TRADEMARK SUBLICENSE AGREEMENT

 

M                                                                 EXHIBIT 10.18.3

 

                         TRADEMARK SUBLICENSE AGREEMENT

 

         This   TRADEMARK    SUBLICENSE    AGREEMENT   (this   "AGREEMENT")   is   made

effective as of March 7, 2005 (the   "EFFECTIVE   DATE"),   by and between   Private

Brands, Inc., a California corporation ("SUBLICENSOR"), and Macy's Merchandising

Group, LLC, a Delaware limited liability company ("SUBLICENSEE"), with reference

to the following facts:

 

                                    WITNESSETH:

 

                  WHEREAS,   SUBLICENSOR is the exclusive SUBLICENSEE of American

Rag CIE, LLC, a California   limited   liability   company   ("MASTER   LICENSOR") of

various   rights   to   commercially   exploit   and   to   sublicense   for   commercial

exploitation   a valuable   Trademark   (as defined   below) with respect to apparel

products and accessories pursuant to that certain License Agreement, dated April

1,   2003   (the   "MASTER   LICENSE"),   by and   between   Industry   Werts,   Inc.,   a

California corporation and the predecessor in interest of Master Licensor to the

Trademark   and the Master   License,   and   SUBLICENSOR,   a copy of which has been

delivered to SUBLICENSEE.

 

                  WHEREAS,   SUBLICENSEE   desires to obtain an exclusive right to

use   the   Trademark,   on   and in   connection   with   the   manufacture,   sale   and

distribution of Licensed Products, as defined below,   bearing,   incorporating or

otherwise utilizing the Trademark in the Territory, as defined below; and

 

                   WHEREAS,   SUBLICENSEE has represented   that it has the ability

to manufacture,   have manufactured,   market and distribute the Licensed Products

and to use the Trademark on or in association with the Licensed   Products in the

Territory; and

 

                   WHEREAS,   SUBLICENSOR has agreed to grant to SUBLICENSEE   such

license under and subject to the terms and conditions hereinafter set forth, and

the terms and conditions of the Master License; and

 

                  WHEREAS,   both   SUBLICENSEE   and   SUBLICENSOR are in agreement

with   respect   to the terms and   conditions   upon which   SUBLICENSEE   shall use,

manufacture   and sell,   have   used,   have   manufactured   and have sold   Licensed

Products and use the Trademark in the Territory.

 

                   NOW,   THEREFORE,   in   consideration of the mutual promises and

agreements   set forth   herein,   the parties each   intending to be legally   bound

hereby, do promise and agree as follows:

 

1.        DEFINITIONS

 

         As used in this Agreement,   the following terms shall have the meanings

set forth below:

 

 

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         1.1       "AFFILIATE" shall mean, with respect to any entity,   any other

entity that,   directly or   indirectly,   controls,   is   controlled by or is under

common control with, that entity; PROVIDED,   HOWEVER, that in each case any such

other entity shall be considered to be an Affiliate   only during the time period

during which such control   exists.   For purposes of this   definition,   "CONTROL"

(including,   with   correlative   meaning,   the terms   "CONTROLLED   by" and "UNDER

COMMON   CONTROL   WITH"),   as used with   respect   to any   entity,   shall mean the

possession,   directly or   indirectly,   of the power to direct   and/or   cause the

direction of the   management   and policies of such entity,   whether   through the

ownership of voting securities, by contract or otherwise.

 

         1.2       "AUTHORIZED SELLERS" shall have the meaning given such term in

the Exclusive Distribution Agreement.

 

         1.3       "CONTRACT   YEAR"   shall   mean   the   period   commencing   on the

Effective   Date and ending on the December   31, 2005,   and each period of twelve

(12) successive calendar months thereafter during the Term.

