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EXHIBIT 10.6
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is made and entered into as of April 27, 1998 by
and between INTERNATIONAL LICENSING (CALIFORNIA) CORP., a California corporation
("Licensor"), whose address is 0000 Xxxxx Xxxxx, Xxxxx 000, Xxx Xxxxx,
Xxxxxxxxxx 00000, and THE SIRENA APPAREL GROUP., a California corporation
("Licensee"), whose address is 00000 Xxxxx Xxxxxx, Xxxxx Xx Xxxxx, Xxxxxxxxxx
00000, with reference to the following facts:
WHEREAS Licensor has been granted the rights to license and enter into
agreements with third parties to utilize certain trademarks and tradenames owned
by Hang Ten International ("HTI"), a California corporation, including the words
"Hang Ten", designs showing bare footprints, and combinations thereof in
accordance with Licensor's style guide and Trend Books delivered periodically to
Licensees (all of the above shall be hereinafter referred to as the
"Trademarks"); and
WHEREAS Licensee seeks a License from Licensor to design, manufacture,
advertise, sell and promote the items listed in Appendix "A"; said item(s)
hereinafter referred to as the "Licensed Items"; and
WHEREAS The parties hereto agree that Licensor shall grant to Licensee a
license to use the Trademarks in the design, manufacture, advertising, sale and
promotion of the Licensed Items, subject to each of the terms, provisions and
conditions of the Special Provisions (the "S.P.'s") and General Provisions (the
"G.P.'s") hereof. This Agreement consists of the S.P.'s and the G.P.'s, as said
S.P.'s are set forth below, and as said G.P.'s are attached hereto and
incorporated by reference as though fully set forth herein. (Whenever the term
"Agreement" or "License Agreement" is used, it specifically includes both the
S.P.'s and the G.P.'s). In case of a difference, conflict and/or discrepancy
between the S.P.'s and G.P.'s, the S.P.'s shall control and prevail.
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
SPECIAL PROVISIONS
S.P. 1 GRANT OF LICENSE AND DESIGNATION OF LICENSED ITEMS:
A) Effective May 1, 1998 and subject to Paragraph B below, Licensor grants to
Licensee, for the period hereinafter specified and upon the terms, provisions
and conditions of this License Agreement, the exclusive right and license to use
the Trademarks within the Territory as Territory is defined in Article S.P. 3,
in the design, manufacture, advertising, sale and promotion of the Licensed
Items. In the event of any question regarding the definition of products which
Licensee may wish to produce pursuant to this Agreement, the final decision
shall rest in the sole discretion of Licensor. The rights granted to Licensee
herein are limited to the use of the Trademarks on or in connection with the
Licensed Items and Licensee specifically agrees not to use the Trademarks or
give consent to the use of any of them in any manner or on any product or item,
except as set forth in this Agreement, without the prior written consent of
Licensor, or in any manner inconsistent with Licensor's grant of rights to
Licensee herein.
*Material omitted on pages 3, 4 and 6 of the Special Provisions Section pursuant
to a request for confidential treatment and filed separately with the Securities
and Exchange Commission.
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B) Licensor reserves the exclusive right to use and license the Trademarks with
respect to the Licensed Items for premiums, giveaways and promotional sales,
sales solely within Hang Ten branded retail stores and for direct mail sales to
retail consumers.
S.P. 2 PREVIOUS LICENSEE: Notwithstanding anything contained herein,
Licensee specifically agrees that this exclusive right and license may be
subject to a former third party licensee's prior disposition rights, as
exemplified by Article G.P. 17 hereof, and acknowledges that its rights under
this Agreement are subject thereto, and such disposition rights shall neither
alter nor diminish Licensee's duties and obligations hereunder.
X.X. 0 XXXXXXXXXX XXXX: The rights granted to Licensee hereunder may be
exercised by Licensee only within the United States of America and its
territories and possessions, (including the Commonwealth of Puerto Rico, Guam
and all U.S. military bases worldwide) (the "Territory"), and shall be exclusive
therein. Upon Licensee's request, Licensor may, in its sole discretion, extend
the areas in which Licensee may exercise said rights, but any extension shall,
in each instance, be first evidenced by a written and duly executed amendment to
this Agreement for such periods and upon such terms and conditions as shall be
determined by Licensor. Notwithstanding the foregoing, Licensee agrees that it
possesses no rights to and shall not sell the Licensed Items to exporters or
others for resale or reshipment outside of the Territory.
S.P. 4 TERM: The term of this Agreement shall be for three (3) years and
eight (8) months commencing as of May 1, 1998 and ending December 31, 2001
unless sooner terminated or extended pursuant hereto. Each period from January 1
through December 31 during the term hereof is hereafter referred to as the
"(sequential number) Contract Year", with the exception of the "First Contract
Year" which shall be for the period of May 1, 1998 through December 31, 1999;
for example, the period from January 1, 2000 through December 31, 2000 shall be
referred to herein as the "Second Contract Year" and so forth. (When the term
"Contract Year" is used, it shall mean each of the First Contract Year, the
Second Contract Year, and so forth.)
S.P. 5 FAILURE TO MARKET:
A) Notwithstanding the above grant of rights to Licensee, in the event that
Licensee is not actively and substantially producing any of the separately
denoted Licensed Item(s) by August 31, 1998, or fails to have such Item(s)
available to the trade in commercially reasonable quantities during any ninety
(90) day period thereafter (except seasonal items out of season), then Licensor,
at its option, may terminate this Agreement with respect to such Licensed
Item(s) upon giving ten (10) days written notice. Upon such termination,
Licensor shall be free to proceed with any third party for such Licensed
Item(s). Notwithstanding any such termination as provided in this Paragraph, the
balance of this Agreement shall remain unaffected, Licensee's rights and
obligations shall be exactly as provided in this Agreement, and there shall be
no reduction or alteration of any Minimum Royalty or Minimum Net Shipment amount
stated in this Agreement; provided such termination is based on one or more of
the following material breaches by Licensee: i) sales made to discount stores,
ii) failure to pay any amounts due hereunder, or iii) sales made outside of the
Territory granted herein (the foregoing breached defined as "Bad Events").
