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EXHIBIT 10.41
TEVA
LICENSE AGREEMENT
BY AND BETWEEN
MARK THATCHER
AND
DECKERS OUTDOOR CORPORATION
Information contained in sections 4.3A, 4.6, 4.7B, 4.8, 5.2, 5.3, 5.4 and 5.5 of
this Agreement has been omitted pursuant to a request for confidential treatment
and has been filed separately with the Securities and Exchange Commission.
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TABLE OF CONTENTS
PAGE
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ARTICLE 1: DEFINITIONS...................................................................6
1.1. "Advertising".................................................................6
1.2. "Affiliates of Licensee"......................................................6
1.3. "Agreement"...................................................................6
1.4. "Annual Period"...............................................................6
1.5. "Archival Collection".........................................................7
1.6. "Change of Control"...........................................................7
1.7. "Close Outs" .................................................................7
1.8. "Collection"..................................................................7
1.9. "Competitive Activity"........................................................7
1.10. "Competitor"..................................................................8
1.11. "Concept Store"...............................................................8
1.12. "Copyrights"..................................................................8
1.13. "Costs".......................................................................8
1.14. "Distribution Channels".......................................................8
1.15. "Effective Date"..............................................................8
1.16. "Force Majeure Event".........................................................8
1.17. "Gross Sales".................................................................8
1.18. "Guaranteed Minimum Royalty"..................................................9
1.19. "Intellectual Property".......................................................9
1.20. "Inventory"...................................................................9
1.21. "Know-how"....................................................................9
1.23. "Licensed Marks"..............................................................9
1.24. "Licensed Patents"............................................................9
1.25. "Licensed Products"...........................................................9
1.26. "Licensee"....................................................................9
1.27. "Licensee Confidential Information"...........................................9
1.28. "Licensor"...................................................................10
1.29. "Licensor Approval"..........................................................10
1.30. "Licensor Confidential Information"..........................................10
1.31. "Licensor's Trade Dress".....................................................10
1.32. "Licensor's Trademark".......................................................10
1.33. "Line".......................................................................11
1.34. "Marketing Program"..........................................................11
1.35. "Marketing Tech Rep".........................................................11
1.36. "Minimum Net Sales"..........................................................11
1.37. "Model"......................................................................11
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1.38. "Net Sales"..................................................................11
1.39. "Packaging"..................................................................11
1.40. "Resultant Intellectual Property"............................................11
1.41. "Royalty"....................................................................11
1.42. "Sandal".....................................................................11
1.43. "Seconds"....................................................................12
1.44. "Specifications".............................................................12
1.45. "Technology".................................................................12
1.46. "Term".......................................................................12
1.47. "Territory"..................................................................12
1.48. "Transfer"...................................................................12
1.49. "Unit".......................................................................12
1.50. "Work".......................................................................12
ARTICLE 2: LICENSE GRANTS..................................................................12
2.1. Grant of Patent License......................................................12
2.2. Grant of Trademark License...................................................13
2.3. Grant of Trade Dress License.................................................13
2.4. Grant of Technology and Intellectual Property License........................13
2.5. License Term.................................................................13
2.6. Licensor's Ownership.........................................................13
2.7. Retained Rights..............................................................14
2.8. Newly Developed Products by Licensor.........................................14
2.9. Newly Developed Products by Licensee.........................................14
2.10. Best Efforts.................................................................14
2.11. Licensor's Mail Order Business, Concept Stores, and Internet Business........14
2.12. Licensee's Duty to Not Authorize Third Party Use of Licensor's Trademark or
Licensor's Intellectual Property.............................................15
2.13. Licensee to Mark All Licensed Products with Licensor's Trademark.............15
2.14. Licensee to Mark Patented Licensed Products with Patent Numbers..............15
2.15. Sublicensing.................................................................15
2.16. Non-Footwear Consultation....................................................15
ARTICLE 3: QUALITY AND STANDARDS...........................................................16
3.1. Goodwill Associated With Licensor's Trademark and Trade Dress................16
3.2. Licensor's Control Over Quality..............................................16
3.3. High Standards of the Licensed Products......................................16
3.4. Licensee's Required QA/QC Submissions........................................17
3.5. Approval and Control over Products, Quality, and Manufacturing...............17
3.6. Licensor's Right to Remove Approval for Previously Approved Product..........18
3.7. Changes......................................................................18
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3.8. Licensor's Control over Product Components and Licensee's Duty to Notify
Licensor of Any Changes to Components........................................19
3.9. Inspection of Licensed Product Records and Licensee's Duty to Provide
Monthly Samples of Product...................................................19
3.10. Right of Inspections of Factory and Offices..................................19
3.11. Monthly Reports Showing Number of Units Returned.............................20
3.12. Distribution.................................................................20
3.13. Disposal of Seconds and Close Outs..........................................21
3.14. Unauthorized Resale..........................................................21
3.15. Identification Number on Licensed Products...................................21
3.16. Limitation on Selling Competing Products.....................................22
3.17. Licensee to Adequately Finance Operations....................................22
3.18. Licensee to Maintain Adequate Inventory......................................22
3.19. Pricing......................................................................22
3.20. Sales and Deliveries.........................................................22
3.21. Purpose of Quality Control...................................................23
ARTICLE 4: SALES AND MARKETING.............................................................23
4.1. Sales/Marketing and Production Plans.........................................23
4.2. Sales Reports................................................................23
4.3. Licensor's Right to Purchase Licensed Products...............................24
4.4. Reporting Retail Sell-through Information....................................24
4.5. Resale of Components.........................................................24
4.6. Research and Development.....................................................25
4.7. Advertising..................................................................25
4.8. Advertising Expenditure and Budget...........................................25
4.9. Approval of Packaging, Labeling..............................................26
4.10. Showroom.....................................................................26
ARTICLE 5: LICENSE FEES AND ACCOUNTING.....................................................27
5.1. Initial Payment..............................................................27
5.2. Amount of Royalty............................................................27
5.3. Guaranteed Minimum Royalties.................................................28
5.4. Minimum Net Sales of Licensed Product........................................28
5.5. Renewal Minimum Net Sales....................................................29
5.6. Mulligan Provision for Minimum Guaranteed Sales..............................29
5.7. Method of Paying Royalties to Licensor.......................................29
5.8. Penalty on Delinquent Payments...............................................29
5.9. Accounting...................................................................29
5.10. Licensor's Authority to Audit Licensee.......................................30
5.11. Financial Statements.........................................................30
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ARTICLE 6: REPRESENTATIONS AND WARRANTIES..................................................31
6.1. Express Warranties...........................................................31
6.2. Licensee's Obligations upon Breach of Warranty...............................31
ARTICLE 7: TERM............................................................................32
7.1. Term.........................................................................32
ARTICLE 8: INSOLVENCY......................................................................32
