EXHIBIT 10.1
THIS AGREEMENT is made and entered into as of this 3rd day of April,
2009 by and between PARLUX FRAGRANCES, INC., a Delaware
corporation, with its principal offices at 5900 North Andrews
Avenue, Suite 500, Ft. Lauderdale, FL 33309 (“ Parlux
”) and ICONIC FRAGRANCES, LLC, a Delaware limited liability
company, with its principal offices at 1850 N.W. 84 th
Avenue, Suite 100, Miami, FL 33126 (“ Iconic
”).
W I T N E S S
E T H :
WHEREAS,
Iconic is in the process of negotiating and entering into license
agreements with the celebrity personalities (each an “
Artist ” and, collectively, the “ Artists
”) listed on Exhibit A hereto (each a “
License ” and collectively the “ Licenses
”); and
WHEREAS, pursuant to each License, the respective Artist
and/or an entity or representative owning the rights to market such
Artist's name and any related trademark, in the capacity as
licensor (herein, the " Licensor " whether referring to the
individual Artist and/or the individual Artist's entity or
representative with respect to the same License, and collectively
the " Licensors " with respect to more than one License),
has granted or will grant the exclusive rights to Iconic as
licensee to develop, manufacture, market and sell fragrance and
related products and packaging for a multi-year term, with the
royalty rates and on the terms and conditions set forth in each
License; and
WHEREAS , Iconic desires to sub-license to Parlux, and Parlux
desires to become a sub-licensee of Iconic under, the Licenses upon
the terms and conditions set forth herein.
NOW, THEREFORE,
in consideration of the premises and
mutual covenants, agreements and obligations set forth herein, the
parties hereto agree as follows:
1.
Licenses .
1.1
Licenses . A list of the four Artists whose names,
signatures and likenesses are the subject of ongoing negotiations
between Iconic and the Artists’ agents, business managers,
attorneys and/or other representatives is set forth on Exhibit
A . As of the date of this Agreement, two of the four
Artists, as identified on Exhibit A (each an “
Initial Artist ” and, collectively, the “
Initial Artists ”), through their representatives,
have concluded Licenses with Iconic (each an “ Initial
License ” and, collectively, the “ Initial
Licenses ”), which are in form and substance ready to be
but are not yet executed. True and correct copies of the
Initial Licenses in the forms to be executed are annexed hereto as
Exhibit B . The Licenses relating to the remaining two
Artists, as identified on Exhibit A (each a “
Subsequent Artist ” and, collectively, the “
Subsequent Artists ”), are, as of the date of this
Agreement, currently under negotiation and are not yet in form and
substance for execution (each a “ Subsequent License
” and, collectively, the “ Subsequent Licenses
”).
1.2
The Initial Licenses
. Iconic agrees to enter into the
Initial Licenses with the respective Licensors, and Parlux agrees
to become a sub-licensee of Iconic under the Initial Licenses, as
follows:
1
(a)
Delivery of the Initial
Licenses . Within ten
(10) business days following the date of execution of this
Agreement (the “ Initial Delivery Date ”),
Iconic will deliver to Parlux true and correct copies of the
Initial Licenses, duly executed by Iconic and the respective
Licensor for each License, which Licenses will be in the exact
forms without change as are attached to Exhibit B
.
(b)
The Sublicenses
. Within three (3) business days
following the Initial Delivery Date, Iconic shall execute and
deliver to Parlux a signed Sublicense in the form attached hereto
as Exhibit C (the “ Sublicense ”) for
each of the Initial Licenses sublicensing each Initial License to
Parlux. Within three (3) business days following receipt by
Parlux of an executed Sublicense for an Initial License, Parlux
will execute and return the fully executed Sublicense to Iconic
resulting in each Initial License being sublicensed to
Parlux.
(c)
The Initial Artist Advance
. The female Initial Artist is
entitled to payment of an initial guaranteed minimum royalty
advance pursuant to paragraph 8A of her License (the “
$*Advance ”). Within three (3) business days
following receipt by Parlux of the fully executed Sublicense of the
License relating to the female Initial Artist, Parlux will pay the
sum of * ($*) to the Licensor (or reimburse Iconic $* if Iconic has
already paid that sum to the Licensor) in partial payment of the $*
Advance, and Iconic will pay the sum of * ($*) to the Licensor in
payment of the balance due of the $* Advance. Parlux agrees
to reimburse Iconic for such $* by paying Iconic the sum of * ($*)
on each of June 30, 2009, September 30, 2009, December 31, 2009 and
March 31, 2010.
1.3
The Subsequent Licenses
. Parlux agrees to become a
sub-licensee of Iconic under the Licenses relating to each of the
Subsequent Licenses, to the extent that the terms and conditions of
such Subsequent Licenses are generally consistent with and no less
favorable to Parlux, taken as a whole, than the terms and
conditions of (i) the draft Subsequent License for the male
Subsequent Artist attached to Exhibit B which reflects the
pending negotiations with the male Subsequent Artist as of the date
hereof, and (ii) the term sheet for the Subsequent License for the
female Subsequent Artist attached to Exhibit B which
reflects the offer made by Iconic to the female Subsequent Artist
as of the date hereof. Parlux acknowledges that the final
agreements negotiated by Iconic with the Subsequent Artists could
be less favorable to Parlux under a sublicense than as set forth in
Exhibit B . Iconic acknowledges that if the final
agreement negotiated by Iconic with a Subsequent Artist is less
favorable to Parlux than in the respective draft Subsequent License
or term sheet attached to Exhibit B , then Parlux will have
no obligation to enter into a Sublicense with respect to such
Subsequent Artist.
(a)
Delivery of the Subsequent
Licenses . In the event
that Iconic is able to conclude a License with the representatives
of the Subsequent Artists, upon execution by Iconic and the
respective Licensor for either or both of the Subsequent Artists
and their respective trademarks, Iconic will deliver a true and
correct copy of such fully executed Subsequent License(s) to Parlux
on a date to be scheduled by mutual agreement of the parties (the
“ Subsequent Delivery Date ”).
——————————————
* Confidential terms omitted and provided separately
to the Securities and Exchange Commission.
