11/6/96
LICENSE AGREEMENT
License Agreement entered into as of the 7th day of November, 1996 (the
"Effective Date") among SII Acquisition, Inc. ("SII or Licensee"), an Arizona
corporation, that plans to change its corporate name to Sports Image, Inc.; Xxxx
Xxxxxxxxx, an individual, on behalf of himself and on behalf of Xxxx Xxxxxxxxx,
Inc., a North Carolina corporation (together "Xxxxxxxxx or Licensor"); and
Action Performance Companies, Inc., an Arizona corporation ("APC").
I. DEFINITIONS:
A. "Likeness of Xxxx Xxxxxxxxx or Xxxxxxxxx" shall mean the name,
signature, copyrights and trademarks (including, without limitation, those set
forth on Schedule A attached), image or likeness of Xxxx Xxxxxxxxx relating to
his personal motorsports racing; and to the extent Xxxxxxxxx has the right to
grant a license, the likeness of his car(s) and its/their numbers, his racing
colors, and his sponsor's, owner's or car manufacturer's name and trademarks,
also relating to his personal motorsports racing.
B. "Personal endorsement contracts" means contracts for the personal
services of Xxxx Xxxxxxxxx to promote the sales of products or services.
C. "Motorsports Racing Products" means all products utilizing,
embodying or incorporating the Likeness of Xxxx Xxxxxxxxx in connection with
motorsports racing, including but not limited to racing collectibles, die cast
products, souvenirs, apparel, and accessories.
D. "Licensable Products" means all Motorsports Racing Products that are
the same or similar to those products advertised or sold by SII and/or APC,
except the following: (1) those products endorsed by Xxxxxxxxx pursuant to the
personal endorsement contracts; and (2) those products that are the subject
matter of the contracts listed on Schedule B, attached.
E. "Licensed Products" means Licensable Products of which SII has
exercised its right of first refusal granted in this Agreement or listed as a
current channel of distribution in Schedule B. Licensed Products do not include
products purchased by SII from third parties licensed directly or otherwise
authorized by Xxxxxxxxx.
F. "Adjusted Gross Revenues" means the revenue derived by SII from the
sale of Licensed Products represented by the quantity of each Licensed Product
sold or otherwise distributed by SII multiplied by its wholesale sales price,
exclusive of any government assessments imposed as taxes or otherwise, less
returns actually refunded.
II. LICENSE:
X. XXXXX OF LICENSE: Xxxxxxxxx hereby grants to SII the right of first
refusal to make, have made, use, sell, or otherwise distribute throughout the
world (hereafter "Market") Licensable Products bearing the Likeness of Xxxx
Xxxxxxxxx.
B. TERM: The term of this Agreement shall be 15 years from the
Effective Date and shall continue from year to year thereafter until terminated
by either party upon 60 days prior written notice.
C. EXERCISE OF RIGHT: SII hereby exercises its right of first refusal
to Market the Licensable Products currently Marketed by Sports Image, Inc. a
North Carolina corporation ("SII-NC") as well as those Licensable Products
listed in Schedule C, attached.
D. NON-COMPETITION: If SII exercises its right of first refusal as to
any Licensable Product, Xxxxxxxxx will not Market or permit any other person or
entity to Market through the then current channels of distribution of SII and/or
APC or their successors, the Likeness of Xxxx Xxxxxxxxx for use on or in
connection with the same or similar product.
E. NOTIFICATION OF NEW PRODUCTS: Xxxxxxxxx agrees to inform SII in
writing of any new Licensable Product that Xxxxxxxxx becomes aware of and
approves for marketing within 15 days after approving such new Licensable
Product for marketing. SII shall have 15 days after receipt in writing of notice
from Xxxxxxxxx in which to inform Xxxxxxxxx in writing of its intent to exercise
its right of first refusal.
F. THIRD PARTY LICENSES: If SII does not exercise its right of first
refusal with respect to a Licensable Product, Xxxxxxxxx shall have the right to
license third parties to Market the product, provided however, that Xxxxxxxxx
will require the third party to agree to sell the Licensable Product to SII
and/or APC or their successors at a price not greater than the lowest price
offered by the third party to similarly situated purchasers of similar
quantities of the product.
