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EXHIBIT 10.141
LICENSE AND CONSULTANT AGREEMENT
THIS LICENSE AND CONSULTANT AGREEMENT ("Agreement") is made
and entered into as of the 25th day of January 1991, by and between THE NAIL
CONSULTANTS, LTD., an Arizona corporation ("Licensor"), and COSMAR CORPORATION,
a California corporation ("Cosmar").
RECITALS
A. Xxxxx Xxxxxx (formerly known as Xxxxx Xxxxxxxx), together
with Xxxxxxxx X. Xxxxxxx, are the inventors of certain compositions and a
process for applying a protective covering and extensions to fingernails, which
inventions are the subject of United States Patent Numbers 4,626,428 and
4,669,491 ("Patents"). Xx. Xxxxxxx assigned all of his right, title and interest
in and to the Patents to Xx. Xxxxxx by an Assignment dated February 15, 1985, a
true and complete copy of which has previously been delivered to Cosmar. Xxxxxx
has granted an exclusive license with respect to the Patents to Licensor
pursuant to a License Agreement dated June 26, 1957, a true and complete copy of
which has previously been delivered to Cosmar. Said license agreement grants
Licensor the right to grant sublicenses under the Patents.
X. Xxxxxx is engaged in the design, development, manufacture
and sale worldwide of artificial fingernail products under various registered
trademarks, including "Press & Go", "Sculpture Quick", and "Quick Fit", as well
as under numerous private label brands. Cosmar presently markets and sells its
own proprietary acrylic nail kit under the registered trademark "Sculpture
Quick", and would like to incorporate and use certain procedures and
compositions claimed in the Patents, without further mixing or other
modification by Cosmar, in a new product kit to be packaged and marketed by
Cosmar under its own name.
C. Subject to the terms and conditions of this Agreement,
Cosmar desires to acquire the exclusive, worldwide right and license to use and
package, and to sell and have sold to the Licensed Markets (as hereinafter
defined), the compositions and process claimed in the Patents, referred to
separately as the "Licensed Products" and "Patented Process" respectively, and
collectively as "Licensed Property," and to obtain Licensor's know-how and
assistance with respect to packaging, storing and marketing same.
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AGREEMENT
In consideration of the foregoing and of the mutual covenants,
conditions and agreements hereinafter contained, the parities hereto agree as
follows:
1. Certain Definitions.
Except as otherwise expressly provided or unless the context
otherwise requires, the definitions of the terms set forth below shall be
applicable when any such term is used in this Agreement.
1.1 "Licensed Markets" shall mean mass merchandisers
(including, without limitation, K-Mart, Walmart and Target Stores); grocery and
discount-grocery stores and chains; drug and discount-drug stores and chains;
perfumery stores in Europe; subject to the reservation of rights in Licensor set
forth in Section 2.3, department and discount-department stores and chains;
government "PX" stores, any combination of the foregoing; and any rack jobbers
or distributors who sell to the foregoing.
1.2 "Net Sale Price" shall mean the greater of (a)
Cosmar's total charges billed to a customer for Licensed Product defined in
Section 4.1 or product incorporating Licensed Product, as invoiced consistent
with Cosmar's standard pricing and billing practices; or (b) 45% of Cosmar's and
its affiliates' suggested retail price for Licensed Product sold domestically
and 35% of Cosmar's and its affiliates' suggested retail price for Licensed
Product sold internationally, as the case may be. In no event shall the "Net
Sales Price" be less than $3.96 on domestic sales and $2.45 on international
sales. Licensed Product or product incorporating Licensed Product returned by
and credited by Cosmar to the account of a customer shall reduce "Net Sale
Price" by the same amount of the "Net Sale Price" of such Licensed Product
determined in accordance with the preceding sentence.
1.3 "Product Royalty" shall have the meaning set
forth in Section 5.1.
1.4 "Royalty Year" shall mean a twelve (12) month
period starting on June 1 and ending on May 31 of the following year, with the
first Royalty Year commencing on June 1, 1991.
2. Grant of Exclusive License.
2.1 Subject to the terms and conditions set forth
herein, Licensor hereby grants to Licensee the exclusive, worldwide right and
license to use and package and have packaged, and to sell and have sold to the
Licensed Markets, the Licensed Products, and to use them in accordance with the
Patented Process. The right and license granted herein, subject to the terms and
conditions expressed herein, are
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understood to extend not only to Cosmar, but to any or all of its related
corporations, or organizations, including without limitation, Precision Molded
Plastics, Inc., and with respect to Cosmar's customers who, directly or
indirectly, purchase Licensed Product from it, the aforesaid right and license
to use and sell the same shall extend to such customers, including Cosmar's
distributors; provided, however, that fulfillment of all obligations hereunder,
including requirements for reports and the payment of royalties, shall be by or
through Cosmar. Cosmar will use reasonable efforts to distribute and market its
new product kit containing the Licensed Property.
2.2 The exclusive right and license herein granted
shall include all inventions, improvements, enhancements and modifications to
the Licensed Products and the Patented Process whether any such inventions,
improvements, enhancements or modifications are patented or kept as trade
secrets, made or conceived during the term of this Agreement, which Licensor
owns or controls or hereafter owns or controls, and all patent applications and
patents based on or claiming the same which Licensor now owns or controls or
hereafter owns or controls ("Improvements"), all of which shall automatically be
included within the meaning and scope of the terms "Licensed Property" and
"Patents", as used herein.
