered to any other
customer of the Licensee and on such other terms that are as good as the most
favorable terms given to any other customers of the Licensee.
8. QUALITY AND APPROVAL
(a) PURPOSE OF QUALITY CONTROL.
It is the intent of the parties hereto to establish,
through the performance of this Agreement, prestige and goodwill and recognition
in the minds of the public with respect to the Trademark and, therefore, it is
of great importance to each party that high standards and reputation be
established in the Trademark and maintained in the manufacture and sale of the
Licensed Products. Accordingly, all items of Licensed Products manufactured by
or on behalf of the Licensee shall be of high quality and high workmanship.
Neither party shall knowingly take any action which damages
5
the reputation of the other party or which diminishes and/or tarnished the image
and/or reputation of the Trademark.
(b) DESIGN/CONCEPT APPROVAL.
Licensee shall submit to Licensor for approval,
not to be unreasonably withheld, pre-production submittals consisting of
concepts, designs, line drawings or sketches and finished artwork, as the case
may be, with respect to any proposed Licensed Products or promotional or
packaging material relating to the Licensed Products ("Concept Submittal(s)").
Licensee shall not manufacture, sell, market or distribute any Licensed Products
or any promotional or packaging material relating to the Licensed Products
before obtaining Licensor's approval of Concept Submittals for each such
Licensed Product. If Licensor fails to communicate its approval or disapproval
of any Concept Submittal within five (5) days after receipt of Licensee's
submission, Licensor shall be deemed to have disapproved such Concept Submittal.
(c) PRE-PRODUCTION APPROVALS.
Licensee shall submit to Licensor for approval,
not to be unreasonably withheld, pre-production samples for any proposed
Licensed Products ("Sample Submittal(s)"). Licensee shall not manufacture, sell,
market or distribute any Licensed Products before obtaining Licensor's approval
of the Sample Submittals for each such item. If Licensor fails to disapprove any
Sample Submittal within five (5) days after receipt of Licensee's submission,
Licensor shall be deemed to approve such Sample Submittal.
(d) QUALITY MAINTENANCE.
Licensee shall maintain the same quality in the
Licensed Products and promotional and packaging material relating to the
Licensed Products produced as in the Sample Submittals approved by Licensor.
Upon commencement of manufacture and distribution of the Licensed Products
and/or promotional and packaging material relating to said Licensed Products
after all required approvals have been given by Licensor, Licensee shall submit,
at its own cost, six (6) sets of the production samples of the Licensed Products
and/or promotional and packaging material to Licensor. Licensor may require that
Licensee submit to Licensor, at Licensee's cost, up to twelve (12) additional
sets of production samples of the Licensed Products and/or promotional and
packaging material.
(e) CHANGES.
If during the term of this Agreement there is to be
any change in the Licensed Products or the promotional or packaging material
relating to the Licensed Products after the approval of production samples,
Licensee must comply with the provisions of Paragraph 8(b) and Paragraph 8(c)
for such Licensed Product or material before its manufacture, sale, marketing or
distribution.
6
(f) LICENSEE'S PRODUCTION FACILITIES.
Licensee agrees to furnish Licensor promptly with the
addresses of Licensee's production facilities for the Licensed Products and the
names and addresses of the persons or entities, if any, which are manufacturing
each of the Licensed Products for Licensee. Licensor shall have the right upon
reasonable notice to Licensee, during regular business hours, at its own expense
to inspect any production facilities where any Licensed Products are being
manufactured for the purpose of enabling Licensor to determine whether Licensee
is adhering to the requirements of this Agreement relating to the nature and
quality of the Licensed Products and the use of the Property in connection
therewith.
(g) IMPERFECT, IRREGULARS OR SECOND QUALITY ITEMS.
Licensee shall have the right to sell and distribute
Licensed Products which are imperfect, irregular or second quality through such
outlets and in such manner as Licensee may reasonably determine; provided,
however, that such products shall be limited to ten (10%) of first quality sales
(measured in number of units sold), reconciled on an annual basis, and that
Licensee shall remove or deface labels, tags and other packaging which bears or
identifies the Property prior to the sale thereof and provided further that
Licensee shall notify Licensor as to the retailers selected for the disposition
of merchandise. Licensor shall have the reasonable discretion to approve the
pricing of such products; provided that the royalty payable to Licensor in
respect of such products shall be three percent (3%) which shall be deemed the
"Royalty" for such products.