8.1. Effect of Proceeding in Bankruptcy, Etc......................................32
8.2. Rights Granted Are Personal to Licensee......................................32
8.3. Financing Consent............................................................32
8.4. Trustee in Bankruptcy........................................................33
ARTICLE 9: TERMINATION.....................................................................33
9.1. Termination With Notice and 10 Day Opportunity to Cure.......................33
9.2. Termination with Notice and 30-Day Opportunity to Cure.......................34
9.3. Effect of Termination........................................................34
9.4. Mistaken Termination for Cause...............................................36
9.5. Force Majeure................................................................37
9.6. Inventory Upon Termination...................................................37
9.7. Post-Termination Transition and Freedom to License...........................37
9.8. Equitable Relief.............................................................38
9.9. Termination Without Prejudice................................................38
9.10. Waiver.......................................................................38
9.11. Noncompetition by Licensee...................................................38
ARTICLE 10: INDEMNIFICATION................................................................38
10.1. Licensee.....................................................................38
10.2. Indemnity Against Liens......................................................39
10.3. Third Party Rights to Technology.............................................39
10.4. Independent Covenants........................................................39
ARTICLE 11: INSURANCE......................................................................40
11.1. Insurance to Be Obtained by Licensee.........................................40
ARTICLE 12: OWNERSHIP OF INTELLECTUAL PROPERTY AND TECHNOLOGY..............................41
12.1. Ownership of Copyright.......................................................41
12.2. Rights to the Trademark and Other Intellectual Property......................41
12.3. Licensee's Use of Trademarks and Copyrights Inures to Licensor's Benefit.....41
12.4. Licensee to Perform a Clearance Search of All Trademarks Used in
Connection with Licensed Products...........................................41
12.5. Licensee Shall Not Attack Licensor's Title in Intellectual Property..........42
12.6. Molds and Designs Used Only on Licensed Products.............................42
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12.7. Assignment of Rights to Resultant Intellectual Property......................42
12.8. Licensee's Duty to Preserve Resultant Intellectual Property..................42
12.9. Licensor's Rights in Licensee's Technology...................................43
ARTICLE 13: INFRINGEMENT OR DILUTION.......................................................43
13.1. Notice of Infringement.......................................................43
13.2. Licensor Control Over Litigation.............................................43
ARTICLE 14: CONFIDENTIALITY................................................................43
14.1. Non-disclosure and Use by Licensee...........................................43
14.2. Delivery by Licensee of Confidential Information.............................44
14.3. Secrecy......................................................................44
ARTICLE 15: OTHER PROVISIONS...............................................................44
15.1. Severability.................................................................44
15.2. Non-waiver...................................................................44
15.3. Permission Needed to Assign or Sublicense....................................44
15.4. Form of Notice to Parties....................................................44
15.5. Notice of Actions Being Brought..............................................45
15.6. Precedence...................................................................46
15.7. Survival of Obligations......................................................46
15.8. Integration..................................................................46
15.9. Arbitration..................................................................46
15.10. Jurisdiction.................................................................46
15.11. Applicable Law...............................................................46
15.12. Responsibility for Taxes.....................................................47
15.13. Headings.....................................................................47
15.14. Remedies Cumulative..........................................................47
15.15. Independent Contractor Status................................................47
15.16. Rights of Licensor's Successors in Interest..................................47
15.17. Construction.................................................................47
15.18. Limitation on Rights of Others...............................................47
15.19. Limitations on Special Damages...............................................47
15.20. Counterparts.................................................................48
Schedule 1.9.
Schedule 1.10.
Schedule 1.12.
Schedule 1.23.
Schedule 2.4.
Schedule 3.4.
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TEVA LICENSE AGREEMENT
This License Agreement (the "Agreement") is made this 7th day of June,
1999, by and between MARK THATCHER, an individual, residing at 1245 Cochran
Avenue in Flagstaff, Arizona, 86001 (the "Licensor"), and Deckers Outdoor
Corporation, a Delaware corporation, having its main place of business at 495-A
South Fairview Avenue, Goleta, California 93117 (the "Licensee").
WHEREAS, the Licensor and Licensee intend to enter in a License
Agreement, such Licensee is granted certain rights in the manufacture,
distribution, sale, and advertising of Licensed Products (as hereinafter
defined) under the Teva(R) brand name.
WHEREAS, Licensor and Licensee desire to manufacture, distribute and
sell the Licensed Products bearing the Teva(R) brand name in a manner consistent
with Teva core values: authenticity, utility and promoting an outdoor lifestyle.
NOW, THEREFORE, to effectuate the foregoing objectives of the parties,
the Licensee and Licensor agree to the following satisfactory terms and
conditions.
ARTICLE 1: DEFINITIONS
The following definition of terms applies in this Agreement:
1.1. "Advertising" shall mean all mediums of promoting Licensed Products
to consumers and the trade including without limitation, cooperative
advertising, catalogs, point of purchase items, web sites, event sponsorship,
product giveaways and promotions, graphics, marketing tech reps and their
expenses, agency and other similar advertising and promotional costs.
Advertising shall not include activities relating to sales, which activities
include trade shows, sales meetings, sales personnel, and the like and similar
non-advertising costs.
1.2. "Affiliates of Licensee" shall mean all persons and business
entities, whether corporations, partnerships, joint ventures or otherwise, which
now or hereafter control, or are owned or controlled, directly or indirectly by
Licensee, are under common control by Licensee, or work in association with
Licensee.
1.3. "Agreement" shall mean this Agreement.
1.4. "Annual Period" shall mean one of the following: (1) the period
commencing January 1, 2000 and ending December 31, 2000 referred to as the
"First Annual Period," or (2) each subsequent twelve (12) month period during
the term, said twelve month period beginning on January 1 and ending on December
31.
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1.5. "Archival Collection" shall mean the collection of products which
Licensee shall assemble, collect and ship to Licensor, which collection shall
include at least two (2) samples of every model (men's size 9; woman's size 7)
and at least one sample of every color of products sold hereunder.
1.6. "Change of Control"shall be deemed to have taken place at the time
after the date hereof:
(a) when any "person" or "group" of persons (as such terms are
used in Section 13 and 14 of the Securities Exchange Act of 1934, as amended
from time to time (the "Exchange Act")), other than Douglas Otto, the Licensee
or any employee benefit plan sponsored by the Corporation, becomes the
"beneficial owner" (as such term is used in Section 13 of the Exchange Act) of
32.5% or more of the total number of the Licensee's common shares at the time
outstanding; or
(b) of the approval by the vote of the Licensee's stockholders
holding at least 50% (or such greater percentage as may be required by the
Certificate of Incorporation or By-Laws of the Corporation or by law) of the
voting stock of the Corporation of any merger, consolidation, sale of assets,
liquidation or reorganization involving the Licensee.
1.7. "Close Outs" shall mean Units of a particular Model of Licensed
Products in existence or in the manufacturing process at the time such Model is
discontinued, or any product sold at a price Twenty Percent (20%) less than the
original wholesale price, provided that in no event shall the aggregate
close-outs in any year exceed Fifteen Percent (15%) of gross sales without
Licensor's prior written consent.
1.8. "Collection" shall mean Models that are grouped together for sale,
display, advertisement or the like.
1.9. "Competitive Activity" means engaging in any of the following
activities in the Territory, whether directly or indirectly (including, without
limitation, through licensing agreements or arrangements), (i) manufacturing,
marketing, selling or distributing any Sandal, (ii) having any employee,
director or designee serving as a director of any Competitor; (iii) either
Controlling any Competitor or owning any equity or debt interests in any
Competitor (other than equity or debt interests which are publicly traded and do
not exceed 5% of any class of securities of such Competitor then outstanding on
a fully diluted basis) (it being understood that, if any such interests in any
Competitor are owned by an entity in which a person owns an equity interest, a
portion of the interests in such Competitor owned by such entity shall be
attributed to the person, determined by applying the percentage of the equity
interest in such entity owned by the person to the interests in such Competitor
owned by such entity); (iv) providing services
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relating to Sandals to any Competitor, or entering into technology or trademark
license agreements relating to such products with any Competitor; or (v)
developing any Sandal except under this Agreement. Notwithstanding the
foregoing, Competitive Activity shall not include those activities of Licensee
identified in Schedule 1.9.