2.3 The exclusive right and license granted hereby is
subject to this express reservation of right in favor of Licensor to make, use,
package and sell, directly or indirectly, by licensing or otherwise authorizing
a third party to do any of the foregoing, Licensed Property to any department or
discount-department store and chain.
3. General Assistance and Consulting.
From and after the date hereof, Licensor, at Cosmar's written
request from time-to-time, shall, at no cost or expense to itself, use its
reasonable best efforts on a timely basis to do reasonable things known or
available to it and reasonably necessary or desirable to assist Cosmar in
preparing to introduce the Licensed Product and entering into quantity marketing
and sale of same, for which services Cosmar agrees to pay monthly at the rate of
$80.00 per hour for Xxxxxx'x time. Without any hourly charge as aforesaid,
however, Licensor shall furnish Cosmar with all of Licensor's knowledge
concerning shelf-life and storage regarding the Licensed Products, and shall
review the consumer instructions for use of the Licensed Property to be
developed, written and owned by Cosmar.
4. Supply of Licensed Products.
4.1 The Licensed Products comprise the following
three proprietary compositions: 1. an acrylic liquid or brush-on plastic
("Liquid"); 2. an acrylic powder ("Powder"); and 3. a liquid primer or bonder
("Primer"). The Liquid, Powder and Primer are sometimes hereinafter individually
or collectively called the "Licensed Product" or the "Licensed Products", as the
context may require.
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4.2 From and after the date hereof, and upon the
terms and subject to the conditions hereof, any and all of Cosmar's requirements
for the Licensed Products shall be supplied solely by Licensor, and Cosmar
shall, subject to Section 11.4 hereof, purchase all of its requirements for the
Licensed Products from Licensor. Licensor agrees to supply all of Cosmar's
requirements with respect to the Licensed Products. Neither Licensor nor any
affiliate or associate of Licensor, shall supply, directly or indirectly, the
Licensed Products to any person or company other than Cosmar for sale in or to
the Licensed Markets. Neither Cosmar nor any affiliate or associate of Cosmar
shall sell, directly or indirectly, any other product if such other product
infringes upon the Patents. Commencing with its first purchase order, Cosmar
shall furnish to Licensor a 90-day forecast of Cosmar's anticipated requirements
for Licensed Product, which forecast shall be updated monthly thereafter by
Cosmar.
4.3 Unless and until increased as provided below, the
purchase prices for the Licensed Products shall be as follows:
Product Price
------- -----
Powder $11.00 per pound
Liquid $95.00 per gallon
Primer $80.00 per gallon
The purchase price set forth above are based upon, and all Licensed Products
shall be ordered in five (5) gallon container quantities. Commencing on the
first anniversary of the first Royalty Year and on each anniversary thereafter,
the above purchase prices may be increased upon 90 days' advance written notice
from Licensor to Cosmar. The amount of the increase, if any, shall be equal to
and based on the greater of (i) Licensor's increased bulk quantity raw material
costs, over such costs on the date hereof, for any of the Licensed Products, and
(ii) any increase in the national consumer price index ("CPI") published by the
United States Government (or any successor or comparable index), using December
31, 1990 as the reference or base index. Licensor shall furnish to Cosmar,
together with any notice of price increases evidence reasonably satisfactory to
Cosmar regarding the basis for any price increase and the computation thereof.
For any Royalty Year, for example, a price increase for one of the Licensed
Products may be based on an increase in raw material costs, whereas a price
increase for the second and third Licensed Products may be based on an increase
in the CPI.
4.4 From time to time during the term of this
Agreement, as Cosmar may require, Cosmar shall place orders for the Licensed
Products. Any order placed by telephone shall be confirmed in writing within 48
hours. Upon placement of each effective written order for the Licensed Products,
Cosmar shall pay fifty percent (50%) of the total purchase price. Payment shall
be made either by bank check or by wire transfer, payable to Licensor. The
balance of the purchase price shall be paid within 10 days after Licensor
invoices the shipment of Licensed Products ordered.
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4.5 The Licensed Products shall be delivered to
Cosmar F.O.B. shipping point, which shipping point shall be at Licensor's place
of business, which is currently in Phoenix, Arizona, or Illinois, in the case of
the Powder. Title to the Licensed Products shall pass to Cosmar upon delivery to
the carrier, and Licensor shall have no liability for any damage to or loss of
the Licensed Products after the Licensed Products are delivered to the carrier
with which the Licensed Products are shipped. If Cosmar so desires, Cosmar shall
be responsible for obtaining insurance to cover the risk of loss or damage to
the Licensed Products from and after the time Licensor delivers the goods to the
carrier.