III. QUALITY CONTROL:
A. APPROVAL RIGHTS: SII will present to Xxxxxxxxx or Xxxxxxxxx'x
designee, with adequate advance notice, for approval, sample designs, prototypes
or other representations of all new Licensable Products and the proposed
distribution channels. Approval by Xxxxxxxxx or Xxxxxxxxx'x designee shall not
unreasonably be withheld or delayed.
B. QUALITY AND APPEARANCE: SII agrees that all Licensed Products
Marketed by it will be of high quality and of such style and appearance as to
enhance the prestige and the goodwill represented by the Likeness of Xxxx
Xxxxxxxxx. Xxxxxxxxx reserves the right to inspect any and all Licensed Products
Marketed by SII bearing any registered trademarks for quality and appearance.
SII agrees that if Xxxxxxxxx rejects any Licensable Products for failing to meet
reasonable quality standards, those products will not be distributed unless and
until they can be made to comply.
IV. COPYRIGHTS AND TRADEMARKS:
A. OWNERSHIP: Licensee recognizes the unique value of the Licensed
Products, the likeness of Xxxx Xxxxxxxxx and the goodwill and secondary meaning
associated therewith in the minds of the public. Licensee acknowledges that
Licensee's use of the Licensed Products
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or the likeness of Xxxx Xxxxxxxxx shall not confer or imply a grant of any
right, title or interest in or to the Licensed Products, the likeness of Xxxx
Xxxxxxxxx, or any goodwill associated therewith, and that the ownership of all
copyright, trademark, service xxxx, trade name, design patent, trade dress and
all other rights in or derived from the Licensed Products, the likeness of Xxxx
Xxxxxxxxx and any articles, photographs, logos, adoptions, artwork, packaging,
test, advertising, promotional and other materials, and all works derived
therefrom, of any kind or nature whatsoever whether now known or hereafter
devised (whether or not developed by or for Licensee) and all goodwill
pertaining thereto (collectively, "Proprietary Material(s)" shall be, and at all
times shall remain, the property of Licensor; provided, however, that the
definition of Proprietary Materials does not include any of the actual Licensed
Products.
B. TRADEMARKS DEVELOPED BY LICENSEE: If Licensee develops any new
trademark, service xxxx, trade name or trade dress for use on or in connection
with the Licensed Products, Licensee shall present to Licensor a full and
complete trademark search report and opinion letter from trademark counsel
attesting to the availability of the trademark, service xxxx, trade name or
trade dress along with Licensee's request for approval of use thereof on or in
connection the Licensed Products. Upon approval by Licensor, the new trademark,
service xxxx, trade name or trade dress shall become Licensed Product. Without
Licensor's approval, no new trademark, service xxxx, trade name or trade dress
shall be used by Licensee in connection with any Licensed Products.
C. WORKS MADE FOR HIRE: Licensee shall insure that all Proprietary
material are "works made for hire" within the meaning of the U.S. Copyright Act
of 1976, as amended. All Proprietary Materials, shall be prepared by Licensee's
employees under Licensee's sole supervision, responsibility, direction, control
and monetary obligation, within the course and scope of each such person's
employment by Licensee. If third parties who are not employees of Licensee
contribute to the creation of any Proprietary Material, Licensee shall obtain
from each such third party, prior to commencement of work, a complete, absolute,
irrevocable and unconditional written assignment, in form and substance
satisfactory to Licensor, by which all right, title and interest in the
applicable Proprietary Materials (including, but not limited to, all copyrights
and rights under copyright), throughout the universe in perpetuity, whether now
known or hereafter devised, shall vest in Licensor irrevocably, exclusively and
unconditionally. Nothing contained herein or otherwise shall, or shall be deemed
to construed to, convey to Licensee any right, title or interest in or to any of
the Proprietary Materials.
D. DELIVERY OF PROPRIETARY MATERIALS TO LICENSOR: Promptly at the
expiration or sooner termination of the Term set forth in Section II(B), and
from time to time as Licensor may elect, Licensee shall deliver to Licensor all
originals or duplicates (cost for duplication to be borne by Licensee) of all
Proprietary Materials, whether supplied by Licensor or created by or on behalf
of Licensee.
