PRODUCT LICENSE AGREEMENT
This Agreement is made as of the date of execution hereof between the
corporation described in the First Schedule of Appendix "A" attached
hereto and made a part hereof (hereinafter called the "Licensor") and
the company described in the Second Schedule (hereinafter called the
"Licensee").
WHERAS, Licensor has certain rights in and to the trademarks set forth
in the Third Schedule (hereinafter collectively referred to as the
"Penthouse Marks");
WHEREAS, Licensee recognizes that the Penthouse Marks have been used:
a. in an internationally distributed magazine (PENTHOUSE) published by
Licensor;
b. in widespread advertising, publicity, motion pictures and home video
productions and allied fields by Licensor, its subsidiaries and
affiliates (hereinafter collectively called the "Group");
c. in promotional and advertising material in diverse businesses by the
Group; and WHEREAS, Licensee recognizes and acknowledges that the
Penthouse Marks are internationally well-known and recognized by
members of the general public, and are associated in the public mind
with the Group, and are designations in which Licensor has acquired a
considerable and valuable goodwill;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, it is mutually agreed as follows:
1. GRANT OF LICENSE.
(a) Grant: Upon and subject to the terms and conditions hereinafter set
forth, Licensor hereby grants to Licensee, and Licensee hereby accepts,
the right, license and privilege specified in the Fourth Schedule, of
using the Penthouse Marks in connection with, and only with, the use
specified in the Fifth Schedule of specifically designated and approved
articles of merchandise within the class or classes of goods specified
in the Sixth Schedule (such articles of merchandise, bearing the
Penthouse Marks are hereinafter collectively referred to as the
"Products") in the territory specified in the Seventh Schedule
(hereinafter called the "Territory"). Such right, license and
privilege is hereinafter called the "License."
(b) Term: The term of the License shall commence on th6 date specified
in the Eighth Schedule (hereinafter called "Commencement Date") and
shall expire on the date specified in the Eighth Schedule (hereinafter
called "Expiration Date"), unless sooner terminated as provided under
this Agreement (hereinafter called the "Term").
(c) Territory: The License shall extend only to the Territory and the
use by Licensee of the Penthouse Marks shall be confined to the
Territory to the extent this provision is permitted by the applicable
law.
2. COVENANTS OF LICENSEE.
(a) Use: Licensee shall commence the manufacture, distribution and sale
of the Products, subject to Licensees prior approval as heretofore and
hereinafter required, bearing the Penthouse Marks under the terms of
this Agreement immediately upon the Commencement Date. Licensee shall
not cause or authorize any use of the Products or Penthouse Marks in
any area of the world outside the Territory, so long as this provision
is permitted under the applicable law and shall not knowingly
manufacture, sell or otherwise deal with or distribute any of the
Products or. any other goods, articles or services bearing any words or
symbols associated with, or confusingly similar to, the Penthouse
Marks, or that may be associated with the Group on behalf of, or to,
any person, firm or corporation that Licensee believes or has reason to
believe intend to, or is like to, deal with same in any area of the
world outside the Territory. Licensee shall, upon notice from
Licensor, immediately and permanently, cease delivering Products to any
person, firm or corporation named in such notice as one dealing
directly or indirectly in the Products outside the Territory, so long
as this provision is permitted by applicable law.
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(b) Best Efforts: Licensee shall, throughout the Term of the License
and as permitted under this Agreement, use its best efforts in the
advertising, promoting, selling and distributing, and in any other
dealing with or disposal of, the Products, to protect the good name and
goodwill associated with the Penthouse Marks and the Group and to
obtain the greatest number of sales of the Products, such sales to be
computed in measurements of both units and dollars, throughout the
Territory and Term of this Agreement and any extensions or renewals
thereof.
(c) Royalties: Licensee, in consideration of the fights granted by
Licensor to Licensee hereunder, shall pay to Licensor, via wire
transfer, a license fee as well as percentage royalties as set forth
below and on Schedule A attached hereto.
(i) License Fee:. Licensee shall pay Licensor as a non-refundable,
non-recoupable License Fee the same set forth in the Ninth Schedule of
Appendix "A" hereto (hereinafter called the "Advance") at the times set
forth therein.
(ii) Earned Royalties: Licensee shall pay to Licensor or its nominee
percentage royalties (hereinafter called "Earned Royalties"), as set
forth in the Ninth Schedule, during the Term of the License. Earned
Royalties shall be payable in accordance with the terms and conditions
of Paragraph 2(d) below.
(d)Statements: On the last day of each Calendar Quarter hereunder (31
March, 30 June, 30 September, 31 December), Licensee shall furnish to
Licensor or its nominee a statement signed and certified as complete
and accurate by the chief financial officer of Licensee showing for the
preceding Calendar Quarter and the Term through such period the unit,
description and computations of gross sales, as hereinafter defined, of
all the Products distributed, sold or otherwise disposed of by Licensee
during the preceding Calendar Quarter and the amount of Earned
Royalties due and payable thereon. Licensee shall make payment of
Earned Royalties by remittance, accompanying such statement, of Earned
Royalties payable through the period covered by such statement. Any
overpayments or underpayments of Earned Royalties caused by errors in
prior quarterly statements revealed by the statement for the last
Calendar Quarter of the Term shall be immediately adjusted by the
parties.
