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Exhibit 10.25
LICENSE AGREEMENT
HEALTHTEX APPAREL CORP.
LICENSOR
AND
M & L INTERNATIONAL, INC.
LICENSEE
Distribution and Sale in: United States of America, its territories and
possessions and military exchanges
Manufacture in: Bangladesh, China, Egypt, Hong Kong,
India, Indonesia, Pakistan, Philippines, South Korea,
Sri Lanka and Thailand
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INDEX
ARTICLE 1 - Definitions
ARTICLE 2 - Trademark License
ARTICLE 3 - Trademark Ownership and License Recordation
ARTICLE 4 - Infringement by Third Parties
ARTICLE 5 - Royalty Fee, Minimum Net Sales and Advertising Expenditure
ARTICLE 6 - Accounting and Reporting
ARTICLE 7 - Quality Control
ARTICLE 8 - Product Approvals and Related Issues
ARTICLE 9 - Aid and Assistance; Non-Competition by Licensor
ARTICLE 10 - Termination
ARTICLE 11 - Products on Hand at Termination and Payments
ARTICLE 12 - Records after Termination
ARTICLE 13 - Relinquishment of Licensed Matter
ARTICLE 14 - Fair Practices
ARTICLE 15 - No Joint Venture; Indemnification; Maintenance of Insurance
ARTICLE 16 - Binding Nature; Assignment
ARTICLE 17 - Notices
ARTICLE 18 - Compliance and Operation of Law
ARTICLE 19 - Consent to Jurisdiction; Waiver of Jury Trial
ARTICLE 20 - Arbitration
ARTICLE 21 - Licensor's Representative
ARTICLE 22 - Entire Agreement
ARTICLE 23 - Term
ARTICLE 24 - Governing Law
ARTICLE 25 - Confidentiality
ARTICLE 26 - Equitable Relief
ARTICLE 27 - Prohibition Against Use of Illegal Child Labor and Against Prison
or Forced Labor
Schedule I - Description of Licensed Products
Schedule II - Registered Trademarks
Schedule III - Letter to Subcontractor
Schedule IV - List of Manufacturers
Schedule V - Quality Standards
Schedule VI - Approved Distribution
Schedule VII - Financial Reporting Forms
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LICENSE AGREEMENT
THIS LICENSE AGREEMENT dated and effective as of November 1, 1997, is
made in the State of Delaware by and between:
HEALTHTEX APPAREL CORP., a corporation organized under the laws of the
State of Delaware, United States of America, with principal offices at 200
Weldin Building, Concord Plaza, 3411 Silverside Road, Wilmington, Delaware
19810, United States of America (hereinafter referred to as "Licensor");
and
M & L INTERNATIONAL, INC. a corporation, organized under the laws of
the State of Illinois, with principal offices at 1333 North Kingsbury Street,
Chicago, Illinois 60622, United States of America (hereinafter referred to as
"Licensee");
W I T N E S S E T H :
WHEREAS, Licensor, through one or more related companies, is engaged in
the business of making, selling and distributing children's apparel, and
in connection therewith uses or licenses for use in commerce the trademark
HEALTHTEX and other trademarks, all of which are used in the sale of such
articles in the United States of America and elsewhere throughout the world; and
WHEREAS, Licensee is engaged in the business of making, having made,
selling and distributing children's outerwear; and
WHEREAS, Licensee desires to acquire from Licensor, and Licensor is
willing to grant to Licensee, a license to use the trademark HEALTHTEX in the
manufacture, distribution, sale and promotion of children's outerwear,
subject to the terms and conditions of this Agreement;
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NOW, THEREFORE, in consideration of the mutual terms, agreements and
conditions herein contained, and for other good and valuable consideration, it
is agreed as follows:
ARTICLE 1 - DEFINITIONS
In this Agreement, the following terms are defined as:
1.1 "Advertising": any and all brochures, catalogs, point-of-sale
materials, consumer and trade media, sales promotion and support
materials and marketing support funds .
1.2 "Affiliate": any person or entity directly or indirectly controlling,
controlled by or under common control with another person or entity.
1.3 "Licensed Products": children's outerwear, more particularly described
on Schedule I hereto, bearing the Licensed Trademarks. Such items shall
be expressly designed for or selected by Licensee, and approved in
writing by Licensor for manufacture by Licensee under this Agreement,
such approval to have been received by Licensee before commencement of
such manufacture, as specified in the provisions of Article 8 (herein
incorporated by reference).
1.4 "Licensed Territory": (a) for the purpose of manufacture, the locations
specified in Schedule IV hereto (incorporated herein by reference);
(b) for the purpose of distribution and sale, the territory consisting
of the United States of America, its territories and possessions and
military exchanges. Licensee may expand the territory solely for the
purpose of manufacturing Licensed Products only upon Licensor's prior
written consent, which shall not be unreasonably withheld or delayed.
1.5 "Licensed Trademarks": Licensor's trademarks enumerated on Schedule II
attached hereto and all derivatives based thereon that are created by
Licensee.
1.6 "Licensor's Representative": Licensor's Affiliate, Healthtex, Inc.
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1.7 "Termination" of License: extinguishing of this Agreement at any time
before its expiration the end of its initial term.
ARTICLE 2 - TRADEMARK LICENSE
2.l Licensor is the owner of the trademarks enumerated on Schedule II.
Licensor hereby grants to Licensee, subject to the terms and conditions
herein contained, the exclusive and non-assignable right and license to
use the Licensed Trademarks within the Licensed Territory, upon
Licensed Products manufactured, sold and distributed by Licensee in
accordance with this Agreement.
2.2 Licensee agrees and undertakes that it will not sublicense the rights
herein granted and that it will not, without the prior written consent
of Licensor, authorize other persons, firms, corporations or other
entities to use any of the Licensed Trademarks (except as provided
herein), or any trademarks or trade names confusingly similar thereto.
