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Exhibit 10.142
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into
as of the 10th day of October, 1995, by and between THE NAIL CONSULTANTS, LTD.,
an Arizona corporation ("Licensor"), and COSMAR CORPORATION, a California
corporation ("Cosmar" or "Licensee").
RECITALS
A. Xxxxx Xxxxxx is the inventor of an activator, which may be
colored, to be used in connection with a process for applying a protective
covering to fingernails, which activator is the subject of pending United States
Patent Application Number 08/404,374 ("Patent").
X. Xxxxxx is engaged in the design, development, manufacture
and sale worldwide of artificial fingernail products. Cosmar would like to
incorporate and use certain procedures and compositions claimed in the Patent,
without further mixing or other modification by Cosmar, in a new product kit to
be packaged and marketed by Cosmar under its own name.
C. Subject to the terms and conditions of this Agreement,
Cosmar desires to acquire the exclusive, worldwide right and license to use and
package, and to sell and have sold to the Licensed Markets (as hereinafter
defined), the compositions and process claimed in the Patent, referred to
separately as the "Licensed Products" and "Patented Process" respectively, and
collectively as "Licensed Property," and to obtain Licensor's know-how and
assistance with respect to packaging, storing and marketing same.
AGREEMENT
In consideration of the foregoing and of the mutual covenants,
conditions and agreements hereinafter contained, the parties hereto agree as
follows:
1. Certain Definitions.
Except as otherwise expressly provided or unless the context
otherwise requires, the definitions of the terms set forth below shall be
applicable when any such term is used in this Agreement.
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1.1 "Licensed Markets" shall mean mass merchandisers
(including, without limitation, K-Mart, Walmart and Target Stores); food stores
and chains; chain and independent drug and discount-drug stores; department and
discount-department stores and chains; all direct (e.g., television,
infomercials, telemarketing, etc.) and indirect (e.g., catalogs and other mail
order, etc.) distribution channels; any combination of the foregoing; and any
rack jobbers or distributors who sell to the foregoing; provided, however, that
direct and indirect distribution channels shall only be included within the
Licensed Markets if by March 1, 1997 Licensee has in the case of direct
distribution channels commenced marketing of the Licensed Product through at
least two separate direct distribution channels and in the case of indirect
distribution channels has commenced marketing the Licensed Product through at
least one separate indirect distribution channels.
1.2 "Net Sales Price" shall mean the greater of (a)
the Gross Wholesale Price stated on Cosmar's Price List less Cosmar's expenses
and customer credits related to free and promotional goods, returns, off-invoice
allowances and discounts from the Gross Wholesale Price, as invoiced and
consistent with Cosmar's standard pricing and billing practices, and (b) 85% of
the Gross Wholesale Price which for the purposes of this subsection (b) shall
always be at least $4.95 for each gel kit and $2.95 for each kit containing nail
tips or glue or any other product using or sold under the same name or system as
the gel kit.
1.3 "Product Royalty" shall have the meaning set
forth in Section 4.1.
1.4 "Royalty Year" shall mean a twelve (12) month
period starting on January 1 and ending on December 31 of the applicable year,
with the first Royalty Year commencing on January 1, 1996.
2. Grant of Exclusive License.
2.1 Subject to the terms and conditions set forth
herein, Licensor hereby grants to Licensee the exclusive, worldwide right and
license to use and package and have packaged, and to sell and have sold to the
Licensed Markets, the Licensed Products, and to use them in accordance with the
Patented Process. The right and license granted herein, subject to the terms and
conditions expressed herein, are understood to extend not only to Cosmar, but to
any or all of its related corporations, or organizations, and with respect to
Cosmar's customers who, directly or indirectly, purchase Licensed Product from
it, the aforesaid right and license to use and sell the same shall extend to
such customers, including Cosmar's distributors; provided, however, that
fulfillment of all obligations hereunder, including requirements for reports and
the payment of royalties, shall be by or through Cosmar.
2.2 The exclusive right and license herein granted
shall include all inventions, improvements, enhancements and modifications to
the Licensed
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Products and the Patented Process, whether any such inventions, improvements,
enhancements or modifications are patented or kept as trade secrets, made or
conceived during the term of this Agreement, which Licensor owns or controls or
hereafter owns or controls ("Improvements"), all of which shall automatically be
included within the meaning and scope of the terms "Licensed Property" and
"Patent," as used herein. Licensee agrees that if it does not notify Licensor in
writing within 60 days after receipt of Licensor's notice that Licensee will
market the Licensed Products with Improvements on the terms and conditions set
forth in this Agreement with respect to the Licensed Product. Licensor shall be
free to market the Licensed Products with Improvements or license others to
market the Improvements on such terms and conditions as Licensor may desire.
3. Supply of Licensed Products.
3.1 The Licensed Product is an activator which may be
clear, cloudy or colored to be used in connection with a process for applying a
protective covering to fingernails (the "Licensed Product" or the "Licensed
Products," as the context may require).