E. COPYRIGHT AND TRADEMARK NOTICES: As a material condition to the
continuation of this Agreement, Licensee shall comply fully with all applicable
trademark, copyright and other proprietary rights notice requirements, and any
other notices which Licensor from time to time may require. Subject to
Licensor's approval of the content, size and placement thereof, Licensee shall
have the right to place its own copyright and trademark notices
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on any materials it owns or creates hereunder which are separate and apart from,
and not related to, the Licensable Product or any Proprietary Material.
F. PROTECTION OF COPYRIGHTS, TRADEMARKS AND GOODWILL: Licensee shall
procure, maintain, defend and enforce Licensor's rights in the Licensed Products
and Proprietary Material; and Licensor hereby grants to Licensee the right to do
so to the maximum extent legally permissible. Licensee shall execute,
acknowledge and deliver, and shall cause to be executed, acknowledged and
delivered, to Licensor all additional documents and instruments Licensor may
require (including, but not limited to, those necessary or appropriate to record
Licensee as a registered user of any trademarks or to cancel any such
recordation), each in form and substance satisfactory to Licensor. If Licensee
fails to execute, acknowledge or deliver any such document or instrument, or to
cause any such document or instrument to be delivered, Licensee hereby appoints
Licensor as its attorney-in-fact to do any of the foregoing on Licensee's behalf
and in Licensee's name, and Licensee acknowledges that such appointment is
coupled with an interest and is irrevocable with full powers of substitution and
delegation. Licensor makes no representation or warranty that copyright,
trademark or any other protection has been or will be secured or maintained for
any of the Licensable Product. Licensee shall prosecute absolutely all
infringement claims or litigation to be brought against third parties involving
or affecting the Licensed Products, and Licensor may join Licensee as a party
thereto at Licensor's sole cost and expense.
V. INDEMNIFICATION:
A. Licensee shall defend, indemnify and hold harmless Licensor, and its
officers, shareholders, directors, employees, partners, agents and other
representatives, and their respective successors, assigns, parents,
subsidiaries, affiliates, partners, heirs, executors, trustees, administrators
and other representatives, and all other parties associated with the Licensed
Products, from and against any and all claims, liabilities, losses, costs,
damages and expenses (including reasonable attorneys' fees) arising out of or in
connection with Licensee's acts or omissions in connection with this Agreement,
the Licensed Products including, but not limited to, any defect (whether obvious
or hidden and whether or not present in any sample approved by Licensor) in a
Licensed Product or arising from personal injury or any infringement of any
rights of anyone in connection with the manufacture, advertising, promotion,
sale, possession or use of Licensed Product or any failure to comply with any
applicable laws, treaties, regulations or standards (collectively, "Law(s)").
B. Licensor shall defend, indemnify and hold harmless Licensee, its
officers, shareholders, directors, employees, partners, agents and other
representatives, and their respective successors, assigns, parents,
subsidiaries, affiliates, partners, heirs, executors, trustees, administrators
and other representatives, and all other parties associated with the Licensed
Products for, from and against any and all claims, liabilities, laches, costs,
damages and expenses (including reasonably attorneys' fees) arising out of or in
connection with Licensor's acts or omissions in connection with this Agreement,
with respect to Licensor's ownership or right to use the Likeness of Xxxx
Xxxxxxxxx or any failure to comply with any applicable Laws.
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VI. PRODUCT LIABILITY AND GENERAL LIABILITY INSURANCE:
A. INSURANCE: Licensee, at its sole cost, will obtain and maintain
throughout the Term, and will provide Licensor written evidence from the
insurance carrier of commercial general liability insurance including broad form
coverage for contractual liability, products liability and personal injury
liability (including bodily injury and death), and advertiser's liability
insurance, each from a legally qualified insurance company reasonably acceptable
to Licensor:
(1) in an amount, with respect to the Product Liability Insurance, not
less than $2,000,000 combined single limited for each single occurrence and with
a deductible no greater than $10,000;
(2) in an amount, with respect to the other general liability
insurance, not less than $1,000,000/$3,000,000 with a deductible no greater than
$10,000;
(3) naming Licensor (and its designees from time to time) as additional
named insureds and providing that each such insurance company shall waive any
rights of subrogation against Licensor (and its designees from time to time);
(4) non-cancelable and non-modifiable except on 30 days' prior written
notice to Licensor and only if replaced so that there is no lapse in coverage as
required herein.