1.10. "Competitor" shall mean any person that, directly or indirectly
through any equity interest in an entity, manufactures, markets, sells or
distributes any Sandal in the Territory. Notwithstanding the foregoing, for the
purposes of this Agreement, Competitor shall not include the relationships
identified in Schedule 1.10.
1.11. "Concept Store" shall mean retail outlet used to display the
entire line of Licensed Products in a fashion to celebrate the history and
lifestyle of outdoor enthusiasts and the Teva brand.
1.12. "Copyrights" shall mean any common law copyright, or any copyright
that has been applied for or registered or will be applied for or registered in
connection with the Licensed Products or other products manufactured by Licensee
for Licensor in the past, including without limitation certain registered
copyrights provided in Schedule 1.12.
1.13. "Costs" shall mean out-of-pocket costs and expenses, including
without limitation, attorneys' fees and disbursements, related litigation
expenses, and court costs incurred in pursuing legal rights or enforcing legal
obligations.
1.14. "Distribution Channels" shall mean the customers and the channels
of trade in the Territory in which the Licensee shall sell or distribute for
sale each Licensed Product, all of which shall be approved by Licensor as
described herein.
1.15. "Effective Date" shall mean the date on which the Agreement goes
into force.
1.16. "Force Majeure Event" shall mean any natural disaster, decrees of
governmental bodies and actions such as storms, floods, other acts of God,
fires, explosions, riots, war or civil disturbances, strikes or other labor
unrest, embargoes and other governmental actions or regulations which prevent or
prohibit either party from performing the obligations under this Agreement.
1.17. "Gross Sales" shall mean the invoiced amount of the Licensed
Products shipped by the Licensee before any deductions for discounts, returns,
insurance and freight.
1.18. "Guaranteed Minimum Royalty" shall mean the minimum Royalty payment
in each Annual Period as set forth in Section 5.3 of this Agreement.
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1.19. "Intellectual Property" shall mean all other patents, Copyrights,
trademarks, trade secrets, Know-how and other proprietary rights relating to the
Teva(R) brand but not including the Licensed Marks, Licensed Patents and/or
Licensor's Trade Dress.
1.20. "Inventory" shall mean Licensee's inventory of finished Licensed
Products and Licensed Products that are in production.
1.21. "Know-how" shall mean information that Licensor has provided or
shall provide to Licensee to enable Licensee to manufacture Licensed Products.
Know-how shall also mean all information relating to the design, production,
distribution, marketing or sale of Licensed Products that Licensee has obtained
in the past or shall obtain after entering into the Agreement, regardless of
whether Licensor provided such information.
1.22. "Licensed Intellectual Property" shall mean collectively, all
Copyrights, Licensed Marks, Intellectual Property, Know-how, Licensed Patents,
Licensor's Trade Dress, Licensor's Trademark, Resultant Intellectual Property
and Technology.
1.23. "Licensed Marks" shall mean any common law trademark, or any
trademark for which registration has been applied for or will be applied for or
registered trademarks that are used in connection with the sale of Licensed
Products, including without limitation Licensor's Trademark and certain marks
listed in Schedule 1.23. Such trademarks are Licensor's property and constitute
the trademarks for which Licensee is granted certain rights under this License.
1.24. "Licensed Patents" shall mean U.S. Patent Nos. 4,584,782 and
4,793,075 and their foreign counterparts.
1.25. "Licensed Products" shall mean any footwear item that is covered
by or incorporates any feature of the Licensed Intellectual Property and sold by
the Licensee pursuant to this Agreement or otherwise.
1.26. "Licensee" shall mean Deckers Outdoor Corporation or a subsidiary
of Deckers Outdoor Corporation.
1.27. "Licensee Confidential Information" shall mean any and all
information which concerns or relates to the business of the Licensee and is,
for any reason, identified or otherwise treated as confidential by the Licensee,
except such information and Technology which the Licensor can prove was: (a) in
the public domain prior to the date of this Agreement; (b) became publicly known
after date of this Agreement through no fault of Licensor; (c) was known and
documented by Licensor prior to the start date of this Agreement, and with
respect to which Licensor was not and is not under any obligation of
confidentiality; (d) was disclosed to Licensor, without restriction on
disclosure or use, by a third party which is not under any obligation of
confidentiality; or (e) constitutes Licensed Intellectual Property.
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1.28. "Licensor" shall mean Mark Thatcher.
1.29. "Licensor Approval" shall mean the written approval, which
approval shall not be unreasonably withheld, of Licensor prior to the
commencement of the requested action. The time permitted for Licensor to submit
its reasonable approval will be governed by the applicable provision of this
Agreement.
1.30. "Licensor Confidential Information" shall mean any and all
information including the Licensed Intellectual Property which concerns or
relates to any aspect of the Licensed Products or the business of the Licensor
and is, for any reason, identified or otherwise treated as confidential by
Licensor, except such information and Technology which Licensee can prove was:
(a) in the public domain prior to the date of this Agreement; (b) became
publicly known after date of this Agreement through no fault of Licensee; (c)
was known and documented by Licensee prior to the start date of this Agreement,
and with respect to which Licensee was not and is not under any obligation of
confidentiality; or (d) was disclosed to Licensee, without restriction on
disclosure or use, by a third party which is not under any obligation of
confidentiality.
1.31. "Licensor's Trade Dress" shall mean the inherently distinctive
features of any product sold hereunder, or any feature or combination of
features of any product sold hereunder which has acquired or acquires
distinctiveness during the term hereof. Without limiting the foregoing such
trade dress includes the distinctive appearance of certain sandals which
include, but are not necessarily limited to, a general strap configuration
including heel strap, instep strap, toe strap, and lateral strap components
(wherein the term "lateral strap" means a strap which in more than one place
along the outer side of the foot connects to or intersects one or more sandal
components), or a sandal with such a general strap configuration which includes
a rectangular label located proximate to the intersection of the ankle strap and
the lateral strap, or a sandal with such a general strap configuration which
includes a rectangular label located on the back of the heel strap, or a sandal
with such a general strap configuration which includes colored weaves located
proximate to the top surfaces of any of the sandal's straps, or any combination
thereof.
1.32. "Licensor's Trademark" shall mean "Teva" or the hand logo in any
style of presentation or as used in connection with any other formative or
design.
1.33. "Line" shall mean product line and includes groups of Collections
and other Licensed Products that are offered for sale at the same time.
1.34. "Marketing Program" shall mean the program established by Licensee
in connection with which Licensee sells products hereunder.
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1.35. "Marketing Tech Rep" shall mean personnel employed as regional
traveling marketing reps, whose job it is to elevate the prestige of the brand
by (a) promotional sponsorship and productive giveaways to opinion leaders, (b)
sponsoring or participating in promotional events, (c) promotion of new
technical products, and (d) store support for key technical dealers.
1.36. "Minimum Net Sales" shall mean the minimum Net Sales of Licensed
Products during each Annual Period as set forth in Section 5.4.
1.37. "Model" shall mean a particular style of Licensed Products
(regardless of year).
