EXHIBIT 10.67
PRODUCT LICENSE AGREEMENT
THIS AGREEMENT ("Agreement") is made by and between Easyriders, Inc. a
Delaware corporation ("Easyriders") Paisano Publications, Inc., a California
corporation ("Paisano") and Easyriders Licensing, Inc., a California corporation
("ELI") each doing business at 28210 Dorothy Drive, Agoura Hills, California
91301, on the one hand (collectively, "Licensor"), and Southern Steel
Streetwear, Inc., a Florida corporation ("Licensee"), as of the "Effective Date"
specified in section 12 below.
1. Recitals This Agreement is made with reference to the following material
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facts:
1.1 Paisano is the publisher of various magazines sold under the titles
("Titles") "Easyriders", "Biker", "V-Twin", "In the Wind", and others
(collectively, the "Magazines").
1.2 Paisano regularly sells and distributes apparel, accessories and other
merchandise (collectively, "Brand Merchandise") under various brand names,
including one or more Titles (the "Brand Names"). The Titles and Brand Names,
and all trademarks, logos, names, likenesses, visual representations and
commercial symbols related thereto which are the subject of this agreement are
listed on the attached Schedule 1.2, and, are hereinafter referred to as the
"Symbols".
1.3 Licensor operates in the US and Canada a program (the "License Store
Program") whereby it offers licenses to retail store owners and operators
("Store Licensees"), pursuant to which each Store Licensee is permitted to
conduct business in a designated geographical territory at a specified retail
location (a "License Store"), in exchange for a commitment to purchase a minimum
amount of Brand Merchandise initially and on an annual basis.
1.4 Licensee is an affiliate of Action Promotions, Inc., a Florida
corporation ("API"), in that Licensee and API share common ownership. Paisano
and Easyriders Events, Inc. (formerly, Teresi, Inc.) are parties to an agreement
with API dated as of March 31, 2000 (the "Events License Agreement"), pursuant
to which Paisano and Easyriders Events granted a license to API to exploit the
Symbols in connection with consumer and industry "Events" (as defined in the
Events License Agreement), and to make and sell at such Events event-specific
Brand Merchandise and other Brand Merchandise from Licensor's Roadware catalog.
Pursuant to the Events License Agreement, there presently exists in favor of API
a credit to purchase Brand Merchandise (as specified and defined therein) in the
sum of $1,360,194.73 (the "API Credit"). For purposes of this Agreement,
$600,000 of the API Credit is defined as the "Offset Credit #1" and the
remaining $760,194.73 of the API Credit is defined as the "Offset Credit #2."
1.5 Licensor sells Brand Merchandise through the following channels:
(a) To Store Licensees for re-sale in License Stores and as may
otherwise be permitted under the applicable store license agreement, and to
retail stores offering products and services of interest to motorcycle
owners and enthusiasts, through its Roadware Catalog of merchandise
(collectively, the "Wholesale Channel");
(b) Through API pursuant to the Events License Agreement;
(c) To retail purchasers on a direct basis, through distribution of
its Roadware Catalog in print form, and via Licensor's Internet Web sites
and magazine advertisements (the "Retail Channel").
(d) Through license agreements with various manufacturers and
distributors, in the US and various foreign territories (the "Licensed
Product Channel").
1.6 Licensee desires to acquire the right to use the Symbols for certain
commercial purposes, namely to manufacture and distribute Brand Merchandise for
sale through the Wholesale Channel, and Licensor desires to grant such rights to
Licensee subject to the terms and conditions of this Agreement.
2. License Subject to Licensor's right to terminate under Section 7,
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Licensor hereby grants to Licensee the following limited rights, which, subject
to the provisions of sections 2 (c) and 2 (d), below, shall be exclusive to
Licensee during the Term, as provided below:
(a) To use the Symbols in conjunction with the sale, development,
marketing and distribution of Brand Merchandise, provided that (i) as used
herein, the term "Brand Merchandise" shall not include any right to create,
develop, promote, market, license, sell or otherwise distribute
publications in any form, including but not limited to magazines,
newsletters, books, posters, calendars, videos, radio or television
programs, Internet content, movies or any other expression or form of media
publication, and (ii) such use shall be limited to the Wholesale Channel.
(b) To enjoy all of the foregoing rights on a worldwide basis
during the Term (the "Licensed Territory"), subject to any laws,
regulations or other restrictions or limitations arising from the
intellectual property rights of third parties.
(c) Licensee acknowledges as follows:
(1) Licensor has entered into a license agreement (the "Doyle
Agreement") with Doyle Motorcycle Productions Corp., an Ontario
(Canada) corporation ("Doyle), pursuant to which Doyle has been
granted certain rights to source Brand Merchandise in Canada
("Approved Product") and to sell the same directly and through
sublicensees of Doyle (collectively, the "Doyle Rights").
Licensee acknowledges receipt of a copy of the Doyle Agreement.
(2) Licensor has entered into an agreement with HD Lee Company
(the "Consent Decree") pursuant to which Licensor has agreed to
restrict its marketing and distribution of merchandise bearing
the mark "Easyriders" as specified in the Consent Decree.
Licensee Acknowledges receipt of a copy of the Consent Decree.
(3) Licensor is a party to a number of license agreements
pursuant to which it has granted various parties the right to
manufacture and distribute, in designated territories, Branded
Merchandise through the Licensed Product Channel. A schedule of
such agreements (collectively, the "Licensed Product Channel
Agreements") is attached hereto as Exhibit A, by this reference
made a part hereof.
