MERCHANDISING LICENSE AGREEMENT
This Merchandising License Agreement (the “Agreement”) is made and entered into this ______ day of ________________, 2017 (the “Effective Date”) by and between Already, LLC d/b/a YUMS, a Texas limited liability company with offices at 207 N. Elm Street, Arlington, Texas 76011 (“Licensor”), and ___________________________, a corporation organized and existing under the laws of the Republic of Chile, having its principal place of business at __________________________ (“Licensee”). Licensee and Licensor may be collectively referred to herein as the “Parties” and individually, a “Party”.
WHEREAS, Licensor is the sole and exclusive owner of the Trademarks, as hereinafter defined;
WHEREAS, Licensor is engaged in the business of making, selling, and distributing headgear, headwear, clothing, apparel, and personal accessories that use and/or otherwise incorporate the Trademarks in commerce in the United States of America and throughout the world;
WHEREAS, Licensee is engaged in the business of making, having made, selling and distributing headgear, headwear, clothing, apparel, and/or personal accessories in the Licensed Territory, as hereinafter defined;
WHEREAS, Licensee recognizes the great value and goodwill associated with the Trademarks and that all rights to the Trademarks and the associated goodwill belong exclusively to the Licensor and that the Trademarks have acquired a secondary meaning to the public, including the public located in the Republic of Chile; and
WHEREAS, Licensee has represented that it has the ability to manufacture, distribute, market, and sell the Licensed Products, as hereinafter defined, in the Licensed Territory; and
WHEREAS, Licensee desires to acquire from Licensor, and Licensor is willing to grant to Licensee, a license to use the Trademarks in the Licensed Territory on or in connection with the manufacture, distribution, sale, and marketing of the Licensed Products bearing, incorporating, or otherwise utilizing the Trademarks for the term provided for in this Agreement, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual terms, agreements and conditions herein contained, and for other good and valuable consideration, the receipt and sufficiency of which is acknowledged and agreed, the Parties, each intending to be legally bound hereby, agree as follows:
ARTICLE 1 — Definitions
“Affiliate” shall mean any person, corporation, or other business entity which now or hereafter control Licensee, is owned or controlled, directly or indirectly, by Licensee, or is under common control with Licensee.
“Advertising Material” shall mean any and all brochures, catalogs, point-of-sale materials, consumer and trade media, sales promotion and support materials, and any other documents that are used in connection with the sale, advertising, promotion, or marketing of the Licensed Products.
“Licensed Products” shall mean the products described on Schedule A bearing one or more of the Trademarks, as amended in writing by the Parties from time to time during the term of this Agreement.
“Licensed Territory” shall mean the jurisdictional territory of the Republic of Chile.
“Trademarks” shall mean the Trademarks described on Schedule A and such other trademarks in classes covering the Licensed Products, whether or not registered with the relevant authorities in the Licensed Territory, and all combinations, forms, and derivatives thereof which may be hereafter created by Licensee or approved by Licensor for use by Licensee in connection with the Licensed Products.
The “Term” of this Agreement shall have the meaning set forth in Schedule A.
All other terms set forth in this Agreement shall have the meanings set forth in this Agreement.
Terms defined herein in the singular shall include the plural and vice versa.
ARTICLE 2—License Grant
2.1 Licensor hereby grants to Licensee, during the Term of this Agreement and subject to all the terms and conditions contained in this Agreement, the non-exclusive and nonassignable right and license to use the Trademark on or in connection with the Licensed Products in the Licensed Territory, including in connection with the manufacture, sale, distribution, and marketing of the Licensed Products in the Licensed Territory. It is understood and agreed that this license shall pertain only to the Licensed Products and does not extend to any other product or service.
2.2 Licensee shall not sublicense the rights granted herein and shall not, without the prior written consent of Licensor, authorize any person, firm, corporation, or other entity to use any of the Trademarks, or any trademarks, trade names, or trade dress confusingly similar thereto.
2.3 Nothing contained in this Agreement shall be construed as an assignment or grant to Licensee of any right, title, or interest in or to the Trademarks, it being expressly understood and acknowledged by Licensee that all rights relating thereto are reserved by Licensor except for the rights specifically granted to Licensee under this Agreement.
2.4 Licensee agrees that it will neither export Licensed Products from the Licensed Territory nor sell same to any person or entity which it knows or has any reason to believe intend to export Licensed Products from the Licensed Territory.
2.5 Licensee acknowledges that due to the nature of the marketplace, the definition of Licensed Products may change or may not be amenable to precise delineation. Licensee agrees that if there is a dispute over the definition of Licensed Products, Licensor shall render a reasonable written determination which shall be conclusive and binding on Licensee without legal recourse.
2.6 All Licensed Products manufactured, distributed, advertised, or sold by Licensee shall bear the Trademarks in prominence as prescribed by Licensor. None of the Trademarks shall be used by Licensee or its manufacturers except on and in connection with the Licensed Products. No product bearing any of the Trademarks shall bear any trademark or trade name other than the Trademarks except with the express prior written authorization of Licensor or except as required by applicable law. Licensee covenants on behalf of itself, its Affiliates and related parties, and such third-party manufacturers with which it may contract, that during the Term of this Agreement and thereafter it will refrain from using any trademark, trade dress, or trade name confusingly or deceptively similar to any of the Trademarks or confusingly similar to any other trademarks, trade names or trade dress of Licensor, except upon such terms and conditions as may be approved in advance, in writing, by Licensor. Licensee shall promptly terminate its manufacturing relationship with any manufacturer that uses any trademark, trade dress, or trade name confusingly similar to any of the Trademarks or confusingly similar to any other trademarks, trade dress, or trade names of Licensor. This provision shall survive termination, cancellation or expiration of this Agreement.
2.7 Licensee shall not use any of the Trademarks in combination with other marks not owned by Licensor, nor shall Licensee include any of the Trademarks, whether registered or not, in its corporate or trading name or in any domain name. During the Term of this Agreement, Licensee must include on its stationery, business cards, invoices and packing slips the phrase “Authorized licensee of Already, LLC” or such other words to that effect as have been previously approved, in writing, by Licensor.