Licensor acknowledges and agrees that it has a duty to exercise good faith
efforts to mitigate its damages for any termination
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based on the occurrence of a Bad Event, including without limitation, to
exercise good faith efforts to seek and obtain a new license with a third party
for the Licensed Items.
S.P. 6 ROYALTIES: Licensee shall pay to Licensor as royalties for the
rights granted hereunder the greater of the Minimum Royalty set out in Article
S.P. 8 or a sum equal to [*] of Licensee's actual Net Shipments of Licensed
Items, as "Net Shipments" is defined in Article G.P. 1. Such royalties shall be
paid for on a quarterly basis and accounted for on a monthly basis in accordance
with Article G.P. 3.
S.P. 7 MINIMUM ROYALTY: Licensee shall pay a Minimum Royalty to
Licensor as follows:
JUNIORS (SWIMWEAR, COVERUPS, HEADWEAR)
First Contract Year (05/01/98-12/31/99 ) [*]
Second Contract Year (1/1/2000-12/31/2000) [*]
Third Contract Year (1/1/2001-12/31/2001) [*]
GIRLS (SWIMWEAR, COVERUPS, HEADWEAR)
First Contract Year (05/01/98-12/31/99 ) [*]
Second Contract Year (1/1/2000-12/31/2000) [*]
Third Contract Year (1/1/2001-12/31/2001) [*]
however, the Minimum Royalty for the Second Contract Year and each succeeding
Contract Year shall be the amount stated above, or [*] of the preceding Contract
Year's actual royalties due, whichever is greater.
The above Minimum Royalties shall be due and payable on or before the
20th day of each quarter following each Contract Year at the rate of 25% per
quarter for each of the respective Contract Years. In the event actual royalties
paid quarterly are less than the quarterly minimums set forth above, Licensee
will be responsible for the difference between actual royalties paid on Net
Shipments and the cumulative Minimum Royalties due.
For the purpose of this Article S.P. 7, the quarterly minimum payments
as referred to above for Licensee's First Contract Year shall apply to the
twelve (12) month period immediately preceding Licensee's Second Contract Year.
S.P. 8 MINIMUM NET SHIPMENTS OF LICENSED ITEMS: Notwithstanding
anything to the contrary set forth herein, Licensee shall maintain Minimum Net
Shipments as follows:
JUNIORS (SWIMWEAR, COVERUPS, HEADWEAR)
First Contract Year (05/01/98-12/31/99 ) [*]
Second Contract Year (1/1/2000-12/31/2000) [*]
Third Contract Year (1/1/2001-12/31/2001) [*]
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GIRLS (SWIMWEAR, COVERUPS, HEADWEAR)
First Contract Year (05/01/98-12/31/99 ) [*]
Second Contract Year (1/1/2000-12/31/2000) [*]
Third Contract Year (1/1/2001-12/31/2001) [*]
however, the Minimum Net Shipments for the Second Contract Year and each
succeeding Contract Year shall be the amount stated above or [*] of the
preceding Contract Year's actual Net Shipments, whichever is greater.
If Licensee fails to maintain the required Minimum Net Shipments in any
Contract Year, Licensor may terminate this Agreement by written notice delivered
to Licensee within six (6) months after the end of the Contract Year in which
Licensee failed to maintain such required Minimum Net Shipments. Any such
termination shall not affect Licensee's obligations to pay any amounts currently
due to Licensor, or upon the occurrence of any Bad Event, those amounts to
become due by Licensee to Licensor, nor any of the other obligations set forth
herein.
S.P. 9 ADVERTISING REQUIREMENTS:
A) In each Contract Year, Licensee shall expend at least a sum equal to the
greater of [*] of Licensee's Minimum Net Shipments (as Minimum Net Shipments are
defined at Article S.P. 8) or [*] of Licensee's actual Net Shipments (as "Net
Shipments" is defined in Article G.P. 1) for that Contract Year for
institutional advertising and promotion of the Licensed Items. (store co-op
advertising and promotion shall include trade and/or consumer media such as
newspapers, magazines, television and/or radio, but does not include catalogues
and brochures.) Concurrently with the rendition of the annual report required by
Article G.P. 4, Licensee shall submit a report certified as accurate by
Licensee's Chief Financial Officer evidencing the performance of its financial
obligation during the preceding Contract Year for such institutional advertising
and promotion. If said annual report shows that less than the required amount
was spent, the difference between the amount actually spent and the amount to be
spent must be remitted to Licensor within thirty (30) days for use in the Hang
Ten Advertising and Promotion Program Pool.
B) Licensee shall submit to Licensor for prior approval all advertising and
promotional items, programs and materials relating to the Licensed Items at
least twenty (20) days prior to media deadlines. Licensor shall have the right
to disapprove any proposed items which do not meet Licensor's standard
requirements as to image and character. Failure of Licensor to disapprove of
same within fifteen (15) days after Licensor's receipt thereof shall constitute
approval.
S.P.10 ADVERTISING RESTRICTIONS ON THE INTERNET: Licensee
specifically acknowledges and agrees that the right to utilize the trademarks on
the Internet is hereby reserved to Licensor, except that Licensee may use the
Trademarks subject to Licensor's approval as to use in its webpage, if any, to
identify the various brands available to Licensee's customers.
S.P. 11 ADDRESS FOR NOTICES: All notices required under this
Agreement shall be in writing and shall be personally delivered, sent by
registered or certified mail, postage prepaid, return receipt requested, or sent
by an overnight express courier service that provides
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written confirmation of delivery, to Licensee at its address as set forth above
in the introductory Paragraph of this Agreement, and to Licensor at the
following address:
International Licensing (California) Corp.