3.2 From and after the date hereof, and upon the
terms and subject to the conditions hereof, any and all of Cosmar's requirements
for the Licensed Product shall be supplied solely by Licensor, and Cosmar shall,
subject to Section 9.4 hereof, purchase all of its requirements for the Licensed
Product from Licensor. Licensor agrees to supply all of Cosmar's requirements
with respect to the Licensed Product. Neither Licensor nor any affiliate or
associate of Licensor shall supply, directly or indirectly, the Licensed Product
to any person or company other than Cosmar for sale in or to the Licensed
Markets. Neither Cosmar nor any affiliate or associate of Cosmar shall sell,
directly or indirectly, any other product if such product infringes upon the
Patent. Commencing with its first purchase order, Cosmar shall furnish to
Licensor a 90-day forecast of Cosmar's anticipated requirements of Licensed
Product, which forecast shall be updated thereafter by Cosmar.
3.3 Unless and until increased as provided below, the
purchase price for the Licensed Product shall be $125 per gallon. The purchase
price set forth above is based upon, and all Licensed Products shall be ordered
in fifty-five (55) gallon container quantities. Commencing on the first
anniversary thereafter, the above purchase price may be increased upon 90 days'
advance written notice from Licensor to Cosmar. The amount of the increase, if
any, shall be equal to and based on the greater of (i) Licensor's increased bulk
quantity raw material costs, over such costs on the date hereof, for any of the
Licensed Products, and (ii) any increase in the national consumer price index
("CPI") published by the United States Government (or any successor or
comparable index), using December 31, 1995 as the reference or base index.
Licensor shall furnish to Cosmar, together with any notice of price increases,
evidence reasonably satisfactory to Cosmar regarding the basis for any price
increase and the computation thereof. For any Royalty Year, for example, a
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price increase for the Licensed Product may be based on an increase in raw
material costs or an increase in the CPI.
3.4 From time to time during the term of this
Agreement, as Cosmar may require, Cosmar shall place orders for the Licensed
Product. Any order placed by telephone shall be confirmed in writing within 48
hours. Cosmar will place orders six months in advance of the requested delivery
date, although Cosmar shall have the right to increase or decrease any order
until 60 days prior to the requested delivery date (which 60th day is
hereinafter referred to as the "Firm Order Date". Cosmar shall pay fifty percent
(50%) of the total purchase price for each month's order at least 45 days before
the delivery date for such order. Payment shall be made either by bank check or
by wire transfer, payable to Licensor. The balance of the purchase price shall
be paid within fifteen (15) days after Licensee receives the invoice for the
Licensed Product ordered.
3.5 The Licensed Product shall be delivered to Cosmar
F.O.B. shipping point, which shipping point shall be where the Licensed Product
is manufactured, which currently is TEVCO, South Plainfield, New Jersey. Title
to the Licensed Product shall pass to Cosmar upon delivery to the carrier, and
Licensor shall have no liability for any damage to or loss of the Licensed
Product after the Licensed Product is delivered to the carrier with which the
Licensed Product is shipped. If Cosmar so desires, Cosmar shall be responsible
for obtaining insurance to cover the risk of loss or damage to the Licensed
Product from and after the time Licensor delivers the goods to the carrier.
3.6 The anticipated date of shipment of all Licensed
Product ordered hereunder is within sixty (60) days following the Firm Order
Date. Licensor shall use its best efforts to meet this schedule. In any event,
Licensor shall ship all Licensed Product ordered hereunder within ninety (90)
days following the Firm Order Date, the specific shipment date to be confirmed
by Licensor to Cosmar within ten (10) days after the Firm Order Date. Subject to
Section 3.9, if at any time during the term hereof Licensed Products are not
delivered within ninety (90) days following Firm Order Date, Licensor shall have
ninety (90) more days within which to either deliver all then delinquent
Licensed Product or enter into an agreement with a third party reasonably
acceptable to Cosmar (which may be Xxxxx Xxxxxx, who is acceptable to Cosmar),
which third party shall by written agreement of assignment and assumption agree
to perform all of the Licensor's obligations hereunder ("New Supplier"). If
within the aforementioned second ninety (90) day period, Licensor has not
delivered all then delinquent Licensed Product orders or appointed a New
Supplier as aforesaid, then Cosmar shall immediately thereupon have the right to
manufacture or cause to have manufactured for its account the Licensed Product
(or equivalent) prior to the requested delivery date and Licensor shall use its
best efforts, on an urgent basis, if requested in writing by Cosmar, (i) to
deliver to Cosmar true and complete copies of all formulas and the names and
addresses of all suppliers and all other commercially useful information
regarding the Licensed Product, and (ii) to do
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all other things necessary or desirable to facilitate Cosmar's immediate entry
into and continued production of Licensed Products for its own account. In
addition, from and after such time any and all obligations of Cosmar under
Sections 3.2, 3.3, 3.4 and 3.5 shall be suspended, and any and all obligations
of Licensor under Sections 3.2, 3.3, 3.4, 3.5 and the first four sentences of
this Section 3.6 shall be suspended, all subject to reinstatement as hereinafter
provided. If at any time after Cosmar has commenced the manufacture of Licensed
Product pursuant to Section 3.6, Xxxxxx or Licensor desire to reinstate the
obligations of Cosmar under Section 3 hereto, then Xxxxx Xxxxxx or Licensor
shall have the right to do so upon ninety (90) days' written notice to Cosmar.