(h) DAMAGED, DEFECTIVE OR NON-APPROVED ITEMS.
Licensee shall not sell any items that are damaged,
defective, or non-approved. To the extent that any such items shall exist during
the Term of this Agreement, Licensee agrees that such items will be disposed of
in accordance with instructions from Licensor.
9. OWNERSHIP OF RIGHTS
(a) Licensor is the sole and exclusive owner of all rights,
title and interest in and to the Property.
(b) Licensee shall not use Licensor's name or the Property or
incorporate Licensor's name or the Property in the Licensee's corporate or
business name in any manner whatsoever other than as permitted hereunder.
Licensee shall not represent that it has any rights to the Property other than
those expressly granted under this Agreement. Licensee shall not use and/or
authorize the use, either during or after the Term of this Agreement, of any
configuration, trademark, trade name or other designation confusingly similar to
Licensor's name and the Property.
10. GOOD WILL AND PROMOTIONAL VALUE
(a) Licensee recognizes the value of the good will associated
with the Property and acknowledges that the Property and all rights therein and
the good will pertaining thereto, belong
7
exclusively to Licensor. Licensee further acknowledges that the Property has
acquired secondary meaning in the mind of the public. Licensee agrees that
during this Agreement, or thereafter, it will not challenge or otherwise contest
the title or any rights of Licensor to the Property or the validity of the
License being granted.
(b) Licensee's use of the Property shall inure to the benefit
of Licensor and that Licensee shall not, at any time, acquire any rights in the
Property by virtue of any use it may make of the Property.
11. INFRINGEMENTS
Licensee shall assist Licensor in the enforcement of any
rights of Licensor in the Property. Licensor may commence or prosecute any
claims or actions in its own name or in the name of Licensee or join Licensee as
a party thereto. Licensee shall notify Licensor in writing of any infringements
by third parties of the Property, which may come to Licensee's attention.
Licensor shall have sole right to determine whether any action shall be taken on
account of any infringement. Licensee shall not contact the third party, make
any demands or claims, institute any suit or take any other action on account of
such infringements without first obtaining the prior written permission of
Licensor. All costs and expenses, including attorneys' fees, incurred in
connection with any suit instituted by Licensee without the consent of Licensor
shall be borne solely by Licensee.
12. COOPERATION WITH LICENSOR
(a) Licensee agrees to cooperate with Licensor in the
prosecution of any trademark or copyright application that Licensor may desire
to file or in the conduct of any litigation relating to the Property. Licensee
shall supply to Licensor such samples, containers, labels, sales information and
similar material and, upon Licensor's request, shall procure evidence, give
testimony and cooperate with Licensor as may reasonably be required in
connection with any such application or litigation.
(b) With respect to all claims and actions, including actions
in which Licensee is joined as a party, Licensor shall have the sole right to
employ counsel of its choosing and to direct handling of the litigation and any
settlement thereof. Licensor shall be entitled to receive and retain all amounts
awarded as damages, profits or otherwise in connection with such actions.
13. TRADEMARK, PATENT AND COPYRIGHT PROTECTION
(a) The License is conditioned upon Licensee's complete
compliance with the provisions of the trademark and copyright laws of the United
States and the foreign country or countries in the licensed Territory.
(b) Licensor has the right but not the obligation, to obtain
at its cost appropriate trademark, patent and copyright protection for the
Property, the Licensed Products and/or the promotional and packaging material.
8
(c) Licensee shall cooperate with Licensor in protecting the
Property. In the event that any claim or problem arises with respect to the
Property in the licensed Territory, Licensee shall promptly advise Licensor in
writing of such event. Licensor has no obligation to take any action whatsoever
in the event that any claim or problem arises with respect to the protection of
the Property. Licensor shall have the right, however, to proceed with counsel of
its own choice.
(d) Licensee shall not at any time apply for any copyright,
trademark or patent protection, which would affect Licensor's ownership of any
rights in the Property nor file any documents with any governmental authority or
take any other action which could affect Licensor's ownership of the Property,
or aid or abet anyone else in doing so.
14. COMPLIANCE WITH GOVERNMENT STANDARDS
Licensee represents and warrants that the Licensed Products,
their packaging, marketing, sales and distribution shall meet or exceed all
Federal, State and local laws, ordinances, standards, regulations and guidelines
pertaining to such Licensed Products or activities, including, but not limited
to, those pertaining to product safety, quality, labeling and propriety.