2.3 All Licensed Products manufactured, sold or distributed by Licensee
shall bear one or more of the Licensed Trademarks as prescribed by
Licensor. No Licensed Trademark, including specifically the trademark
HEALTHTEX, shall be used by Licensee or its third party manufacturers
except on and in connection with the Licensed Products. No product
bearing a Licensed Trademark shall bear any trademarks or trade names
other than Licensed Trademarks except with the prior written
authorization of Licensor. Licensee covenants on behalf of itself, its
Affiliates and related parties, and such third party manufacturers with
which it may contract, that during the term of this Agreement and
thereafter it will refrain from using any trademark or trade name
confusingly similar to any of the Licensed Trademarks, or confusingly
similar to any other trademarks or trade names of Licensor, except upon
such terms and conditions as may be approved in advance, in writing, by
Licensor. During the term of this Agreement, Licensee shall promptly
terminate its manufacturing relationship with any third party
manufacturer that uses any trademark or trades names confusingly
similar to any of the Licensed Trademarks or confusingly similar to any
other trademarks or trade names of Licensor.
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2.4 Licensee shall submit, for prior written approval by Licensor,
specimens of all labels and advertising copy that Licensee intends to
use in identifying, selling or advertising Licensed Products bearing
the Licensed Trademarks. Licensor shall provide Licensee with written
notice of approval or disapproval within ten (10) business days from
the date that Licensor receives such a request for approval; if no
notice of approval or disapproval is provided by Licensor to Licensee,
then the request will be deemed to have been disapproved.
2.5 Nothing herein shall entitle Licensee to use the Licensed Trademarks in
combination with other marks not owned by Licensor, which Licensee
expressly agrees not to do, nor to include any of the Licensed
Trademarks in its corporate or trading name irrespective of whether
registered or not. During the term of this Agreement, with respect to
Licensed Products, Licensee must include on its stationery, business
cards, invoices and packing slips and the phrase "Authorized Healthex
Apparel Corp. licensee" or such other words to that effect as have been
previously approved, in writing, by Licensor.
ARTICLE 3 - TRADEMARK OWNERSHIP AND LICENSE RECORDATION
3.1 Licensor at its own cost will, insofar as possible and as reasonably
requested by Licensee, register and/or renew relevant trademarks in the
Licensed Territory and will cooperate in registering or recording
Licensee as a registered user or recorded Licensee of the Licensed
Trademarks in the Licensed Territory if appropriate and necessary in
Licensor's sole judgment. Licensee agrees to execute and deliver to
Licensor such lawful documents as Licensor may request for this
purpose. Licensee shall not register or attempt to register any of the
Licensed Trademarks or marks similar thereto in its own name or in any
other name in or outside the Licensed Territory unless so authorized by
Licensor in writing.
3.2 Licensee acknowledges that Licensor is the owner of all the Licensed
Trademarks, whether registered or unregistered. All trademarks
subsequently adopted and used by Licensee under the provisions of this
Agreement shall be deemed to be Licensed Trademarks and owned by
Licensor (except as otherwise expressly provided in writing by
Licensor). Licensee acknowledges that Licensor is entitled to all of
the rights in and to the Licensed Trademarks, including the sole and
exclusive right to register said
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trademarks in the Licensed Territory and elsewhere throughout the
world, and Licensee shall assist Licensor in so doing at Licensor's
expense.
3.3 Licensee further agrees never to contest, deny or dispute the validity
of the Licensed Trademarks or Licensor's title therein; agrees never,
either directly or indirectly, or in any other way, to encourage or
assist others in doing so; and agrees never to take any action of any
kind inconsistent with Licensor's holding of all such trademark rights.
Nothing in this Agreement shall confer upon Licensee a proprietary
interest of any kind in and to any of the Licensed Trademarks or any
trademarks or trade names confusingly similar thereto. Any and all use
of the Licensed Trademarks by Licensee shall inure to the benefit of
Licensor.
ARTICLE 4 - INFRINGEMENT BY THIRD PARTIES
4.1 Licensee shall, insofar as possible, report immediately in writing to
Licensor any and all infringements of the Licensed Trademarks, or of
Licensor's trade names and/or trade dress and any and all attempts by
any third party to use, copy, register, infringe upon or otherwise
imitate the Licensed Trademarks or Licensor's trade names or trade
dress, or any design features of the Licensed Products.
4.2 Except upon the written request and authorization of Licensor, Licensee
shall not take any action to prevent infringements, imitation or
illegal use of the Licensed Trademarks, trade dress associated with the
Licensed Products or trade name of Licensor. However, Licensee shall
render to Licensor all assistance reasonably requested, fully and
without reservation, in connection with any matter pertaining to
protection or enforcement of the Licensed Trademarks before
administrative and quasi-judicial agencies and the courts, and shall
make available to Licensor, its representatives, agents and attorneys,
all of Licensee's records, files and other information pertaining to
the Licensed Trademarks, including the purchase, manufacture, sale,
distribution and advertising of the Licensed Products sold and
distributed under said trademarks.
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4.3 Licensor, at its cost, shall take such steps and institute such legal
proceedings as shall be reasonably necessary to protect the Licensed
Trademarks and Licensee's license therein as set forth in this
Agreement.
4.4 Licensor shall indemnify and defend Licensee and hold it harmless from
and against any claims, suits and expenses (including reasonable
attorney's fees) arising solely from Licensee's use of the Licensed
Trademarks in accordance with the terms of this Agreement on or in
connection with Licensed Products sold in the Licensed Territory.
Licensor's indemnification and defense obligations are expressly
conditioned upon (a) Licensee's giving Licensor prompt written notice
of such claim or suit against Licensee after assertion thereof and (b)
Licensee's full and prompt cooperation and assistance, to the extent
reasonably requested by Licensor, in connection with the defense of
such claim or suit. Licensor shall have the right, at its own expense,
to undertake and conduct the defense and/or negotiation of any
settlement of any such suit or claim.
