U.s. Trademark License Agreement

U.S. TRADEMARK LICENSE AGREEMENT


"HAND HELD - HARD GOODS"


INTERNATIONAL APPAREL MARKETING CORP.
D/B/A NAUTILUS WEAR INTERNATIONAL


AND


BOLLINGER INDUSTRIES, INC.


(5/95) 2


TABLE OF CONTENTS
----------------- SUMMARY OF TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . 1

AGREEMENT
--------- ARTICLE I - LICENSE TO USE . . . . . . . . . . . . . . . . . . . . . 3
1. Grant of License . . . . . . . . . . . . . . . . . . . . . . 3 2. Licensed Territory Defined . . . . . . . . . . . . . . . . . 5 3. Licensee's Best Efforts. . . . . . . . . . . . . . . . . . . 6 4. Licensor's Further Right to License. . . . . . . . . . . . . 6 5. Approvals Regarding Products Other than
Licensed Products. . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II - TERM OF AGREEMENT. . . . . . . . . . . . . . . . . . . . 10
1. Initial Term and Option Term Defined . . . . . . . . . . . . 10 2. Licensed Term and Year Defined . . . . . . . . . . . . . . . 11
ARTICLE III - MINIMUM SALES . . . . . . . . . . . . . . . . . . . . . 11
1. Minimum Sales. . . . . . . . . . . . . . . . . . . . . . . . 11 2. Shipment Minimums. . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE IV - TRADEMARK ROYALTY. . . . . . . . . . . . . . . . . . . . 12
1. Royalty Payment. . . . . . . . . . . . . . . . . . . . . . . 12
A. Net Sales . . . . . . . . . . . . . . . . . . . . . . . 13
B. Discounted Goods . . . . . . . . . . . . . . . . . . . 13 2. Guaranteed Minimum Trademark Royalty . . . . . . . . . . . . 14 3. Advance Trademark Royalty Payment. . . . . . . . . . . . . . 15
ARTICLE V - ADVERTISING PAYMENT . . . . . . . . . . . . . . . . . . . 16
1. Advertising Payment Defined. . . . . . . . . . . . . . . . . 16 2. Guaranteed Minimum Advertising Payment Defined . . . . . . . 17 3. Advertising Approval . . . . . . . . . . . . . . . . . . . . 17
ARTICLE VI. PAYMENT REPORTS AND LATE PAYMENTS . . . . . . . . . . . . 18
1. Payment Report Required. . . . . . . . . . . . . . . . . . . 18 2. Calculation of Minimum Sales . . . . . . . . . . . . . . . . 18 3. Late Reports and Payments. . . . . . . . . . . . . . . . . . 18 4. Multiple License . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE VII. QUALITY CONTROL. . . . . . . . . . . . . . . . . . . . . 20
1. Quality Control Standards Defined. . . . . . . . . . . . . . 20 2. Product Approval Procedure . . . . . . . . . . . . . . . . . 21 3. Quality Control. . . . . . . . . . . . . . . . . . . . . . . 23 4. Inspection of Operation . . . . . . . . . . . . . . . . . . 24