4.6 The anticipated date of shipment of all Licensed
Products ordered hereunder is within 30 days following the date Licensor
receives an order for such goods. Licensor shall use its best efforts to meet
this schedule. In any event, Licensor shall ship all Licensed Products ordered
hereunder within 60 days following the date Licensor receives the order, the
specific shipment date to be confirmed by Licensor to Cosmar within 10 days
after the order is placed. Subject to Section 4.9, if at any time during the
term hereof Licensed Products are not delivered within 60 days following receipt
of any order, Licensor shall have ninety more days within which to either
deliver all then delinquent Licensed Products or enter into an agreement with a
third party reasonably acceptable to Cosmar (which may be Xxxxxx, who is
acceptable to Cosmar), which third party shall by written agreement of
assignment and assumption agree to perform all of Licensor's obligations
hereunder ("New Supplier"). If within the aforementioned ninety day period
Licensor has not delivered all then delinquent Licensed Product orders or
appointed a New Supplier who has delivered all the Licensed Product within said
90 days as aforesaid, then Cosmar shall immediately thereupon have the right to
manufacture or cause to have manufactured for its account the Licensed Products
(or equivalents). Licensor shall use its best efforts, on an urgent basis, (i)
to deliver to Cosmar true and complete copies of all formulas and the names and
addresses of all suppliers and all other commercially useful information
regarding the Licensed Products, and (ii) to do all other things necessary or
desirable to facilitate Cosmar's immediate entry into and continued production
of Licensed Products for its own account. In addition, from and after such time
any and all obligations of Cosmar under Sections 4.2, 4.3, 4.4, 4.5 and 4.10
shall be suspended, and any and all obligations of Licensor under Sections 4.2,
4.3, 4.4, 4.5 and the first four sentences of this Section 4.6 shall be
suspended, all subject to reinstatement as hereinafter provided. If at any time
after Cosmar has commenced the manufacture of Licensed Products pursuant to
Section 4.6, Xxxxxx or Licensor desire to reinstate the obligations of Cosmar
under Section 4 hereof, then Xxxxxx or Licensor shall have the right to do so
upon ninety days' written notice to Cosmar. In lieu of furnishing this 90-day
notice, Xxxxxx or Licensor may reinstate Cosmar's obligations immediately upon
(a) delivery to Cosmar of written assurances reasonably satisfactory to Cosmar
of Xxxxxx or Licensor, as the case may be, as to the assumption of and
performance by the assuring party of all of Cosmar's obligations with respect to
the delivery of Licensed Products, including unfilled purchase orders, and (b)
the cash purchase and payment by the assuring party of all equipment and the
like purchased by Cosmar for the purpose of or used by Cosmar in the manufacture
of
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Licensed Products. The purchase price for all of said property shall be Cosmar's
depreciated cost. Reinstatement of Cosmar's obligations hereunder shall be
subject to the concurrent reinstatement of Licensor's obligations hereunder.
Trade secret and other confidential information disclosed hereunder to Cosmar
will be maintained in strictest confidence and will be used only as contemplated
hereby.
4.7 Except as hereinafter provided, Licensor
represents, covenants and agrees that all quantities of Licensed Products shall
be free from defects in material, manufacturing and packaging at the point of
delivery and shall indemnify Cosmar from and against any and all claims,
demands, actions or causes of action of any kind or nature whatsoever concerning
personal injury and/or property damages arising from any such defect. Should
Cosmar be named as a party in any such action then Licensor shall also indemnify
Cosmar for all of its reasonable costs and expenses in defending any such
action. The foregoing representations, warranties and indemnifications shall not
apply if or with respect to, as appropriate: (i) the Licensed Products have been
subjected to misuse, negligence or accident as a result of any act or omission
of Cosmar; (ii) the Licensed Products shall not be used in accordance with
Licensor's written instructions; (iii) the Licensed Products shall have been
altered or modified by Cosmar without the written approval of Licensor; or (iv)
any other cause not within the control of Licensor shall result in any of the
Licensed Products becoming defective or subjected to any of the foregoing.
Except as set forth in this Section 4.7 and Section 8, Licensor makes no other
representations or warranties, express or implied, with respect to the Licensed
Products, and all such other representations and warranties are hereby expressly
disclaimed and denied. The indemnifications contained in this Section 4.7 shall
also not apply unless: (i) Cosmar notifies Licensor promptly in writing of the
claim, (ii) Cosmar allows Licensor, at its sole cost and expense, to fully
participate in the defense of such claim and (iii) Cosmar does not agree to any
settlement of such claim without Licensor's written consent. At any time within
thirty (30) days after Licensor is notified by Cosmar of a claim pursuant to
clause (i) in the preceding sentence, and provided that Cosmar does not notify
Licensor that Cosmar has determined, in the exercise of its reasonable
discretion, that a conflict of interest makes separate representation by
Cosmar's own counsel advisable, and provided further that Licensor is not in
default under this Agreement and continues to perform its obligations under this
Agreement, Licensor may elect to assume the defense of any such claim by notice
to Cosmar, which notice shall confirm that Licensor is obligated to indemnify
Cosmar with respect to such claim. Failure by Licensor to notify Cosmar of the
Licensor's election to defend any such claim within thirty (30) days after
notice thereof shall have been given to Licensor shall be deemed a waiver by
Licensor of its right to defend such claim. If a responsive pleading is due
before Licensor makes the election to defend, Cosmar shall take all action which
is reasonably necessary to preserve the Licensor's right to defend the action
(including but not limited to employing attorneys to, among other things, obtain
an extension to reply or to reply to the responsive pleading). All reasonable
expenses of Cosmar in taking such action shall be indemnified by Licensor. If
Licensor assumes the defense of any claim, the obligations of Licensor hereunder
as to such claim shall be limited to taking all steps necessary in the defense
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or settlement of such claim and to holding Cosmar harmless from and against any
and all losses, damages and liabilities caused by or arising out of any
settlement or any judgment in connection with such claim or litigation resulting
therefrom. Cosmar shall retain the right to employ its own counsel and to
participate in the defense of any claim, the defense of which has been assumed
by Licensor pursuant hereto, but Cosmar shall bear its own costs and expenses in
connection with such participation. For purposes of this Section 4.7, "Cosmar"
shall mean Cosmar and each of its directors, officers, shareholders, employees,
representatives, successors and assigns. Notwithstanding the foregoing, Licensor
shall have no responsibility whatsoever for any damage to the Licensed Products
in transit resulting from any act or omission occurring after delivery of the
Licensed Products to the carrier with which the Licensed Products are shipped.
