Exhibit 10.21
LICENSE AGREEMENT
THIS LICENSE AGREEMENT is entered into this 16th day of June 1997, by
Michael Caruso & Co., lnc., a California corporation, ("Licensor"), whose
address is 4560 Loma Vista Avenue, Vernon, California 90058 and Candie's, Inc.
("Licensee"), a Delaware corporation, whose address is 2975 Westchester Avenue,
Purchase, New York 10577, with reference to the following:
A. Licensor is the owner of Trademarks and Trade Names which include
"BONGO" and "B BONGO" (collectively, the "Trademarks");
B. Licensee wishes to manufacture and market mens', womens' and childrens'
footwear (collectively "Footwear") and handbags, backpacks and sport bags
(collectively "Handbags") under and in connection with the Trademarks (the
"Licensed Items");
C. The parties entered into a License Agreement on January 13, 1995 whereby
Licensor granted Licensee the license to manufacture and market footwear under
and in connection with the Trademarks (the "1995 License Agreement").
D. The parties desire to provide for the early termination of the 1995
License Agreement and to replace the 1995 License Agreement with this Agreement.
THE AGREEMENT:
1. 1995 LICENSE AGREEMENT
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1.1 Ratification and Validity. Licensor and Licensee each expressly
acknowledge that the 1995 License Agreement is valid and binding and,
subject to the provisions of paragraph 1.2, in addition to the rights and
obligations created hereunder, that the mutual waiver and release of each
party's respective obligations owing to the other under the 1995 License
Agreement is good and valuable consideration supporting the parties'
agreement to terminate the 1995 License Agreement as hereinafter provided.
1.2 Early Termination of the 1995 License Agreement. The parties agree
to terminate the 1995 License Agreement as of 11:59 p.m. PST January 31,
1998; provided, however, that Licensee shall not thereby be relieved of its
obligations under Paragraphs 6 and/or 7 of the 1995 License Agreement to
render to Licensor its report(s) of sales of the Licensed Items or to remit
to Licensor any and all royalties due Licensor for sales of the Licensed
Items made through January 31, 1998.
2. LICENSE
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2.1 Grant of License and Designation of Licensed Items. Effective
February 1, 1998, Licensor grants to Licensee the exclusive license to use
the Trademarks within the geographic area described in Paragraph 5 hereof,
in the manufacture and marketing of the Licensed Items. Questions regarding
the definition of the Licensed Items shall be decided by the Licensor. The
rights granted to Licensee are limited to use in connection with the
Licensed Items. Licensee agrees not to use the Trademarks or give consent
to their use except as allowed in this Agreement, without written consent
of Licensor.
2.2 Right to Sublicense. Licensee shall have the right, exercisable in
its sole discretion, to sublicense its rights and obligations under this
Agreement to its wholly owned subsidiary, to wit, INTERNATIONAL TRADING
GROUP, INC., a New York corporation; provided, however, that a grant of
such sublicense shall not in any way relieve Licensee of any obligations
owing to Licensor hereunder.
3. TERM
3.1 Initial Term. The initial term of this Agreement (the "Initial
Term") shall commence on February 1, 1998, and shall end on January 31,
2002, unless sooner terminated in accordance with the terms of this
Agreement. The period beginning February 1, 1998 and ending January 31,
1999, and each subsequent twelve (12) month period ending on January 31
during the Initial Term and the First Extended Term (as hereinafter
defined) is herein referred to as a "Contract Year."
3.2 First Extended Term. Provided that the aggregate Minimum Net
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Sales (as hereinafter defined) required to be achieved for the first three
(3) Contract Years of the Initial Term ending January 31, 2001 are met, and
as of the last day of the Initial Term, Licensee is not in default under
this Agreement nor has there occurred any event that, with the passage of
time or the giving of notice, or both, would constitute a default under
this Agreement by Licensee, the term of this Agreement may be extended by
Licensee for the period (the "First Extended Term") beginning on February
1, 2002 and ending on January 31, 2006, unless sooner terminated in
accordance with this Agreement, provided notice of such extension is given
in writing to Licensor at least six (6) months prior to the end of the
Initial Term. The amount of Minimum Net Sales (as hereinafter defined) to
be achieved by Licensee during the First Extended Term is set forth in
Paragraph 4.2.