2.8 Sublicensing. Licensee shall not have the right to sublicense any of the rights granted to it under this Agreement.
2.9 Agreements with Manufacturers. Licensee shall have the right to arrange with another party to manufacture the Licensed Products or components of the Licensed Products for exclusive sale, use, and distribution by Licensee. Licensee agrees to enter into a written agreement with all such manufacturers and agrees to incorporate into such written agreements all of the provisions, for the protection of the rights of Licensor, which are contained in the form manufacturer agreement which is available from Licensor. Licensee further agrees to furnish Licensor, within five days of their execution, copies of all agreements with such manufacturers. The failure to comply with any aspect of this section is a material breach, and Licensor shall have the right to immediately terminate this Agreement.
2.10 Enforcement of Manufacture Agreements. Licensee agrees strictly to enforce against its manufacturers all of the provisions which are required to be included in such agreements for the protection of Licensor; to advise Licensor of any violations thereof by manufacturers and of corrective actions taken by Licensee and the results thereof; and at the request of Licensor to terminate such an agreement with any manufacturer which violates any of such provisions for the protection of Licensor. If Licensee fails to exercise such termination rights by giving written notice to the manufacturer within five days after being requested to do so in writing by Licensor, Licensee appoints Licensor as its irrevocable attorney-in-fact to send a notice of termination in the name of Licensee to the manufacturer for the purpose of terminating the Agreement or any specific rights of the party under such agreement
ARTICLE 3—Trademark Ownership and License Recordation
3.1 Licensor at its own cost will, insofar as possible and as reasonably requested by Licensee, register and/or renew relevant trademarks in the Territory and will cooperate in registering or recording Licensee as a registered user or recorded licensee of the Trademarks in the Licensed Territory if appropriate and necessary in Licensor’s sole judgment. Licensee agrees to execute and deliver to Licensor such lawful documents as Licensor may request for this purpose. Licensee shall not register or attempt to register any of the Trademarks or any marks similar thereto in its own name or in any other name either in the Licensed Territory or outside thereof unless so authorized by Licensor in writing. Licensee shall not register or attempt to register any domain name incorporating all or a material part of any of the Trademarks or any marks similar thereto in its own name or in any other name either in the Licensed Territory or outside thereof unless so authorized by Licensor in writing.
3.2 Licensee acknowledges that Licensor is the owner of all of the Trademarks, whether registered or unregistered. All trademarks subsequently adopted and used by Licensee under the provisions of this Agreement shall be deemed to be Trademarks and owned by Licensor (except as otherwise expressly provided in writing by Licensor). Licensee acknowledges that Licensor is entitled to all of the rights in and to the Trademarks, including the sole and exclusive right to register the Trademarks in the Licensed Territory and elsewhere throughout the world, and Licensee shall assist Licensor in so doing at Licensor’s expense.
3.3 Licensee further agrees never to contest, deny or dispute the validity of any of the Trademarks or Licensor’s title therein; agrees never, either directly or indirectly, or in any other way, to encourage or assist others in doing so; and agrees never to take any action of any kind inconsistent with Licensor’s holding of all such trademark rights. Nothing in this Agreement shall confer upon Licensee a proprietary interest of any kind in and to any of the Trademarks or any trademarks or trade names confusingly similar thereto. Any and all use of any of the Trademarks by Licensee shall inure to the benefit of Licensor.
ARTICLE 4—Term of the Agreement
4.1 This Agreement and the provisions hereof, except as otherwise provided, shall be in full force and effect commencing on the Effective Date and shall end on the date specified in Schedule A.
5.1 In consideration of the licenses granted hereunder and of the other benefits that accrue to Licensee hereunder, Licensee agrees to use its best efforts to promote the sale of the Licensed Products in the Licensed Territory and Licensee further agrees to pay to Licensor, for the use of the Trademarks, a royalty (the “Royalty”) of 12% based on Licensee’s Net Sales of the Licensed Products.
5.2 The Royalty owed Licensor shall be calculated on a quarterly calendar basis (the “Royalty Period”) and shall be paid no later than thirty (30) days after the termination of the preceding full calendar quarter, i.e., commencing on the first (1st) day of January, April, July, and October with the exception of the first and last calendar quarters which may be “short” depending upon the effective date of this Agreement.
5.3 Licensee shall furnish to Licensor, at the same time it makes payment of Royalties, a full and complete royalty statement, duly certified by an officer of Licensee to be true and accurate, showing (a) the number of each type of Licensed Product sold during the calendar quarter in question, broken down by month, (b) the total gross sales revenues for each such Licensed Product, (c) an itemization of all allowable deductions, if any, (d) the Net Sales Price for each Licensed Product sold, (e) the amount of Royalties due with respect to such sales, (f) the quantities of each Licensed Product on hand and in transit as of the end of such quarter, and (g) all other pertinent information as Licensor may reasonably request from time to time. All figures and monetary amounts reflected in the royalty statement shall first be stated in the currency in which the sales were actually made. Next to each currency amount shall be set forth the equivalent amount stated in U.S. Dollars, and the rate of exchange used in making the required conversion calculation as required under this Agreement.
5.4 “Net Sales” shall mean Licensee’s gross sales (the gross invoice amount billed customers) of Licensed Products, less any bona fide returns (net of all returns actually made or allowed as supported by credit memoranda actually issued to the customers). No other costs incurred in the manufacturing, selling, advertising, and distribution of the Licensed Products shall be deducted nor shall any deduction be allowed for any uncollectible accounts or allowances.
5.5 A Royalty obligation 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.
5.6 If Licensee sells any Licensed Products to any Affiliate of Licensee, or any other person or entity directly or indirectly related to or under the common control with Licensee, at a price less than the regular price charged to other parties, the Royalty payable to Licensor shall be computed on the basis of the regular price charged to other parties
5.7 The receipt or acceptance by Licensor of any royalty statement, or the receipt or acceptance of any royalty payment made, shall not prevent Licensor from subsequently challenging the validity or accuracy of such statement or payment.