For the purposes of this Agreement, "Gross Sales" shall mean the gross
wholesale prices (or retail prices where Licensee sells direct to the
public) of all Products shipped by Licensee during the Term of the
License.
(e) Records and Audit: Licensee shall keep true and accurate books of
account and records (including, but not limited to, consecutively
numbered invoices) covering all transactions relating to this Agreement
or arising out of the License, and shall permit Licensor, or any of its
nominees, employees or agents, to have full access to, and to inspect
same, at all reasonable hours of the day, to enable Licensor and its
nominees, employees or agents to conduct an examination of, and to
copy, at Licensees expense, all such books and records. Licensee shall
maintain, in good order and condition, all such books and records for a
period of two (2) years after the expiration or termination of the
License or, in the event of a dispute between the parties hereto, until
such dispute is resolved, whichever date is later, and such books and
records shall be kept at the address stated in the Tenth Schedule,
except as such address may be changed from time to time in accordance
with Paragraph 9 of this Agreement.
Expenses of Conducting Examinations: If an examination referred to in
Paragraph 2(e) above discloses an overpayment or underpayment of Earned
Royalties, the appropriate amount shall be immediately paid or refunded
to the party entitled thereto. If such examination reveals that for
the period covered by such examination there is an error of five
percent (5%) or more in the Earned Royalty previously reported as being
due from Licensee, all expenses involved in the conducting of such
examination shall be borne by Licensee. If such error is less than
five percent (5%), such expenses shall be borne by Licensor except that
if the error is less than five percent (5%) and reflects an overpayment
of royalty to Licensor, Licensor shall be entitled to deduct an amount
equal to the amount of the expenses incurred in the conducting of such
examination from any payment to be made to Licensee.
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(g) Product Quality: The Products manufactured, sold, distributed or
otherwise disposed of under this Agreement shall bear faithfully
produced Penthouse Marks and shall meet the high standards of quality,
workmanship, material, design, size, color and style established by
Licensor in accordance with the terms and conditions of Paragraphs 2(h)
and 20) of this Agreement; and Licensee will not knowingly cause, or
authorize, any Product not conforming to the conditions of Paragraphs
2(h) and 20) hereof to be available for sale within the Territory as
doing so may adversely. affect the good name of Licensor or other
members of the Group. All Products made available for sale in the
Territory shall conform to, and comply with, in all respects, all
federal, state and local laws, rules and regulations governing the
design, quality or safety of such Products. Licensee shall not cause
or authorize: (i) the use of any substandard or offensive materials in
Products; (ii) in its actions under or related to this License, any
violation of any federal, state or local law or regulation, including,
but not limited to, regulations imposing advertising standards or
requiring trade or content descriptions of Products; (iii) the use of
the Penthouse Marks or any other word, device or symbol associated in
any way with Licensor or any other member of the Group in connection
with any product or activity that is not the subject of this License.
(h) Submission of Samples of Products, Wrapping Materials and Related
Materials: Licensee shall, at its own expense, submit to Licensor or
its nominee, for its approval, at least two (2) samples, prototypes or
equivalents of each of the cartons, containers, labels, wrappers,
packages or other inner or outer packaging materials, artwork,
printing, advertising, sales, marketing and promotional materials (in
whatever medium) and any other items bearing the Penthouse Marks and
intended for use in connection with the Products (hereinafter call , ed
"Wrapping Materials and Related Materials") and of each of the Products
that Licensee intends to manufacture, sell, distribute or otherwise
dispose of in the Territory from time to time. Licensee agrees not to
commence or permit such manufacture, sale, distribution of, or dealing
in, Products, Wrapping Materials or Related Materials until Licensee
has received: (i) the written approval of Licensor, or its nominee, for
such Product and such Wrapping Material and Related Material, and (ii)
a sample, prototype or equivalent acceptable to Licensor that has been
signed and dated by Licensor as a record of its approval of same.
Sales or use by Licensee, or anyone acting with Licensee's
authorization on its behalf, of Products, Wrapping Materials or Related
Materials that do not conform to the previously approved samples shall
constitute a material default under the terms of this License.
Licensor shall have the sole and absolute discretion to approve or
withhold approval of any Product, Wrapping Material or Related Material
or any sample of any of them without providing any reasons to Licensee,
and in the event that Licensor fails to signify its approval or
disapproval of any Product, Wrapping Material or Related Material
within fourteen (14) days of receipt of same by Licensor, Licensor's
approval shall be deemed withheld.