1.38. "Net Sales" shall mean the Gross Sales Price of Licensed Products
shipped to and paid by Licensee's direct customers less returns actually allowed
and actually received by Licensee, price allowances, mark downs and chargebacks,
customary and usual trade discounts granted by the Licensee, freight, and
insurance. The maximum bad debt allowance allowed pursuant to this Section 1.38
shall not exceed the lesser of actual bad debt allowance or 0.5% of Net Sales
per annum. Taxes of Net Sales such as value added taxes, sales taxes or their
equivalent shall be deducted and separately listed. No other deductions shall be
taken.
1.39. "Packaging" shall mean labels, tags, packaging material, business
supplies, advertising and promotional materials, utilized on containers and
displays or in connection with Licensed Products.
1.40. "Resultant Intellectual Property" shall mean any and all
Technology or Intellectual Property relating to the Licensed Products that is
conceived, created, or first made, used or reduced to practice (a) under this
Agreement, and (b) in connection with equipment, products or information
supplied and services for which Licensee has been engaged by Licensor, or which
are otherwise performed on behalf of Licensor by Licensee.
1.41. "Royalty" shall mean the percentage amount of Net Sales Licensee
shall pay to Licensor for all sales of Licensed Products.
1.42. "Sandal" shall mean a shoe consisting of a sole fastened to the
foot by thongs or straps. In addition, the term Sandal shall include any
Sandal-like product.
1.43. "Seconds" shall mean damaged, imperfect, non-first quality or
defective Licensed Products.
1.44. "Specifications" shall mean the specifications for Licensed
Products, as they may be from time to time modified, which Specifications shall
be subject to Licensor Approval.
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1.45. "Technology" shall mean conceptions, innovations, inventions,
processes, machines, manufactures, compositions of matter, improvements,
designs, data and information, whether or not patentable, copyrightable or
susceptible to any other form of protection relating to the Licensed Products.
1.46. "Term" shall mean the time period for which this License shall be
effective, as set forth in Article 7.
1.47. "Territory" shall mean the geographic area in which Licensee shall
have the right to export to or sell the Licensed Products, which shall be
worldwide.
1.48. "Transfer" shall mean to sell, assign and/or otherwise alienate
ownership or control.
1.49. "Unit" shall mean a single Licensed Product.
1.50. "Work" means all labor, equipment, materials, methods, engineering
and services required by or reasonably inferable from this Agreement, and the
carrying out of all obligations imposed by this Agreement.
1.51. "Domestic" shall mean North America.
1.52. "International" shall mean all parts of the world other than North
America.
ARTICLE 2: LICENSE GRANTS
2.1. Grant of Patent License. Subject to the terms and provisions
hereof, Licensor hereby grants to Licensee an exclusive, worldwide,
non-transferable, sublicensable, non-assignable license, right and privilege
under the Licensed Patents during the term thereof to make, have made, use,
sell, offer to sell and promote Licensed Products embodying the inventions
covered thereby in the Territory. Licensee acknowledges that the Licensed
Patents may expire during the term of this Agreement, and Licensee agrees that
royalties paid under this Agreement shall not be attributed to such expired
patent rights.
2.2. Grant of Trademark License. Subject to the terms and provisions
hereof, Licensor hereby grants to Licensee an exclusive, worldwide,
non-transferable, sublicensable, non-assignable license, right and privilege to
use the Licensed Marks to make, have made, use, sell, offer to sell and promote,
Licensed Products in the Territory.
2.3. Grant of Trade Dress License. Subject to the terms and provisions
hereof, Licensor hereby grants to Licensee an exclusive, worldwide,
non-transferable, sublicensable, non-assignable license, right and privilege to
use the Licensor's Trade Dress to make, have, made, use, sell, offer to sell and
promote, Licensed Products in the Territory.
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2.4. Grant of Technology and Intellectual Property License. All
Technology and Intellectual Property, including Resultant Intellectual Property,
which exists or is hereafter developed or acquired and is used or embodied in
any Licensed Product is and shall be the property of Licensor, except that which
is identified on Schedule 2.4. Licensee hereby assigns, or agrees to assign to
Licensor any interest Licensee has or may have therein, and Licensee agrees to
reasonably assist Licensor in perfecting any interest therein and to not take
any action inconsistent with or to impair Licensor's ownership thereof.
Notwithstanding the foregoing, subject to the terms and provisions hereof,
Licensor hereby grants to Licensee an exclusive, worldwide, non-transferrable,
sublicensable, non-assignable license, right and privilege to use the
Technology, Resultant Intellectual Property and Intellectual Property to make,
have made, use, sell, offer to sell and promote, Licensed Products in the
Territory.
2.5. License Term. All licenses granted in this Article 2 shall be for
the term of this Agreement, unless earlier terminated as set forth herein, or if
such rights cease to be in full force and effect. No license shall continue
beyond the duration of any such right.
2.6. Licensor's Ownership. The rights and licenses hereby granted to
Licensee under this Agreement shall in no way affect Licensor's exclusive
ownership in and to said Licensed Patents, Licensed Marks, Licensor's Trade
Dress, Technology, Intellectual Property, Copyrights and Resultant Intellectual
Property and Licensee acknowledges that Licensor is the sole owner of such
rights except those listed on Schedule 2.4. Upon termination of this Agreement,
the right of Licensee to use such rights shall terminate and Licensee shall
immediately cease using the same, except those listed on Schedule 2.4. Nothing
contained in this Agreement shall be construed as an assignment or grant to
Licensee of any right, title or interest in or to the Intellectual Property,
except that which is identified on Schedule 2.4. it being understood and
acknowledged by Licensee that all right relating thereto are reserved to the
Licensor except for the privileges specifically granted to Licensee in this
Agreement.
2.7. Retained Rights. Licensee understands and agrees that Licensor may
manufacture and sell, or authorize third parties to manufacture and sell,
non-Licensed Products of any and all types and descriptions in or outside the
Territory. In addition, no license is granted hereunder for the manufacture,
sale or distribution of the Licensed Products for publicity purposes, other than
publicity of the Licensed Products, in combination sales, premiums or giveaways,
or to disposition of under or in connection with similar methods of
merchandising, without Licensor Approval. Licensor reserves the right to sell
Licensed Products as set forth in Section 2.11.
2.8. Newly Developed Products by Licensor. The licenses herein granted
apply to any Models developed by the Licensor after the date of this Agreement
which are not now covered by the Licensed Patents, and any such new Models shall
become a
15
Licensed Product, at the election of the Licensee, such election not to be
unreasonably withheld.
2.9. Newly Developed Products by Licensee. Licensed Products shall also
include any new Sandal or new product developed by Licensee bearing Licensor's
Trademark. As to newly developed products developed by Licensee, written notice
shall be provided by Licensee to Licensor within 60 days of development. In the
event Licensor determines that such new developed product does not enhance the
brand and shall therefore not become a Licensed Product, Licensor shall notify
Licensee of such rejection within 60 days after receipt of written notice. If
Licensor rejects Licensee's new developed product, Licensee shall refrain from
distribution of such product to any retailer selling Licensed Product.