5.8 Upon expiration or termination of this Agreement, all payment obligations owed by Licensee to Licensor under this Agreement shall be accelerated and shall immediately become due and payable.
5.9 Licensee’s obligations for all payments owed to Licensor under this Agreement shall survive expiration or termination of this Agreement and will continue for so long as Licensee continues to manufacture, sell or otherwise market the Licensed Products.
5.10 Late payments shall incur interest at the rate of ONE PERCENT (1%) per day from the date such payments were originally due.
5.11 Licensor shall have the right to terminate this Agreement upon notice to Licensee if Licensee fails to cure a payment default within five (5) days after receiving written notice of such default from Licensor.
5.12 Licensee will bear all taxes, duties and other governmental charges in the Licensed Territory relating to or arising under this Agreement, including without limitation, any income taxes, any stamp or documentary taxes or duties, turnover, sales or use taxes, value added taxes, excise taxes, customs or exchange control duties or any other charges relating to or on, any Royalty payable by Licensee to Licensor. If Licensee or any other person is required by law to make any deduction or withholding on account of any tax, assessment, duty, or levy charged against any payments to Licensor under this Agreement, Licensee shall pay such tax, assessment, duty, or levy before the date on which a penalty for nonpayment or late payment attaches. Payment of the tax, levy, duty, or assessment is to be made (if the liability to pay is imposed on Licensee) for Licensor’s own account or (if the liability to pay is imposed on Licensor) on behalf of and in the name of Licensor. Payments by Licensee to Licensor with respect to which the relevant deduction, withholding, or payment (including any penalties) is required will be increased to the extent necessary to ensure that, after the deduction, withholding, or payment of such tax, levy, duty, or assessment is made, Licensor receives on the due date and retain (free from any liability with respect to the deduction, withholding, or payment) a net sum equal to what Licensor would have received and retained had no such deduction, withholding, or payment been required or made, provided, however, that Licensee shall not be obligated to increase its payments to Licensor if the relevant deduction, withholding, or payment is expressly required by law with respect to the types of payments due under this Agreement from Licensee to Licensor and relates exclusively to income taxes potentially due from and payable by Licensor to the taxing authority of the country in the Licensed Territory. Licensee shall obtain, at its own cost and expense, obtain all documentation and approvals necessary for the transmission of Royalties and all other payments relevant to Licensee’s performance under this Agreement. If any tax or withholding is imposed on Royalties, Licensee shall obtain certified proof of the tax payment or withholding and immediately transmit it to Licensor.
5.13 All payments by Licensee to Licensor under this Agreement shall be made in U.S. Dollars, unless Licensor specifies otherwise. All payments under this Agreement shall be calculated in the currency of the country where the Licensed Territory is located and then converted into U.S. Dollars for payment to Licensor and shall be converted at the spot currency rate announced by the Dallas, Texas office of Citibank in the United States (or any other United States bank or financial institution Licensor designates in writing). The rate used will be the rate that was in effect as of 10:00 a.m. Dallas, Texas time on the business day before the date payment is due. All payments made under this Agreement shall be made in full, net of any bank charges. Licensee shall make all payments to a bank of Licensor’s choice in the United States or elsewhere (including, if Licensor so elects, in a bank located in the Licensed Territory). Licensee will bear all of the costs and expenses of (and obtain any required governmental authorizations in connection with) obtaining U.S. Dollars and making required payments. Licensee shall provide detailed conversion calculations with every payment submitted hereunder. If, by any reason of any governmental or fiscal restrictions effecting the convertibility, payment cannot be made in U.S. funds, then Licensee shall take such reasonable actions with respect to the payment due as Licensor shall direct.
5.14 Licensee shall use its best efforts to obtain any consents or authorizations that are necessary in order to permit timely payments in U.S. Dollars of all amounts payable under this Agreement. If any legal restriction at any time prevents Licensee from paying in U.S. Dollars, Licensee shall notify Licensor immediately. While such restrictions are in effect, Licensor may require payment in any currency it designates that is available to Licensee. Alternatively, Licensor may require Licensee to deposit all amounts due but unpaid as a result of such a restriction in any type of account in any bank or institution Licensor designates in the country where the Licensed Territory is located. Licensor shall be entitled to all profit earned on such deposits.
5.15 If Licensee sells any Licensed Products to any party at a price less than the regular price charged to other parties, the Royalty payable Licensor shall be computed on the basis of the regular price charged to other parties. In the event that Licensee combines or bundles any Licensed Product with non-licensed goods or services, the Royalty due Licensor will be based on the proportional value of the cost of goods of the Licensed Products as a percentage of the cost of goods of the bundled product including the Licensed Products.
6.1 Licensee shall, at its sole cost and expense, maintain complete and accurate books and records (specifically including, without limitation, the originals or copies of documents supporting entries in the books of account) covering all transactions arising out of or relating to this Agreement. In addition, Licensor and its duly authorized representative have the right, during normal business hours, for the duration of this Agreement and for three (3) years thereafter, to examine and copy said books and records and all other documents and materials in the possession of and under the control of Licensee with respect to the subject matter and terms of this Agreement. In the event a sublicense is approved by Licensor as provided hereunder, Licensee shall also obtain for Licensor the right in any and all of such sublicenses for Licensor to similarly inspect the books and records of the sublicensees. The exercise by Licensor of any right to audit at any time or times or the acceptance by Licensor of any statement, or payment shall be without prejudice to any of Licensor's rights or remedies and shall not bar Licensor from thereafter disputing the accuracy of any payment or statement and Licensee shall remain fully liable for any balance due under this Agreement.
6.2 In the event that such inspection reveals a discrepancy in the amount of Royalty owed Licensor from what was actually paid, Licensee shall pay such discrepancy, plus interest, calculated at the rate of ONE AND ONE-HALF PERCENT (1.5%) per month from the date on which the underlying Royalty payment should have been received by Licensor. Licensee shall also reimburse Licensor for the cost of such inspection including any attorney’s fees incurred in connection therewith.
6.3 All books and records relative to Licensee’s obligations hereunder shall be maintained and kept accessible and available to Licensor for inspection in the United States for at least three (3) years after termination of this Agreement.