2
(b)
Approval/Rejection of the Subsequent
Licenses . Within ten
(10) business days following the Subsequent Delivery Date, Parlux
shall accept or reject becoming a sub-licensee of Iconic under such
Subsequent License. If a rejection, Parlux's rejection
thereof shall be by written notice to Iconic and shall include a
statement in reasonable detail explaining the reasons for such
rejection. Failure to respond by the conclusion of the ten
(10) business day period shall be deemed to be an acceptance of
Parlux to become a sub-licensee of Iconic for such Subsequent
License. In the event of such a rejection, Iconic shall have
thirty (30) days to cure by amending the Subsequent License to
address those issues identified in Parlux’s rejection notice,
in which event Iconic shall submit an amended and fully executed
Subsequent License within such cure period. Upon receipt of
the amended Subsequent License, provided Iconic has addressed and
remedied to Parlux's satisfaction those issues to which Parlux had
previously rejected, Parlux shall be obligated to accept the
amended Subsequent License. If the Subsequent License, in the
form originally submitted to Parlux is acceptable to Parlux, then
within the original ten (10) business day period, or if rejected
and subsequently cured by amendment, then within three (3) business
days of receipt of such amended Subsequent License, Parlux’s
acceptance thereof shall be effectuated by the execution by
Parlux and delivery to Iconic of a Sublicense sublicensing such
Subsequent License to Parlux. Within three (3) business days
following receipt by Iconic of a signed Sublicense for such
Subsequent License, Iconic will execute and return the fully
executed Sublicense to Parlux.
(c)
Subsequent Artists Advance
. In the event that any Sublicense
relating to a Subsequent License requires the payment of an advance
royalty to the Licensor, Parlux covenants and agrees that it shall
make such payment by wire transfer to the account designated
therefor in such Subsequent License in accordance with the time
frame for payment thereof that is set forth in such Subsequent
License. The foregoing agreement of Parlux is a material
inducement to Iconic to enter into this Agreement.
1.4
Third Party Manufacturer
. If Parlux fails to execute and
deliver the signed Sublicense to Iconic for a Subsequent License
within the periods specified above, then Iconic thereafter may
sub-license or assign its rights as the licensee of such Subsequent
License to any other manufacturer and/or distributor of fragrance
products (a “Third Party Manufacturer”). From the
date hereof until the termination of this Agreement or, if earlier,
the expiration of the respective periods referred to above for each
License, Iconic shall not directly or indirectly discuss,
negotiate, or enter into or commit to enter into, a sub-license or
assignment of its rights under any of the Subsequent Licenses with
or to any Third Party Manufacturer. Should Parlux fail to
execute and deliver the Sublicense for a Subsequent License to
Iconic if and as required above (as opposed to a valid rejection by
Parlux of a Sublicense as is allowed above), Iconic reserves all
rights and remedies it may have against Parlux on account of such
failure, whether or not Iconic enters into a Sublicense with a
Third Party Manufacturer thereafter.
1.5
Parlux Obligations
. Pursuant to the terms and
conditions of each Sublicense, Parlux shall directly assume and
perform all of the obligations of the licensee under each License,
as the sub-licensee of Iconic. Parlux agrees that in the
event Parlux, as the sub-licensee under any of the Licenses, fails
to perform its obligations in any respect, the Licensor shall have
a direct right to enforce such breach against Parlux. In
addition, Parlux agrees to include a provision in each Sublicense,
which provision is included in the form of Sublicense attached
hereto, pursuant to which Parlux shall assume or guaranty all of
Iconic’s obligations to each Licensor under each of the
Licenses.
3
1.6
Iconic's Right to Assign
. Iconic represents and warrants
that it has the right pursuant to each of the Licenses to
sub-license its rights as licensee to Parlux in accordance with
this Agreement, without the further consent of any of the Licensors
or the Artists or their representatives.
2.
Warrants .
2.1
Warrants . As a material inducement to (i) Iconic to
enter into this Agreement and to sub-license the Licenses to Parlux
on an exclusive basis and (ii) the Licensors and Artists to consent
to, and become a party to, the Sub-Licenses, and for good and
valuable consideration, receipt and adequacy of which is
acknowledged by Parlux, at the time of entering into each
Sublicense of a License, Parlux shall issue (to the extent
set forth in this Section 2.1 and Section 2.2 below)
to Iconic, the Licensors and the Artists warrants in the form
attached hereto as Exhibit D (the “ Warrants
”) to purchase a designated number of shares of Parlux Common
Stock, $0.01 par value (the “ Warrant Shares ”),
at a purchase price of $5.00 per share. In each of
Iconic’s, the Licensor’s and the Artist’s sole
discretion, each of such parties may cause Parlux to issue all or a
portion of the Warrants to any of their respective Affiliates (as
such term is defined in the Warrants) and business associates, as
designated by Iconic on the form of instruction letter attached
hereto as Exhibit E , provided that any such designated
person makes investment representations to Parlux and qualifies as
an “accredited investor” under Regulation D of the
Securities Act of 1933, as amended (“ 1933 Act
”) and further provided that any such designated person is
not a Parlux Restricted Person (as such term is defined below) as
of the date hereof or as of the date of designation by Iconic.
For purposes hereof, a “ Parlux Restricted
Person ” shall mean any person or entity who as of the
designated date is, or at any time in the three year period
immediately preceding the designated date has been, a director,
officer, 5% or greater shareholder, employee, consultant, vendor,
supplier, distributor or direct competitor of Parlux, or an
Affiliate or relative of any of the foregoing. The specific
amount of Warrant Shares to be reserved for potential issuance
under the Warrants with respect to each License is set forth on
Exhibit A next to the name of each respective Licensor.
However, Warrants with respect to any of the Subsequent
Licenses set forth on Exhibit A will not be issued by Parlux
unless and until the Subsequent Licenses set forth on Exhibit
A are entered into by the respective Licensors and Iconic and
sub-licensed by Iconic to Parlux pursuant to a Sublicense, and only
to the extent that the required shareholder approval has been
obtained by Parlux as set forth in Section 2.2 below.