4.8 Licensor and Cosmar covenant and agree that each
will keep in force during the entire term of this Agreement product liability
insurance, each policy for which shall name the other party as an additional
insured thereunder. In the case of Licensor the amount of the combined single
limit of liability shall be not less than $1,000,000 and in the case of Cosmar
the minimum amount shall be $2,000,000. Licensor and Cosmar shall each provide
to the other a certificate evidencing said insurance which prohibits
cancellation, termination or modification without thirty (30) days's written
notice to the named additional insured.
4.9 In the event only of war declared by the United
States Congress, strike, national or Phoenix, Arizona labor shortage, declared
national state of emergency or state of emergency in the city or county of the
place of business of Licensor any of its suppliers, fire, flood, famine, and
failure of interstate transportation systems, or any order, direction, law or
equivalent of the United States Government, or of any state or subdivision
thereof or any other country or subdivision, which renders impossible the
performance by Licensor of its obligations hereunder ("force majeure"), the
obligations of Licensor's performance, except as set forth in the next sentence,
shall be suspended during the continuance of such event of force majeure, and no
liability for failure to perform during such suspension shall accrue.
Notwithstanding the occurrence of an event of force majeure, Licensor shall use
its reasonable best efforts to seek alternative means of performance on an
interim basis and to resume performance of its obligations hereunder in
accordance with their terms at the earliest time practicable; provided, however,
that Licensor shall not be required by the foregoing to take any action
requiring any material expenditure of funds or any exposure to liability so long
as it presents to Cosmar the expenditure or exposure and Cosmar does not
forthwith agree to pay or indemnify Licensor as to same. If Cosmar forthwith
agrees to pay or indemnify Licensor as to same, then Licensor shall be required
to take the subject action.
4.10 For the purpose of developing the market for and
promoting sales of Licensed Product, Cosmar covenants and agrees during each
Royalty Year to expend or commit to expend on advertising (including cooperative
advertising) and promotion an amount equal to at least the total Product Royalty
payments made by Cosmar for such Royalty Year.
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5. Royalty Payments.
5.1 Cosmar shall pay to Licensor in addition to the
consideration referred to in Section 4.3 hereof, royalties in the amounts and at
the times hereinafter set forth. Commencing on July 15, 1991, and on the 15th
day of each month thereafter until the expiration or earlier termination of this
Agreement, Cosmar shall pay to Licensor a royalty of five percent (5%) of the
Net Sale Price of all Licensed Product sold by Cosmar and any packaged products
or kits sold by Cosmar in which Licensed Product is included ("Product Royalty")
during the immediately preceding month (except for the first payment on July 15,
1991 which shall include Product Royalty accrued from the date hereof). Licensor
specifically acknowledges Cosmar's right to include Licensed Product together
with Cosmar's own products, such as nail tips, nail glue and nail file, in
Cosmar's own acrylic sculpture kit to be marketed and sold in Cosmar's packaging
and under its trademarks.
5.2 Licensed Product shall be considered as "sold"
when Licensed Product or products incorporating same are shipped to customers.
Any Product Royalty paid on Licensed Product not accepted or returned by
customers of Cosmar shall be credited against future Product Royalty payments
accruing from Cosmar. The parties acknowledge that Licensed Product may be sold
by Cosmar either incorporated with or without one or more Cosmar products not
subject to this Agreement, that precise sales configurations are impossible to
predict and may vary over the term of this Agreement, and that in any package or
kit incorporating Licensed Product together with non-Licensed Product items, the
Licensed Product is likely to represent the most valuable component thereof. In
view of the foregoing, the parties have determined to adopt a single blended
royalty rate. Licensor shall therefore be entitled to Product Royalty based on
the Net Sale Price of each complete package or kit incorporating any Licensed
Product, and no allocation shall be made as between the relative values of
Licensed Product and any Cosmar product contained therein. All payments of
Product Royalty shall be accompanied by a statement showing in reasonable detail
the computation thereof. No Product Royalty payments shall be triggered solely
by any bulk sale of the Licensed Product by Cosmar in connection with the
cessation of sale of Licensed Product by Cosmar or the sale of Cosmar's business
or the Licensed Product component of such business, so long as the purchaser
under any such bulk sale has agreed to and does, in fact, accept assignment to
it of, and assume, Cosmar's obligations under this Agreement; and, provided,
that subsequent sales of unit(s) of such bulk-sold Licensed Product shall
occasion payment of the Product Royalty. No Product Royalty payment shall be due
Licensor on account of any Licensed Product given away (that is, without receipt
by Cosmar of any payment for such Licensed Product) by Cosmar for promotional
purposes.
5.3 Cosmar shall make Product Royalty payments due on
the 15th day after the end of each month, or the next business day if such 15th
day is a Saturday, Sunday or a legal holiday, commencing with the month ending
June 30, 1991. Unless and until otherwise notified in writing by Licensor, all
payments to Licensor hereunder shall be made in person or by deposit on the date
due in the United States
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mails, first-class postage prepaid, of Cosmar's check in the amount due, payable
and addressed as follows: The Nail Consultants, Ltd., 0000 X. Xxxx Xxxxxx Xxxx,
Xxxxx 0, Xxxxxxx, Xxxxxxx 00000 or to such other address as Licensor may from
time-to-time specify in writing.