ARTICLE 5 - ROYALTY FEE, MINIMUM NET SALES AND ADVERTISING EXPENDITURE
5.1 In consideration of the licenses herein granted and of the other
benefits that accrue to Licensee hereunder, Licensee agrees to use its
best commercial efforts to promote the sale of the Licensed Products in
the Licensed Territory and Licensee further agrees to pay to Licensor,
for use of the Licensed Trademarks, a royalty fee (the "Royalty Fee")
or a minimum royalty (the "Minimum Royalty"), whichever is greater, on
the Net Sales of Licensed Products sold by Licensee for each period
stated below (a "Contract Year") as follows:
FIRST CONTRACT YEAR ROYALTY FEE MINIMUM ROYALTY
------------------- ----------- ---------------
11/1/97 - 5/31/99 5% $ 160,000
SECOND CONTRACT YEAR ROYALTY FEE MINIMUM ROYALTY
-------------------- ----------- ---------------
6/1/99 - 5/31/00 5% $ 180,000
THIRD CONTRACT YEAR ROYALTY FEE MINIMUM ROYALTY
------------------- ----------- ---------------
6/1/00 - 5/31/01 5% $ 200,000
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Said Royalty Fee shall be calculated on actual Net Sales of
Licensed Products. "Net Sales" means (a) the total number of units of
Licensed Products sold or otherwise transferred by Licensee to
Affiliates or non-Affiliates, multiplied by Licensee's published unit
list price (excluding shipping/freight charges separately listed as
payable by the customer) charged by Licensee to its customers who are
not its Affiliates, LESS (b) trade discounts and allowances given by
Licensee and returns. If Licensee's actual price to its non-Affiliate
customers is higher than as calculated above, the actual price shall
replace the list price in the calculation. Net Sales shall be computed
without deducting uncollectible accounts, anticipations or financial
discounts and shall include all transactions of Licensed Products
distributed by or for Licensee.
5.2 Licensee and Licensor have established the following minimum Net Sales
("Minimum Net Sales") for the sales of Licensed Products in the
Licensed Territory:
CONTRACT YEAR MINIMUM NET SALES
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November 1, 1997 - May 31, 1999 $ 4,000,000
June 1, 1999 - May 31, 2000 $ 4,500,000
June 1, 2000 - May 31, 2001 $ 5,000,000
Licensor may terminate this Agreement in accordance with Article
10.1(i) if Licensee fails to achieve Net Sales of at least the Minimum
Net Sales for each Contract Year specified above
5.3 With respect to the business done by Licensee under this Agreement,
Licensee shall pay said Royalty Fee and Minimum Royalties to Licensor
quarter-annually for the quarters ending on the last days of March,
June, September and December of each year, payment for each said
quarter to be made to Licensor within twenty-five (25) days after the
end of the quarter for which such payment is made. On the date payment
is due for the last quarter of each Contract Year, Licensee shall also
pay to Licensor the deficiency, if any, from the minimum royalty
payable for the applicable Contract Year.
5.4 Payment of the Royalty Fee shall be made either by check made payable
to Healthtex Apparel Corp., mailed to the address for Licensor set
forth in Article 17 or to such other
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address as Licensor may subsequently designate in writing or by wire
transfer to Licensor in United States Dollars at the following address:
PNC Bank
Wilmington, Delaware 19899
ABA No.: 0311-000-89
Credit to: Healthtex Apparel Corp.
Account No.: 56-8427-6940
5.5 Time is of the essence with regard to the Royalty Fees and Minimum
Royalties due under this Agreement and Licensee shall make each of said
payments on time. Each and every late payment shall, for each day the
payment is late, bear interest at two percent (2%) over the Morgan
Guaranty Trust Company of New York prime rate in effect on the
twenty-sixth (26th) day following the quarter for which such payment is
due. Licensor shall have the right to terminate this Agreement upon
notice to Licensee if Licensee fails to cure a payment default within
five (5) business days after receiving written notice of such default
from Licensor.
5.6 Licensee agrees to expend each Contract Year in advertising Licensed
Products a sum not less than two percent (2%) of its Net Sales thereof,
one percent (1%) of which shall be paid directly to Licensor's
Representative, which sum shall be expended for advertising, consumer
and trade media, production cost, consumer and promotional materials,
point-of-sale materials, sales aids and Licensee's share of marketing
support funds as approved by Licensor. In trade advertising and under
any marketing support fund, Licensee shall closely follow the
advertising image and copy concepts indicated by Licensor in
advertising its products for sale under the Licensed Trademarks.
Licensee is obliged to provide Licensor with proof of performance
pursuant to this paragraph for each Contract Year by the twenty-fifth
(25th) day following the end of the applicable Contract Year. Licensee
also agrees to pay to Licensor's Representative Licensee's
proportionate share of expense, as agreed between Licensor's
Representative and Licensee, of showroom display and trade show space
owned by Licensor's Representative and utilized by Licensee with
Licensor's Representative's consent.
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5.7 If Licensor or any of its Affiliates (including VF Factory Outlet,
Inc.) wishes to purchase available Licensed Products, Licensee agrees
to sell such Products to Licensor or any of its Affiliates at a price
equal to the then lowest wholesale price at which Licensee sells such
Licensed Products. Licensee shall pay royalties and promotional fees
with respect to such sales.
5.8 Termination or expiration of this Agreement for any reason whatsoever
shall not relieve Licensee of its accrued payment obligations or such
obligations incurred by sale of Licensed Products after the effective
date of such termination or expiration.
ARTICLE 6 - ACCOUNTING AND REPORTING
6.1 Licensee shall submit to Licensor's Representative an Annual Marketing
Plan in the format approved by Licensor's Representative within sixty
(60) days of the execution of this Agreement and at least sixty (60)
days before the start of each Contract Year thereafter.
6.2 Licensee shall keep a true and accurate account of all Licensed
Products manufactured, ordered, received, sold and distributed under
this Agreement, and render to Licensor a just and true account in
writing, sworn to and verified by an officer of Licensee, specifying:
(a) the number of Licensed Products manufactured by or for Licensee in
the preceding three (3) month period, (b) the number of such Licensed
Products distributed or sold in said three (3) month period and (c) the
list prices and sales prices of all such Licensed Products, within
twenty-five (25) days of the last day of March, June, September and
December (the "Quarterly Sales Report").
6.3 The Quarterly Sales Report shall be submitted by Licensee to Licensor
in the format prescribed by Schedule VII. Said Quarterly Sales Report
shall be sent to:
Chief Accountant
Healthtex Apparel Corp.
200 Weldin Building
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19810
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with a copy to:
Anne Garvey, Licensing Director
Healthtex, Inc.
