Exhibit 99.2
LICENSE AGREEMENT
BETWEEN
EVERLAST WORLDWIDE INC.
AND
XXXXXXX XXXXX, INC.
(WOMEN'S APPAREL IN THE U.S.)
LACKENBACH XXXXXX
Xxx Xxxxx Xxxx
Xxxxxxxxx, XX 00000
(000) 000-0000
TABLE OF CONTENTS
1.0 DEFINITIONS . . . . . . . . . . . . . . . . . . .1
2.0 GRANT OF RIGHTS . . . . . . . . . . . . . . . . . . .5
3.0 TERM AND RENEWAL . . . . . . . . . . . . . . . . . . .7
4.0 ROYALTIES . . . . . . . . . . . . . . . . . . 12
5.0 REPORTS AND PAYMENTS . . . . . . . . . . . . . . . . . . 15
6.0 CHAIN OF DISTRIBUTION . . . . . . . . . . . . . . . . . .16
7.0 QUALITY CONTROL . . . . . . . . . . . . . . . . . . 19
8.0 PROPER USE OF TRADEMARKS . . . . . . . . . . . . . . . . . . 23
9.0 SALES PROMOTION AND ADVERTISING . . . . . . . . . . . . . . . . . . 25
10.0 ACCESS TO BOOKS AND RECORDS . . . . . . . . . . . . . . . . . . 27
11.0 PROTECTION OF TRADEMARKS AND INDEMNIFICATIONS . . . . . . . . . . . . . 28
12.0 RIGHT TO PURCHASE . . . . . . . . . . . . . . . . . . 30
13.0 COPYRIGHT AND TRADEMARK RIGHTS . . . . . . . . . . . . . . . . . . 31
14.0 GOODWILL . . . . . . . . . . . . . . . . . . 32
15.0 EXPIRATION, DEFAULT AND TERMINATION . . . . . . . . . . . . . . . . . . 32
16.0 POST-TERMINATION INVENTORY AND FINAL REPORTS . . . . . . . . . . . . . .35
17.0 MISCELLANEOUS EXPENSES . . . . . . . . . . . . . . . . . . 37
18.0 RESERVATION OF RIGHTS . . . . . . . . . . . . . . . . . . 37
19.0 NOTICES . . . . . . . . . . . . . . . . . . 37
20.0 INJUNCTIVE RELIEF . . . . . . . . . . . . . . . . . . 38
21.0 ENFORCEMENT AND ARBITRATION . . . . . . . . . . . . . . . . . . 38
22.0 TRANSITIONAL EXPENSES . . . . . . . . . . . . . . . . . . 39
23.0 NO PARTNERSHIP . . . . . . . . . . . . . . . . . . 41
24.0 NON-ASSIGNABILITY . . . . . . . . . . . . . . . . . . 41
25.0 APPLICABLE LAW . . . . . . . . . . . . . . . . . . 42
26.0 INTEGRATION . . . . . . . . . . . . . . . . . . 42
27.0 MODIFICATION . . . . . . . . . . . . . . . . . . 42
28.0 CONFIDENTIALITY . . . . . . . . . . . . . . . . . . 42
29.0 ENFORCEMENT . . . . . . . . . . . . . . . . . . 43
30.0 FORCE MAJEURE . . . . . . . . . . . . . . . . . . 43
i
LICENSE AGREEMENT
This Agreement is made and entered as of the 1st day of January, 2005
("Effective Date"), by and between EVERLAST WORLDWIDE INC., a corporation
organized and existing under the laws of the State of Delaware, having its
principal place of business at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter "Everlast");
AND
XXXXXXX XXXXX, INC., a corporation organized and existing under the laws of the
State of New York, having its principal place of business at 0000 Xxxxxxxx, 0xx
Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 (hereinafter "Licensee").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, Everlast has the exclusive right to license trademarks owned by
Everlast World's Boxing Headquarters Corp, and has the right to license the
trademarks listed in Exhibit A hereto (hereinafter referred to as "Licensed
Marks"); and
WHEREAS, Licensee wishes to obtain this license upon the terms and
conditions set forth below;
NOW THEREFORE, in consideration of the promises and covenants set forth
below, the adequacy of which is hereby acknowledged, the parties agree as
follows:
1.0 DEFINITIONS
1.1 "Licensed Products" means all women's apparel, including activewear,
sportswear, underwear, and sleepwear, but specifically excludes: women's
1
outerwear jackets and overcoats; swimwear; women's woven windwear sets; socks,
hosiery, tights, and leg warmers; girls' apparel; and any and all apparel
products to be used for professional and amateur boxing purposes ("amateur"
herein meaning Olympics and/or Gold Gloves). Everlast shall only be permitted to
sell women's apparel products to be used for professional and amateur boxing
purposes by and through Everlast's catalogs, directly over the Internet, and/or
directly to consumers at boxing venues. Licensee acknowledges that Everlast is
currently party to one or more third-party licenses in the Contract Territory
(defined herein below) that are valid and in effect as of the Effective Date
("Third-Party Licenses") for the following goods: swimwear; women's outerwear
jackets and overcoats; women's windwear sets; girls' apparel; and leg warmers
("Third Party License Goods"). In the event that any Third-Party License
expires, or is terminated during the Term (defined herein below) of this
Agreement, Everlast shall provide Licensee written notice of such termination or
expiration at least 30 days prior thereto, and upon receipt of such notice
Licensee shall have a right of first refusal for a period of 30 calendar days to
enter into a license ("New License") with Everlast for the Third Party License
Goods covered by such terminated or expired Third Party License. Such New
License shall be at the same royalty rate as the terminated or expired Third
Party License, shall provide for an initial term and renewal periods which are
consistent with the Term of this Agreement, shall conform substantially and
materially to the business terms expressed in the terminated or expired Third
Party License, shall require that Licensee pay guaranteed minimum royalties
annually in an amount equal to the amount of guaranteed minimum royalties
actually paid by the former Third Party License licensee in the final 12
calendar months of such Third Party License and shall otherwise substantially
conform to the terms of this Agreement. In the event Licensee declines to
exercise such right of first refusal within 30 days of receiving notice from
Everlast, and Everlast subsequently obtains an offer from a third party to
license any Third Party License Goods previously licensed in the Contract
Territory under such Third Party License upon terms acceptable to Everlast
("Third Party Terms"), Everlast shall notify Licensee of such third party offer,
which notice shall include a disclosure and representation as the accuracy of
all relevant Third Party Terms, and Licensee shall thereafter have a right of
first refusal for a period of 30 calendar days to license such Third Party
License Goods from Everlast pursuant to the Third Party Terms, for an initial
2
term and renewal periods which are consistent with the Term of this Agreement.
Such license shall otherwise substantially conform to the terms of this
Agreement. Such right of first refusal shall apply to any subsequent offers made
by such third party on different Third Party Terms, as well as to subsequent
offers made by additional third parties. Licensee acknowledges and agrees that
the Third Party Licenses contain provisions for automatic renewal, and that
Everlast shall at no time be obligated to rescind any such renewal rights;
provided, however, that Everlast shall not be permitted to increase the maximum
possible term (including all possible renewals) of any such Third Party License
calculated as of the Effective Date. Everlast otherwise makes no representation
or covenant whatsoever herein that any Third Party License Goods will become
available and subject to the right of first refusal granted herein.
1.2 "Licensed Marks" shall as of the Effective Date mean and include only
those marks set forth on Exhibit A hereto, but thereafter shall also mean, at
Licensee's discretion, any trademarks adopted by, or on behalf of, and owned by,
Everlast Worldwide, Inc., Everlast World's Boxing Headquarters Corporation, or
any subsidiary thereof ("New Xxxx"). Licensee acknowledges and agrees that the
indemnity provided by Everlast to Licensee in paragraph 11.1 shall not apply to
any New Xxxx until, and will apply when, but only if such New Xxxx is registered
for the Licensed Products in the Contract Territory, and Licensee further agrees
that Licensee shall indemnify Everlast and hold Everlast harmless from all
claims or suits arising out of Licensee's use of any New Xxxx xxxxx to its
registration in accordance with this paragraph. Everlast shall provide Licensee
with written notice of the registration of any such New Xxxx promptly upon the
issuance of such registration. Licensee acknowledges that the "Inverted
Hourglass Shape" xxxx set forth on Exhibit A, which is currently the subject of
U.S. Trademark Application Serial No. 78445260, has not been registered for the
Licensed Products in the Contract Territory (defined below), and Licensee
acknowledges and agrees that the indemnity provided by Everlast to Licensee in
paragraph 11.1 shall not apply to Licensee's use of such Inverted Hourglass
Shape as a Licensed Xxxx under this Agreement and license until, and will apply
when, but only if U.S. Trademark Application Serial No. 78445260 matures into a
registration or the Inverted Hourglass Shape xxxx is otherwise registered for
3
the Licensed Products in the Contract Territory. Everlast shall provide Licensee
with written notice of the registration of the Inverted Hourglass Shape xxxx
promptly upon the issuance of such registration.
1.3 Licensee shall be permitted, with the prior written consent of
Everlast which shall not be unreasonably withheld, to use the Licensed Marks
together, or in conjunction with, one or more additional words, designations or
marks, including without limitation the designation "by Everlast" in connection
with additional words or marks ("Co-brand License Marks"); provided, however,
that Licensee shall indemnify Everlast and hold Everlast harmless from any and
all claims, actions and suits arising from, or related to Licensee's use of any
Co-brand Licensed Xxxx, including any and all claims of trademark infringement,
service xxxx infringement and/or unfair competition.
1.4 "Contract Territory" means the United States, its territories and
possessions, and any and all U.S. military installations and bases worldwide. In
the event Everlast obtains an offer during the First Option Period or Second
Option Period (defined herein below) from any third-party to license any
Licensed Products in the territory of Canada upon terms acceptable to Everlast
("Third Party Canada Terms"), Everlast shall notify Licensee of such third-party
offer, which notice shall include a disclosure and representation as the
accuracy of all relevant Third Party Canada Terms, and Licensee shall thereafter
have a right of first refusal for a period of 30 calendar days to license such
Licensed Products from Everlast pursuant to the Third Party Canada Terms, for an
initial term and renewal periods which are consistent with the Term of this
Agreement. Such license shall otherwise substantially conform to the terms of
this Agreement. Such right of first refusal shall apply to any subsequent offers
made by such third party on different Third Party Canada Terms, as well as to
subsequent offers made by additional third parties.
