PLAYBOY ENTERPRISES, INC.
June 17, 1998
Xx. Xxxxxxx Xxxxx
President
TITAN MOTORCYCLE COMPANY OF AMERICA
0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
RE: PLAYBOY 45TH ANNIVERSARY LIMITED EDITION MOTORCYCLES
Dear Xx. Xxxxx:
This letter, when the enclosed copy has been signed, dated and returned by
you, will evidence the agreement between Playboy Enterprises, Inc. ("Licensor")
and Titan Motorcycle Company of America ("Licensee") concerning the manufacture,
sale and distribution of motorcycles bearing trademarks and images owned by
Licensor as described below. Our agreement is as follows.
1. Licensee acknowledges that Licensor owns the marks PLAYBOY, RABBIT HEAD
DESIGN, PLAYBOY 2000, and the image of XXXXXXX XXXXXX (ON THE KNEES) in
SILHOUETTE and other images from the Playboy art and photo archives (the
trademarks and images are collectively referred to herein as the
"Trademarks" and "Images" respectively) and recognizes and acknowledges
that the Trademarks and Images are internationally well-known and
recognized by the general public and are associated in the public mind with
Licensor and are designations in which Licensor has acquired a considerable
and valuable goodwill.
2. Except as hereinafter provided, Licensor hereby grants to Licensee and
Licensee hereby accepts, a non-sublicensable, non-exclusive, non-assignable
right (the "License") to utilize the Trademarks and Images in the design,
manufacture, advertisement, distribution and sale of Playboy 45th
anniversary limited edition motorcycles (the "Products") through, and only
through, retail stores located in, and only in, the United States, Canada
and Japan (the "Territory") or to wholesalers which will sell the Products
to, and only to, retail stores located in the Territory. Under no
circumstances may Licensee advertise, sell or distribute the Products
outside of the Territory. Other countries may be added to the Territory on
a case-by-case basis and only upon the prior written approval of Licensor.
3. Licensee may manufacture and produce no more than one hundred (100) Units
of the Products for sale and distribution plus two (2) units which must be
manufactured and produced at the start of production and which must be
called PLAYBOY PROOFS (the "Proofs"). However, no more than twenty (20)
units of the Products may be distributed and sold into Japan. The first
Proof shall be numbered "1 of 2" and the second Proof shall be numbered "2
of 2." Both Proofs shall be given to Licensor free of charge no later than
September 31, 1998.
4. Licensee's rights under this agreement will commence June 1, 1998 and will
expire not later than December 31, 1999 unless sooner terminated as
provided under this agreement.
5. For all purposes under this agreement, a "License Quarter" shall be each
consecutive three (3) month period except that the first (1st) License
Quarter shall be the four (4) month period commencing on June 1, 1998 and
ending at midnight central standard time on September 30, 1998, and if the
expiration or termination of the License and this agreement is effective
other than on December 31, 1999, then the final period of less than four
(4) or three (3) months ending on the effective date of such expiration or
termination shall be deemed to be a License Quarter.
6. Subject to Licensor's prior approval as hereinafter required, Licensee
shall commence the design, manufacture, advertising, promotion, sale and
distribution of or for the Products as soon as practicable after June 1,
1998, but in no event later than September 1, 1998. If Licensee fails to do
so by such date, Licensor may treat such failure as an incurable default
under this agreement.
7. Within forty-five (45) days after the end of each License Quarter,
including the "Sell-Off Period" (if any), Licensee shall pay to Licensor
the following royalties ("Earned Royalties"):
a. Two and one-half percent (2 1/2%) of "Net Sales" of the first twenty
(20) units of the Products sold (specifically excluding the Proofs),
but in no event will the Earned Royalties for such first twenty (20)
units be less than Seven Hundred and Seventy-Five United States
Dollars (U.S.$775) per unit of the Products sold.
b. Five percent (5%) of Net Sales of the remaining units of the Products
sold, but in no event will the Earned Royalties for the twenty-first
(21st) through thirtieth (30th) units of the Products sold be less
than One Thousand Five Hundred and Fifty United States Dollars
(U.S.$1,550) per unit of such twenty-first (21st) through thirtieth
(30th) units of the Products sold.
c. Five Percent (5%) of Net Sales of the Products on units thirty-one
(31) through one hundred (100). Licensor and Licensee shall negotiate
in good faith the establish a minimum Earned Royalty for each such
unit sold. In the event Licensor and Licensee do not or cannot
establish such minimum on or before ten (10) business days after the
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sale of the thirtieth (30th) unit, the minimum Earned Royalty for each
such unit will be One Thousand Five Hundred United States Dollars
(U.S.$1,500) per unit sold.