(d) Licensee hereby agrees that it will not use the license rights
granted hereby in any way that would violate, or tend in any way, directly
or indirectly, to violate the Doyle Agreement, the Consent Decree and/or
the Licensed Product Channel Agreements (the "Excepted Rights"). Licensee
acknowledges and agrees that the rights granted hereby are specifically
limited by and qualified by the Excepted Rights.
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(e) Licensee is hereby granted the right to adopt a fictitious
business name incorporating Licensor's tradename "Easyriders," in order to
conduct the business contemplated by this agreement, provided that any such
name must first be approved by Licensor.
3. Covenants Concerning License
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3.1 During the Term (as defined in section 7) Licensor agrees that it will
use reasonable commercial efforts to (a) continue in operation its Licensed
Store Program, and (b) continue to promote the Licensed Store Program for the
purpose of expanding the number of License Stores, provided that any and all
decisions in connection with the operation, maintenance and expansion of the
Licensed Store Program shall be made by Licensor in its sole discretion.
3.2 During the Term, Licensor shall continue to produce its Roadware
Catalog, commensurate in style and quality to its current catalog. The Roadware
Catalog shall be produced twice annually, one edition for Spring/Summer products
and one for Fall/Winter products, and each edition shall be not less than 32
pages in length. The 2 annual Roadware Catalogs shall together continue to
include all merchandise then available and comprising Brand Merchandise, except
for Brand Merchandise sold through the Licensed Product Channel.
3.3 At the request of Licensee, Licensor shall produce for Licensee a
print-ready "Dealer Version" of its Roadware Catalog, at a cost of $600 per
page. Such Dealer Version shall be prepared in a digital format, ready for
printing. The cost of $600 per page does not include printing. Licensee shall
provide reasonable advance notice if its desire to have such a Dealer Version
produced, and the parties shall negotiate in good faith the terms and conditions
of delivery and other relevant matters applicable thereto.
3.4 The parties acknowledge and agree that the objective of this Agreement
is to place primary responsibility with Licensee for the design and selection of
all Brand Merchandise, irrespective of distribution channel, i.e. the products
featured in the Roadware Catalog. In this regard, Licensee shall have primary
responsibility for the design and selection of the products which comprise Brand
Merchandise (the "Product Array"), subject in all cases to prior collaboration
with Licensor and the reasonable approval of Licensor of each product in the
Product Array. "Product Array" does not include merchandise sold by Licensor
through the Licensed Product Channel.
3.5 Licensee shall have sole and exclusive responsibility for
manufacturing or causing to be manufactured under its direct control (as
provided in section 3.11 below), all T-Shirts and non-leather garments in the
Product Array, except for such items that are not presently capable of being so
manufactured by Licensee (collectively, "Manufactured Merchandise"). All Brand
Merchandise other than Manufactured Merchandise is referred to hereinafter as
"Vendor Sourced Product." In order to assist Licensee in creating Manufactured
Merchandise for the Product Array, Licensor shall make available to Licensee,
during the Term, any and all dyes and/or screens for use in silkscreening and/or
embroidery which Licensor owns and/or controls, and all art works, images and
designs which it owns and/or controls.
3.6 The parties shall collaborate and cooperate with one another in
connection with the acquisition of Vendor Sourced Product, each sharing with the
other product source information. Where feasible, the parties shall effect
joint purchases of Vendor Sourced Product so as to maximize the opportunity for
bulk purchase discounts.
3.7 Licensee shall have sole and exclusive responsibility for procuring,
stocking, warehousing, shipping and fulfilling orders for the sale of
merchandise comprising the Product Array to
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(a) License Store owners and dealers in connection with distribution through the
Wholesale Channel, and (b) to Licensor for re-sale through the Retail Channel;
provided that with respect to all Brand Merchandise sold through the Retail
Channel, Licensor shall have responsibility for (i) maintaining its own
inventory, (ii) warehousing and shipping all merchandise, and (iii) processing
all orders. In addition, Licensee shall have sole and exclusive responsibility
for preparing invoices and collecting all revenues attributable to Wholesale
Channel Sales.
3.8. In order to support the sale of Brand Merchandise to the Wholesale
Channel, Paisano shall provide the following advertising support to the
Wholesale Channel:
. 1 full page and 2 one-third pages of 4-color ads in each issue of every
motorcycle-themed title Paisano continues to publish. The parties shall
collaborate with one another in developing the content for such
advertising to ensure that the same is consistent with Licensor's
advertising in the various Titles in order to support it sales of Brand
Merchandise through the Retail Channel. The parties agree to share the
expense thereof on an equitable basis as result of good faith
negotiations.
. At Licensee's sole cost (including reimbursement for incremental
materials and labor incurred by Licensor), the right to put in Regional
inserts ("bind-ins" or "blow-ins"). There shall be no charge, however,
for the right to place these inserts into magazines.
3.9 Insurance. During the Term, Licensee agrees to maintain in full
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force and effect the following minimum levels of insurance coverage.
. A policy of general and comprehensive liability coverage, insuring
against all manner of injuries and damages arising out the performance
of this Agreement by Licensee, in the sum of not less than $2 million
for each occurrence. Such policy or policies shall cover Licensee and
shall name Easyriders and Paisano as additional insureds.