0000 Xxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxx, President
Each such notice shall be deemed given, delivered and received upon its actual
receipt, except that if it is sent by mail in accordance with this Paragraph,
then it shall be deemed given, delivered and received five (5) days after the
date such notice or other communication is deposited with the United States
Postal Service in accordance with this Paragraph. Any party to this Agreement
may give notice of a change of its address to the other party to this Agreement.
S.P. 12 TIME IS OF THE ESSENCE IN EXECUTION: Licensee and Licensor
acknowledge that time is of the essence with respect to the Licensee's execution
and delivery to Licensor of this license agreement, which shall occur no later
than May 31, 1998.
This license agreement shall have no force and effect unless and until
signed by both Licensee and Licensor.
S.P. 14 FISCAL YEAR: Licensee's fiscal year is January to
December.
S.P. 15 TRADE SHOWS: Licensee agrees to participate with other U.S.
licensees at trade shows when requested by retailers or where several (3 or
more) licensees in related product areas are involved. Notwithstanding the
foregoing, Licensee agrees to participate and exhibit the Licensed Items at all
ISAM trade shows at Licensee's sole cost. Licensee shall be responsible for its
share of the total exhibition costs, which shall be equal to the total costs for
the booth and space used by Licensee. Licensee agrees to use at least one booth
space at each trade show.
S.P. 16 PRODUCT DISTRIBUTION: Licensee agrees to maintain reasonable
standards to protect the value of the Trademarks and the image of the Licensed
Items. Licensee shall maintain the same or higher standards for the selection of
retail, wholesale and other outlets as those maintained by Licensor, namely
those stores that are commonly referred to in the market as "up-market" stores.
In the event of any question regarding the type of store or stores to which this
requirement applies, Licensee shall first request Licensor's approval of a
proposed store or stores and the final decision regarding same shall be
determined by Licensor. Licensee acknowledges that Licensor may reasonably
change such standards from time to time during the term of this Agreement and
that the changed standards shall apply to Licensee after reasonable written
notice thereof.
Licensor shall have the right, at any time, and from time to time, to
disapprove of the sale of Licensee's Licensed Items to particular wholesale
and/or retail outlets, including the right to disapprove of outlets that were
previously acceptable. Any disapproval of any previously acceptable outlets
shall be prospective only and shall relate only to any previously acceptable
outlets shall be
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prospective only and shall relate only to the subsequent sale or distribution of
the Licensed Items by Licensee to those previously acceptable, now disapproved
outlets. Unless prior written approval is obtained from Licensor, Licensee is
specifically prohibited from the sale and distribution of the Licensed Items
through (i) any disapproved outlets, and (ii) any factory outlet stores,
warehouse sales, parking lot sales, swap meets, flea markets and similar sale or
disposal techniques. Licensee's failure to comply with the requirements of this
Article S.P. 15 shall constitute a material breach of this License Agreement and
Licensor may, at its sole option, terminate Licensee's rights under this
Agreement for failure to adhere to these retailing and marketing standards
and/or obtain specific performance to enjoin any such actions or threatened
actions by Licensee. Licensor's determination as to whether a retail outlet
satisfies the criteria of this Article S.P. 15 shall be final and binding as
between Licensee and Licensor.
S.P. 17 DISTRIBUTION: Licensee agrees to utilize Licensor as its sole
and exclusive distributor of the Licensed Items outside of the Territory (and
any other market in which it maintains a Hang Ten license) and the price of the
Licensed Items to Licensor shall be at manufacturer's cost plus [*].
S.P.18 RETAIL STORE PROTECTION: Licensee shall be obligated to offer the
Licensed Items to any free standing Hang Ten retail stores in any future
locations within the Territory, if any. Such Hang Ten store(s) shall have no
obligation to purchase the Licensed Items unless it is reasonably satisfied with
the quality, delivery and pricing terms (Licensor agrees that Licensee's
wholesale price less [*] shall be deemed reasonable as to pricing) associated
therewith, failing which the Hang Ten store(s) shall have the right to purchase
Licensed Items from any third party of their choosing. Any sales made by
Licensee to such stores shall be royalty-free and shall not be applied against
the Minimum Net Shipments otherwise set forth herein.
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IN WITNESS WHEREOF, THE AUTHORIZED OFFICERS OF THE PARTIES HERETO HAVE
EXECUTED THIS AGREEMENT AS OF THE DATE SET FORTH BELOW.
INTERNATIONAL LICENSING (CALIFORNIA) CORPORATION
A California corporation
("Licensor")
By:/s/ XXXX XXXXX
-------------------------------
Xxxx X. Xxxxx, President
Dated: 4/27/98
----------------------------
THE SIRENA APPAREL GROUP
A California corporation
("Licensee")
By: /s/ XXXXXXX X. XXXXXX
--------------------------------------------
Xxxxxxx Xxxxxx, Chief Operating Officer
Dated:
-----------------------------
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APPENDIX "A"
Licensed Items
JUNIORS AND GIRLS (SIZES 7-16, 4-6X)
1. Swimwear
2. Swimwear related Coverups to include oversized T-shirts merchandised with
Swimwear
(each of the Licensed Items will be reported separately on Appendix B)
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GENERAL PROVISIONS
THESE GENERAL PROVISIONS AND THE SPECIAL PROVISIONS TO WHICH THEY ARE
ATTACHED CONSTITUTE THE LICENSE AGREEMENT BETWEEN INTERNATIONAL LICENSING
(CALIFORNIA) CORP., ("LICENSOR"), AND THE SIRENA APPAREL GROUP ("LICENSEE")
DATED ________. _______.
THESE GENERAL PROVISIONS ARE OF FULL FORCE AND EFFECT IN CONJUNCTION
WITH THE SPECIAL PROVISIONS HEREOF, PROVIDED, HOWEVER, THAT IN THE EVENT ANY
TERM HEREOF IS INCOMPATIBLE AND/OR AT VARIANCE AND/OR AMBIGUOUS WITH ANY TERM OR
PROVISION OF THE SPECIAL PROVISIONS, THE SPECIAL PROVISIONS SHALL CONTROL AND
PREVAIL.