5.4 Notwithstanding payment of all Product Royalty,
the continued maintenance of the exclusivity of the license granted hereby shall
be subject to payment by Cosmar of minimum annual royalties, payable pro rata on
a quarterly basis, commencing September, 1991, according to the following
schedule ("Minimum Royalty"):
Royalty Year Minimum Annual Royalty
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1 $ 25,000
2 37,000
3 50,000
4 55,000
5 60,500
6 66,550
7 73,205
8 80,526
9 88,578
10 97,436
11 and thereafter 100,000
If the Product Royalty payment due for the last month of any quarter of any
Royalty Year would not, when added to the sum of all Product Royalty payments
made for all of the preceding months of the same Royalty Year, equal or exceed
the pro rata Minimum Royalty then due at that point for that Royalty Year (the
difference being hereinafter called the "Deficiency Amount"), then Cosmar, if it
desires to maintain this Agreement in full force and effect, including the
exclusivity of the license granted hereby, shall instead of paying only the
Product Royalty amount then due, pay the entire Deficiency Amount.
5.5 If for any Royalty Year Licensor does not receive
royalty payments from Cosmar at least equal to the applicable Minimum Royalty,
this Agreement shall be subject to termination by Licensor as provided in
Section 12 hereof; provided, however, that if Licensor receives from Cosmar
royalty payments at least equal to $60,000 for any Royalty Year, then Licensor
shall have no right to terminate this Agreement but only to notify Cosmar in
writing within sixty (60) days after the last payment for any Royalty Year for
which Licensor has not received from Cosmar at least $60,000 in total royalty
payments, that its license thereunder shall be converted from an
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exclusive to a nonexclusive license. The proviso in the preceding sentence is
intended solely for the benefit of Cosmar, and shall not apply in favor of any
transferee of Cosmar's rights or obligations hereunder. This Agreement shall
otherwise continue in full force and effect, except that if Licensor should
grant a nonexclusive license to any other licensee to make, use and sell the
Licensed Products, and any Improvements thereof, and to practice the Patented
Process, and any Improvements thereof (which Improvements shall automatically
become part of and be included in the Licensed Property), Cosmar shall have the
option of having a similar nonexclusive license under the same terms and
conditions granted to said other licensee under the Licensed Property, if it so
desires. Licensor agrees to submit to Cosmar a copy of each such license
hereinafter granted by Licensor to any other licensee.
6. Audit of Product Royalty.
6.1 Licensor shall have the right to perform from
time to time in Licensor's sole reasonable discretion, an audit of the books and
records of Cosmar by notifying Cosmar in writing of its desire to perform an
audit thereof ("Payment Audit"). Licensor, or its authorized agent shall then
have the right to examine, during Cosmar's regular business hours, all relevant
books and records of Cosmar for the purpose of verifying the accuracy of the
Product Royalty payment(s) or nonpayment(s). Cosmar agrees that it will at all
times keep true and complete books of account containing a current record of all
sales and other data in sufficient detail to enable the royalties payable under
this Agreement to be computed and verified. If after any Payment Audit Licensor
should conclude that Product Royalty paid to Licensor is less than the amount
which should have been paid to Licensor for the period covered by the Payment
Audit, then Licensor shall make a claim in writing upon Cosmar stating the
aggregate amount of Product Royalty which should have been paid to Licensor for
such period, the deficient amount due, and the date(s) upon which each such
deficient amount was initially due. Cosmar shall within ten (10) business days
after receipt of written notice of such claim either pay the aggregate amount of
said deficiency, plus interest at the rate of ten percent (10%) per annum on the
amount of the deficiency from the date(s) payment was initially due, or name an
independent certified public accounting firm satisfactory to Licensor not
previously retained by Licensor or Cosmar or any of their respective affiliates
or affiliated persons to perform a new audit for the same period as was the
subject of the Payment Audit (the "Independent Audit"). If Cosmar and Licensor
cannot agree upon such a firm, then Cosmar may name such a firm from among the
50 largest national accounting firms or the 15 largest Los Angeles accounting
firms (as shown in the latest Los Angeles Business Journal listing or other
published source).
6.2 Within sixty (60) days after the naming of a firm
to perform the Independent Audit (the "Independent Firm"), the Independent Firm
shall set the proper royalty payment for the audited period, including any
interest due as hereinafter prescribed, and shall notify Licensor and Cosmar in
writing of the amount. During the course of the Independent Audit, Licensor and
Cosmar shall be entitled to make whatever timely submissions they reasonably
desire to the Independent Firm. The determination
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of the Independent Firm shall be final and binding on the parties; provided,
however, that in the event the determination depends upon an interpretation of
this Agreement, such Independent Firm shall seek advice of counsel acceptable to
the parties hereto, or the parties shall resolve any such disagreement about
interpretation by submission to arbitration as provided hereunder.
6.3 After the royalty payment due as aforesaid has
been set, Cosmar shall immediately make payment of the amount due, plus interest
at the rate of ten (10%) per annum from the date payment was initially due, all
as determined by the Independent Firm.
6.4 All fees and expenses of any Payment Audit or
Independent Audit shall be paid by Licensor; provided, however, that if any
additional amount claimed by Licensor, after any Payment Audit, is paid or
payable by Cosmar and the additional amount paid or payable exceeds by more than
three (3%) percent the amount previously paid by Cosmar with respect to the
period audited, or is not paid and Cosmar does not name an Independent Firm as
required above, or if the royalty which should have been paid during the audited
period, as determined by the Independent Audit, is greater than the actual
royalty payments made by Cosmar during the period audited, and the incremental
amount exceeds by more than three percent (3%) the actual amount paid by Cosmar,
then the reasonable fees and expenses of the Payment Audit and any Independent
Audit shall be paid by Cosmar. Licensor shall be entitled to a maximum of one
(1) Payment Audit in any one Royalty Year; provided, however, that any Payment
Audit the costs of which are required to be borne by Cosmar shall not count for
purposes of the foregoing limitation.