2.10. Best Efforts. At all times while this Agreement is in effect,
Licensee shall use its reasonable best efforts to exploit the License granted
hereunder throughout the Territory, including but not limited to, selling a
sufficiently representative quantity of the Licensed Products; offering for sale
the Licensed Product in a fashion so that they shall be sold to the consumer on
a timely basis; maintaining a sales force sufficient in number and appropriate
training, skill or experience to provide effective distribution throughout all
areas of the Territory; and cooperating with Licensor's marketing,
merchandising, sales and anti-counterfeiting programs. Licensee and Licensor
shall jointly develop a marketing plan for each Annual Period relating to
various geographical areas and countries within the Territory to be targeted for
focused sales efforts during such Annual Period. If Licensee does not use its
reasonable best efforts to exploit the License granted hereunder in accordance
with such plan, then Licensor may, at its election, make the rights granted
hereunder with respect to such area or country become non-exclusive for the
remainder of the Term of this Agreement. In such event Licensee shall sell
Licensed Product to any new licensee in such area or country at Licensee's
current wholesale most favorable quantity price.
2.11. Licensor's Mail Order Business, Concept Stores, and Internet
Business. Licensor may sell Licensed Products as well as other products not
within the scope of this Agreement only directly to consumers through its mail
order business, Concept stores and Internet business. The Licensee will supply
Licensor with Licensed Products for sale in the mail order business, concept
stores, and Internet business as provided in this Agreement. Licensee shall
provide to Licensor, at no charge to Licensor, catalogue designs and mock-ups
and product images for Licensor's use. Licensor may, but need not, purchase
finished catalogues from Licensee at Licensee's cost.
2.12. Licensee's Duty to Not Authorize Third Party Use of Licensor's
Trademark or Licensor's Intellectual Property. Licensee shall not use or permit
or authorize another person or entity to use the word "Teva(R)" or any other
marks associated with "Teva(R)" as part of a corporate name or tradename or
otherwise in commerce without the prior written consent of Licensor. Licensee
shall not permit or authorize use of the Licensed Marks or Licensor's Trademark,
Licensed Patents, Licensor's Trade Dress or other Technology or Intellectual
Property hereby licensed in such a way as to
16
give the impression that such, or any modifications thereof, are the property of
the Licensee.
2.13. Licensee to Mark All Licensed Products with Licensor's Trademark.
The Licensee shall mark, directly, by hang tag or identify as otherwise
indicated by Licensor, all Licensed Products and prototypes thereof with the
Licensor's Trademark, unless otherwise specified by the Licensor; no other
marks, except Licensed Marks, approved by Licensor shall be applied to the
Licensed Products without Licensor Approval. Licensee shall bear the burden of
costs of complying with this provision so long as such costs are reasonable
within the industry.
2.14. Licensee to Mark Patented Licensed Products with Patent Numbers.
Unless otherwise specified by Licensor, Licensee shall mark, directly and by
label or hang tag or as otherwise directed by Licensor, all patented Licensed
Products with the applicable patent number. Licensee shall bear the burden of
cost for complying with this provision so long as such costs are reasonable
within the industry.
2.15. Sublicensing. Licensee has the right, subject to Licensor Approval
to sublicense its rights covered by this Agreement. Any such license shall not
reduce or remove any obligation owed to the Licensor set forth in this
Agreement. The form of any such sublicense agreement shall receive Licensor
Approval which shall have appropriate provisions to protect Licensor's interests
in this Agreement and in the Licensed Intellectual Property.
2.16. Non-Footwear Consultation. Licensor agrees to consult with
Licensee on the selection of other entities that may be granted a license to
manufacture, distribute, and/or sell non-footwear products utilizing Licensed
Intellectual Property, including, but not limited to, Licensor's Trademark.
Additionally, Licensor agrees to consider utilization of Licensee's
non-domestic business operations as vehicles for potential manufacturing,
marketing or sales of non-footwear products utilizing the Licensed Intellectual
Property including, but not limited to, Licensor's Trademark.
ARTICLE 3: QUALITY AND STANDARDS
3.1. Goodwill Associated With Licensor's Trademark and Trade Dress.
Licensee acknowledges that Licensor has valuable goodwill and other rights in
the Licensed Marks and Licensor's Trade Dress. Licensee agrees that it shall not
at any time do or cause to be done directly or indirectly any act contesting, or
in any way impairing any part of the Licensor's right, title or interest in the
Licensed Marks and Licensor's Trade Dress. Without limiting the foregoing,
Licensee shall during the term of this Agreement use reasonable efforts to
ensure that use of the Licensed Marks and Licensor's Trade Dress is in
accordance with use which is to the best advantage and protection of Licensor's
goodwill in Licensed Marks and said Trade Dress.
17
3.2. Licensor's Control Over Quality. Licensee agrees that Licensor has
the right to control the quality of Licensed Products, and that Licensor has
sole discretion (not to be unreasonably exercised) to determine in good faith
whether the Licensed Products meet the quality standards of this Article. If
Licensor determines the quality standards of this Article have not been met,
Licensor shall notify Licensee in writing of the details of such quality failure
and provide Licensee a reasonable time frame to correct the failure, but in no
event shall the time to correct the failure exceed sixty (60) days after notice
or thirty (30) days after any arbitration decision, whichever is later. In the
event the Licensee disagrees that the Licensor's determination of a quality
failure is reasonable, Licensee has a right within the first thirty (30) days
after receipt of Licensor's written notice of quality failure to notify Licensor
of such disagreement and submit the sole issue of whether or not Licensor has
reasonably determined there exists a quality failure to arbitration pursuant to
this Agreement. In the event the quality failure is not corrected, Licensor may
consider such a material default or breach, and this Agreement will be subject
to termination as provided in Article 9.
3.3. High Standards of the Licensed Products. The Licensee shall use its
reasonable efforts to maintain the high quality standards and distinctiveness of
Licensor's Trademark, Trade Dress and the Licensed Products, in all advertising,
packaging and promotion of the Licensed Products. licensee agrees that, with
respect to all Licensed Products manufactured or sold by it, the same will be of
high quality workmanship, fit, design and materials used therein, and shall be
at least equal in quality, workmanship, fit, design and materials to the samples
of Licensed Products submitted by Licensee and approved by Licensor pursuant to
this Agreement. All manufacturing and production shall be of a quality in
keeping with the prestige of the Licensed Marks.
3.4. Licensee's Required QA/QC Submissions. Licensee shall deliver to
Licensor a detailed description of the QA/QC program utilized by Licensee which
shall contain the minimum requirements or their equivalents as set forth in
Schedule 3.4. Said program may be reasonably modified by Licensee, and any such
modification shall be delivered to Licensor within 30 days of implementation.
3.5. Approval and Control over Products, Quality, and Manufacturing.
Before selling, distributing or promoting any Licensed Product, Licensee will
deliver for Licensor's inspection and correction, amendment or alteration a
prototype sample, of each such Licensed Product (a men's size 11 for men's
footwear and a women's size 7 for women's footwear) together with prototype
tags, labels and packaging intended for use in connection therewith.
A. Prototypes. Such prototypes shall be delivered within a
reasonable period of time sufficient to enable Licensor to evaluate and test
such prototype, together with Licensee's proposed development schedule.
18
B. Initial Samples. Licensee will also deliver one initial sample
pair of each Licensed Product, together with the spec sheet report, the tags,
labels and packaging to be used in connection therewith, for Licensor Approval.
C. Ongoing Production. In addition, upon Licensor's request,
Licensee will deliver to Licensor, free of charge, up to six (6) pairs per
model, per annum, of current production samples of each Licensed Product
produced hereunder together with the tags, labels and packaging being used in
connection therewith so that Licensor may be assured of the maintenance of the
quality standards set forth herein. In the event Licensor determines that any
Licensed Product so submitted fails to meet the quality standards set forth
herein, Licensee will make any corrections reasonably determined by Licensor to
be necessary to meet the original quality standards.