In lieu of furnishing this 90-day notice, Xxxxx Xxxxxx or Licensor may reinstate
Cosmar's obligations immediately upon (a) delivery to Cosmar of written
assurances reasonably satisfactory to Cosmar of Xxxxx Xxxxxx or Licensor, as the
case may be, as to the assumption of and performance by the assuring party of
all of Licensor's obligations with respect to the delivery of Licensed Products,
including unfilled purchase orders, and (b) the cash purchase and payment by the
assuring party of all equipment and the like purchased by Cosmar for the purpose
of or used by Cosmar in the manufacture of Licensed Products. The purchase price
for all of said property shall be Cosmar's depreciated cost. Reinstatement of
Cosmar's obligations hereunder shall be subject to the concurrent reinstatement
of Licensor's obligations hereunder. Trade secret and other confidential
information disclosed hereunder to Cosmar will be maintained in strictest
confidence and will be used only as contemplated hereby.
3.7 Except as hereinafter provided, Licensor
represents, covenants and agrees that all quantities of Licensed Product shall,
to the Licensor's knowledge, be free from defects in material, manufacturing and
packaging at the point of pick-up of the Licensed Product by the carrier and
shall indemnify Cosmar from and against any and all claims, demands, actions or
causes of action of any kind or nature whatsoever concerning personal injury
and/or property damages arising from any such defect; provided, however, that
Licensee acknowledges that the glue used in or with respect to the Licensed
Product is not manufactured by Licensor and that, accordingly, Licensor makes no
representation or warranty, express or implied with respect to such glue and
shall have no liability for any defect in or damage caused by such glue. Should
Cosmar be named as a party in any such action then Licensor shall also indemnify
Cosmar for all of its reasonable costs and expenses in defending any such
action. The foregoing representations, warranties and indemnifications shall not
apply if or with respect to, as appropriate: (i) the Licensed Products have been
subjected to misuse, negligence or accident as a result of any act or omission
of Cosmar; (ii) the Licensed Products shall not be used in accordance with
Licensor's written instructions; (iii) the Licensed Product shall have been
altered or modified by Cosmar without the written approval of Licensor; or (iv)
any other cause not within the control of Licensor shall result in any of the
foregoing. Except as set forth in this Section 3.7 and Section 6 Licensor makes
no other representations and warranties express or implied with respect to the
Licensed Products, and all such other representations and warranties are hereby
expressly disclaimed and denied. The
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indemnifications contained in this Section 3.7 shall also not apply unless: (i)
Cosmar notifies Licensor promptly in writing of the claim, (ii) Cosmar allows
Licensor, at its sole cost and expense, to fully participate in the defense of
such claim and (iii) Cosmar does not agree to any settlement of such claim
without Licensor's written consent. At any time within thirty (30) days after
Licensor is notified by Cosmar of claim pursuant to clause (i) in the preceding
sentence, and provided that Cosmar does not notify Licensor that Cosmar has
determined, in the exercise of its reasonable discretion, that a conflict of
interests makes separate representations by Cosmar's own counsel advisable, and
provided further that Licensor is not in default under this Agreement and
continues to perform its obligations under this Agreement, Licensor may elect to
assume the defense of any such claim by notice to Cosmar, which notice shall
confirm that Licensor is obligated to indemnify Cosmar with respect to such
claim. Failure by Licensor to notify Cosmar of the Licensor's election to defend
any such claim within ten (10) days after notice thereof shall have been given
to Licensor shall be deemed a waiver by Licensor of its right to defend such
claim. If a responsive pleading is due before Licensor makes the election to
defend, Cosmar shall take all action which is reasonably necessary to preserve
the Licensor's right to defend the action (including but not limited to
employing attorneys to, among other things, obtain an extension to reply or to
reply to the responsive pleading). All reasonable expense of Cosmar in taking
such action shall be indemnified by Licensor. If Licensor assumes the defense of
any claim, the obligations of Licensor hereunder as to such claim shall be
limited to taking all steps necessary in the defense or settlement of such claim
and to holding Cosmar harmless from and against any and all losses, damages and
liabilities caused by or arising out of any settlement or any judgment in
connection with such claim or litigation resulting therefrom. Cosmar shall
retain the right to employ its own counsel and to participate in the defense of
any claim, the defense of which has been assumed by Licensor pursuant hereto,
but Cosmar shall bear its own costs and expenses in connection with such
participation. For purposed of this Section 3.7, "Cosmar" shall mean Cosmar and
each of its affiliates, directors, officers, shareholders, employees,
representatives, successors and assigns. Notwithstanding the foregoing, Licensor
shall have no responsibility whatsoever for any damage to the Licensed Products
in transit resulting from any act or omission occurring after delivery of the
Licensed Products to the carrier with which the Licensed Products are shipped.
3.8 Licensor and Cosmar covenant and agree that each
will keep in force during the entire term of this Agreement product liability
insurance, each policy for which shall name the other party as an additional
insured thereunder. In the case of Licensor the amount of the combined single
limit of liability minimum amount shall not be less than $1,000,000 and in the
case of Cosmar the minimum amount shall be $2,000,000. Licensor and Cosmar shall
each provide to the other a certificate evidencing said insurance which
prohibits cancellation, termination or modification without thirty (30) days'
written notice to the named additional insured.
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3.9 In the event only of war declared by the United
States Congress, strike, national or Phoenix, Arizona labor shortage, declared
national state of emergency or state of emergency in the city or county of the
place or business of Licensor or any of its suppliers, fire, flood, famine, and
failure of interstate transportation systems, or any order, direction, law or
equivalent of the United States Government, or of any state or subdivision
thereof or any other country or subdivision, which renders impossible the
performance by Licensor of its obligations hereunder ("force majeure"), the
obligations of Licensor's performance, except as set forth in the next sentence,
shall be suspended during the continuance of such event of force majeure, and no
liability for failure to perform during such suspension shall accrue.