G.P. 1 DEFINITION OF "NET SHIPMENTS": "Net Shipments" shall mean the
invoice price charged by Licensee for Licensed Items sold and shipped by
Licensee, less refunds, high-low billing specifically set forth in writing,
credits and allowances actually made or allowed to customers for returned
Licensed Items. In the event that Licensee sells to a related party of Licensee,
the pricing structure for said sale shall be uniform for all licensees at a
reasonable discounted price, excluding at least royalties, advertising, sales
commission and discounts.
G.P 2 LICENSEE'S RECORDS: Licensee shall keep and maintain at its
regular place of business, during the term of this Agreement and for twelve
months thereafter, complete books and records of all business transacted by
Licensee in connection with the Licensed Items, including but not limited to
books and records relating to Net Shipments and orders for Licensed Items. Such
books and records shall be maintained in accordance with Generally Accepted
Accounting Principles consistently applied.
G.P. 3 LICENSEE'S MONTHLY REPORT OF NET SHIPMENTS AND ROYALTY PAYMENTS:
On or before the 20th day of each month during the term hereof and any extension
thereof, Licensee shall deliver to Licensor a "Report of Net Shipments and
Royalty Payments" (see Appendix "B" attached hereto), certified to be true and
correct by the Chief Financial Officer of Licensee, setting forth the Gross and
Net Shipments by Licensee during the preceding calendar month for each territory
and/or category for which the License Agreement contains separate Minimum
Royalty guarantees. Full payment of the amounts due under Articles X.X. 0, X.X.
7 and S.P. 9 hereof, and as reported on the Report of Net Shipments and Royalty
Payments, shall be wire transferred to Licensor's bank account as designated at
Appendix "B". The wire transfer amount must agree with the amount recorded on
the Report of Net Shipments an Royalty Payments as "Amount Paid".
In the event of shipments of Licensed Items prior to commencement of the
term hereof, Licensee shall submit monthly reports and royalty payments as if
the term had commenced on the date of the first such shipment. If Licensee fails
to pay any sum due hereunder within ten (10) days after its due date, the amount
owing shall thereupon bear interest until paid at the rate
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of 18% per annum with the amount of such interest calculated from such time as
said amounts were initially due hereunder until they are actually paid. In no
event shall the interest rate charged exceed the maximum rate allowable under
the relevant provisions of the laws of California and Licensee's domicile.
Concurrent with Licensee's delivery of the above-described monthly
report, Licensee shall provide Licensor with a listing of all of Licensee's
accounts and customers showing the completed Net Shipments of Licensed Items
achieved by Licensee for each account and/or each customer for the previous
shipment month. In addition, Licensee shall provide Licensor with a listing, by
account, of all account/bookings (open order dollar volume) open at the time of
the report.
G.P. 4 LICENSEE'S ANNUAL REPORTS AND ANNUAL ROYALTY
PAYMENTS: On or before the 20th day of the third month following the end of
Licensee's fiscal year, Licensee shall render to Licensor a written statement,
certified by a certified public accountant, showing gross shipments, Net
Shipments, royalties due and royalties paid for Licensee's preceding fiscal
year, and for any Contract Year which ended within said fiscal year. If said
statement discloses that the amount of royalties paid during any period to which
said statement relates was less than the amount required to be paid, Licensee
shall pay said deficiency concurrently with the delivery of the statement,
together with interest at 18% per annum, with the amount of such interest
calculated from such time as said amounts were initially due hereunder until
they are actually paid. In no event shall the interest rate charged exceed the
maximum rate allowable under the relevant provisions of the laws of California
and Licensee's domicile. If said statement discloses that Licensee has paid
royalties in excess of the amounts required to be paid, Licensee shall be
entitled to a credit equal to such excess royalties against the royalties next
accruing under this Agreement. In the event of excess royalty payments during
the final year of this Agreement, adjustments shall be made in cash rather than
in the form of a credit.
G.P. 5 AUDIT BY LICENSOR: At all times during the existence of this
Agreement and for twelve (12) months thereafter, Licensor, upon giving Licensee
at least ten (10) days advance written notice of its intention so to do, shall
have the right to inspect or audit all books and records which Licensee is
required to maintain pursuant to Article G.P. 2 above. If any such audit shall
disclose that Licensee has understated Net Shipments or underpaid royalties for
any reporting period, Licensee, upon written demand, shall forthwith pay the
amount, if any, by which the royalties owing exceed royalties paid, with
additionally, interest at 18% per annum from such time as said amounts were
initially due. In the event that Licensee has understated Net Shipments in
excess of 2% or underpaid royalties in excess of 2% of the amount due for any
Contract Year, Licensee shall forthwith and upon written demand also pay all
costs, fees and expenses incurred by Licensor in conducting such audit,
including, without limitation, reasonable travel expenses. Should such audit
disclose that the royalties paid exceed the royalties due, Licensee shall
receive credit equal to such excess royalties against the same royalties next
accruing, except that when such audit is conducted at the expiration of the
Agreement, any excess royalty payments revealed by such audit will be remitted
to Licensee within thirty (30) days thereafter.
G.P. 6 BEST EFFORTS OF LICENSEE: Licensee shall use its best
efforts and skill to design, manufacture, advertise, sell and ship the Licensed
Items and shall continuously and
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diligently during the term hereof produce an inventory of Licensed Items and
procure and maintain facilities and trained personnel sufficient and adequate to
accomplish the foregoing. A cessation of the above for a continuous period of
ninety (90) days shall be grounds for termination, without prior notice.
Licensor shall have the right to inspect Licensee's said facilities during
regular business hours, upon five (5) days prior written notice. Licensor shall
use reasonable efforts to make such inspection in the presence of a
representative of Licensee.