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5. Compliance With Laws . . . . . . . . . . . . . . . . . . . . 25
ARTICLE VIII. USE OF LICENSED MARKS . . . . . . . . . . . . . . . . . 25
1. Use Defined . . . . . . . . . . . . . . . . . . . . . . . . 25 2. Licensed Mark Use Approval Procedure . . . . . . . . . . . . 28
ARTICLE IX - TRADEMARK, COPYRIGHT AND OTHER RIGHTS
AND USES. . . . . . . . . . . . . . . . . . . . . 29
1. Ownership Rights Defined . . . . . . . . . . . . . . . . . . 29 2. Copyright Notices. . . . . . . . . . . . . . . . . . . . . . 30 3. Confirmation of Ownership. . . . . . . . . . . . . . . . . . 31 4. Trademark Registration . . . . . . . . . . . . . . . . . . . 31 5. Agreement Not to Contest . . . . . . . . . . . . . . . . . . 31 6. Cessation of Rights. . . . . . . . . . . . . . . . . . . . . 32
ARTICLE X. MARKETING AND DISTRIBUTION OF THE
LICENSED PRODUCTS. . . . . . . . . . . . . . . . . . . . . . 32
1. Participation Pledged. . . . . . . . . . . . . . . . . . . . 32 2. Policy of Wholesale Sale . . . . . . . . . . . . . . . . . . 33 3. Merchandiser / Designer. . . . . . . . . . . . . . . . . . . 35 4. Appearance of One Product Line . . . . . . . . . . . . . . . 35
ARTICLE XI. LABELLING . . . . . . . . . . . . . . . . . . . . . . . . 36
1. Labelling. . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XII. LICENSEE'S BOOKS AND RECORDS . . . . . . . . . . . . . . 37
1. Proper Books and Records . . . . . . . . . . . . . . . . . . 37 2. Annual Financial Statement . . . . . . . . . . . . . . . . . 38 3. Right to Audit . . . . . . . . . . . . . . . . . . . . . . . 39 4. Confidentiality of Financial Records . . . . . . . . . . . . 40
ARTICLE XIII. INSURANCE AND INDEMNIFICATION . . . . . . . . . . . . 41
1. Product, General and Public Liability Insurance . . . . . . 41 2. Indemnification . . . . . . . . . . . . . . . . . . . . . . 42 3. Effect of Approval . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XIV. EXPIRATION, TERMINATION
AND WINDING UP . . . . . . . . . . . . . . . . . . . . . . . 44
1. Cessation of Agreement . . . . . . . . . . . . . . . . . . . 44 2. Termination Procedure. . . . . . . . . . . . . . . . . . . . 44 3. Other Grounds For Termination. . . . . . . . . . . . . . . . 45 4. Winding-Up . . . . . . . . . . . . . . . . . . . . . . . . . 48
ARTICLE XV - INFRINGEMENTS. . . . . . . . . . . . . . . . . . . . . . 51


ii 4 1. Third Party Infringements. . . . . . . . . . . . . . . . . . 51
ARTICLE XVI - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . 51
1. Limitation of Relationship . . . . . . . . . . . . . . . . . 51 2. Specific Performance to Obtain Cooperation . . . . . . . . . 52 3. Uniqueness of Licensed Marks, Equitable and
Legal Relief . . . . . . . . . . . . . . . . . . . . . . . . 52 4. License Limited to Licensee. . . . . . . . . . . . . . . . . 53 5. Limitation on Use of Other Trademarks. . . . . . . . . . . . 54 6. Notices and Communications . . . . . . . . . . . . . . . . . 54 7. Waiver of Rights . . . . . . . . . . . . . . . . . . . . . . 55 8. Confidentiality of Information . . . . . . . . . . . . . . . 55 9. Licensor's Right to Appoint Representatives. . . . . . . . . 57 10. Complete Agreement; No Oral Modification;
Severability; Surviving Provisions . . . . . . . . . . . . . 58 11. Governing Law and Jurisdiction . . . . . . . . . . . . . . . 58 12. Warranties of Corporate Fitness. . . . . . . . . . . . . . . 59
Signatures of Parties . . . . . . . . . . . . . . . . . . . . . . . . 60


EXHIBITS
--------
EXHIBIT A - LICENSED MARKS. . . . . . . . . . . . . . . . . . . . . . 61
EXHIBIT B - QUARTERLY REPORT FORM . . . . . . . . . . . . . . . . . . 62
EXHIBIT C - LICENSED PRODUCT APPROVAL FORM. . . . . . . . . . . . . . 64
EXHIBIT D - LICENSED MARKS USE APPROVAL FORM. . . . . . . . . . . . . 65
EXHIBIT E - MINIMUM REQUIREMENTS. . . . . . . . . . . . . . . . . . . 66
EXHIBIT F - LICENSED PRODUCT DEFINED. . . . . . . . . . . . . . . . . 67


SCHEDULES
---------
SCHEDULE 1 - List of All trademarks, tradenames or other . . . . . . 68
identifying words or symbols used by Licensee
and exempted from Article XVI, Paragraph 5.