. As to each physical site owned, leased, occupied or maintained by
Licensee for manufacturing, storing, warehousing or holding Brand
Merchandise, a comprehensive policy providing coverage for loss or
damage to the Brand Merchandise for the full replacement value thereof,
which policy shall name Easyriders and Paisano as additional insured.
. All other insurance and permits required under federal, state and local
laws to operate the business of Licensee referred to herein.
3.10 Use of Titles - Notification.
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(a) The license rights granted hereby extend and apply to all current
Titles, provided that with respect to all current Titles other than
Easyriders, Biker and In the Wind, (collectively, the "Available Titles"),
the following provisions shall apply:
(i) Licensee shall have no right to exploit any Available Title
without first providing written notice of Licensee's intentions to do
so, which notice shall identify the applicable Available Title, and
specify the plan and method developed by Licensee for the marketing of
merchandise under an Available Title (each, Magazine Title Plan").
Thereafter, Licensor shall have 30 days to review and evaluate the
applicable Magazine Title Plan, and to reasonably approve the same.
If Licensor reasonably disapproves such Magazine Title Plan it shall
notify Licensee before the end of such 30 day period, and if
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such disapproval is noticed, Licensee shall have no right to exploit
the applicable Available Title. If no such disapproval notice is
given, Licensee shall then have 60 days to implement the applicable
Magazine Title Plan. Should Licensee fail to implement such Magazine
Title Plan within such 60 day period, or should Licensee fail to
pursue with reasonable commercial diligence such Magazine Title Plan
as approved, Licensor shall have the right, to revoke the license as
to such Available Title upon the delivery of notice thereof and
Licensee's failure to cure such default within ten (10) days.
(ii) Licensor reserves the right to license to another party any
Available Title which has not been licensed to Licensee pursuant the
preceding subparagraph 3.10(a)(i), provided that before doing so, it
shall provide Licensee with written notice of intentions in this
regard, and offer such Available Title to Licensee. Upon receipt of
such notice, Licensee shall have 21 days to notify Licensor if it
desires to exploit the Available Title in question, and to specify the
plan and method to be used by Licensee for the marketing of
merchandise under such Available Title. If Licensee fails to respond
within such period, or notifies Licensor of its intention not to use
the applicable Available Title, then as to such Available Title
rejected or not addressed, Licensor shall be free to offer the
Available Title(s) in question to any person or entity for the purpose
of selling Brand Merchandise. In the event that Licensee does timely
submit a Magazine Title Plan for the Available Title in question, then
Licensor shall have 30 days to review and evaluate the applicable
Magazine Title Plan, and to reasonably approve the same. If Licensor
reasonably disapproves such Magazine Title Plan it shall notify
Licensee before the end of such 30 day period, and if such disapproval
is noticed, Licensee shall have no right to exploit the applicable
Available Title. If no such disapproval notice is given, Licensee
shall then have 60 days to implement the applicable Magazine Title
Plan. Should Licensee fail to implement such Magazine Title Plan
within such 60 day period, or should Licensee fail to pursue with
reasonable commercial diligence such Magazine Title Plan as approved,
Licensor shall have the right, to revoke the license as to such
Available Title upon the delivery of notice thereof and Licensee's
failure to cure such default within ten (10) days.
(b) In the event that Paisano develops and launches any new magazine
title, Licensor shall notify Licensee of such new title, and offer Licensee
an option to include such new title as a Symbol covered by the terms and
conditions of this Agreement. Such offer shall be in writing, and shall be
exercisable for a period expiring 21 days following the delivery of such
notice. If Licensee fails to respond within such period, or notifies
Licensor of its intention not to exercise such option within such period,
then such option shall expire, and Licensor shall be free to offer such new
magazine title to any person or entity for the purpose of selling Brand
Merchandise.
3.11 With respect to Wholesale Channel sales, Licensee shall indicate
Licensor's ownership of the Symbols whenever Licensee uses the Symbols in
connection with the advertising, manufacture, or sale of Brand Merchandise.
Licensee shall provide all trade dress and labels for the Product Array, subject
to the reasonable approval of Licensor, and Licensee shall use only such
approved trade dress and labels in connection with the sale of Brand Merchandise
through the Wholesale Channel.
3.12 Licensee will comply with all laws applicable to the Symbols,
including compliance with marking requirements. Should Licensee fail to perform
Licensee's obligations under this Section, Licensor may perform them on
Licensee's behalf, without notice to Licensee and at Licensee's sole cost and
expense.
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3.13 Although none of the rights granted to Licensee by this Agreement can
be assigned to others without Licensor's express written consent, Licensee is
permitted hereby to cause the Brand Merchandise to be manufactured by others for
Licensee. In such event, the agreements between Licensee and Licensee's
subcontractors shall be subject to Licensor's written approval, which consent
shall not be unreasonably withheld, and shall provide that Licensor may enter
upon Licensee's subcontractors' premises to determine whether the Brand
Merchandise is being produced in accordance with the terms and conditions of
this Agreement. Licensor agrees that Hot Action Sportswear, Inc. is pre-
approved as a subcontractor to manufacture all Brand Merchandise as provided for
under this agreement.