G.P. 7 LICENSED ITEMS TO BE KEPT DISTINCTIVE: Licensee shall take such
reasonable efforts as are necessary to maintain the Licensed Items as separate
and distinct lines in styling, design, advertising and merchandising from any
other product manufactured or sold by Licensee. Licensor agrees to render
reasonable assistance and advice to Licensee concerning style trends and
direction. In the event Licensor shall create any design or style and submit the
same for use by Licensee, Licensee shall not be required to use it, but
regardless of Licensee's election, Licensee shall have no right to such design
or style and shall not use it in connection with any product or service other
than Licensed Items.
G.P. 8 ADDITIONAL OBLIGATIONS OF LICENSEE AS TO QUALITY,
MERCHANDISING AND OTHER ASPECTS OF LICENSED ITEMS:
A) Licensee shall provide and maintain at its sole cost and expense adequate
facilities and qualified personnel to assure and perpetuate the quality of the
Licensed Items consistent with the type, style and price range thereof.
Licensee's accounting records of sales, shipments and returns of Licensed Items
shall be maintained separately from Licensee's accounting records relating to
other items manufactured or sold by Licensee.
B) Licensee shall similarly furnish to Licensor, without request, prior to sale
or shipment of such items, samples of each proposed new and/or introductory
model and material to be utilized so as to insure the consistent high quality of
the image and character of the Licensed Items. Licensor shall have the right to
disapprove any proposed new model or material which does not meet Licensor's
standard requirements as to image, quality and character, but failure of
Licensor to notify Licensee of such disapproval within fourteen (14) days after
receipt of the sample shall constitute Licensor's approval.
C) Upon request, Licensee, at its sole cost, shall furnish to Licensor
photographs and negatives of each previously approved line, samples and finished
production models of Licensed Items for Licensor's further approval as to
styling, materials and manufacturing quality. Licensor shall not arbitrarily or
unreasonably withhold said approval.
D) In addition thereto, prior to submission of such samples to Licensor,
Licensee shall conduct normal tests and verification procedures on each such
sample to assure that the quality of the Licensed Items are at least equal to
the quality of similar competitive non-licensed items manufactured and sold at
retail at comparable prices. In the event that Licensed Items are wearing
apparel, Licensee shall further conduct tests relating to color fastness,
maximum shrinkage, burst strength, curing and the like.
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E) Each Licensed Item shall contain thereon at least one representation of the
Trademarks, to be applied in a reasonable size and manner. All representations
of the Trademarks placed upon any Licensed Item shall be either embroidered,
knitted, screenprinted or flocked thereon unless Licensor gives its prior
written consent to some alternate method. Licensor specifically reserves the
right to withhold approval as to any representation of any of the Trademarks on
the Licensed Items, including without limitation any hang tags, labeling or
packaging thereof (excluding packaging not to be seen by consumer), which does
not conform to Licensor's standard requirements regarding uniformity as to such
Trademark.
G.P. 9 RESTRICTIONS UPON SUBCONTRACTS: Licensee shall have the right to
enter into subcontracts for the manufacture of Licensed Items; provided, however
that Licensee shall first ascertain to its satisfaction that each subcontractor
is able to meet Licensee's quality standards and delivery schedules. In any
event, Licensee shall not permit any subcontractor to further subcontract the
work contracted for and shall discontinue using any subcontractor who shall
consistently fails to comply with the required quality standards and/or delivery
schedules. Licensee, if requested by Licensor, shall provide a list of
subcontractors to Licensor.
G.P. 10 LICENSOR - LICENSEE MEETINGS: Licensor shall have the right to
call meetings to be held at Licensor's primary place of business not more
frequently than once a year, with at least thirty (30) days advance written
notice to Licensee. Such meeting shall be called to generally review matters
relating to the terms and conditions of this Agreement and the compliance of
each of the parties herewith, and to consider policies, planning and performance
relating to quality controls, production, marketing, advertising and promotion
of the Licensed Items and any other matter or matters of concern. In addition
thereto, any party shall have the right to call meetings, as necessary, with at
least thirty (30) days advance written notice to the other party to discuss and
resolve specific matters of concern as they occur. If such meeting requires the
attendance of Licensor then it should be held at Licensor's primary place of
business. All meetings shall be attended by the representatives of the parties
who are responsible for the performance as to those matters to be discussed and
the costs thereof shall be borne by the respective parties. In addition,
Licensor holds an annual Licensee convention and it is intended that the
convention shall, among other things, xxxxxx cooperative projects among
licensees, resolve outstanding business matters and provide an opportunity to
review current licensee product and advertising. Due to the importance of this
convention, Licensor expects Licensee to use its best efforts to have its
representative(s) attend and participate.
G.P. 11 SAMPLES, PROMOTIONAL MATERIALS AND ACCOUNT LISTS:
A) Upon completion of the following, Licensee shall make available to
Licensor:
1) Current representative samples of all Licensed Items as well as
findings, as Licensor may reasonably designate. Licensor shall pay Licensee's
normal salespersons sample charges for said Licensed Items. Samples provided to
Licensor for quality and design approval in accordance with the requirements set
forth below shall be provided without cost to Licensor.
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2) Copies of Licensee's advertising, sales and promotional materials
when the material is developed and available. Licensee shall keep a reasonable
supply of such materials in stock to facilitate requests.
3) Two (2) complete sample lines, at the same time as sample lines are
provided to licensee's sales force, at the same price that Licensee charges its
salespeople.
Licensee shall furnish the items specified in Article G.P. 11 (A) 1),
2) and 3) within seven (7) days after said items first become available to
Licensee's sales representatives.
B) Licensee acknowledges that providing the above items to Licensor is of the
essence of this Agreement, Licensor shall be free to incorporate any features,
styling or otherwise, in the manufacture of Licensed Items under other license
agreements with Licensor; provided, however, that nothing herein shall be
construed to alter and/or diminish the exclusive license granted Licensee
hereby.