 

         1.4       "EXCLUSIVE   DISTRIBUTION   AGREEMENT"   shall mean that   certain

Exclusive   Distribution   Agreement,   dated as of April 1, 2003,   by and   between

SUBLICENSOR and SUBLICENSEE, as successor in interest to Federated Merchandising

Group,   an   unincorporated   division of   Federated   Department   Stores,   Inc., a

Delaware corporation,   as amended, modified,   supplemented,   extended,   renewed,

restated or replaced from time to time.

 

         1.5       "NET   SALES"   shall mean (i) the gross sales price of Licensed

Products   actually   charged by SUBLICENSEE   or by any of its   Affiliates   (which

price   shall   not be less   than the   actual   cost of the   Licensed   Products   to

SUBLICENSEE or its   Affiliates),   or invoiced by a third party directly,   to the

Authorized   Seller that takes the Licensed   Products into   inventory for sale by

such Authorized Seller in its retail stores, PLUS (ii) internal load,   insurance

and freight for such   Licensed   Products,   LESS (ii) the amount of any credit or

refund to   SUBLICENSEE   and/or   the   Authorized   Seller   for   Licensed   Products

returned to the supplier due to quality issues and the Trademark is removed from

the Licensed Products prior to re-sale or the Licensed Products are destroyed.

 

         1.6       "LICENSED   PRODUCTS"   shall   mean men's   clothing,   including,

without   limitation,   men's   shirts,   pants,   suits,   shorts and   swimwear,   but

expressly   EXCLUDING any and all denim clothing and other denim products   (e.g.,

jeanswear).

 

         1.7       "PERCENTAGE ROYALTY" shall have the definition given that term

in PARAGRAPH 4.2.

 

          1.8       "TERRITORY"   shall mean the United   States of America,   Canada

and Bermuda.

 

         1.9       "TRADEMARK"    means    "American    Rag    CIE"    including    the

correspondent U.S.   trademark   registration   numbers and trademark   applications

listed in EXHIBIT A attached hereto and incorporated   herein, and any Canada and

Bermuda   common law trademark   rights or future   registrations,   if any, in each

case   exclusively   licensed   by   SUBLICENSOR,   as well as the   right to   utilize

derivations of "American Rag CIE" under the Master License.

 

 

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2.        GRANT OF SUBLICENSE

 

         2.1       SUBLICENSE.    SUBLICENSOR   hereby   grants   to   SUBLICENSEE   an

exclusive, non-transferable,   non-sublicensable license, during the Term of this

Agreement,   and   subject   to all the   terms   and   conditions   contained   in this

Agreement and the Master   License,   to use,   manufacture,   sell, have used, have

manufactured   and   have   sold,    Licensed   Products    utilizing   the   Trademark,

including,    without    limitation,    on   or   in   association   with   the   design,

manufacture,   distribution,   sale,   marketing,   promotion and advertising of the

Licensed   Products,   as well as on the packaging,   promotional   and   advertising

material associated therewith, in the Territory.

 

         2.2       RESERVATIONS. It is understood and agreed that this sublicense

shall   pertain   only to the   Licensed   Products and does not extend to any other

products or   services.   All rights not   specifically   granted   herein are hereby

expressly reserved by SUBLICENSOR.

 

         2.3       AUTHORIZED   SELLERS.   Notwithstanding   anything   herein to the

contrary,   SUBLICENSEE   shall have the right to sell   Licensed   Products   in the

Territory solely through Authorized Sellers and through the websites operated by

or on behalf of   Authorized   Sellers.   SUBLICENSEE'S   right to sell the Licensed

Products   through   websites   operated by or on behalf of the Authorized   Sellers

shall be restricted to the right to fulfill orders placed by end user purchasers

of the Licensed Products who are located within the Territory.

 

         2.4       EXCLUSIVITY. SUBLICENSEE shall not make or authorize, any use,

direct or indirect,   of the Licensed   Products in any other country   outside the

Territory   and will not   knowingly   sell the   Licensed   Products   to persons who

intend or are   likely to   resell   them in any   country   outside   the   Territory.

