SUBLICENSE

EXHIBIT 10.3

SUBLICENSE

This Sublicense (the “Sublicense”) is made as of this 7 ^th day of April, 2009, by and among Parlux Fragrances, Inc., a Delaware corporation, with its principal offices at 5900 North Andrews Avenue, Suite 500, Ft. Lauderdale, FL 33309 (“Sub-Licensee”), and Iconic Fragrances, LLC, a Delaware limited liability company, with its principal offices at 1850 N.W. 84th Avenue, Suite 100, Miami, FL 33126 (“Sub-Licensor”).

WHEREAS , Sub-Licensor, Kanye West (“Artist”) and Mascotte Holdings, Inc., an entity or representative owning/and or controlling the rights to market such Artists name and any related trademark (“Licensor”) have entered into that certain License Agreement, dated as of April 3, 2009 (the “License Agreement”), pursuant to which Sub-Licensor holds the exclusive right and license to use the Licensed Mark in the Territory for use on and solely in connection with the manufacture, promotion, distribution and sale of Licensed Products in the Licensed Channels of Distribution (as all of such terms are defined in the License Agreement); and

WHEREAS , Sub-Licensor has the right and obligation pursuant to the License Agreement to sublicense its rights and obligations under the License Agreement to Sub-Licensee; and

WHEREAS , pursuant to that certain Agreement entered into by Sub-Licensee and Sub-Licensor dated April 3, 2009 (the "Parlux-Iconic Agreement"), Sub-Licensor desires to sublicense the License Agreement to Sub-Licensee, and Sub-Licensee desires to sublicense the License Agreement from Sub-Licensor; and

WHEREAS , the Artist and Licensor desire to permit the Sublicense between Sub-Licensee and Sub-Licensor to be entered into.

NOW, THEREFORE , the parties hereto agree as follows:

1.

Grant of Exclusive Sublicense .  Sub-Licensor hereby grants to Sub-Licensee, and Sub-Licensee hereby accepts, the exclusive sublicense of the License Agreement, on the terms and subject to the conditions set forth in this Sublicense, pursuant to which the Sub-Licensee shall be responsible for performing all of Sub-Licensor’s obligations under the License Agreement directly for the benefit of the Licensor, and the Sub-Licensee shall be entitled directly to all of the rights and benefits of the Sub-Licensor under the License Agreement.  The Sub-Licensee hereby assumes all of Sub-Licensor’s obligations to the Licensor under the License Agreement and guarantees to the Licensor and Artist that it will fully perform as the licensee under the License Agreement, as if the License Agreement were directly entered into with the Sub-Licensee.  All capitalized terms used in this Sublicense shall have the meaning assigned to such terms in the License Agreement, except as otherwise defined in this Agreement.

2.

Term .  The Initial Term of this Sublicense shall be for the same Initial Term as the License Agreement, as may be extended by the Sub-Licensee's exercise of the Licensee's option to extend the License Agreement for a Renewal Term, in accordance with the terms and conditions of the License Agreement.

3.

Royalties .  Without limiting the Sub-Licensee's assumed obligations as set forth in Section 1 above, the Sub-Licensee shall assume the Sub-Licensor’s obligation to make payments of Sales Royalties to the Licensor on account of Sub-Licensee’s Net Sales for the applicable Licensed Products covered by the License Agreement including the payment of any Guaranteed Minimum Royalties

 

required in the License Agreement, subject to any advance payments of Guaranteed Minimum Royalties that Sub-Licensor may agree to make on Sub-Licensee’s behalf pursuant to the terms of the Parlux-Iconic Agreement, the repayment of which shall be governed by the terms of the Parlux-Iconic Agreement.  The Sub-Licensee shall remit payment of such Sales Royalties directly to the Licensor under the License Agreement in accordance with the terms and conditions of the License Agreement.  The Licensor shall be entitled to enforce its rights to be paid Sales Royalties under the License Agreement directly from the Sub-Licensee, and the Licensor need not proceed against the Sub-Licensor to enforce its rights against the Sub-Licensee.  The Sub-Licensee agrees, and represents to the Licensor and Artist, that the Licensor and the Artist under the License Agreement shall have the right to enforce against Sub-Licensee the obligations of the Licensee under the License Agreement.

4.

Audit .  Sub-Licensee shall permit Licensor's and Sub-Licensor’s employees, agents and other representatives to audit, review and inspect Sub-Licensee's books and records in accordance with the License Agreement and the Parlux-Iconic Agreement.  Licensor and Sub-Licensor agree to coordinate their audit rights so that no more than one joint audit on behalf of Licensor and Sub-Licensor per period is conducted for the benefit of Licensor and Sub-Licensor, if any audit is conducted.

5.

