THROUGHOUT THIS AGREEMENT, WHERE
INFORMATION HAS BEEN REPLACED BY AN ASTERISK
(*), THAT INFORMATION HAS BEEN OMITTED
PURSUANT TO A REQUEST FOR CONFIDENTIAL
TREATMENT FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION PURSUANT TO RULE
24B-2 PROMULGATED UNDER THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED. THE
OMITTED INFORMATION HAS BEEN FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
EXHIBIT 10.71
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and effective as of
the
6th day of January 2005 (the "effective
date"), by and between PARIS HILTON
ENTERTAINMENT INC., with offices at 250
North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210 ("Licensor"), and PARLUX
FRAGRANCES, INC., a public Delaware
corporation with offices at 3725 S.W. 30th
Avenue, Ft. Lauderdale, Fl. 33312
("Licensee") (together the "Parties").
W I T N E S S E T H :
WHEREAS, by way of a
master license (the "Master License") from Ms.
Paris Hilton, an individual with a mailing
address of c/o Ms. Wendy White, 250
North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210, to Licensor, Licensor has
the sole and exclusive rights to license
the Licensed Mark (as hereinafter
defined) pursuant to the terms hereof;
and,
WHEREAS, the Parties entered into a license agreement on May 19,
2004
in which Licensor granted Licensee the sole
and exclusive rights to manufacture
and distribute fragrances and related
products bearing the Licensed Mark( the
"Fragrance License"); and,
WHEREAS, Licensee is familiar with the business of
manufacturing,
promoting and selling Articles (as
hereinafter defined) and Licensee desires to
obtain from Licensor, the exclusive right
and license to use the Licensed Mark
in the Territory (as hereinafter defined)
for use on and in connection with the
manufacture, promotion, distribution and
sale of Articles; and,
WHEREAS, Licensor is willing to grant the license pursuant to the
terms
contained herein.
NOW, THEREFORE, in consideration of the premises and mutual
agreements
contained herein, the parties hereto
covenant and agree as follows:
ARTICLE 1
DEFINITIONS
The following definitions shall apply:
A. TERRITORY. All countries of the world and all
duty-free-shops,
ships, airplanes, military bases and
diplomatic missions of every country of the
world, including the world-wide web.
B. ARTICLES. Men's and women's watches and other time pieces.
C. LICENSED MARK. The trademark PARIS HILTON and such other
trademarks
as are, from time to time, agreed to by
Licensor. Licensor has filed an
application to register the Licensed Mark
for Articles: (i) in the United States
<PAGE>
Patent and Trademark Office on July 27,
2004, Serial No. 76/604,205; and, (ii)
in the 25 cooperating countries of Europe
in a CTM application filed on October
4, 2004, Serial No. 4059631; and (iii) in
Japan, Paris Hilotn word mark filed on
October 5, 2004 in International Classes 3
(perfume); 14 (watches and clocks)
and 25 (clothing); Application No.
2004-91278 in the name of Paris Hilton,
personally. The trademark examiner sent a
priority action on December 9, 2004.
This letter did not mention any opposition
by Genender Intl..
D. NET SALES. The sales price at which Licensee or any Subsidiary
or
Affiliate (as hereinafter defined) bills
its Non-Subsidiary or Affiliate
customers for Articles less: (i) all
returns of damaged, defective or other
merchandise, uncollectible accounts, trade
and cash discounts and allowances,
and taxes directly applicable to the sale
of Articles (such as sales, use, value
added or similar taxes); (ii) all freight
and shipping charges, insurance costs
and duties and other governmental charges
paid by the Licensee to the extent
stated separately on any invoice; (iii) all
receipts from the sale of
discontinued and close-out merchandise
(which shall include only Articles sold
at a discount of 25% or more from the
normal price charged to that specific
customer and then only to the extent that
the aggregate gross sales thereof in
any contract year do not exceed fifteen
percent (15%) of total gross sales);
and, (iv) all receipts from the sale of
samples, displays, brochures,
gift-with-purchase and similar advertising
and promotional materials and
packaging supplies. Notwithstanding the
terms of sub-section (iii) above,
Licensee shall not be excused from paying
royalties on the sales of the Articles
in which the Licensee receives a minimum
gross margin of 25%, in which gross
margin is defined as sales price to the
customer less Licensee's cost of goods
and shipping.
E. SUBSIDIARY. Any corporation or other entity which is 100%
directly
or indirectly owned by Licensee.
F. AFFILIATE. Any corporation or other
entity which is at least 50% owned by
Licensee.