Licensee agrees that it will not package, market, sell or distribute any
Licensed Products or cause or permit any Licensed Products to be packaged,
marketed, sold or distributed in violation of any such Federal, State or local
law, ordinance, standard, regulation or guideline.
15. IDENTIFICATION
Licensee shall place its own name or identifying ▇▇▇▇ on the
Licensed Products or on their packaging in an inconspicuous manner so that
Licensor can readily identify the source of the Licensed Products. Licensee
shall institute an identification program for security purposes to prevent
counterfeiting of the Licensed Products. Licensee shall obtain Licensor's prior
written consent for use of the security product that Licensor wishes to utilize,
which consent shall not be unreasonably withheld.
16. TRADEMARK AND COPYRIGHT OWNERSHIP AND NOTICES
(a) All Licensed Products and all promotional and packaging
material shall contain appropriate legends, markings and/or notices as required
from time to time by Licensor, to give notice to the public of Licensor's right.
Unless otherwise expressly approved in writing by Licensor, each usage of the
Trademarks shall be followed by the appropriate trademark notice symbol as set
forth in Paragraph 6(c). Licensor will provide Licensee with the appropriate
legend for each Licensed Product and/or promotional and packaging material
during the approval process.
(b) Licensor and Licensee agree and intend that all artwork
and designs created by Licensee or any other person or entity and used with the
Trademarks shall be the property of Licensor, which shall be entitled to use and
license to others the use of such artwork and designs subject to the provisions
of this Agreement. Licensee assigns to Licensor the copyright in all artwork and
designs. Licensee agrees to execute any additional documents proposed by
Licensor to effectuate and confirm Licensor's sole and exclusive ownership of
all copyright in and to such
9
artwork and designs, and Licensee irrevocably appoints Licensor as its
attorney-in-fact to execute any and all such documents if Licensee fails to
return executed copies of such documents to Licensor within five (5) days
following submission.
(c) Licensee shall use no other markings, legends and/or
notices on or in association with the Licensed Products or on or in association
with the promotional and packaging material other than the specified legend and
Licensee's legend, without first obtaining Licensor's prior express written
approval.
(d) The use of any word, name, symbol or device to identify or
distinguish any of the Licensed Products shall inure to the benefit of Licensor.
The use of any such word, name, symbol or device in connection with any of the
Licensed Products shall be made only with Licensor's prior approval. All
trademark rights in any such word, name, symbol or device shall belong to
Licensor and shall be exercised by Licensee only pursuant to Licensor's prior,
written approval. Paragraph 17(d) shall not apply to the words, names, symbols
or devices set forth on Exhibit C.
17. MANUFACTURER'S AGREEMENT
If the Licensed Products or parts of the Licensed Products are
to be manufactured for Licensee, Licensee shall, before authorizing such
manufacture and before placing any orders with the proposed manufacturer, obtain
Licensor's approval in the manner provided herein. Licensee shall have the
proposed manufacturer sign in duplicate original an agreement identical to the
attached Exhibit B ("Manufacturer's Agreement"). Licensee shall deliver the
original copies of the Manufacturer's Agreement signed by Licensee and the
proposed manufacturer to Licensor, and Licensee shall obtain Licensor's
signature on the Manufacturer's Agreements before the manufacture of the
Licensed Products or parts of the Licensed Products by the proposed
manufacturer.