4. PAYMENTS.
4.1 Net Sales. For purposes of this Agreement the term "Net Sales"
shall mean and refer to the aggregate gross invoice price for all Licensed
Items sold by Licensee in any Contract Year, less any refunds, allowances,
deductions and credits for returns actually made by Licensee's retail
customers. For purposes of this Agreement, Licensed Items shall be
considered sold upon the date of invoicing, shipment or payment, whichever
event first occurs.
4.2 Minimum Net Sales. During each contract year, Licensee shall
achieve the following minimum Net Sales ("Minimum Net Sales") of the
Licensed Items within the Territory:
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First Contract Year:
Footwear: $ 8,000,000; and
Handbags: $ 1,000,000.
Second Contract Year:
Footwear: $11,000,000; and
Handbags: $ 2,000,000.
Third Contract Year:
Footwear: $12,000,000; and
Handbags: $ 3,000,000.
Fourth Contract Year:
Footwear: $13,000,000; and
Handbags: $ 4,000,000.
First Extended Term (each contract year):
Footwear: $15,000,000; and
Handbags: $ 5,000,000.
4.2.1 Option to Exclude Handbags. If in any Contract Year,
whether during the Initial Term or Extended Term of this Agreement,
Licensee fails to achieve the Minimum Net Sales of handbags required
to be achieved for such Contract Year, Licensor at its sole option may
elect to terminate Licensee's license hereunder with respect to
handbags. Licensor shall notify Licensee of its election to exercise
the option in writing within thirty (30) days of Licensor's receipt
from Licensee of the annual report required under Paragraph 8, in
which event Licensee shall be entitled to dispose of its remaining
inventory of handbags in accordance with the provisions of Paragraph
19.
4.3 Royalty. During the term of this Agreement, Licensee shall pay to
Licensor a royalty (the "Royalty") equal to (i) five percent (5%) of the
Minimum Net Sales
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for the Contract Year (the "Minimum Guaranteed Royalty"), or (ii) five
percent (5%) of the actual net sales for the Contract Year, whichever is
greater.
4.4 Advertising Royalty. In addition to the Royalty to be paid under
Paragraph 4.3 hereof, for purposes of Licensor advertising the Licensed
Items and the Trademarks in the Territory, Licensee shall pay to Licensor a
royalty (the "Advertising Royalty") for each Contract Year during the term
of such Contract Year an amount equal to the greater of (i) two percent
(2%) of the combined Minimum Net Sales for such Contract Year, or (ii) two
percent (2%) of the actual combined Net Sales of Licensed Items for such
Contract Year. The Advertising Royalty shall be applied by Licensor to the
production and placement of print, radio and television advertising for the
Licensed Items, utilizing creative, graphics and other material of
Licensor. Licensor shall use its best efforts to utilize Licensee's
products in all Licensor advertising.
5. GEOGRAPHIC AREA. The rights granted to Licensee hereunder shall be
exclusively exercised by Licensee within the United States and its territories,
and all foreign countries and jurisdictions worldwide in which Licensor owns the
Trademarks or the rights to use the Trademarks (the "Territory").
6. LICENSEE'S RECORDS. Licensee shall maintain at its regular place of
business complete records of all business transacted by Licensee in connection
with the Licensed Items. Such records shall be maintained in accordance with
generally accepted accounting procedures. Licensor or its duly authorized agents
or representatives shall have the right to inspect said records at Licensee's
premises during Licensee's regular
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business hours. Licensor shall give Licensee at least ten (10) days' advance
written notice of Licensor's intention to do so.