(5) providing that such insurance shall be primary insurance
notwithstanding the existence or coverage of any other policy of insurance
maintained by Licensor or by any other insured or third party;
(6) as proof of such insurance, fully paid certificates of insurance
shall be submitted to Licensor, naming each of the parties identified in
subparagraph (3) above as additional named insureds, shall be submitted to
Licensor by Licensee for Licensor's prior written approval before any Licensed
Product is distributed or sold, not later than 30 days after the date of this
Agreement. Each such certificate shall provide for no less than 30 days prior
written notice to Licensor of any lapse, cancellation or termination of such
insurance, and any proposed change in any certificate of insurance shall be
submitted to Licensor for its prior written approval. Each party named as an
additional insured as herein described shall be entitled to a copy of the then
prevailing certificate of insurance at any time, upon request, which promptly
shall be furnished by Licensee. No such party shall have any responsibility or
liability for any deductible, premium or over-limit liability.
VII. EVENTS OF DEFAULT:
The following shall be Events of Default and cure, if any, shall be
evidenced in each subsection:
A. INSOLVENCY: If Licensee becomes unable to pay its debts as they
become due, or if Licensee files or has filed against it a petition in
bankruptcy, reorganization or for the adoption of an arrangement under any
present or future bankruptcy, reorganization or similar
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law (which petition, if filed against Licensee, is not dismissed within 30 days
after the filing date), or if Licensee makes an assignment of all or
substantially all of its property for the benefit of its creditors or is
adjudicated bankrupt, or if a receiver, trustee, liquidator or sequestrator of
all or substantially all of Licensee's property is appointed, or if Licensee
discontinues its business, the license granted herein automatically shall
terminate forthwith upon written notice to Licensee.
B. CHANGE OF CONTROL: If Licensee's business is sold or transferred by
operation of law or otherwise, and if there is a substantial change in
Licensee's management, Licensor, in its sole and absolute discretion, shall have
the right to convert this Agreement to a yearly term upon written notice to
Licensee.
C. FAILURE TO RENDER STATEMENTS OR MAKE ROYALTY PAYMENTS WHEN DUE: If
Licensee fails to deliver to Licensor any statement accompanied by payment of
Royalties then due, and continues to fail to render such statement and/or make
payment of Royalties then due during the 30 business days immediately following
Licensor's written notice of such default, Licensor may terminate this Agreement
upon final written notice to Licensee. Notwithstanding the foregoing, the
parties agree that any disputes regarding payment amounts will be resolved
pursuant to Section IX (B) hereof.
D. BREACH OF OTHER AGREEMENT: If APC breaches, without cure within the
applicable time period, which shall include notice and opportunity to cure, that
certain 1997- 2000 License Agreement ($500,000 minimum Advance Royalty
Guarantee) between Licensee and Licensor, Licensor may terminate this Agreement
upon written notice to Licensee.
E. FAILURE TO COMPLETE PURCHASE OF LICENSEE: If APC fails to pay when
due the $24 million promissory note to SII-NC, then this Agreement shall
terminate immediately upon such failure.
F. NO DISPARAGEMENT: If APC or SII commits an act or becomes involved
in a situation or occurrence which, in Xxxxxxxxx'x good faith opinion, tends to
bring it or him into public disrepute, contempt, scandal or ridicule and tends
to provoke, shock or offend the community or any sizable group or class thereof
so that there is an unfavorable reflection on Xxxxxxxxx'x reputation, or if APC
or SII publicly disparages Xxxxxxxxx, then Xxxxxxxxx may terminate this
Agreement effective at any time after the date on which Xxxxxxxxx first acquires
knowledge and notifies APC and SII in writing thereof and after which no good
faith action shall be promptly taken by APC or SII to cure the same to
Xxxxxxxxx'x good faith satisfaction.