18. TERMINATION
(a) Without prejudice to any other rights that Licensor may
have, Licensor may at any time give notice of termination effective immediately:
(1) If within one hundred eighty (180) days of
execution of this Agreement, Licensee shall not have begun the bona fide
distribution and sale of the Licensed Products in commercially reasonable
quantities throughout the Territory;
(2) If Licensee shall fail for sixty (60) consecutive
days to continue the bona fide distribution and sale of the Licensed Products in
commercially reasonable quantities throughout the Territory;
(3) If Licensee shall fail to timely make any payment
due hereunder or submit any statement required hereunder and such failure to pay
or submit a statement is not remedied within fifteen (15) days of receipt of
written notice thereof;
(4) If Licensee shall be unable to pay its
obligations when due, shall make
10
any assignment for the benefit of creditors, shall file a voluntary petition in
bankruptcy, shall be adjudicated bankrupt or insolvent, shall have any receiver
or trustee in bankruptcy or insolvency appointed for its business or property,
or shall make an assignment for the benefit of creditors;
(5) If the quality in any Licensed Products is lower
than in the approved samples referred to in Paragraph 8 and such failure to
maintain the same quality in the Licensed Products as in the approved samples is
not remedied within thirty (30) days of receipt of written notice thereof;
(6) If Licensee manufactures, sells, markets,
distributes or uses any Licensed Products or promotional or packaging material
relating to the Licensed Products without Licensor's approval as provided for by
this Agreement or continues to manufacture, sell, market, distribute or use any
Licensed Products or promotional or packaging material relating to the Licensed
Products after receipt of notice from Licensor disapproving such items;
(7) If Licensee becomes subject to any voluntary or
involuntary order of any governmental agency involving the recall of any
Licensed Products or promotional or packaging material relating to the Licensed
Products because of safety, health or other hazards or risks to the public;
(8) If Licensee breaches any provision of this
Agreement relating to the unauthorized assertion of rights in the Property;
(9) If Licensee breaches any provision of this
Agreement prohibiting Licensee from assigning, transferring, sublicensing,
delegating or otherwise encumbering this Agreement or any of its rights or
obligations;
(10) If Licensee fails to obtain or maintain
insurance coverage as required by the provisions of this Agreement;
(11) If Licensee commits any material breach of its
obligations under this Agreement or any other agreement between Licensor and
Licensee.
(b) If reasonable grounds for insecurity arise with respect to
Licensee's performance of this Agreement, Licensor may in writing demand
adequate assurance of due performance. Until Licensor receives such assurance in
writing, it may suspend its performance of this Agreement. If Licensor does not
receive such written assurance within five (5) days after Licensee's receipt of
its request thereof or within such other shorter period of time as Licensor may
reasonably designate under the circumstances, the failure by Licensee to furnish
such assurance will constitute a material breach, which entitles Licensor to
immediately terminate this Agreement.
(c) Without prejudice to any other rights, which Licensee may
have, Licensee may terminate this Agreement upon thirty (30) days written notice
to Licensor of the occurrence of a material breach of any of the material terms,
covenants, representations and/or warranties of this Agreement which breach is
not remedied by Licensor to Licensee's reasonable satisfaction within
11
such thirty (30) day notice period.
19. POST-TERMINATION AND EXPIRATION RIGHTS AND OBLIGATIONS
(a) If this Agreement is terminated for any cause under
Paragraph 19(a) or (b), Licensee and Licensee's receivers, representatives,
trustees, agents, administrators, successors or permitted assigns shall have no
right after the effective date of termination to manufacture, sell, ship, market
or distribute Licensed Products or to use any promotional and packaging material
relating to the Licensed Products. Licensee's final statement and payment of
royalties (and all other amounts due hereunder) including the difference, if
any, between all royalties based upon Net Sales for the Annual Period and the
Guaranteed Minimum Royalty for such Annual Period, shall be received by Licensor
within ten (10) days after the effective date of termination. Licensee shall
send all payments and statements required by Paragraph 19(a) to Licensor at the
address in Paragraph 22.
(b) After expiration of the Term of this Agreement or the
termination of this Agreement under any provision other than Paragraph 18(a) or
(b), Licensee may sell, ship, market and distribute Licensed Products which are
on hand or in the process of manufacture at the date of expiration or at the
time notice of termination is received for a period of one hundred eighty (180)
days after the date of expiration or the date of notice of termination
("Sell-Off Period"), as the case may be, provided that the Royalties with
respect to that period are paid and the appropriate statements for that period
are furnished. Licensee shall make no post-termination sales to affiliates,
except in the ordinary course of its business operations. For purposes of this
subsection, "affiliate" shall mean (i) any entity having any relationship,
contract, or arrangement with Licensee whereby Licensee has or exercises or has
the power to exercise, directly or indirectly, any manner, control, direction,
or restraint over the business or operations of such entity, or (ii) Licensee
and such entity are subject to common or mutual control or direction by some
other entity. Any Licensed Products not sold, shipped and distributed by
Licensee within this one hundred eighty (180) day period must be destroyed or
reprocessed so that the Property is no longer present in whole or in part on the
Licensed Products or on their packaging material. Upon Licensor's request,
Licensee shall provide evidence satisfactory to Licensor of such destruction or
reprocessing of remaining Licensed Products or packaging material. After
expiration of the Sell-Off Period, Licensee's final statement and payment of
royalties including the difference, if any, between all royalties based upon Net
Sales and the full Guaranteed Minimum Royalty shall be received by Licensor
within ninety (90) days after expiration of the Term. Licensee shall send all
payments and statements required by Paragraph 19(b) to Licensor at the address
in Paragraph 22.