1.5 "Net Sales" shall mean Licensee's gross dollar sales volume resulting
from bona fide, arms length transactions at invoice price, less deductions for
4
trade discounts, shipping charges, returns and allowances, and sales taxes (or
any use, value-added or similar taxes) included therein, whether or not
separately stated on the invoice. Such deductions shall not collectively exceed
fifteen percent (15%) of gross Net Sales during any single Contract Year. Such
Net Sales shall be determined without deducting any income taxes, franchise
taxes, uncollectible accounts, anticipation or financial discounts. No costs
incurred in the manufacture, sale, distribution, advertisement or exploitation
of Licensed Products shall be deducted from gross sales. A sale shall be deemed
to occur when product is shipped or invoiced by Licensee. Included in Net Sales
shall be all transactions of Licensed Products distributed by Licensee or any of
its affiliated, associated or subsidiary companies, even if such transactions
are not invoiced. Such non-invoiced transactions shall be included in Net Sales
at the usual selling prices of such Licensed Products.
2.0 GRANT OF RIGHTS
2.1 Everlast hereby grants to Licensee, and Licensee hereby accepts, an
exclusive license and right to use the Licensed Marks in connection with the
manufacture, importation, advertisement, distribution and sale of the Licensed
Products (constructed, packaged or marketed per the requirements below) during
the Term (defined herein below) hereof and only in the Contract Territory.
Licensee has no right to use the Licensed Marks, or any portions thereof, as
part of a trade name, and shall not use any Licensed Xxxx as a trademark in such
a manner as to create the impression that Licensee owns such Licensed Xxxx.
Licensee shall neither affix to, nor use in connection with Licensed Products
any trademark other than the Licensed Marks. Notwithstanding any of the above,
Licensee shall be permitted to manufacture, or have manufactured Licensed
Products anywhere in the world, subject to all applicable U.S. or other laws,
treaties and/or regulations, for sale under this Agreement within the Contract
Territory.
2.2 Everlast represents that it has the sole and exclusive right to grant
the within rights and license. Everlast further represents that the rights and
license granted herein do not conflict with or violate the rights or license
granted by Everlast to any other person or entity.
5
2.3 The parties recognize their common interest in protecting and policing
the Licensed Marks, both within the Contract Territory and outside the Contract
Territory, and recognize that the avoidance of confusion as to the source of
goods bearing the Licensed Marks is an important ingredient of such policing.
Therefore, as permitted by law, Licensee shall use all reasonable efforts during
the term hereof to assure that Licensed Products manufactured by Licensee shall
not be introduced outside of the Contract Territory. Licensee shall not export
Licensed Products from the Contract Territory or sell Licensed Products to any
distributor whom it knows intends to export Licensed Products from the Contract
Territory. In addition, if Licensee learns that any of its customers or any
sub-contractor has exported Licensed Products from the Contract Territory, it
shall cease selling Licensed Products to such customer, or buying from such
sub-contractor, unless such customer/sub-contractor agrees in a writing
sufficient to Everlast not to export Licensed Products thereafter. Nothing
herein shall be deemed to preclude Licensee from having Licensed Products
manufactured for Licensee by subsidiaries, affiliates or sub-contractors located
outside of the Contract Territory for distribution solely within the Contract
Territory.
2.4 Subject to the dispute resolution mechanisms set forth in paragraph
21.0, herein below, in the event of a dispute between Licensee and Everlast,
between Licensee and other Everlast licensee, or between Licensee and any other
persons, as to what classifications of goods are covered by the descriptions of
Licensed Products listed in this Agreement, or as to the similarity of any goods
to Licensed Products, the decision of Everlast shall be final.
2.5 From and after the termination of this Agreement, except as otherwise
expressly provided herein or agreed between the parties hereto, all of the
rights of Licensee to the use of the Licensed Marks shall cease absolutely and
Licensee shall not thereafter advertise, promote, distribute or sell any item
whatsoever bearing any Licensed Xxxx. As used in this Agreement, "termination"
shall include "expiration" of the Agreement. Before termination, licenses for
the Licensed Marks may be granted by Everlast to others in connection with the
advertisement, promotion and sale of Licensed Products in the Contract
6
Territory, provided shipment of such Licensed Products is made after the
termination of this Agreement.
3.0 TERM AND RENEWAL; LICENSEE'S OPTION TO CONVERT LICENSE
3.1 The initial "Term" of this Agreement shall commence on the Effective
Date and end December 31, 2009, unless renewed pursuant to Paragraph 3.2 hereof.
The term "Contract Year" shall refer initially to the period commencing on the
Effective Date and continuing through December 31, 2005, and thereafter to each
calendar twelve (12) month period commencing on each January 1st during the Term
of this Agreement, whether the same shall occur during the initial Term or
during any Option Period as defined in Paragraph 3.2 below. The term "Contract
Year Quarter" shall refer initially to the period commencing on the Effective
Date and continuing through March 31, 2005, and thereafter to each successive
calendar three (3) month period during each Contract Year, commencing April 1,
2005 and thereafter.
3.2 Licensee may renew this Agreement for 2 additional ("First" and
"Second," respectively) terms of five (5) years each, one commencing January 1,
2010 and ending December 31, 2014 ("First Option Period"), and a second
commencing January 1, 2015 and ending December 31, 2019 ("Second Option
Period"), upon Licensee giving to Everlast written notice as provided in Article
19 hereof of its intention to renew no later than December 31, 2008 for the
First Option Period, and no later than December 31, 2013 for the Second Option
Period. For the First Option Period, Licensee shall be entitled to renew
provided Licensee has paid Everlast a minimum of US$10,000,000 in cumulative
Earned Royalties and Guaranteed Minimum Royalties (defined herein as "cumulative
royalties") for the period January 1, 2005 through December 31, 2008. If at the
time Licensee provides its notice of renewal for the First Option Period to
Everlast Licensee's cumulative royalties paid to Everlast are then below
US$10,000,000, and upon payment to Everlast of Licensee's remaining cumulative
royalties for the period January 1, 2005 through December 31, 2008 such
cumulative royalties remain below US$10,000,000, then Licensee's notice of
renewal shall be void and of no effect, and this Agreement and License shall
7
expire and terminate in accordance with its terms as set forth herein as of end
of the initial Term hereof. For the Second Option Period, Licensee shall be
entitled to renew provided Licensee has paid Everlast a minimum of US$10,800,000
in cumulative royalties during the period January 1, 2010 through December 31,
2013. If at the time Licensee provides its notice of renewal for the Second
Option Period to Everlast Licensee's cumulative royalties paid to Everlast for
the period January 1, 2010 through December 31, 2013 are then below
US$10,800,000, and upon payment to Everlast of Licensee's remaining cumulative
royalties for the period January 1, 2010 through December 31, 2013 such
cumulative royalties remain below US$10,800,000, then Licensee's renewal shall
be void and of no effect, and this Agreement and License shall expire and
terminate in accordance with its terms as set forth herein as of end of the
initial Term hereof.
(a) In the event Licensee exercises its option to renew for the First
Option Period, it shall, as of December 31, 2009, have the additional option to
convert this Agreement and license to a fully-paid exclusive license in and to
the Licensed Marks in connection with the Licensed Products in the Contract
Territory, plus the territory of Canada, for a term of 99 years, with automatic
one-year renewals in perpetuity thereafter at Licensee's option ("First Option
New License"), for the price of US$26,000,000 ("First New License Fee").
Licensee shall execute and provide Everlast a promissory note in the amount of
the First New License Fee to secure payment of the First New License Fee (the
"Promissory Note"), which shall obligate and bind Licensee to pay to Everlast
the First New License Fee in 20 equal, quarterly installments commencing January
1, 2010, with interest accruing on unpaid principal at the prime lending rate.
In the event that prior to the earlier of (i) Licensee's payment of the full
First New License Fee to Everlast, or (ii) December 31, 2014, the First Option
New License is terminated by Everlast or Everlast declares bankruptcy or is
adjudicated bankrupt, all further obligations under the Promissory Note shall
cease and be of no further effect. Licensee shall be permitted, at any time
during the term of the First Option New License, to pay the remainder of the
First New License Fee, together with all accrued interest thereon, without any
pre-payment penalty. Such First Option New License shall, if applicable, (i) be
royalty-free (apart from the installments due on the First New License Fee due
Everlast under the Promissory Note), guaranteed minimum royalty-free, and
8
contain no advertising requirements or sales reporting requirements; (ii)
provide for quality control by Everlast solely to such minimum extent as shall
be necessary so that (a) Everlast's consent with respect to any submission by
Licensee of any proposed use of the Licensed Marks shall be based solely on
whether or not Licensee's proposed use is consistent with previously approved
versions of the Licensed Marks, (b) Everlast's consent with respect to any
submission by Licensee of any proposed Licensed Products shall be based solely
upon its material conformity in quality to any product of like type and style
previously approved by Everlast, and (c) any disapproval in either case shall be
subject to established dispute-resolution procedures; (iii) provide that the
Agreement may be terminated by Everlast solely (a) upon Licensee's filing for
bankruptcy protection under Chapter 7 (liquidation) of the U.S. Bankruptcy Code,
(b) upon Licensee becoming subject to involuntary bankruptcy and liquidation,
(c) upon Licensee being adjudicated bankrupt and liquidated, (d) upon Licensee's
failure to timely pay any installment of the First New License Fee, after
expiration of the applicable cure period, or (e) upon any two material breaches
by Licensee of the First Option New License litigated against Licensee
successfully (either by verdict and reduction to judgment against Licensee or by
settlement or consent judgment entered by the court) by Everlast; provided,
however, that in the event the second material breach by Licensee giving rise to
Everlast's termination right hereunder shall be unintentional, Everlast's right
to terminate shall be subject to its obligation to compensate Licensee for such
termination in an amount equal to the then-current value of the First Option New
License, as then determined and agreed in good faith by and between the parties;
(iv) shall provide that Everlast shall not be entitled to any payments, other
than the First New License Fee and any applicable indemnities owing under the
terms of the First Option New License, for any reason whatsoever; (v) shall
eliminate any restrictions on channels of distribution and eliminate all
performance requirements pertaining to sales, marketing, and/or advertising of
Licensee as may be currently set forth in the Agreement, and (vi) shall be
freely assignable in whole or in part by Licensee without limitations, provided
assignee expressly ratifies and agrees in the assignment instrument(s) to all
covenants and obligations of Licensee set forth in the First Option New License.
The parties agree to negotiate and execute such additional and/or ancillary
9
terms and conditions as may be necessary to memorialize such First Option New
License, and to cooperate in the drafting and execution of all necessary
documentation related to such First Option New License.