SUBLICENSOR   acknowledges   and   agrees   that the grant of rights to   SUBLICENSEE

under this PARAGRAPH 2 are exclusive to SUBLICENSEE,   and SUBLICENSOR   shall not

itself   exploit or grant to any third party the right to exploit any such rights

in the Territory.

 

3.        TERM

 

         This Agreement and the provisions hereof, except as otherwise provided,

shall be in full force and   effect on and as of the   Effective   Date,   and shall

continue for a period ending on December 31, 2009 (the "INITIAL   TERM"),   unless

sooner terminated as herein provided.   This Agreement may be renewed for two (2)

additional   periods of five (5) years each (each a "RENEWAL   TERM" and   together

with the Initial Term, the "TERM"),   by mutual written   agreement of SUBLICENSEE

and   SUBLICENSOR.   SUBLICENSEE   shall give written   notice to SUBLICENSOR of its

desire to renew   this   Agreement   on or before a date   which is sixty   (60) days

prior to   expiration of the Initial Term or Renewal   Term.   Notwithstanding   the

foregoing,   if the Master License terminates prior to the expiration of the Term

(including   the   Initial   Term   and any   Renewal   Term),   this   Agreement   shall

terminate   upon   termination   of the Master   License.   SUBLICENSOR   shall advise

SUBLICENSEE   by written   notice given no less than one hundred eighty (180) days

in advance of the   scheduled   expiration   of the Master   License.   Expiration or

termination of this Agreement   shall not effect any obligation of SUBLICENSEE to

make   payments   hereunder   accruing   prior   to,   or after,   such   expiration   or

termination, as applicable.

 

 

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4.        COMPENSATION

 

         4.1       ROYALTIES.    In    consideration    of   the   rights   granted   to

SUBLICENSEE   pursuant to this Agreement,   SUBLICENSEE shall, during each Royalty

Period,   as defined below, or portion thereof during the Term, pay SUBLICENSOR a

royalty (the "PERCENTAGE ROYALTY") equal to:

 

         (a)       Three   Percent   (3%) of Net   Sales   of all   Licensed   Products

sourced directly by SUBLICENSEE or any of its Affiliates; and

 

          (b)       Five   Percent   (5%)   of Net   Sales   of all   Licensed   Products

sourced by a person or entity other than SUBLICENSEE or any of its Affiliates.

 

         For purposes   hereof,   (i) Licensed   Products are "SOURCED   DIRECTLY BY

SUBLICENSEE   OR ANY OF ITS   AFFILIATES"   if SUBLICENSEE or any of its Affiliates

directly   manufactures the Licensed   Products,   or contracts directly with third

party   manufacturers   for the   manufacture   of the Licensed   Products   which are

purchased   directly   from such   third   party   manufacturers,   and (ii)   Licensed

Products are "SOURCED BY A PERSON OR ENTITY OTHER THAN SUBLICENSEE OR ANY OF ITS

AFFILIATES" if SUBLICENSEE or any of its Affiliates   contracts   directly with an

intermediary,   who arranges   for the   manufacturer   of the Licensed   Products by

third   party   contract    manufacturers    and   sells   the   Licensed   Products   to

SUBLICENSEE or any of its Affiliates.

 

         4.2       ROYALTY   PERIOD.   The   Percentage   Royalty owed to SUBLICENSOR

shall be calculated   on a quarterly   calendar   basis (the "ROYALTY   PERIOD") and

shall be payable no later than   twenty   (20) days after the   termination   of the

immediately preceding full calendar quarter.   Thus, the Percentage Royalties are

payable on January   20,   April 20,   July 20 and   October 20 for the   immediately

preceding quarter of transactions.

 

         4.3       ACCRUAL OF PERCENTAGE ROYALTY.   The Percentage Royalty payable

with   respect to License   Products   shall   accrue   and become an   obligation   of

SUBLICENSEE at the time title to such Licensed   Products is first transferred to

SUBLICENSEE   or any of its   Affiliates,   and shall be   payable   irrespective   of

whether such Licensed Products thereafter are sold by an Authorized Seller.