Indemnity by Sub-Licensee .  Sub-Licensee assumes full responsibility for the conduct of its business and shall indemnify and hold harmless Licensor, Artist and Sub-Licensor (each, an “Indemnified Party,” and collectively, the “Indemnified Parties”), from and against any and all losses, liabilities, claims, charges, actions, proceedings, demands, judgments, settlements, costs and expenses (including, without limitation, reasonable attorneys' fees) which any of them may incur as a result of any claim or demand which may be made against any of them arising in any way out of this Sublicense including, without limitation, claims alleging negligence in connection with the conduct of the business operated by Sub-Licensee or any product liability or other defects or any inherent danger in or from the business conducted by Sub-Licensee or the products it sells or manufactures, and for any breach by Sub-Licensee of any representation, warranty, covenant, agreement or obligation of Sub-Licensee in this Sublicense or in the Parlux-Iconic Agreement.  Furthermore, Sub-Licensee shall indemnify and hold harmless Sub-Licensor from and against any and all losses, liabilities, claims, charges, actions, proceedings, demands, judgments, settlements, costs and expenses (including, without limitation, reasonable attorneys' fees) which Sub-Licensor may incur as a result of any claim or demand by Licensor or Artist against Sub-Licensor alleging that Sub-Licensee failed to perform any obligations of Sub-Licensor under the License Agreement.  The foregoing indemnification obligations shall not limit, but shall be in addition to, any indemnification obligation of Licensee provided by the License Agreement, all of which are hereby expressly assumed by Sublicensee.

6.

Indemnity by Sub-Licensor .  Sub-Licensor shall indemnify and hold harmless Sub-Licensee from and against any and all losses, liabilities, claims, charges, actions, proceedings, demands, judgments, settlements, costs and expenses (including, without limitation, reasonable attorneys' fees) which Sub-Licensee may incur as a result of any claim or demand which may be made against Sub-Licensee arising in any way out of this Sublicense including, without limitation, claims alleging that the Licensed Mark infringes on another person's intellectual property rights, negligence in connection with the conduct of the business operated by Licensor, for any breach by Licensor or Artist of any representation, warranty, covenant, agreement or obligation of the Licensor or Artist under the License Agreement, and for any claim for income taxes due and payable by Licensor with respect to Sales Royalties or other sums paid to Licensor under the License Agreement or pursuant to any assignment of rights to Licensor by the Sub-Licensor under the Parlux-Iconic Agreement.  For the avoidance of doubt, neither Licensor nor Artist shall have any obligations to any party arising out of this Section 6.

7.

Governing Law .  The provisions of, and all rights and obligations under, this Sublicense shall be governed by and construed in accordance with the laws of the State of Florida.

 

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8.

Modification of Sublicense .  No modification of any provision of this Sublicense shall be effective against Sub-Licensor unless the same shall be in writing and signed by all parties hereto, and then such modification or consent shall be effective only in the specific instance and for the purpose for which given.

9.

Successors and Assigns .  This Sublicense shall be binding upon the parties hereto and their respective successors and assigns, and shall inure to the benefit of the parties hereto and, to the extent permitted, their respective successors and assigns.  

10.

Invalidity .  Any provision of this Sublicense which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction only, be ineffective only to the extent of such prohibition or unenforceability, without invalidating the remaining provisions of this Sublicense or affecting the validity or enforceability of such provision in any other jurisdiction.    

11.

Notices .  Except as otherwise set forth herein, any agreement, approval, consent, notice, request or other communication required or permitted to be given by any party under this Sublicense shall be in writing and shall be deemed to have been given when received and delivered (i) by hand or by courier, (ii) by a nationally-recognized over-night courier service such as Federal Express, or (iii) upon transmittal by facsimile with confirmation of receipt to the number set forth below:

If to Sub-Licensor:

Iconic Fragrances, LLC

1850 N.W. 84 ^th Avenue

Suite 100

Miami, FL  33126

Attention:  Rene Garcia, Manager

Facsimile:  305-448-4068

 

With a copy to

 

Littman Krooks LLP

655 Third Avenue

New York, NY  10017

Attention:  Mitchell C. Littman, Esq.

Facsimile:  212-490-2990

If to Sub-Licensee:

Parlux Fragrances, Inc.

5900 North Andrews Avenue

Suite 500

Fort Lauderdale, FL  33309

Attention:  Neil J. Katz, Chief Executive Officer

Facsimile:  954-491-1187

 

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With a copy to

Akerman Senterfitt

One Southeast Third Avenue

25 ^th Floor

Miami, FL  33131-1714

Attention:  Jonathan L. Awner, Esq.

Facsimile:  305-374-5095

or to such other address as the recipient party shall have designated by notice given in accordance with this Section.

12.

Further Assurances .  Each of the parties hereby agrees to execute such further documentation and perform such other actions as may be reasonably requested to evidence and effect the purposes and intent of this Sublicense.

13.