2303 West Meadowview Road
Suite 200, Kinston Building
Greensboro, North Carolina 27407
6.4 Licensee shall submit to Licensor monthly sales reports, in the format
and containing the information prescribed in Schedule VII, within
fifteen (15) days after the first (1st) day of each month of each
calendar year (the "Monthly Sales Report"). Licensee shall also submit
such other reports, as specified by Licensor and within a reasonable
time after Licensor so specifies, as will enable Licensor to evaluate
the success of Licensee's marketing , sales and activities relating to
this Agreement. Such reports shall be sent to the addresses set forth
in Article 6.3.
6.5 Licensor, its agents, attorneys and accountants shall have the right to
audit and investigate once each calendar year during normal business
hours, at Licensor's expense, the books, accounts, audits, and other
things and matters showing or reflecting all business conducted by
Licensee pertaining to the manufacture, sale or distribution of the
Licensed Products under this Agreement. In the event that an audit of
Licensee's books and records reveals that Licensee's Royalty Fees were
underpaid by an amount equal to five percent (5%) or more in any year,
Licensee shall bear Licensor's reasonable direct costs of said audit.
Licensee shall provide Licensor annually with audited financial
statements of Licensee as soon as possible, and in any event within
ninety (90) days, after the close of Licensee's fiscal year. In the
absence of actual fraud by Licensee, all reports shall become final two
(2) years after they are submitted to Licensor.
ARTICLE 7 - QUALITY CONTROL
Licensee further covenants and agrees as follows:
7.1 Licensee may have Licensed Products manufactured for it by third party
manufacturers for sale only within the Licensed Territory. For purposes
of this Agreement, "third party manufacturers" shall mean such
manufacturers as are listed on Schedule IV. No changes
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may be made to Schedule IV without the prior written approval of
Licensor. The third party manufacturers shall be subject to the quality
control requirements stipulated in this Article 7. For purposes only of
understanding reference to "manufacture," "manufacturing" and
"manufactured" as these words may be used hereafter in this Agreement,
Licensed Products made for Licensee by third party manufacturers in
accordance herewith shall be deemed manufactured by Licensee. Not less
than ten (10) days prior to engaging any third party manufacturer,
Licensee shall advise Licensor of the specific Licensed Products to be
so manufactured. Licensee shall provide Licensor with the name and
address of such manufacturer, and shall cause such manufacturer to
execute ANNUALLY, in duplicate, a letter agreement in the form set
forth in Schedule III, shall forthwith provide a duplicate original
thereof to Licensor by registered or certified mail, and shall
guarantee such manufacturer's compliance with the quality standards of
Licensor and the terms of such letter agreement. Licensee shall
strictly prohibit any such third party manufacturer from
sub-contracting the manufacture of Licensed Products. Licensee shall
remain primarily and completely responsible to Licensor for the acts of
such third party manufacturers under all of the provisions of this
Agreement and the acts of such third party manufacturers shall be
deemed to be the acts of Licensee. To the extent requested by Licensor,
Licensee shall assist representatives of Licensor in visiting and
inspecting such third party manufacturers from time to time. Licensee
further covenants to obtain in writing from any such manufacturers,
undertakings in form satisfactory to Licensor, regarding the
disposition of unused branded materials and defective finished products
to Licensee. Licensee shall, upon request of Licensor, cease using any
third party manufacturer whose activities would be in violation of any
of the terms of this Agreement or the provisions of Schedule III,
whether or not such third party manufacturer has actually executed a
letter in the form of Schedule III. Upon the request of Licensor,
Licensee shall take reasonable action in conjunction with Licensor
against any such manufacture that violates the provisions of this
Agreement or of Schedule III.
7.2 All Licensed Products manufactured by or for Licensee and sold or
distributed by Licensee under the Licensed Trademarks shall conform to
the standards set forth in Schedule V and shall as all times be at
least equal in quality to the quality of children's apparel
manufactured, sold and distributed by Licensor's Representative in the
United States of America under the trademarks licensed herein.
Licensor, its agents, attorneys
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and representatives are hereby authorized, at any reasonable time
during normal working hours, to inspect the physical manufacturing and
storage facilities used by Licensee or under its direction to ascertain
whether such products conform to Licensee's standards of quality.
Repeated failure on the part of Licensee to meet Licensor's quality
standards shall be grounds for Licensor to terminate this Agreement by
giving Licensee written notice of termination under the provision of
Article 10.1(b).
7.3 Licensee shall at all times keep Licensor currently informed as to the
price and discount structure employed by Licensee in the sale of
Licensed Products under this Agreement. Licensee's prices of Licensed
Products shall be made official by the publication of a price list (or
lists), and each such price list shall be submitted to Licensor in
advance of publication.
7.4 Licensee agrees to sell its production of Licensed Products under the
Licensed Trademarks directly to approved retailers and approved
wholesalers for resale within the Licensed Territory only. Licensee
shall send written notice to all approved wholesalers, with a copy of
such notice to Licensor, advising them of the Licensed Territory.
Retail and wholesale outlets approved as of the date of this Agreement
are listed on Schedule VI. Schedule VI may be amended from time to time
by Licensor upon fifteen (15) business days' written notice to
Licensee.
7.5 Licensee shall not, during the term of this Agreement or thereafter,
manufacture, have manufactured, sell or distribute the Licensed
Products outside the Licensed Territory, nor shall Licensee sell
Licensed Products to any person who it knows, should know, has reason
to believe or should have reason to believe intends to export Licensed
Products outside the Licensed Territory.
7.6 Licensee agrees to mark each Licensed Product manufactured by it with
the country of origin permanently affixed at the time of manufacture to
each Licensed Product. Country of origin shall be affixed to all
Licensed Products regardless of the country in which the Licensed
Product will be sold. Licensee warrants that the genuine and true
origin of all merchandise subject to this Agreement will be the origin
as stated on invoice, visa, country of origin declaration or other
document made in conjunction with the importation
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of the merchandise into the United States of America, and further
warrants that no shipment has been or will be illegally transshipped
from any other country.