7. LICENSEE'S REPORTS OF SALES AND PAYMENT OF ROYALTIES.
7.1 Monthly Reports. On or before the 15th day of each month during
the term of this Agreement, Licensee shall deliver to Licensor a written
statement, certified to be true by the Chief Financial Officer of Licensee,
setting forth the gross and Net Sales of Licensed Items by Licensee for the
preceding month.
7.2 Royalty Payments. Licensee shall remit to Licensor with the
Monthly Reports rendered in the months of November, February, May and
August an amount equal to the sum of one-fourth (1/4) of the Minimum
Guaranteed Royalty plus one-fourth (1/4) of the Advertising Royalty for the
three (3) month period just ended.
8. LICENSEE'S ANNUAL REPORTS. On or before April 30 following the end of
each Contract Year, Licensee shall deliver to Licensor an annual statement,
audited and certified by the certified public accountant employed by Licensee,
showing gross and Net Sales of Licensed Items, and royalties (including the
Advertising Royalty) due and royalties paid by Licensee during the just ended
Contract Year. If said annual statement discloses that the amount of royalties
paid to Licensor during the Contract Year to which said statement relates is
less than the amounts required to be paid to Licensor pursuant to Paragraph 4
above, Licensee shall pay said deficiency to Licensor concurrently with the
delivery of such annual statement. If said annual statement discloses that
Licensee has paid to Licensor royalties in excess of the amounts required to be
paid by Licensee
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pursuant to Paragraph 4 above, Licensee shall be entitled to a credit equal to
such royalties against the royalties next accruing under this Agreement. In the
event the foregoing occurs during the final Contract Year of this Agreement,
adjustments shall be made in cash rather than in the form of a credit. Licensee
shall also provide with each annual statement an estimated projection of net
shipments of the Licensed Items for the succeeding Contract Year.
9. AUDIT BY LICENSOR. Should an audit, pursuant to Paragraph 6, disclose
that Licensee has understated sales or underpaid royalties to Licensor, Licensee
shall upon written demand pay to Licensor the amount by which the actual
royalties owing exceed royalties paid. If Licensee has understated either gross
or net sales or royalties by an amount in excess of five percent (5%) of actual
sales or the amount due for any Contract Year, Licensee shall forthwith and upon
written demand also pay to Licensor all expenses incurred by Licensor in
conducting such audit. Should such audit disclose that the royalties paid exceed
the actual royalties due, Licensee shall be entitled to a credit equal to such
excess royalties against the royalties next accruing under this Agreement,
except that when such audit is conducted at the expiration of the Agreement, any
excess royalties paid will be remitted by check to the Licensee within thirty
(30) days.
10. BEST EFFORTS OF LICENSEE. Licensee shall use it best efforts to
manufacture and market the Licensed Items. A cessation of best efforts for a
continuous period of one hundred eighty (180) days shall be grounds for
termination of this Agreement. Licensor shall have the right to inspect
Licensee's facilities during regular
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business hours, on twenty-four (24) hours prior written notice. Licensor shall
use its best efforts to make such inspection in the presence of an officer of
Licensee.
11. LICENSED ITEMS TO BE KEPT DISTINCTIVE. Licensee shall consistently
distinguish the Licensed Items from other products manufactured and sold by
Licensee and shall maintain distinct lines in all merchandising efforts.
Licensor agrees to render reasonable assistance and advice to Licensee
concerning styles and trends. In the event Licensor shall create any design or
style and submit the same for use by Licensee, Licensee shall not be required to
use the same, but if Licensee elects not to do so, Licensee shall have no right
thereto and shall not use the same in connection with any product or service of
Licensee.