6.4 In the event that an investigation of Licensee’s books and records is made, certain confidential and proprietary business information of Licensee may necessarily be made available to the person or persons conducting such investigation. It is agreed that such confidential and proprietary business information shall be retained in confidence by Licensor and shall not be used by Licensor or disclosed to any third party for a period of two (2) years from the date of disclosure, or without the prior express written permission of Licensee unless required by law. It is understood and agreed, however, that such information may be used in any proceeding based on Licensee’s failure to pay its actual Royalty obligation.
6.5 Licensee shall provide Licensor (a) a certified, audited financial statement to be delivered to Licensor within five (5) months after the end of each fiscal year of Licensee and (b) a six (6) month interim unaudited financial statement to be delivered to Licensor within sixty (60) days after the end of the six (6) month period. The year-end financial information must be prepared by a chartered accountant having no interest in Licensee's business and approved by Licensor.
6.6 Upon the request of Licensor, Licensee shall submit to Licensor copies of invoices, credit memoranda, price lists, line sheets and customer lists related to the sale of Licensed Products. All payment terms discounts and trade discounts must appear on the face of each invoice; each such discount must be itemized as a percentage reduction in Licensee’s published wholesale list price.
ARTICLE 7—Warranties and Obligations
7.1 Licensor represents and warrants that it has the right and power to grant the licenses granted herein and that there are no other agreements with any other party in conflict herewith.
7.2 Licensor further represents and warrants that the Trademarks do not infringe any valid right of any third party.
7.3 Licensee represents and warrants that it will use its best efforts to make, cause to be made, promote, market, sell and distribute the Licensed Products in the Licensed Territory.
7.4 Licensee shall be solely responsible for the manufacture, production, sale, advertising, and distribution of the Licensed Products and will bear all related costs associated therewith.
7.5 It is the intention of the parties that the first bona fide shipment of Licensed Products to a customer of Licensee shall occur within two months of the Effective Date of this Agreement. Licensee also agrees and acknowledges that for each calendar year in which this Agreement is in effect, Licensee shall be required to meet a minimum level of Net Sales of the Licensed Products in the amount of One Hundred Thousand United States Dollars. Licensee’s failure to make it first bona fide shipment of Licensed Products by the deadline specified above or its failure to meet the minimum level of Net Sales specified above shall constitute grounds for immediate termination of this Agreement by Licensor.
7.6 If within two months of the Execution Date of this Agreement Licensee has failed to take any good-faith steps to exploit the rights granted to it (including, but not limited to, Licensee failing to seek to obtain Licensor’s approval of a proposed Licensed Product under Article 8 and/or failing to commence manufacturing and selling of a Licensed Product that Licensor has previously approved under Article 8), Licensor shall have the right to terminate this Agreement immediately by giving written notice of termination to Licensee.
7.7 The Licensed Products sold by Licensee may be sold only to those specialty shops, department stores and retail outlets which carry high quality and prestige merchandise and whose operations are consistent with Licensor's reputation and its sales policies and with the prestige of the Trademark and only to those customers expressly approved by Licensor. Licensee shall submit a written list of the proposed customers to Licensor for Licensor's prior written approval, which approval may be given or withheld at Licensor's sole discretion, based upon whether it deems that the proposed customer shall enhance the quality and prestige of the Trademarks. Licensor shall have the right to withdraw any such approval on written notice to Licensee. Licensee shall not (a) market or promote or seek customers for the Licensed Products outside of the Licensed Territory; (b) establish a branch, wholly owned by subsidiary, distribution or warehouse with inventories of Licensed Products outside of the Licensed Territory; (c) sell or distribute any Licensed Products to wholesalers, jobbers, diverters, catalog vendors or any other entity which does not operate retail stores exclusively; (d) sell the Licensed Products directly to the public in retail stores; (e) use the Licensed Products as giveaways, prizes or premiums, except for promotional programs which have received the prior written approval of Licensor; or (f) sell the Licensed Products to any third party or Affiliate of Licensee or any of its directors, officers, employees or any person having an equity participation in or any other affiliation to Licensee, without the prior written approval of Licensor.
7.8 At all times during the Term, Licensee shall use commercially reasonable efforts to generate the maximum possible level of sales of the Licensed Products within the Licensed Territory including, without limitation, the design and development of unique retail displays to include styles, designs, and powerful point of purchase visual displays at each location that desires to sell the Licensed Products. Licensee acknowledges that Licensor is entering into this Agreement not only in consideration of the payments to be made by Licensee, but also in consideration of the promotional value to Licensor of the widespread marketing, distribution, advertising, promotion, offer for sale and sale of the Licensed Products. Accordingly, Licensee shall use commercially reasonable efforts to seek to procure the greatest volume of sales of the Licensed Products consistent with high quality and shall diligently and continuously make and maintain timely and adequate arrangements for their manufacture, marketing, distribution, advertising, promotion, offering for sale and sale.
7.9 Licensed Products will, at all times, be manufactured, sold and distributed with labels, tags, packaging, and sales promotion materials that are appropriate for merchandise of such quality; and will at all times be manufactured, sold and distributed in accordance with all applicable laws and regulations of the Licensed Territory, and shall in no manner reflect adversely upon the good name of Licensor.
ARTICLE 8—Quality Control
8.1 Approval Procedures for Licensed Products and Advertising Materials; Approval Standards: Time for Approval by Licensor.
8.1.1 Licensee shall comply with all reasonable procedures which Licensor may from time to time adopt regarding its approval of the Licensed Products and Advertising Materials which Licensee proposes to manufacture, sell, or use under this Agreement. These approval procedures shall be implemented using prescribed forms to be supplied to Licensee by Licensor and shall incorporate the basic approval requirements and steps outlined in the following sections. Licensee agrees to retain all materials relating to approvals in its files while this Agreement remains in effect and for 3 years thereafter.