(b) In the event Licensee exercises its option to renew for the Second
Option Period, and has not exercised the option granted above in sub-paragraph
(a), it shall, as of December 31, 2014, have the additional option to convert
this Agreement and license to a fully-paid, exclusive license in and to the
Licensed Marks in connection with the Licensed Products in the Contract
Territory, plus the territory of Canada, for a term of 99 years, with automatic
one-year renewals in perpetuity thereafter at Licensee's option ("Second Option
New License"), for a price equal to the greater of (i) US$30,000,000, or (ii) an
amount equal to 50% of the sum of (a) US$30,000,000 and (b) the sum of all
royalties received by Everlast in the Contract Year ending December 31, 2014
from all sources other than Licensee for sales of goods that would be subject to
Licensee's right of first refusal option in paragraph 2.1, herein above, but
have been and/or are still subject to a Third Party License, and all royalties
paid by Licensee to Everlast pursuant to this Agreement in such Contract Year,
multiplied by five (x 5) ("Second New License Fee"). Licensee shall execute and
provide Everlast a promissory note in the amount of the Second New License Fee
to secure payment of the New License Fee (the "Promissory Note"), which shall
obligate and bind Licensee to pay to Everlast the First New License Fee in 20
equal, quarterly installments commencing January 1, 2015, with interest accruing
on unpaid principal at the prime lending rate. In the event that prior to the
earlier of (i) Licensee's payment of the full Second New License Fee to
Everlast, or (ii) December 31, 2019, the Second Option New License is terminated
by Everlast, or Everlast declares bankruptcy or is adjudicated bankrupt, all
further obligations under the Promissory Note shall cease and be of no further
effect. Licensee shall be permitted, at any time during the term of the Second
Option New License, to pay the remainder of the Second New License Fee, together
with all accrued interest thereon, without any pre-payment penalty. Such Second
Option New License shall, if applicable, (i) be royalty-free (apart from the
installments due on the Second New License Fee due Everlast under the Promissory
Note), guaranteed minimum royalty-free, and contain no advertising requirements
or sales reporting requirements; (ii) provide for quality control by Everlast
solely to such minimum extent as shall be necessary so that (a) Everlast's
10
consent with respect to any submission by Licensee of any proposed use of the
Licensed Marks shall be based solely on whether or not Licensee's proposed use
is consistent with previously approved versions of the Licensed Marks, (b)
Everlast's consent with respect to any submission by Licensee of any proposed
Licensed Products shall be based solely upon its material conformity in quality
to any product of like type and style previously approved by Everlast, and (c)
any disapproval in either case shall be subject to established
dispute-resolution procedures; (iii) provide that the Agreement may be
terminated by Everlast solely (a) upon Licensee's filing for bankruptcy
protection under Chapter 7 (liquidation) of the U.S. Bankruptcy Code, (b) upon
Licensee becoming subject to involuntary bankruptcy and liquidation, (c) upon
Licensee being adjudicated bankrupt and liquidated, (d) upon Licensee's failure
to timely pay any installment of the Second New License Fee, after expiration of
the applicable cure period, or (e) upon any two material breaches by Licensee of
the Second Option New License litigated against Licensee successfully (either by
verdict and reduction to judgment against Licensee or by settlement or consent
judgment entered by the court) by Everlast; provided, however, that in the event
the second material breach by Licensee giving rise to Everlast's termination
right hereunder shall be unintentional, Everlast's right to terminate shall be
subject to its obligation to compensate Licensee for such termination in an
amount equal to the then-current value of the Second Option New License, as then
determined and agreed in good faith by and between the parties; (iv) shall
provide that Everlast shall not be entitled to any payments, other than the
Second New License Fee and any applicable indemnities owing under the terms of
the Second Option New License, for any reason whatsoever; (v) shall eliminate
any restrictions on channels of distribution and eliminate all performance
requirements pertaining to sales, marketing, and/or advertising of Licensee as
may be currently set forth in the Agreement, and (vi) shall be freely assignable
in whole or in part by Licensee without limitations, provided assignee expressly
ratifies and agrees in the assignment instrument(s) to all covenants and
obligations of Licensee set forth in the Second Option New License. The parties
agree to negotiate and execute such additional and/or ancillary terms and
conditions as may be necessary to memorialize such Second Option New License,
and to cooperate in the drafting and execution of all necessary documentation
related to such Second Option New License.
11
(c) In the event Licensee exercises its option to convert this Agreement
to a First Option New License or Second Option New License pursuant to and in
accordance with subsections (a) or (b) herein above, Everlast shall as of the
effective date of such First or Second Option New License assign all of its
rights, title and interest in and to all royalties (earned royalties and
guaranteed minimum royalties) thereafter due and payable to Everlast under the
then-existing and valid and enforceable Third Party Licenses and Third Party
Sam's Club Licenses (defined herein below) to Licensee ("Third Party
Assignments"), including the right to enforce its right to such royalties via
demand, litigation, or otherwise. Everlast shall take such further action upon
making such assignment, including the preparation and delivery of any necessary
documentation, to facilitate the payment of all such royalties to Licensee upon
the consummation of such assignment. Upon the termination or expiration of any
Third Party License and/or Third Party Sam's Club License which was existing and
valid as of Licensee's exercise of its option to enter into a First Option New
License or Second Option New License, Everlast and Licensee shall promptly
thereafter amend the First Option New License or Second Option New License, as
applicable, to add the licensed products from the Third Party License into the
definition of Licensed Products hereunder, or add Sam's Club as a permitted
channel of distribution, as may be applicable.
4.0 ROYALTIES
4.1 Licensee shall pay Everlast a royalty on all Net Sales of Licensed
Products made by Licensee, its affiliated, associated or subsidiary companies at
the rate of five percent (5%) of such Net Sales ("Earned Royalty"); provided,
however, that Earned Royalties shall be calculated at 4% of Net Sales with
respect to any and all sales to MarMaxx within the Contract Territory. For
purposes of this Agreement, for Contract Years ending December 31, 2006,
December 31, 2007, December 31, 2008, and December 31, 2009, Earned Royalties
shall also include all "Earned Royalties" earned by Licensee during those years
pursuant to Licensee's license with Everlast dated as of July 1, 2004 for the
territory of Canada, as amended ("Canada Earned Royalties"). For Contract Years
12
ending December 31, 2006 and December 31, 2007, respectively, Canada Earned
Royalties shall be reported and/or paid hereunder solely to the extent that such
Canada Earned Royalties exceed guaranteed minimum royalties paid by Licensee for
such Contract Years, respectively, pursuant to and in accordance with Licensee's
license with Everlast dated as of July 1, 2004 for the territory of Canada, as
amended. For Contract Years one, two and three, ending December 31, 2005, 2006,
and 2007, respectively, Licensee shall pay Earned Royalties collectively, in one
payment, due no later than January 31, 2008, on all Net Sales earned during the
period January 1, 2005 through December 31, 2007 in excess of US$150,000,000.
Thereafter, subject to paragraph 4.3, herein below, Earned Royalties shall be
paid to Everlast quarterly (in accordance with the terms of Article 5, herein
below), in arrears for all Net Sales in each Contract Year Quarter and less
Guaranteed Minimum Royalties (defined herein below) paid during such Contract
Year Quarter, concurrently upon the submission of the Royalty and Net Sales
Report (defined herein below) specified in Article 5.
4.2 Licensee shall pay to Everlast Guaranteed Minimum Royalties for each
Contract Year as follows (in Option Period years* if renewed):
CONTRACT YEAR ENDING GUARANTEED MINIMUM ROYALTY INSTALLMENT
-------------------- -------------------------- -----------
December 30, 2005 US$2,500,000 (See below)
December 31, 2006 US$2,500,000 US$625,000
December 31, 2007 US$2,500,000 US$625,000
December 30, 2008 US$2,500,000 US$625,000
December 31, 2009 US$2,500,000 US$625,000
December 31, 2010* US$2,700,000 US$675,000
December 30, 2011* US$2,700,000 US$675,000
December 31, 2012* US$2,700,000 US$675,000
December 31, 2013* US$2,700,000 US$675,000
December 30, 2014* US$2,700,000 US$675,000
December 31, 2015* US$2,850,000 US$712,500
13
December 31, 2016* US$2,850,000 US$712,500
December 30, 2017* US$2,850,000 US$712,500
December 31, 2018* US$2,850,000 US$712,500
December 31, 2019* US$2,850,000 US$712,500
Licensee shall pay annual Guaranteed Minimum Royalties in equal quarterly
installments, as set forth in the chart above, on or before each of January 1st,
April 1st, July 1st, and October 1st during each Contract Year. For Contract
Year 1 only (ending December 31, 2005), Licensee shall pay Everlast US$2,000,000
on or before January 1, 2005, and US$500,000 on or before September 15, 2005.
4.3 During each individual Contract Year commencing after December 31,
2007, excess Earned Royalties paid quarterly over the quarterly Guaranteed
Minimum Royalty amount shall be carried forward to succeeding quarters (whether
in the same or succeeding Contract Years) as a credit against next due
Guaranteed Minimum Royalty payments. In the event Guaranteed Minimum Royalties
are not fully earned in the Contract Years ending December 31, 2008 and December
31, 2009, respectively, Earned Royalty overages paid for the period January 1,
2005 through December 31, 2007 on (or before) January 31, 2008 shall be credited
against such Guaranteed Minimum Royalty payments, beginning with the Contract
Year ending December 31, 2008. Excess Earned Royalties paid for the Contract
Years ending December 31, 2008 and December 31, 2009, shall also be credited
against any shortfall in Earned Royalties for the period January 1, 2005 through
December 31, 2007, such that in the event cumulative Guaranteed Minimum
Royalties for the initial Term are not fully earned by Licensee, Licensee shall
not be obligated to pay Everlast in excess of the cumulative Guaranteed Minimum
Royalty amount of US$12,500,000. In no event shall application of this paragraph
result in Licensee paying less than US$12,500,000 in total royalties for the
initial Term.
14
5.0 REPORTS AND PAYMENTS
5.1 Within 30 days of the end of each Contract Year Quarter during the
Term hereof, Licensee shall furnish to Everlast a complete and accurate royalty
statement ("Royalty and Net Sales Statement") for such Contract Year Quarter, in
U.S. dollars, per Exhibit B hereto. Each such Royalty and Net Sales Statement
submitted after January 1, 2008 shall be accompanied by payment in full, in U.S.
dollars, of an amount equal to the Earned Royalties for the Contract Year
Quarter ending as of the month immediately prior to such Royalty and Net Sales
Statement, less Guaranteed Minimum Royalties due and paid during such Contract
Year Quarter (subject to any applicable adjustments made pursuant to paragraph
4.3 herein above). Licensee shall also submit a Royalty and Net Sales Statement
in connection with its payment of Earned Royalties due for the period January 1,
2005 through December 31, 2007, on or before January 31, 2008. Upon Licensee's
request and in Everlast's reasonable discretion, errors made in any Royalty and
Net Sales Statements during any Contract Year (if reflected in Licensee's
payments) may be corrected with credits or debits to the Royalty and Net Sales
Statement submitted for the first Contract Year Quarter of the immediately
following Contract Year. Receipt or acceptance by Everlast of any Royalty and
Net Sales Statement furnished, or of any sums paid pursuant to this Agreement
shall not preclude Everlast from questioning the correctness thereof at any time
within three (3) years of the date such Royalty and Net Sales Statement is
received by Everlast. In the event that any inconsistencies or mistakes are
discovered in Royalty and Net Sales Statements or royalty or other payments,
they shall be rectified promptly and the appropriate payment made by Licensee.