(i)Trademark and Copyright Notices: Licensee shall:
Affix to any Product, Wrapping Material or Related Material the
trademark notice and notice of the sponsorship of Licensor as set forth
on Appendix "B" and any others Licensor may request from time to time
during the Term of the License;
(ii) Manufacture, sell, distribute or otherwise deal with Wrapping
Materials or Related Materials solely in connection with the Products,
and shall, upon the termination of the License, however caused, assign
to Licensor, without consideration other than such nominal
consideration as may be required by local law to make valid any such
assignment, the beneficial ownership of all rights that Licensee may
have acquired to any word, device, design or symbol used by Licensee
on, or developed by Licensee particularly for use with, any of the
Products, Wrapping Materials or Related Materials during the Term of
the License;
(iii) Not cause or grant permission to any third parties to acquire any
copyright or other proprietary fight in connection with any such word,
device, design or symbol used by Licensee in connection with any of the
Products, Wrapping Materials or Related Materials.
(j) Submission of Manufactured Samples, Wrapping Materials and Related
Materials and Permission to Inspect: Licensee shall, within seven (7)
days of demand by Licensor, dispatch to Licensor at Licensee's expense,
for reinspection, samples of any of the Products, Wrapping Materials
and Related Materials that Licensee is manufacturing, selling or
distributing or otherwise disposing of under the terms of this
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Agreement. Also, to ensure that all of the Products, Wrapping
Materials and Related Materials dealt with by Licensee are constantly
maintained at the highest quality, Licensee shall take such action as
may be required to ensure that Licensor shall have the right to enter
upon and inspect, at all reasonable hours in the day, any office,
factory, warehouse or other facility where any of the Products or
Wrapping Materials and Related Materials are designed, manufactured,
stored or otherwise dealt with; and Licensor shall have the right take,
without payment, such samples of any of the Products, Wrapping
Materials and Related Materials at any such place as Licensor
reasonably requires for the purposes of such inspection. If any such
dispatched or taken Products, Wrapping Materials and Related Materials
fail to meet the high standards as evidenced by the previously approved
samples, then Licensor shall have the right to notify Licensee in
writing, specifying in what respect Licensor disapproves; in such
event, Licensee shall, immediately upon receipt of notification of
disapproval, suspend all manufacture, sale and distribution of the
disapproved Product, Wrapping Material or Related Material until it has
made all necessary changes and corrections to the satisfaction of
Licensor and obtained Licensees written reapproval of such Product,
Wrapping Material or Related Material. Products, Wrapping Materials or
Related Materials that do not conform to the approved samples,
including seconds, shall not be sold, distributed or otherwise released
by Licensee useless all references to all Penthouse Marks shall have
first been completely obliterated or removed or otherwise made totally
unidentifiable.
(k) List of Sources and Customers: Licensee shall, upon demand from
Licensor, provide Licensor with a list of the names and addresses of
all manufacturing sources, subcontractors, suppliers, dealers,
wholesalers, retailers and customers who have been engaged in the
manufacture, sale, distribution or other dealings with the Products,
Wrapping Materials and Related Materials during the Term of the License
(such list shall include customers to whom Products, Wrapping Materials
or Related Materials have been delivered after the expiration or
termination of this License); and such list shall, if so requested by
Licensor, contain the full specification of any designs, utility
models, patents or trademarks that may be involved, directly or
indirectly, in the manufacture, production or distribution of any of
the Products, Wrapping Materials or Related Materials; and Licensee
shall obtain the consent of any relevant third parties for such
disclosure.
(l) Inventory: It is the intent of this Agreement that, insofar as
practical, Licensee shall at all times be able to fulfill all orders
for Products promptly and yet not have an excessive inventory on hand
at the time of the termination or expiration of the License.
