This Trademark License ("License") is made and entered into this __, day of August, 1997 by and between , LOLA, INC., a California corporation, hereinafter referred to as "Licensor", and BISCAYNE APPAREL INTERNATIONAL, Inc., a Delaware corporation, hereinafter referred to as "Licensee", with reference to the following:
A. Licensee is in the business of manufacturing, selling and distributing certain outerwear (the "Licensed Products"), as more particularly set forth on Schedule "A";
B. Licensee desires to obtain from Licensor an exclusive license to manufacture, market, sell, distribute and advertise the Licensed Products in the territories set forth on Schedule "A", (the "Licensed Territory") and to use the Trademarks, as hereinafter defined, on or in association with the Licensed Products;
C. Licensor is the owner of the Trademarks and other related original works of art as stylized, collectively referred to herein as the "Trademarks", as more fully set forth on Schedule "A", attached hereto and incorporated by this reference. Licensor has obtained a trademark registration for the mark "XOXO", Registration Number 2,009,243 for goods in International Class 25 for men's, women's and children's clothing and "XOXO IN AMERICA AND ABROAD", Registration Number 2,043,508, for goods in International Class 25 for women's and children's clothing.
D. Licensee represents that it has the ability to manufacture, market, sell, distribute and advertise the Licensed Products in the territories set forth on Schedule "A" hereto (the "Licensed Territory") and to use the Trademarks on or in association with the Licensed Products;
Now, Therefore, in consideration of their respective promises and agreements made herein, Licensor and Licensee agree as follows:
1.1 GRANT OF LICENSE.Subject to the terms and conditions of this License, Licensor hereby grants to Licensee the exclusive right to use the Trademarks in the Licensed Territory (as defined below), solely to manufacture, market, sell, distribute and advertise the Licensed Products set forth on Schedule "A", during the Term of this Agreement. The License created hereby only allows the Licensee to
market, sell, distribute and advertise the Licensed Products for sale at wholesale and does not permit Licensee to engage in the retail sale and/or retail marketing of the Licensed Products. The License granted herein does not extend to any other product or service. Licensor shall not grant to anyone the license to manufacture Licensed Products for sale at retail.
1.1.1 Licensor additionally grants the Licensee the exclusive license, subject to the terms and conditions of this Agreement, to use the Trademarks on or in association with the Licensed Products in the Licensed Territory on packaging, promotional and advertising material associated therewith.
1.2 DETERMINATION OF LICENSED PRODUCTS. Licensee agrees that Licensor shall be entitled to reasonably determine whether a particular style or design of a Licensed Product may be offered for sale by Licensee in accordance with Paragraph 8 herein. Licensee agrees that it will not manufacture, market, sell, distribute and advertise, either directly or indirectly, any style, design or product which Licensor in its reasonable discretion disapproves.
1.3 APPROVAL REGARDING OTHER PRODUCTS ETC. Licensee acknowledges that Licensor may grant additional licenses in the future for territories, products and categories not presently licensed and not within the scope of this License. Permission of Licensor for Licensee to manufacture a particular style, design or product, or to distribute the Licensed Products within an area, which is not, in the opinion of the Licensor, within the scope of the License, shall not constitute a continuing approval or a waiver of the right of Licensor to later disapprove any style, design, product, or distribution area.
1.4 USE/OWNERSHIP OF TRADEMARKS. Other than as expressly set forth in this License, Licensee has absolutely no right, title or interest in or to the Trademarks or the use thereof. Licensee acknowledges that it is only acquiring the right to use the Trademarks in connection with (i) the manufacture of the Licensed Products, and (ii) the marketing, advertising, distribution and sale of the Licensed Products in the Licensed Territory, for the Term set forth in this Agreement and subject to the terms hereof. Upon termination of the License, Licensee shall cease all use of the Trademarks except as provided in Paragraph 18. Licensee shall not apply anywhere in the world, to register any copyright, trademark or trade name that in any way mentions or uses the Trademarks or any trademark or trade name that is confusingly similar to the Trademarks or trade names licensed hereunder, without the express prior written consent of the Licensor.
1.5 OWNERSHIP OF TRADEMARKS. Licensor is the sole owner of the Trademarks in the Licensed Territory and all applications and/or registrations for the Trademarks in the Licensed Territory; and Licensor is and will be, to the best of its knowledge, the exclusive owner of all designs, images, art work, logos, drawings,
illustrations, trade names, and the like, which it may provide to Licensee from time to time pursuant to this Agreement. Licensee acknowledges that it is often difficult, particularly in foreign countries, to obtain clear, registered title to trademarks and other intellectual property rights. Accordingly, subject to the provisions of Paragraph 13, Licensee agrees that the rights granted herein exist only to the extent that Licensor has such rights, and no warranty, express or implied, is made with respect thereto or with respect to the rights of any third parties that may conflict with the rights granted herein. Licensee agrees that the Trademarks and all rights, registrations and entitlement thereto, together with all applications, registrations and filings are and shall remain the sole and exclusive property of Licensor.