(c) After the expiration or termination of this Agreement and
except as provided in Paragraph 19(b), all rights granted to Licensee under this
Agreement shall forthwith revert to Licensor, and Licensee shall refrain from
further use of the Property or any further reference to the Property, either
directly or indirectly, or from use of any marks or designs similar to the
Property in connection with the manufacture, sale, marketing or distribution of
Licensee's Licensed Products. Licensee also shall turn over to Licensor all
molds, silk-screens and other materials, which reproduce the Property or shall
give evidence satisfactory to Licensor of their destruction. Licensee shall be
responsible to Licensor for any damages caused by the unauthorized use by
Licensee or by others of such molds, silk-screens or reproduction materials
which are not turned over to Licensor.
12
(d) Licensee acknowledges that any breach or threatened breach
of any of Licensee's covenants in this Agreement relating to the Property,
including without limitation, Licensee's failure to cease the manufacture, sale,
marketing or distribution of the Licensed Products or the promotional and
packaging material relating to the Licensed Products at the termination or
expiration of this Agreement, except as provided in Paragraph 19(b), will result
in immediate and irreparable damage to Licensor and to the rights of any
subsequent licensee of Licensor. Licensee acknowledges and admits that there is
no adequate remedy at law for any such breach or threatened breach, and Licensee
agrees that in the event of any such breach or threatened breach, Licensor shall
be entitled to injunctive relief and such other relief as any court with
jurisdiction may deem just and proper.
(e) Within twenty (20) days after expiration or notice of
termination of this Agreement, as the case may be, Licensee shall deliver to
Licensor a written report indicating the number and description of the Licensed
Products, which it had on hand or in the process of manufacture as of the date
of expiration or at the time termination notice is received. Licensor may
conduct a physical inventory in order to verify such report. If Licensee fails
to submit the required written report or refuses to permit Licensor to conduct
such physical inventory, Licensee shall forfeit its rights under this Agreement
to dispose of such inventory. In addition to such forfeiture, Licensor shall
have recourse to all other available remedies.
20. PURCHASE OPTION
At any time during the Term Licensee shall have an option to
purchase the Property from Licensor. Licensee shall provide written notice to
Licensor of its desire to exercise the purchase option. The "PURCHASE PRICE" for
the Property shall be the fair market value of the Property as of the date of
exercise of the purchase option. For purposes of this Agreement, the fair market
value shall be the appraised value of all of the Property, determined by
qualified appraisers with regard to intellectual properties, taking into
consideration such factors as "good will." In the event an impartial appraiser
cannot be jointly agreed upon by both parties, then each party may hire his or
her own appraiser, at Licensee's expense. If more than one appraisal is obtained
and if they are within fifteen percent (15%) of each other, then the appraised
value shall be the average of the two appraisals. If the difference is greater
than fifteen percent (15%) and the parties are unable to mutually agree upon an
appraised value, then the appraisers shall appoint an impartial appraiser (at
the Licensee's expense). Once all three appraisals have been made, the one whose
value is between the values of the other two appraisals shall become binding on
all the parties.
21. INDEMNITY AND INSURANCE
(a) Licensee acknowledges that it will have no claims against
Licensor for any damage to property or injury to persons arising out of the
operation of Licensee's business. Licensee agrees to indemnify, hold harmless
and defend Licensor with legal counsel acceptable to Licensor from and against
all demands, claims, injuries, losses, damages, actions, suits, causes of
action, proceedings, judgments, liabilities and expenses, including reasonable
attorneys' fees, court costs and other legal expenses, arising out of or
connected with the Licensed Products, the promotional or
13
packaging material relating to the Licensed Products, Licensee's methods of
manufacturing, marketing, selling or distributing the Licensed Products, , or
any breach by Licensee of any provision of this Agreement or of any warranty
made by Licensee in this Agreement. No approval by Licensor of any action by
Licensee shall affect any right of Licensor to indemnification hereunder.
(b) Licensee shall obtain and maintain during the term of this
Agreement and the one hundred eighty (180) day disposal period, if any, provided
for in Paragraph 19(b), comprehensive general liability insurance coverage,
including product liability insurance, naming Licensor as additional insured.