(m) Non-Competitive Merchandise: Licensee shall not, during the Term of
the License, knowingly cause or authorize the manufacture, sale,
distribution or any other dealings in goods, packaging, wrapping
materials or service or any advertisement or promotion of the same that
are in any manner competitive with any of the Products in the
Territory, but this Paragraph shall not preclude Licensee from
manufacturing, selling, distributing or otherwise dealing in any such
goods, packaging wrapping materials or services if the same:
(i) Do not bear any words, device, design or symbol confusingly similar
to those borne by, or authorized in connection with the Products or
associated in any way with the Penthouse Marks;
(ii)Do not use, or are not contained within, any packaging or wrapping
materials confusingly similar to any such packaging or wrapping
materials using or containing any of the Products, or associated in any
way with the Penthouse Marks or the Group or any of the GROUPS
publications or published material or other activities whatsoever;
(iii) Are not advertised, promoted, marketed or sold with or under or
associated with any word, design, device or symbol confusingly similar
to the Penthouse Marks or associated with the Group or any of the
Group's publications or published materials or activities whatsoever,
(n) Indemnification and Product Liability Insurance: Licensee shall:
(i) Indemnify, defend and hold Licensor, other members of the Group,
their respective licensees, franchisees, and the agents, officers,
directors and employees of all of the foregoing harmless from any
costs, claims, suits, losses, damages and expenses arising out of any
67
allegedly unauthorized use or infringement of any patent, process,
idea, method, trademark (except the Penthouse Marks), copyright or
device or other intellectual or tangible proprietary right by Licensee
in connection with the manufacture, sale, distribution or any other
dealing whatsoever with the Products or any other alleged action
whatsoever by Licensee or arising out of any alleged defect in any of
the Products or non-conformity to or non-compliance with any statutory
or other regulations pertaining to the design, quality, safety,
advertising or marketing of the Products, Wrapping Materials and
Related Materials;
(ii) Forthwith obtain and maintain, at its own expense, satisfactory
comprehensive product liability insurance in an amount not less than
$5,000,000 from an insurance company or office of substance and good
repute with a rating of "A" or better as rated by A.M. Bests, and
qualified to transact business in the Territory (such insurance policy
shall name the Group, its respective licensees, franchisees and the
agents, officers, directors, and employees of all of the foregoing, as
required by Licensor, as additional insured parties by reason of the
indemnity contained in this Paragraph 2(n) and shall evidence the
insurees agreement that such insurance shall not be amended, canceled,
terminated or permitted to lapse without sixty (60) days' prior written
notice to Licensor), and provide Licensor with a certificate of such
insurance and an endorsement to the policy naming Licensor an
additional insured upon execution of this Agreement by Licensee and on
each anniversary date of the grant or issue of each such policy
evidencing that each such policy has not been altered with respect to
the Group in any way whatsoever nor permitted to lapse for any reason,
and evidencing the payment of each such policy;
(iii) Cause such policies to be in full force and effect prior to the
commencement of any manufacture, sale, distribution or dealing with any
of the Products whatsoever.
o. Title and Protection: Licensee hereby acknowledges the great value
of the goodwill associated with the Penthouse Marks and the world-wide
recognition of same and that the proprietary rights therein, and
goodwill attached thereto, are solely owned and belong to Licensor and
that the Penthouse Marks and other words, devices, designs and symbols
have a secondary meaning that is firmly associated in the mind of the
general public with Licensor and other members of the Group and their
respective publications, published material and other activities; and
any additional goodwill attached to the Penthouse Marks, created
through the use of such Marks by Licensee shall inure to the benefit of
Licensor alone. During and after the Term of the License, Licensee
shall not:
(i) Attack or question the validity of, (or assist any other person in
such action), the title or any rights of Licensor or any other member
of the Group or any of their respective licensees or franchisees in and
to the Penthouse Marks or any other trademark, copyright or such other
intellectual or tangible property associated or connected with Licensor
or any other member of the Group or any of their respective
publications, published material or other activities or their
respective licensees or franchisees;
(ii) Directly or indirectly seek for itself, or assist any third party
to use or acquire, any rights, proprietary or otherwise, in any patent,
trademark, copyright or such other intellectual or tangible property so
associated or connected, without tile prior written authority of
Licensor which may be granted or withheld at Licensor's sole
discretion.
(p) Advertising, and Advertising Expenditures:
(i) Licensee agrees to expend within the Term for institutional
advertising and promotion (specifically trade and/or consumer media
such as newspapers, magazines, television and/or radio), not less than
two percent (2%) of Licensee's net sales for the Term.
(ii) It is agreed by the parties hereto that Licensor shall provide
Licensee with ten (10) full color pages of advertising for the Products
in Penthouse Magazine (each such page an "Advertising Page") during the
first sixteen (16) months that the Agreement it in effect, and five (5)
Advertising Pages during the last ten (10) months that the Agreement is
in effect, for which Licensee agrees to pay the reduced rate of $10,000
per Advertising Page (the "Advertising Fee"). All advertising shall
conform in all respects to Penthouse's rate card, standard contract and
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copy conditions as set forth in SRDS, and the procedures and
specifications of Penthouse's Advertising Production Department as any
of the foregoing may be modified from time to time. Only one
Advertising Page shall be available in any issue. The first such issue
in which this advertising may be placed is that which closes for
advertising purposes at least ten (10) days subsequent to the execution
of this agreement by the last party to sign. Licensee shall submit an
appropriate insertion order for each page it wishes to run and Licensor
shall xxxx Licensee for each Advertising Page and Licensee shall remit
payment for same within thirty (30) days of receipt of the applicable
xxxx. Licensee shall pay Advertising Fees for all of the fifteen (15)
Advertising Pages whether or not it elects to use all or any of the
pages during their designated time periods. If any of the Advertising
Pages are not used by Licensee within their allotted times, at the end
of the sixteen (16) and ten (10) month periods, respectively, Licensor
will xxxx Licensee for the unused pages and Licensee shall remit
payment for same within thirty (30) days of receipt of the invoice.