8.1.2 With respect to each different Licensed Product which Licensee proposes to manufacture and sell under this Agreement, Licensee shall submit to Licensor for its review and approval the following materials, in the order stated:
(i) A generic sample of the type of Licensed Product in question (that is, a sample of the kind of merchandise articles to which Licensee proposes to add the Trademarks in producing the Licensed Product, showing the general quality standard which will be met by the Licensed Product);
(ii) Finished art for the Licensed Products, showing the exact use of the Trademarks on or in connection with each proposed Licensed Product;
(iii) A preproduction prototype sample of the Licensed Product, where appropriate, or a preproduction final sample of the Licensed Product, showing in either case the exact form, finish, and quality the Licensed Product will have when manufactured in production quantities; and
(iv) Six identical production samples of the Licensed Product, to be submitted immediately upon commencement of production.
Licensee shall comply with all of the foregoing approval steps for each Licensed Product, obtaining Licensor’s written approval at each step of the procedure, unless by prior written notice from Licensor it is exempted from any such step with respect to a specific Licensed Product. If Licensor should disapprove any sample, it may provide specific reasons for such disapproval. Licensee shall not manufacture or sell any Licensed Products that is based, in whole or in part, on a preproduction sample or prototype that Licensor has not previously approved in accordance with this Agreement. Once samples have been approved, Licensee will manufacture only in accordance with such approved samples and will not make any changes for manufacture without Licensor's prior written approval. All samples of Licensed Products submitted to Licensor pursuant to this Agreement shall be provided at Licensee's sole cost and expense. No Licensed Products (including samples) shall be distributed and/or sold by Licensee pursuant to this Agreement unless such products are in substantial conformity with and at least equal in quality to the samples previously approved by Licensor in accordance with this Agreement.
8.1.3 With respect to each different item of Advertising Materials which Licensee or any party acting on its behalf proposes to produce and use under this Agreement, Licensee shall submit to Licensor for its review and approval the following materials, in the order stated:
(i) proposed written copy for the item of Advertising Materials, with attached rough art showing how the Trademarks will be used in connection with the copy;
(ii) a final printed sample of the item, where feasible (as, for example, in the case of labels, hangtags, printed brochures, catalogs, and the like).
Licensee shall comply with all of the foregoing approval steps for each item of Advertising Materials, obtaining Licensor’s written approval at each step of the procedure, unless by prior written notice from Licensor it is exempted from any such step with respect to a specific item of Advertising Materials. If Licensor should disapprove any Advertising Materials, it may provide specific reasons for such disapproval. Licensee shall not distribute or use any Advertising Materials that is based, in whole or in part, on Advertising Materials that Licensor has not previously approved in accordance with this Agreement. Once samples have been approved, Licensee will distribute and use Advertising Materials only in accordance with such approved samples and will not make any changes without Licensor's prior written approval. All samples of Advertising Materials submitted to Licensor pursuant to this Agreement shall be provided at Licensee's sole cost and expense. No Advertising Materials (including samples) shall be distributed and/or used by Licensee pursuant to this Agreement unless such materials are in substantial conformity with and at least equal in quality to the samples previously approved by Licensor in accordance with this Agreement.
8.1.4 Licensor shall have the right to disapprove any materials submitted to it for any reason, including if Licensor determines, in its sole and unfettered discretion, that the materials in question would impair the value and good will associated with the Trademarks, by reason of (i) their failure to satisfy the general quality standards of Licensor; (ii) their use of artwork, designs, or concepts which fail to depict accurately the Trademarks; (iii) their use of materials which are unethical, immoral, or offensive to good taste; (iv) their failure to carry proper copyright or trademark notices; or (v) any other reasonable cause.
8.1.5 Licensor agrees to use reasonable efforts to notify Licensee in writing of its approval or disapproval of any materials submitted to it under this Agreement within 10 business days after its receipt of such materials, and agrees, in the case of its disapproval, to notify Licensee in writing of its reasons for disapproval. In the event Licensor fails to approve or disapprove of any materials submitted as provided for above within 10 business days after Licensor’s receipt of such materials the materials shall be deemed disapproved.
8.2 Maintenance of Quality of Licensed Products: Inspection of Production Facilities. Licensee agrees to maintain the quality of each Licensed Product manufactured under this Agreement up to the specifications, quality, and finish of production sample of such Licensed Product approved by Licensor under this Agreement, and agrees not to change the Licensed Product in any respect or to make any change in the artwork for the Licensed Product without first submitting to Licensor samples showing such proposed changes and obtaining Licensor’s written approval of such samples. From time to time after it has commenced manufacturing the Licensed Products, Licensee, upon request, shall furnish free of charge to Licensor a reasonable number of random production samples of any Licensed Product specified by Licensor. Licensee shall also furnish to Licensor upon request the addresses of the production facilities used by Licensee for manufacturing the Licensed Products, and shall make arrangements for Licensor or its representatives to inspect such production facilities during reasonable business hours.
8.3 Artwork for Licensed Products. If Licensee requests Licensor to furnish it with any photographs or special artwork incorporating the Trademarks, Licensee agrees to reimburse Licensor for its costs of supplying such materials to Licensee.
8.4 Translation. All translations of written material used on or in connection with the Licensed Products or Advertising Materials shall be accurate, and Licensee, when submitting the Licensed Products and the Advertising Materials for approval, shall provide Licensor with English translations of all such written materials in a language other than English.
8.5 Transactions with Other Licensees. Licensee shall not, without Licensor’s prior written consent: (i) sell or deliver to another licensee of Licensor the patterns or other devices used by Licensee to produce the Licensed Products; or (ii) print or otherwise produce any items using the Trademarks for another licensee of Licensor.
8.6 Licensor’s Right to Purchase Licensed Products. In addition to the random production samples of the Licensed Products to be supplied by Licensee to Licensor free of charge under this Agreement, Licensor shall be entitled at any time while this Agreement remains in effect to purchase from Licensee, at Licensee’s cost of manufacture, any available quantity of the Licensed Products. Any such Licensed Products purchased by Licensor shall be royalty free.
8.7 The licenses granted hereunder are conditioned upon Licensee’s full and complete compliance with the marking provisions of the patent, trademark and copyright laws of the United States and the Licensed Territory.