3.14 Licensee acknowledges Licensor's exclusive right, title, and interest
in and to the Symbols and will not do anything that will in any way impair or
tend to impair any part of Licensor's right, title, and interest. In connection
with the use of the Symbols, Licensee will not represent that Licensee has any
ownership in the Symbols or in its registration. Use of the Symbols by Licensee
will not create any right, title, or interest in or to the Symbols in favor of
Licensee. Licensee will not at any time, either during the term of this
Agreement or after it has ended, adopt or use any work or mark that is similar
to or confusing with the Symbols, without Licensor's prior written consent.
Further, Licensee agrees that in performing the obligations of this Agreement,
it will not, by act or omission, do anything or cause anything to be done
directly or indirectly which will reflect adversely upon Licensor or any of the
Symbols, adversely affect the reputation and goodwill of Licensor, or otherwise
cause damage or harm to Licensor or any affiliate thereof.
4. Economic Provisions Pertaining to License.
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4.1 In exchange for the foregoing grant of exclusive rights, Licensee
shall pay to Licensor the following consideration:
(a) The first $2,500 realized from the sale of Brand Merchandise to
any new License Store (the "Initial Product Royalty"). A list of the
current Licensed Stores is attached hereto as Exhibit B, by this reference
made a part hereof. The aggregate amount of all Initial Product Royalties
shall be paid within 20 business days following the end of each calendar
month during the Term, for the preceding month.
(b) A royalty equal to ten percent (10%) of the gross revenues
realized by Licensee from the sale of Brand Merchandise through the
Wholesale Channel, but not less than 10% of the minimum sales targets per
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year (the "Annual Minimums") set forth in subparagraphs (1) and (2) below
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(the "Gross Revenue Royalty"):
(1) With respect to sales to License Stores: The sum of $37,500
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(the "Per Store Minimum") multiplied by that number of
License Stores participating in the License Store Program on
an annual basis. The Per Store Minimum shall be pro-rated
for each License Store whose license agreement is not in
effect for a full calendar year. If, for example, a License
Store's agreement is terminated on May 31, the Per Store
Minimum for that License Store would be 50% of $37,500. The
Per Store Minimum shall be increased each time that the
minimum Brand Merchandise commitment required of License
Stores under the License Store Program is increased above
$75,000, so as to always be 50% of the minimum purchase
commitment. For example, if the annual minimum commitment is
raised to $90,000, the Per Store Minimum would increase to
$45,000 per License Store.
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(2) With respect to sales to other stores and customers in the
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Wholesale Channel:
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Year Sales Target
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1 $500,000
2-5 110% of the previous year's actual Sales, but
in no event less than $550,000 in Year 2.
Thereafter Increasing on an annual basis in accordance
with any increases in the US Consumer Price
Index.
(c) For purposes of the foregoing, "Year" shall mean January 1 to
December 31, except for the year 2001, which shall mean the period
running from the Effective Date through December 31, 2001 ("Year 1").
All of the Annual Minimums for Year 1 shall be pro-rated
appropriately. If for example, the Effective Date is April 1, 2001,
the Sales Targets in sections 4.1(b)(1) and (2) would be adjusted to
75% of the figures stated.
(d) The Gross Revenue Royalty shall include all sums realized by
Licensee on account of "Sales" to any person, firm or entity,
including, without limitation, API, Hot Action Sportswear, or any
entity controlled by Melissa Penland and/or John Green, provided that
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as used herein, the term "Sales" shall not include: (i) sales to
Licensor under section 4.6 of Manufactured Merchandise, nor (ii) sales
to API of Manufactured Merchandise in furtherance of the Events
License Agreement.
4.2 The Initial Product Royalty and Gross Revenue Royalty are hereinafter
each referred to sometimes as a "Royalty."
4.3 The aggregate amount of all Gross Revenue Royalties shall be paid
within 20 business days following the end of each calendar month during the
Term, for the preceding month, and interest shall accrue upon any unpaid balance
thereon at an annual rate of twelve percent (12%) until such unpaid balance has
been paid. Such rate of interest shall increase to fifteen percent (15%) on any
unpaid balance remaining outstanding in excess of sixty (60) days. For purposes
of this provision, Licensee shall have until January 31 of each Year, to pay
such additional sums as may be necessary to achieve the Annual Minimums for the
previous Year. If, for example, the total, cumulative amount of monthly
payments of Gross Revenue Royalties were $175,000 through December 31, and the
Annual Minimum for that Year were $200,000, Licensee would have until January 31
of the next Year to pay the additional sum of $25,000 to achieve the required
Annual Minimum.
4.4 Along with each Royalty payment, Licensee shall provide Licensor a
statement ("Financial Report") showing the number of units of the Brand
Merchandise sold by Licensee during the period covered by the Royalty payment,
as well as Licensee's gross receipts for those sales and the computation of
Royalties due to Licensor. Such Financial Report will be executed by the
President or Chief Financial Officer of Licensee and will contain a
representation that the financial information contained therein is to their best
knowledge and belief a true and accurate accounting of royalties due Licensor
for the month just ended.
4.5 Upon reasonable notice and at reasonable intervals, Licensor or its
auditors shall have the right to examine the books and records of Licensee at
Licensor's cost, provided, however, that if any such
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audit shows an underpayment to Licensor of more than 5% as to any applicable
royalty payment, Licensee shall reimburse Licensor for the cost of such audit.
4.6 (a) Subject to the provisions of subparagraph (b) of this Section
4.6, the price charged by Licensee for merchandise sold to Licensor for re-
sale by Licensor through the Retail Channel shall be 50% off of "dealer
cost."