For the sake of clarification, during the initial sixteen (16) month
period of the Term, Licensee shall pay to Licensor as provided above
$100,000 in Advertising Fees and, during the last ten (10) months of
the Term, Licensee shall pay to Licensor as provided above $50,000 in
Advertising Fees, regardless of the number of Advertising Pages it has
elected to actually use of the fifteen (I 5) allotted herein. In the
event that Licensee chooses to place additional advertising for the
Products in Penthouse Magazine during the Term hereof beyond the
fifteen (IS) Advertising Pages that are allotted herein, the cost of
each additional Advertising Page will be $20,000 and will similarly be
billed by Licensor.
(iii) Licensor shall provide two (2) free full color pages of
advertising in Mind and Muscle Power Magazine for use by Licensee to
advertise its own line of products, but in no event the Products that
are the subject of this Agreement, during the first fourteen (14)
months of the Term hereof. Licensee agrees that if for any reason Mind
and Muscle Power ceases publication then Licensor shall not be required
to provide any pages therein under this subparagraph; if Mind and
Muscle Power ceases monthly publication then Licensor shall not be
required to provide any pages in any issue which closes for advertising
purposes more than fourteen (14) months after the effective date of
this agreement.
(iv) Licensor agrees that it will use its best efforts to advertise and
promote the Products on its Internet website, on Licensee's behalf
3.ADDITIONAL COVENANTS OF THE PARTIES.
(a) Reservation of Rights: All rights not expressly and specifically
granted herein to Licensee are reserved to Licensor or the other
members of the Group; and without limiting the generality of the
foregoing, nothing herein contained shall be construed as prohibiting
the Group or its respective franchisees or licensees from:
(i) Purchasing any of the Products from Licensee and offering any such
Products for sale and selling same to consumers through Licensor's or
other members of the Group's direct mail fulfillment programs;
(ii) Advertising any of the Products in any publication published by
any member of the Group or any licensee of any such member thereof and
selling same by direct mail fulfillment or other promotional methods;
(iii) Granting a license, free of any liability to Licensee, to any
third party to manufacture in or outside of the Territory for the sole
purpose of selling to the Group only for distribution outside of the
Territory any of the Products, or obtaining any of the Products from
any source other than Licensee for the sole purpose of permitting the
sale of, or offering for sale, any such Products outside of the
Territory without restriction, or for the purpose of offering any
product free for promotional purposes in the Territory in any
nightclub, restaurant, cabaret, resort or hotel during and in
connection with promotional activities on behalf of any magazine
published by the Group;
4. TITLE AND PROTECTION.
(a) Indemnification by Licensor: Except to the extent of Licensee's own
fault or liability, Licensor shall indemnify, defend and hold Licensee
harmless for all costs and losses incurred, including legal fees and
damages, arising out of any claim, prompt notice of which is given
69
Licensor by Licensee, that the Penthouse Marks, when accurately used,
infringe the trademark of any Third Party; Licensor shall have the
option to settle or to undertake and conduct the defense of any such
claim or suit; but Licensee shall, upon notice from Licensor and
pursuant to Licensor's instructions, handle, undertake and conduct the
defense of any such suit at Licensor's expense. If Licensor does not
so notify Licensee, Licensee may, through counsel of its own ch6ice and
at its own expense, participate in any such litigation, but in such
event Licensor shall have sole and exclusive control over such defense
and Licensees decisions shall govern and control. Licensee expressly
covenants that no compromise or settlement of any claim or suit, or any
preliminary negotiations with respect to any compromise or settlement,
shall be made or entered into without the prior written approval of
Licensor. If there is a final court decision or settlement agreement
entered that prohibits the use of a Penthouse Xxxx on a Product, the
Products bearing such prohibited Marks being hereinafter called the
"Prohibited Products," then Licensee shall abide by such decision or
settlement agreement.
(b) Enforcement: Licensee shall promptly notify Licensor, in writing,
of any actual, suspected or apparent infringement or imitation of the
Penthouse Marks on products similar or identical to the Products that
may come to the attention of Licensee. Licensor shall take that action
in regard to such infringement or imitation as Licensor, in its sole
judgment, deems to be reasonable. Licensor shall, in its sole and
absolute discretion, decide whether to undertake or conduct any suit or
assert any claim with respect to Such infringement or imitation; but
Licensee shall, upon notice from Licensor and pursuant to Licensees
instructions, vigorously handle, undertake and conduct any such Suit or
assert any Such claim at Licensor's expense in the name of Licensor, or
Licensee or in both names as Licensor may direct. Licensee expressly
covenants that no compromise or settlement of any such suit or claim,
or any preliminary negotiations with respect to any compromise or
settlement, shall be made or entered into without the prior written
approval of Licensor. Licensee may share in any damage recovery
obtained by Licensor as a result of any Such suit or claim only if
Licensee notified Licensor upon the initiation of such suit or claim of
Licensee's desire to participate financially in such suit or claim and
only in an amount that shall bear the sam6'ratio to the damage recovery
as the amount of Licensee's financial participation bears to The total
costs and expenses incurred by Licensor in obtaining such damage
recovery. In no event shall Licensor be responsible to Licensee for
any consequential damages that may result from such infringement or
imitation.