Net Sales shall mean the invoice price charged by Licensee for the
Products less: (i) refunds, credits and allowances actually made or
allowed to customers for returned Products; (ii) customary trade
discounts (including anticipations) afforded to and actually taken by
customers against payment for the Products; and (iii) value added tax
assessed on sales (only where applicable).
8. Along with each Earned Royalty payment remitted to Licensor, Licensee shall
furnish to Licensor or its designee a complete and accurate statement in a
format acceptable to Licensor and certified to be true by the Chief
Financial Officer of Licensee (hereinafter referred to as the "Statement")
showing for such License Quarter: (a) a listing of Licensee's accounts in
the Territory and the units and description of all of the Products sold and
distributed to each such account or otherwise disposed of by Licensee; (b)
the computations of Net Sales on all such sales; and (c) the computation of
Earned Royalties and the amount of Earned Royalties due and payable.
9. a. The Products to be sold and distributed will be of the highest
quality. The Products will not be sold or distributed until Licensee
has confirmed that Licensor has approved the Products, including any
and all packaging, artwork, printing, advertising, sales, marketing
and promotional materials, fixtures and displays (or any other items
bearing the Trademarks or Images intended for use in connection with
this agreement). Licensee shall submit samples of the Products and all
marketing materials to Licensor for its approval prior to the sale,
distribution or advertising thereof. If, within five (5) business days
of Licensor's receipt of such samples, Licensor has not responded,
then Licensor shall be deemed to have disapproved of such samples. If,
however, Licensor has approved of such samples, then the Products and
marketing materials thereafter will conform to the approved samples.
b. Licensee's policy of sale or distribution of the Products will never
reflect adversely upon the good name of Licensor. Licensee shall not
obtain any right, title or interest whatsoever in or to the Trademarks
and Images by virtue of its use of the Trademarks and Images under
this agreement or otherwise and all additional goodwill associated
with the Trademarks and Images which is created through Licensee's use
of such Trademarks and Images shall inure solely to the benefit of
Licensor.
c. Licensee shall affix or imprint legibly on the Products or packaging
for the Products such trademark and copyright notices, legends and
disclaimers a Licensor directs. The Products shall contain no
advertising unless approved in advance by Licensor.
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d. All rights not specifically granted to Licensee under this agreement
are reserved by Licensor.
10. Licensee shall: (i) keep accurate books of account and records (including
but not limited to utilization of consecutively numbered invoices which
reconcile to each Statement and Licensee's general ledger) covering all
transactions relating to or arising out of this agreement (which books and
records shall be maintained separately from Licensee's documentation
relating to other items manufactured or sold by Licensee) and (ii) permit
Licensor or its nominees, employees, agents or representatives to have full
access to, to inspect such books and records at all reasonable hours of the
day, to conduct an examination of and to copy (at Licensor's 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 this agreement or, in the event of a dispute
between the parties hereto, until such dispute is resolved, whichever date
is later. Receipt or acceptance by Licensor of any Statement furnished
pursuant hereto or any sums paid by Licensee hereunder shall not preclude
Licensor from questioning the correctness thereof at any time, and if one
or more inconsistencies or mistakes are discovered by Licensor in such
Statement, it or they shall be rectified in an amended Statement received
by Licensor no later than ten (10) days after the date of receipt by
Licensee of notice of that which should be rectified.
11. If any inspection or examination referred to in Paragraph 10. hereof
discloses, or Licensor or Licensee otherwise discovers, an underpayment of
Earned Royalties, the amount of such underpayment shall be paid by Licensee
to Licensor no later than thirty (30) days after receipt of notice or
knowledge thereof by Licensee. In the event of such an underpayment by
Licensee in excess of nine percent (9%), then Licensor may elect to treat
such occurrence as an incurable default by Licensee under this agreement.
If such inspection or examination: (i) discloses or Licensor or Licensee
otherwise discovers an overpayment of Earned Royalties the amount of such
overpayment shall be credited against future payment of any Earned
Royalties or, in the event of the expiration or termination of this
agreement and there is or are no such future payments, such amount shall be
paid by Licensor to Licensee not later than thirty (30) days after the
discovery thereof by Licensor, subject to Licensor's rights of setoff,
recoupment and counterclaim or (ii) reveals that for the period covered by
such inspection or examination there is an error of five percent (5%) or
more in the Earned Royalties previously reported on the Statement(s) as
being due from Licensee, all expenses involved in the conducting of such
inspection or examination shall be borne by Licensee. Licensee shall pay to
Licensor the amount of such expenses no later than ten (10) days after
Licensee's receipt of Licensor's invoice therefor. If such error is less
than five percent (5%), such expenses shall be borne by Licensor.