(b) Licensee shall have the right to establish any and all "volume
discount prices," i.e. the prices to be paid by License Stores and other in
the Wholesale Channel for Brand Merchandise based the amount of merchandise
purchased. In the case of any sale price ("Volume-Based Dealer Price")
based on volume ("Quantity"), Licensor shall be entitled to purchase
merchandise at 50% off of such Volume-Based Dealer Price only if it
purchases twice the Quantity established for such Volume-Based Dealer Price
in the case of buyers other than Licensor. For example, and by way of
illustration only, if Licensee establishes for a particular apparel item a
unit "dealer cost" of $10 for up to 99 units, and a Volume Based Dealer
Price of $9 for purchases of 100 or more units, then Licensor's pricing
would be $4.50 per unit only on a purchase by Licensor of 200 or more
units. Otherwise, Licensor will be charged the full Volume-Based Dealer
Price.
4.7 As of the Effective Date, Licensee shall deliver to Licensor the fully
executed Assumption and Release Agreement in the form of Exhibit B, attached
hereto and by this reference made a part hereof.
4.8 Licensee shall invoice Licensor for all sales of Brand Merchandise to
Licensor hereunder, and payment shall be due in accordance therewith. If any
such sales are on credit terms, whereby Licensor accepts or takes possession of
Brand Merchandise prior to full payment therefor, then as to such merchandise
sold on credit, Licensee shall have a first priority lien on such merchandise
until full payment is made. Such lien shall be established pursuant to the
Pledge and Security Agreement in the form of Exhibit C, attached. Licensor
agrees to cooperate with Licensee in connection with the execution of any and
all documents necessary to perfect such lien.
5. Payment for Transition Services and Merchandise.
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5.1 Promptly after the Closing Licensor shall deliver to and provide
Licensee with all necessary transition and support services, customer and vendor
lists, sales records, marketing literature, graphics, and promotional assistance
relating to the License Store Program, and its prior activities with respect to
sales to the Wholesale Channel. In consideration therefor, and for license
rights granted hereby, Licensee shall pay Paisano at the Closing the sum of
$600,000, (allocated as set forth in Schedule 5.1 attached) payable by the
assumption by Licensee of all obligations of Licensor pertaining to the Offset
Credit #1, pursuant to execution (by all parties) and delivery, as of the
Effective Date, of the Assumption and Release Agreement in the form of Exhibit
B, attached hereto and by this reference made a part hereof.
5.2 Licensor shall prepare, as of the close of business on the day
immediately prior to the Effective Date, an itemized inventory of all Brand
Merchandise then held by Licensor (the "Final Inventory"). An itemized list of
the Final Inventory shall be attached hereto as Schedule 5.2. In order to
provide Licensee with inventory sufficient to enable it to fulfill orders for
the Wholesale Channel, Licensor shall sell to Licensee, and Licensee shall
purchase from Licensor, the Final Inventory as of the Effective Date. The
purchase price shall be $760,194.73 payable through Offset Credit #2 up to the
total amount thereof, and thereafter as to any excess, in cash within 5 days of
delivery to Licensee. Such sale
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shall be evidenced by a separate Bill of Sale in form satisfactory to Licensee.
Forthwith following the Effective Date, Licensor shall ship the Final Inventory
to Licensee at the expense of Licensee.
6. Representations and Warranties.
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6.1 Representations and Warranties of Licensor. Licensor represents and
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warrants to Licensee that:
(a) Licensor has the full and complete right to enter into and
perform the obligations of this Agreement, and to grant the rights
specified in the license above.
(b) Subject to the provisions of Section 2(c), exploitation of the
Symbols in the United States, as contemplated by this Agreement, will not
infringe upon any trademarks, service marks, license rights of intellectual
property interests of any other party.
(c) No party other than Licensee has the rights granted by this
Agreement.
6.2 Representations and Warranties of Licensee. Licensee represents and
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warrants to Licensor that:
(a) Licensee's use of the Symbols will not disparage or reflect
adversely upon Licensor or the Symbols, hold Licensor or the Symbols up to
scorn or ridicule, damage the reputation and goodwill of Licensor, or
otherwise harm Licensor.
(b) Licensee has the full and complete authority to enter into and
perform the obligations of this Agreement, have the financial capacity to
perform as contemplated hereby and do so as principals and not as the
agents for any other person or entity.
(c) Licensee acknowledges that Licensor and the Symbols enjoy an
excellent reputation, that the Symbols constitute valuable intellectual
property of Licensor, and that improper use of the Symbols could cause
Licensor irreparable harm.
(d) Licensee will abide by all laws both in the United States and
other countries where violation of such laws could adversely affect the
image, reputation or financial condition of Licensor and/or its affiliates.
7. Term and Termination.
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7.1 Subject to the provisions of Section 7.2, the License granted hereby
shall be in effect for a period of 10 years following the Effective Date (the
"Term").
7.2 Licensor shall have the right, upon five (5) days advance notice, to
terminate this Agreement prior to expiration of the Term in the event that (a)
Licensee is adjudicated bankrupt or insolvent, or makes a general assignment for
the benefit of creditors, (b) Licensee materially breaches its obligations under
this agreement, and if such breach is capable of being cured, fails to cure the
same within twenty (20) business days of receipt of notice from Licensor which
specifies the nature of the breach, or (c) in the course or performing the
obligations of this Agreement, Licensee engages in any conduct deemed materially
detrimental in the good faith opinion of Licensor to the interests of Licensor
such that continuation of this Agreement would not be in the best business
interests of Licensor.