(c) Third Party Infringements: In furtherance and not in limitation of
the above, it is specifically understood and agreed that Licensor shall
not be liable to Licensee for the unauthorized sale or distribution of
products the same as, or similar to, the Products in the Territory, by
any third party, including, but not limited to, other licensees of
Licensor.
5. RELATIONSHIP BETWEEN THE PARTRES.
(a) No Joint Venture: Nothing herein contained shall be construed to
place the parties in the relationship of partners or a joint venture,
and Licensee shall have no power to obligate or bind Licensor or any
other member of the Group in any manner whatsoever.
(b) Assignment:
Licensor, in entering into this Agreement, is relying entirely upon the
skills, reputation and personnel, including the ownership and
management, of Licensee. This Agreement and all rights and duties
hereunder are personal to Licensee and shall not, without the prior
consent of Licensor, be assigned, mortgaged or otherwise encumbered by
Licensee or by operation of law. Any attempt to assign, mortgage or
otherwise encumber this Agreement, or any of the rights and duties
hereunder, or any change in the ownership or management of Licensee
without tile prior written consent of Licensor shall constitute a
material violation of this Agreement.
(ii) Licensor may assign this Agreement to any other member of the
Group or to any entity that succeeds to the interest of Licensor in the
Penthouse Marks without the consent of Licensee and shall have the
right to nominate any other person, company or corporation to receive
royalty income or to undertake the obligations of Licensor under the
terms of this Agreement whether or not this Agreement is so assigned.
70
6. SUBLICENSING. Licensee may not, without the prior written approval
of Licensor, enter into sublicense agreements with respect to any of
the rights granted herein, including the manufacture, sale or
distribution of the Products, in the Territory.
7. DEFAULTS AND RIGHTS OF TERMRNATION.
(a) Defaults: If Licensee shall violate any of its obligations or
warranties under the terms of this Agreement, including its obligation
to make any of the required payments hereunder, Licensor shall have the
right and option, but not the duty, to terminate the License upon ten
(10) days' prior written notice; but no neglect or failure to serve
such notice shall be deemed to be a waiver of any breach of any
covenant or stipulation under this Agreement. Such termination of the
License shall become effective unless the violation complained of shall
be completely remedied to the satisfaction of Licensor within such ten
(10) day period. If the violation complained of shall be of a kind
such that a remedy or cure cannot effectively restore the prior
circumstances, then this Agreement shall terminate forthwith upon
service of such notice without any period of grace as aforesaid. The
termination of the License shall be without prejudice to any rights
that Licensor may otherwise have against Licensee under this Agreement
or under law.
(b)Bankruptcy or Assignment of Creditors, Business Discontinuance: If
Licensee files a petition in bankruptcy or is adjudicated a bankrupt,
or if a petition in bankruptcy is filed against Licensee, or if
Licensee shall become insolvent or shall make or agredf6 make an
assignment for the benefit of creditors or an arrangement pursuant to
any bankruptcy law, or if Licensee discontinues business, or if a
receiver shall be appointed for Licensee, the License shall
automatically terminate forthwith without the necessity of any notice
whatsoever. If the License is so terminated, Licensee or its
receivers, representatives, trustees, agents, administrators,
successors or assigns shall have no right to sell, exploit or in any
way deal with any Products, Wrapping Materials or Related Materials,
except with and under the special written consent and instructions of
Licensor that they shall be obligated to follow.
(c) Loss of Trademark Rights: If Licensee's right to use the Penthouse
Marks is adjudged illegal or invalid, and such adjudication has become
final and non-appealable, or if a settlement agreement is entered into
that prohibits Licensee's right to use the Penthouse Marks, this
License shall automatically terminate as of the date of such final and
non-appealable adjudication or the entry of such settlement agreement
without the necessity of any notice whatsoever.
(d) Impossibility of Performance: Licensee and Licensor shall be
released from their respective obligations under this Agreement, and
the License shall terminate, if governmental regulations or other
causes arising out of a state of national emergency or war, or any
other similar cause beyond the control of the parties hereto, shall
render performance impossible, Either party shall so inform the other
in writing of any such cause and of its desire to be released, and
immediately thereafter the License shall terminate and all royalties on
sales of the Products theretofore made shall become immediately due and
payable.
8. TERMATION OR EXPIRATION.
(a)Effect of Termination or Expiration: Upon and after the expiration
or termination of the License, all rights granted to Licensee under
this Agreement shall forthwith revert to Licensor. Licensee will
refrain from any further use of the Penthouse Marks and/or from any
further reference to anything, including but not listed to words,
devices, designs and symbols, similar to the Penthouse Marks or in any
way associated with Licensor or any other member of the Group, in
connection with the conduct of Licensee's business, except with the
written consent of Licensor and except as expressly provided in this
Paragraph 8.