12. Upon the expiration or termination of this agreement, and provided Licensee
is in full compliance with the terms and conditions of this letter
agreement, and provided Licensee is not in arrears in the payment of any
Earned Royalties, Licensee may, for a period of five (5) months after the
effective date of expiration or termination (the "Sell-Off Period"),
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dispose of, through Licensee's existing, recognized network of
distribution, any remaining inventory of the Products that have been
approved by Licensor and that are in process or on hand at the effective
date of such expiration or termination. Any new promotional, marketing or
other materials used during the Sell-Off Period are subject to the
approvals and conditions set forth in Paragraph 9. above. It is expressly
understood and agreed by Licensee that the Sell-Off Period shall be
considered a separate accounting period for the purpose of computing Earned
Royalties due to Licensor for sales during such period. Such sales during
the Sell-Off Period shall not be applied against any Earned Royalties due
or payable prior to the Sell-Off Period.
13. Licensor shall have the option, in regard to any Products which remain
unsold after the Sell-Off Period has ended, to require Licensee to, at
Licensee's cost, either: (i) sell such remaining inventory to Licensor at
cost; (ii) destroy such remaining inventory, in which case a certificate of
destruction will be provided to Licensor signed by an authorized
representative of Licensee; or (iii) remove from such inventory and
destroy, at Licensee's sole cost all Trademarks and Images and provide
Licensor with evidence of such removal and destruction.
14. Licensee will obtain and maintain, at Licensee's own expense, product
liability insurance satisfactory to Licensor in the minimum amount of
Twenty Million United States Dollars (U.S.$20,000,000) of primary and
umbrella coverage from one or more insurance companies, each with a Best's
rating of "A" (or better), and qualified to transact business in the
Territory (each such insurance policy shall name each of the Indemnitees as
additional insureds by reason of the indemnity contained in Paragraph 15.a.
hereof and shall evidence the insurer's agreement that such insurance shall
not be amended, canceled, terminated or permitted to lapse without thirty
(30) days' prior written notice to Licensor), and provide Licensor with a
certificate of such insurance upon execution of this agreement by Licensee
and on each anniversary date of the grant or issuance of each such policy
during the terms of this agreement and the Sell-Off Period evidencing that
each such policy has not been altered with respect to the Indemnitees in
any way whatsoever nor permitted to lapse for any reason, and evidencing
the payment of premium of each such policy. Licensee will cause each such
policy to be in full force and effect prior to the commencement of any
design, manufacture, advertising, promotion, sale, distribution or dealing
with any or all of the Products whatsoever and will cause each such policy
to remain in effect for 10 years after the -- expiration or termination of
this agreement. Failure by Licensee to obtain the required insurance prior
to such commencement or failure by Licensee to adequately maintain such
insurance during .the term of this agreement and the Sell-Off Period shall
be an incurable default by Licensee under this agreement.
15. a. Except as provided in Paragraph 15.b. below, Licensee will indemnify,
defend and hold Licensor, its parent, subsidiaries and affiliates, and
its and their respective officers, directors, employees and
shareholders harmless from any claims, suits, losses, injuries or
damages (including without limitation attorneys' fees and litigation
expenses) arising out of
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or in connection with: (a) the design, manufacture, advertising,
promotion, sale or distribution of or any other dealing whatsoever
with the Products or Materials; (b) any alleged action or failure to
act whatsoever by Licensee; (c) any alleged defect in any or all of
the Products; (d) any alleged non-conformity to or non-compliance with
any law pertaining to the design, quality, safety, advertising,
promotion or marketing of any or all of the Products or advertising
material; or (e) any breach by Licensee of any of its obligations
hereunder.
b. Licensor will indemnify, defend and hold Licensee harmless against any
claims or suits arising solely and directly out of the authorized use
by Licensee of the Trademarks, Images or material received from
Licensor as set forth under this agreement provided prompt notice is
given to Licensor of any such claim or suit, but in no event shall
such indemnification include consequential or incidental damages.
Licensor shall have the option to settle or to undertake and conduct
the defense of any suit so brought. Licensee expressly represents and
agrees that no compromise or settlement of any claim or suit or any
preliminary negotiations with respect to any such compromise or
settlement, shall be made or entered into by Licensee except with and
under the special written consent and instructions of Licensor.
Licensee will cooperate fully with Licensor in defending any such
action.