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7.3 For purposes of section 7.2, the term "material breach" shall mean any
default by Licensee in the performance of (a) any and all sections hereof which
specify and/or limit Licensee's use of the Symbols, (b) Sections 2 (a), 3.4,
3.5, 3.7, 6.2, 11, 12, 15 and 16, (c) any default in payment as provided in
Section 4, and (d) any other obligation which, by reason of such default,
substantially prevents Licensor from realizing the overall benefits contemplated
by this Agreement, or is likely to cause such consequences.
7.4 Disposal of Stock
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(a) After the expiration or termination of this Agreement in
accordance with sections 7.1 or 7.2 (a), Licensee shall have no further
right to manufacture, advertise, distribute, sell, or otherwise deal in any
Brand Merchandise except as hereinafter provided. Upon such expiration or
termination, Licensor shall have the right (but not the obligation) to
purchase all existing inventories of Brand Merchandise, which right shall
be exercised, if at all, upon written notice to Licensee delivered within
30 days following such termination or expiration (the "Option Period").
This option (the "Inventory Purchase Option") may be exercised only once,
for all or any portion of the available inventory of Brand Merchandise. If
Licensor exercises such option, Licensor shall pay to Licensee within 30
days following expiration of the Option Period a sum equal to Licensee's
cost, in cash, against delivery to Licensor of the inventory so purchased.
In the event such Inventory Purchase Option is not exercised, Licensee
shall dispose of finished Brand Merchandise on hand or in process at the
time of such expiration or termination, in an orderly fashion, for a period
not to exceed 180 days from the date of such termination or expiration
days, provided all further payments due with respect to such 180 day period
are made in accordance with paragraph 4 hereof.
(b) If this Agreement is terminated for any reason set forth in
section 7.2 (b) or (c), and the Inventory Purchase Option is not exercised
by Licensor then Licensee shall have no rights of disposal under the
previous paragraph and Licensee shall immediately upon expiration of the
Option Period ship to Licensor, without cost to Licensor, all existing
inventory of Brand Merchandise and all items utilized in the manufacture of
Brand Merchandise and within its control, except for those items which
contain information proprietary to Licensee (e.g. positive films) and all
trade dress and containers embodying the property along with a written
inventory of Brand Merchandise remaining and on hand, which shall be
certified by an officer of Licensee. Licensor's receipt of such inventory,
written inventory and other materials shall not constitute a waiver by
Licensor of its right to recover any amounts due Licensor or a waiver of
its right to exercise any other remedies which are provided by law or this
Agreement.
8. Remedies Licensee acknowledges that its failure (except as otherwise
--------
expressly provided herein) to cease the manufacture, sale or distribution of the
Brand Merchandise upon the termination or expiration of this Agreement will
result in immediate and irreparable damage to Licensor. Licensee acknowledges
and admits that there is no adequate remedy at law for such failure to cease
manufacture, sale or distribution, and Licensee agrees that in the event of such
failure the goods shall be deemed counterfeit and Licensor shall be entitled to
equitable relief including, without limitation, temporary and permanent
injunctions and such other and further relief as any court or agency with
jurisdiction may deem just and proper. Resort to any remedy referred to
hereinabove shall not be construed as a waiver of any other rights and remedies
to which Licensor is entitled under this Agreement or under applicable law.
9. Option to Extend.
----------------
9.1 Licensor hereby grants Licensee an option to extend this Agreement for
two additional terms of ten (10) years, upon the same terms provided for herein
except that as to Section 4, the Minimum
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Annual Royalty required to be made by Licensee to Licensor pursuant to section
4.1 (b) shall be, for Year 11 or 21 (as the case may be) the Year 5 Annual
Minimum, adjusted to reflect any and all changes in the US Consumer Price Index
(CPI) as of the extension date, from the CPI as of the Effective Date of this
Agreement (or any renewal agreement). Thereafter, the Annual Minimums for any
extension period shall be adjusted on a Year-by-Year basis to reflect any and
all changes from the CPI in effect for the base Year of any such extension
period, with respect to section 4.1(b)(1) and (2).
9.2 In order to exercise such option to renew, Licensee shall deliver
notice thereof to Licensor as provided in section 16.11 below, not later than
180 days prior to the end of the Initial term.
10. Indemnification by Licensor In the event of any claim, demand, legal
---------------------------
action or other legal proceeding against Licensee, or any officer, director,
employee or agent of Licensee (collectively "Licensee Parties") which arises
from, or occurs by reason of any actual or alleged breach of the foregoing
warranties by Licensor, or any breach of this Agreement by Licensor, Licensor
shall fully indemnify and hold each Licensee Party harmless from any and all
losses, damages, awards, judgments, settlements, decrees and expenses,
including, without limitation, attorneys fees and costs, arising from or
connected with such claim, demand or legal action/proceeding, provided that in
order to be entitled to such indemnification, Licensee shall provide Licensor
with timely notice of the basis therefor, and thereafter cooperate with Licensor
in the defense of any such claim, demand or legal action/proceeding.