Notwithstanding the occurrence of an event of force majeure, Licensor shall use
its reasonable best efforts to seek alternative means of performance on an
interim basis and to resume performance of its obligations hereunder in
accordance with their terms at the earliest time practicable; provided, however,
that Licensor shall not be required by the foregoing to take any action
requiring any material expenditure of funds or any exposure to liability so long
as it presents to Cosmar the expenditure or exposure and Cosmar does not
forthwith agree to pay or indemnify Licensor as to same. If Cosmar forthwith
agrees to pay or indemnify Licensor as to same, then Licensor shall be required
to take the subject action.
4. Royalty Payments.
4.1 Cosmar shall pay to Licensor in addition to the
consideration referred to in Section 3.3 hereof, royalties in the amounts and at
the times hereinafter set forth. On the first day of each month commencing
January 1, 1996 an amount equal to one-twelfth of the then Minimum Royalty (as
defined in Section 4.4 hereof). Commencing on April 30, 1996, and on the 30th
day of each April, July, October and January thereafter until the expiration or
earlier termination of this Agreement, Cosmar shall pay to Licensor a royalty of
six percent (6%) of the Net Sale Price of all Licensed Product sold by Cosmar
("Product Royalty") during the immediately preceding calendar quarter less an
amount equal to Minimum Royalty payments made pursuant to the immediately
preceding sentence for the immediately preceding calendar quarter. Licensor
specifically acknowledges Cosmar's right to include Licensed Products together
with Cosmar's own products in kits to be marketed and sold in Cosmar's packaging
and under its trademarks. Prior to sale of any such kits, Licensor and Cosmar
shall agree on the portion of the sale price thereof to represent the Licensed
Product and be included in Net Sales Price.
4.2 Licensed Products shall be considered as "sold"
when Licensed Products or products incorporating same are shipped to customers.
Each April 30, July 30, October 30 and January 30 Cosmar shall send to Licensor
a statement whether or not any Product Royalty payments are due showing in
reasonable detail the computation of the Product Royalty for the prior calendar
quarter. No Product Royalty payments shall be triggered solely by any bulk sale
of the Licensed Product by Cosmar in connection with the cessation of sale of
Licensed
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Product by Cosmar or the sale of Cosmar's business or the Licensed Product
component of such business, so long as the purchaser under any such bulk sale is
reasonably satisfactory to Licensor, has agreed to and does, in fact, accept
assignment to it of, and assume Cosmar's obligations under this Agreement and is
able to meet such obligations, and, provided that subsequent sales of unit(s) of
such bulk-sold Licensed Products shall occasion payment of the Product Royalty.
4.3 In the event that Minimum Royalty or Product
Royalty payment due dates fall on a Saturday, Sunday or a legal holiday, such
payment shall be due on the following business day. Unless and until otherwise
notified in writing by Licensor, all payments to Licensor hereunder shall be
made in person or by deposit on the date in the United States mails, first-class
postage prepaid, of Cosmar's check in the amount due, payable and addressed as
follows: The Nail consultants, Ltd., 00000 X. 00xx Xxxxxx, Xxxxxxx, Xxxxxxx
00000. There shall be a late charge of 1/2% per month on all payments of Minimum
Royalty or Product Royalty more than fifteen (15) days late.
4.4 Notwithstanding payment of all Product Royalty,
the continued maintenance of the exclusivity of the license granted hereby shall
be subject to payment by Cosmar of minimum annual royalties; payable pro rata on
a monthly basis, commencing January 1, 1996, according to the following schedule
("Minimum Royalty"):
Royalty Year Minimum Royalty
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1996 $250,000
1997 350,000
1998 400,000
1999 450,000
2000 500,000
Cosmar agrees to pay $50,000 to Licensor on September 15, 1995, one-twelfth of
which shall be credited against each Minimum Royalty payment to be paid by
Cosmar during each month of calendar year 1996. Cosmar shall not be entitled to
any refund if at any time Product Royalty is less than Minimum Royalty for any
period, it being understood and agreed that the Minimum Royalty is a guaranteed
minimum amount to be paid by Licensee to Licensor hereunder.
4.5 Provided it is not in default under this
Agreement, Cosmar shall have the right, but no obligation, to extend the term of
this Agreement by an additional three years by delivering written notice of such
extension to Licensor at least 90 days prior to the expiration of this
Agreement. In the event Cosmar extends the term of this Agreement the Minimum
Royalty during each of the subsequent years shall be $500,000.
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4.6 Cosmar shall have the right to convert the
exclusive license granted hereunder to a nonexclusive license at any time after
December 31, 1998, by delivering written notice of such election to Licensor
prior to July 1, 1998. In this event, the Minimum Royalty applicable to each
year following such election (including the years 2001, 2002 and 2003, in the
event that Cosmar extends the term of this Agreement pursuant to Section 4.5
above) shall be $350,000.