16. a. Except as otherwise provided in this agreement, if Licensee shall
violate any of the terms or conditions hereof or default on any of its
duties, obligations or warranties hereunder, Licensor shall have the
right and option, but not the duty, to terminate the License and this
agreement upon not less than ten (10) days' prior written notice, but
no neglect or failure to serve such notice shall be deemed to be a
waiver of any such violation or default. Such termination shall become
effective unless such violation or default described in such notice
shall be completely remedied to the satisfaction of Licensor within
such ten (10) day period.
b. Notwithstanding the provisions of Paragraph 16.a. hereof, if such
violation or default: (a) is of a kind that a remedy or cure cannot
effectively restore the prior circumstances; or (b) is described in
this agreement as an incurable default, then the License and this
agreement shall terminate upon receipt by Licensee of written notice
thereof without any period of remedy or cure whatsoever. The
termination of the License and this agreement shall be without
prejudice to any rights that Licensor otherwise has against Licensee
under this agreement or under law.
17. The expiration or termination of this agreement shall not relieve Licensee
of any obligations incurred prior 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.
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18. Not more than ninety (90), but not less than thirty (30) days prior to the
expiration of this agreement, or within ten (10) days after (i) receipt of
notice of termination or (ii) the happening of any event that terminates
this agreement where no such notice may be required, Licensee shall furnish
to Licensor a complete and accurate statement showing the number and
description of all Products 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. Licensor retains all
other legal and equitable rights it may have in the circumstances, which
rights are hereby reserved.
19. 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 agree to make or makes an assignment for the
benefit of creditors or an arrangement pursuant to any bankruptcy law, or
if Licensee discontinues business, or it a receiver is appointed for
Licensee, this agreement will automatically terminate without the necessity
of any notice whatsoever. If this agreement is so terminated, Licensee or
its receivers, representatives, agents or the like shall have no right to
sell, exploit or enter into any deal with respect to the Products except
with and under the special written consent and instruction of Licensor.
20. If any term or provision of this agreement or its application to any
circumstances shall be 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.
21. Nothing herein contained shall be construed to place the parties in the
relationship as partners or joint venturers and Licensee will have no power
to obligate or bind Licensor in any manner whatsoever.
22. 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 assigned by the parties and there are no
representations, promises, warranties, covenants or undertakings other than
those contained in this agreement. No custom or practice of the parties at
variance with the terms hereof shall constitute a waiver of Licensor's
right to demand exact compliance with any of the terms or the delay by
either party in enforcing, any of its rights under this agreement shall not
be deemed as constituting a waiver or a modification thereof and either
party may, within the time provided by applicable law, commence appropriate
proceedings to enforce any or all such rights. No person firm, group or
corporation other than Licensee, Licensor, their subsidiaries and
affiliates shall be deemed to have acquired any rights by reason of
anything contained in this agreement.
23. Licensor, in entering into this agreement, is relying upon the skills,
reputation and personnel of Licensee. This agreement and all rights, and
duties under this agreement are personal to Licensee and shall not, without
the prior written consent of Licensor, be assigned, mortgaged or otherwise
encumbered by Licensee.
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24. Licensor may assign this agreement to any of its subsidiaries or affiliates
or to any entity that succeeds to the interest of Licensor in the
Trademarks or Images 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.
25. a. 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.
b. Unless otherwise expressly indicated in this agreement, each notice,
request, approval, consent, payment and Statement (hereinafter
referred to as a "Submission") specifically provided for in this
agreement shall be in writing and shall be considered effective or
received the earliest of: (i) five (5) days after the date when such
Submission is mailed by certified or registered mail with postage
prepaid to the party hereto at the address set forth below; (ii) two
(2) business days after the date when such Submission is sent by
overnight courier service addressed to such party at such address or
the date indicated as received on the overnight courier service
confirmation receipt, whichever is earlier; (iii), except for
payments, when such Submission is sent by facsimile addressed to such
party at such address and the sender thereof requests and receives
written confirmation from such party that such Submission has been
received and is legible; or (iv) when such Submission is actually
received by such party at such address:
Licensor at: 000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx Xxxxx
With a copy to: 000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
Licensee at: 0000 Xxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Xx. Xxxxxxx Xxxxx, President
or Xx. Xxxxx Xxxxx, Chairman
26. This agreement shall be governed by and interpreted under the laws of the
State of Illinois without regard to its conflicts of laws provisions.
Licensee hereby submits to personal jurisdiction in Cook County, Illinois.
The parties hereto agree that any and all disputes arising out of or
relating in any way to this agreement shall be litigated only in courts
sitting in Cook County, Illinois.
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If the above is acceptable to you, please sign, date and return the
enclosed copy of this letter.
ACCEPTED AND AGREED TO: Very truly yours,
TITAN MOTORCYCLE COMPANY OF AMERICA PLAYBOY ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxxx By: /s/ [illegible]
------------------------------- -------------------------------
Title: CEO Title: V.P.
---------------------------- ----------------------------
Date: 6/18/97 Date: 6/17/98
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