As more fully set forth in the form of Warrants, and subject
to the provisions of Section 2.2 below, the Warrants (i)
will be exercisable for an eight (8) year period from the date of
issuance, provided if the attendant License is not renewed by
Parlux as the sub-licensee for the Renewal Term (as
defined in the License Agreement), then the Warrants will only be
exercisable for a five (5) year period from the date of issuance;
(ii) will be subject to the vesting schedule contained therein;
(iii) will have an exercise price of $5.00 per share, subject to
corporate anti-dilution and adjustment provisions as set forth in
the Warrants; (iv) will restrict the holder of any Warrants from
exercising such holder's Warrants to the extent that the number of
shares of Parlux Common Stock otherwise issuable upon exercise of
the Warrants, together with any other Parlux Common Stock then
beneficially owned by such holder, would make the holder the
beneficial owner of more than 19.9% of the total number of then
issued and outstanding shares of Parlux Common Stock, provided that
this restriction shall not prevent, or be deemed to prevent, Iconic
or any of its Affiliates from engaging or offering or proposing to
engage in a transaction with Parlux that would constitute a Special
Transaction under Sections 2.5(b) or
4
2.5(c) of the Warrants; and (v) will
contain certain registration rights for the holders of the
Warrants, covering the re-sale of the Warrant Shares for the
benefit of each of the holders (including Iconic, the Licensors and
the Artists). At the Initial Closing Date, Iconic, the
Licensors, the Artists and/or their respective designees, will be
issued Warrants for an aggregate of 4,000,000 Warrant Shares (the
“ Initial Warrants ”) consisting of
Warrants for 2,000,000 Warrant Shares allocable to each Sublicense
of the two Initial Licenses, subject however, as more fully set
forth in Section 2.2 below, to increase for each of the Initial
Warrants to contain 3,000,000 underlying Warrant Shares.
2.2
Required Shareholder
Approval . Iconic
acknowledges that due to limitations imposed by the Nasdaq Stock
Market (“ NASDAQ ”), Parlux is required to
obtain the approval of its shareholders in order to issue an amount
of shares of Parlux Common Stock in excess of 20% of Parlux's total
issued and outstanding Common Stock, which limitation applies to
the Warrants to be issued with respect to the Subsequent Licenses.
Iconic further acknowledges that Parlux has represented that
its Certificate of Incorporation currently authorizes a total of
30,000,000 shares of Common Stock, that Parlux has approximately
20,324,812 shares issued and outstanding at present and
approximately 2,484,500 shares reserved at present for potential
future issuance, and that Parlux will need to amend its Certificate
of Incorporation to increase its authorized Common Stock in order
to be able to have a sufficient number of shares reserved for the
remaining balance of 2,000,000 Warrant Shares allocable to the two
Initial Licenses (an additional 1,000,000 Warrant Shares for each
of the Initial Licenses) and with respect to the Subsequent
Licenses listed on Exhibit A (3,000,000 Warrant Shares for
each). Accordingly, Iconic acknowledges (and will inform the
Licensors and Artists) that Parlux cannot and will not issue
Warrants for the balance of 2,000,000 Warrant Shares allocable to
the Initial Licenses or for the 6,000,000 Warrant Shares allocable
to the Subsequent Licenses, absent receipt of shareholder approval.
Parlux covenants and agrees, promptly after the entering into
of the Sublicense for the Initial Licenses designated on Exhibit A
(but in any event within 30 days thereafter), to file a preliminary
proxy statement with the Securities and Exchange Commission ("
SEC ") and to thereafter call and hold, as promptly as is
reasonably possible, a special meeting of its shareholders to seek
the requisite approval of its shareholders to approve an amendment
to the Certificate of Incorporation of Parlux to increase the
amount of authorized shares of Common Stock to at least 40,000,000
shares, and to approve the issuance of a total of up to 8,000,000
Warrant Shares with respect to those Warrants related to the
balance of 2,000,000Warrant Shares allocable to the Initial
Licenses and the 6,000,000 Warrant Shares allocable to the
Subsequent Licenses (collectively, the “ Required
Shareholder Approval ”). Parlux makes no
representation, warranty, covenant or guaranty to Iconic or any
Licensor as to whether or not the Required Shareholder Approval
will be obtained, or obtained on a timely basis, but agrees to use
its best efforts to take such action as is reasonably necessary as
promptly as possible to facilitate such Required Shareholder
Approval. Iconic agrees and acknowledges that Parlux will not
be able to issue any Warrants other than the Initial Warrants for a
total of 4,000,000 Warrant Shares in connection with the entering
into of the Sublicenses of the Initial Licenses hereunder, without
the Required Shareholder Approval. Parlux and Iconic agree
that if
5
the Required Shareholder Approval is not
received within 150 days of the date of entering into any
Sublicense with respect to any Subsequent License, then Iconic
(following consultation with the Licensors and the Artists) shall
have the unilateral option of either proceeding with the Sublicense
to Parlux of such Subsequent License without receiving any
additional Warrants, or terminating the Sublicense to Parlux of
such Subsequent License. In the event the Required
Shareholder Approval is not obtained within the 150 day time
period, whether Iconic proceeds with the Sublicense to Parlux of
the Subsequent Licenses without additional Warrants, or whether
Iconic terminates the Sublicense to Parlux of the Subsequent
Licenses, in either case, the parties agree that (i) Parlux shall
have no further obligation to issue any additional Warrants with
respect to the Initial Licenses or the Subsequent Licenses, (ii)
Parlux shall not have any liability to Iconic, any Licensor or
Artist, or any of their designees, for its failure to issue
additional Warrants, (iii) neither Iconic nor any Licensor or
Artist under any Licenses, nor their designees, shall have or
assert any claim against Parlux for its failure to issue any
additional Warrants, and (iv) the Sublicenses to Parlux of the
Licenses designated as Initial Licenses on Exhibit A , and
the Initial Warrants (for a total of 4,000,000 Warrant Shares)
issued by Parlux with respect to the Sublicenses of the Initial
Licenses, shall remain in full force and effect. If Parlux
does not obtain the Required Shareholder Approval within the 150
day time period, then Iconic shall notify Parlux of its decision,
which Iconic may determine in its sole discretion, to proceed with
Sublicenses of the Subsequent Licenses without Warrants within 30
days following the end of such 150 day period.
3.
Profit Payments and
Royalties .