12. ADDITIONAL OBLIGATIONS OF LICENSEE AS TO QUALITY, MERCHANDISING AND
OTHER ASPECTS OF LICENSED ITEMS. Licensee shall furnish to Licensor, without
request, photographs of samples and finished production models of Licensed Items
for Licensor's approval. Approval shall be based on styling, materials and
manufacturing quality. Licensee shall also furnish to Licensor, without request,
samples of each proposed new model and material of a Licensed Item. Failure of
Licensor to notify Licensee of disapproval within fourteen (14) days after
receipt of a sample shall constitute Licensor's approval. Prior to submission of
samples to Licensor, Licensee shall conduct its usual tests on each such sample
to assure that quality of the Licensed Item is at least equal to the quality of
similar non-licensed items manufactured by Licensee, sold at retail, at
comparable prices. Each Licensed Item shall contain at
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least one representation of one of the Trademarks. Licensor reserves the right
to withhold approval of any Trademark representation which does not conform to
Licensor's standard as to such representation.
13. RESTRICTIONS UPON SUBCONTRACTS. Licensee shall have the right to enter
into subcontracts for the manufacture of Licensed Items. Licensee shall not
permit any subcontractor to further subcontract the work contracted for.
14. PROHIBITION OF ASSIGNMENTS AND TRANSFERS. Without written consent of
Licensor, Licensee shall not voluntarily, involuntarily or by operation of law
assign or transfer this Agreement or any of Licensee's rights, interests, or
duties hereunder (except as specifically provided herein). The consent of
Licensor to one assignment, transfer or sublicense shall not be deemed to be
consent to any subsequent assignment, transfer or sublicense. Any assignment,
transfer or sublicense without Licensor's written consent shall be void and at
the option of the Licensor shall constitute a default hereunder.
15. NO DILUTION OF TRADEMARKS; NO ATTACK UPON TRADEMARKS. Licensee shall
not use the Trademarks or any material utilizing either of them in such manner
as will adversely affect any rights of ownership of Licensor in and to the
Trademarks, or any of them.
Licensee shall cause to appear on all Licensed Items and on all materials
on which the Trademarks are used, such indications as may be required by any
applicable law so as to give appropriate notice of any trademark, trade names or
other rights therein.
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Licensee shall not contest the validity of the Trademarks or any of the
rights of Licensor under which this license is granted, nor will Licensee
willingly become an adverse party to litigation in which others contest the
Trademarks or Licensor's said rights. Licensee shall not seek to avoid its
obligations hereunder because of the assertion or allegation by any person(s)
that the Trademarks, or any of them, are invalid.
16. INFRINGEMENT AND OTHER TRADEMARK LITIGATION. Licensee shall notify
Licensor as soon as practicable of any infringement of the Trademarks, or any of
them, which comes to Licensee's attention. Licensor at its sole expense, and in
its own name, shall prosecute and defend any action or proceeding which Licensor
deems necessary or desirable to protect the Trademarks. Licensee may, and upon
written request by Licensor shall, join Licensor at Licensor's sole cost in any
such action or proceeding. Licensee shall not commence any action or proceeding
to protect the Trademarks without the written consent of Licensor and shall not
defend any such action without Licensor's written consent. Any damages recovered
in any action or proceeding commenced by Licensor shall belong solely and
exclusively to Licensor. Licensor shall have no liability to Licensee for any
damages awarded or recovered against Licensee, nor shall Licensor have any
liability to any other person for any damages awarded to or recovered by such
other person, including but not limited to any action or proceeding alleging any
violation of any antitrust, trade regulation, unfair competition, or similar
statute. If Licensor is made a party to any such action or proceeding, Licensee
shall indemnify and hold Licensor harmless from any and all attorneys' fees,
costs, damages,
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liabilities and awards as may be incurred, assessed, imposed or adjudicated by
reason thereof; provided, however, that such action or proceeding results from
the manufacture or marketing by Licensee of the Licensed Items. Licensor shall
indemnify and hold Licensee harmless from any liability arising solely from
Licensee's use of the Trademarks licensed hereunder. Licensee may, at its
option, choose to be represented in any threatened or actual action or
proceeding to which this Paragraph pertains by Licensor's counsel at no cost to
Licensee, in which event Licensor shall control such representation. If
Licensor's counsel cannot thereafter represent both Licensor and Licensee,
Licensor's counsel shall continue to represent Licensor only.