4.7 Licensor and Cosmar agree that Cosmar shall have
the right to introduce flanking products based on products sold under the LaJoe,
Pro 10 or other Cosmar product lines (exclusive of product lines based on the
Licensed Products), and that Licensor will not be entitled to any royalties in
connection with sales of such flanking products. However, sales by Cosmar of
flanking products based on the Licensed products or sold or advertised for sale
as part of, in connection or for use with, or under the same name or system as
the Licensed Products ("Flanking Products") shall be subject to a royalty to be
agreed to, in writing by Licensor and Cosmar in their sole discretion, (and not
subject to arbitration pursuant to Section 11.6) but not to exceed six percent
(6%) of the Net Sale Price of such product payable at the same time and for the
same periods Product Royalty is payable with the same proof of the amount
thereof due as for Product Royalty, and such products shall generally be
considered Licensed products for purposes of this Agreement except that Licensor
makes no representations or warranties, express or implied, and has no
obligations or liability with respect thereto and sale of such product shall not
be taken into account in determining Product Royalty or payments thereof. Cosmar
may not sell Flanking Products unless the royalty with respect thereto has been
agreed to.
5. Audit of Product Royalty and Section 4.7 Payments.
5.1 Licensor shall have the right to perform from
time to time in Licensor's sole reasonable discretion, an audit of the books and
records of Cosmar by notifying Cosmar in writing of its desire to perform an
audit thereof ("Payment Audit"). Licensor or its authorized agent shall then
have the right to examine, during Cosmar's regular business hours, all relevant
books and records of Cosmar for the purpose of verifying the accuracy of the
Product Royalty payment(s) or nonpayment(s) or the accuracy of the payments due
under Section 4.7 ("Section 4.7 Payments"). Cosmar agrees that it will at all
times keep true and complete books of account containing a current record of all
sales and other data in sufficient detail to enable the royalties payable under
this Agreement to be computed and verified. If, after any Payment Audit,
Licensor should conclude that Product Royalty and Section 4.7 Payments paid to
Licensor is less than the amount which should have been paid to Licensor for the
period covered by the Payment Audit, then Licensor shall make a claim in writing
upon Cosmar stating the aggregate amount of Product Royalty and Section 4.7
Payments which should have been paid to Licensor for such period, the deficient
amount due, and the date(s) upon which each such deficient amount was initially
due. Cosmar shall with ten (10) business days after receipt of written notice
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of such claim either pay the aggregate amount of said deficiency, plus simple
interest at the rate of ten percent (10%) per annum on the amount of the
deficiency from the date(s) payment was initially due, or name an independent
certified public accounting firm satisfactory to Licensor not previously
retained by licensor or Cosmar or any of their respective affiliates or
affiliated persons to perform a new audit for the period that was the subject of
the Payment Audit (the "Independent Audit"). If Cosmar and Licensor cannot agree
upon such a firm, then Cosmar may name such a firm from among the 50 largest
national accounting firms or the 15 largest Los Angeles accounting firms (as
shown in the latest Los Angeles Business Journal listing or other published
source).
5.2 Within sixty (60) days after the naming of a firm
to perform the Independent Audit (the "Independent Firm"), the Independent Firm
shall set the proper payment for the audited period, including any interest due
as hereinafter prescribed, and shall notify Licensor and Cosmar in writing of
the amount. During the course of the Independent Audit, Licensor and Cosmar
shall be entitled to make whatever timely submissions they reasonably desire to
the Independent Firm. The determination of the Independent Firm shall be final
and binding on the parties; provided, however, that in the event the
determination depends upon an interpretation of this Agreement, such Independent
Firm shall seek advice of counsel acceptable to the parties hereto, or the
parties shall resolve any such disagreement about interpretation by submission
to arbitration as provided hereunder.
5.3 After the royalty payment due as aforesaid has
been set, Cosmar shall promptly make payment of the amount due, plus simple
interest at the rate of ten percent (10%) per annum from the date payment was
initially due, all as determined by the Independent Firm.
5.4 All fees and expenses of any Payment Audit or
Independent Audit shall be paid by Licensor, provided, however, that if any
additional amount claimed by Licensor, after any Payment Audit, is paid or
payable by Cosmar and the additional amount paid or payable exceeds by more than
three percent (3%) the amount previously paid by Cosmar with respect to the
period audited, or is not paid and Cosmar does not name an independent Firm as
required above, or if the amounts which should have been paid during the audited
period, as determined by the Independent Audit, is greater than the actual
payments made by Cosmar during the period audited, and the incremental amount
exceeds by more than three percent (3%) the actual amount paid by Cosmar, then
the reasonable fees and expenses of the Payment Audit and any Independent Audit
shall be paid by Cosmar. Licensor shall be entitled to a maximum of one (1)
Payment Audit in any one Royalty Year; provided, however, that any Payment Audit
the costs of which are required to be borne by Cosmar shall not count for
purposes of the foregoing limitation.
5.5 During any Payment Audit, all periods covered by
this Agreement not previously subject of a Payment Audit may be examined and no
more.
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Notwithstanding any contrary provision herein, no firm which has previously
performed an Independent Audit shall be virtue of that fact alone be
disqualified from performing an Independent Audit.
6. Representations and Warranties of Licensor
Licensor represents and warrants that as of the date of the
execution of this Agreement.