1.6 USE OF NAMES. Except as authorized pursuant to this License, and only to that extent, Licensee shall not use the Trademarks and/or name "XOXO", "XOXO In America and Abroad" or "LOLA" or any confusingly similar or substantially similar word or names in its business name or otherwise in any other manner, without the prior written consent of Licensor.
1.7 BEST EFFORTS. Licensee shall use its best efforts to manufacture, market, sell, distribute and advertise the Licensed Products in order to meet the demand for the Licensed Products in the Licensed Territory and to uphold, protect and defend the image and reputation of the Licensed Products and the integrity of the Trademarks. Licensee further agrees to use its best efforts to manufacture and ship not less than eighty-five percent (85%) of all approved, confirmed orders for Licensed Products within a reasonable time of the delivery date specified in such orders.
2. LICENSED TERRITORY.
2.1 The Licensed products shall only be sold, marketed, distributed or delivered exclusively by Licensee, either directly or indirectly, in the Licensed Territory.
2.2 Licensee shall not, directly or indirectly, sell, market, distribute or deliver, the Licensed Products outside of the Licensed Territory without prior written consent of Licensor, which consent may be withheld in the sole and absolute discretion of the Licensor. Licensee shall not knowingly, directly or indirectly, sell, distribute or otherwise deliver or cause to be sold, distributed or delivered, the Licensed Products to any individual or entity who intends to, or is likely to, or to whom Licensee reasonably believes might, sell the Licensed Products outside the Licensed Territory.
2.3 Nothing contained herein shall in any way restrict or prohibit Licensor from licensing, marketing, manufacturing, selling or distributing the Licensed Products outside the Licensed Territory and Licensee shall have no rights therein.
3.1 INITIAL TERM. The initial term of this License is three (3) Years
commencing August 1, 1997 and terminating on June 30, 2001 ("Initial Term"), unless sooner terminated as provided herein. Each period during the Initial Term shall be as follows:
First Year August 1, 1997 through June 30, 1999
Second Year July 1, 1999 through June 30, 2000
Third Year July 1, 2000 through June 30, 2001
3.2 RENEWAL. Licensee has the option to extend the term of this License for an additional period of five (5) Years ("Option Period"). Each Year of the Option Period shall be for a period of twelve months commencing upon the expiration of the immediately preceding Year. Said option must be exercised by providing written notice to Licensor at least six (6) months and no more than nine (9) months, prior to the end of the Initial Term. Said option may only be exercised if Licensee is in full compliance with its obligations under this Agreement as of the time of exercise of the option and as of the date of commencement of the Option Period. In the event of any extension or renewal of this Agreement as provided herein, all terms and conditions of this Agreement shall remain in full force and effect, except as otherwise set forth in this Agreement. Should Licensor, at any time, exercise its right under this Agreement to terminate the rights of Licensee hereunder, thereafter Licensee shall not have any option to extend the term of this Agreement.
4. ROYALTY PAYMENTS. In consideration for the license granted pursuant to this Agreement, the Licensee shall pay to Licensor, each month, an amount equal to seven (7%) percent of the Net Sales of the Licensed Products, ("Royalty").
4.1 ADVANCE PAYMENT OF ROYALTY. Concurrently with the execution of this Agreement, the Licensee shall pay to Licensor a NON-REFUNDABLE advance in the amount of seventy-five thousand U.S. Dollars (US $75,000.00), which payment shall be credited against the Guaranteed Minimum Royalty Payment due for the first Year ONLY of the Initial Term, pursuant to Paragraph 4.4 below.
4.2 NET SALES. As used herein, "Net Sales" shall mean Licensee's gross sales (as determined by the gross invoice amount billed to customers) of the Licensed Products, whether or not actually paid for, less actual returns, freight, bona fide trade discounts and bona fide charge backs. No deduction shall be made for cash or other discounts, or reserves for charge backs or sales discounts. No costs incurred in the manufacturing, selling, advertising and/or distribution of the Licensed Products or in the payment by Licensee of any taxes of any nature whatsoever shall be deducted from the gross sales amounts or from any royalty payable to Licensor, except in the event of a withholding tax on royalties due to Licensor, nor shall any deduction be allowed for any
uncollectible accounts or allowances.
4.3 GUARANTEED MINIMUM NET SALES. During the Initial Term of this Agreement Licensee guarantees that its Net Sales shall be in the amount set forth on Schedule "A" during each Year.