7.7 Solely for the benefit of Licensor, Licensee shall guarantee to its
ultimate consumer the quality, materials and workmanship of the
Licensed Products sold under the provisions of this Agreement. If the
ultimate consumer is dissatisfied with any such product and Licensee
fails to make an adjustment satisfactory to such consumer, Licensor may
at its option either replace the product at Licensee's expense and
without cost to the purchaser or refund the purchase price and charge
Licensee for such refund.
7.8 Licensee agrees not to sell more than ten percent (10%) of its annual
sales volume as branded seconds or irregulars bearing the Licensed
Trademark. Licensee has the option to re-label such products and remove
all Licensed Trademarks prior to sale.
ARTICLE 8 - PRODUCT APPROVALS AND RELATED ISSUES
Licensee and Licensor agree to the following with respect to Licensor's
rights of approval of the product to be developed, manufactured and marketed by
Licensee:
8.1 On or before November 1st of each year, Licensee shall provide to
Licensor its annual product planning calendar for the forthcoming year.
This annual product planning calendar will indicate the dates by which
Licensor is required to approve or disapprove any item which is to be
included in the relevant product line. In no event will such date be
less than seven (7) business days from the date on which Licensor is
provided with product samples. In the event that Licensee submits
additional product samples at a time which is outside the submitted
product planning calendar, then Licensor will have seven (7) business
days from the date on which Licensor is provided with product samples
to approve such product. Approval or disapproval shall be at Licensor's
discretion and any product on or in connection with which the Licensed
Trademarks are to be used that is not approved by Licensor in writing
shall be deemed unlicensed and shall not be manufactured or sold. If
the product to be produced by Licensee is a simple extension of
previously approved products, (i.e., the pattern, fabric, threads,
buttons, embroidery, colors and material components have all been
previously approved by Licensor for use in
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Licensed Products), then no additional approvals will be required. For
purposes of this Agreement, "product planning" shall include the review
of current in-line products. After approval has been given, Licensee
shall provide to Licensor, at no cost to Licensor, one (1) production
sample from the first production run. Licensee shall also from time to
time apply to Licensor for approval of concepts and designs for
Licensed Product to be manufactured hereunder. Such approval shall not
be unreasonably withheld.
8.2 If any Licensed Product to be included in the product line is to
include "innovative" elements or components, Licensor shall have the
right to require the testing of the Licensed Product and/or the
innovative element or component. For purposes of this Agreement,
"innovative" elements or components is defined as those elements or
components that have not previously been used in the manufacture of
items comparable to the Licensed Products.
8.3 Licensor shall have the right to approve the items set forth below,
with respect to the Licensed Products to be developed, manufactured and
marketed by Licensee. Licensor shall provide written notice of approval
or disapproval to Licensee within ten (10) business days from the date
that Licensor receives such a request for approval; if no notice of
approval or disapproval is provided by Licensor to Licensee, such
request will be deemed to have been disapproved:
(a) Retail outlets, in addition to those listed on Schedule VI (as
may be amended from time to time), that will purchase Licensed
Products directly from Licensee or its manufacturing sources;
(b) Wholesale distributors, in addition to those listed on
Schedule VI (as may be amended from time to time), that will
purchase licensed products directly from Licensee or its
manufacturing sources;
(c) Point of purchase displays;
(d) Advertising, as more fully described in Article 5;
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(e) Any and all methods of distribution to be used by Licensee in
order to dispose of manufacturers' "seconds" and "irregulars"
and any product overruns that are to be disposed of outside
previously approved retail or wholesale distribution outlets.
Licensee may dispose of seconds, irregulars and overruns
outside the Licensed Territory provided all trademarked
labels, hang tags and HEALTHTEX adornments are completely
removed. The neck labels of all "irregulars" must be stamped
"irregular"; and
(f) The labels, hang tags and other packaging to be included with
or on the Licensed Products.
8.4 Licensee warrants that each Licensed Product and component thereof
shall comply with all applicable laws, regulations and voluntary
industry standards and shall conform to the samples thereof approved by
Licensor.
ARTICLE 9 - AID AND ASSISTANCE; NON-COMPETITION BY LICENSOR
9.1 So long as this Agreement remains in full force and effect, Licensor
agrees to provide to Licensee available material and information on
merchandising, planning of Licensor's products, including colors,
merchandising, sales promotion and advertising, as appropriate to
Licensed Products.
9.2 So long as Licensee is not in default under this Agreement, Licensor
agrees not to sell or distribute Licensed Products bearing its
trademark HEALTHTEX or any other trademark licensed under this
Agreement within the Licensed Territory.
ARTICLE 10 - TERMINATION
10.1 In addition to the provisions contained in Article 5.5 for the
termination of this Agreement, this Agreement may be terminated as
follows:
(a) If, at any time during the term of this Agreement, either
party thereto is unable to pay its debts when due, becomes
insolvent, or there is filed by or against it in any
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court a petition for bankruptcy , insolvency, reorganization,
or the appointment of a receiver or trustee for all or a
portion of its property; or if either party makes an
assignment for the benefit of creditors, this Agreement may be
canceled and terminated at the option of the non-acting party
upon written notice to the acting party; such cancellation to
be effective immediately if the act giving rise to
cancellation be voluntary; otherwise such cancellation to be
effective upon adjudication of bankruptcy or insolvency or
upon a court of competent jurisdiction taking and retaining
jurisdiction over the acting party and/or its assets for a
period of sixty (60) days or more;
(b) Except as to a monetary default, which shall be governed by
Article 5.5, by either party by giving thirty (30) days'
written notice to the other party for any breach or default by
the other party in its obligations under this Agreement, such
termination to be effective unless the other party remedies
the breach or default specified in the notice before the end
of such thirty (30) days;
(c) By Licensor by giving thirty (30) days' written notice if
there is a change in control of Licensee by way of merger,
sale of assets or stock, consolidation or otherwise unless
such change has been approved in writing by Licensor;
(d) By Licensor upon written notice to Licensee if production
samples submitted by Licensee fail to meet Licensor's quality
standards for three (3) consecutive months;
(e) By Licensor upon written notice to Licensee if Licensee
discontinues manufacture, distribution, product development or
sale of the Licensed Products for any three (3) consecutive
months during the term of this Agreement;
(f) By Licensor upon written notice to Licensee if Licensee fails
to submit reports as and when due under paragraph 6.4 on three
(3) or more consecutive occasions;
(g) By Licensor upon written notice to Licensee if Licensee
exhibits a pattern of failing to make "timely delivery" of
sufficient quantities of the Licensed Products
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to its retail accounts. For purposes of this provision,
"timely delivery" means 75% of deliveries (by volume) are made
within customer delivery windows, excluding cancellations
prior to the expiration of the delivery window;
(h) By Licensor upon written notice to Licensee should Licensee
become an Affiliate of any competitor of Licensor or
Licensor's Representative without Licensor's prior written
approval;
(i) By Licensor, upon written notice to Licensee, if Licensee does
not achieve the Minimum Net Sales for any Contract Year. If,
however, Licensee shall develop and submit to Licensor,
simultaneously with the submission of the Annual Marketing
Plan for a Contract Year, (a) an explanation of why the
Minimum Net Sales were not attained for the prior Contract
Year and (b) a plan of action as to how the Minimum Net Sales
for the current Contract Year will be achieved, which
explanation and plan are accepted by Licensor in its sole
discretion, the default shall be waived; or
(j) By Licensor should there occur any change of corporate control
or ownership of a majority interest in Licensor or Licensor's
Representative, by way of merger, sale or consolidation.