3.1
Iconic's Right to *% of Net
Profits . So long as any
Sublicense remains in effect and so long as the amount of
cumulative Net Profits (as hereinafter defined and calculated) is a
positive number, Parlux agrees to pay Iconic and Iconic's
assignee(s), on an annual basis, a sum equal to * (*%) of the
cumulative Net Profits (as hereinafter defined) earned by Parlux,
and/or any of its subsidiaries, affiliates (meaning a person or
entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the person or entity specified) or sub-licensees (the
“ Net Profits Share ”), on sales of
‘Licensed Products’ (as defined in the applicable
License) in each ‘Sales Year’ (as defined in the
applicable License) during the ‘Term’ (as defined in
the applicable License), less the aggregate amount of the Net
Profits Share previously paid to Iconic and Iconic's assignee(s)
with respect to such Sublicense. This payment obligation will
continue for so long as the Licensed Products are sold by Parlux
pursuant to its Sublicense of such
License. Parlux acknowledges and agrees that at any time on
or after the Initial Delivery Date with respect to the Initial
Licenses and the Subsequent Delivery Date for each of the
Subsequent Licenses, Iconic may deliver a letter of instruction in
the form attached to Exhibit F (the “ Net Profits
Assignment Letter ”), pursuant to which, for each of the
Licenses, Iconic may irrevocably assign a portion of the Net
Profits Share payable to Iconic under this Section 3 to any
other Person, including without limitation, each of the Licensors
or Artists, but excluding any Parlux Restricted Person. The
Net Profits Assignment Letter will specify the percentage (not in
excess of *%) of the Net Profits Share to be assigned to the Person
specified therein (the “ Assigned Share ”) and
will acknowledge that Iconic relinquishes any and all further right
and entitlement to such Assigned Share granting to
——————————————
* Confidential terms omitted and provided separately
to the Securities and Exchange Commission.
6
the assignee thereof full right and title
to such Assigned Share directly to such assignee. The total
percentage assigned by Iconic to all assignees can not exceed *% of
Iconic's Net Profits Share. The Net Profits Assignment Letter
shall also acknowledge that the assignee of the Assigned Share
shall have a direct right to audit Parlux's books and records in
the manner described in Section 3.4 below and as specified
in the Net Profits Assignment Letter to confirm the accuracy of
Parlux's computation of the Net Profits under the relevant
Sublicense, provided that to the extent either Iconic or the
assignee, or both Iconic and assignee together, conducts an audit
of any period, then neither will be able to subsequently conduct a
separate audit of the same period. Iconic agrees to
coordinate audit rights with its assignee so that only one audit of
any period is conducted for the benefit of Iconic and its assignee.
Should Parlux default in its obligation to pay the
Assigned Share to any such assignee resulting in any liability to
Iconic for the payment of such Assigned Share to such assignee,
Parlux acknowledges that Iconic shall have a right to seek
reimbursement from Parlux for Parlux's default in payment with
respect to such Assigned Share and Parlux agrees to reimburse
Iconic for funds paid by Iconic to its assignee to cure Parlux's
default.
3.2
Net Profits . For purposes hereof, “ Net
Profits ” derived with respect to any Sublicense between
Parlux and Iconic shall mean ‘Net Sales’ (as defined in
the applicable License) from the sale of ‘Licensed
Products’ (as defined in the applicable License) less
Direct Expenses (as defined below) related to the Licensed
Products, less Overhead Expenses (as defined below) from
inception of each Sublicense to the last day of the period for
which Net Profits is being computed. Net Profits may be a
positive number or (if Direct Expenses plus Overhead Expenses, as
limited below, exceed Net Sales) a negative number. For
purposes hereof, “ Direct Expenses ” incurred
with respect to any Sublicense between Parlux and Iconic includes
cost of goods sold, Royalties (as defined in Section 3.3
below), the cost of a Brand Marketing Manager and a Brand
Planner/Buyer (each as defined below) to the extent dedicated to
the ‘Licensed Mark’ (as defined in the applicable
License), advertising and promotion expenses, depreciation and
amortization expense, and any other out-of-pocket (not overhead)
expenses payable by Parlux to third parties, in each case directly
related to the Licensed Products under that Sublicense. For
purposes hereof, “ Overhead Expense ” for each
quarter in any Sales Year shall be the product computed by
multiplying a fraction, the numerator of which shall be Net Sales
of the Licensed Products under that Sublicense for the period in
question and the denominator of which shall be total Net Sales of
all Parlux fragrance and related cosmetic and skin care brands for
the period in question, by the general and administrative and
selling and distribution expenses with respect to all Parlux
fragrance and related cosmetic and skin care brands (inclusive of
the Licensed Products) consistent with the reporting of such
expenses in Parlux's financial statements for period that
corresponds to or ends shortly after each quarter in the Sales Year
(the “ SG&A Expenses ”) filed with the SEC.
For purposes hereof, “ Overhead Expense ”
related to such Licensed Products shall not exceed *% of SG&A
Expenses (as defined herein) for the Sublicense with regard to the
female Initial Artist and *% of SG&A Expenses for the
Sublicense with regard to all other Artists, for any period being
measured. Any Direct Expenses deducted from Net Sales for
purposes of determining Net Profits or any expenses included in the
calculation of Overhead Expense for purposes of determining Net
Profits shall not be duplicated and may not also be deducted from
the gross invoice price of sales of Licensed
——————————————
* Confidential terms omitted and provided separately
to the Securities and Exchange Commission.
7
Products in the computation of Net Sales.