11. Indemnification by Licensee. In the event of any claim, demand, legal
---------------------------
action or other legal proceeding against Licensor, or any officer, director,
employee or agent of Licensor (collectively "Licensor Parties") which arises
from, or occurs by reason of any actual or alleged material breach of this
Agreement by Licensee, Licensee shall fully indemnify and hold each Licensor
Party harmless from any and all losses, damages, awards, judgments, settlements,
decrees and expenses, including, without limitation, attorneys fees and costs),
arising from or connected with such claim, demand or legal action/proceeding
provided that in order to be entitled to such indemnification, Licensor shall
provide Licensee with timely notice of the basis therefor, and thereafter
cooperate with Licensee in the defense of any such claim, demand or legal
action/proceeding.
12. Assignment Neither party may assign, transfer or delegate all or any of the
----------
rights and obligations created by this Agreement without the express written
consent of the other party.
13. Effective Date The effective date of this Agreement is 12:01 a.m. Los
--------------
Angeles Time on the day on which both parties hereto have executed the same.
14. Other Covenants of the Parties.
------------------------------
14.1 In order to protect its interests concerning the Symbols, Licensor
shall have the right to reasonably approve the name of any entity formed by
Licensee to conduct its business under this Agreement. Licensee shall provide
Licensor with sufficient prior notice of its proposed name, and Licensor shall
have a period of fifteen (15) business days to approve. If Licensor fails to
respond within such period, its approval shall be deemed to have been given.
14.2 In the event of breach of this Agreement by Licensee, Licensor shall
be entitled to exercise any and all remedies at law or in equity available to it
pursuant to the laws of the State of California. In particular, Licensee
acknowledges that any breach of this Agreement concerning the permitted use of
the Symbols, or of sections 3.11 or 3.12 would be likely to cause irreparable
harm to Licensor, as a consequence of which Licensor shall be entitled to
injunctive relief in the event of breach of any such provision.
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14.3 Licensee shall be responsible to pay its own taxes and file
appropriate tax returns where required as a result of all activities pursued
under this Agreement and shall indemnify Licensor for any such Licensee taxes
(including interest or penalties) which may be imposed on Licensor as a result
of Licensee's noncompliance with this provision of the Agreement.
15. Protection of Symbols
---------------------
15.1 Licensee recognizes the great value of the goodwill associated with
the Symbols, and acknowledges that the Symbols and all rights therein and
goodwill pertaining thereto belong exclusively to Licensor, and that the Symbols
have a secondary meaning in the minds of the public. Accordingly, Licensee
agrees that it will not, during the term of the Agreement or thereafter, attack
the title or any rights of Licensor in and to the Symbols or attack the validity
of this Agreement.
15.2 In furtherance of the protection of the Symbols, to prevent dilution
of the value of the Symbols, to eliminate the likelihood of confusion and to
prevent deception to the public, Licensee agrees that it will not sell Brand
Merchandise in territories, channels of trade, or fields of use not expressly
authorized by this Agreement.
15.3 Licensee agrees to assist Licensor, at Licensor's expense (except as
otherwise provided herein), to the extent necessary in the procurement of any
protection of Licensor's rights to the Symbols, in the protection and defense of
the Symbols, the filing and prosecution of any trademark or copyright
application or other applications, the recording of this Agreement or any other
agreement, and the publication of any notices or the doing of any other act with
respect to the Symbols, including the prevention of the use thereof by any
unauthorized person, firm or corporation, that in the judgment of Licensor may
be necessary or desirable under any law, regulation or decree of the Licensed
Territory. If Licensor so desires, at its expense, it may commence or prosecute
any claims or suits in its own name or in the name of Licensee, or join Licensee
as a party thereto. Licensee shall notify Licensor in writing of any
infringements, possible infringements or any imitations by others of the Symbols
or the Brand Merchandise which may come to Licensee's attention. Licensor shall
have the sole right to determine whether or not any further action shall be
taken on account of any such infringements or imitations. Licensee shall not
institute any suit or take any action on account of any such infringements or
imitations without first obtaining the written consent of Licensor. Licensee
shall not have any rights against Licensor by reason of Licensor's failure to
prosecute any such alleged infringements or imitations.
15.4 Licensee agrees to obtain all necessary governmental approvals with
respect to Licensee's sale and advertising of Brand Merchandise and Licensee's
rights to manufacture, promote, sell and distribute the Brand Merchandise
throughout the Licensed Territory. Licensee shall promptly furnish copies of
all such approvals to Licensor, if requested.
16. General Provisions.
------------------
16.1 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of California. Any action brought by
either party arising out of this Agreement shall be brought in a court of
competent jurisdiction in the County of Los Angeles, California, and Licensee
hereby consents to the jurisdiction of such court for purposes of adjudicating
any and all disputes arising hereunder.
16.2 Further Assurances. Each party to this Agreement shall execute all
------------------
instruments and documents and take all actions as may be reasonably required to
effectuate this Agreement.
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16.3 Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original and all of which together shall constitute
one document.
16.4 Time of Essence. Time and strict and punctual performance are of the
---------------
essence with respect to each provision of this Agreement.
16.5 Attorney's Fees. In the event any dispute arises between the parties
---------------
hereto to enforce or interpret the provisions of this Agreement, the prevailing
party in such action shall be entitled to recover from the other party all
reasonable costs, expenses, attorney's fees and costs actually incurred relating
to or arising from such action.
16.6 Modification. This Agreement may be modified only by a contract in
------------
writing executed by the party(ies) to this Agreement against whom enforcement of
such modifications is sought.