Entire Agreement .  This Sublicense constitutes the entire agreement of the parties relating to its subject matter and supersedes all prior oral or written understandings or agreements relating thereto.  No promise, understanding, representation, inducement, condition or warranty not set forth herein has been made or relied upon by either party hereto.

14.

Counterparts .  This Sublicense may be executed in counterparts, each of which shall constitute an original, but all of which taken together shall constitute one and the same instrument.

15.

Headings .  The headings in this Sublicense are for reference purposes only, do not constitute a part of this Sublicense and shall not affect its meaning or interpretation.

16.

Licensor and Artist Consent .  The undersigned Licensor and Artist hereby consent to the above Sublicense and agree, and represent to the Sub-Licensee, that the Sub-Licensee has the right to enforce the obligations of the Licensor and Artist under the License Agreement, to the same extent as the Sub-Licensor.  The Sub-Licensee agrees, and represents to the Licensor and Artist, that the Licensor and/or the Artist shall have the right to enforce against Sub-Licensee (and/or the Licensee) obligations of the Licensee under the License Agreement, as well as enforce the terms and conditions of this Agreement.

 

[SIGNATURE PAGE TO FOLLOW]

 

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IN WITNESS WHEREOF, the parties have caused this Sublicense to be executed as of the date first written above, with intent to be bound hereby.

 

 

 

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LICENSE AGREEMENT

THIS AGREEMENT made and entered into as of the 3rd day of April 2009 (the " Effective Date "), by and between MASCOTTE HOLDINGS, INC., a California corporation with offices at c/o Davis Shapiro Lewit & Hayes, LLP, 689 Fifth Avenue, 5th Floor, New York, NY 10022, Attn: Alison Finley, Esq. (" Licensor "), and ICONIC FRAGRANCES, LLC, a Delaware limited liability company with offices at 1608 N.W. 84th Avenue, Miami, FL 33126 (" Licensee ") (together the " Parties ").

WITNESSETH:

WHEREAS, Licensor and its Affiliates (as defined below) own or have the right to grant licenses of the Licensed Mark (as defined below), which is to be licensed herein solely in connection with the Licensed Products, as defined below. (Licensor agrees to provide a copy of the signed master license agreement or other document demonstrating a clear chain of title and rights in the "KANYE WEST" mark to Mascotte Holdings, Inc.); and

WHEREAS, Licensee is engaged in the business of manufacturing, promoting and/or selling fragrance and related skin care and personal beauty care products, and Licensor desires to obtain the services of Licensee in connection with the manufacture, promotion and sale of the Licensed Products, bearing the Licensed Mark; and

WHEREAS, in accordance with the terms and conditions of this Agreement, Licensor is willing to grant to the Licensee 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 solely in connection with the manufacture, promotion, distribution and sale of Licensed Products in the Licensed Channels of Distribution (as such terms are hereinafter defined);

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 worldwide web, in accordance with the Licensed Channels of Distribution, as defined below. Licensee will supply Licensor with a plan within 180 days prior to the projected First Shipment Date, as defined below, that will set forth a timetable for introducing the Licensed Products, as defined below, into specified foreign countries (" Roll Out Schedule "). Licensor and Licensee shall agree upon the foregoing Roll Out Schedule based upon Licensee's reasonable judgment as to where there is substantial profit potential and taking into account the availability of the Licensed Mark, as defined below, and any secondary marks. Licensor shall not unreasonably withhold its agreement with Licensee's proposed Roll Out Schedule. Licensor shall have the right, in the exercise of its reasonable discretion, to prohibit distribution and sale in a particular country in the

 

 

 

 

 

event that there is a substantial impediment to use of the "Kanye West" trademark or any words, phrases, images or logos to be associated with the "Kanye West" trademark (collectively, " Associated Matter ") so that it is unlikely that registration of said "Kanye West" trademark, either alone or together with such Associated Matter, will be obtained in said country. In the event that the difficulty in registration pertains only to the "Kanye West" trademark and not to any or all of the Associated Matter, and the country in which such difficulty arises and in which Licensor exercises its discretion hereunder to prohibit distribution and sale represents a material market (defined as the United States, France, Italy, United Kingdom, and other countries of similar economic scope based on historic sales figures for products competitive with or comparable to the Licensed Products) (hereinafter, a " Material Market ") for the Licensed Products, the parties will negotiate in good faith to attempt to achieve a mutually agreeable adjustment to the Net Sales Minimum to reflect the loss of such market for the applicable period(s) of the Term. In the event that the difficulty in registration pertains to any or all of the Associated Matter and not to the "Kanye West" trademark, and Licensor exercises its discretion hereunder to prohibit distribution and sale in such market, and the country in which such difficulty arises is a Material Market, the parties will negotiate in good faith to attempt to achieve a mutually agreeable adjustment to the Net Sales Minimum to reflect the loss of such market for the applicable period(s) of the Term, but in such event the adjustment shall be no greater than a ^* (*%) reduction of the Net Sales Minimum for the applicable Sales Year.