In addition to Licensor's other rights and remedies hereunder,
at law or inequity, upon termination of this Agreement by Licensor pursuant to
Article 5.5 hereof or clauses (a) and (b) and (d) through (i) above, Licensee
shall pay to Licensor, within thirty (30) days of such termination of this
Agreement, the total Minimum Royalties that would have been payable over the
remaining term of this Agreement had such termination not occurred.
10.2 At any time within six (6) months before the date of termination of
this Agreement, Licensor may appoint a new Licensee or distributor for
the Licensed Products in the Licensed Territory. Licensor directly or
its newly appointed Licensee or distributor may sell Licensed Products
in the Licensed Territory at any time within six (6) months of the date
of expiration for shipment subsequent to the date of expiration.
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10.3 Failure of either party to exercise any right or option to terminate
this Agreement shall not constitute a waiver of such right or any other
right.
ARTICLE 11 - PRODUCTS ON HAND AT TERMINATION AND PAYMENTS
11.1 Termination or cancellation or expiration of this Agreement for any
reason shall not relieve Licensee of its obligation to pay to Licensor
the Royalty Fee specified in Article 5.1 with respect to Licensed
Products manufactured and/or sold by Licensee prior to such termination
or cancellation. Licensee further agrees to pay Licensor, at the same
royalty rate in effect at the date of termination, for all Licensed
Products sold by Licensee after termination of this Agreement that
Licensee has on hand or are in process of manufacture at the effective
date of termination of this Agreement. For Licensed Products sold after
the termination or cancellation of this Agreement, Royalty Fees shall
be payable not later than the twenty-fifth (25th) day after the end of
the month in which the Licensed Products were sold.
11.2 Within twenty (20) days after termination of this Agreement, Licensee
shall provide Licensor with a complete inventory of all remaining
Licensed Products and all Licensed Products on order from third party
manufacturers, as well as the anticipated delivery date(s) thereof.
Licensor shall have the right to purchase all or any portion of
Licensee's remaining inventory of Licensed Products at a price equal to
seventy percent (70%) of Licensee's list price, in which case no
Royalties thereon shall be payable. Such right shall be exercisable by
giving written notice to Licensee within ten (10) business days after
Licensor receives Licensee's inventory listing. Such purchase shall be
completed and the purchase price for the inventory Licensor elects to
purchase shall be paid within ten (10) business days after Licensor
exercises its purchase option.
11.3 To the extent that Licensor does not exercise its right to purchase
Licensee's remaining inventory, Licensee shall have six (6) months from
the date of termination of this Agreement in which to sell unsold
Licensed Products through previously approved retail and wholesale
distribution outlets only. As to any Licensed Products on order on the
date of termination, Licensee shall have six (6) months from the last
date on which such Licensed Products are received in which to sell such
goods through previously-approved
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retail and wholesale distribution outlets only. However, such six (6)
month sell-off periods shall be available to Licensee if, and only if,
(a) Licensee has paid all Royalty Fees and Minimum Royalties and all
plans and reports in accordance with Articles 5 and 6, and (b) an audit
during the current Contract Year in accordance with the terms of
Article 6.5 has been completed by or on behalf of Licensor to its
satisfaction.
ARTICLE 12 - RECORDS AFTER TERMINATION
Upon termination or expiration of this Agreement, Licensee agrees to
permit Licensor, its agents, attorneys and accountants to inspect, upon
reasonable notice, the records and books of account of Licensee referred to in
Article 6.5, and to investigate generally all business transactions carried on
by Licensee under and pursuant to this Agreement from time to time for a period
of twelve (12) months following the last sale of Licensed Products, and Licensee
agrees not to destroy any of such records prior to the expiration of said twelve
(12) months.
ARTICLE 13 - RELINQUISHMENT OF LICENSED MATTER
13.1 At the expiration or termination of this Agreement for any reason,
Licensee shall not have acquired and will not claim any right to use
the trademark HEALTHTEX or any other trademark licensed hereunder, or
any other trademark of Licensor, or any trade name containing the term
HEALTHTEX or any part thereof, and Licensee agrees that it will not
thereafter use or adopt any such trademark or trade name or any related
trade dress, or any trademark, trade name, or trade dress confusingly
similar thereto. Licensee further agrees that, after termination or
expiration of this Agreement, except as provided in Article 11, it will
refrain from using any trade dress or distinctive features of the
Licensed Products' labeling or design theretofore employed by Licensee
in carrying out the provisions of this Agreement.
13.2 Further, upon expiration or termination of this Agreement for any
reason whatsoever, Licensee shall return to Licensor any and all
materials furnished to Licensee by Licensor (including, but not limited
to, promotional and product development materials), as such material
remains the property of Licensor.