16.7 Headings. The headings of the sections of this Agreement have been
--------
included only for convenience, and shall not be deemed in any manner to modify
or limit any of the provisions of this Agreement, or be used in any manner in
the interpretation of this Agreement.
16.8 Prior Understanding. This Agreement contains the entire agreement
-------------------
between the parties to this Agreement with respect to the subject matter of this
Agreement, is intended as a final expression of such parties' agreement, is
intended as a complete and exclusive statement of the terms of such agreement,
and supersedes all negotiations, stipulations, understandings, agreements,
representations and warranties, if any, with respect to such subject matter,
which precede the execution of this Agreement.
16.9 Interpretation. Whenever the context so requires in this Agreement,
--------------
all words used in the plural (and vice versa), each gender shall be construed to
include any other genders, and the word "person" shall be construed to include a
natural person, a joint venture, a trust, an estate or any other entity. This
Agreement shall be deemed to have been created jointly by all of the parties and
shall be interpreted the same way as to all parties, without regard to which of
them may have actually drafted the instrument.
16.10 Partial Invalidity. Each provision of this Agreement shall be valid
------------------
and enforceable to the fullest extent permitted by law. If any provision of
this Agreement or the application of such provision to any person or
circumstance shall, to any extent, be invalid or unenforceable, the remainder of
this Agreement, or the application of such provision to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected by such invalidity or unenforceability, unless such provision of such
application of such provision is essential to this Agreement.
16.11 Notices. Notices under this agreement shall be deemed effective
-------
upon receipt, if delivered by messenger, facsimile or overnight courier, and if
by regular US mail, on the 3rd day following deposit in the US mail, postage
prepaid. All notices shall be sent as follows:
If to Easyriders or Paisano: With a copy to:
--------------------------- --------------
Attention: J. Robert Fabregas Mark Dodge, Esq., General Counsel
28210 Dorothy Drive 28210 Dorothy Drive
Agoura Hills, CA 91301 Agoura Hills, CA 91301
Facsimile: (818) 889-4726 Facsimile: (818) 735-6531
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If to Licensee: With a copy to:
--------------- --------------
Southern Steel Streetwear, Inc. Michael Holihan, Esq.
Attention: Melissa Penland Holihan Diaz
306 Division Avenue, Bldg. 12 1101 North Lake Destiny Road, Suite 350
Ormond Beach, FL 32174 Maitland, FL 32751
Facsimile: (904) 673-8266 Facsimile: (407) 667-0020
16.12 Successors-in-Interest and Assigns. Subject to any restriction on
----------------------------------
transferability contained in this Agreement, this Agreement shall be binding
upon and shall inure to the benefit of the successors-in-interest and permitted
assigns of each party to this Agreement. Nothing in this Paragraph shall create
any rights enforceable by any person not a party to this Agreement, except for
the rights of the successors-in-interest and assigns of each party to this
Agreement, unless such rights are expressly granted in this Agreement to other
specifically identified persons.
16.13 Waiver. Any waiver of a default under this Agreement must be in
------
writing and shall not be a waiver of any other default concerning the same or
any other provision of this Agreement. No delay or omission in the exercise of
any right or remedy shall impair such right or remedy or be construed as a
waiver. A consent to or approval of any act shall not be deemed to waive or
render unnecessary consent to or approval of any other or subsequent act.
17. Confidentiality.
---------------
17.1 Licensee will have access to or learn certain information belonging to
Licensor that is proprietary and confidential. The term "Confidential
Information", as used throughout this Agreement, means any secret or proprietary
information relating directly to Licensor's business and that of Licensor's
affiliates, including, but not limited to, products, customer lists, pricing
policies, employment records and policies, operational methods, marketing plans
and strategies, product development techniques or plans, business acquisition
plans, new personnel acquisition plans, methods of manufacture, technical
processes, designs and design projects, inventions and research programs, trade
know-how, trade secrets, specific software, algorithms, computer processing
systems, object and source codes, user manuals, systems documentation, and other
business and financial affairs of Licensor and its affiliated companies and
subsidiaries.
Balance of this page left blank intentionally.
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17.2 Licensee will keep strictly confidential all Confidential Information
and will not, without Licensor's express written authorization, signed by one of
Licensor's authorized officers, use or sell, market or disclose any Confidential
Information to any third person, firm, corporation or association for any
purpose. Licensee further agrees that Licensee will not make any copies of the
Confidential Information except upon Licensor's written authorization, signed by
one of Licensor's authorized officers, and will not remove any copy or sample of
Confidential Information from the premises of Company without such
authorization.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the Effective Date.
Easyriders, Inc. Paisano Publications, Inc.
By: /s/ Mark S. Dodge By: /s/ Joseph Teresi
--------------------------- --------------------------
Name: Mark S. Dodge Name: Joseph Teresi
------------------------- ------------------------
Title: Executive Vice President Title: Chief Executive Officer
------------------------ -----------------------
Date: 3/28/01 Date: 3/28/01
------------------------ -----------------------
Easyriders Licensing, Inc. Southern Steel Streetwear, Inc.
By: /s/ Mark S. Dodge By: /s/ Melissa Penland
--------------------------- --------------------------
Name: Mark S. Dodge Name: Melissa Penland
------------------------- ------------------------
Title: Secretary Title: Vice President
------------------------ -----------------------
Date: 3/28/01 Date: 3/28/01
------------------------ -----------------------
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