B.

Licensed Products . Men's and women's fragrances, skin care products and solely the following related personal fragrance enhanced beauty care products: body lotions, body crème, hand crème, body butter, body mist, bath and shower gel, bath oil, body oil, dusting powder, after shave balm or gel, deodorant stick, bath soap, incense, room fragrances and scented candles (but excluding cosmetic products, hair care products and other skin care products not set forth herein), which are manufactured, produced, sold, distributed, promoted and advertised by Licensee in the Licensed Channels of Distribution, as defined below, and which bear the Licensed Mark, as defined below, under this Agreement. Licensee shall cause the Licensed Products to be launched on retail shelves in commercially reasonable quantities (the " Product Launch Date ") no later than *.

C.

Licensed Mark . The trademarks "KANYE WEST" and any approved secondary marks, approved logos, the approved signature of the artist known as "KANYE WEST" (the " Artist "), and the approved likeness of Artist and any derivative thereof, and such other trademarks as are, from time to time, agreed to and approved in writing by Licensor, which approval will not be unreasonably withheld. Licensor acknowledges and agrees that the name "Kanye West" will be used either alone or in association with other words or phrases in connection with the Licensed Products. Nevertheless, the manner and style of the lettering and placement of the term "Kanye West" on the bottle and packaging of such Licensed Products and any other words or phrases proposed to be used in conjunction with such term shall be subject to Licensor's approval in accordance with the applicable provisions of Article 7 hereof.

D.

Net Sales . The term " Net Sales " shall mean the gross invoice price of all Licensed Products shipped by or on behalf of the Licensee including but not limited to its Subsidiaries, Affiliates or any sub-licensees, except that sales by Perfumania Holdings, Inc. and its

 

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^* Confidential terms omitted and provided separately to the Securities and Exchange Commission.

 

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Subsidiaries and Affiliates (collectively, the " Perfumania Group ") shall not be deemed sales by the Subsidiaries, Affiliates, sub-licensees of Licensee for purposes of determining the gross invoice price upon which Net Sales is derived under this Agreement, minus (i) any documented actual allowances for damaged or returned Licensed Products, (ii) any documented credits for the return of Licensed Products to Licensee actually accepted or destroyed in the field, and (iii) any documented and bona fide trade and quantity discounts or allowances (including margin or markdown allowances) actually taken with respect to the Licensed Products (collectively, " Permitted Reductions "). The total Permitted Reductions in any Sales Year during the Initial Term and Renewal Term for all customers other than department store customers (" Non-Department Store Customers ") shall in no event exceed ^* (*%) percent of the gross invoice price of all Licensed Products shipped by or on behalf of the Licensee to such Non Department Store Customers in such Sales Year. The total Permitted Reductions in any Sales Year during the Initial Term and Renewal Term for all department store customers shall in no event exceed * (*%) of the gross invoice price of all Licensed Products shipped by or on behalf of the Licensee to such department store customers in such Sales Year. In computing Net Sales, no costs incurred in manufacturing, selling, advertising or distributing the Licensed Products and no indirect expenses shall be deducted, nor shall there be any deduction for uncollectible accounts. Licensed Products shall be deemed sold when shipped, distributed, billed, sold or paid for, whichever occurs first.

Subject to the exception for the Perfumania Group set forth in this Article 1 D, in the event of sales by Licensee of Licensed Products to a marketing organization, individual, distributor or any other company in whole or in part controlled by Licensee for ultimate sale to a retailer, or in any transaction other than an arm's length transaction, the invoice price used to determine Net Sales hereunder shall be the invoice price at which the Licensed Products are resold by any such person or entity to an unrelated retailer in an arm's length transaction. Licensed Products shall be deemed sold when shipped, distributed, billed, sold or paid for, whichever occurs first.

Licensee covenants and agrees that sales made by Licensee, Parlux and their respective Subsidiaries or Affiliates, sub-licensees or distributors to any and all members of the Perfumania Group shall be bona fide, arms length transactions at prices that are consistent with historical practices and reasonably comparable to those prices charged to third party distributors which are not Affiliates or Subsidiaries of Licensee or Parlux. Licensee and Parlux will provide Licensor with access to historical sales records to enable Licensor to audit compliance by Licensee with the foregoing covenant.

E.

Subsidiary . Any person, corporation or other entity that is more than 50%, directly or indirectly, owned by Licensee.

F.

Affiliate .

Any person, corporation or other, which directly or indirectly controls, is controlled by, or is under common control with a party. " Control " shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies of any such person, corporation or entity, through ownership of voting securities, by contract or otherwise.

 

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^* Confidential terms omitted and provided separately to the Securities and Exchange Commission.

 

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G.