G.P. 12 PROHIBITION OF ASSIGNMENTS AND TRANSFERS: Without the prior
written consent of Licensor, Licensee shall not voluntarily, involuntarily or by
operation of law assign or transfer this Agreement or any of Licensee's rights
or duties hereunder (except as specifically provided herein) or any interest of
Licensee herein, nor shall Licensee enter into any sublicense for the use of the
Trademarks by others. For the purposes of this G.P.12 a subcontractor as
provided in G.P. shall not be deemed to be a sublicensee. Further, without the
prior written consent of Licensor, Licensee shall not sell or otherwise transmit
or transfer to any party engaged in the design or manufacture of items similar
to any of the Licensed Items, any design, style, know-how, technology or other
item or knowledge of a technical or competitive nature furnished to Licensee by
or through Licensor ("Licensor's Research & Development Material") unless
Licensor's Research & Development materials shall include information which is
known by Licensee at the time of receipt from Licensor). Included within the
prohibitions set forth herein are: (1) any transfer of any interest of Licensee
under this Agreement to any entity in which the present controlling shareholders
of Licensee do not have voting control, and (2) any transfer to any other party
or parties of voting control of Licensee by its present controlling
shareholders. Licensor shall not arbitrarily or unreasonably withhold its
consent to any assignment or transfer of ownership or control of Licensee. It
shall not be arbitrary or unreasonable for the Licensor to withhold its consent
to an assignment or transfer made without its prior permission, even though if
its permission had been sought it would have been arbitrary or unreasonable not
to grant it. The consent of Licensor to one assignment, transfer or sublicense
shall not be deemed to be consent to any subsequent assignment, transfer or
sublicense. Any assignment, transfer or sublicense without Licensor's written
consent shall be void and at the option of the Licensor shall constitute a
default hereunder.
G.P. 13 NO DILUTION OF TRADEMARKS NO ATTACK UPON TRADEMARKS:
A) Licensee shall not at any time use, promote, advertise, display or otherwise
publish any of the Trademarks or any material utilizing or reproducing any of
them in whole or in part, in such a manner as may adversely affect any of
Licensor's rights therein.
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14
B) Licensee shall cause to appear on all Licensed Items and on all materials on
or in connection with which any of the Trademarks are used, such legends,
markings and notices as may be required by law to give appropriate notice of all
trademark, tradename or other rights therein or pertaining thereto.
C) Licensee shall not contest the validity of the Trademarks or any rights of
Licensor therein, nor will Licensee willingly become an adverse party to
litigation in which others shall contest the Trademarks or Licensor's said
rights. In addition thereto, Licensee shall not in any way seek to avoid its
obligations hereunder because of the assertion or allegation by any person(s) or
government(s) that the Trademarks or any of them are invalid or by reason of any
contest concerning the rights of Licensor therein.
G.P. 14 INFRINGEMENT AND OTHER TRADEMARK LITIGATION:
A) Licensee shall apprise Licensor as soon as practicable of any possible
infringement of the Trademarks which comes to the attention of Licensee.
Licensor at its sole cost and expense, and in its own name, shall prosecute and
defend any action or proceeding which Licensor deems necessary or desirable to
protect the Trademarks, including but not limited to actions or proceedings
involving their infringement. Upon written request by Licensor, Licensee shall
join Licensor at Licensor's sole cost in any such action or proceeding. In no
event shall Licensee commence any action or proceeding to protect the Trademarks
or any action or proceeding alleging infringement thereof without the prior
written consent of Licensor. In addition, Licensee shall not unilaterally defend
any infringement action unless it shall first make written demand upon Licensor
so to do, and Licensor shall fail to do so in a timely manner. Any and all
damages recovered in any action or proceeding commenced by Licensor shall belong
solely and exclusively to Licensor. Notwithstanding the foregoing, Licensee may
prosecute and defend, at its sole cost and expense, and in its own name, any
action or proceeding to protect its designs or styles, provided, however, that,
in connection therewith, Licensee shall indemnify and hold Licensor harmless
from any liability (including attorney's fees and costs of defense) arising from
any such action or proceeding, or from Licensee's creation or use of its designs
or styles.
B) Licensor shall indemnify and hold Licensee harmless from any damage, cost or
liability arising solely from Licensee's use of the Trademarks as authorized
herein. Licensor shall not have any such obligation with regard to damages,
costs or liabilities allegedly or actually arising, in whole or in part, from
any other causes, including violations of laws and statutes governing antitrust
regulation, trade regulation or unfair competition, except to the extent, if
any, that claim is based on any act or refrainment to act required by this
Agreement or by the direction of Licensor. Further, in the event of any
threatened or actual action or proceeding in which they are or may be charged
with jointly violating any antitrust, trade regulation or similar statute,
Licensee may, at its option, choose to be represented in such threatened or
actual action or proceeding by Licensor's counsel at no cost to Licensee for
fees, costs or expenses. Licensor shall maintain full control of such threatened
or actual action or proceeding and such representation of Licensee shall
continue only so long as Licensor's counsel, in its sole discretion, is of the
opinion that it may properly and ethically represent both Licensor and Licensee.
Thereafter, Licensor's counsel shall continue to represent only Licensor and
Licensee's continued defense shall be at its expense with separate
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15
counsel. Licensee shall, in a timely manner, execute and deliver to Licensor any
pleading or other document necessary to carry out such change in legal
representation.
C) Other than as expressly set forth in this Article G.P. 14, Licensee shall
have no rights against Licensor with respect to any of the matters covered in
this Article G.P. 14. Licensee shall under no circumstances incur legal expenses
on Licensor's account without first obtaining Licensor's specific written
authorization.