(b) Reserved Rights: The expiration or termination of this License
under any of the terms of this License shall not relieve Licensor or
Licensee, respectively, of any obligations incurred prior to, or
subsequent to, such expiration or termination; nor shall expiration or
termination impair or prejudice any of the rights of Licensor or
Licensee, respectively, accruing prior or subsequent thereto. Upon
71
expiration or termination, any overpayment or underpayment of Earned
Royalties shall be adjusted by the parties in accordance with Paragraph
2(d) hereof
(c) Inventory: Within ninety (90) days prior to the expiration of the
License, or in the event of its termination within ten (10) days after
(i) receipt of notice of termination or (ii) the happening of any event
that terminates the License where no such notice is required, Licensee
shall furnish to Licensor a complete and accurate statement showing the
number and description of Products in process and on hand. Licensor or
its authorized agents shall have the right to conduct a physical
inspection and take inventory to ascertain or verify such inventory and
statement, and any refusal by Licensee to submit to such physical
inventory by Licensor or its authorized agents, or Licensee's failure
to furnish to Licensor the statement described above, shall forfeit
Licensee's right to complete any work in process and to dispose of all
such inventory, Licensor retaining all other legal and equitable rights
it may have in the circumstances, which lights are hereby reserved.
(d)Continued Sales After Termination or Expiration:
If this License expires, or is terminated pursuant to any Paragraph of
this Agreement except Paragraphs 2(h) and 7(b) hereof, and except as
provided in Paragraph 8(c) above, Licensee may for a period of six (6)
months after expiration or notice of termination dispose of Products,
the samples for which have previously been approved as provided under
this Agreement and that are in process or on hand at the time such
notice of termination is received; but in such event Licensee shall pay
royalties and furnish statements with respect to said period in
accordance with the terms of this Agreement as though the License were
still in effect; except that if this License is terminated for failure
of Licensee to pay those royalties required under the terms of this
Agreement, Licensor shall be entitled to receive and Licensee shall pay
to Licensor, in addition to Earned Royalties payable on such sale, all
amounts received by Licensee for the sale of such Products until all
past due amounts, including interest thereon calculated at the rate of
ten percent (10%) per annum, have been paid. Upon expiration of a
sell-off period as allowed under Paragraph 8(d) herein, Licensee shall
immediately, and at its sole cost and expense, forward to Licensor, any
and all inventory. remaining in Licensee's possession. In the event
the License expires or is terminated pursuant to Paragraph 2(h) or 7(b)
hereof, Licensee shall, immediately upon notice of same and at its sole
cost and expense, forward to Licensor any and all inventory in
Licensee's possession at the time such notice is given.
9. NOTICES. All notices required or permitted by the terms of this
Agreement shall be in writing and shall be sent to Licensee at the
address specified in the Second Schedule, marked Attention: Xxxxx Xxxx,
and to Licensor at the address specified in the First Schedule marked,
Attention: Senior Vice President/CFO, with a copy to: Legal
Department. All reports required or permitted by the terms of this
Agreement shall be sent to Licensor marked, Attention: Senior Vice
President/CFO, c/o Accounting Department, with a copy to: Legal
Department. All material requiring approval shall be sent to Licensor
at the address shown on the First Schedule, attention: Xxxxx Xxxxxxxxx,
with a copy to: Legal Department or to such different or additional
parties and addresses as Licensor may hereafter designate from time to
time. 4JI notices and other material shall be sent postage prepaid,
certified or registered mail, return receipt requested. Notices and
other material shall be deemed conclusively to have been served when
actually received or refused by the addressee or upon notification of
non-deliverability by the postal authorities, as the case may be.
Notice of any change of address or addressee shall be made in
accordance with the terms of this Paragraph 9.
10. INVALIDITY. If any provision or any application of any provision
hereof is adjudged illegal, unenforceable or invalid and such
adjudication has become final and non-appealable, such provision or
application shall be deemed deleted without affecting the remainder of
this Agreement unless Such deletion shall have a material adverse
effect upon the rights or obligations of either party hereto and notice
of such effect is given as provided in the following sentence. Either
party may notify the other within forty-five (45) days after such
adjudication has become final and non-appealable that, in its opinion,
such deletion would have a material adverse effect upon the notifying
party and that the License is terminated by reason thereof, but the
existence of such effect and the termination of the License shall be
subject to contest by the party receiving such notice if it notifies
72
the other party, within forty-five (45) days after service of the
notice of termination upon it, of its desire to contest the matter and
thereafter proceeds promptly with a proceeding so to c6ntest the
matter. During such time as the matter is being contested, this
Agreement shall remain in full force and effect.
11. CONSENTS AND APPROVALS., In this Agreement, where the consent or
approval of Licensor is required to any action of Licensee, such
consent or approval shall only be effective if granted in writing by
Licensor. In no event shall Licensor's silence be deemed consent, and
if Licensor falls or declines to grant such consent or approval to
Licensee, Licensor shall not be liable to give any reason therefor or
for any events or circumstances that arise as a result of such failure.