Sales Year . Each twelve (12) month period during the Term, as defined below, of this Agreement, commencing on the first date of shipment of Licensed Products by Licensee or its distributor or sub-licensee in commercially reasonable quantities (the " First Shipment Date ") for the first line of Licensed Products to be launched by Licensee or its distributor or sub-licensee, and ending on each anniversary thereof. If the First Shipment Date in Sales Year 1 occurs on other than the first day of the month, then Sales Year 1 shall end on the last day of the month in which the anniversary of the First Shipment Date occurs and all subsequent Sales Years shall end on the anniversary of such date.

ARTICLE 2
Grant Of License

A.

Upon the terms and conditions of this Agreement, Licensor hereby grants to Licensee, during the Term, as defined below, of this Agreement, the sole and exclusive right and license to use the Licensed Mark in the Licensed Channels of Distribution, as defined below, in the Territory as a trademark in connection with the manufacture, promotion, sale and distribution solely of the Licensed Products and on all related packing materials, containers, promotional material, publicity, sales, advertising, newspaper, magazine, radio, television, cinema and similar media presently existing or that may exist in the future, in connection solely with the creation, manufacture, introduction, marketing, distribution, sale and advertising of the Licensed Products, through the channels used to manufacture, sell, distribute, advertise and promote Licensed Products of comparable prestige design and quality as described in paragraphs 7A(i) and 7B of Article 7 below (collectively, the " Licensed Channels of Distribution "). Licensor acknowledges and agrees that it will not license the name "Kanye" or any variation of the "Kanye West" name in connection with the Licensed Products to any other parties other than Licensee hereunder during the Term of this Agreement.

B.

Licensor shall not, during the Term, as defined below, of this Agreement and in the Territory, grant to any third party any rights to use the Licensed Mark or any derivative thereof in connection with Licensed Products in Licensed Channels of Distribution.  It is understood and agreed that this Agreement shall pertain only to the Licensed Products for sale in the aforesaid Licensed Channels of Distribution and does not extend to any other product or service or other territory or other distribution channel, unless otherwise agreed to by the parties as evidenced by a mutually executed written amendment of this Agreement, specifically setting forth the further intention and agreement of Licensee and Licensor to do so. Except for the rights to use the Licensed Mark solely in connection with the manufacture and sale of the Licensed Products in the Territory through the Licensed Channels of Distribution expressly provided for herein, Licensor reserves all rights to the use of the Licensed Mark. Licensee shall have the right to sub-license the Licensed Mark to Parlux Fragrances, Inc. (" Parlux "), subject to and on the same terms and conditions as set forth in this Agreement and so long as Parlux guarantees in writing to Licensor the performance by Parlux and Licensee of all the terms, obligations, warranties, restrictions, payments and conditions contained in this Agreement as though Parlux was a party hereto. It is the essence of this Agreement that Licensee enter into a sub-license agreement with Parlux within the time period set forth in this Agreement and that Parlux guarantees in writing to Licensor the performance by Licensee and Parlux of all the terms, obligations, restrictions, warranties, payments and conditions contained in this Agreement and

 

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any exhibits or agreements incorporated by reference herein. Failure to enter into a sublicense agreement with Parlux in the time provided and upon the foregoing terms and conditions shall afford Licensor the immediate right to terminate the Agreement upon written notice and retain all payments which may have been previously paid to Licensor under this Agreement, and Licensor shall thereafter have no further obligations to Licensee hereunder.

C.

Licensor and Artist each agree not to promote any products described herein as Licensed Products utilizing any other brand during the Term of this Agreement including without limitation the brand "Kanye" or any other variant of the "Kanye West" name; provided however, that neither Artist nor Licensor shall be in breach of this Agreement in the event any sponsors of any events in which Artist participates, including but not limited to any tours, television programs, films or special events, are companies in the business of selling fragrance products, provided that the sale of fragrance products is not their primary business (neither Artist nor Licensor shall be in breach of the foregoing in the event that Artist does not have final control over the engagement of any such sponsors), and provided further that Artist shall not be precluded from using or wearing any products whatsoever in the ordinary course, but Artist shall not publicly disclose that he wears any fragrance brands that are not Licensed Products hereunder, except those fragrance brands in which Iconic has an interest. Furthermore, Artist shall not be precluded from editorializing in connection with any products described herein as Licensed Products (utilizing any other brand) on Artist's "blog" in a complimentary fashion or otherwise, provided however, that Artist shall not be free to disparage or make any negative or derogatory comments about other fragrance brands in which Licensee or Parlux has an interest.

ARTICLE 3
Exclusivity of License

Licensor will not grant any other license effective during the Term, as defined below, of this Agreement for the use of the Licensed Mark on or in connection with Licensed Products through Licensed Channels of Distribution in the Territory. Licensor may use or grant others the right to use the Licensed Mark on or in connection with goods of all other types and descriptions in the Territory. Licensor acknowledges that Licensee or its sub-licensees or distributors presently manufacture and/or distribute in parts of the Territory products similar to or the same as the Licensed Products covered by this Agreement, which bear other trademarks. Licensor further acknowledges that Licensee will be obtaining other licenses for the manufacture and/or distribution of other similar lines during the Term, as defined below, of this Agreement. Licensee will not, during the Term, as defined below, of this Agreement and thereafter, attack either Licensor's title in and to the Licensed Mark or the validity of this License.