D. Quality Committee. Licensor and Licensee shall establish a
quality committee comprised of two (2) representatives of Licensor and two (2)
representatives of Licensee (the "Quality Committee"). The Quality Committee
will endeavor to resolve all matters related to Article 3 and if there is a
deadlock the matter will be resolved by arbitration as provided in Section 15.9.
E. Equal Quality. All Licensed Products to be sold hereunder will
be at least equal in quality to the samples approved by Licensor. Licensor's
duly authorized representatives will have the right, upon reasonable advance
notice and during normal business hours, to examine Licensed Products in the
process of being manufactured and to inspect all facilities utilized or
controlled by Licensee or its Affiliates (including those of all its
contractors) in connection with the manufacture, distribution and sale of the
Licensed Products. Licensee's agreements with third party contractors related to
Licensed Products shall include a similar provision permitting Licensor to
inspect each of such contractors' facilities on a confidential basis.
F. Proof of Quality. If Licensor should in Licensor's reasonable
discretion in good faith determine that any element in any new product may
negatively impact the quality of the brand and/or the goodwill associated with
Licensed Marks and Licensor's Trade Dress, Licensor may reasonably require
Licensee to demonstrate the durability or quality of the element or product
through laboratory or other testing, such testing to be performed and the
results provided to Licensor, and the costs and expenses of such testing shall
be borne equally by Licensee and Licensor.
3.6. Licensor's Right to Remove Approval for Previously Approved
Product. If the style, appearance or quality of any Licensed Product ceases to
be reasonably acceptable to Licensor, Licensor shall have the right to withdraw
his prior approval of such Licensed Product upon not less than one hundred
eighty (180) days' written notice specifying in detail the requested withdrawal
and the reasons for such withdrawal. Upon receipt of written notice from
Licensor of his decision to withdraw such approval, Licensee shall take
reasonable steps to immediately cease the use of Licensor's Trademark and other
Licensed Intellectual Property in connection with the promotion, advertising,
sale, manufacture, distribution or use of such Licensed Products(s). Upon
19
receipt of Licensor's notice of election to withdraw approval, Licensee may
complete work in process, utilize materials on hand and sell all existing
inventory provided that it submits to Licensor proof of such work in process,
materials on hand, and existing inventory. Notice of such election by Licensor
to withdraw approval shall not relieve Licensee from its obligation to pay
Royalties on sale of such disapproved Licensed Products(s) made by Licensee to
date or thereafter as permitted. Licensee shall, prior to sale of existing
inventory of previously approved Licensed Product, offer such product to
Licensor at Licensee's cost. If Licensor buys such existing inventory of
previously approved product, Licensor agrees such inventory shall be destroyed
or distributed at no charge. In the event the Licensee deems any withdrawal
requested by the Licensor to be inconsistent with any part of this Agreement,
the Licensee, within fifteen (15) calendar days of receipt of the withdrawal
notice may, in writing, object to the withdrawal. This written objection shall
include a detailed explanation of the basis for objection. The Licensor shall
consider the objection in good faith, and shall reply in writing, accepting or
rejecting the objection. If the parties continue to disagree, the matter will be
resolved by the Quality Committee within ninety (90) days after the date of
Licensee's written objection or by arbitration pursuant to Section 15.9 hereof.
3.7. Changes. Licensor shall have the right to make reasonable changes
in the technical specification of the Licensed Products upon not less than one
hundred eighty (180) days' written notice specifying in detail the requested
change and the reasons for such change. Licensee shall provide the Licensed
Products in conformance with such changes as soon as reasonably possible. In the
event that the Licensee deems any change requested by Licensor to cause an
increase in cost or time required for performance of any part of this Agreement,
Licensee, within fifteen (15) calendar days of receipt of the change order may,
in writing, object to the change. This written objection shall include a
detailed explanation of the basis for objection, and any proposed adjustment to
be made to the price, performance time, or both. Licensor shall consider the
objection in good faith, and shall reply in writing, accepting or rejecting the
objection. If Licensor in good faith rejects the objection, Licensee shall
provide the Licensed Products in conformance with such changes as soon as
reasonably possible. If the Licensee disagrees, the matter will be resolved by
the Quality Committee within ninety (90) days after the date of Licensee's
written objection or by arbitration pursuant to Section 15.9. If the change
cannot be made, Licensor approves the sale of such Licensed Products as a
close-out but not subject to the limitation on close-out sales as set forth in
Section 1.6.
3.8. Licensor's Control over Product Components and Licensee's Duty to
Notify Licensor of Any Changes to Components. The Licensee shall use its
reasonable efforts to maintain standards for Licensed Products set by the
Licensor and any proposed change involving any alterations in materials,
construction, structure, quality, or design of the Licensed Products shall be
submitted to the Licensor and which shall require Licensor Approval; provided,
however, the Licensee, in an emergency when the Licensor is unavailable, shall
have the right to temporarily substitute construction materials for up to thirty
(30) calendar days, but shall stop using said substitute construction materials
after thirty (30) calendar days, unless before the end of said thirty (30)
calendar days the Licensor approves thereof in writing; provided further
Licensee shall submit all changes
20
through sample or technical specifications to the Licensor for reasonable
approval and Licensor shall approve or reject said changes in writing within
thirty (30) calendar days of receipt, if testing is required and within five (5)
calendar days if testing is not required, along with reasons for rejecting, if
applicable. Licensee shall provide confidential specification books to Licensor
to enable Licensor to determine the source and composition of all components
used in Licensed Products.
3.9. Inspection of Licensed Product Records and Licensee's Duty to
Provide Monthly Samples of Product. Licensee recognizes the right of the
Licensor to inspect product quality and hereby authorizes the Licensor to
inspect the manufacture and assembly of the Licensed Products made by Licensee
and agrees Licensor or his agent may, upon ten (10) calendar days' notice and
during normal business hours, check the accounting and material cost records,
which shall be maintained confidential, to verify the quality of materials used
in manufacture of the Licensed Products. Licensee shall send monthly one (1)
sample of each Model of Licensed Products to Licensor for inspection. Licensor
shall be entitled to request monthly, by means of a duly authorized
representative or himself, reasonable number of additional samples selected at
random from Licensee's production in order to monitor the quality of Licensed
Products.
3.10. Right of Inspections of Factory and Offices. The Licensee will
permit the Licensor or his agent, at the Licensor's own expense, on ten (10)
calendar days' notice to visit the Licensee's factory and offices and the
factory or office of any entity involved in the manufacture or sale of Licensed
Products for such periods as may be reasonable and during normal business hours
to inspect the Licensed Products being made by Licensee to ensure said Products
meet the quality standards of the Licensor on a confidential basis.
3.11. Monthly Reports Showing Number of Units Returned. Licensee shall
prepare and send to Licensor a monthly report showing the number of Units
returned and the reasons given for such return. The monthly report shall itemize
the number of Units of each Model returned, from whom such Models were returned,
and the reasons given for that return.
3.12. Distribution.
A. The Licensed Products shall be sold by Licensee only to those
Distribution Channels that deal in products similar in quality and prestige to
the Licensed Products, and whose representations and operations will enhance the
quality and prestige of the Licensed Marks. Within thirty (30) days from the
date of this Agreement, Licensee shall provide Licensor with a list of the
Distribution Channels for Licensor Approval. Each calendar quarter Licensee
shall submit to Licensor a list of all customers that were deleted from its
customer base during that quarter.