5.2 Past due payments hereunder shall bear interest at the rate of one
(1%) percent per month commencing fifteen (15) days after the same shall fall
due. Such interest shall also be applied to any royalty payments understated by
Licensee in reports/statements to Everlast, and to underpayments discovered
following an inspection of books and records pursuant to Article 10, interest
being applied to all underpayments as of the date when any such payments should
have been made under this Agreement.
5.3 Any withholding tax levied by any governmental agency in connection
with the payment of Earned Royalties or annual Guaranteed Minimum Royalties to
15
be paid to Everlast under this Agreement shall be borne by Everlast, but only if
actually paid by Licensee to the appropriate taxing authority. Licensee shall
deduct any required withholding tax from the amount of such payments, and shall
send to Everlast without delay an appropriate certificate showing the payment of
such withholding tax. Failure to make such payment as due and to send such
certificate shall require immediate repayment to Everlast of any amounts so
deducted.
5.4 All payments by Licensee to Everlast under this Agreement shall be made
in United States dollars either by check payable to Everlast Worldwide, Inc., by
wire transfers to the order of Everlast at HSBC Bank, ABA No. 000000000, for the
account of Everlast Worldwide Inc., Account No. 007863721, or as otherwise
directed by Everlast in writing from time to time.
6.0 CHAIN OF DISTRIBUTION
6.1 Licensee may sell Licensed Products to retail stores, and to merchants
for resale and distribution directly to the public, except that Licensee shall
be prohibited from selling any Licensed Products, directly or indirectly, for
resale at any Xxxxx b or Sam's Club warehouse store. Licensee shall further be
prohibited from selling Licensed Products to Wal-Mart and Kmart without
Everlast's prior written approval which shall not be unreasonably withheld;
provided, however, that Licensee shall be permitted to sell Licensed Products
branded solely with, or sold solely in connection with any approved Co-brand
Licensed Xxxx to Wal-Mart and to Kmart. Licensee acknowledges and agrees that
this Agreement does not convey a license to use the Licensed Marks in connection
with retail sale services, and nothing in this Agreement shall be construed to
permit Licensee to sell Licensed Products directly to the consuming public. In
the event that Licensee sells or distributes a Licensed Product at a special
price directly or indirectly to itself, including, without limitation, any
subsidiary of Licensee, or to any other person, firm or corporation related in
any manner to Licensee or its officers, directors or major stockholders, except
a sale by a manufacturing affiliate to Licensee, Licensee shall pay Earned
16
Royalties with respect to such sales or distribution in accordance with Article
4 hereof, based upon the price generally charged the trade by Licensee.
6.2 Licensee acknowledges that Everlast is currently party to third-party
licenses in the Contract Territory that grant to third-party licensees exclusive
rights to distribute Licensed Products to Sam's Club stores ("Third Party Sam's
Club Licenses"). In the event that any Third Party Sam's Club License expires,
or is terminated during the Term of this Agreement, Everlast shall provide
Licensee written notice of such termination or expiration at least 30 days prior
thereto, and upon receipt of such notice Licensee shall have a right of first
refusal for a period of 30 calendar days to enter into a license ("New Sam's
Club License") with Everlast for the Licensed Products in the contract territory
and channels of trade permitted by such terminated or expired Third Party Sam's
Club License. Such New License shall be at the same royalty rate as the
terminated or expired Third Party Sam's Club License, shall provide for an
initial term and renewal periods which are consistent with the Term of this
Agreement, shall conform substantially and materially to the business terms
expressed in the terminated or expired Third Party Sam's Club License, shall
require that Licensee pay guaranteed minimum royalties annually in an amount
equal to the amount of guaranteed minimum royalties actually paid by the former
Third Party Sam's Club License licensee in the final 12 calendar months of such
Third Party Sam's Club License, and shall otherwise substantially conform to the
terms of this Agreement. In the event Licensee declines to exercise such right
of first refusal within 30 days of receiving notice from Everlast, and Everlast
subsequently obtains an offer from a third party for such license upon terms
acceptable to Everlast ("Third Party Sam's Club Terms"), Everlast shall notify
Licensee of such third-party offer, which notice shall include a disclosure and
representation as the accuracy of all relevant Third Party Sam's Club Terms, and
Licensee shall thereafter have a right of first refusal for a period of 30
calendar days to enter into such license with Everlast under the Third Party
Sam's Club Terms for an initial term and renewal periods which are consistent
with the Term of this Agreement. Such license shall otherwise substantially
conform to the terms of this Agreement. Such right of first refusal shall apply
to any subsequent offers made by such third party on different Third Party Sam's
Club Terms, as well as to subsequent offers made by additional third parties.
Licensee acknowledges and agrees that the Third Party Sam's Club Licenses
17
contain provisions for automatic renewal, and that Everlast shall not at any
time be obligated to rescind any such renewal rights. Everlast makes no
representation or covenant whatsoever herein that any Third Party Sam's Club
License will terminate or expire and become subject to the rights of first
refusal granted herein; provided, however, that Everlast shall not be permitted
to increase the maximum possible term (including all possible renewals) of any
such Third Party Sam's Club License calculated as of the Effective Date.
6.3 Licensee agrees that it will not, without the prior written consent of
Everlast, manufacture or sell products either directly or through third parties
during the Term (including any Option Periods) of this Agreement which
substantially duplicate the style and color of any Licensed Products
manufactured, promoted, advertised, sold or distributed hereunder ("Competing
Styles"), except that this paragraph shall not apply to any style of Licensed
Products known in the trade as "basic" or "generic" styles, to any Competing
Styles as of six calendar months after such Competing Style is first introduced
by Licensee at retail, or to Competing Styles in existence as of the Effective
Date. Licensee acknowledges that the duplication and distribution of such
similar product could severely damage the long-standing quality reputation of
Everlast by creating a likelihood of confusion in the marketplace.
6.4 Licensee shall not use, or knowingly permit the use of, the Licensed
Products as a premium, except with the prior written consent of Everlast,
including the specific negotiation of a higher royalty payment therefor. For
purposes of this Paragraph, the term "premium" shall include, but not be limited
to, free or self-liquidated items offered to the public in conjunction with the
sale or promotion of a product or service, including traffic building or
continuity visits by the consumer/customer, or any similar scheme or device, the
prime intent of which is to use the Licensed Products in such a way as to
promote, publicize and/or sell the products, services or business image of the
user of such item. Licensee shall exercise due care that its customers likewise
shall refrain from making such use of Licensed Products. Licensee hereby agrees
and acknowledges that Everlast reserves all rights to use the Licensed Products
in connection with any premium, giveaway or promotional arrangement; provided,
18
however, that Everlast shall not be permitted to use more than 50 units of
Licensed Products as premiums pursuant to any single give-away or other
promotion without Licensee's prior written consent.
6.5 Licensee may not sell seconds, irregulars or defectives bearing, or in
connection with the Licensed Marks in excess of five percent (5%) of Net Sales
in any Contract Year without Everlast's prior written approval, which approval
Everlast may grant or withhold in its sole discretion. Licensee shall cut the
Everlast label of, and xxxx accordingly all seconds, irregulars and/or
defectives offered for sale and/or sold pursuant to this Agreement. To the
extent a label of any second, irregular or defective cannot be cut, Licensee
shall clearly xxxx such second, irregular or defective as such.
6.6 Licensee may, with the prior written consent of Everlast, enter into
sublicense or agency agreements for the sale or distribution of the Licensed
Products. Everlast shall not unreasonably withhold its consent under this
paragraph. With respect to any material breach of this Agreement and/or Default
(defined herein below) occasioned by the acts or omissions of any permitted
sub-licensee of Licensee, Licensee shall be first required to make all diligent
attempts to effect a cure of such breach and/or Default. In the event Licensee
shall not be able to effect a cure pursuant to such diligent attempts, Licensee
shall be permitted to cure solely by terminating such sub-licensee and providing
Everlast with satisfactory proof of such termination. Such a termination and
proof thereof shall effect a cure of the breach and/or Default.
7.0 QUALITY CONTROL
7.1 The nature and quality of the Licensed Products bearing the Licensed
Marks shall at all times be subject to the control of Everlast, and the Licensed
Products shall always be of consistent and merchantable quality. Licensee
recognizes that Everlast has a reputation for high quality and that Licensee
must, therefore, maintain such high quality, commensurate with applicable
channels of distribution, with respect to all Licensed Products manufactured,
19
sold and distributed hereunder.
7.2 Licensee shall not sell, manufacture or distribute any Licensed
Products before first obtaining Everlast's prior written approval and consent
therefor, pursuant to and in accordance with this Article 7. Such approval shall
be made within 10 business days after submittal. Approvals will not be
unreasonably withheld. Prior to the shipment of any Licensed Product, Licensee
shall upon request submit to Everlast, at no cost to Everlast, one production
sample of the Licensed Products from each production run, unless otherwise
individually requested. If Everlast has not previously approved representative
samples of Licensed Products, then immediately following the execution of this
Agreement, or as soon as reasonably possible thereafter, Licensee shall submit,
for the inspection and approval of Everlast, samples, or comprehensive drawings
or prototypes or production models of each style representative of Licensed
Products covered by this Agreement to be manufactured by Licensee. In any event,
such drawings or samples shall be submitted for approval at least 10 business
days before any such Licensed Products are shipped or sold by the Licensee.
Thereafter, upon Everlast's reasonable request, but no more than once during any
six (6) months upon Everlast's reasonable request, and also two (2) weeks prior
to any change in the materials, method of manufacture or design of Licensed
Products, Licensee shall submit, for inspections and approval of Everlast,
samples representative of Licensed Products manufactured, shipped and sold by
Licensee. Additional samples shall also be submitted at Everlast's reasonable
request. Everlast shall determine whether such samples shall materially conform
to the quality control provisions set forth in this Agreement, and shall inform
the Licensee of its approval or of any deficiencies. Licensed Products may be
manufactured and sold only after Everlast shall have approved drawings or
samples representative of such Licensed Products in writing or shall have failed
to disapprove them within 10 business days after receipt. All 10 business day
periods specified in this Article shall run from the receipt by Everlast of the
material referred to.