4.4 GUARANTEED MINIMUM ROYALTY PAYMENT. Regardless of whether or not Licensee achieves the required Guaranteed Minimum Net Sales determined pursuant to Paragraph 4.3 hereof, Licensee shall pay to Licensor a Guaranteed Minimum Royalty Payment for each Year during the term hereof, in accordance with the terms of Schedule "A" attached hereto (the "Guaranteed Minimum Royalty"). [For purposes of this Agreement, the "Royalty Payment", whether Guaranteed or Minimum, shall include the "Royalty" (7%) as defined above, and the amount due Licensor for "Advertising" (2%) as set forth in paragraph 5 below, for a total Royalty Payment of 9%.] If at the end of any Year during the term hereof, Licensee has not paid to Licensor Royalty Payments equaling or exceeding the Guaranteed Minimum Royalty Payment for that Year, Licensee shall pay to Licensor the balance due within thirty (30) days of the end of the applicable period.
4.5 MANNER OF PAYMENT; MONTHLY STATEMENTS. The Royalties due Licensor shall be calculated and paid within 20 calendar days of the end of each calendar month during the term hereof, for Net Sales invoiced and delivered during the immediately preceding calendar month, (the "Royalty Period) . Concurrently with the payment of each Royalty Payment, Licensee shall deliver to Licensor a written monthly statement of accounting showing any pre-payment of royalties made by Licensee to Licensor and all of the Licensed Products sold and delivered during the applicable period covered by the Royalty Payment. Said statement shall be in the form and shall contain the information as Licensor may from time to time direct. Such royalty statement shall be certified as accurate by a duly authorized officer of Licensee, reciting on a territory by territory basis, the stock number, item, units sold, description, quantity shipped, gross invoice, amount billed customers less discounts, allowances, returns and reportable sales for each Licensed Product. Such statements shall be furnished to Licensor whether or not any Licensed Products were sold during the Royalty Period. Time is of the essence with respect to all payments herein and if payment is not timely made, an interest charge of prime (as determined by Bank of America when said payment was due) plus one (1%) percent, per annum, or the maximum legal rate, whichever is less, shall be added to the unpaid balance until said balance, plus accrued interest is paid in full.
4.5.1 Licensee's obligation to pay Licensor the Royalty Payment shall accrue upon the sale of the Licensed Products regardless of the time of collection by Licensee. For purposes of this Agreement, a Licensed Product shall be considered "sold" upon the date when such Licensed Product is billed, invoiced, shipped or paid for, whichever event occurs first.
4.5.2 If Licensee sells any Licensed Products to any party affiliated with Licensee, or in any way directly or indirectly related to or under the common control with Licensee, at a price less that the regular price charged to other parties, the Royalty Payment payable to Licensor shall be computed on the basis of the regular price charged to the other parties.
4.6 Upon termination of this Agreement by Licensor, other than pursuant to Section 17.1.1 hereof, all Royalty Payments, due Licensor, including any unpaid portions of the Guaranteed Minimum Royalty Payment, shall be accelerated and shall immediately become due and payable discounted to present value at the rate of ten percent per annum. Upon termination of this Agreement by Licensor pursuant to Section 17.1.1 hereof, no Guaranteed Minimum Royalty Payment shall become due for any period subsequent to the end of the Year in which the Licensee failed to achieve the Minimum Net Sales. Licensee's obligations to pay any Royalty Payment or Guaranteed Minimum Royalty Payment which accrued prior to expiration or termination of this Agreement shall survive such expiration or termination.
4.7 CURRENCY. All payments made pursuant to this License and all calculations of amounts under this License shall be in U.S. dollars, with all checks drawn on a U.S. bank, except as otherwise specifically provided in writing between the parties.
4.8 BOOKS, RECORDS AND REPORTS. Licensee shall keep true and accurate books of accounts and records in accordance with generally accepted accounting principles of all transactions with respect to the Licensed Products.
4.9 ANNUAL REPORTS OF SALES. For each Year during the term hereof, Licensee shall submit to Licensor a statement as well a year end statement for the period ending December 31. The year end statement shall be submitted by March 20th of each year for the previous calendar year and the statement for the full Year period shall be due 90 days after the end of such period. Each statement shall include a detailed and cumulative account of all transactions of the Licensed Products, including, without limitation, all sales, all returns, all bona fide trade discounts, all royalties paid and payable, all Licensed Products returned as substandard, and all orders canceled for non-delivery and such other information as Licensor may from time to time reasonably request. This report shall be certified to be correct by the Chief Executive Officer or the Chief Financial Officer of Licensee.
4.10 MULTIPLE LICENSE. In the event Licensee is or becomes a party to
more than one (1) license with Licensor, separate reports and records shall be maintained and generated as required by Paragraphs 4.5, 4.8 and 4.9 for each License. Failure to comply with the provisions hereof may constitute an event of default under the terms of this License, which could cause Licensor to terminate same or take such other actions as Licensor deems appropriate in its sole and absolute discretion subject to Paragraph 17 of this Agreement.