G. MISCELLANEOUS: If (A) Licensee (i) manufactures, offers to sell,
sells, distributes or otherwise disposes of articles in any way utilizing any of
the Licensed Products which are not approved as provided herein; (ii) purchases
materials, products, or services from or acts as a broker, seller, distributor,
or retailer for, any third party whom Licensor has given Licensee written notice
is an infringer or Licensor's proprietary rights; (iii) registers or attempts to
register any claim to copyright, trademark, service xxxx, design patent or any
other right in or to any element of the Licensed Product or Likeness of
Xxxxxxxxx; or (iv) fails to obtain or maintain insurance coverage as required
hereunder, and (B) Licensee fails to cure any such
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condition within 30 days written notice of the occurrence thereof from Licensor,
Licensor may terminate this Agreement upon written notice to Licensee.
VIII. CONSIDERATION:
A. ROYALTY: SII agrees to pay to Xxxxxxxxx a royalty equal to 20% of
the Adjusted Gross Revenue for the full term of this Agreement, including any
extensions.
B. INVENTORY LIQUIDATION: Notwithstanding anything in this Agreement to
the contrary, if SII is required or deems it advisable to liquidate certain
Licensed Products at a price that results in a gross margin of less than 40%,
SII will pay to Xxxxxxxxx a royalty equal to one-half of the gross margin of the
Licensed Product so liquidated.
IX. REPORTING AND PAYMENT:
A. QUARTERLY REPORTS AND PAYMENTS: Within 20 days after the end of each
calendar quarter during the term of this Agreement, SII shall report to
Xxxxxxxxx its Adjusted Gross Revenue, revenue and margins for any liquidated
Licensed Products, and cumulative royalties due for the immediately preceding
quarter, in a format having sufficient detail for reasonable verification of the
royalty payment. Reports shall be signed and certified by an officer of SII as
true and accurate and shall be accompanied by the applicable cumulative
royalties payment.
B. BOOKS AND RECORDS: SII shall keep full, clear and accurate books and
records with respect to all sales or other disposition of Licensed Products
subject to this Agreement. The books and records shall be maintained in such a
manner that the quarterly royalty reports required herein shall be readily
verifiable. Xxxxxxxxx and Xxxxxxxxx'x authorized agent, shall have the right to
examine and audit SII's records on SII's premises upon reasonable prior notice
to SII and during normal business hours. In no event shall Xxxxxxxxx be entitled
to examine and audit SII's records more than twice per calendar year unless a
prior audit by Xxxxxxxxx in that year revealed a deficiency. In the event
Xxxxxxxxx'x audit reveals an overpayment in any royalty due under this
Agreement, such amounts will be credited against the royalty next due. In the
event Xxxxxxxxx'x audit reveals a deficiency in any royalty due under this
Agreement, SII shall remit the deficiency within 10 days together with interest
at a rate of 10% per annum. In the event such audit shows a deficiency greater
than 5% with respect to the funds that should have been paid to Xxxxxxxxx, the
cost of such audit shall be paid by SII. Should Xxxxxxxxx fail to examine
records for a period of three years from the date of any quarterly report which
they were compiled, that quarterly report shall be deemed final and binding and
Xxxxxxxxx shall have no further right to contest the report or payment of
royalties called for therein. Notwithstanding the foregoing, in the event that
SII disagrees with the results of an audit by Xxxxxxxxx, SII and Xxxxxxxxx shall
mutually agree upon a "Big Six" accounting firm to review Xxxxxxxxx'x audit and
the results thereof shall be binding on Xxxxxxxxx and SII.
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X. MISCELLANEOUS PROVISIONS:
A. ASSIGNMENT: This Agreement may not be assigned by SII, Xxxxxxxxx, or
APC without the written consent of the other party.
B. THIRD PARTY BENEFICIARY AND GUARANTOR: This Agreement is entered
into in connection with an Asset Purchase Agreement of even date among SII, APC
and others. Accordingly, the parties xxxx that APC is also contemplated as third
party beneficiary of this Agreement and APC shall also unconditionally guarantee
all performance and all payment obligations and duties of SII under this
Agreement as evidenced by the signature hereto.
C. BINDING ON HEIRS AND APPROVED ASSIGNEES: This Agreement is binding
on the parties, their heirs, successors and their approved assigns.