7.3 Licensee shall comply with all applicable laws, rules, treaties and
regulations, including labor laws, rules, treaties and regulations, and laws,
20
rules, treaties and regulations pertaining to human rights and
non-discrimination, in connection with the manufacture, sale, advertising or use
of the Licensed Products. Licensee shall comply with the regulations, orders and
directives of all regulatory agencies having jurisdiction over the Licensed
Products. Everlast does not, and will not tolerate the use of child labor,
prison labor, or any other unfair labor practices as defined under the laws and
regulations of the United States or the Contract Territory, and any such
practices by Licensee, its agents, assigns, sub-licensees or contract
manufacturers in connection with the manufacture, sale or distribution of
Licensed Products, subject to paragraph 7.6, herein below, shall constitute a
material breach of this Agreement. Everlast does not, and will not tolerate
discrimination on the basis of race, religion, gender, age or sexual
orientation, and any such practices by Licensee, its agents, assigns,
sublicensees or contract manufacturers in connection with the manufacture, sale
or distribution of Licensed Products, subject to paragraph 7.6, herein below, in
connection with the manufacture, sale or distribution of Licensed Products shall
constitute a material breach of this Agreement. With respect to any material
breach by Licensee under this paragraph, Everlast shall not have the right to
terminate this Agreement in its discretion in the event Licensee has commenced
in good faith to cure such material breach within the 30-day cure period
provided herein below in Article 15, and as of the termination of such 30-day
period is using its best efforts to diligently prosecute such cure. So long as
Licensee continues thereafter to use its best efforts to effect a cure of the
material breach, Everlast's right to terminate hereunder shall be, and remain
suspended.
7.4 Duly authorized representatives of Everlast shall have the right, at
any and all reasonable times, to inspect all facilities or premises maintained
by Licensee, including, without limitation, the plants, factories or other
manufacturing or producing facilities of Licensee or third parties, at which the
Licensed Products intended to bear the Licensed Marks are being manufactured or
produced. Said representatives shall have the right to inspect and test any
Licensed Products and to take any other reasonable action which in the opinion
of Everlast is necessary or proper to assure Everlast that the nature and
quality of the Licensed Products are in accordance with the requirements of this
Agreement, and that Licensee is otherwise operating in compliance with
Everlast's policies and standards as set forth herein.
21
7.5 Licensee shall have the right to enter into contract manufacturing
and/or contract packing arrangements to have Licensed Products manufactured and
packaged anywhere in the world for Licensee's account only. All such
arrangements (i) shall be in writing, and (ii) shall ensure that the Licensed
Products will be manufactured and packaged in full accordance with the terms and
conditions hereof and in full accordance with Everlast's quality control
standards. In this regard Licensee shall provide to Everlast, prior to execution
of any such written arrangement, a formal statement of compliance with the
policies set forth in this Article 7 from any such contract manufacturer or
packer. Licensee shall remain primarily responsible to Everlast for the acts and
omissions of its contract manufacturers and contract packers and others with
whom Licensee is in contractual or other privity with respect to the Licensed
Products and the Licensed Marks, as if same had been committed or omitted by
Licensee.
7.6 Licensee shall, upon written demand by Everlast, terminate within 30
days any third party manufacturer, supplier, packer or other contractor whose
use of child labor, prison labor and/or any demonstrable pattern of corporal
punishment and/or physical abuse violates the policies of Everlast as set forth
herein, the laws, regulations, rules or governing principles of any applicable
United States governmental authority having jurisdiction in this regard, or any
law or regulation in effect in the Contract Territory during the Term of this
Agreement (including Option Periods) and thus causes a breach and/or Default
under this Agreement. Licensee shall provide Everlast with written proof of any
such termination as soon as commercially practicable thereafter. In the event
any third party manufacturer, supplier, packer or other contractor commits any
other unfair or discriminatory labor or other practice or human rights
violations that violate the policies of Everlast as set forth herein, the laws,
regulations, rules or governing principles of any applicable United States
governmental authority having jurisdiction in this regard, or any law or
regulation in effect in the Contract Territory during the Term of this Agreement
(including Option Periods) and thus causes a breach and/or Default under this
Agreement, Licensee shall make all diligent efforts to effect a cure of such
breach and/or Default. In the event Licensee shall not be able to effect a cure
pursuant to such diligent attempts, Licensee shall be permitted to cure solely
by terminating such third party manufacturer, supplier, packer or other
22
contractor and providing Everlast with satisfactory proof of such termination.
Such a termination and proof thereof shall effect a cure of the breach and/or
Default.
8.0 PROPER USE OF TRADEMARKS
8.1 Except as otherwise permitted by this Agreement, or otherwise to the
minimum extent required by law, no trademarks, service marks, trade names or
corporate names, other than those shown in Exhibit A or added subsequently
pursuant to paragraph 1.2, herein above, shall be used by Licensee on or
otherwise in connection with any Licensed Products. [add back in agreed]
8.2 Licensee may use its corporate name in connection with transactions
with its trade customers. The signature or designation of origin in Licensee's
consumer advertising, labeling and packaging, in respect of Licensed Products,
shall be "A Licensee of Everlast Worldwide Inc.," or equivalent, followed by the
address of Licensee. If applicable law shall require the identification of
Licensee on packaging or labeling, this identification shall be accomplished by
RN, or similar number, if permitted, and in any such event, such identification
shall have the minimum prominence permitted by such applicable law.
8.3 Unless otherwise agreed in writing by Everlast, Licensee's use of the
Licensed Marks, or any other Everlast trademark, shall conform to each of the
following standards:
(a) None of said trademarks may be used in the generic or descriptive
sense;
(b) Each of said trademarks shall always be clearly set off from
surrounding text by color, underlining, quotation marks, or by distinctive type
faces, in a manner satisfactory to Everlast; and
(c) The first time any of said trademarks are used in any item of
packaging or labeling, or in any advertisement, it must be followed, in the case
23
of registered trademarks, by the registration symbol, (R), and in the case of
all other trademarks by the symbol TM, or other appropriate symbol acceptable to
Everlast.
8.4 Every Licensed Product shall be neatly labeled with a Licensed Xxxx in
a manner approved by Everlast. Upon the termination of this Agreement, Licensee
will either promptly ship to Everlast or destroy all labels in Licensee'?s
possession or control bearing any of Everlast'?s trademarks or trade names. In
the event labels are destroyed, Licensee shall certify such destruction to
Everlast in writing.
8.5 Licensee acknowledges Everlast's exclusive right, title and interest
in and to the Licensed Marks, and to all other trademarks, trade dress and trade
names as the parties agree, in writing, from time to time, shall be used in
connection with Licensed Products ("Marks" herein). Licensee shall not, in any
way, during the term of this Agreement, or thereafter, directly or indirectly do
or cause to be done any act or thing contesting or in any way impairing any such
Marks. Licensee shall not, in any manner, represent that it has any ownership in
said Marks. Licensee acknowledges that its use of said Marks shall not create in
Licensee any right, title and interest in or to any of said Marks and that all
use of said Marks by Licensee shall inure to the benefit of Everlast. Licensee
covenants and agrees that it shall at no time adopt or use any word or corporate
name or xxxx which is similar to, or likely to cause confusion with any
trademark or trade name licensed hereunder or used by Licensee in connection
with Licensed Products and that, after the termination hereof, Licensee will not
use any of Everlast'?s trademarks, trade names or its corporate name in any
manner whatsoever.
8.6 Licensee shall, at the request and cost of Everlast, execute, deliver
or file any and all documents which Everlast deems necessary or appropriate to
make fully effective or to implement the provisions of this Article 8, or any
other provisions of this Agreement relating to the ownership, registration or
use of trademarks or trade names, or to otherwise conform the undertakings
contained or required herein.
24
8.7 Licensee agrees that, in addition to fulfilling all of its other
obligations hereunder, Licensee shall, at Everlast's commercially reasonable
request and expense, or as may be required by law or court order, do all other
acts and things necessary (subject to, and not otherwise inconsistent with
Article 11 of the Agreement) to protect and preserve the validity of Everlast's
trademarks and trade names.
9.0 SALES PROMOTION AND ADVERTISING
9.1 Licensee agrees that it will, during the Term and any Option Period:
(i) use commercially reasonable efforts to promote, develop, advertise,
manufacture, sell and ship the Licensed Products; (ii) diligently fill accepted
purchase orders for Licensed Products (Licensee not being required to fill such
orders received from customers lacking financial capacity therefor); and (iii)
procure and maintain facilities and trained personnel sufficient and adequate to
accomplish the foregoing. In fulfilling its obligations hereunder, Licensee
shall engage such sales representatives and other personnel and shall display
the Licensed Products at merchandise markets and trade shows (which can take
place at Licensee'?s showroom) as is commercially reasonable. Licensee shall
attend tradeshows in its reasonable commercial discretion.
9.2 Licensee will cause to appear on all packaging, labeling, advertising,
promotional and marketing materials and trade communications such legends,
markings and notices as Everlast may reasonably request before use, and Licensee
shall submit copies thereof to Everlast for its approval and to permit Everlast
to edit, alter or amend such material and the form and manner in which the
Licensed Marks are displayed. No packaging, labeling, advertising, or
promotional and marketing program or materials may be used in connection with
the sale, or offering for sale, of Licensed Products, nor may any other use be
made of Everlast's trademarks without the prior written approval of Everlast,
which may not be withheld unreasonably. Initial samples of advertising,
packaging, promotional and marketing materials and labeling, and/or any
revisions, changes, modifications or substitutions therefor, shall be submitted
sufficiently far in advance to permit Everlast to examine such material for ten
(10) days and permit Licensee to make such changes as Everlast shall deem
25
necessary. Such approval shall not unreasonably be denied and if Everlast has
not approved an item of packaging, labeling or advertising within ten (10) days
after receipt of its submission in writing, such item shall be deemed to have
been approved.
9.3 Licensee shall expend on advertising in each Contract Year, during the
initial Term and any Option Period hereof, an amount equal to not less than one
(1%) percent of Net Sales. Notwithstanding any exclusive rights granted by this
Agreement, Everlast shall also have the right to spend up to 1% of Licensee's
Net Sales, during each and any Contract Year, on advertising in respect of
Licensed Products in the Contract Territory. Licensee's advertising expenditures
may include, without limitation, cooperative (retail) advertising, trade show
expenses, catalog expenses, and the cost of hang tags, and point of purchase
materials, packaging, compensation to Licensee's employees, or travel expenses.