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ARTICLE 14 - FAIR PRACTICES
Licensor and Licensee each covenants and agrees that during the term of
this Agreement or thereafter it will not encourage, induce or assist any third
party in doing any act or thing which, were it done by Licensor or Licensee, as
applicable, would be contrary to the provisions of this Agreement.
ARTICLE 15 - NO JOINT VENTURE; INDEMNIFICATION; MAINTENANCE OF INSURANCE
15.1 This Agreement shall not in any way be deemed or construed to establish
any relationship between the parties by way of agency, distributorship,
partnership or joint venture. Neither party will nor will have the
authority, directly or indirectly, to contract or purport to contract
any bills or other obligations of any kind in the name of, or
chargeable against the other party, its agents or employees, or in any
way, directly or indirectly, involve the other party in any expense or
liability.
15.2 Except for claims for which Licensor is obligated to indemnify Licensee
under Article 4.4, Licensee shall indemnify, defend, and hold harmless
Licensor, its officers, directors, affiliates, employees and agents
from any and all claims, liabilities and expenses which may be imposed
or sought to be imposed upon it or them by virtue of any
representation, act or agency, made by or on the part of Licensee or
any of Licensee's agents or employees including, without limitation,
any of the foregoing arising out of any defect (whether obvious or
hidden and whether or nor present in any sample approved by Licensor)
in a Licensed Product, or any packaging or promotional materials or
arising from personal injury or from any failure on the part of
Licensee or its agents or affiliates to comply with applicable laws,
regulations and standards. Any and all such claims made or suits
brought by anyone in connection with the products manufactured by
Licensee under this Agreement shall be the sole responsibility of
Licensee, and Licensor shall be held harmless by Licensee in all
respects from any and all loss, damage, expense, claim or liability of
any kind by reason thereof, including reasonable attorney's fees. In
the event that a judgment, levy, attachment or other seizure is entered
against Licensor arising from any claim as to which indemnification is
provided hereunder, Licensee shall promptly post the necessary bond to
prevent execution against any property of Licensor.
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The provisions of this Article 15.2 shall survive termination or
expiration of this Agreement. Licensor will endeavor to give Licensee
prompt written notice of any claim or suit which may give rise to a
claim for indemnification hereunder.
15.3 Licensee shall procure and maintain in full force and effect, at its
sole cost and expense, at all times during which Licensed Products are
being sold and for three (3) years thereafter, a product liability
insurance policy (on an occurrence rather than a claims-made basis)
with respect to the Licensed Products with a limit of liability of not
less than $5,000,000. Such insurance policy shall include Licensor as
an additional insured thereunder and shall provide for at least thirty
(30) days' prior written notice to Licensor of the cancellation or
substantial modification thereof. Such insurance may be obtained by
Licensee in conjunction with a policy of products liability insurance
which covers products other than the Licensed Products. Licensee will
deliver a certificate of such insurance to Licensor promptly upon
issuance of said insurance policy and shall, from time to time upon
reasonable request by Licensor, promptly furnish to Licensor evidence
of the maintenance of said insurance policy. Nothing contained in this
Article 15.3 shall be deemed to limit in any way the indemnification
provisions of Article 15.2.
ARTICLE 16 - BINDING NATURE; ASSIGNMENT
This Agreement is binding upon and for the benefit of Licensee and
Licensor, their respective legal successors and permitted assigns. The rights
and license given to Licensee by this Agreement are strictly personal. Neither
this Agreement nor any interest in it may be transferred, pledged, mortgaged or
hypothecated by Licensee (including by assignment, sublicense, operation of law
or otherwise) without the prior written consent of Licensor. Any attempted
assignment, sublicense, transfer, encumbrance or other disposal without such
consent shall be void and shall constitute a material default of this Agreement.
Nothing herein shall be deemed to prevent or restrict Licensor's ability to
sell, transfer or assign the Licensed Trademarks or this Agreement to any party,
subject only to Licensee's rights to continue use thereof as provided herein,
subject to the terms and conditions of this Agreement in all respects.
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ARTICLE 17 - NOTICES
All notices given or required to be given hereunder shall be deemed to
be given and received (a) as of the date sent if sent by telecopier, promptly
confirmed by United States registered mail, postage paid, return receipt
requested, or (b) three (3) business days after being sent by United States
registered mail, postage paid, return receipt requested and addressed as
follows:
LICENSOR: Healthtex Apparel Corp.
200 Weldin Building
Concord Plaza
3411 Silverside Road
Wilmington, Delaware 19810
Telephone: 302/477-3930
Fax: 302/477-3932
with a copy to: Anne Garvey, Licensing Director
Healthtex, Inc.
2303 West Meadowview Road
Suite 200, Kinston Building
Greensboro, North Carolina 27407
LICENSEE: M & L International, Inc.
1333 North Kingsbury Street
Chicago, Illinois 60622
Telephone: 312/944-3800
Fax: 312/944-3895
unless another address for either party is substituted by prior written notice.
ARTICLE 18 - COMPLIANCE WITH AND OPERATION OF LAW
18.1 Licensee shall comply in all material respects with all applicable
laws, rules and regulations. Licensee shall use all reasonable efforts
to determine that each manufacturer of Licensed Products complies in
all material respects with all applicable laws, rules and regulations,
including applicable wage, hour, child labor and other employment laws
and shall deal only with manufacturers who so comply and shall, from
time to time as requested by Licensor, certify that to the best of
Licensee's knowledge, after reasonable inquiry, such is the case.
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18.2 Nothing in this Agreement shall require, encourage or oblige a party to
perform any act or make any payment which is illegal or in
contravention of any applicable statute, law or regulation.
18.3 If any provision of this Agreement is in violation of the present or
future law of any relevant jurisdiction in such a way that it is void
or voidable, the validity of the remaining provisions shall not be
affected thereby unless such invalidity is of an essential and material
part of this Agreement, in which event either party shall have the
right to terminate this Agreement.
ARTICLE 19 - CONSENT TO JURISDICTION: WAIVER OF JURY TRIAL
19.1 Licensee hereby irrevocably submits to the jurisdiction of any Delaware
state court sitting in Wilmington, Delaware or the United States
District Court for the District of Delaware over any action or
proceeding arising out of or relating to this Agreement. Service of
process in any such action or proceeding arising out of or relating to
this Agreement may be made to Licensee by mailing or delivering a copy
of such process to Licensee at Licensee's address as specified in
Article 17 hereof. Nothing in this Article 19 shall affect the right of
Licensor to serve legal process in any other manner permitted by law or
affect the right of Licensor to bring any action or proceeding against
Licensee or its property in the courts of any other jurisdictions.