6.5 During the Payment Audit, all periods covered by
this Agreement not previously the subject of a Payment Audit may be examined and
no more. Notwithstanding any contrary provision herein, no firm which has
previously performed an Independent Audit shall by virtue of that fact alone be
disqualified from performing an Independent Audit.
7. Improvements.
If during the term of this Agreement, Licensor makes any
Improvement of the Licensed Products and/or the Patented Process, or becomes the
owner of any new Improvements with respect thereto, then it shall communicate
such Improvements to Cosmar and the same shall automatically become part of the
Licensed Property and be within the scope of this Agreement without additional
compensation.
8. Representations and Warranties of Licensor.
Licensor represents and warrants that as of the date
of the execution of this Agreement:
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8.1 Licensor has the exclusive right to use and
practice the inventions disclosed in the Patents, free and clear of any liens,
encumbrances, licenses (other than Licensor's agreement with Xx. Xxxxxx and this
Agreement) or, to the best of Licensor's knowledge, claims of any nature
relating to or affecting Licensor's right to use and practice such inventions,
and has made no agreement with respect to the Patents or Licensor's related
know-how disclosed to Cosmar by Licensor hereunder (relating to the storage,
shelf-life, packaging and marketing of Licensed Products) which is in conflict
with this Agreement;
8.2 Except as previously disclosed to Cosmar in
writing, Licensor has received no notice, written or oral, of any action or
claim with respect to the product safety or efficacy of any of the Licensed
Product, either as a whole or as to any component thereof, nor has Licensor
received any report relating to the same;
8.3 Licensor has not at any time filed, or caused to
be filed, applications for patents, or obtained in its name, or caused to be
obtained in the name of others, any patents in the United States other than the
Patents, or filed in any foreign country any patent or similar applications or
registrations with respect to the Licensed Products, the Patented Process, or
any Improvements thereof.
9. Representations and Warranties of Cosmar.
Cosmar represents and warrants to Licensor as follows:
9.1 Cosmar is a corporation duly organized, validly
existing and in good standing under the laws of the State of California.
9.2 The execution, delivery and performance of this
Agreement by Cosmar have been duly authorized by all necessary corporate action.
This Agreement has been duly executed by Cosmar and constitutes a valid and
legally binding obligation of Cosmar enforceable against Cosmar in accordance
with its terms, except to the extent that that enforceability may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating to or
affecting generally the enforcement of creditors' rights, and subject to the
effect of general principles of equity. Cosmar has obtained all necessary
authorizations, consents, licenses and approvals, governmental and otherwise,
presently required for the execution and delivery of this Agreement and
performance of its obligations hereunder and is in compliance therewith in all
material respects.
9.3 The execution, delivery and performance of this
Agreement by Cosmar in accordance with its terms will not, with or without the
giving of notice of the passage of time, or both, conflict with, result in a
default, right to accelerate or loss of rights under, or result in the creation
of any lien, claim or encumbrance on the assets of Cosmar or require the consent
of any third party or governmental authority, pursuant to (i) any provision of
the certificate of incorporation or by-laws of Seller or (ii) any franchise,
mortgage, indenture or deed of trust or any lease, license or other agreement
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or any law, rule, regulation, order, judgment or decree to which Cosmar is a
party or by which Cosmar (or any of its assets, properties, operations or
businesses) may be bound, subject to or affected.
9.4 There are no material claims, legal actions,
arbitrations, governmental investigations or other legal or administrative or
other proceedings, decrees or judgments in progress, pending or in effect, or to
the knowledge of Cosmar threatened, against or relating to Cosmar, its
properties, assets or business or the transactions contemplated by this
Agreement, except for two product liability claims which have been tendered to
Cosmar's insurance company, and which, even if resolved adversely to Cosmar,
will not, individually, or together, have a material adverse effect on Cosmar's
financial condition or its ability to perform its obligations under this
Agreement.
10. Marking.
Cosmar agrees that it will xxxx all Licensed Products made
and/or sold by it with property patent notice as specified by applicable patent
laws, namely, "Xxx No. 4,626,428" and "Xxx No. 4,669,491".
11. Patent Litigation Involving Third Parties.
11.1 Provided that Cosmar has made substantially all
payments required to be made by it hereunder and is otherwise not in material
default under this Agreement, Licensor shall defend solely at its own expense,
and hold Cosmar harmless from and against any actions and claims brought by
third parties against Licensor and/or Cosmar concerning Licensor's rights with
respect to the Patents and its related know-how, or the right of Licensor to
enter into this Agreement. The provisions of Section 4.7 of this Agreement
relating to indemnification procedures, including, without limitation, Cosmar's
obligation to give notice regarding claims and Licensor's right to defend, are
hereby incorporated in full in this section as if fully set forth herein.
11.2 Provided that Cosmar has made substantially all
payments required to be made by it hereunder and is otherwise not in material
default under this Agreement, Licensor shall defend solely at its own expense,
and hold Cosmar harmless from and by third parties in the United States against
Cosmar relating to Cosmar's exercise of any rights or licenses granted to it
pursuant to this Agreement. The provisions of Section 4.7 of this Agreement
relating to indemnification procedures, including, without limitation, Cosmar's
obligation to give notice regarding claims and Licensor's right to defend, are
hereby incorporated in full in this section as if fully set forth herein.