ARTICLE 4
Term of Agreement

Subject to the rights of termination set forth in this Agreement, the initial term of this Agreement (the " Initial Term "), shall commence on the date of execution hereof (the " Effective Date ") and shall terminate five (5) years following the First Shipment Date, but in no event later

 

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than April 30, 2015. Licensee shall have the option to renew this Agreement for an additional three- year period under the terms set forth in this Agreement applicable to such renewal period (the " Renewal Term ") provided:

A.

The Guaranteed Minimum Royalty (as hereinafter defined) for each Sales Year of the Initial Term of this Agreement which, by the terms of this Agreement, are due to be paid prior to the expiration of the Initial Term have been paid in full prior to the expiration of the Initial Term;

B.

Licensee has achieved in Sales Years 1 through 4 Net Sales, in the aggregate, of at least $* and has paid its Sales Royalty on such Net Sales;

C.

Licensee is not otherwise in material breach of any terms or conditions of the Agreement, unless Licensor waives in writing any such breach;

D.

Licensor has not otherwise exercised its rights set forth herein to terminate this Agreement.

E.

Licensee gives Licensor notice in writing of its intent to renew no later than sixty (60) days following the end of Sales Year 4 and no earlier than the end of Sales Year 4.

The Initial Term and the Renewal Term are collectively referred to in this Agreement as the " Term ."

ARTICLE 5
Confidentiality-Publicity

A.

Each party (each a "Restricted Party") (i) shall, and shall cause its officers, directors, managers, members, employees, attorneys, accountants, auditors and agents (collectively, "Representatives"), to the extent such persons have received any Confidential Information, and their Affiliates and their Representatives, to the extent such entities have received any Confidential Information, as a result of or in connection with or in relation to the conduct and performance of this Agreement, to maintain in strictest confidence the terms of this Agreement and any and all information relating to the parties that is proprietary to each party, as applicable, or otherwise not available to the general public including, but not limited to, this Agreement, any of the terms of this Agreement, information about royalties, warrants, marketing strategies, marketing plans, customer lists, supplier information, distribution channels, contacts at such suppliers, customers and distributors, information related to costs and profits, employees, finances, businesses and operations and activities of each party or their Affiliates, and all notes, analyses, compilations, studies, forecasts, interpretations or other documents prepared by a party or its Representatives or Affiliates which contain, reflect or are based upon, in whole or in part, the information furnished to or acquired by such party ("Confidential  Information") and (ii) shall not disclose, and shall cause its Representatives, its Affiliates and their Representatives not to disclose, Confidential Information to any entity except as required by law, regulation or legal process or by the requirements of any securities exchange on which the securities of a party

 

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^* Confidential terms omitted and provided separately to the Securities and Exchange Commission.

 

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hereto are listed or quoted (as reasonably determined by such party) and (iii) shall not use, and shall cause its Representatives, its Affiliates and their Representatives not to use, the Confidential Information other than for the purposes anticipated by this Agreement. The provisions of this paragraph shall not apply with respect to:

1.

any information that is generally available to the public other than as a result of disclosure in violation of the foregoing;

2.

any information that is known to the recipient thereof prior to disclosure thereof by the disclosing party or independently developed by the recipient;

3.

any otherwise confidential information that is disclosed to a Party by a third party and such disclosure by the third party is not, to the best knowledge of such receiving Party, in violation of any confidentiality agreement that such third party has with the other Party to this Agreement; or

4.

information that is required to be disclosed by judicial or administrative order or required to be disclosed to enforce the terms and conditions hereof.

B.

All press releases and other public announcements related to this Agreement and the business contemplated herein shall, subject to applicable law and applicable disclosure obligations as required by law, be produced and released by Licensee, subject to Licensor's reasonable prior approval, for release by Licensee.  Licensor shall refer all press inquiries concerning this Agreement and Licensed Products to Licensee for handling.  For purposes hereof, the Artist shall be free without prior approval of Licensee to handle impromptu media interviews and question and answer sessions in which the subject of this Agreement or Licensed Products is raised.

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 directly or through its Licensor approved sub-licensee or distributors through the Licensed Channels of Distribution the maximum quantity of Licensed Products 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 Licensed Products and Licensee shall bear all costs related thereto.

ARTICLE 7
Quality Standards

A.

Manufacture of Licensed Products: Quality Control .

 

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(i)

The contents and workmanship of Licensed Products shall be at all times of the highest quality consistent with the reputation, image and prestige of the Licensed Mark, and Licensed Products shall be distributed and sold with packaging and sales promotion materials appropriate for such high quality products. The Parties agree that the Licensed Products shall be of the same or similar premium quality and prestige as that of the Paris Hilton, Britney Spears and Jennifer Lopez fragrance brands as of the date of this Agreement.