5. ADVERTISING. As payment for advertising, Licensee shall pay to Licensor an amount equal to two (2%) percent of Licensee's Net Sales or Guaranteed Minimum Net Sales, whichever is greater. The payment for advertising is in addition to any retail co-op advertising that Licensee may do on its own. Licensee shall spend at least $35,000 for advertising and/or public relations to "launch" the Licensed Products during 1998. All advertising used by Licensee must be approved in writing by Licensor by either Licensor's Chief Executive Officer or Director of Advertising or any other designee of Licensor, prior to any use of same in any manner by Licensee. Such advertising shall at all times be subject to the approval by Licensor, in its sole and absolute discretion, prior to its publication, exhibition or other use. All advertising shall be placed through the Advertising Department of Licensor, (if one exists), or as otherwise designated by Licensor through an advertising agency of Licensor's choice. Payment for advertising is in addition to all other payments required hereunder and shall be paid monthly concurrently with the Royalty Payments set forth above.
6. AUDIT. Licensee shall keep complete and accurate books and records at its principal place of business covering all transactions relating to this Agreement. Licensor and/or its duly authorized representatives shall have the right, at reasonable business hours and upon reasonable notice, at the place where such records are normally maintained, to inspect, audit, examine and make copies of such books and records and all other documents and material in Licensee's possession or control regarding any transactions relating to this Agreement.
6.1 All books and records of Licensee relating to this Agreement shall be retained for at least three (3) years following termination of this Agreement.
6.2 The receipt or acceptance by Licensor of any of the statements furnished or any payments made by Licensee pursuant to this Agreement, shall not preclude Licensor from reviewing the books and records or from questioning the accuracy thereof. Licensor shall have the right from time to time, and at any reasonable time, to audit Licensee's books to determine the correctness of payments/amounts due Licensor hereunder during a period of three (3) years from the end of each Year of the Agreement. The cost of said audit shall be borne by Licensor. However, if any audit reveals an underpayment by Licensee of five percent (5%) or more, Licensee shall pay forthwith (and in no event later than five (5) days after completion of said audit), the cost of the audit, and all payments found to be due, with interest thereon, at the rate of prime (as determined by Bank of America when said payment was due) plus one (1%)
percent, per annum, or the maximum legal rate, whichever is less, computed from the date said unpaid payments/amounts would have been due had they been properly accounted for until the date they are actually paid.
6.3 In the event that an audit or investigation of Licensee's books and records is made, certain confidential and proprietary information of Licensee may necessarily be made available to the person(s) conducting such audit or investigation. It is agreed that such confidential and proprietary information shall be retained in confidence by Licensor, and shall not be used by Licensor or disclosed to any third party without the prior written consent of Licensee, unless otherwise required by law. Notwithstanding the foregoing, such information may be used in any proceeding based on Licensee's failure to pay its actual Royalty Payments or other obligations to Licensor.
7. ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. Not later than one hundred twenty (120) days after Licensee's fiscal year-end,(or calendar year-end as the case may be), Licensee shall furnish Licensor with an audited annual financial statement which shall include an income statement and a balance sheet of the Licensee prepared in accordance with generally accepted accounting principles consistently applied. In addition, within sixty (60) days of the end of each calendar quarter during the term of this License, Licensee shall furnish Licensor with quarterly financial statements prepared in accordance with generally accepted accounting principles. In the event an audited statement is not prepared by Licensee, Licensee shall nevertheless furnish Licensor with its unaudited financial statements, certified to be correct by the Chief Executive Officer or Chief Financial Officer of Licensee.
8. PRODUCT STANDARDS. Licensee shall not sell, distribute or otherwise market the Licensed Products unless they are of the highest standards and quality and unless each product has received the prior written approval of Licensor prior to distribution thereof, subject to the terms and conditions of this Paragraph 8.
8.1 APPROVAL OF DESIGN CONCEPT. As soon as Licensee has developed a design for a Licensed Product that it desires to produce, sell and market, Licensee shall submit three (3) design samples or drawings thereof if samples are not available, at no cost to Licensor, of said product, along with color and fabric samples, if applicable, to Licensor for approval, along with one (1) complete set of all promotional and advertising material associated therewith.
8.1.1 Within five (5) working days following the receipt of any design sample, Licensor shall either approve or disapprove the product or indicate changes to be made. Failure by Licensor to so note approval, disapproval or changes within said five (5) working days shall be deemed approval. In the event changes are required, Licensee shall be required to resubmit the revised design sample or drawings thereof if samples were not originally submitted, for approval with the recommended
changes. Subsequent re-submissions shall occur until Licensor either approves or rejects the design in question. All approvals shall be within Licensor's reasonable discretion. However, in the event that a dispute arises as to the determination of same, Li