8.8 The Licensed Products, as well as all promotional, packaging and advertising material relative thereto, shall include all appropriate legal notices as required by Licensor.
8.9 Licensee shall maintain the distinctiveness of the Trademarks and the image and high quality of the goods and merchandise bearing the mark presently manufactured and sold by Licensor and its other licensees, and the prestigious marketing of same as hitherto and presently maintained by Licensor and its other licensees. Licensee agrees that, with respect to all Licensed Products manufactured or sold by it, the same will be of high quality as to workmanship, fit, design and materials used therein, and shall be at least equal in quality, workmanship, fit, design and material to the samples of Licensed Products submitted by Licensee and approved by Licensor pursuant to this Agreement. All manufacturing and production shall be of a quality in keeping with the prestige of the Trademarks. In addition, Licensee acknowledges that in order to preserve the goodwill attached to the Trademarks, the Licensed Products should be sold at prices and terms reflecting the prestigious nature of the Trademarks, and the reputation of the Trademarks as appearing on goods of high quality and reasonable price, it being understood, however, that Licensor is not empowered to fix or regulate the prices for which the Licensed Products are to be sold, either at the wholesale or retail level.
8.10 If the quality of a class of the Licensed Products falls below such a production-run quality, as previously approved by Licensor, Licensee shall use its best efforts to restore such quality. In the event that Licensee has not taken appropriate steps to restore such quality within thirty (30) days after notification by Licensor, Licensor shall have the right to terminate this Agreement.
8.11 Licensee agrees to permit Licensor or its representative to inspect the facilities where the Licensed Products are being manufactured and packaged.
8.12 If the style, appearance or quality of any Licensed Product ceases to be acceptable to Licensor, Licensor shall have the right in the exercise of its sole discretion to withdraw its approval of such Licensed Product. Upon receipt of written notice from Licensor of its election to withdraw such approval, Licensee shall immediately cease the use of the Trademarks in connection with the promotion, advertising, sale, manufacture, distribution or use of such Licensed Product(s). Notice of such election by Licensor to withdraw approval shall not relieve Licensee from its obligation to pay Royalties on sales of such Licensed Product(s) made by Licensee to the date of disapproval or thereafter as permitted. Licensee may, however, complete work in process and utilize materials on hand provided that it submits proof of such work in progress and fabric inventory to Licensor.
8.13 All right, title and interest in and to samples, sketches, designs, and other materials furnished to Licensee by Licensor, whether created by Licensor or Licensee, including any modifications or improvements thereof which may be created by Licensor or Licensee are hereby assigned to and shall be the sole property of Licensor as between Licensee and Licensor and are licensed hereunder solely and exclusively for use in connection with the manufacture and sale of Licensed Products in the Licensed Territory. Licensor may use and permit others to use said designs and other materials in any manner it desires, provided that such use does not conflict with any rights granted Licensee hereunder. Licensee specifically acknowledges that such designs and other materials may be used by Licensor and other licensees on Licensed Products in jurisdictions outside the Licensed Territory and on products other than Licensed Products anywhere in the world. In addition to the foregoing, for marketing purposes, Licensor shall, upon reasonable request, make available to Licensee, such of the following which are available to Licensor: (a) reports on marketing policy of Licensor; (b) reports on color, style and fabric trends; (c) samples of advertising materials; (d) display ideas; and (e) labels, hangtags and packaging.
ARTICLE 9—Notice and Payment
9.1 Any notice required to be given pursuant to this Agreement shall be in writing and delivered personally to the other designated party at the above stated address or mailed by certified or registered mail, return receipt requested or delivered by a recognized national overnight courier service.
9.2 Either party may change the address to which notice or payment is to be sent by written notice to the other in accordance with the provisions of this paragraph.
ARTICLE 10—Patents, Trademarks, and Copyrights
10.1 The Parties agree to execute any documents reasonably requested by the other party to effect any of the above provisions.
10.2 Licensee acknowledges Licensor’s exclusive rights in the Trademarks and, further, acknowledges that the Property and/or the Trademarks are unique and original to Licensor and that Licensor is the owner thereof. Licensee shall not, at any time during or after the Term of the Agreement, dispute or contest, directly or indirectly, Licensor’s exclusive right and title to the Property and/or the Trademarks or the validity thereof.
10.3 Licensee acknowledges that the Licensed Property and/or the Trademarks have acquired secondary meaning.
10.4 Licensee agrees that its use of the Property and/or the Trademarks inures to the benefit of Licensor and that the Licensee shall not acquire any rights in the Property and/or the Trademarks.
The following termination rights are in addition to the termination rights provided elsewhere in this Agreement:
11.1 Licensor shall have the right to immediately terminate this Agreement by giving written notice to Licensee in the event that Licensee does any of the following:
(i) fails to meet the minimum level of Net Sales of the Licensed Produces as specified in Schedule A; or
(ii) after having commenced sale of the Licensed Products, fails to continuously sell Licensed Products for three consecutive months; or
(iii) breaches any of the provisions of this Agreement relating to the unauthorized assertion of rights in the Trademarks; or
(iv) fails, after receipt of written notice from Licensor, to immediately discontinue the distribution or sale of the Licensed Products or the use of any packaging or promotional material which does not contain the requisite legal legends; or
(v) fails to make timely payment of Royalties when due; or
(vi) makes, sells, offers for sale, or distributes or uses any Licensed Product or Advertising Material without having the prior written approval of Licensor or makes any use of the Trademarks in a manner not authorized under this Agreement; or
(vii) fails to timely submit any royalty statements when due.
11.2 Licensor shall have the right to immediately terminate the portion(s) of the Agreement relating to any Licensed Product(s) and/or for the Licensed Territory if Licensee, for any reason, fails to meet the deadlines set forth in this Agreement or, after the commencement of manufacture and sale of a particular Licensed Product in the Licensed Territory, ceases to sell commercial quantities of such Licensed Product in the Licensed Territory for three consecutive months. In the event of such partial termination, all other non-terminated rights granted herein shall survive.
11.3 In addition to any other termination provisions contained in this Agreement, this Agreement may be terminated by Licensor upon thirty (30) days written notice to Licensee.
