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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