(ii)

All Licensed Products 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 the fragrance, scent, packaging and other material, designs, pre-production samples, design concepts, sketches, colors, tags, containers and labels and advertising and marketing materials and any other matter utilizing the Licensed Mark or Associated Matter for Licensor's review and approval, which approval shall not be unreasonably withheld: however, should Licensor fail to respond to written requests for approval within twenty (20) days of receipt of such requests, Licensor shall be deemed to have approved the item or items for which approval was requested.

(iv)

During the Term of this Agreement, upon Licensor's request, Licensee shall submit, free of charge to Licensor, a then current production sample of each Licensed Product marketed. Production samples submitted by Licensee for this purpose may be retained by Licensor and Licensor will pay Licensee for any additional production samples Licensor requests and retains at prices equal to Licensee's actual costs. All Licensed Products to be sold hereunder shall be at least equal in quality to the samples 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 Licensed Products in the process of being manufactured and to inspect all facilities utilized by Licensee or its sub- licensee in connection therewith.

B.

Distribution .  In order to maintain the reputation, image and prestige of the Licensed Mark, during the first six (6) months following the initial launch of any new line of Licensed Products, subject to the limitations set forth below, Licensee and its sub-licensee or distributor shall only sell Licensed Products to better department stores (as defined below) and specialty stores (including those better department and specialty stores in Canada and Puerto Rico), including perfumeries and travel retail outlets, but thereafter may sell Licensed Products to those retailers and distributors that sell prestige designer and celebrity fragrances such as the Paris Hilton, Britney Spears and Jennifer Lopez fragrance brands. For purposes hereof, the term "better department stores" shall describe the category and type of department stores that includes without limitation those stores identified on Schedule 7B hereto. Notwithstanding the foregoing, Licensor shall be kept informed of the general make up of the Licensed Channels of Distribution with respect to each product line of the Licensed Products. For each line of Licensed Products, Licensee shall not be permitted to begin selling into the mass market until at least twelve months after the First Shipment Date of such line. However, if requested by Licensor, in the event that the Artist is in the midst of another campaign that Licensor reasonably believes will be impaired by sales of Licensed Products into the mass market, such twelve-month period will be extended for an additional three months. If Licensee has a First Shipment Date for a new line of Licensed Products within the first fifteen months following the First Shipment Date for the previous line

 

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of Licensed Products, then Licensee shall be free to begin selling the previously launched line to mass market upon the First Shipment Date of the new line, but in no event earlier than twelve months following the First Shipment Date of the previous line. The previous line may be shipped to customers in the mass market up to thirty days before it may first be sold hereunder, provided that it does not appear on mass market retail shelves until the date which is twelve to fifteen months (as applicable) following the First Shipment Date of each previous line. Sales into the mid-tier market, which shall include without limitation international (excluding Canada and Puerto Rico, which are included above in the department store and specialty store category) and stores such as JC Penney and Sears, shall be permitted no earlier than six (6) months after the First Shipment Date with respect to each line of Licensed Product.

C.

Product Design . Throughout the Term of this Agreement, Licensor and Licensee shall work together in good faith in deciding the types of articles of Licensed Products that Licensee may manufacture, sell, and market, all subject to Licensor's reasonable approval. Licensee shall provide Licensor with a product development plan for each line of all Licensed Products, which plan may include Licensee's assessment of market needs and competitive positioning, and such additional information as reasonably requested by Licensor.

(i)

Licensee and Licensor shall jointly establish product development calendars, under which at appropriate agreed points throughout the development process of Licensed Products, Licensee shall make available to Licensor the concepts, materials, fabrications (if applicable), packaging and other relevant contents of each line of all Licensed Products for Licensor's prior written approval as to concept interpretation, workmanship and quality and to assure that Licensed Products are consistent in quality with comparable prestige products such as those referred to in Section 7A(i) above and with Licensor's standing and reputation with the public. The parties shall make every reasonable effort to adhere to the product development calendars.

(ii)

For each new line of Licensed Products (other than items from prior lines to be continued), Licensee shall prepare and deliver to Licensor, for its prior written approval, product concepts and specifications for those Licensed Products that it proposes to include in such line in accordance with the approved product development plan. The various lines of Licensed Products shall be created from such initial concepts and specifications, which shall then be modified and developed cooperatively by Licensor and Licensee until Licensor has approved, in writing, a line which, including items from prior lines to be continued, is consistent with the approved product development plan.