ARTICLE 2
GRANT OF LICENSE RIGHTS
RIGHTS GRANTED. Upon the terms and conditions of this
Agreement,
Licensor hereby grants to Licensee, during
the term of this Agreement, the sole
and exclusive right and license to use the
Licensed Mark in the Territory as a
trademark in connection with the
manufacture, promotion, sale and distribution
solely of the Articles and on all packaging
materials, containers and
promotional materials related to the
Articles and in connection with the
publicity, sales and advertising of the
Articles, including in newspapers,
magazines, radio, television, cinema and
similar media presently existing or
that may exist in the future. Articles may
be sold through the channels
customarily used to sell similar products
of comparable prestige and quality in
the ordinary course of business as
described in paragraph A of Article 7 below.
Licensor shall not, during any period this
Agreement is in effect, grant any
rights to any third party in connection
with the Articles for the Trademark or
any other trademark which includes PARIS
HILTON or any derivative thereof.
<PAGE>
ARTICLE 3
EXCLUSIVITY OF LICENSE
Licensor will not grant any other license effective during the term
of
this Agreement for the use of the Licensed
Mark on or in connection with the
Articles in the Territory. Licensor and Ms.
Paris Hilton may use or grant others
the right to use the Licensed Mark on or in
connection with goods of all other
<PAGE>
types and descriptions (with the
acknowledgement that Licensor has previously
granted a license to Licensee contained in
Fragrance License) in the Territory.
Licensor acknowledges that Licensee may
manufacture and/or distribute in parts
of the Territory goods similar to the
Articles covered by this Agreement which
bear other trademarks. Licensor further
acknowledges and consents to Licensee
obtaining other additional licenses for the
manufacture and/or distribution of
other similar lines of goods during the
term of this Agreement. Licensee will
not, during the term of this Agreement and
thereafter, attack either Licensor's
title in and to the Licensed Mark or the
validity of this License.
Notwithstanding the foregoing, Licensee acknowledges that Ms.
Paris
Hilton has entered into an agreement with
the company Guess?, Inc. to act as a
model and spokesperson for their products,
some of which are watches, although
the Licensed Mark does not appear on any
actual watches. Further, on July 28,
2004 Licensor entered into an agreement
with Amazon.com LLC licensing Amazon.com
LLC to jointly create a line of at least 10
pieces of jewelry with Ms. Paris
Hilton bearing the Licensed Mark for sale
on an online Paris Hilton Boutique to
be established by Amazon.com LLC.
Amazon.com LLC was granted rights to operate
the online Paris Hilton Boutique for six
months from the date of first launch
(August 28, 2004) after which at Amazon.com
LLC's sole discretion, it may
continue to operate the online Paris Hilton
Boutique for a longer period of
time. To date, the Licensed Mark has not
been used by Amazon.com LLC on any
watches or time pieces, but only in
connection with a 10-piece jewelry line.
Attached is an agreement that Amazon.com
has executed that precludes them from
including watches (and other time pieces)
from the Paris Hilton Boutique as of
March 1, 2005.
ARTICLE 4
TERM OF AGREEMENT
Subject to the rights of termination set forth in this Agreement,
the
initial term of this Agreement shall be for
five (5) years commencing on the
execution date above and terminating on
June 30, 2010 (the "Initial Term").
Licensee shall have the option to renew
this Agreement for an additional
five-year period as long as the Minimum
Royalties (as hereinafter defined) for
the Initial Term have been fully paid.
Licensee shall notify Licensor of its
intent to either renew or not renew no
later than December 31, 2009. Each twelve
(12) month period commencing on each July 1
and ending on June 30 shall
constitute and be referred to herein as an
"Annual Period." However, the initial
Annual Period shall commence on the
execution date above and shall terminate on
June 30, 2006.
ARTICLE 5
CONFIDENTIALITY
The Parties acknowledge that all information relating to the
business
and operations of Licensor and Licensee
which they learn or have learned during
or prior to the term of this Agreement is
confidential. The Parties acknowledge
the need to preserve the confidentiality
and secrecy of such information and
agree that, both during the term of this
Agreement and after the expiration or
termination hereof, they shall not use or
disclose same, and shall take all
necessary steps to preserve in all respects
such confidentiality and secrecy.
The provisions of this paragraph shall not
apply with respect to any information
which has entered the public domain through
no fault of Parties. The provisions
of this paragraph shall survive the
expiration or termination of this Agreement.
<PAGE>
ARTICLE 6
DUTIES OF LICENSEE
A. Best Efforts. During the term of this Agreement, Licensee will
use
its best efforts to exploit the rights
herein granted throughout the Territory
and to sell the maximum quantity of
Articles therein consistent with the high
standards and prestige represented by the
Licensed Mark.
B. Design and Sample Making. Licensor shall not be responsible for
the
production, design or sample making of the
Articles and Licensee shall bear all
costs related thereto.
ARTICLE 7
QUALITY STANDARDS
A.
Manufacture of Articles; Quality Control.