17. ADDITIONAL RESTRICTIONS UPON USE OF TRADEMARKS. Licensee shall not use
or permit the use of any of the Licensed Items, or on any packaging which is
received by the general public (as opposed to retailers), any identification
which includes with the name "BONGO," the name of Licensee or of any other
person or entity (e.g. "BONGO by Candies") nor shall Licensee include or permit
the inclusion, with the name BONGO or any of the Trademarks, in any advertising
or promotional material featuring any of the Licensed Items which is
disseminated to the general public (as opposed to trade advertising) the name of
Licensee or of any other person or entity. In addition to the foregoing,
Licensee shall not use or permit the use of any of the Trademarks, including the
name BONGO on or in connection with any product or service, other than the
Licensed Items, which is manufactured or sold by Licensee, or which is licensed
by Licensee to others for manufacture or sale (e.g. "CANDIES by the makers of
BONGO").
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18. DEFAULTS BY LICENSEE. Except as provided, in the event Licensee
materially defaults in the performance of any of the terms and conditions
hereunder, and if such default involves the payment of money not cured within
ten (10) days after receipt of written notice or if such default involves
performance other than the payment of money, and Licensee shall not have
commenced curing the same within thirty (30) days after receipt of written
notice, or if a Receiver is appointed to, or one or more creditors take
possession of all or substantially all of Licensee's assets, or if Licensee
shall make a general assignment for the benefit of creditors, of if any action
is taken or suffered by Licensee under any insolvency or bankruptcy act, then in
such event Licensor may cancel and terminate this Agreement. Such cancellation
and termination will not relieve Licensee of any of its obligations as may by
then have accrued hereunder. If Licensee commits three or more material defaults
and corrections thereof during the term or extension of this Agreement, Licensor
may terminate this Agreement with written notice to Licensee. The time for
performance of any act required of either party shall be extended by a period
equal to the period during which a party was reasonably prevented from
performance, by fire, flood, storm, or like casualty.
19. LICENSOR'S RIGHTS TO DESIGNS, ETC., UPON TERMINATION. In the event this
Agreement is cancelled or terminated for any reason, Licensee shall assign and
transfer to Licensor any and all rights in the Trademarks, and in the designs of
the Licensed Items, and the goodwill associated therewith, and shall not
thereafter manufacture or market any of said designs. Licensee may, however,
dispose of its on-
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hand stock of Licensed Items for a period not to exceed six (6) months after the
date of cancellation or termination of this Agreement, provided all Royalties
then due Licensor have been paid and provided further that Licensee provides a
schedule of all inventory of Licensed Items in Licensee's possession (actual or
otherwise). Neither Licensee nor any other person or entity may, other than in
the regular course of Licensee's business, sell or transfer any Licensed Item
unless all sums due Licensor from Licensee have been paid. All Royalties due
Licensor by reason of the sell-off of such on-hand inventory of Licensed Items
shall be paid to Licensor within fifteen (15) days of the end of the month
during which the sell-off is completed or terminates, but in no event beyond six
(6) months from the date this Agreement is cancelled and terminated. Upon
termination or cancellation of this Agreement, all packaging, advertising, and
other items bearing representation of Trademarks shall, without cost to
Licensor, become the property of Licensor and be delivered to Licensor's place
of business. The reasonable cost of such delivery shall be paid by the Licensor.
20. ADDITIONAL RIGHTS UPON TERMINATION. During the last six (6) months of
the final Contract Year of this Agreement, Licensor shall have the right to
design and manufacture merchandise of the types covered by this Agreement and to
negotiate agreements which grant a license to a party of any of the rights
herein mentioned. No merchandise identified as Licensed Items shall be shipped
by Licensor or any third party other than Licensee prior to the expiration or
termination of this Agreement (exclusive of the additional six (6) month period
for the disposition of the Licensed Items).