If any SG&A Expenses constitute Direct Expenses related
specifically to the Licensed Products and Licensed Mark, such
Direct Expenses shall not be duplicated but shall be deducted from
SG&A Expenses prior to the application of the foregoing formula
in determining Overhead Expense. For purposes hereof, all
start up and other costs incurred by Parlux prior to the initial
product shipment date which commences the first Sales Year for any
License shall be amortized as Direct Expenses (provided such costs
meet the definition of Direct Expenses set forth herein) during the
first Sales Year as and when incurred (except those expenditures
that, pursuant to GAAP as consistently applied by Parlux, must be
amortized over a multi-year period), and to the extent that the
amount of Net Profits for any Sales Year is a negative number, such
negative number will be carried forward to the subsequent Sales
Year to reduce the amount of Net Profits otherwise derived in such
subsequent Sales Year for purposes of computing the Net Profits
Share to be paid for such Sales Year (e.g., a loss in Sales Year 1
will be carried forward to Sales Year 2), so that Net Profits for
any Sales Year will be determined net of any loss incurred during
the prior Sales Year. Payment of the Net Profit Share under
any Sublicense will be net of all prior payments of the Net Profit
Share under that Sublicense as follows: an amount equal to *%
of the cumulative Net Profits (which shall include all negative Net
Profits and positive Net Profits) for the period commencing on the
Effective Date of the applicable License Agreement and ending on
the last day of the then-current Sales Year for which the Net
Profits Share is being computed (the “ Current Sales
Year ”) (the entire period from the Effective Date
through the end of the Current Sales Year being referred to as the
“ Period To Date ”), less the aggregate,
cumulative amount of Net Profits previously paid to Iconic or
Iconic’s assignee(s), provided that, if such aggregate,
cumulative amount of Net Profits previously paid to Iconic or
Iconic’s assignee(s) shall exceed *% of the cumulative,
aggregate amount of Net Profits for the Period To Date, there shall
be no Net Profits Share payable to Iconic or Iconic assignee(s) for
the Current Sales Year. For purposes hereof, “ Brand
Marketing Manager ” shall mean an employee or independent
contractor of Parlux whose primary responsibility shall be to
develop and market one or more of the fragrance brands that are the
subject of the Licenses. For purposes hereof, “ Brand
Planner/Buyer ” shall mean an employee or independent
contractor of Parlux whose primary responsibility shall to be to
oversee the manufacture of the Licensed Products and the purchasing
of the respective fragrances, bottles, caps, molds and packaging
for one or more of the fragrance brands that are the subject of the
Licenses. If the Brand Marketing Manager and/or Brand
Planner/Buyer is responsible for more than one fragrance brand of
Parlux, then the cost of such employee shall be allocated between
the Licensed Products and/or any other Parlux fragrance brand
products on an equitable basis in good faith by Parlux primarily
based on the respective sales levels of such Licensed Products
and/or such other products in the relevant time period.
3.3
Royalties . In furtherance and not limitation of its
obligations under Section 1.5 , under each Sublicense,
Parlux shall assume the licensee's obligation to make royalty
payments to the Licensor on account of Net Sales for the applicable
brands covered by the underlying License (“ Royalties
”). Parlux shall remit payment of such Royalties
directly to the Licensor under each License in accordance with the
terms and conditions of each License.
——————————————
* Confidential terms omitted and provided separately
to the Securities and Exchange Commission.
8
3.4
Profit and Royalty Reports;
Audits . The respective
amount of Net Profits derived under each Sublicense shall be
reportable by Parlux to Iconic on or before the date that is
forty-five (45) days following the end of each quarter of each
Sales Year during the Term of each License (each such date a
“ Profits Reporting Date ”). On or before
each Profits Reporting Date, Parlux shall submit to Iconic (i) a
true, correct and complete copy of the sales royalty report
provided by Parlux to each Licensor pursuant to the applicable
License, and (ii) a profit report setting forth for the end of the
preceding quarter the cumulative amount of Net Sales and the
cumulative amount of Net Profits earned under each Sublicense.
The profits report shall include a detailed listing, in
accordance with Section 3.2 , of all deductions from gross
receipts to determine Net Sales and in turn all deductions from Net
Sales for purposes of determining Net Profits, and shall show the
calculation of the cumulative payment of the Net Profits Share
under that Sublicense. Parlux agrees to maintain, for the
term of each License, plus three (3) years or, if earlier, three
(3) years from the date of audit as discussed below, true, accurate
and complete business records regarding Licensed Products sold
under each License, including the calculations of Net Sales,
Royalties due to each Licensor under each License, Net Profits
earned by Parlux and the Net Profits Share paid.
Iconic for all Sublicenses, and each
Licensor for such Licensor’s own License, and Iconic's
assignee of the Assigned Share, if any, for the applicable
Sublicense, shall have the right, at any time with at least ten
(10) days’ prior written notice, to audit any and all of
Parlux’s books and records related to the business conducted
in connection with the applicable Sublicense(s) and the
determination of the Net Profits Share. For purposes of this
Section 3.4 , such books and records shall include, but not
be limited to, the manner and methodology of the determination of
the Net Profits Share. In connection with any such audit,
Parlux shall provide access during normal business hours to its
premises and to all of Parlux’s employees as are reasonably
necessary for the completion of such audit. Parlux shall not
bear the costs of any audit hereunder; provided ,
however , that if after the first year of a Sublicense an
audit of a Sublicense reveals under-reporting of Net Profits by (i)
*% or more for any Sales Year or (ii) $* for any Sales Year,
whichever is greater, the costs of such audit shall be reimbursed
by Parlux and failure by Parlux to so reimburse shall constitute a
breach of this Agreement. Iconic agrees to coordinate all
audit demands by Iconic, by its assignee(s) of the Assigned Share,
and by the Licensor, so that only one audit of any period with
respect to any Sublicense is conducted.
In the event that as a result of such
audit, Iconic disputes the amount of the Net Profits Share or the
manner in which it is determined, it shall promptly (but not later
than 30 days after the delivery of such audit to Iconic) give
written notice (the “Dispute Notice”) to Parlux of such
dispute (in reasonable detail describing the nature of the dispute
asserted). If Iconic and Parlux reconcile the dispute, the
Net Profits Share shall be adjusted accordingly (and if applicable,
any remaining balance shall be paid promptly) and shall thereupon
become binding, final and conclusive upon Parlux and Iconic.
If Iconic and Parlux are unable to reconcile the dispute in
writing within 20 days after the date on which Iconic gives the
applicable Dispute Notice (the " Reconciliation Period "),
the items in dispute shall be submitted to a mutually acceptable
accounting firm (other than the accountants for Parlux) selected
from any of the eight largest accounting firms in the United States
in terms of gross revenues (the " Independent Auditors ")
for
——————————————
* Confidential terms omitted and provided separately
to the Securities and Exchange Commission.
9
final determination, and the Net Profits
Share shall be deemed adjusted in accordance with the determination
of the Independent Auditors and shall become binding, final and
conclusive upon all of the parties hereto. The Independent
Auditors shall consider only the accounting items in dispute and
shall be instructed to act within 20 days (or such longer period as
Iconic and Parlux may agree) to resolve all accounting items in
dispute. If the dispute relates to a non-accounting issue and such
dispute is not reconciled within the Reconciliation Period, the
dispute shall be resolved by a court of competent
jurisdiction.