(i) The contents and workmanship of Articles shall be at all
times of the highest quality consistent
with the reputation, image and prestige
of the Licensed Mark and Articles shall be
distributed and sold with packaging
and sales promotion materials appropriate
for such high quality Products. The
parties agree that the Articles shall be of
such premium quality, prestige and
price similar to that of the Guess?,
Fossil, and Jennifer Lopez watches as of
the date of this Agreement.
(ii) All Articles shall be manufactured, labeled, sold,
distributed and advertised in
accordance with all applicable national, state
and local laws and
regulations.
(iii) Licensee shall submit to Licensor for approval the
proposed watch designs, along with
the proposed packaging and other material,
designs, sketches, colors, tags,
containers and labels (the "Approval
Package") for Licensor's review,
which approval shall not be unreasonably
withheld. In the event that
Licensor does not respond to Licensee within 10
days of the receipt of any and all
items within the scope of the Approval
Package, any such item shall be
deemed approved.
(iv) During the term of this Agreement, upon Licensor's
request, Licensee shall submit,
free of charge to Licensor, the then current
production samples of each Article
marketed. Production samples submitted by
Licensee for this purpose may be
retained by Licensor. Further, Licensee shall
provide Licensor with 100 samples
of the various Articles being distributed
each year for Licensor to use for
public relations and promotional purposes.
All Articles to be sold hereunder
shall be at least equal in quality to the
Approval Package presented to
Licensor. Licensor and its duly authorized
representatives shall have the
right, upon reasonable advance notice and
during normal business hours, at
Licensor's expense, to examine Articles in
the process of being
manufactured.
B. Required Markings. Licensee shall cause to appear on all
packaging
of Articles, (i) "the trademark, PARIS
HILTON" is licensed to "Parlux
Fragrances, Inc."; and such additional
legends, markings and notices complying
with the requirements of any law or
regulation in the Territory and (ii) such
legends, markings and notices as Licensor,
from time to time, may reasonably
request.
C. Distribution. In order to maintain the reputation, image and
prestige of the Licensed Mark, Licensee's
normal distribution patterns shall
consist of those retail establishments
whose location, merchandising and overall
operations are consistent with the products
described in paragraph A (i) of
Article 7 above.
D. Sales Force. During the term of this Agreement, Licensee
shall
maintain a non-exclusive sales force
suitable to carry out the purpose of this
Agreement.
<PAGE>
ARTICLE 8
GUARANTEED MINIMUM ROYALTY
In consideration of both the license granted and the services to
be
performed by Ms. Paris Hilton hereunder,
Licensee shall pay to Licensor an
annual Guaranteed Minimum Royalty as
follows:
ANNUAL PERIOD
GUARANTEED MINIMUM ROYALTY
-------------
--------------------------
Year 1 (Execution date - 6/30/06) * (due upon execution hereof)
Year 2 (7/1/06 - 6/30/07)
*
Year 3 (7/1/07 - 6/30/08)
*
Year 4 (7/1/08 - 6/30/09)
*
Year 5 (7/1/09 - 6/30/10)
*
In the event that the Initial Term of this Agreement is extended
for an
additional five-year term (July 1, 2010 -
June 30, 2015, the "Extended Term")
the Guaranteed Minimum Royalty for each
Annual Period of the Extended Term shall
be *.
The Guaranteed Minimum Royalty payable for each Annual Period shall
be
paid to Licensor on a monthly basis in
12-equal installments on the first of
every month starting with the payment of
the Guaranteed Minimum Royalty for Year
2 on July 1, 2006.
The Guaranteed Minimum Royalty for each Annual Period shall be
credited
against the Sales Royalty for only the same
Annual Period as provided in Article
9 below.
ARTICLE
9
SALES ROYALTY; WITHHOLDING TAXES; COMMISSION TO RICK HILTON
A. Licensee shall pay to Licensor a Sales Royalty on each
Annual
Period's Net Sales of *. The Sales Royalty
payable hereunder shall be accounted
for and paid on a quarterly basis within
forty-five (45) days after the close of
the prior quarter's sales, along with the
Guaranteed Minimum Royalty that may be
due. In other words, the actual Sales
Royalty will be paid 45-days in arrears
computed on the basis of Net Sales during
the quarter ending 45 days before the
period upon which royalties are being paid,
with a credit for any Guaranteed
Minimum Royalty and Sales Royalty payments
previously made to Licensor.
B. If applicable, Licensee shall compute any payment, on behalf
of
Licensor, for all taxes (other than United
States Federal, state or local income
taxes) which any governmental authority in
the Territory may impose on Licensor
with respect to royalties paid by Licensee
to Licensor. The amount of such taxes
shall be deducted from payments of
royalties, provided that Licensor is entitled
under applicable law to credit the amount
of such taxes against its United
States Federal Income Tax obligations.
Licensee shall furnish Licensor with an
official receipt (together with a
translation thereof if not in English)
promptly after each such payment of taxes.