6.1 Licensor has the exclusive right to use and
practice the inventions disclosed in the Patent, free and clear of any liens,
encumbrances, licenses (other than this Agreement) or, to the best of Licensor's
knowledge, claims of any nature relating to or affecting Licensor's right to use
and practice such inventions, other than and as set forth in Section 9.5 hereof,
and has made no agreement (with the exception of an agreement with Pro Finish
U.S.A., Ltd.) regarding distribution of Licensed Product to which this Agreement
and the rights of Licensee hereunder is subject with respect to the Patent or
Licensor's related know-how disclosed to Cosmar by Licensor hereunder (relating
to the storage, shelf-life, packaging and marketing of Licensed Products) which
is in conflict with this Agreement;
6.2 Except as previously disclosed to Cosmar in
writing, Licensor has received no notice, written or oral, of any action or
claim with respect to the product safety or efficacy of any of the Licensed
Product, either as a whole or as to any component thereof, nor has Licensor
received any report relating to the same;
6.3 Licensor has not at any time filed, or caused to
be filed, applications for patents, or obtained in its name, or caused to be
obtained in the name of others, any patents in the United States other than the
Patent, or filed in any foreign country any patent or similar applications or
registrations with respect to the Licensed Products, the Patented Process, or
any Improvements thereof.
7. Representations and Warranties of Cosmar.
Cosmar represents and warrants to Licensor as follows:
7.1 Cosmar is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
7.2 The execution, delivery and performance of this
Agreement by Cosmar have been duly authorized by all necessary corporate action.
This Agreement has been duly executed by Cosmar and constitutes a valid and
legally binding obligation of Cosmar enforceable against Cosmar in accordance
with its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting generally the
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enforcement of creditors' rights, and subject to the effect of general
principles of equity. Cosmar has obtained all necessary authorizations,
consents, licenses and approvals, governmental and otherwise, presently required
for the execution and delivery of this Agreement and performance of its
obligations hereunder and is in compliance therewith in all material respects.
7.3 The execution, delivery and performance of this
Agreement by Cosmar in accordance with its terms will not, with or without the
giving of notice of the passage of time, or both, conflict with, result in a
default, right to accelerate or loss of rights under, or result in the creation
of any lien, claim or encumbrance on the assets of Cosmar or require the consent
of any third party or governmental authority, pursuant to (i) any provision of
the certificate of incorporation or by-laws of Cosmar or (ii) any franchise,
mortgage, indenture or deed of trust or any lease, license or other agreement or
any law, rule, regulation, order, judgment or decree to which Cosmar is a party
or by which Cosmar (or any of its assets, properties, operations or businesses)
may be bound, subject to or affected.
7.4 There are no material claims, legal actions,
arbitrations, governmental investigations or other legal or administrative or
other proceedings, decrees or judgments in progress, pending or in effect, or to
the knowledge of Cosmar threatened, against or relating to Cosmar, its
properties, assets or business or the transactions contemplated by this
Agreement which, if resolved adversely to Cosmar, would, individually, or
together, have a material adverse effect on Cosmar's financial condition or its
ability to perform its obligations under this Agreement.
8. Marketing.
8.1 Cosmar agrees that it will xxxx all Licensed
Products made and/or sold by it with appropriate patent pending or patent
notices as specified by applicable patent laws.
8.2 Licensee agrees to commence selling the Licensed
Product not later than February 1, 1996 and to use its best efforts to market
and sell the Licensed Product to the Licensed Markets. Licensee further agrees
to spend the amounts set forth on Schedule A hereto in the manner and for the
purposes set forth on said Schedule in furtherance of its marketing efforts.
9. Patent Litigation Involving Third Parties.
9.1 Provided that Cosmar has made substantially all
payments required to be made by it hereunder and is otherwise not in material
default under this Agreement, Licensor shall defend solely at its own expense,
and hold Cosmar harmless from and against any actions and claims brought by
third parties against Licensor and/or Cosmar concerning Licensor's rights with
respect to the Patent and its related know-how, or the right of Licensor to
enter into this
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Agreement. The provisions of Section 3.7 of this Agreement relating to
indemnification procedures, including, without limitation, Cosmar's obligation
to give notice regarding claims and Licensor's right to defend, are hereby
incorporated in full in this section as if fully set forth herein.
9.2 Provided that Cosmar has made substantially all
payments required to be made by it hereunder and is otherwise not in material
default under this Agreement, Licensor shall defend solely at its expense, and
hold Cosmar harmless from and against any actions and claims of infringement
that may be brought by third parties in the United States against Cosmar
relating to Cosmar's exercise of any rights or licenses granted to it pursuant
to this Agreement. The provisions of Section 3.7 of this Agreement relating to
indemnification procedures, including, without limitation, Cosmar's obligation
to give notice regarding clams and Licensor's right to defend, are hereby
incorporated in full in this section as if fully set forth herein.
9.3 In the event either Licensor or Cosmar discovers
any infringement of the Patent or related know-how by a third party in the
Licensed Markets, the other party shall be promptly notified of such
infringement. Except as hereinafter provided, Licensor shall not create any
controversy with an alleged infringer without Cosmar's prior written consent.
Cosmar may, at its option and at its sole expense, through attorneys of its own
selection, take appropriate action to terminate or prevent the infringement. In
the event of any legal action initiated by or with the prior written consent of
Cosmar and relating to an infringement by a third party of the Patent or related
know-how in any of the Licensed Markets, all costs and expenses and such legal
action shall be paid by Cosmar and all recoveries shall be retained by Cosmar.