 

         4.4       ROYALTY   STATEMENT.   With   each   Percentage   Royalty   payment,

SUBLICENSEE shall provide SUBLICENSOR with a written royalty statement on a form

in the manner attached hereto as EXHIBIT B.

 

         4.5       ACCELERATION.   Provided   SUBLICENSOR   is not in   breach,   upon

expiration or termination   of this   Agreement,   notwithstanding   anything to the

contrary herein, all of SUBLICENSEE'S royalty obligations,   including any unpaid

portions of the Percentage   Royalty shall be accelerated and   immediately   shall

become due and payable.

 

         4.6       SURVIVAL OF   OBLIGATIONS.   SUBLICENSEE'S   obligations   for the

payment of the Percentage Royalty shall survive the expiration or termination of

this   Agreement,   and will   continue   for so long as   SUBLICENSEE   continues   to

manufacture,   have manufactured,   sell, have sold or otherwise market or exploit

the Licensed Products.

 

 

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         4.7       MANNER OF PAYMENT. All payments due hereunder shall be made in

United States currency drawn on a United States bank, unless otherwise specified

by the parties.

 

         4.8       INTEREST ON LATE PAYMENTS.   Late payments shall incur interest

at the rate of One and   One-Half   Percent   (1.5%)   per month   from the date such

payments were originally due.

 

5.        AUDIT

 

         5.1       BOOKS AND RECORDS.   SUBLICENSOR   shall have the right, upon at

least   fifteen (15) days written   notice and no more than once during any twelve

month period, to inspect SUBLICENSEE'S books and records and all other documents

and material in the   possession of or under the control of SUBLICENSEE or any of

its Affiliates with respect to the subject matter of this Agreement at the place

or places where such records are normally   retained by SUBLICENSEE or any of its

Affiliates.

 

         5.2       UNDERPAYMENTS.   In the event   that such   inspection   reveals a

discrepancy in the amount of Percentage   Royalty owed   SUBLICENSOR from what was

actually paid, SUBLICENSEE shall pay such discrepancy, plus interest, calculated

at the rate of One and One-Half Percent (1.5%) per month. In the event that such

discrepancy is in excess of Five Thousand Dollars ($5,000.00), SUBLICENSEE shall

also   reimburse   SUBLICENSOR   for the   cost of such   inspection,   including   any

accounting and/or attorneys' fees incurred in connection therewith.

 

         5.3       MAINTENANCE   OF   RECORDS.   All books and   records   relative to

SUBLICENSEE'S   obligations hereunder shall be maintained and kept accessible and

available   to   SUBLICENSOR   for   inspection   for at least   three (3) years after

termination of this Agreement.

 

6.        WARRANTIES AND OBLIGATIONS

 

         6.1       WARRANTIES AND   REPRESENTATIONS   OF   SUBLICENSOR.   SUBLICENSOR

hereby represents and warrants that:

 

                   (a)       it has the full right,   power and   authority to enter

into this Agreement and to grant the sublicense granted herein;

 

                  (b)       there are no other agreements with any other party in

conflict herewith;

 

                  (c)        it is a   corporation   validly   existing   and in   good

standing under the laws of the jurisdiction of its incorporation; and

 

                  (d)       it   has   no   actual    knowledge   that   the   Trademark

infringes any valid right of any party.

 

          6.2       WARRANTIES AND   REPRESENTATIONS   OF   SUBLICENSEE.   SUBLICENSEE

  hereby represents and warrants that:

 

                  (a)       it has the full right,   power and   authority to enter

into this Agreement and to perform all of its obligations hereunder;

 

 

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                  (b)       it is financially capable of undertaking the business

operations which it conducts and of performing its obligations hereunder;

 

                  (c)       it is a   corporation   or a division of a   corporation

validly   existing and in good standing under the laws of the jurisdiction of its

incorporation; and

 

                  (d)       it will use its best efforts to promote, market, sell

and distribute the Licensed Products.