In the event such taxes are not paid
when due, all resulting penalties and
interest shall be borne by Licensee.
<PAGE>
C. No payment of Sales Royalty for any Annual Period in excess
of
payments of Guaranteed Minimum Royalty for
the same Annual Period shall be
credited against the Guaranteed Minimum
Royalty due to Licensor for any other
Annual Period.
D. Payment of the initial Guaranteed Minimum Royalty shall be
as
follows:
(1) * to: "Rick Hilton". c/o Ms. Wendy White, 250 North Canon
Drive, 2nd Floor, Beverly Hills, CA 90210; and,
(2) * to: Paris Hilton Entertainment Inc. c/o Ms. Wendy
White, 250 North Canon Drive, 2nd Floor, Beverly Hills, CA
90210
E. All other Guaranteed Minimum Royalties and other Royalties shall
be
paid as follows:
(1) 5% of amounts due to: "Rick Hilton" c/o Ms. Wendy White,
250 North Canon Drive, 2nd Floor, Beverly Hills, CA 90210;
and,
(2) 95% of amounts due to: Paris Hilton Entertainment Inc. c/o
Ms. Wendy White, 250 North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210.
F. In addition to the Sales Royalty and Guaranteed Minimum
Royalties
that Licensee is obligated to pay pursuant
to the terms hereof, Licensee shall
further pay Mr. Rick Hilton, a commission
for negotiating this Agreement of * of
the actual Sales Royalty and Guaranteed
Minimum Royalty (paid to Licensor and
Rick Hilton) throughout the term of this
Agreement and any extensions thereof.
This * commission shall be paid to Rick
Hilton at the time that the Sales
Royalty is due to Licensor. The *
commission shall be paid on the initial
Guaranteed Minimum Royalty due upon
execution hereof, so that Rick Hilton shall
received * (Guaranteed Minimum Royalty) + *
(commission) upon execution hereof,
or * .
ARTICLE 10
ADVERTISING
Licensee agrees to spend in the United States for "consumer
advertising" (as defined below) * of Net
Sales during each Annual Period.
For the
other markets in the Territory, Licensee or its distributors
will jointly spend not less than * of Net
sales in such markets during each
Annual Period.
"Consumer Advertising" shall be understood to include
newspapers,
magazines, television, radio, billboards
(including related artwork and
production charges for these five
categories), retailer demonstration charges,
retailer's catalogues, gifts-with-purchase
including the gift aspect of value
sets, direct mail, remittance envelopes,
billing inserts , product samples,
pamphlets, free goods (including those to
Licensor for events and other public
relation activities), window and counter
displays (including testers, dummies,
counter cards and other visual aids),
special events, contests, publicity and
promotions and cooperative advertising.
Licensor undertakes at Licensee's request to make Ms. Paris
Hilton
("PH") available at reasonable intervals
and for reasonable periods (which shall
involve a maximum of four (4) appearances
during the first Annual Period and a
maximum of two (2) appearances each Annual
Period thereafter) for promotional
tie-ins serving to associate PH with the
Articles. Licensee shall also be
entitled to the use of PH's likeness for
advertising and promotional purposes
<PAGE>
upon Licensor's approval first being
obtained in each instance, which approval
shall not be unreasonably withheld or
delayed. Licensor shall make every
reasonable effort, in light of PH's busy
schedule, at the request of the
Licensee, to arrange for PH's cooperation
for publicity photographs, launch
parties, personal appearances and radio and
TV interviews (which shall be
included in PH's obligations of four (4)
and two (2) appearances discussed
above). Licensee shall reimburse Licensor
for the reasonable costs involved in
providing PH plus one other individual,
selected by Licensor, plus her Mother
and Father if they wish to attend, with
first-class travel, lodging, food and
other related expenses mutually agreed upon
in advance of each appearance
attended by PH at Licensee's request. If PH
fails to appear for a scheduled
Licensor approved event, Licensee will have
the right to deduct up to $20,000 of
its non-refundable out of pocket expenses
incurred in connection with each
specific event from the Sales Royalty. The
failure to appear at a scheduled
event could have a material adverse effect
on the Licensee's ability to market
the Articles.
ARTICLE 11
SALES STATEMENT; BOOKS AND RECORDS; AUDITS
A. Sales Statement. Licensee shall deliver to Licensor at the time
each
Sales Royalty payment is due, a reasonably
detailed report signed by a duly
authorized officer of Licensee indicating
by quarter the Net Sales and a
computation of the amount of Sales Royalty
payable hereunder for said period.
Such statement shall be furnished to
Licensor whether or not any Articles have
been sold during the period of which such
statement is due.
Licensee shall deliver to Licensor, not later than ninety (90)
days
after the close of each Annual Period
during the term of this Agreement (or
portion thereof in the event of prior
termination for any re