G.P. 15 ADDITIONAL RESTRICTIONS UPON USE OF TRADEMARKS:
Licensee shall not use or permit the use on any of the Licensed Items, or on any
carton, container or packaging which is received by the general public (as
opposed to retailers), any tag, label, sticker, or other xxxx or identification
which includes with any of the Trademarks, including the name "Hang Ten", the
name of Licensee or of any other person, firm or entity (e.g., "Hang Ten by
Licensee") nor shall Licensee include or permit the inclusion, with the name
"Hang Ten" or any of the other Trademarks, in any advertising or promotional
material featuring any of the Licensed Items which is disseminated to the
general public (as opposed to trade advertising) the name of Licensee or of any
other person, firm or entity. In addition to the foregoing, Licensee shall not
use or permit the use of any of the Trademarks, including the name "Hang Ten",
on or in connection with any product or service, other than the Licensed Items,
which are manufactured or sold by Licensee, or which is licensed by Licensee to
others for manufacture or sale (e.g., "Licensed by the makers of Hang Ten"), nor
shall any of the Trademarks be used as part of the company name of Licensee. It
is the intention of the parties hereto and the purpose of this Article G.P. 15
that all of the Licensed Items, and only the Licensed Items, be identified to
the general public solely by one or more of the Trademarks. Licensee also agrees
to use a registration indicator in the form of a circle - R symbol (or any
alternative indicator complying with the trademark laws of the country(s) in
which Licensee uses the marks) in conjunction with the Trademarks, except that
the registration indicator may be omitted from the trademarks where the marks
are used as design elements on the Licensed Items. However, all labels and hang
tags shall include the registration indicator. Licensor represents that it owns
and/ or has the exclusive right to license each of the Trademarks, and that each
of the Trademarks is valid and registered on the Principal Register of the U.S.
Patent and Trademark Office.
G.P. 16 DEFAULTS BY LICENSEE:
A) Except as otherwise expressly provided in this Agreement, i) in the event
Licensee shall default in the performance of any of the terms, obligations and
conditions on the part of Licensee to be performed hereunder, and if such
default involves the payment of money and the same shall not be cured within ten
(10) days after Licensee's receipt of written notice, or if such default
involves performance other than the payment of money and same shall not be cured
within thirty (30) days after Licensee's receipt of written notice, or ii) if a
Receiver is appointed to, or one or more creditors do take possession of all or
substantially all of the assets of Licensee, or iii) if Licensee shall make a
general assignment for the benefit of creditors, or iv) if any action is taken
or suffered by Licensee under any insolvency or bankruptcy act; then, and in any
one or more of such events, and in addition to any other rights which Licensor
may have under this Agreement or at law or in equity, Licensor may immediately
and without prior notice cancel and terminate this Agreement. In the event
Licensee commits three or more defaults and corrections thereof of any nature
during the term
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hereof and any extension, of which Licensor has given written notice, Licensor,
in addition to its other rights hereunder and at law or in equity, may
immediately and without prior notice, cancel and terminate this Agreement. The
time for performance of any act required of either party shall be extended by a
period equal to the period during which such party was actually prevented from
performance by fire, flood, storm, earthquake or other like casualty.
B) The termination of this Agreement shall not relieve Licensee of any accrued
obligations to Licensor. Termination for any Bad Event shall not relieve
Licensee of any obligation or duty to pay Minimum Royalties for any Contract
Years subsequent to the date of such termination.
G.P. 17 DISPOSAL OF INVENTORY OF LICENSED ITEMS UPON TERMINATION OF
LICENSE AGREEMENT: Immediately upon the Termination or Cancellation of this
License Agreement, for any reason whatsoever, Licensee shall discontinue its use
of the Trademarks in connection with the design, manufacture and sale of the
Licensed Items and Licensee shall no longer have the right to use the Trademarks
in any form or manner.
Licensor shall have a right of first refusal to purchase all finished
goods and piece goods (in production or on order) in the possession of Licensee
at a price equal to Licensee's substantiated cost for same. Licensor shall have
fifteen (15) days from Licensor's receipt of a complete list of such inventory
(itemized by style, size and color) of Licensed Items to be disposed of
(including the applicable costs for same), in which to exercise said right of
first refusal. In the event Licensor declines to exercise its right of first
refusal within the stated time period, and if Licensee has fully complied with
the terms of this Agreement, including the payment of all monies due to
Licensor, Licensee shall have one hundred and twenty (120) days from the date of
Termination or Cancellation of this License Agreement to dispose of its
inventory of Licensed Items, provided however, that said disposal shall be
through approved outlets acceptable to Licensor, in accordance with the terms
and conditions stipulated in Article S.P. 15 hereof. If any of the Licensed
Items remain unsold after the expiration of the one hundred and twenty (120) day
disposal period, Licensee shall then remove from the Licensed Items all
identification of the trademarks, including but not limited to any labels, hang
tags, wrappers and packaging on which the Trademarks appear, before they are
further sold or distributed. Any unsold Licensed Items upon which the trademarks
cannot be removed shall be destroyed by Licensee. Such destruction shall be
attested to in a certificate signed by an independent third party, approved by
Licensor, and delivered forthwith to Licensor. In the event that this Agreement
is terminated by Licensor for any Bad Event, Licensee shall be deemed to have
forfeited its sell-off rights hereunder. Licensee agrees that any sales of
Licensed Items following termination for any Bad Event will cause Licensor undue
harm for which monetary damages will not suffice, and Licensor shall be entitled
to seek and obtain injunctive relief prohibiting Licensee from selling any
Licensed Items following such termination.
Licensee shall continue to abide by the terms of this Agreement with
respect to such Licensed Items during the period that they are being disposed of
as aforesaid, including without limitation, the payment of all royalties and
fees in connection therewith. Neither Licensee nor any creditor (judgment or
otherwise), assignee, transferee, trustee, or receiver of Licensee, or similar
person or officer, or purchaser other than in the regular course of Licensee's
business, may sell or
Page 8 of 11 Pages
17
transfer any of the Licensed Items until and unless all sums due Licensor from
Licensee have been paid.