DEFINITIONS
-----------
Advertising Payment - . . . . . . . . . . . . . . . . . . . . . . . . 16 Agreement - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Discounted Goods -. . . . . . . . . . . . . . . . . . . . . . . . . . 13 GMAP -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 GMTR -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


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Initial Term -. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Inventory - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 License - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Licensed Marks -. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Licensed Term - . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Licensed Products - . . . . . . . . . . . . . . . . . . . . . . . . . 4 Licensed Territory -. . . . . . . . . . . . . . . . . . . . . . . . . 5 LICENSEE -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 LICENSOR -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Master License -. . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Net Sales - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Notice Address -. . . . . . . . . . . . . . . . . . . . . . . . . . . 54 Option Term - . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Related Facility -. . . . . . . . . . . . . . . . . . . . . . . . . . 24 Trademark Royalty - . . . . . . . . . . . . . . . . . . . . . . . . . 13 Use - . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Year -. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11


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SUMMARY OF TERMS


THE LICENSED MERCHANDISE:


CATEGORY A = weight benches (on a non-exclusive basis), exercise mats, weightlifting bars, non-cast iron dumbbell sets, jumpropes, handgrips, ankle weights, aerobic steps, neoprene trimming products.


CATEGORY B = cast iron weight sets, trampolines.


TERM: May 1, 1995 to August 31, 1997, with a three (3) year option, if exercised.


THE TERRITORY:


The United States of America, its Commonwealths and Territories.


NET SALES MINIMUMS:


$1,500,000 for the first year;


$2,000,000 for the second year.


ROYALTY RATE:


Five percent (5%) of Net Sales for Category A Licensed Products;


Three and One/half percent (3.5%) of Net Sales for Category B Products.


GUARANTEED MINIMUM TRADEMARK ROYALTY:


$ 75,000 for the first year;


$100,000 for the second year.


ADVERTISING ROYALTY:


One and one/half percent (1.5%) of Net Sales for both Category A and B Licensed Products.


GUARANTEED MINIMUM ADVERTISING PAYMENT:


$22,500 for the first year;


$30,000 for the second year.


THE SUMMARY OF TERMS ARE SUBJECT TO AND MODIFIED BY THE PROVISIONS OF THE AGREEMENT. TO THE EXTENT THAT THERE IS ANY CONFLICT BETWEEN THE SUMMARY OF TERMS AND THE BODY OF THE AGREEMENT, THE BODY SHALL CONTROL.


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TRADEMARK LICENSE AGREEMENT


This TRADEMARK LICENSE AGREEMENT (the "Agreement") is made and entered into this 1st day of May, 1995 by and between the following parties:


1. The LICENSOR: INTERNATIONAL APPAREL MARKETING CORPORATION d/b/a Nautilus Wear International, a New York corporation, having its principal office at 80 West 40th Street, Suite 80, New York, New York, 10018.


2. The LICENSEE: BOLLINGER INDUSTRIES INC, a Delaware corporation, having its principal office at 222 West Airport Freeway, Irving, TX 75062.
W I T N E S S E T H:


(A) WHEREAS, LICENSOR warrants and represents that it has been granted the exclusive right to enter into and administer sublicenses under a Master License with Nautilus International Inc. ("NII") and Alchem Capital Corp. ("ACC"), the trademark owners, (hereinafter the "Master License"), with respect to the marks and logos listed and shown on Exhibit "A" which is attached hereto and incorporated herein by reference. The marks and logo depictions listed and shown on Exhibit "A", together with any variations thereof or additional marks which may hereafter be approved in writing by LICENSOR for use by LICENSEE in connection with the sale of the Licensed Products (as hereinafter defined), subject to any conditions set forth in any written approval, shall hereinafter be referred to as the "Licensed Marks"; and


(B) WHEREAS, LICENSEE desires to obtain an exclusive right to


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use the Licensed Marks in connection with the manufacture and sale of the Licensed Products (the "License") in the Licensed Territory (as hereinafter defined) and LICENSOR is willing to grant to LICENSEE such License under the terms and conditions hereinafter specifically set forth; and


(C) WHEREAS, LICENSEE acknowledges that the Licensed Marks and associated goodwill are of a great significance and value to LICENSOR and that strict adherence to the quality control standards provided in this Agreement is essential to the maintenance of the significance and value of the Licensed Marks and associated goodwill; and


(D) WHEREAS, LICENSEE pledges its reasonable and active cooperation in and support of LICENSOR'S programs, the spirit and intent of which are to maintain and enhance the value and significance of the Licensed Marks throughout the world.