D. REPRESENTATIONS AND WARRANTIES: The parties hereto each represents
that they are authorized and empowered to enter into this Agreement and that by
entering into this Agreement they will not be in breach of any other agreement
with any person or entity.
E. NOTICES: All notices or other communications required or permitted
under this Agreement shall be in writing and shall be sent by first class,
certified mail, return receipt requested, postage prepaid, to the party
concerned at the address set forth below. Notice may be sent by facsimile
provided confirmation is delivered as described above. Unless otherwise
specifically provided to the contrary herein, any such notice shall be
considered made on the date of receipt at the address of the intended recipient.
To Xxxxxxxxx: To SII:
0000 Xxxxxx Xxxxx Xxxxxxx Xxxx: Xxxx Xxxxxxxxx
Xxxxxxxxxxx, Xxxxx Xxxxxxxx 00000 Action Performance Companies
0000 X. Xxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
With a copy to: With a copy to:
Xxxxx X. Xxxx Xxxxxx X. Xxxx, Esq.
Gray, Layton, Drum, Xxxxx, X'Xxxxxx, Xxxxxxxx
Xxxxxxx, Xxxxxx & Xxxx, P.A. One East Camelback Road
P.O. Box 2636 Suite. 1100
Gastonia, North Carolina 28053 Xxxxxxx, Xxxxxxx 00000
or such change in address as may be given in writing according to the terms of
this section.
F. RELATIONSHIP OF PARTIES: Nothing contained in this Agreement shall
constitute a joint venture or legal partnership between the parties. The
relationship of the parties is that of licensor and licensee.
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G. CONTINGENCIES: The delay or failure of either party to perform any
obligation otherwise due, as a result of force majeure, including but not
limited to governmental action, laws, orders, regulations, directions or
requests, or events such as war, acts of public enemies, strikes or other labor
disturbances, fires, floods, acts of God or any causes of like or different
kind, in each instance beyond the control of such party, but excluding delay or
failure of SII to pay royalties promptly when due, shall be excused for so long
as the cause exists and provided that party gives the other party timely notice
of the cause of the delay or failure and exercises reasonable diligence to
eliminate the cause or to find an alternative by which to resume performance.
H. CHOICE OF LAW: This Agreement shall be interpreted under the laws of
the State of North Carolina without resort to the choice of law provisions
thereof and proper venue shall also reside in North Carolina.
I. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement
and understanding of the parties relating to the subject matter hereof, and
supersedes all prior and contemporaneous agreements, understandings and
communications between the parties relating to the subject matter hereof except
existing License Agreements to which any or all of the parties hereto may be
parties. No modification of this Agreement shall be effective unless made in
writing, signed by all parties. Delay or inaction by any party will not
constitute a waiver of its rights conferred by this Agreement.
J. CONSTRUCTION: The parties acknowledge and agree that each party has
participated in the drafting of this Agreement and that this document has been
reviewed by their respective legal counsel. Accordingly, the parties agree that
any ambiguity is not to be resolved against the drafting party. No inference in
favor of, or against, any party will be drawn from the fact that one party has
drafted any portion of this Agreement.
K. COUNTING OF DAYS: For the purpose of calculating periods of time
specified or allowed under this Agreement, all days are counted, including
weekends and holidays. If the last day of the period is Saturday, Sunday, or
legal holiday in the State of North Carolina, then the period will be extended
through the next business day.
L. EQUITABLE RELIEF: Licensee and Licensor each acknowledges that its
failure to comply with any of the terms of this Agreement including, but not
limited to, Licensee's obligation to cease the manufacture, sale or distribution
of Licensed Products at the termination or expiration of this Agreement, will
cause immediate and irreparable damage to the other and that, in addition to any
and all other remedies, the other shall have the right to equitable relief for
any breach including, but not limited to, temporary restraining order,
preliminary and permanent injunction or other alternative relief without the
necessity of posting any bond or other security or proving any damages.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SII ACQUISITION, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
XXXX XXXXXXXXX, INC.
By:___________________________________________
Xxxx Xxxxxxxxx
Title:________________________________________
ACTION PERFORMANCE COMPANIES, INC.
By:___________________________________________
Name:_________________________________________
Title:________________________________________
________________________________________(Seal)
Xxxx Xxxxxxxxx
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