B. As to each new customer Licensee desires to sell to, Licensee
shall supply Licensor with a request to add such new customer to the existing
Distribution Channels before shipping any licensed product to such new customer.
The request shall include a description of the new customer on the form and
provide any data reasonably
21
requested by Licensor. In the event Licensor does not object to the addition of
the new customer as a retail outlet for Licensed Product within ten (10) working
days after Licensor's receipt of the request, Licensee shall be free to sell
Licensed Product to such customer. Subject to the provisions of Section 3.12(C)
below, in the event Licensor notifies Licensee of an objection to the new
customer, Licensee shall not accept orders from such new customer.
C. If Licensor should reasonably determine that any actual or
proposed Distribution Channel is not consistent with the quality and prestige
associated with Licensor's Trademark, as set forth in paragraphs A and B above,
Licensor shall discuss such concern with Licensee through the Quality Committee,
and after such discussion Licensor shall have the right to object by notice to
Licensee to any Distribution Channel, and Licensee shall not thereafter accept
orders from such customer. If Licensee disagrees with Licensor's objection, and
concludes that Licensor's objection would negatively affect Licensee's sales of
Licensed Products, Licensee may, within thirty (30) days of receipt of the
objection, submit to arbitration the following specific questions, which
questions are to be decided by the arbitrator within ninety (90) days of
submission:
Is Licensor's objection to the specific customer unreasonable? If
the arbitrator determines that Licensor's objection to the specific customer is
unreasonable, then the arbitrator shall determine the negative effect in total
lost sales (if any) such objection to specific customer has on Licensee's sales
for the period of one year after the date of the objection.
If the arbitrator determines that the Licensor's objection was
unreasonable and such objection resulted in lost sales for Licensee within one
year after the date of Licensor's objection, the amount of such lost sales
incurred within such one year shall be deducted from the minimum net sales
requirements set forth in other parts of this Agreement solely for that one year
period following the objection. For purposes of judging the reasonableness of
Licensor's objection the arbitrator shall use as a standard the following
principle: "Was Licensor's objection reasonably calculated to maintain or
improve the Licensor's Trademark brand quality image?
3.13. Disposal of Seconds and Close Outs.
A. Licensee shall use reasonable efforts to dispose of Licensed
Products which are designated as Seconds in a way which shall maintain the value
of the Licensor's Trademark and Licensor's reputation, and Licensee shall obtain
Licensor's Approval with respect to the terms and method of such disposal. All
Seconds approved for sale by Licensor shall clearly be marked "Seconds" or
"Irregular" in a manner obvious to a casual consumer. The percentage of Seconds
of any of the Licensed Products which shall be disposed of pursuant to this
Section shall not exceed five percent (5%) of the total number of Units of
Licensed Products distributed, manufactured or sold by Licensee in each Annual
Period.
B. All Close Outs shall be sold only with Licensor's Approval,
through retail outlets and traditional accepted dealers in such merchandise and
upon such
22
terms and conditions as Licensee determines appropriate. The percentage of Close
Outs sold pursuant to this Section shall not exceed fifteen percent (15%) of the
total number of Units of Licensed Products distributed, manufactured or sold by
Licensee in each Annual Period.
3.14. Unauthorized Resale. In the event Licensor reasonably determines
that the unauthorized resale of Licensed Products through unauthorized
Distribution Channels is causing a negative impact on the reputation and
desirability of Licensor's products, Licensee shall consult with Licensor in
good faith regarding implementation of a system, including, but not limited to,
an inventory marking system to remedy such negative impact.
3.15. Identification Number on Licensed Products. Licensed Products
shall have a Model number that is unique from Licensee's other products, and
such unique identification shall be used in Licensee's accounting system. If any
Model numbers of Licensee's other brands are the same as those used on
Licensor's products, Licensee bears all expense and responsibility for changing
the numbering system on Licensee's other brands to eliminate duplication.
3.16. Limitation on Selling Competing Products. At all times while this
Agreement is in effect, neither Licensee, nor any company affiliated with
Licensee, owned or controlled by Licensee, under common ownership with Licensee,
in which the owner of Licensee is a partner, or in which Licensee is a partner,
shall engage in Competitive Activity without Licensor Approval. If Licensor
consent is given for Licensee to engage in competitive activity, Licensee shall
provide Licensor with samples of each product Model that Licensee manufactures,
has manufactured or distributed for it which do not bear the Licensor's
Trademark. A breach of this clause shall constitute a violation of Licensee's
obligation to use its reasonable best efforts to exploit this license. The
design, merchandising, packaging, marketing, sales force, sales and display of
all of Licensee's products (if any are permitted) that are not Licensed Products
shall be separate and distinct from the Licensed Products. Licensee shall
contractually restrict its sales agents and sales force from manufacturing or
selling Sandals or any product that has the same or a similar image as any
Licensed Product. Licensor Approval of all manufacturers shall be required,
other than those manufacturers utilized for Licensed Products as of the date of
this Agreement.
3.17. Licensee to Adequately Finance Operations. Licensee shall at all
times, within reasonable industry standards, maintain its financial position
including maintaining such standards for payment of Licensee's account payables
and maintaining sufficient cash flow to finance all of the operations and
obligations specified in this Agreement. In this regard, Licensee shall
establish a division for purposes of promoting the Licensed Products, within
such Division, Licensee shall provide Licensor with access to the premises where
the Licensed Products are designed and provide to Licensor an opportunity to
review and participate in the activities of the Division.
23
3.18. Licensee to Maintain Adequate Inventory. Licensee shall at all
times maintain an inventory of Licensed Products which shall be reasonably
sufficient to meet customers' and Licensor's reasonable and anticipated demands.
Without limiting the generality of the foregoing, Licensee shall use its
reasonable efforts to fill all preseason orders on time or within thirty (30)
days of the confirmed delivery date. If Licensee shall fail on two or more
occasions to fill pre-season orders within thirty (30) days of the requested
delivery date Licensor and Licensee shall together discuss how to remedy this
situation.
3.19. Pricing. Licensee shall use its reasonable efforts in order to
preserve the goodwill attached to Licensor's Trademark, to sell the Licensed
Products at prices and terms reflecting the consumers' perception of the high
quality and prestigious nature of the Licensed Products, it being understood,
however, that Licensor is not empowered to fix or regulate the prices for which
the Licensed Products are to be sold, either at the wholesale or retail level.
The Licensee shall use its reasonable efforts to charge prices fairly and to not
discriminate between similarly situated purchasers.
3.20. Sales and Deliveries.
A. Licensee acknowledges that the availability and selection of
styles, fabrications, colors and sizes are an integral part of the excellent
reputation for quality and value which the trade and consumers have come to
associate with the Licensed Products. Therefore, to reasonably protect that
reputation and value, Licensee agrees that its policies for sale, distribution,
or other exploitation of Licensed Products shall promote the consumers'
perception of the Licensed Products and that the same shall in no way adversely
reflect upon the good name of Licensor or any of its products.
B. The License shall use its reasonable efforts to provide the
Licensor all Licensed Product ordered by Licensor as stock and inventory for
Licensor's mail order business, Concept Stores, and Internet business on the
basis set forth in Section 4.3.