3.5
Payment Terms . The Net Profits Share, and each Licensor's
Royalties, shall be paid by Parlux in U.S. dollars. Parlux
shall pay Royalties directly to the applicable Licensor, when and
as due under the respective Licenses. An amount equal to the
Net Profits Share of each Sublicense shall be paid by Parlux to
Iconic and/or its assignee(s) of the Assigned Share within 60 days
following the end of the respective Sales Year for each Sublicense.
Payment of the Net Profit Share under any Sublicense will be
net of all prior payments of the Net Profit Share under that
Sublicense in accordance with the computational formula set forth
in paragraph 3.2 above. Iconic may assess simple
interest at the rate of one percent (1%) per month for past-due
payments. The payment of such interest shall not prevent
Iconic from exercising any other rights it may have as a
consequence of the lateness of any payment and in no event shall
this interest provision be construed as a grant of permission for
any payment delays or a waiver of the payment terms set forth
herein.
3.6
Taxes . The calculations of Net Profits and Royalties
are exclusive of any national, state or local sales, use, value
added or other taxes, customs duties, or similar tariffs and fees
which Parlux may be required to pay or collect. Should any
such tax or levy be made, Parlux agrees to pay such tax or levy and
indemnify Iconic against any claim for such tax or levy demanded.
Parlux will pay when due any withholding taxes required by
applicable law with respect to its employees. The Licensor
and/or Iconic will pay all federal, state and local income taxes
payable with respect to its receipt of any payments with respect to
Net Profits and Royalties, and any interest thereon, paid or
payable by Parlux. Iconic agrees to indemnify Parlux
against any claim for income taxes due and payable by Iconic or by
any Licensor, except with respect to any Assigned Share. The
assignee of an Assigned Share will agree in the Net Profits
Assignment Letter to indemnify Parlux against any claim for income
taxes due and payable by the assignee with respect to the Assigned
Share.
4.
Right of First Offer
.
4.1
Right of First Offer
. Parlux is hereby granted
the right of first offer as described in this Section 4
exercisable in connection with any proposed Fragrance Transaction.
For purposes hereof, a “ Fragrance Transaction
” shall mean an exclusive license agreement to manufacture,
market and sell fragrance and related products which is obtained by
Iconic as licensee with any celebrity personalities as licensors,
other than and in addition to those listed on Exhibit A
.
(a)
Subject to Section 4.2
below, if at any time Iconic shall enter into a Fragrance
Transaction, then prior to negotiating with or initiating any
assignment or sub-license of any such Fragrance Transaction to any
Third Party Manufacturer (as defined in Section 1.1 ),
Iconic shall give written notice (the “ Negotiation
Notice ”) to
10
Parlux. The Negotiation Notice will
include a copy of the proposed or executed license agreement or
term sheet that Iconic has obtained with the celebrity and/or her
or his representative with respect to the Fragrance Transaction.
If Parlux wishes to pursue an assignment or sub-license of
that Fragrance Transaction with Iconic, then Parlux shall, not
later than ten (10) days after delivery of the Negotiation Notice
(the “ Decision Period ”), give written notice
thereof (the “ Exercise Notice ”) to Iconic
stating whether Parlux wishes to pursue such Fragrance Transaction.
The Exercise Notice, which shall be non-binding, shall
include the proposed consideration, the terms of payment of such
consideration and all other substantive economic terms of the
assignment or sub-license of the Fragrance Transaction to Parlux.
Such sub-license or assignment, as applicable, shall be
subject to the consent of the Licensor in each such Fragrance
Transaction.
(b)
Iconic shall consider Parlux’s
proposal for a Fragrance Transaction in good faith. If Iconic
and Parlux are unable to negotiate a binding agreement for an
assignment or sub-license of a Fragrance Transaction within the
thirty (30) day period following the delivery of the Exercise
Notice, then Iconic shall have the right to pursue that Fragrance
Transaction with any unrelated Third Party Manufacturer.
4.2
Expiration and Limitations
. The respective rights and
obligations of Parlux and Iconic under this Section 4 shall
expire upon the earlier of (i) the expiration of the respective
Terms or earlier termination of all the Licenses, (ii) the failure
of Parlux to make a payment to Iconic of Net Profits when due, if
not cured after ten (10) days’ written notice of payment
default by Iconic to Parlux, (iii) the breach by Parlux of any of
its covenants and obligations (including without limitation, any
payment obligations) under any License Agreement or Sub-License, if
not cured after ten (10) days’ written notice of default by
Iconic (or, to the extent applicable, the Licensor), to the extent
curable or (iv) the breach by Parlux of any of its covenants and
obligations under the Initial Warrants, the Additional Warrants (if
so issued) or that certain letter agreement of even date herewith
between the parties, if not cured after ten (10) days’
written notice of default by Iconic, to the extent
curable.
4.3
Non-Contravention
. Iconic shall have the right, but
not the obligation, to provide written notice to Parlux if Iconic
in good faith believes that Iconic has a reasonable opportunity to
enter into a Fragrance Transaction with a celebrity (an “
Opportunity Notice ”). Parlux will confirm
within ten (10) days from receipt of an Opportunity Notice if (i)
Parlux is interested in working with Iconic in order to pursue a
license from that celebrity (a “ Proposed Celebrity
”), (ii) Parlux has had or is in bona fide substantive
discussions (which must be documented with proof reasonably
satisfactory to Iconic) with or otherwise pursuing a license
directly with the Proposed Celebrity pursuant to an already
existing term sheet or draft license (a “ Pre-Existing
Relationship ”), or (iii) Parlux has no interest in
pursuing the Proposed Celebrity (an “ Opportunity
Declination ”), it being understood and agreed that the
failure of Parlux to timely respond to the Opportunity Notice shall
constitute an Opportunity Declination. If Parlux confirms its
interest in having Iconic pursue the Proposed Celebrity, then
Iconic will have an exclusive period of ninety (90) days to obtain
and present to Parlux a term sheet for a Fragrance Transaction with
the Proposed Celebrity, and then will have an additional exclusive
period of ninety (90) days to obtain a definitive license agreement
for a Fragrance Transaction with the Proposed Celebrity, at which
point Iconic will present the Fragrance Transaction to Parlux
pursuant to the right of first offer set forth in Section 4.1, and
Parlux shall not negotiate, enter
11
into or attempt to negotiate or enter
into any agreement, covenant or understanding, written or oral,
with the Proposed Celebrity or its agents and representatives,
directly or indirectly, during both such ninety (90) day exclusive
periods. If Parlux confirms it has a Pre-Existing
Relationship with the Proposed Celebrity, then Iconic agrees not to
pursue a Fragrance Transaction with such Proposed Celebrity for a
period of six months and Iconic shall not negotiate, enter into or
attempt to negotiate or enter into any agreement, covenant or
understanding, written or oral, with the Proposed Celebrity or its
agents and representatives, directly or indirectly, during such six
month period. In the event of an Opportunity Declination,
than Iconic shall be free to pursue a Fragrance Transaction with
such Proposed Celebrity for a period of six months without being
subject to the right of first offer set forth in this Section
4 and Parlux shall not negotiate, enter into or attempt to
negotiate or enter into any agreement, covenant or understanding,
written or oral, with the Proposed Celebrity or its agents and
representatives, directly or indirectly, during such six month
period.