12. APPLICABLE LAW. This Agreement, and the rights of the parties
hereto, shall be governed by the laws of the State of New York
applicable to contracts made and wholly to be performed therein without
application of the conflicts of laws rules thereof The parties consent
to the exclusive jurisdiction of courts physically located in New York
County, New York, over any suit, claim, action or proceeding arising in
any way out of this Agreement.
13. NO BROKER. Licensee warrants and represents that there was no
broker in connection with this transaction and agrees to indemnify and
hold Licensor harmless from any and all liabilities (including, without
limitation, reasonable attorneys fees) for any brokerage commissions or
finder's fees in connection with this Agreement.
1
14. ENTIRE AGREEMENT. This Agreement represents the entire
understanding of the parties.
None of the terms of this Agreement can be waived or modified except by
an express agreement in writing signed by the parties. There are no
representations, warranties, covenants or undertakings other than those
contained in this Agreement. 'The failure of either party hereto to
enforce, or the delay by either party in enforcing, any of its rights
under this Agreement shall not be deemed as constituting a waiver or
modification thereof and either party may, within the time provided by
applicable law, commence appropriate proceedings to enforce any or all
of such rights. No person, firm, group or corporation other than
Licensee, Licensor and other members of the Group shall be deemed to
have acquired any rights by reason of anything contained in this
Agreement.
15. This Agreement shall be binding immediately upon its execution by
an authorized agent of Licensee and by two (2) authorized agents of
Licensor.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be duly executed as of the day and year first above written.
GENERAL MEDIA COMMUNICATIONS, INC.
(Licensor)
By:
Xxxx X. Xxxxxxx
President/COO
5/31/00
By:
Xxxx X. Xxxxxxx
President/CFO Senior Vice President/CFO
Date: May 31,2000
PURE STEEL CUSTOM CYCLES, INC.
(Licensee)
By:
Xxxxx Xxxx
President
Date: 5-23-2000
APPENDIX A
THE FIRST SCHEDULE
THE LICENSOR: General Media Communications, Inc., 00 Xxxx Xxxxx, 00xx
Xxxxx, Xxx Xxxx, XX 00000
THE SECOND SCHEDULE
THE LICENSEE: Pure Steel Custom Cycles, Inc., 0000 Xxxxx Xxxxxx, Xxxxx
x0, Xxxxxxx, XX 00000
THE THIRD SCHEDULE
THE MARKS LICENSED: PENTHOUSE, ONE-KEY LOGO, THREE-KEY LOGO.
THE FOURTH SCHEDULE
THE TYPE OF LICENSE: Exclusive
THE FIYFH SCHEDULE
THE USE OF THE PENTHOUSE MARKS: Production, Manufacture, Distribution
THE SIXTH SCHEDULE
THE PRODUCTS- 1. 90 Limited Edition "Penthouse Magazine 30th
Anniversary Motorcycles" manufactured by Pure Steel Custom Cycles, Inc.
:Licensee will produce, at no cost to Licensor, I additional Limited
Edition Penthouse Magazine 30th Anniversary Motorcycle for Licensor's
sole and exclusive promotional use.
2. Penthouse Magazine 30th Anniversary Motorcycle Accessory items:
Leather Jackets, Gloves, Goggles, Helmets and Bandanas, that will be
supplied by Pure Steel Custom Cycles, Inc. In the event Licensee
wishes to add additional items to the Product list at a future date,
Licensee shall submit a proposal for same to Licensor for review and
approval, which approval shall not be unreasonably withheld.
THE SEVENTH SCHEDULE
THE TERRITORY: North America (United States, Mexico and Canada)
THE EIGHTH SCHEDULE
THE COMMENCEMENT DATE: Upon execution hereof.
THE EXPIRATION DATE: Twenty-six (26) months from execution hereof.
THE NINTH SCHEDULE
THE NON-REFUNDABLE, NON-RECOLTPABLE LICENSE FEE: $150,000, payable as
follows:
$50,000 previously paid on March 15, 2000.
$15,000 per month for six (6) consecutive months commencing on 1 June
2000 thru 30 November 2000; and
$10,000 on 1 December 2000.
THE EARNED ROYALTY: Five Percent (5%) of the Gross Wholesale and/or
Retail Selling Price, as applicable, for the Penthouse Magazine 30th
Anniversary Motorcycles and the Penthouse Magazine .30th Anniversary
Motorcycle Accessory items, based on an average projected sales price
of at least $30,000 per motorcycle.
74
THE TENTH SCHEDULE
THE ADDRESS WHERE BOOKS ARE KEPT: See the Second Schedule.
APPENDIX "B"
TRADEMARK NOTICE:
]The Product shall bear on its cover the following legend in a form
approved by Licensor:
"By special arrangement with General Media Communications, Inc.,
PENTHOUSE, the ONE KEY LOGO and the THREE KEY LOGO are trademarks of
General Media Communications, Inc. Used by permission."