G.P. 18 ADDITIONAL RIGHTS UPON TERMINATION: During the final
Contract Year of the Term hereof or of any extension thereof, Licensor shall
have the right to design, manufacture, and sell merchandise of the types covered
by this Agreement and to negotiate and conclude such agreements as it desires
pursuant to which it may grant licenses to any party or parties of any of the
rights herein granted to Licensee, except that no merchandise herein identified
as Licensed Items shall be shipped by Licensor, or any third party other than
Licensee, prior to the expiration or termination of this Agreement (exclusive of
the additional six (6) month period for the disposition of the Licensed Items),
but any successor Licensee may at all times solicit orders for shipment
subsequent to the final Contract Year or any extension hereof.
G.P. 19 GOOD WILL: Licensee acknowledges that the Trademarks have
acquired a valuable secondary meaning and good will. Accordingly, Licensee shall
not use the Trademarks in any manner whatsoever which, directly or indirectly,
might derogate or detract from their secondary meaning or good will. Except as
may be otherwise specified in this Agreement, Licensee shall not use any of the
Trademarks or any name or symbol confusingly similar thereto as part of its
company name or symbol or as part of the name or symbol of any company which it
controls or which is affiliated with it.
G.P. 20 INSURANCE: Licensee and its subcontractors and sublicensees, if
any, shall carry product liability insurance with respect to the Licensed Items
with a limit of liability of not less than US$1,000,000, and Licensor, its
agents and affiliated companies shall be named therein as coinsured. Such
insurance may be obtained in conjunction with a policy of product liability
insurance which covers products other than the Licensed Items and shall provide
for at least ten (10) days prior written notice to Licensor of the cancellation
or substantial modification thereof. Licensee shall deliver to Licensor a
certificate evidencing the existence of such insurance policies promptly after
their issuance. Licensee hereby agrees to provide Licensor a copy of said
insurance policy within sixty (60) days from the effective date of the License
Agreement.
G.P. 21 BROKERS: Each of the parties hereby represents and warrants to
the other that it has not employed or dealt with any broker or finder in
connection with this Agreement or the transactions contemplated hereby and
agrees to indemnify the other and hold it harmless from any and all liabilities
including, without limitation, reasonable attorney's fees and disbursements paid
or incurred in connection with any such liabilities for any claimed brokerage
commissions or finders' fees in connection with this Agreement or the
transactions contemplated hereby.
G.P. 22 RESERVED RIGHTS; OWNERSHIP: Rights not herein specifically and
expressly granted to Licensee herein are reserved by Licensor and may be used by
Licensor without limitation. Any use by Licensor of such reserved rights,
including but not limited to the use or authorization of the use of the
Trademarks in any manner whatsoever not inconsistent with Licensee's rights
hereunder, shall not be deemed to be interference with or infringement of any of
Licensee's rights, nor a breach of this Agreement. Licensee agrees that it does
not and shall not possess any right, title or interest in the Trademarks, except
the right to use the Trademarks in
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18
accordance with the terms and conditions of this Agreement, and that the
Trademarks are and shall be the sole property of Licensor.
G.P. 23 ATTORNEY'S FEES; SITUS OF ACTIONS; APPLICABLE LAW: In the event
any party hereto shall commence any action or proceeding against the other by
reason of any breach or claimed breach in the performance of any of the terms or
conditions of this Agreement, or to seek a judicial declaration of rights
hereunder, the prevailing party in such action or proceeding shall be entitled
to reasonable attorney's fees to be fixed by the trial court. This License
Agreement shall be governed by, and construed in accordance with, the laws of
the State of California. It is further agreed that this License Agreement is
deemed to be consummated in the State of California and the forum for any
dispute shall be the Federal Courts located in the State of California whose
jurisdiction is the County of San Diego or the Superior Court of California for
the County of San Diego, whichever is appropriate.
G.P. 24 NON-AGENCY OF PARTIES: This Agreement does not constitute
Licensee as the agent or legal representative of Licensor, or Licensor as the
agent or legal representative of Licensee, for any purpose whatsoever. Licensee
is not granted any right or authority to assume or create any obligation or
responsibility, express or implied, on behalf of or in the name of Licensor or
to bind Licensor in any manner or thing whatsoever; nor is Licensor granted any
right to authority to assume or create any obligation or responsibility, express
or implied, on behalf of or in the name of Licensee or to bind Licensee in any
manner or thing whatsoever. No joint venture or partnership between the parties
hereto is intended or shall be inferred.
G.P. 25 WAIVER BY LICENSOR: In the event Licensor shall at any
time waive any of its rights under this Agreement or the performance by Licensee
of any of its obligations hereunder, such waiver shall not be construed as a
continuing waiver of the same rights or obligations, or a waiver of any other
rights or obligations, and no waiver shall be effective unless made in writing
by Licensor.
G.P. 26 INTEGRATED AGREEMENT: This Agreement (both S.P.'s and G.P.'s)
constitutes the entire agreement between the parties as to the subject matter
hereof and supersedes and replaces all prior understandings between the parties.
No modifications, amendments or revisions hereof shall be of any force or effect
unless the same are in writing and executed by the parties hereto. No officer,
employee or representative of either party has any authority to make any
representation or promise in connection with this Agreement or the subject
matter hereof which is not contained herein; and each party agrees that it has
not executed this Agreement in reliance upon any such representation or promise.
G.P. 27 SEVERABILITY OF PROVISIONS: Any provisions of this
Agreement which shall be finally determined invalid shall be ineffective but
such invalidity shall not affect the remaining provisions hereof. The titles to
the Articles hereof are for convenience only and have no substantive effect.
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X.X. 00 XXXXXXX XXXX XXXXXXXXXX: This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns. This Article shall not be construed to alter or modify
the prohibitions upon assignments or transfers by Licensee expressed elsewhere
in this Agreement.
Page 11 of 11 Pages