5.
Representations and Warranties of
Parlux . Parlux
represents, warrants and covenants to Iconic as follows:
5.1
Organization; Execution, Delivery and
Performance .
(a)
Parlux is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware, with full power and authority (corporate and
otherwise) to own, lease, use and operate its properties and to
carry on its business as and where owned, leased, used, operated
and conducted.
(b)
Subject to receiving the Required
Shareholder Approval and the filing of an Amendment to the
Certificate of Incorporation of Parlux in accordance with the
Required Shareholder Approval: (i) Parlux has all requisite
corporate power and authority to enter into and perform its
obligations under this Agreement, the Warrants, and the Sublicenses
(collectively the “ Transaction Documents ”) and
to consummate the transactions contemplated hereby and thereby and
to issue the Warrants, in accordance with the terms hereof and
thereof, (ii) the execution and delivery of the Transaction
Documents by Parlux and the consummation by Parlux of the
transactions contemplated hereby and thereby (including without
limitation, the issuance of the Warrants, and the issuance and
reservation for issuance of the Warrant Shares) have been duly
authorized by Parlux’s Board of Directors and no further
consent or authorization of Parlux or its Board of Directors is
required, (iii) each of the Transaction Documents has been duly
executed and delivered by Parlux by its authorized representative,
and such authorized representative is a true and official
representative with authority to sign each such document and the
other documents or certificates executed in connection herewith and
bind Parlux accordingly, and (iv) each of the Transaction Documents
constitutes, and upon execution and delivery thereof by Parlux will
constitute, a legal, valid and binding obligation of Parlux
enforceable against Parlux in accordance with its respective terms,
except to the extent limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application
affecting enforcement of creditors’ rights and general
principles of equity that restrict the availability of equitable or
legal remedies.
12
5.2
Warrant Shares Duly
Authorized . The Warrant
Shares underlying the Initial Warrants have been duly authorized
and reserved for issuance and, upon exercise of the Initial
Warrants in accordance with the terms of the Initial Warrants,
including receipt of payment of the requisite exercise price, the
Warrant Shares will be duly and validly issued, fully paid and
non-assessable, and shall not be subject to preemptive rights or
other similar rights of shareholders of Parlux. Subject to
the Required Shareholder Approval for the Warrants to be issued
with respect to any Subsequent Licenses and for the additional
Warrants for 2,000,000 Warrant Shares to be issued with respect to
the Initial Licenses, such Warrant Shares will be duly authorized
and reserved for future issuance and, upon exercise of the Warrants
in accordance with the terms of the Warrants, including receipt of
payment of the requisite exercise price, the Warrant Shares will be
duly and validly issued, fully paid and non-assessable, and shall
not be subject to preemptive rights or other similar rights of
shareholders of Parlux.
5.3
No Conflicts . The execution, delivery and performance of
the Transaction Documents by Parlux and the consummation by Parlux
of the transactions contemplated hereby and thereby (including,
without limitation, the issuance and reservation for issuance of
the Warrant Shares) will not violate or conflict with, or result in
a breach of any provision of, or constitute a default (or an event
which with notice or lapse of time or both could become a default)
under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture, patent,
patent license or instrument to which Parlux or any of its
subsidiaries is a party, except for possible violations, conflicts
or defaults as would not, individually or in the aggregate, have a
Material Adverse Effect (as hereinafter defined). Provided that the
Required Shareholder Approval is obtained, and the Certificate of
Incorporation of Parlux is thereafter amended in accordance with
the Required Shareholder Approval, the execution, delivery and
performance of the Transaction Documents by Parlux and the
consummation by Parlux of the transactions contemplated hereby and
thereby (including, without limitation, the issuance and
reservation for issuance of the Warrant Shares) will not: (i)
conflict with or result in a violation of any provision of the
Certificate of Incorporation or By-laws of Parlux; or (ii) result
in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations
and regulations of any self-regulatory organizations to which
Parlux or its securities are subject) applicable to Parlux or any
of its subsidiaries or by which any property or asset of Parlux or
any of its subsidiaries is bound or affected. Neither Parlux
nor any of its subsidiaries is in violation of its Certificate of
Incorporation, By-laws or other organizational documents.