Such insurance shall be underwritten by insurers satisfactory to Licensor and
shall be written for limits of not less than Two Million Dollars ($2,000,000.00)
each occurrence combined, for bodily injury, including death and property
damage. Licensee shall furnish Licensor promptly upon the execution of this
Agreement with a certificate of insurance stating thereon the limits of
liability, the period of coverage, the parties insured (including Licensee and
Licensor), and the insurer's agreement not to terminate or materially modify
such insurance without endeavoring to notify Licensor in writing at least ten
(10) days before such termination or modification. Licensee's coverage shall be
primary, and any insurance maintained by Licensor shall be in excess of, and not
contributing to, the insurance provided by Licensee.
(c) Licensee has the responsibility to procure legally
sufficient permission from the copyright owner(s) of photographs, illustrations,
artwork, and recorded and published music used in conjunction with the
manufacture and distribution of the Licensed Products. Licensee indemnifies and
holds Licensor harmless from any and all claims made by third parties with
respect to copyrighted material used by Licensee that is licensed from, or owned
by, a party other than Licensor.
(c) The existence of the insurance coverage shall not
mitigate, alter or waive the indemnity provisions of Paragraph 21(a). Licensor
shall not be responsible for the payment of the premiums, charge taxes,
assessments or other costs for the insurance.
22. REPRESENTATION, WARRANTY AND INDEMNIFICATION
Licensor warrants and represents that: (a) Licensor (and the
officers executing on its behalf) has full right and power to enter into this
Agreement; (b) neither the execution and the delivery of this Agreement, nor the
license granted herein, will violate the terms of any existing Agreements to
which Licensor is a party; (c) so long as this Agreement remains in effect,
Licensor shall not commit any act or enter into any agreement with any third
party which is inconsistent or in conflict with this Agreement; (d) the Property
and any and all other materials delivered by Licensor to Licensee shall be
original or under a valid license to Licensee with right to provide the
exclusive License as set forth herein to Licensee; and (e) neither the execution
and performance of this Agreement by Licensor nor the license granted herein,
infringes, misuses, misappropriates or conflicts with the rights, including
copyright, trademark and other intellectual property rights or contract rights,
licensed to or from, or owned by, a party other than Licensor. Licensor shall
defend, indemnify and hold harmless Licensee, its parent, affiliated companies
and partners and their respective officers, directors, members, employees and
agents from and against any and all liabilities, claims, obligations, suits,
judgments, amounts paid in settlement, costs and expenses (including,
14
without limitation, reasonable attorneys fees, court costs and expenses) which
Licensee may incur as a result of a breach by Licensor of any its
representations, warranties, covenants or undertakings as set forth in this
Agreement.
23. NOTICES
Notices provided for herein shall be considered effectively
given when sent by Certified Mail, in the case of Licensor, to:
YANUK JEANS, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn:
And, in the case of Licensee, to:
BLUE HOLDINGS, INC..
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇. ▇▇▇▇ ▇▇▇▇, President
24. PAYMENT AND STATEMENT ADDRESS
Licensee shall send payments and statements to:
YANUK JEANS, LLC
▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
25. ASSIGNMENT AND SUBLICENSE
The license granted hereunder is personal to Licensee, and
Licensee shall not assign, transfer or sublicense any of its rights under this
Agreement or delegate any of its obligations under this Agreement (whether
voluntarily, by operation of law, change in control or otherwise) without
Licensor's prior written approval, not to be unreasonably withheld. Any
attempted assignments, transfer, sublicense or delegation by Licensee without
such approval shall be void and a material breach of this Agreement. A change in
the majority ownership or a material change in the management of Licensee shall
constitute an assignment of rights under this Paragraph requiring Licensor's
prior approval. Licensor is entering into this Agreement with Licensee based, in
substantial part, on the unique attributes, which Licensee and its business
offer, in view of Licensee's management, products and methods of operation.
Subject to the foregoing, this Agreement will be binding upon, and inure to the
benefit of, the parties and their respective successors and assigns.
15
26. APPROVALS
Any approval or consent required by this Agreement to be
obtained from Licensor must be in writing and shall not be unreasonable
withheld, conditioned or delayed.
27. COSTS AND EXPENSES
Each party shall bear and pay all costs and expenses arising
in connection with its performance of this Agreement.