11.4 In the event this Agreement is terminated, all moneys paid to Licensor shall be deemed non-refundable, all Royalties on sales previously made shall become immediately due and payable in full to Licensor, and Licensee shall have no right to sell, exploit, or in any way deal with the Licensed Products or the Trademarks, except with special written consent and instruction of Licensor.
11.5 In the event this Agreement is terminated, Licensee agrees immediately and permanently to discontinue manufacturing, selling, advertising, distributing, and using the Licensed Products and Advertising Materials; immediately and permanently to discontinue using the Trademarks; immediately to destroy any films, molds, dies, patterns, or similar items from which the Licensed Products and Advertising Materials were made, where any element of the Trademarks is an integral part thereof; and immediately to terminate all agreements with manufacturers, distributors, and others which relate to the manufacture, sale, distribution, and use of the Licensed Products.
11.6 Licensee obligations for the payment of a Royalty shall survive expiration or termination of this Agreement.
ARTICLE 12—Post Termination Rights
12.1 Not less than thirty (30) days prior to the expiration of this Agreement or immediately upon termination thereof, Licensee shall provide Licensor with a complete schedule of all inventory of Licensed Products then on-hand (the “Inventory”).
12.2 Upon expiration or termination of this Agreement, except for reason of a breach of Licensee’s duty to comply with the quality control or legal notice marking requirements, Licensee shall be entitled, for an additional period of three (3) months and on a nonexclusive basis, to continue to sell such Inventory. Such sales shall be made subject to all of the provisions of this Agreement and to an accounting for and the payment of a Royalty thereon. Such accounting and payment shall be due and paid within thirty (30) days after the close of the said three (3) month period.
12.3 Upon the expiration or termination of this Agreement, all of the rights of Licensee under this Agreement shall forthwith terminate and immediately revert to Licensor and Licensee shall immediately discontinue all use of the Trademarks, the Licensed Property, and the like, at no cost whatsoever to Licensor.
12.4 Upon termination of this Agreement for any reasons whatsoever, Licensee agrees to immediately return to Licensor all material relating to the Trademarks and the Licensed Property including, but not limited to, all artwork, color separations, prototypes and the like, as well as any market studies or other tests or studies conducted by Licensee with respect to the Trademarks and Licensed Property, at no cost whatsoever to Licensor.
13.1 All uses of the Trademarks by Licensee shall inure to the benefit of Licensor, which shall own all trademarks and trademark rights created by such uses. Licensee hereby assigns and transfers to Licensor all trademarks and trademark rights created by such uses of the Trademarks, together with the goodwill of the business in connection with which such trademarks are used.
13.2 Licensee shall, insofar as possible, report immediately in writing to Licensor any and all infringements of any of the Trademarks, or of Licensor’s trade names and/or trade dress, and any and all attempts by any third party to use, copy, register, infringe upon or otherwise imitate any of the Trademarks or Licensor’s trade names or trade dress, or any design features of the Licensed Products.
13.3 If hereafter requested and authorized by Licensor in writing, Licensee shall have the right to institute and prosecute lawsuits against third persons for infringement of the rights licensed in this Agreement.
13.4 Licensee shall undertake all reasonable actions to prevent infringements, imitation, or illegal use of the Trademarks, trade dress associated with the Licensed Products, or trade name of Licensor. Licensee shall render to Licensor all assistance reasonably requested, fully and without reservation, in connection with any matter pertaining to protection or enforcement of any of the Trademarks before administrative and quasi-judicial agencies and the courts, and shall make available to Licensor, its representatives, agents and attorneys, all of Licensee’s records, files and other information pertaining to the Trademarks, including the purchase, manufacture, sale, distribution and advertising of the Licensed Products.
13.5 If Licensee does not institute an infringement suit against third persons within ninety (90) days after Licensor’s written request that it do so, Licensor may institute and prosecute such lawsuit. Any lawsuit shall be prosecuted solely at the cost and expense of the party bringing suit and all sums recovered in any such lawsuits, whether by judgment, settlement or otherwise, in excess of the amount of reasonable attorneys’ fees and other out of pocket expenses of such suit, shall be divided equally between the Parties.
13.6 Upon request of the party bringing the infringement lawsuit, the other party shall execute all papers, testify on all matters, and otherwise cooperate in every way necessary and desirable for the prosecution of any such lawsuit.
13.7 Licensee shall keep appropriate records (including copies of pertinent invoices and correspondence) relating to the dates when each of the Licensed Products is first placed on sale or sold in the Licensed Territory, and the dates of first use in the Licensed Country of each different element of the Trademarks on the Licensed Products and Advertising Materials. If requested to do so by Licensor, Licensee agrees to supply Licensor with samples of the trademark usages in question and other information which will enable Licensor to complete and obtain trademark applications or registrations, or to evaluate or oppose any trademark applications, registrations, or uses of other parties.
13.8 Licensee agrees to affix or to cause its authorized manufacturing sources to affix to the Licensed Products and to the Advertising Materials such trademark notices as may be supplied by Licensor.
14.1 Licensee agrees to defend and indemnify Licensor, its officers, directors, agents, and employees, against all costs, expenses and losses (including reasonable attorneys’ fees and costs) incurred through claims of third parties against Licensor based on the manufacture or sale of the Licensed Products including, but not limited to, actions founded on product liability.
14.2 Licensor agrees to defend and indemnify Licensee, its officers, directors, agents, and employees, against all costs, expenses and losses (including reasonable attorneys’ fees and costs) incurred through claims of third parties against Licensee challenging the authenticity of the originally submitted Licensed Property provided, however, that such indemnity shall only be applicable in the event of a final decision by a court of competent jurisdiction from which no appeal of right exists and shall be limited up to the amount of the actual moneys received by Licensor under this Agreement. Further, this indemnity does not cover any modifications or changes made to the Licensed Property.
ARTICLE 15—Jurisdiction and Disputes
15.1 This Agreement shall be governed in accordance with the laws of the State of Texas, United States of America, regardless of the place or places of its physical execution and performance and without regard to conflicts of law principles.