Together with each fourth (4th) Contract Year Quarter Royalty and Net Sales
Statement submitted to Everlast during each Contract Year, Licensee shall submit
to Everlast a written summary of such expenditures made during said quarter.
Licensee shall certify the amount actually expended for the above advertising in
each Contract Year, and the accuracy of its written summary, by a written
statement certified to be correct by the President, Chief Operating Officer, or
Chief Financial Officer of Licensee. This expenditure shall in no way affect or
be credited to the required amount to be spent for any subsequent Contract Year.
Licensee's failure to spend one (1%) percent of Net Sales on advertising in
accordance with this paragraph shall not, by itself, be deemed a material breach
of this Agreement, but the covenant of good faith and fair dealing shall apply
to Licensee's performance under this paragraph.
9.4 At least once in each advertisement by Licensee using any of the
Licensed Marks, other than style designations, each such Licensed Xxxx shall be
keyed by asterisks, or other appropriate symbol, to a legend stating: "Trademark
Used Under Authority of Everlast Worldwide Inc.," or equivalent language.
26
9.5 All necessary or permitted requests by Licensee for consents must be
in writing. In the case of requests for the approval of advertising, packaging,
marketing, labeling or other objects used in connection with Licensed Products,
such request shall be accompanied by at least two (2) samples of the object to
be approved. All such consents may be withdrawn by Everlast upon the giving of
written notice to Licensee, without prejudice to the right of Licensee to use,
for a reasonable time during the term hereof, such reasonable quantities of
previously approved objects as had been manufactured or ordered prior to such
withdrawal of consent. All consents, except those herein expressly made
effective upon the passage of a stated time, shall be given in writing and no
oral consent or approval shall be binding.
9.6 Licensee agrees that it shall utilize only approved display materials
designed by Everlast or such materials approved by Everlast.
10.0 ACCESS TO BOOKS AND RECORDS
10.1 Licensee shall keep, maintain and preserve in Licensee's place of
business, or at any facility under Licensee's control or otherwise accessible to
third-parties, for not less than three (3) years following termination or
expiration of each Contract Year, including Option Periods, complete and
accurate records for such Contract Year of accounts including without limitation
all invoices, correspondence, banking, financial and other records pertaining to
the information required to be shown on the reports to be submitted by Licensee.
Everlast shall have the right during the Term hereof and for three years
thereafter to examine and take extracts from such records of account during
usual business hours and on reasonable notice to Licensee. Licensee agrees not
to cause or permit any interference with Everlast or its agents in the
performance of their duties of inspection and/or audit.
10.2 Everlast may make one (1) audit during any twelve (12) consecutive
months. If any such audit shows that the amount of royalties paid by Licensee to
Everlast during the time period covered by the audit is less than the actual
27
royalties that should have been paid by Licensee by more than five percent (5%)
of the amount actually paid to Everlast, then the cost of such audit shall be
paid for by Licensee. Licensee may dispute audit findings, subject to the
dispute resolution provisions set forth herein below; provided, however, that in
the event Licensee disputes the results of any audit conducted by or on behalf
of Everlast hereunder, and such dispute is adjudicated, settled, or otherwise
resolved in Everlast's favor, Licensee shall indemnify and reimburse Everlast
for all of Everlast's costs and attorney's fees in connection with such dispute,
including costs and fees associated with obtaining and/or litigating judicial
confirmation of any arbitral award.
10.3 The exercise by Everlast in whole or in part, or at any time or times,
of the right to inspect or audit records and accounts or of any other right
herein granted, or the acceptance by Everlast of any report or the receipt or
deposit by Everlast of any payment from Licensee shall be without prejudice to
any other rights or remedies of Everlast and shall not stop or prevent Everlast
from thereafter disputing the accuracy of any such report or payment.
11.0 PROTECTION OF TRADEMARKS AND INDEMNIFICATIONS
11.1 Subject to the terms of paragraph 1.2, herein above, Everlast hereby
indemnifies Licensee and shall hold it harmless against any claim or suit
arising solely out of use by Licensee of the Licensed Marks as specifically
authorized in this Agreement, on the express condition that Licensee shall give
to Everlast (i) written notice of any such claim or suit within 15 days of
assertion against Licensee of such claim or suit, and (ii) cooperation and
assistance relative to the defense of such claim or suit, at Everlast's
reasonable expense. Provided that all conditions referred to in this Paragraph
are met, Everlast shall, subject to Paragraph 11.4, below, undertake and conduct
at its own expense the defense of any claim or suit within the purview of this
Paragraph 11.1; provided further, however, that Everlast shall not be permitted
to withhold its indemnity and defense under this paragraph in the event
Licensee's failure to provide timely notice of a claim or suit does not
prejudice, impact or otherwise affect, in any material way, Everlast's defense,
settlement, negotiation, discretion, analysis, decision making, or any necessary
28
actions or conduct relative to such claim or suit. Everlast hereby represents to
Licensee that as of the Effective Date hereof, Everlast has no knowledge of any
infringement of the Licensed Marks by any third party, of any threatened
infringement thereof by any third party, or of any use thereof by any other
party that may adversely affect Licensee's use of the Licensed Marks pursuant to
this Agreement.
11.2 Everlast may, but shall not be required to, commence and/or prosecute
any claims or suits in its own name to protect any of its rights in and to the
Licensed Marks against the infringement, imitation or misappropriation thereof
by others not a party to this Agreement. Everlast shall use commercially
reasonable discretion in making any such determination. Such claims or suits
shall be at Everlast's expense. However, Licensee shall cooperate with and
assist Everlast in the commencement and prosecution of such claims or suits to
the extent deemed necessary by Everlast, at Everlast's request and expense.
Licensee shall notify Everlast in writing within 15 days of the discovery by
Licensee of any infringement, imitation or misappropriation by any non-party to
this Agreement of the Licensed Marks on any articles or goods similar to the
Licensed Products, and Everlast shall thereafter have the sole right to
determine whether or not any action shall be taken on account thereof. Licensee
shall not institute any suit or take any action with respect to any such
infringement, imitation or misappropriation without first obtaining the written
consent of Everlast, which consent Everlast shall, in its judgment, determine to
grant or withhold based on the interests of both parties hereto. Such judgment
shall be final and binding on Licensee. In the event that Everlast consents to
any such action by Licensee, Licensee may pursue such action at its own expense.
In any such action brought by Licensee under this paragraph at its own expense
in which Licensee obtains a damage award or monetary settlement award, such
award shall be treated as Net Sales under this Agreement (after deducting all
provable litigation expenses). Licensee shall report any such award in the
Royalty and Net Sales Report for the Contract Year Quarter in which such award
is received, and pay Everlast a royalty of 5% thereon. Everlast shall not,
without the consent of Licensee, voluntarily settle any claim or suit of the
kind referred to in this Article 11 in a manner which prevents Licensee from
using the Licensed Marks.
29
11.3 Licensee hereby indemnifies and agrees to hold Everlast harmless from
any claim or suit arising out of any unauthorized sale, acts, or omissions by
Licensee, or any other conduct constituting a breach of this Agreement, in
connection with the Licensed Marks and/or in connection with Licensed Products
covered by this Agreement, and indemnifies and agrees to hold Everlast harmless
from any and all claims or suits arising out of or related to alleged defects in
the design, material or workmanship of the Licensed Products or the use thereof.
Licensee agrees to obtain, at its own cost and expense, product liability
insurance providing adequate protection for Everlast and Licensee against any
such claims or suits in amounts not less than three million (U.S.) dollars (U.S.
$3,000,000) per occurrence. Such insurance coverage may be provided by one or
more product liability insurance policies, provided that all primary and
umbrella coverage shall aggregate not less than three million (U.S.) dollars
(U.S. $3,000,000). Upon execution hereof, Licensee will submit to Everlast (a)
fully paid policy(ies) or certificate(s) of insurance, at Licensee's discretion,
naming Everlast as an insured party, (each) requiring that the insurer shall not
terminate or materially modify such without written notice to Everlast,
specifying the nature of the proposed modification, or the reason for such
termination at least 15 days in advance thereof.
11.4 Licensee shall, at its own cost, defend against any claims brought or
actions filed against Everlast on a product liability theory, whether such
claims or actions are rightfully or wrongfully brought or filed, and Everlast
shall execute all papers necessary in connection with such suit and shall
testify in any such suit whenever required to do so by Licensee all, however, at
the expense of Licensee with respect to travel and similar out-of-pocket
disbursements.
12.0 RIGHTS TO PURCHASE AND PURCHASE OF INVENTORY
12.1 Everlast shall have the right to purchase Licensed Products from
Licensee, subject to availability, at a price equal to the lowest wholesale
price at which Licensee offers such Licensed Products, less ten percent (10%),
and no royalty shall be due Everlast. Everlast shall not have the right to
30
re-sell the Licensed Products in the Contract Territory without the permission
of Licensee.
12.2 Licensee shall purchase from Everlast all of Everlast's inventory of
Licensed Products existing as of December 31, 2004, plus all of Everlast's Open
to Buy purchase orders for Licensed Products on order as of December 31, 2004
and expected to be received between January 1, 2005 and April 30, 2005, at a
price equal to Everlast's landed cost of all such Licensed Products plus a fee
for merchandising and design equal to 3.5% of such landed cost ("Inventory
Purchase Price"). The Inventory Purchase Price shall not include the 3.5%
marketing and design fee for any and all Licensed Product fashion inventory that
is older than Spring, 2005, and any such inventory shall be valued at a price to
be negotiated in good faith between Everlast and Licensee. Licensee shall pay
the Inventory Purchase Price to Everlast in installments upon, and in accordance
with Licensee's sale within the Contract Territory of the inventory purchased
from Everlast hereunder; provided, however, that in no event shall Licensee have
paid less than the following percentages of the total Inventory Purchase Price
as of the following dates: 20% by January 1, 2005; 40% by February 1, 2005; 60%
by March 1, 2005; 80% by March 31, 2005; 90% by April 30, 2005; and 100% by May
30, 2005. Licensee shall, in all cases, make up payments to equal or exceed
these percentages by the dates set forth above. The Inventory Purchase Price is,
and shall be separate from, and in addition to any and all Earned Royalties and
Guaranteed Minimum Royalties payable to Everlast hereunder, and no portion of
the Inventory Purchase Price shall be applied as a credit against, or otherwise
reduce the amount of, such due royalties.
12.3 Licensee shall assume, and take over all of Everlast's open customer
orders for Licensed Products not fulfilled by December 31, 2004.
13.0 COPYRIGHT AND TRADEMARK RIGHTS
13.1 All use of the Licensed Marks by Licensee shall inure to the benefit
of Everlast. All rights in the Licensed Marks other than those specifically
granted herein are reserved to Everlast.