NOW, THEREFORE, in consideration of their mutual covenants, undertakings and promises contained herein, and other good and valuable consideration, the receipt and adequacy of which the parties hereby acknowledge, LICENSOR and LICENSEE agree as follows:


ARTICLE I


LICENSE TO USE


1. Grant of License


(A) LICENSOR grants to LICENSEE the sole and exclusive right during the Licensed Term (as hereinafter defined) in the Licensed Territory to manufacture and sell to retailers the


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products bearing the Licensed Marks as set forth on Exhibit "F" attached hereto (hereinafter referred to individually or collectively, as the case may be, as the "Licensed Products") in accordance with the provisions of this Agreement, provided that LICENSEE is in full compliance with all of the terms and conditions of this Agreement including obtaining prior quality control approval pursuant to Article VII. LICENSEE may engage in the retail sale of the Licensed Products only if retail selling is done in strict compliance with all the terms and conditions set forth in this Agreement, and if LICENSEE obtains LICENSOR'S prior written approval which shall be at LICENSOR'S sole discretion.


(B) LICENSEE shall have the right of first refusal with respect to the granting by LICENSOR after the date of this Agreement of an exclusive right to use the Licensed Marks on or in connection with the manufacture and sale to retailers of glove and/or weightlifting/fitness belts (i) if an existing license for either of these categories in the Territory expires or terminates and/or LICENSOR desires to license either of these categories in any of the territories included in Paragraph (2)(B) of this Article; (ii) if LICENSOR desires to continue to license said category to a third party; and (iii) if LICENSEE is in full compliance with all the terms and conditions of this Agreement at the time LICENSEE exercises said rights of first refusal, if at all.


LICENSOR shall notify LICENSEE in writing of the availability of the exclusive right to use the Licensed Marks as


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set forth in this Agreement, and such notice shall include the specific terms and conditions of such grant. LICENSEE shall have thirty (30) days after delivery of such notice in which to determine whether it will exercise the right to accept such exclusive license on the terms so offered. If LICENSEE fails to notify LICENSOR in writing of its intention to accept such exclusive license on the terms and conditions so offered within such thirty (30) day period, LICENSEE shall be deemed to have elected not to exercise such right.


2. Licensed Territory Defined:


(A) This License shall be specifically limited to the use of the Licensed Marks on or in connection with the Licensed Products sold and distributed solely in the United States of America, its Commonwealths and Territories, (the "Licensed Territory"). LICENSEE shall not sell the Licensed Products to any person or entity LICENSEE knows, should have known, or had reason to believe would sell them outside the Licensed Territory.


(B) LICENSEE shall have the right of first refusal with respect to the granting by LICENSOR after the date of this Agreement to an exclusive right to use the Licensed Marks on or in connection with the manufacture and sale to retailers of the Licensed Products in any of the following territories - Canada, Mexico, Australia and New Zealand, provided LICENSEE is in full compliance with all the terms and conditions of this Agreement at the time LICENSEE exercises said rights of first refusal, if at all. LICENSEE'S right of first refusal to the additional


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territories shall be subject to the procedure set forth in Paragraph (1) (B) above.


3. LICENSEE'S Best Efforts:


During the Licensed Term, LICENSEE shall use its best efforts to exploit the License granted herein throughout the Licensed Territory, including, but not limited to, selling a representative quantity of each of the Licensed Products in the Licensed Territory; offering for sale Licensed Products so that they may be sold to the consumer on a timely basis; maintaining an inventory of Licensed Products adequate to meet Licensee's obligations under this Agreement; coordinating the characteristics and marketing of its Licensed Products with the products of LICENSOR'S other licensees; cooperating with LICENSOR and any of its licensees' marketing and sales programs; aiding LICENSOR in its timely giving of technical assistance and know-how to its other licensees; sharing of information regarding fabric and other resources, design merchandising and marketing ideas, concepts and materials with LICENSOR'S other licensees; the joint purchasing of fabric and other materials where price discounts, fabric color consistency or other advantages are available from joint purchasing; and offering a collection (as referred to in Article VII) of the Licensed Products under the Licensed Marks for sale in the Licensed Territory at all times, but no less than twice each calendar year.