If Cosmar takes no action within one hundred twenty (120) days of the discovery
of the infringement, then Licensor may, at its option and at its sole expense,
take such action as it deems appropriate to protect its rights without
interfering with or adversely affecting the benefits enjoyed by Cosmar
hereunder. Each party, without cost or expense to itself, shall render all
reasonable cooperation and assistance to the other in connection with any legal
action brought by either party, including, without limitation, consenting to be
named or joined as a party therein to the event that either party may be deemed
a necessary or indispensable party to a legal proceeding brought or proposed to
be brought by the other party. The parties may jointly initiate any legal action
upon such terms as they shall mutually agree.
9.4 In light of the fact that no foreign patent
applications or registrations were made by the inventor of the Licensed Products
and the Patented Process, it is possible that Cosmar's foreign sale of Licensed
Product may infringe upon the rights of one or more third parties in one or more
foreign countries ("Foreign Infringement"). In the event of any claim or dispute
between Cosmar and a third party regarding a Foreign Infringement, as a result
of which Cosmar becomes obligated pursuant to a written instrument, a copy of
which shall be furnished to Licensor, to make any payment, in the nature of a
royalty, licensee or otherwise, then
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as to, but only to the extent of, sales of Licensed Product or similar product
in the foreign country or countries affected, Cosmar shall be relieved of any
obligation to Licensor under Sections 3.2 and 4 of this Agreement,
notwithstanding the provisions thereof to the contrary; provided, however, that
to the extent any such payment(s) in respect of a Foreign Infringement is less
than the sum of (a) the greater of the Product Royalty and Minimum Royalty
payment(s) and (b) Section 4.7 Payments that would otherwise be due, Cosmar
shall make payment of the difference to Licensor when the same would otherwise
be due. The foregoing provision shall not affect Licensor's obligation to defend
Cosmar against a claim of Foreign Infringement pursuant to Section 9.2 above.
9.5 Notwithstanding anything contained in this
Agreement, Licensor shall have no liability whatsoever for any claim made under,
through, as a result of or by the holder of the Xxxxx Patent U.S. Patent No.
4,687,827 ("Xxxxx Patent") nor shall Cosmar make any claim against Licensor
under the provisions of this Agreement, including, without limitation the
indemnification provisions or otherwise as a result of the existence or use of
the Xxxxx Patent. Licensee shall be responsible to enter into any arrangement,
and pay all costs, licenses fees, royalties and other expenses in connection
therewith, as may be necessary to resolve any claim or demand under the Xxxxx
Patent or by reason of its existence.
10. Duration and Termination.
10.1 Unless otherwise terminated as hereinafter set
forth, this Agreement and the license granted hereby shall continue in full
force and effect until December 31, 2000. Cosmar shall have the right to
terminate this Agreement at any time after December 31, 1998, with six (6)
months prior written notice to Licensor.
10.2 If Cosmar shall at any time default in rendering
any of the statements required hereunder, in the payment of any monies due
hereunder, or in fulfilling any of its other material obligations hereof, and
such default shall not be cured within 10 days, in the case of a monetary
default, or 45 days in the case of a non-monetary default, in each case after
written notice thereof is given by Licensor to Cosmar, Licensor shall have the
right to terminate this Agreement by giving written notice of termination to
Cosmar. Cosmar shall have the right to cure any such default up to the effective
date of termination.
10.3 Licensor shall have the right to terminate this
Agreement by giving written notice of termination to Cosmar in the event of any
one of the following, such termination being effective within 60 days of receipt
of such notice, unless such event is cured within such 60 day period:
(a) Filing of a petition of insolvency or
bankruptcy of Cosmar or Renaissance Corp., whether voluntary or involuntary;
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(b) Appointment of a trustee or receiver for
Cosmar or Renaissance Corp.; or
(c) Any assignment by Cosmar or Renaissance
Corp. for the benefit of creditors.
10.4 In the event that substantially all claims of
the Patent are held invalid in an unappealed or unappealable decision of a court
of competent jurisdiction, either party may at any time thereafter, at its sole
discretion, elect to terminate this Agreement in its entirety upon ten (10)
days' written notice to the other party.
10.5 The expiration or early termination of this
Agreement for any cause whatsoever shall in no manner interfere with, affect or
prevent the collection by Licensor of any and all sums of money due to it under
this Agreement. Upon the expiration or termination of this Agreement for any
reason, Cosmar's payments required by Section 4, but not yet due, shall become
due and payable as if such Agreement had not been terminated, including, but not
limited to, payments on the sale of Cosmar's inventory of Licensed Product which
Cosmar shall be entitled to continue to sell in the ordinary course of its
business. Moreover, Cosmar shall have a limited, non-exclusive license (i) to
complete work-in-process subsequent to the date of expiration or termination
hereof, provided such work-in-process was undertaken prior to such date of
expiration or termination, subject to payment of the Product Royalty, Minimum
Royalty and Section 4.7 Payments which accrues on the sale of the Licensed
Product resulting from the completion of said work-in-progress; and (ii) to
produce Licensed Product subsequent to the date of expiration or termination
hereof it and as required to fulfill purchase orders or other commitments,
provided that such purchase orders were accepted or such commitments made prior
to such date of expiration or termination, subject to payment of the Product
Royalty, Minimum Royalty and Section 4.7 Payments on the sale thereof. The
foregoing does not confer upon Cosmar any right to manufacture Licensed Product.