11.3 In the event either Licensor or Cosmar discovers
any infringement of the Patents or related know-how by a third party in the
Licensed Markets, the other party shall be promptly notified of such
infringement. Except as
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hereinafter provided, Licensor shall not create any controversy with an alleged
infringer without Cosmar's prior written consent. Cosmar may, at its option and
at its sole expense, through attorneys of its own selection, take appropriate
action to terminate or prevent the infringement. In the event of any legal
action initiated by or with the prior written consent of Cosmar and relating to
an infringement by a third party of the Patents or related know-how in any of
the Licensed Markets, all costs and expenses of such legal action shall be paid
by Cosmar and all recoveries shall be retained by Cosmar. If Cosmar takes no
action within one hundred twenty (120) days of the discovery of the
infringement, then Licensor may, at its option and at its sole expense, take
such action as it deems appropriate to protect its rights without interfering
with or adversely affecting the benefits enjoyed by Cosmar hereunder. Each
party, without cost or expense to itself, shall render all reasonable
cooperation and assistance to the other in connection with any xxxx action
brought by either party, including, without limitation, consenting to be named
or joined as a party therein to the extent that either party may be deemed a
necessary or indispensable party to a legal proceeding brought or proposed to be
brought by the other party. The parties may jointly initiate any legal action
upon such terms as they shall mutually agree.
11.4 In light of the fact that no foreign patent
applications or registrations were made by the inventor of the Licensed Products
and the Patented Process, it is possible that Cosmar's foreign sale of Licensed
Product may infringe upon the rights of one or more third parties in one or more
foreign countries ("Foreign Infringement"). In the event of any claim or dispute
between Cosmar and a third party regarding a Foreign Infringement, as a result
of which Cosmar becomes obligated pursuant to a written instrument, a copy of
which shall be furnished to Licensor, to make any payment, in the nature of a
royalty, license fee or otherwise, then as to, but only to the extent of, sales
of Licensed Product or similar product in the foreign country or countries
affected, Cosmar shall be relieved of any obligation to Licensor under Sections
4.2 and 5 of this Agreement, notwithstanding the provisions thereof to the
contrary; provided, however, that to the extent any such payments(s) in respect
of a Foreign Infringement is less than the Product Royalty payment(s) that would
otherwise be due, Cosmar shall make payment of the difference to Licensor when
the same would otherwise be due, to the greatest extent reasonably practicable.
The foregoing provisions shall not affect Licensor's obligations to defend
Cosmar against a claim of Foreign Infringement pursuant to Section 11.2 above.
12. Duration and Termination.
12.1 Unless otherwise terminated as hereinafter set
forth, this Agreement and the license granted hereby shall continue in full
force and effect until the expiration date of the last of the Patents.
12.2 If Cosmar shall at any time default in rendering
any of the statements required hereunder, in the payment of any monies due
hereunder, or in fulfilling any of the other material obligations hereof, and
such default shall not be cured
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within 10 days, in the case of a monetary default, or 45 days in the case of a
non-monetary default, after written notice thereof is giving by Licensor to
Cosmar, Licensor shall have the right to terminate this Agreement by giving
written notice of termination to Cosmar. Cosmar shall have the right to cure any
such default up to the effective date of termination.
12.3 Licensor shall have the right to terminate this
Agreement by giving written notice of termination to Cosmar in the event of any
one of the following, such termination being effective within 60 days of receipt
of such notice, unless such event is cured within such 60 day period:
(a) Insolvency or bankruptcy of Cosmar,
whether voluntary or involuntary;
(b) Appointment of a trustee or receiver for
Cosmar; or
(c) Any assignment by Cosmar for the benefit
of creditors.
12.4 In the event that substantially all claims of
the Patents are held invalid in an unappealed or unappealable decision of a
court of competent jurisdiction, then Cosmar's obligation to make any payment of
Product Royalty shall thereupon immediately cease and expire. This Agreement
shall otherwise continue in full force and effect, with only Sections 5 and 6
hereof being excised herefrom; provided, however, that either party may at any
time thereafter, at its sole discretion, elect to terminate this Agreement in
its entirety upon ten (10) days' written notice to the other party.
12.5 The expiration or early termination of this
Agreement for any cause whatsoever shall in no manner interfere with, affect or
prevent the collection by Licensor of any and all sums of money due to it under
this Agreement. Upon the expiration or termination of this Agreement or any
reason, Cosmar's payments required by Section 5, but not yet due, shall become
due and payable as if such Agreement had not been terminated, including, but not
limited to, payments on the sale of Cosmar's inventory of Licensed Product which
Cosmar shall be entitled to continue to sell in the ordinary course of its
business. Moreover, Cosmar shall have a limited, non-exclusive license (i) to
complete work-in-process subsequent to the date of expiration or termination
hereof, provided such work-in-process was undertaken prior to such date of
expiration or termination, subject to payment of the Product Royalty which
accrues on the sale of the Licensed Product resulting from the completion of
said work-in-process; and (ii) to produce Licensed Product subsequent to the
date of expiration or termination hereof if and as required to fulfill purchase
orders or other commitments, provided that such purchase orders were accepted or
such commitments made prior to such date of expiration or termination, subject
to payment of the Product Royalty on the sale thereof. The foregoing does not
confer upon Cosmar any right to manufacture Licensed Product.