4. LICENSOR'S Further Right to License


(A) Except as set forth herein, during the Licensed Term (excluding the Winding-up Period set forth in Article XIV,


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Paragraph 4), LICENSOR shall not sell products identical to the Licensed Products under the Licensed Marks in the Licensed Territory, nor grant a license to another person or entity, effective during the Licensed Term, to sell, under the Licensed Marks, products identical to the Licensed Products in the Licensed Territory.


(B) Notwithstanding the foregoing, LICENSOR or its designee shall have the right to use, license and sublicense to others the right:


(i) to manufacture and sell the Licensed Products under the Licensed Marks in any area of the world other than the Licensed Territory;


(ii) to manufacture or sell products of any and all types and descriptions, other than the Licensed Products, in any area of the world including the Licensed Territory; and


(iii) to manufacture and sell a limited amount of Licensed Products under the Licensed Marks as premium items. Such premiums shall only be produced in limited quantities to promote the Licensed Marks and shall in no event be re-sold at retail. LICENSEE shall be given a right of first refusal to manufacture the premium items, provided that LICENSEE agrees to do so at a competitive wholesale price, that the quality of the premium items is in keeping with the quality of LICENSEE'S Licensed Products, and that LICENSEE is not in default of any of the terms or conditions of this Agreement at the time said right of first refusal is exercised. All premium items manufactured by LICENSEE,


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if any, shall be treated as Licensed Products and subject to the terms and conditions of this Agreement during the limited time period in which they are manufactured and sold.


(C) LICENSOR, or its designee, shall have the right to manufacture and sell, in the Licensed Territory under the Licensed Marks, any unique and/or novel product that falls within the definition of Licensed Products; provided, however, that LICENSOR shall give LICENSEE reasonable written notice of its intent to so manufacture and sell, and LICENSEE shall have declined to manufacture and sell such product in its next collection by either giving written notice of its rejection or by failing to respond in writing to LICENSOR within fourteen (14) days of receipt of the aforesaid notice.


5. Approvals Regarding Products Other Than Licensed Products:


(A) LICENSEE acknowledges that LICENSOR has previously licensed the use of the Licensed Marks in connection with products other than the Licensed Products to other manufacturers and that LICENSOR shall grant additional licenses in the future for territories or products that are not presently licensed and that are not within the scope of this License.


(B) Approval (which shall in all cases be in writing) of LICENSOR for LICENSEE to manufacture a particular style, design or product, or to distribute within the scope of the License, shall not constitute a continuing approval or waiver of the right of LICENSOR to later disapprove any style, design, product or


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distribution area.


(C) For the purpose of this Paragraph 5(C), when the term "LICENSEE" or "Licensees" is used, it is intended that said terms mean the whole or part of the whole group of all of LICENSOR'S licensees, which includes LICENSEE. LICENSEE hereby acknowledges that, due to the nature of the industry, precise definition of products is sometimes not possible. LICENSEE therefore agrees to accept at all times the sole reasonable judgement of LICENSOR with respect to whether a particular style, design or product is a Licensed Product within the scope of the License. LICENSEE agrees that it will not market, either directly or indirectly, any style, design or product which LICENSOR, in its sole reasonable discretion, determines is not a Licensed Product within the scope of the License. LICENSEE further agrees that in the event of a dispute between any of the "Licensees" arising out of or based upon a claim that a product being manufactured or sold as a Licensed Product by one "Licensee" infringes upon the license granted by LICENSOR to another "Licensee", regardless of the legal grounds upon which the cause of action or claim is based, LICENSOR shall investigate the claim and LICENSEE shall cooperate in all respects with said investigation. LICENSOR shall then submit to any affected party a written determination, which may include a procedure for mitigating any losses that might occur. Said determination and procedure shall be conclusive on all parties including LICENSEE, and all shall be bound thereby witho ...