15.2 Any dispute or disagreement which may arise between Licensee and Licensor in connection with either any interpretation of this Agreement or the performance or nonperformance thereof shall be exclusively determined by the courts located in Tarrant County, Texas. The Parties expressly consent to the exclusive jurisdiction of the courts located in Tarrant County, Texas, agreed to accept service of process by mail, and hereby waive any jurisdictional or venue defenses otherwise available to the parties.
16.1 The provisions of this Agreement shall be binding upon and shall inure to the benefit of the parties hereto, their heirs, administrators, successors and assigns.
16.2 No waiver by either party of any default shall be deemed as a waiver of prior or subsequent default of the same or other provisions of this Agreement.
16.3 If any term, clause or provision hereof is held invalid or unenforceable by a court of competent jurisdiction, such invalidity shall not affect the validity or operation of any other term, clause or provision and such invalid term, clause or provision shall be deemed to be severed from the Agreement.
16.4 Nothing contained herein shall constitute this arrangement to be employment, a joint venture or a partnership.
16.5 The license granted hereunder is personal to Licensee and shall not be assigned by any act of Licensee or by operation of law unless in connection with a transfer of substantially all of the assets of Licensee or with the consent of Licensor.
16.6 As promptly as possible after execution of this Agreement, Licensee agrees to submit copies of this Agreement to any governmental agency in any country in the Licensed Territory where approval of a license agreement is necessary and agrees to promptly prosecute any such application diligently.
16.7 This Agreement is in the English language. No translation of this Agreement into any language other than English shall be considered in the interpretation thereof, and in the event that any translation of this Agreement is in conflict with the English language version, the English version shall govern.
16.8 In the event that any payment required to be made to Licensor pursuant to this Agreement cannot be made when due because of the exchange control of any country in the Licensed Territory and such payment remains unpaid for one (1) month, Licensor may, by notice served to Licensee, elect any of the following alternative methods of handling such payment:
(i) If the currency can be converted into currency other than U.S. Dollars for purposes of foreign remittance, Licensor may elect to receive such payment in any such currencies as it may specify and, in such case, the amount payable in the foreign currency so selected shall be determined by reference to the then existent legal rate of exchange which is most favorable to Licensor.
(ii) Licensor may elect to have payment made to it in the local currency, deposited to the credit of Licensor in a bank account in such country designated by Licensor, in which event Licensee shall furnish to Licensor evidence of such deposit.
16.9 All expenses of currency conversion and transmission shall be borne by Licensee and no deduction shall be made from remittances on account of such expense. Licensee from time to time may prepare all applications, reports or other documents which may be required by the government of the applicable country in order that remittances may be made in accordance with this Agreement.
16.10 This Agreement constitutes the entire understanding of the parties, and revokes and supersedes all prior agreements between the parties, including any option agreements which may have been entered into between the parties, and is intended as a final expression of their Agreement. It shall not be modified or amended except in writing signed by the parties hereto and specifically referring to this Agreement. This Agreement shall take precedence over any other documents which may be in conflict with said Agreement.
16.11 Each party to this Agreement agrees to execute and deliver all documents and to perform all further acts and to take any and all further steps that may be requested by the other party and are reasonably necessary to carry out the provisions of this Agreement and the transactions contemplated hereby.
16.12 This Agreement may be executed in two or more counterparts, each of which will be deemed an original but all of which together will constitute one and the same instrument. The parties may execute this Agreement and exchange counterparts of the signature pages by means of facsimile transmission, email, or regular mail, and the receipt of such executed counterparts will be binding on the parties.
16.13 Any notice, consent or other communication required or permitted hereunder shall be in writing. It shall be deemed given when: (1) delivered personally; (2) sent by confirmed facsimile transmission; (3) sent by commercial overnight courier with written verification of receipt; or (4) sent by registered or certified mail, return receipt requested, postage prepaid, and the receipt is returned to the sender. Names, addresses and facsimile numbers for notices (unless and until written notice of other names, addresses and facsimile numbers are provided by either or both parties) are as follows:
If to Licensor:
Attn: JP McDade
207 N. Elm Street
Arlington, Texas 76011
If to Licensee:
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have each caused to be affixed hereto its or his/her hand and seal the day indicated.
Address for Notice Purposes:
Attn: JP McDade
207 N. Elm Street
Arlington, Texas 76011
Telephone Number: 001-817-475-3648
Address for Notice Purposes:
The following Trademarks form part of this Agreement:
US Registration Numbers: 4198685, 3706931
US Serial Numbers: 77248900, 77978030
US Registration Dates: 8/28/2012, 11/3/2009
Goods and Services: Clothing Products (namely, pants, shorts, bathing suits, jackets, footwear, headwear, shirts, sweaters)
US Registration Numbers: 3576757, 3490070, 3908314
US Serial Numbers: 77089254, 77975719, 77247636
US Registration Dates: 2/17/2009, 8/19/2008, 1/18/2011
Goods and Services: Clothing Products (namely, athletic footwear, baseball caps, caps, t-shirts, footwear, headwear, shirts, pants, shorts, sweaters)
2. Licensed Products
The following Licensed Products form part of this Agreement:
Clothing products, including headgear, headwear, clothing, apparel, and personal accessories that use and/or otherwise incorporate the Trademarks
The following countries shall constitute the Territory:
Jurisdictional territory of the Republic of Chile
This Agreement shall commence on the Effective Date and shall extend for an initial Term of one year.
Licensor hereby grants Licensee two (2) separately exercisable options (the “Options”) to renew this Agreement for additional one (1) year extended Terms on the same terms and conditions provided for herein, provided: a) Licensee provides written notice of its intention to exercise this Option within sixty (60) days prior to expiration of the then in-effect Term; and b) Licensee has achieved at least ONE HUNDRED THOUSAND UNITED STATES DOLLARS ($100,000.00) in Net Sales of Licensed Products in the Licensed Territory during the then in-effect Term.
5. Royalty Rate
Licensee shall pay the following royalty rate: TWELVE PERCENT (12%) of Net Sales.