28. INDEPENDENT CONTRACTOR
Licensee is an independent contractor and not an agent,
partner, joint venturer, affiliate or employee of Licensor. No fiduciary
relationship exists between the parties. Neither party shall be liable for any
debts, accounts, obligations or other liabilities of the other party, its agents
or employees. Licensee shall have no authority to obligate or bind Licensor in
any manner. Licensor has no proprietary interest in Licensee and has no interest
in the business of Licensee, except to the extent expressly set forth in this
Agreement.
29. SEVERABILITY
If any provision of this Agreement shall be determined to be
illegal and unenforceable by any court of law or any competent governmental or
other authority, the remaining provisions shall be severable and enforceable in
accordance with their terms so long as this Agreement without such terms or
provisions does not fail of its essential purpose or purposes. The parties will
negotiate in good faith to replace any such illegal or unenforceable provision
or provisions with suitable substitute provisions, which will maintain the
economic purposes and intentions of this Agreement.
30. EXHIBITS
All references to "Exhibit" or "Exhibits" herein shall mean
those Exhibits A through C attached to this Agreement, which Exhibits, wherever
referred to herein, are hereby incorporated into this Agreement as though fully
set forth herein.
31. SURVIVAL
Licensee's obligations and agreements under Paragraphs 4, 5,
8, 9, 13, and 19 shall survive the termination or expiration of this Agreement.
32. MISCELLANEOUS
(a) CAPTIONS.
The captions for each Paragraph have been inserted
for the sake of convenience and shall not be deemed to be binding upon the
parties for the purpose of interpretation of this Agreement.
16
(b) SCOPE AND AMENDMENT OF AGREEMENT.
This Agreement constitutes the entire agreement
between the parties with respect to the subject matter of this Agreement,
supersedes any and all prior and contemporaneous negotiations, understandings or
agreements in regard to the license of the Property in connection with the
Licensed Products is intended as a final expression of their agreement.
(c) GOVERNING LAW.
This Agreement will be deemed to have been executed
in the State of California and will be construed and interpreted according to
the laws of that State without regard to its conflicts of law principles or
rules. The parties agree that any legal action or proceeding with respect to
this Agreement shall be brought in the Superior Court for the Central District
of California, Los Angeles Judicial District or, if such court does not have
jurisdiction, in any court of general jurisdiction in the County of Los Angeles,
California. Licensee consents to the personal jurisdiction of such courts,
agrees to accept service of process by mail and hereby waives any jurisdictional
or venue defenses otherwise available to it.
(d) ATTORNEYS' FEES.
If either party brings any legal action or other
proceeding to interpret or enforce the terms of this Agreement, or retains a
collection agent to collect any amounts due under this Agreement, then the
prevailing party shall be entitled to recover reasonable attorneys' fees and any
other costs incurred, in addition to any other relief to which it is entitled.
(e) INTERPRETATION.
The parties agree that each party and its counsel
have reviewed this Agreement and the normal rule of construction that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.
(f) WAIVER.
The failure of Licensor to insist in any one or more
instances upon the performance of any term, obligation or condition of this
Agreement by Licensee or to exercise any right or privilege herein conferred
upon Licensor shall not be construed as thereafter waiving such term,
obligation, or condition, or relinquishing such right or privilege, and the
acknowledged waiver or relinquishment by Licensor of any default or right shall
not constitute waiver of any other default or right. No waiver shall be deemed
to have been made unless expressed in writing and signed by the an authorized
officer of YANUK JEANS, LLC
(g) TIME OF THE ESSENCE.
Time is of the essence with respect to the
obligations to be performed under this Agreement.
17
(h) RIGHTS CUMULATIVE.
Except as expressly provided in this Agreement, and
to the extent permitted by law, any remedies described in this Agreement are
cumulative and not alternative to any other remedies available at law or in
equity.
(i) CONFIDENTIALITY
This Agreement and contents hereof constitute a
confidential business relationship between the parties. Each party acknowledges
that significant damage could be done to the other one should the terms of this
Agreement become public knowledge. Both parties agree that they will not reveal
the terms of this Agreement to any third party (excluding agents, attorneys,
representatives, manufacturers and others with whom they have legal obligation
to disclose) and that they will exercise reasonable precautions to insure that
neither they nor their employees or agents shall allow the terms of the
agreement to become public knowledge. Prior to providing this Agreement to the
manufacturer of the Licensed Products, Licensee shall redact Paragraph 4.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their authorized representatives on the dates indicated below.