31
13.2 Licensee shall, at any time, whether during the Term hereof or
thereafter, at Everlast'?s expense, cooperate with Everlast or its designee in
the prosecution of any trademark or copyright applications that Everlast may
reasonably determine to file.
13.3 Any design or copyright which may exist, arise or be acquired by or
for Licensee specifically for Licensed Products, including for labels, hang
tags, advertising or promotional materials used pursuant to this Agreement,
shall be the property of Everlast, but Licensee shall have the right, to the
extent necessary, to use such material during the Term hereof. However,
notwithstanding the foregoing, exclusive designs and the like (and their
respective copyrights) created by and for Licensee, which do not include or
refer to the Licensed Marks, or otherwise can be utilized without inclusion or
reference to the Licensed Marks are and shall remain the property of Licensee.
Licensee shall furnish Everlast with copies of all copyright filings made by
Licensee during the Term (including Option Periods). Licensee shall execute any
papers necessary or desirable in connection with the filing of any copyright
applications filed or to be filed by Everlast, including preparation and
execution of assignments of copyrights, whenever required to do so by Everlast,
all, however, at the expense of Everlast.
14.0 GOODWILL
Licensee recognizes the great value of the publicity and goodwill
associated with the Licensed Marks, and accordingly acknowledges that all such
goodwill exclusively belongs to Everlast and that none is transferred hereunder.
15.0 EXPIRATION, DEFAULT AND TERMINATION
15.1 Upon the expiration or termination of this Agreement for any reason
whatsoever, all rights granted to Licensee under this Agreement shall cease and
forthwith revert, subject to any "sell-off" rights under Article 16, to
Everlast.
32
15.2 If Licensee shall at any time be in default of payment of sales
royalties, any guaranteed minimum royalty payments, or any other payments
required hereunder and such default is not cured within ten (10) days after
receipt of a written notice of such default from Everlast, Everlast shall have
the right to terminate this Agreement by written notice effective upon receipt.
If Licensee shall otherwise fail to materially perform any of the terms or
conditions of this Agreement, and such failure or breach is not cured within 30
days of receipt of a written notice of such default from Everlast, Everlast
shall have the right to terminate this Agreement by written notice effective
upon receipt. Specifically, and without limitation or prejudice, the following
events and/or occurrences shall be deemed and considered material breaches of,
and shall constitute defaults under the Agreement giving rise to the cure and
termination provisions set forth herein and/or elsewhere in this Agreement
("Defaults"). With respect to Defaults under sub-paragraphs (d), (f) and/or (g),
set forth below, Everlast shall not have the right to terminate this Agreement
in its discretion in the event Licensee has commenced in good faith to cure any
such Default within the 30-day cure period provided herein, and as of the
termination of such 30-day period is using its best efforts to diligently
prosecute such cure. Provided that Licensee continues thereafter to use its best
efforts to effect a cure of the Default, Everlast's right to terminate hereunder
shall be, and remain suspended.
a) If Licensee fails to deliver to Everlast or to maintain in full force
and effect the insurance required by this Agreement; or
b) If Licensee fails to make any royalty or other required payment,
including payment of any minimum guaranteed royalty due hereunder, on or before
the date due; or
c) If Licensee fails to deliver any of the reports referred to in Article
5 or to grant Everlast's authorized representative(s) access to Licensee's
records pursuant to the provisions of Article 10 for the purposes permitted
hereunder; or
d) If any governmental agency determines that the Licensed Products may
not be sold, or that such Licensed Products as manufactured, sold or distributed
33
by Licensee are banned or hazardous, in any way, subject to right to cure under
Paragraph 15.3 below; or
e) If during the initial Term or any Option Period hereof, Licensee
becomes unable to pay its debts when due, or makes any assignment for the
benefit of creditors, or files any petition under the bankruptcy or insolvency
laws of any jurisdiction, county or place, or has a receiver or trustee
appointed for its business or property or be adjudicated a bankrupt or an
insolvent; or
f) If Licensee fails to place proper copyright or trademark notices on
all Licensed Products as required by Article 12 hereof; or
g) If Licensee offers for sale, manufactures, distributes or sells
Licensed Products that do not conform to the quality control standards set forth
herein above, or are otherwise of inferior or unacceptable quality contrary to
the provisions of this Agreement.
15.3 In the event of any Default under this Agreement by Licensee that is
not cured pursuant to any applicable provisions of this Agreement, and subject
to applicable provisions of paragraph 15.2 and Article 7, herein above, this
Agreement shall terminate upon receipt by Licensee of a written notice of
termination from Everlast, and thereafter any and all Earned Royalty and other
payments then due or due at the end of the then-current Contract Year Quarter
from Licensee hereunder shall be promptly due and payable. Guaranteed Minimum
Royalties then owing, and Guaranteed Minimum Royalties due for the 12-month
period immediately following the date on which termination occurs shall also be
promptly due and payable, but Guaranteed Minimum Royalties for subsequent
periods shall be waived. Any defaults resulting in termination occurring in the
Contract Year ending December 31, 2009 shall be deemed to occur during the First
Option Period, and unpaid (and [insert: 2010?]next year's) Guaranteed Minimum
Royalties due on such termination shall be paid in the amounts due during the
First Option Period.
15.4 The list of Defaults in Paragraph 15.2 above shall not be deemed to be
a complete listing of material events or occurrences that may constitute a
material default, thereby entitling Everlast to terminate this Agreement or seek
34
any other remedy to which it is or may be entitled. Violations of the provisions
of Article 7 of this Agreement by Licensee shall be deemed material breaches of,
and Defaults under, this Agreement, and shall be subject to any specific,
applicable cure provisions and remedies set forth in Article 7.
15.5 This Agreement and license hereby granted may be terminated at any
time by Everlast on five (5) days written notice to Licensee in the event there
is a change equal to or in excess of fifty percent (50%) in the ownership or
control of Licensee; provided, however, that the issuance or dispostions of
shares of the Licensee to the employees of Licensee, including without
limitation, pursuant to an Employee Stock Ownership Plan, as well as transfers
between and among the current shareholders or employees of Licensee and between
such shareholders or employees and members of their respective immediate
families directly or in connection with any estate planning vehicles (by means
of example only, a trust) shall be exempt from the restrictions of this
provision. Consistent with the terms of this paragraph, Licensee may engage in a
transaction or a series of transactions, including without limitation a merger,
with any third party entity, whereby the cumulative total of forty-nine and 9/10
percent (49.9%) or less of the voting stock or beneficial interest of Licensee
is purchased by or transferred to such third party, but in the event of any such
transaction in which greater than a cumulative total of twenty-four and 9/10
percent (24.9%) of the voting stock or beneficial interest of Licensee is
purchased by or transferred to such third party, and such third party is
determined by Everlast in its commercially reasonable discretion to be a
competitor of Everlast, Everlast may, in its reasonable discretion, deny
Licensee the right to renew this Agreement for a term beyond the Term, or Option
Period, in which such transaction takes place.
16.0 POST-TERMINATION INVENTORY AND FINAL REPORTS
16.1 Within ten (10) days after the expiration or termination of this
Agreement, Licensee shall meet with a representative of Everlast to work out a
full payment schedule of royalties payable to the date of termination that is
acceptable to Everlast. Licensee shall deliver to Everlast, as soon as
35
practicable but within thirty (30) days following expiration or termination a
report ("Final Report") indicating the number, location and description of
Licensed Products on hand, including in-process inventory. Provided Licensee is
not in default of any material provision of this Agreement regarding payment of
Earned Royalties or Guaranteed Minimum Royalties, and/or maintenance of
applicable insurance, Licensee may complete the production of approved
in-process inventory (provided such in-process inventory does not exceed the
total volume of goods sold by Licensee during the preceding six-month period)
and may deliver such approved inventory on order to customers. Licensee may not
manufacture, have manufactured or place orders for any additional Licensed
Products following expiration or termination. Subject to Licensee's right to
fill orders existing on the date of termination, Everlast shall have the right
to purchase any remaining inventory of Licensed Products, or any portion
thereof, within thirty (30) days of termination of this Agreement, at a price
equal to Licensee's manufactured cost, landed duty paid, plus 10% including all
overhead (with no royalty due on any such sale); provided, however, that in the
event Everlast desires to purchase less than 100% of any style that is more than
one year old, such purchase shall be subject to Licensee's prior approval.
Should Everlast decline to purchase, or purchase only a portion of this
inventory, Licensee may continue to distribute its remaining inventory for a
period not to exceed one hundred eighty (180) days, on the express condition
that applicable royalties are paid and all required monthly reports relative
thereto are submitted. In no event shall Licensee be permitted hereunder to
sell-off any items of inventory not approved for sale by Everlast under
applicable provisions of this Agreement. Everlast shall have the continuing
right to conduct a physical inventory in order to ascertain or verify the Final
Report.
16.2 Upon the termination or expiration of this Agreement, Licensee shall
inform Everlast, by written notice, of the nature and quantity of any and all
packaging material, business supplies and advertising and promotional material
and/or devices bearing any of Everlast's trademarks or trade names and, except
as necessary in connection with any permitted sell-off in accordance with
paragraph 16.1, shall make no further use of such objects unless, and until said
trademarks and trade names shall have been removed or obliterated from such
objects, in a manner satisfactory to Everlast.
36
17.0 MISCELLANEOUS EXPENSES
Neither party shall create any expenses chargeable to the other without
prior written consent.
18.0 RESERVATION OF RIGHTS
Everlast retains all rights not expressly and exclusively conveyed herein,
and subject to any rights of first refusal granted by this Agreement, Everlast
may license firms, individuals, co-partnerships or corporations to use the
Licensed Marks on or in connection with (i) the Licensed Products in any area of
the world other than the Contract Territory; and (ii) merchandise of any and all
types and descriptions, other than the Licensed Products in any area of the
world including the Contract Territory.
19.0 NOTICES
All reports, approvals, requests, demands and notices required or permitted
by this Agreement to be given to a party shall be in writing and shall be deemed
to be duly given on the date: (i) personally delivered; (ii) mailed by certified
or registered mail, return receipt requested; or (iii) delivered by Express Mail
or courier service (such as Federal Express) which requires the addressee to
acknowledge, in writing, the receipt thereof:
IF TO EVERLAST:
--------------
Xx. Xxx X. Xxxxxxx
Xx. Vice President Licensing
EVERLAST WORLDWIDE INC.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
WITH A COPY TO:
--------------
Xxxxx Xxxxxxxxx, Esq.