Neither Parlux nor any of its subsidiaries is in default (and
no event has occurred which with notice or lapse of time or both
could put Parlux or any of its subsidiaries in default) under, and
neither Parlux nor any of its subsidiaries has taken any action or
failed to take any action that would give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which Parlux or any of its
subsidiaries is a party or by which any property or assets of
Parlux or any of its subsidiaries is bound or affected, except for
possible defaults as would not, individually or in the aggregate,
have a Material Adverse Effect or asserted defaults which have been
waived by the other parties. The businesses of Parlux and its
subsidiaries are not being conducted in violation of any law, rule,
ordinance or regulation of any governmental entity, except for
possible violations (other than with respect to federal and state
securities laws) which would not, individually or in the aggregate,
have a Material Adverse Effect. Except as required under the 1933
Act, the Securities Exchange Act of 1934, as amended (the “
1934 Act ”), the rules and regulations of NASDAQ and
any applicable state laws, Parlux is not required to
13
obtain any consent, authorization or
order of, or make any filing or registration with, any court,
governmental agency, regulatory agency, self regulatory
organization or stock market or any third party in order for it to
execute, deliver or perform any of its obligations under this
Agreement or the Warrants in accordance with the terms hereof or
thereof or to issue and sell the Warrants in accordance with the
terms hereof and to issue the Warrant Shares upon exercise of the
Warrants. All consents, authorizations, orders, filings and
registrations which Parlux is required to obtain pursuant to the
preceding sentence have been obtained or effected on or prior to
the date hereof or will be obtained or effected in a timely manner
following the date hereof, except that Iconic acknowledges that
Parlux cannot provide any assurance of receiving the Required
Shareholder Approval. For purposes of this Agreement, “
Material Adverse Effect ” means a material adverse
effect on (i) the assets, liabilities, results of operations,
condition (financial or otherwise), business, or prospects of
Parlux and its subsidiaries taken as a whole, or (ii) the ability
of Parlux to perform its obligations in all material respects under
the Transaction Documents.
5.4
SEC Information
.
(a)
Since August 1, 2008, Parlux has timely
filed all reports, schedules, forms, statements and other documents
required to be filed by it with the SEC pursuant to the reporting
requirements of the 1934 Act (all of the foregoing and all other
documents filed with the SEC within the past two years and all
exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being
hereinafter referred to herein as the “ SEC Documents
”). The SEC Documents have been made available to Iconic via
the SEC’s EDGAR system. As of their respective dates, the SEC
Documents complied in all material respects with the requirements
of the 1934 Act and the rules and regulations of the SEC
promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. As of their respective
dates, the financial statements of Parlux included in the SEC
Documents (“ Parlux Financial Statements ”)
complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of
the SEC with respect thereto. Parlux Financial Statements have been
prepared in accordance with United States generally accepted
accounting principles, consistently applied, during the periods
involved (except as may be otherwise indicated in such financial
statements or the notes thereto) and fairly present in all material
respects the consolidated financial position of Parlux and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments).
(b)
The shares of Common Stock are currently
listed on NASDAQ. Within the past year, Parlux has not
received notice (written or oral) from NASDAQ to the effect that
Parlux is not in compliance with the continued listing and
maintenance requirements of such trading market. Parlux is,
and has no reason to believe that it will not in the foreseeable
future continue to be, in compliance with all such listing and
maintenance requirements, provided its market price does not remain
below $1.00 per share.
14
5.5
Permits; Compliance
. Parlux and each of its
subsidiaries is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate its properties and to carry on its
business as it is now being conducted (collectively, the “
Parlux Permits ”), and there is no action pending or,
to the knowledge of Parlux, threatened regarding suspension or
cancellation of any of Parlux Permits. Neither Parlux nor any
of its subsidiaries is in conflict with, or in default or violation
of, any of the Parlux Permits, except for any such conflicts,
defaults or violations which, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse
Effect.
6.
Representations and Warranties of
Iconic.
6.1
Status . Iconic is a limited liability company formed,
validly existing and in good standing, under the laws of the State
of Delaware. Iconic has full power and authority (corporate
and otherwise) to carry on its business as and where operated and
conducted.
6.2
Ownership of Iconic
. Set forth on Exhibit G
hereto is a true, correct and complete list of the member(s) and
manager(s) of Iconic. Other than the member(s) as set forth
on Exhibit G , as of the date of this Agreement, no person
or entity has any direct or indirect ownership interest in Iconic
(including the right to any share of the profits and losses of
Iconic, or to receive distributions of Iconic's assets) or any
right to acquire any ownership interest in Iconic. Other than
the manager(s) as set forth on Exhibit G , no person or
entity has any direct or indirect right, power or authorization to
manage or direct the management or operations of the business of
Iconic. A true, correct and complete copy of the
Certificate of Formation of Iconic, as filed with the Secretary of
State of the State of Delaware, has been provided by Iconic to
Parlux, and a true, correct and complete copy of the limited
liability company agreement of Iconic and its member(s) will
provided by Iconic to Parlux on each of the Closing
Dates.
6.3
Execution and Delivery
. (i) Iconic has all requisite
power and authority to enter into and perform its obligations under
this Agreement, the Licenses and the Sublicenses, and to consummate
the transactions contemplated hereby in accordance with the terms
hereof and thereof, (ii) the execution and delivery of this
Agreement, the Licenses and the Sublicenses by Iconic and the
consummation by Iconic of the transactions contemplated hereby and
thereby have been duly authorized by Iconic’s manager(s) and
member(s) and no further consent or authorization of Iconic or its
manager(s) is required, (iii) each of this Agreement, the Licenses
and the Sublicenses has been duly executed and delivered by Iconic
by its authorized representative, and such authorized
representative is a true and official representative with authority
to sign each such document and the other documents or certificates
executed in connection herewith and bind Iconic accordingly, and
(iv) each of this Agreement, the Licenses and the Sublicenses
constitutes, and upon execution and delivery thereof by Iconic will
constitute, a legal, valid and binding obligation of Iconic
enforceable against Iconic in accordance with its respective terms,
subject to bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws of general
applicability, relating to or affecting creditors’ rights
generally.
15
6.4
No Conflicts . The execution, delivery and performance of
this Agreement, the Licenses and the Sublicenses by Iconic and the
consummation by Iconic of the transactions contemplated hereby and
thereby will not: (i) conflict with or result in a violation of any
provision of the Certificate of Formation or limited liability
company agreement of Iconic; (ii) violate or conflict with, or
result in a breach of any provision of, or constitute a default (or
an event which with notice or lapse of time or both could become a
default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which Iconic or
any of its affiliates is a party, except for possible violations,
conflicts or defaults as would not, individually or in the
aggregate, have a material adverse effect on Iconic, or (iii)
result in a violation of any law, rule, regulation, order, judgment
or decree applicable to Iconic or any of its affiliates or by which
any property or asset of Iconic or any of its affiliates is bound
or affected. Iconic is not in violation of its Certificate of
Formation, its limited liability company agreement or other
organizational documents. Iconic is not in default (and no
event has occurred which with notice or lapse of time or both could
put Iconic in default) under, and Iconic has not ta