"LICENSOR"
YANUK JEANS, LLC
By: /s/ ▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: CEO & Manager
Date: July 5, 2005
"LICENSEE"
BLUE HOLDINGS, INC.
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
Title: Chief Operating Officer
Date: July 5, 2005
18
EXHIBIT A
LICENSED PRODUCTS
1. APPAREL in all categories for men and women
E - 1
EXHIBIT B
MANUFACTURER'S AGREEMENT
This Manufacturer's Agreement is made pursuant to the License Agreement between
YANUK JEANS, LLC ("EPE") and the undersigned LICENSEE ("Licensee"), a copy of
which is attached hereto and made a part hereof ("License Agreement"). The term
of this Agreement shall begin on FIELD and end on FIELD, unless sooner
terminated in accordance with Paragraph 20 of the License Agreement.
--------------------------------------------------------------------------------
Manufacturing Company Name
--------------------------------------------------------------------------------
Manufacturer Company ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇)
--------------------------------------------------------------------------------
Manufacturing ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (▇▇▇▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇, ▇▇▇, ▇▇▇▇▇▇▇)
--------------------------------------------------------------------------------
Contact Person and Telephone and/or Fax Number
--------------------------------------------------------------------------------
List the Licensed Products you will manufacture (Attach a separate sheet, if
necessary to list all of the Licensed Products you will manufacture)
Manufacturer desires to manufacture and sell to Licensee the above listed
Licensed Products bearing the name, likeness and image of ▇▇▇▇▇ ▇▇▇▇▇▇▇ and in
and to the Trademark(s) listed in Exhibit D (herein after referred to as the
"Property"). Such Licensed Products shall be manufactured only at Manufacturing
Location. In consideration of EPE's approval of the manufacture by Manufacturer
of any Article listed in Exhibit A of the License Agreement bearing the
Property, the parties agree as follows:
Manufacturer acknowledges the validity of and EPE's sole title to the Property.
Manufacturer agrees that its right to manufacture Licensed Products with the
Property thereon is in all respects subject to the terms and conditions in the
License Agreement, including, but not limited to, the termination provisions and
restrictions on the use of the Property. Manufacturer agrees that the provisions
of the License Agreement shall take precedence over and supersede any agreements
between Licensee and Manufacturer. Manufacturer shall sell Licensed Products
with the Property thereon only to Licensee. Manufacturer agrees that its
manufacture of Licensed Products shall give Manufacturer no right to use the
Property or to sell Licensed Products bearing the Property beyond the expiration
or termination of the License Agreement. If Licensee's right to use the Property
expires or terminates, Manufacturer agrees to make no claim against YANUK JEANS,
LLC for any reason.
YANUK JEANS, LLC MANUFACTURER
By: By:
-------------------------------- -------------------------------
Title: Title
------------------------------ ----------------------------
Date: Date:
----------------------------- ----------------------------
(LICENSEE NAME FIELD)
By:
-------------------------------
Title:
----------------------------
Date:
-----------------------------
FIELD
E - 2
EXHIBIT C
TRADEMARKS AND THEIR RESPECTIVE REGISTRATION NUMBERS AS
WELL AS THE COUNTRIES IN WHICH SUCH MARKS ARE REGISTERED OR
WHERE APPLICATIONS FOR REGISTRATION ARE PENDING.
TRADEMARK REGISTRATIONS
United States 2,867,990
Japan 4781166
PENDING TRADEMARK APPLICATIONS
Canada
Madrid Protocol
(Antigua and Barbuda, Armenia, Netherlands Antilles, Austria, Australia,
Benelux, Belarus, Switzerland, China, Cuba, Cyprus, Czech Republic, Germany,
Denmark, Spain, Finland, France, United Kingdom, Georgia, Greece, Croatia,
Hungary, Ireland, Iceland, Italy, Republic of Korea, ▇▇▇▇▇▇▇▇▇▇▇, Lithuania,
Monaco, Republic of Moldova, Former Yugoslav Republic of Macedonia, Mongolia,
Norway, Poland, Portugal, Romania, Russian Federation, Sweden, Singapore,
Slovenia, Slovakia, Turkmenistan, Turkey, Ukraine, and Serbia and Montenegro.
New Zealand
PATENT REGISTRATIONS
Japan 1242022
PATENTS PENDING
United States 29/182,927
European Union 000100789
E - 3