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However, any successor Licensee may solicit orders during the last six (6)
months of the final Contract Year.
21. GOOD WILL. Licensee acknowledges that the Trademarks have acquired a
valuable secondary meaning and good will. Accordingly, Licensee agrees not to
use the Trademarks, or any of them, so as to detract from their repute.
22. INSURANCE. Licensee and its sublicensees, if any, agree to carry
product liability insurance on the Licensed Items, with a limit of liability of
$5,000,000. Licensor shall be named as an additional insured on each such
insurance policy. Such insurance may be obtained in conjunction with a policy of
product liability insurance which covers products other than the Licensed Items.
The policy shall provide for at least ten (10) days prior written notice to
Licensor of the cancellation or substantial modification of the policy. The
Licensee shall deliver to Licensor a certificate evidencing the existence of
such insurance policies after their issuance.
23. RESERVED RIGHTS. Rights not specifically granted to Licensee are
reserved by Licensor and may be used by Licensor without limitation. Any use by
Licensor of such reserved rights, including but not limited to the use or
authorization of the use of the Trademarks, or any of them, shall not be deemed
unfair competition, interference with or infringement of any of Licensee's
rights under.
24. ATTORNEY'S FEES; CHOICE OF FORUM; APPLICABLE LAW. In the event either
party shall commence any action or proceeding against the other by reason of any
breach or claimed breach in the performance of this Agreement, or seeks a
judicial
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declaration of rights hereunder, the prevailing party in such action or
proceeding shall be entitled to reasonable attorney's fees fixed by the trial
court. Any legal action or proceeding against Licensor by or on behalf of
Licensee shall be brought in the County of Los Angeles. The law applicable
thereto shall be the law of the State of California.
25. NON-AGENCY OF PARTIES. This Agreement does not make Licensee an agent
of Licensor, or Licensor an agent of Licensee. Licensee is not granted any
authority to create any obligation on behalf of Licensor and Licensor is not
granted any right to create any obligation on behalf of Licensee. No joint
venture or partnership between the parties is intended or shall be inferred.
26. ADDRESSES FOR NOTICE. All notices required under this Agreement shall
be in writing, by certified mail addressed to Licensee at 2975 Westchester
Avenue, Purchase, New York 10577 and to Licensor at 4560 Loma Vista Avenue,
Vernon, California 90058, and shall be deemed given seventy-two (72) hours after
being deposited in the mail.
27. WAIVER BY LICENSOR. In the event Licensor shall waive any of its rights
under this Agreement, or the performance by Licensee of any of its obligations,
such waiver shall not be a continuing waiver or a waiver of any other rights or
obligations.
28. INTEGRATED AGREEMENT. This Agreement constitutes the entire agreement
between the parties as to the Licensed Items. No modifications of this Agreement
shall be of any force unless it be in writing and executed by the parties
hereto.
29. SEPARABILITY OF PROVISIONS. Any provision of this Agreement found
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invalid shall not invalidate the remaining provisions. Titles to the paragraphs
shall have no substantive effect.
30. BINDING UPON SUCCESSORS. This Agreement shall be binding upon the
parties hereto, and their successors and assigns; provided, however, this
Paragraph shall not modify the Agreement's prohibition against assignment or
transfer.
31. INTERPRETATION. No provision in the Agreement is to be interpreted for
or against either party because that party or that party's legal representative
drafted such provision.
Dated this 30th day of May, 1997.
MICHAEL CARUSO & CO., INC., CANDIE'S, INC.,
a California Corporation a Delaware Corporation
By /s/ Brian Kail, President By /s/ Neil Cole, CEO
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(Name and Title) (Name and Title)
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