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13. Miscellaneous.
13.1 Further Action. Each of the parties hereto
agrees that it will, at any time, and from time to time, after the date hereof,
upon the request of the other party, do, execute, acknowledge and deliver, or
will cause to be done, executed acknowledged and delivered, all such further
acts, deeds, assignments, transfers, conveyances, powers of attorney and
assurances as may be required to effectuate the provisions and intent of this
Agreement.
13.2 Notices. All notices, consents, requests,
demands, and other communications hereunder shall be in writing and shall be
deemed to have been duly given or delivered if delivered personally or mailed by
registered or certified mail, return receipt requested, with first class postage
prepaid as follows:
(a) If to Cosmar, to:
Cosmar Corporation
00000 Xxxxx Xxxx
Xxxxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention: Mr. Aldran X. XxXxxx
with a copy to:
Reinstein, Pantell, Xxxxxxx & Xxxx
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
(b) If to Licensor, to:
The Nail Consultants, Ltd.
0000 X. Xxxx Xxxxxx Xxxx
Xxxxx 0
Xxxxxxx, Xxxxxxx 00000
Attention: Xx. Xxxxx Xxxxxx
with a copy to:
Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx
1290 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, Esq.
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or to such other address as Cosmar or Licensor shall have last designated by
notice to the other party. All notices mailed shall be deemed to have been given
or received when actually received or when acceptance of such notice has been
declined.
13.3 Modification. This Agreement contains the entire
agreement between the parties with respect to the transactions contemplated
herein and shall not be modified or amended except by an instrument in writing
signed by or on behalf of the parties hereto. No course of prior dealings
between the parties and no usage of the trade shall be relevant or admissible to
supplement, explain or vary any of the terms of this Agreement. Acceptance of,
or acquiescence in, a course of performance rendered under this or any prior
agreement shall not be relevant or admissible to determine the meaning of this
Agreement even though the accepting or acquiescing party has knowledge of the
nature of the performance and an opportunity to make objection. No other
representations, understandings or agreements have been made or relied upon in
the making of this Agreement other than those specifically set forth herein.
13.4 California Law to Govern. This Agreement shall
be governed by and construed and enforced in accordance with the laws of the
State of California applied to agreements to be fully performed within the State
of California.
13.5 Attorneys' Fees. In the event of any
controversy, dispute or claim arising out of, or relating to this Agreement, the
prevailing party in any litigation or arbitration shall be entitled to receive
reimbursement for all of its reasonably incurred attorneys' fees, costs and
expenses of such litigation or arbitration. In the event of litigation or
arbitration which results in a final judgment or award, the prevailing party
shall be that party who obtains such judgment or award in its favor. A judgment
or award shall be deemed final after all rights of appeal have been exhausted.
13.6 Arbitration. Any controversy, dispute or claim
arising out of, or relating to, this Agreement shall, unless resolved by
agreement of the parties, be settled by arbitration in Los Angeles, California
in accordance with the Rules of the American Arbitration Association then
existing. This agreement to arbitrate shall be specifically enforceable under
the prevailing arbitration law of the State of California. For the purpose of
enforcing an arbitration award granted herein or enforcing any other provisions
or rights hereunder or connected hereto, the parties hereby agree and consent to
in personam jurisdiction of the courts of the State of California, United States
of America. The award rendered by the arbitrator(s) shall be final and judgment
may be entered upon the award in any court of the State of California having
jurisdiction of the matter.
13.7 Waiver. No waiver by either party hereto,
whether express or implied, of any of its rights under any provision of this
Agreement at any particular time shall constitute a waiver of such party's
rights under such provision at any other time or a waiver of such party's rights
under any other provision of this Agreement. No failure by either party hereto
to take any action against any breach of this Agreement or
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default by the other party hereto shall constitute a waiver of the former
party's right to enforce any provision of this Agreement or to take action
against such breach or default or any subsequent breach or default by such other
party.
13.8 Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and upon their respective
successors and assigns. Each party shall have the right freely to assign,
transfer or subcontract this Agreement or any of its rights or obligations
hereunder without the consent of the other party.
13.9 Severability. Any provisions of this Agreement
which may be prohibited by law or otherwise held invalid shall be ineffective
only to the extent of such prohibition or invalidity and shall not invalidate or
otherwise render ineffective the remaining provisions of this Agreement.
13.10 Relationship of the Parties. The parties hereto
are independent contractors and nothing contained in this Agreement shall be
deemed or construed to create the relationship of partnership or joint venture
or principal and agent or of any association or relationship between the parties
other than that of independent licensor and licensee, and vendor and vendee of
the Licensed Products.
13.11 Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.
13.12 Expenses. Licensor and Cosmar shall each bear
their respective expenses in connection with the transactions herein
contemplated.
13.13 Section Headings. Section headings shall not be
of any force or effect whatsoever in the interpretation of this Agreement and
shall be deemed inserted and used solely for the convenience of the parties.
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13.14 Counsel. The undersigned have carefully read
the foregoing and understand the provisions thereof, and, having consulted or
had the opportunity to consult with their separate counsel, acknowledge that
they have signed the same of their own free act and deed.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first herein written.
COSMAR CORPORATION
By /s/ Aldran X. XxXxxx
------------------------------
Aldran X. XxXxxx
President
THE NAIL CONSULTANTS, LTD.
By /s/ Xxxxx Xxxxxx
------------------------------
Xxxxx Xxxxxx
President