LACKENBACH XXXXXX
00
Xxx Xxxxx Xxxx
Xxxxxxxxx, Xxx Xxxx 00000
IF TO LICENSEE:
Xx. Xxx Xxxxxx
Xxxxxxx Xxxxx, Inc.
0000 Xxxxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
WITH A COPY TO:
--------------
Xxxx Xxxxxx, Esq.
Xxxxxxx & Masyr
000 Xxxx 00xx Xx.
Xxx Xxxx, Xxx Xxxx 00000
20.0 INJUNCTIVE RELIEF
Licensee acknowledges and admits that in the event Licensee should violate
any of the terms of this Agreement concerning or related to the use of the
Licensed Marks: (i) Everlast could not be adequately compensated for injury
resulting therefrom by payment of money damages; (ii) Everlast would be
irreparably injured by such violation; (iii) Everlast would not have an adequate
remedy at law; and (iv) it would be extremely difficult, if not impossible to
determine the resulting monetary damages suffered by Everlast. Accordingly,
Licensee agrees that, in the event Licensee violates any of the terms of this
Agreement concerning or related to the use of the Licensed Marks, Everlast shall
be entitled, in addition to any other remedy to which Everlast would otherwise
be entitled, to equitable relief by way of preliminary and permanent injunction.
21.0 ENFORCEMENT AND ARBITRATION
21.1 Either party shall have the right at all times to seek enforcement of
this Agreement in court, but the parties shall be required to waive a jury in
any action brought to enforce, or for breach of this Agreement. The parties may
38
mutually elect, alternatively, to arbitrate any disputes arising under this
Agreement, and any such disputes, to the extent permitted by law, shall be
settled and determined by arbitration in New York, New York before the American
Arbitration Association in accordance with and pursuant to its then-current
Rules for Commercial Arbitration. The arbitrators shall have the power to award
specific performance or injunctive relief and reasonable attorneys' fees and
expenses to any party in such arbitration. However, in any arbitration
proceeding arising under this Agreement, the arbitrators shall not have the
power to change, modify or alter any express condition, term or provision of
this Agreement, and to that extent, the scope of their authority is limited. The
arbitration award shall be final and binding upon the parties.
21.2 The parties shall have such right to interim relief, including
injunctive relief as provided in Article 20 hereof, in any federal Court sitting
in the City of New York as may be provided by law.
21.3 Any action to enforce an arbitration award or for interim relief
hereunder may be brought only in a Court of general original jurisdiction
sitting in the City of New York and the parties do hereby submit to the
jurisdiction of each such Court.
21.4 The service of any notice, process, motion or other document in
connection with any arbitration under this Agreement or for interim relief or
the enforcement of any arbitration award hereunder may be effectuated in the
manner in which notices are to be given to a party pursuant to Article 19,
above.
22.0 TRANSITIONAL EXPENSES
Everlast and Licensee acknowledge and agree that during the period January
1, 2005 through June 30, 2005, Everlast and Licensee will each incur costs and
expenses related to the Licensed Products, payable on a monthly basis commencing
January 31, 2005, which were previously borne and satisfied pursuant to contract
solely by Everlast. The parties agree that such expenses shall, as of the
39
Effective Date, be borne by Everlast and Licensee in accordance with the
following rules:
(a) With respect to discounts, allowances and other charge-backs incurred
by Licensee that arise from or otherwise relate to Licensed Products sold
in 2004 by Everlast: (i) Everlast shall reimburse Licensee for all retailer
charge-backs relating to specific retailer agreements written and signed
and/or orally agreed to by Everlast before December 31, 2004; and (ii) For
all other retailer requested charge-backs, Licensee, Everlast and the
retailer shall fully negotiate, and agree upon the amount and terms of the
charge-back, and only upon such agreement Everlast shall be liable to
reimburse Licensee for the amount paid to retailer.
(b) With respect to Spring, Summer and Fall, 2005 samples and catalogs of
Licensed Products purchased by Everlast, Licensee will purchase such
samples and catalogs from Everlast at a price equal to half of Everlast's
cost, but not greater than $45,000. Such amount shall be in addition to,
and not offset against, any royalties due under this Agreement.
(c) Licensee shall pay 25% of the February 2005 MAGIC Trade Show booth
cost paid by Everlast, if Licensee chooses to participate and display its
Licensed Products in 25% of the Everlast booth/stand, at a cost of
approximately $14,990. Such amount shall be in addition to, and not offset
against, any royalties due under this Agreement.
(d) Licensee shall reimburse Everlast for certain publication advertising
costs already borne by Everlast. Licensee shall reimburse Everlast for 5
insertions purchased by Everlast in the publication WWD at Everlast's
per-insertion cost $5,933, for Issue dates from January 2005 through June
2005, for a total reimbursement of $29,665. Licensee shall reimburse
40
Everlast for 3 insertions purchased by Everlast in the publication Shape at
Everlast's per-insertion cost $40,000, for Issue dates from January 2005
through March 2005, for a total reimbursement of $120,000. Licensee shall
have the right to utilize new creative materials, subject to approvals in
accordance with the terms of this Agreement, for these ads. Such
reimbursements shall be in addition to, and not offset against, any
royalties due under this Agreement.
(e) Licensee shall reimburse Everlast for those warehousing and freight
costs incurred by Everlast for any and all sales of Licensed Products
commencing January 1, 2005 and thereafter. Such reimbursements shall be in
addition to, and not offset against, any royalties due under this
Agreement.
23.0 NO PARTNERSHIP
This Agreement does not constitute and shall not be construed as
constituting a partnership or joint venture between Everlast and Licensee.
24.0 NON-ASSIGNABILITY
24.1 This Agreement is personal to Licensee, and Licensee shall neither
assign nor franchise this Agreement without the prior written approval of
Everlast. Neither this Agreement nor any of the rights of Licensee hereunder
shall be sold, transferred or assigned by Licensee without Everlast'?s prior
written consent. No rights hereunder shall derive by operation of law or
otherwise upon any assignee, receiver, liquidator, trustee or other party.
24.2 This Agreement may be freely assigned, without consent, to any entity
that assumes substantially all of the business of Everlast, including all of the
obligations pursuant to this Agreement; provided, however, that any assignment
by Everlast of this entire Agreement, in whole, shall include an assignment of
the Licensed Marks. Any such assignment shall effect a novation.
41
25.0 APPLICABLE LAW
It is the intention of the parties that all questions relating to this
Agreement, or to its validity, shall be decided in accordance with the laws of
the State of New York, United States of America, as if this Agreement were made
in and to be performed entirely in the State of New York. For the purposes of
enforcing rights hereunder, all parties hereby unconditionally submit to the
jurisdiction and venue of the United States District Court for the Southern
District of New York, and the New York State Courts, located in New York, New
York, waive all defenses relating to personal jurisdiction and/or improper or
inconvenient venue, and agree that any process in any action related hereto may
be served in the manner therein provided for the giving of notices.
26.0 INTEGRATION
This Agreement constitutes the entire Agreement between the parties
concerning the subject matter hereof, and no other agreements, understandings or
representations are included except as expressly noted herein.
27.0 MODIFICATION
This Agreement may not be modified except by a written instrument, signed
by both parties, which makes specific reference to this Agreement by date,
parties and subject matter.
28.0 CONFIDENTIALITY
Licensee and Everlast each agrees to keep the terms and conditions of this
Agreement confidential, and neither party shall disclose such terms and
conditions to any third party without obtaining the other party's prior written
42
consent; provided, however, that this Agreement may be disclosed on a
need-to-know basis to either party's attorneys and accountants provided they
agree to be bound by this confidentiality provision. Both parties hereby consent
to the other's disclosure of information of a financial nature in this Agreement
to its auditors and to financial institutions in the ordinary course of
business, or as required by law. In addition, each party may have access to
information concerning the other party's and/or its affiliates' business and
operations, and/or other matters relating to creations or business plans, which
information may not be accessible or known to the general public. Each party
agrees not to use or disclose such information of the other party to any third
party without obtaining such other party's prior written consent.
29.0 ENFORCEABILITY
Neither the invalidity nor unenforceability of any provision of this
Agreement shall affect the validity or enforceability of any of the other
provisions of this Agreement, nor shall the invalidity nor unenforceability of
any provision of this Agreement as applied to a particular occurrence or
circumstance affect the validity or enforceability of any other applications of
the same provision, provided, in either case, that such invalidity or
unenforceability does not unreasonably frustrate the commercial purposes of this
Agreement.
30.0 FORCE MAJEURE
If either party is prevented from the performance of its obligations
hereunder by reason of an act of God, fire, flood, war, public disaster,
governmental enactment, regulation, or order, strikes or labor difficulties, or
any other cause beyond its control, and if such party has given the other party
prompt notice thereof and, on request, such confirmatory documentation as the
other party may reasonably request and has in good faith kept the other party
apprised of when the delay, interruption or prevention is expected to be
resolved, the time for the performance of the party's obligations shall
43
thereupon be extended for a period equal to the duration of the contingency that
occasioned the delay, interruption or prevention, but not exceeding 60 days
unless otherwise mutually agreed. If the force majeure condition continues for
more than 60 days, either party may terminate this Agreement upon written notice
to the other party, and in the event of such a termination of Licensee's rights
hereunder, paragraph 15.3 shall not obligate Licensee to pay any Guaranteed
Minimum Royalties on termination other than such Guaranteed Minimum Royalties
that are due and unpaid as of the date of termination.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year above written.
EVERLAST WORLDWIDE INC. XXXXXXX XXXXX, INC.
By: /s/ Xxxxxx X Xxxxxxxx By: /s/ Xxxxxx Xxxxxx
-------------------------- ------------------------
Name: /s/ Xxxxxx X Xxxxxxxx Name: Xxxxxx Xxxxxx
----------------------- ----------------------
Title: President Title: President
Date: December 17, 2004 Date: December 17, 2004
44
EXHIBIT A
(Licensed Marks)
45
EXHIBIT B
ROYALTY AND NET SALES STATEMENT
LICENSEE NAME____________________________________________________
LICENSEE ROYALTY AND NET SALES REPORT FOR THE ________ QUARTER, _____
Gross Unit Sales _________________________________________________________
Net Unit Sales ___________________________________________________________
Gross Dollar Sales ________________________________________________________
Net Dollar Sales___________________________________________________________
Royalties (at 5% of Net Sales (4% for MarMaxx sales)) _____________________
Total (Net Sales) Royalty Payable this Quarter ____________________________
Net Royalty Due Everlast __________________________________________________
NET SALES BY PRODUCT CATEGORY
Product Category:
Total Units_______________ Total Gross Sales ________________
Total Net Sales __________
NET SALES BY RETAILER:
Retailer:
Total Units_______________ Total Gross Sales ________________
Total Net Sales __________
46