(iii)

Upon Licensor's approval in accordance with this Section, Licensee shall prepare and deliver product assortments/samples for each line of Licensed Products, together with the carding, tags, labels and packaging (" Packaging Materials ") intended to be used with them and Licensee's internal sales materials for that product introduction, and all advertising and promotional materials to be used in connection therewith, for Licensor's prior written approval. Once Licensor approves the bottle design and execution and the cap and collar thereto, Licensee shall be permitted to commence production of the bottle, cap and collar.  Such production may proceed even if Licensor has not yet approved the bottle contents, packaging materials and any advertising or promotional materials associated therewith. Subject to the foregoing, Licensee shall not commence commercial production of any item or matter utilizing the Licensed Mark,

 

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including but not limited to the Packaging Materials, until Licensor has approved in writing a final product assortment and the associated Packaging Materials and all other items or matter utilizing the Licensed Mark. Licensee expressly acknowledges that all approved sample Licensed Products and all original, approved production specification drawings, models, molds and patterns therefor (collectively " Sample Materials ") will be Licensor's property and Licensee shall surrender these Sample Materials to Licensor immediately upon the expiration or termination of the Term. Approval of an item or Licensed Product which uses particular artwork does not imply approval of such artwork with a different item or Licensed Product or of such item or Licensed Product with different artwork. Licensee acknowledges that Licensor's approval of an item or Licensed Product does not imply approval of, or license to use, any non-Licensor controlled elements contained in any item or Licensed Product. After a sample of an item has been approved, Licensee shall not make any changes without resubmitting the modified item for Licensor's written approval. All decisions by Licensor shall be subject to the approval timing and other approval procedures that are set forth in Section 7A above and any disapproval of any Licensed Product shall be made in Licensor's reasonable discretion, and shall be accompanied with an explanation and a proposed solution or alternative design, concept and/or execution. Should Licensor fail to give its approval, Licensor agrees to engage in good faith negotiations with Licensee to solve whatever objections Licensor may have. After such negotiations conclude and an agreement is not reached, then Licensor's disapproval shall be final and binding and shall not be subject to review in any proceeding.

(iv)

All Packaging Materials shall be submitted to Licensor with product affixed in either actual form or actual digital image for review and final approval in accordance with the terms hereof. All fees, if any, associated with the acquisition of any image of the Artist to be used in connection with the Packaging Materials shall be the responsibility of Licensee.

D.

Legal Notices/Quality Control .  The license granted hereunder is conditioned upon Licensee's full and complete compliance with the marking provisions of the trademark, patent and copyright laws of the United States and other countries in the Territory.

(i)

The Licensed Products, as well as all promotional, packaging and advertising material relative thereto, shall include all appropriate legal notices as required by applicable law.

(ii)

The Licensed Products shall be of a quality at least equal to comparable prestige fragrance products as set forth in Article 7, and marketed by Licensee, in conformity with a standard sample reasonably approved in writing by Licensor.

(iii)

Licensee covenants and agrees that all the Licensed Product shall be manufactured, sold, marketed and advertised in compliance with all applicable laws, rules and regulations (collectively, " Laws ").  Licensee shall pretest a sampling of all proposed and approved Licensed Products and shall cause truthful labeling regarding the care, maintenance, and use to be affixed to the Licensed Products as required by the Laws. Licensee shall immediately inform Licensor in writing of any complaint by any governmental or other regulatory or self-regulatory body relevant to the Licensed Products, and the status and resolution thereof. Licensee shall act expeditiously to resolve any such complaint. Licensee covenants on behalf of itself and on behalf of all of Licensee's manufacturers, that it shall not use child labor, prison labor and shall only employ persons whose presence is voluntary, and shall

 

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otherwise provide employees with a safe and healthy workplace in compliance with all applicable Laws, including but not limited to wage and hour Laws, including minimum wage, overtime, and maximum hours, shall comply with all discrimination and other labor Laws, and all environmental Laws.

(iv)

In the event of Licensee's unapproved or unauthorized manufacture, distribution, use or sale of any Licensed Products or any packaging materials bearing any reference to the Licensed Mark, including promotional and advertising materials, or the failure of Licensee to comply with any provisions of this Section 7, Licensor shall have the right to: (a) immediately revoke Licensee's rights with respect to any such Licensed Products licensed under this Agreement, and/or (b) at Licensee's expense, confiscate or order the destruction of such unapproved, unauthorized or non-complying products, packaging materials or other materials. Such right(s) shall be in addition to and without prejudice to any other rights Licensor may have under this Agreement or otherwise.

(v)

Licensee covenants and agrees that: (a) All Licensed Products manufactured, sold and distributed hereunder will be merchantable and fit for the purpose for which they are intended; (b) the Licensed Products will conform at all times to all applicable federal, state and local laws, rules, regulations, ordinances and other enactments provided in the Territory or otherwise applicable, and all applicable industry standards, including but not limited to, those relating to product safety; and (c) all Licensed Products will conform in all respects to the samples approved by Licensor and that Licensee will not distribute or sell any Licensed Products which are of a quality or standard inferior to or different from the approved quality or are injurio