11. Miscellaneous.
11.1 Further Action. Each of the parties hereto
agrees that it will, at any time, and from time to time, after the date hereof,
upon the request of the other party, do, execute, acknowledge and deliver, or
will cause to be done, executed, acknowledged and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required or effectuate the provisions and intent of this
Agreement.
11.2 Notices. All notices, consents, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given or delivered if delivered personally or mailed by
registered or certified mail, return receipt requested, with first class postage
prepaid as follows:
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(a) If to Cosmar, to:
Cosmar Corporation
0000 Xxxxxx Xxxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxxx
(b) If to Licensor, to:
The Nail Consultants, Ltd.
00000 X. 00xx Xxxxxx
Xxxxx 0
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxx
with a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
or to such other address as Cosmar or Licensor shall have last designed by
notice to the other party. All notices mailed shall be deemed to have been given
or received when actually received or when acceptance of such notice has been
declined.
11.3 Modification. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and shall not be modified or amended except by an instrument in writing
signed by or on behalf of the parties hereto. No course of prior dealings
between the parties and no usage of the trade shall be relevant or admissible to
supplement, explain or vary any of the terms of this Agreement. Acceptance of,
or acquiescence in, a course of performance rendered under this or any prior
agreement shall not be relevant or admissible to determine the meaning of this
Agreement even through the accepting or acquiescing party has knowledge of the
nature of the performance and an opportunity to make objection. No other
representations, understandings or agreements have been made or relied upon in
the making of this Agreement other than those specifically set forth herein.
11.4 California Law to Govern. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of California applied to agreements to be fully performed within the State
of California.
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11.5 Attorneys' Fees. In the event of any
controversy, dispute or claim arising out of, or relating to this Agreement, the
prevailing party in any litigation or arbitration shall be entitled to receive
reimbursement for all of its reasonably incurred attorneys' fees, costs and
expenses of such litigation or arbitration. In the event of litigation or
arbitration which results in a final judgment or award, the prevailing party
shall be that party who obtains such judgment or award in its favor. A judgment
or award shall be deemed final after all rights of appeal have been exhausted.
11.6 Arbitration. Any controversy, dispute or claim
arising out of, or relating to, this Agreement shall, unless resolved by
agreement of the parties, be settled by arbitration in Phoenix, Arizona in
accordance with the Rules of the American Arbitration Association then existing.
This Agreement to arbitrate shall be specifically enforceable under the
prevailing arbitration law of the State of Arizona. For the purpose of enforcing
an arbitration award granted herein or enforcing any other provisions or rights
hereunder or connected hereto, the parties hereby agree and consent to in
personam jurisdiction of the courts of the State of Arizona, United States of
America. The award rendered by the arbitrator(s) shall be final and judgment may
be entered upon the award in any court of the State of Arizona having
jurisdiction of the matter.
11.7 Waiver. No waiver by either party hereto,
whether express or implied, or any of its rights under any provision of this
Agreement at any particular time shall constitute a waiver of such party's
rights under such provision at any other time or a waiver of such party's rights
under any other provision of this Agreement. No failure by either party hereto
to take any action against any breach of this Agreement or default by the other
party hereto shall constitute a waiver of the former party's right to enforce
any provision of this Agreement or to take action against each breach or default
or any subsequent breach or default by such other party.
11.8 Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and upon their respective
successors and assigns. Each party shall have the right freely to assign,
transfer or subcontract this Agreement or any of its rights or obligations
hereunder without the consent of the other party.
11.9 Severability. Any provisions of this Agreement
which may be prohibited by law or otherwise held invalid shall be ineffective
only to the extent of such prohibition or invalidity and shall not invalidate or
otherwise render ineffective the remaining provisions of this Agreement.
11.10 Relationship of the Parties. The parties hereto
are independent contractors and nothing contained in this Agreement shall be
deemed or construed to create the relationship of partnership or joint venture
or principal and
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agent or of any association or relationship between the parties other than that
of independent licensor and licensee, and vendor and vendee of the Licensed
Products.
11.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
11.12 Expenses. Licensor and Cosmar shall each bear
their respective expenses in connection with the transactions herein
contemplated.
11.13 Section Headings. Section headings shall not be
of any force or effect whatsoever in the interpretation of this Agreement and
shall be deemed inserted and used solely for the convenience of the parties.
11.14 Counsel. The undersigned have carefully read
the foregoing and understand the provisions thereof, and, having consulted or
had the opportunity to consent with their separate counsel, acknowledge that
they have signed the same of their own free act and deed.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first herein written.
COSMAR CORPORATION
By /s/ Illegible
--------------------------------
THE NAIL CONSULTANTS, LTD.
By /s/ Xxxxx Xxxxxx, Pres.
--------------------------------
Xxxxx Xxxxxx, President
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ULTRAGEL
MARKETING SUPPORT - YEAR ONE
TRADE PROMO 401,862
COMMISSIONS 587,628
CO-OP ADVERTISING 602,793
CONSUMER PROMOS/PR 250,000
SELLING MATERIAL 50,000
DISPLAYS - Promotional 150,000
DISPLAYS - Permanent 65,000
MEDIA 1,500,000
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TOTAL ADV/PROMO $3,607,282
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