19.2 Licensee hereby irrevocably agrees that any action or proceeding
arising out of or relating to this Agreement may be brought against
Licensor solely in Delaware state court sitting in Wilmington, Delaware
or the United States District Court for the District of Delaware.
19.3 LICENSEE AND LICENSOR HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, SUIT, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR ANY OTHER AGREEMENT, INSTRUMENT OR OTHER DOCUMENT
EXECUTED IN CONNECTION HEREWITH.
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ARTICLE 20 - ARBITRATION
At the election of Licensor, any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, except any claim or
controversy relating to the performance of a third party manufacturer, may be
finally settled by arbitration before three (3) arbitrators in accordance with
the Commercial Arbitration Rules of the American Arbitration Association
("AAA"). Each party to this Agreement shall appoint one (1) arbitrator, and a
third shall be appointed by agreement of the named arbitrators. If any party
fails to appoint an arbitrator within thirty (30) days after demand for
arbitration is filed with the AAA, or if the named arbitrators are unable to
agree on the appointment of a third arbitrator within sixty (60) days after the
first two arbitrators have been appointed, the AAA shall select such unnamed or
unappointed arbitrators in accordance with its standard procedures. Arbitration
shall be conducted in the English language at Wilmington, Delaware. The award of
the arbitrators shall be final and enforceable, and judgment upon any award
rendered thereby may be entered in any Court having jurisdiction, or application
may be made to such Court for a judicial acceptance of the award and an order of
enforcement, as the case may be. Anything herein to the contrary
notwithstanding, the arbitration provided for herein shall in no way limit,
affect, hinder or become a precondition to or a qualification upon the rights of
either party hereto to obtain immediate equitable relief to which it may be
entitled.
ARTICLE 21 - LICENSOR'S REPRESENTATIVE
Licensor has appointed Licensor's Representative to perform Licensor's
rights and obligations under Articles 2.4, 7, 8, 9, and 21 of this Agreement,
and Licensee shall cooperate with Licensor's Representative under this Agreement
with respect to such Articles and otherwise as Licensor may direct from time to
time.
ARTICLE 22 - ENTIRE AGREEMENT
This Agreement constitutes the entire Agreement between the parties
hereto, relating to the subject matter hereof, and supersedes any prior
agreement or understanding. There are no terms, obligations, covenants,
representations, statements or conditions other than those
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contained herein. No variation or modification of this Agreement nor waiver of
any of the terms and provisions hereof shall be deemed valid unless in a writing
signed by both parties hereto.
ARTICLE 23 - TERM
23.1 This Agreement shall be effective as of November 1, 1997, and shall
expire on May 31, 2001, unless sooner terminated as herein provided.
23.2 If Licensee has complied in all material respects with the terms of
this Agreement, and if its Net Sales of Licensed Products are in excess
of $5,000,000 for the third Contract Year of this Agreement, Licensee
may request that Licensor renew this Agreement for a single additional
period of three (3) years commencing June 1, 2001, and terminating May
31, 2004 (the "Renewal Term"), with a royalty rate not to exceed eight
percent (8%) a year, upon terms and conditions to be set by Licensor.
Such request must be made in writing on or before January 1, 2001.
ARTICLE 24 - GOVERNING LAW
This Agreement shall be governed and construed in accordance with the
internal laws of the State of Delaware, United States of America, without regard
to its provisions governing conflicts of law.
ARTICLE 25 - CONFIDENTIALITY
Each party hereto agrees that the terms of this Agreement will be kept
confidential by it and its representatives (which term shall include its
directors, members, officers, employees, agents, banks, advisors, and in the
case of Licensee, factors). Each party shall be responsible for any breach of
this agreement of confidentiality by it or its representatives, and the other
party shall be entitled to directly enforce such agreement. The foregoing to the
contrary notwithstanding, disclosure of this Agreement may be made in a public
announcement or filing with the Securities and Exchange Commission or a national
securities exchange if and to the extent, in the written opinion of either
party's counsel, such disclosure is required.
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ARTICLE 26 - EQUITABLE RELIEF
Licensee acknowledges that Licensor will have no adequate remedy at law
if Licensee continues to manufacture, sell, advertise, promote or distribute the
Licensed Products upon the expiration or termination of this Agreement. Licensee
acknowledges and agree that, in addition to any and all other remedies available
to Licensor, Licensor shall have the right to have any such activity by Licensee
restrained by equitable relief, including, but not limited to, a temporary
restraining order, a preliminary injunction, a permanent injunction, or such
other alternative relief as may be appropriate, without the necessity of posting
any bond.
ARTICLE 27 - PROHIBITION AGAINST USE OF ILLEGAL CHILD LABOR AND
AGAINST USE OF PRISON OR FORCED LABOR
Licensee warrants that it and, to the best of its knowledge after
reasonable investigation, each manufacturer, vendor or supplier utilized by
Licensee in connection with the manufacture of Licensed Products, is in
compliance with and will remain in compliance with all applicable laws governing
the use of child labor and the importation of merchandise produced with child
labor into the Licensed Territory. Licensee also warrants that to the best of
its knowledge after reasonable investigation, no prison or forced labor is
utilized in the production of any of the Licensed Products. Licensee shall
certify to Licensor from time to time upon request its continued compliance with
the terms of Article 18.1 and this Article 27.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their duly authorized officers in two (2) or more counterparts, each
of which shall for all purposes be deemed an original, as of the day and year
first above written.
LICENSOR
HEALTHTEX APPAREL CORP.
By: /s/ Sharon A. Beard
------------------------------
Title: Authorized Signatory
----------------------------
Date: February 11, 1998
----------------------------
LICENSEE
M & L INTERNATIONAL, INC.
By: /s/ Kurt C. Gutfreund
------------------------------
Title: President
----------------------------
Date: February 10, 1998
----------------------------
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