 

         6.3       SUBLICENSEE'S OBLIGATIONS. SUBLICENSEE shall:

 

                  (a)       be financially   responsible   for employing a designer

to design the Licensed Products; and

 

                  (b)       be    solely     responsible    for    the    manufacture,

production,   sale and   distribution   of the Licensed   Products and will bear all

related costs associated therewith.

 

         6.4       WARRANTY   EXCLUSION AND WAIVER.   THE   WARRANTIES   SET FORTH IN

PARAGRAPH 6.1 ABOVE ARE THE SOLE AND EXCLUSIVE   WARRANTIES OF SUBLICENSOR   UNDER

THIS AGREEMENT. SUBLICENSOR SPECIFICALLY DISCLAIMS, AND SUBLICENSEE SPECIFICALLY

WAIVES,   ALL   WARRANTIES   WHICH ARE NOT CONTAINED IN SECTION 6.1 ABOVE,   WHETHER

EXPRESS OR   IMPLIED,   ORAL OR WRITTEN   OR ARISING BY TRADE   USAGE OR   OTHERWISE,

INCLUDING BUT NOT LIMITED TO EXPRESS OR IMPLIED   WARRANTIES   OF   MERCHANTABILITY

AND FITNESS FOR A PARTICULAR PURPOSE.

 

7.        NOTICES, QUALITY CONTROL AND SAMPLES

 

         7.1       COMPLIANCE   WITH LEGAL   REQUIREMENTS.   The sublicense   granted

hereunder is conditioned upon   SUBLICENSEE'S   full and complete   compliance with

the marking provisions of the trademark, patent and copyright laws of the United

States.

 

         7.2       LEGAL   NOTICES.    The   Licensed   Products,    as   well   as   all

packaging, promotional, and advertising material relative thereto, shall include

all   appropriate   legal notices as required by SUBLICENSOR   from time to time as

reasonably required.

 

         7.3       QUALITY OF LICENSED   PRODUCTS.   The Licensed Products shall be

of a high quality.   SUBLICENSEE   shall notify   SUBLICENSOR   of each new seasonal

collection of Licensed   Products.   When requested by SUBLICENSOR,   at no cost to

SUBLICENSOR,   SUBLICENSEE   shall   submit   to   SUBLICENSOR,   for   approval   as to

quality,   samples of the Licensed   Products.   Such approval by SUBLICENSOR shall

not be unreasonably withheld. At SUBLICENSOR'S request, SUBLICENSEE shall submit

all packaging,   promotional,   marketing and advertising   material related to the

Licensed   Products for such uses of the Trademark which have not been previously

approved by   SUBLICENSOR.   Failure of SUBLICENSOR to approve such samples within

fifteen (15) working days after receipt of such samples will be deemed approval.

If SUBLICENSOR   should   disapprove any sample, it shall provide specific reasons

for such   disapproval.   Once such   samples   have been   approved by   SUBLICENSOR,

SUBLICENSEE  

 

 

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shall not materially   depart therefrom in the making of future Licensed Products

without   SUBLICENSOR'S   prior   express   written   consent,   which   shall   not   be

unreasonably withheld.

 

         7.4       COMPLIANCE    WITH   LEGAL    REQUIREMENTS.    SUBLICENSEE    shall

manufacture,   package,   sell and distribute the Licensed   Products in accordance

with all applicable national, state and local laws and regulations.

 

8.        INTELLECTUAL PROPERTY RIGHTS

 

         8.1       EXCLUSIVE RIGHTS IN MASTER LICENSOR.   SUBLICENSEE acknowledges

that,   as between   SUBLICENSEE   and Master   Licensor,   Master   Licensor owns all

right, title and interest, including intellectual property rights, in and to the

Trademark,   subj