3.21. Purpose of Quality Control. Licensor's right to enforce the
standards for quality hereunder is for the sole purpose of protecting Licensor's
rights in and to the Licensed Marks, and except as otherwise set forth in this
Agreement:
A. Licensor shall have no duty or responsibility to the Licensee
or to any third party with respect thereto;
B. No third parties shall acquire any rights against Licensor in
connection with Licensor's acceptance or right to enforce standards; and,
C. Licensor's rights to enforce the standards shall in no way
diminish or abrogate the termination provisions of Article 9.
24
ARTICLE 4: SALES AND MARKETING
4.1. Sales/Marketing and Production Plans. On November 1 and May 1 of
each Annual Period during the Term, Licensee will submit to Licensor, for
Licensor's comments, a schedule showing in reasonable detail the projected sales
and marketing plans for the Licensed Products for each of the next two quarterly
periods. In addition, Licensee will submit to Licensor at the start of the
Agreement a proposed production calendar for the Licensed Products. The Licensee
shall provide to Licensor, on a monthly basis, monthly wholesale bookings
reports and retail selling reports detailing model, color, and size.
4.2. Sales Reports. Within sixty (60) days after the close of each
quarter within an Annual Period, Licensee shall provide to Licensor a detailed
listing of all sales made by Licensee of Licensed Products, broken out by sales
region, by top twenty (20) accounts, and showing relationship of sales for such
quarter as compared to the same quarter for the preceding Period. In the event
sales for any quarter evidence a substantial decline in any sales region,
Licensor may request Licensee to submit, for Licensor Approval, a marketing plan
which addresses the decline.
4.3. Licensor's Right to Purchase Licensed Products.
A. It is understood and agreed that the Licensor shall have the
right to purchase from the Licensee as many Units of Licensed Products as
Licensor may reasonably require for retail sale or promotional use or for such
other uses as Licensor deems appropriate in non-exclusive Territories as
described in Section 2.10 of this Agreement, with 90% of any order to be
delivered timely (as described below) to the Licensor's offices, at prices to be
negotiated by the parties, but in no event higher than Licensee's current
wholesale at the most favorable quantity price less - * - , or in the
alternative a lower price under any other provision of this Agreement. Licensor
shall comply with Licensee's published order procedures.
The Licensee shall be obligated to make the royalty payments provided herein
with respect to any Licensed Products sold by the Licensee to the Licensor. All
payments for Licensed Products are due from the Licensor, net thirty (30)
calendar days, and in the event of non-payment, the Licensee shall set off any
sums due from the Licensor against any payments due the Licensor from the
Licensee. Licensee agrees that such products will be delivered timely, which
shall mean: for preseason orders, delivery shall be in accordance with a
schedule provided by Licensor to Licensee and approved by Licensee, which
approval shall not be unreasonably withheld; for season fill-in orders, delivery
shall be within seven (7) days with respect to any product then in
available-to-ship inventory. Licensor shall be entitled to return any Licensed
Products purchased from Licensee, shipping prepaid, on the same basis and
subject to the same credit on most favorable terms as Licensee provides to any
other customer.
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
25
B. The Licensee will use its reasonable efforts to negotiate with
the Licensee's contract factories so that the Licensor may buy at cost all
previously used molds and other devices necessary to make discontinued, but
previously manufactured Licensed Products. Licensor may order Licensed Products
from Licensee which have been discontinued at prices of two (2) times the
Licensee's cost, and at minimum quantities and deliveries, negotiated in good
faith with Licensee's contract factories These Models shall continue to be
marked with Licensor's Trademark.
4.4. Reporting Retail Sell-through Information. Licensee will deliver
within thirty (30) calendar days after each quarter, its sales results
reflecting goods actually shipped, by Model on a Unit basis, of Licensed
Products shown and sold; and, if available, within thirty (30) calendar days
following the close of each quarter a report setting forth the sell-through by
Licensee's customers of Licensed Products shipped to them for top five (5)
accounts by sales territory utilized by Licensee.
4.5. Resale of Components. Licensee shall not resell any left over,
unused, disassembled, or otherwise excess components including, but not limited
to, the soles, webbing, fasteners, labels, and the like to a third party without
Licensor Approval obtained at least fifteen (15) calendar days prior to the
sale. If Licensor does not approve the sale the components will be destroyed but
Licensee's cost for such destroyed components will be credited to royalty
payments due Licensor.
4.6. Research and Development. Licensee shall maintain for the duration
of this Agreement a separate Research and Development Department for the
Licensed Products with an annual budget of not less than - * - of Net Sales of
Licensed Products of the preceding Annual Period for personnel, development,
tooling, equipment, overhead and other direct costs.
4.7. Advertising.
A. All Advertising and promotion in connection with Licensed
Products, including cooperative advertising whereby Licensee provides its
customers with a contribution, whether in the form of monetary contribution,
credit or otherwise, shall be submitted by Licensee to Licensor for review, and
if placed with an agency, the agency shall receive Licensor Approval. Any
creative advertising product shall be submitted by Licensee to Licensor for
reasonable written approval prior to being used. Licensor shall have ten (10)
calendar days from submission by Licensee to disapprove any advertising. In the
event Licensor does not disapprove such advertising within that period, Licensor
will be deemed to have approved it. Licensee will pay advertising invoices
directly as
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
26
they become due. Licensee agrees to use its reasonable efforts to advertise and
promote the Licensed Products during each Annual Period in order to make the
Licensed Products well-known within the Territory to maintain awareness of the
Licensed Products and to maintain the high standards of quality that has come to
be associated with Licensor's Trademark.
B. In addition to any advertising expenditures required elsewhere
in this Agreement, Licensee and Licensor shall each contribute a sum equal to
- - * - of Net Sales to an account maintained by Licensor to be used by Licensor
exclusively to promote the Licensor's Trademark brand image with or without
reference to individual licensed products; provided, however, that Licensor's
obligation under this Section 4.7(B) shall not begin until January 1, 2001. Such
funds should be paid by the parties within thirty (30) days of the end of each
quarter.
4.8. Advertising Expenditure and Budget. During each year of this
Agreement by November 15 and May 15 of each year, Licensee shall expend for the
advertising of Licensed Products, which advertising may consist of cooperative
advertising, an amount that is not less than the "annual Advertising
Expenditure," as hereinafter defined, for such year. Licensor and Licensee shall
consult with each other regarding the creation, production and placement of all
advertising of Licensed Products.
With respect to Domestic Net Sales, Licensee shall spend the greater of - * - of
the Minimum Net Sales or - * - of the actual Net Sales for each Annual Period,
for Domestic Advertising of the Licensed Products. With respect to International
Net Sales, Licensee shall spend the greater of - * - of the Minimum Net Sales
(on an FOB basis) or - * - of the Actual Net Sales (on an FOB basis) for each
Annual Period, for International Advertising of Licensed Products. Licensee
shall deliver to Licensor within thirty (30) calendar days after the end of each
quarter hereof an accounting statement detailing the amounts expended by
Licensee on advertising for the prior quarter. Each such accounting statement
shall be signed, and certified as correct, by a duly authorized officer of
Licensee. Prior to each year hereof, Licensee shall submit to Licensor the
advertising budget for the upcoming year, based on the aggregate net sales of
Licensed Products during the year then ending and on sales projected for the
upcoming year. The Annual Advertising Expenditure for each upcoming year will be
calculated based upon such budget, and subsequently adjusted and expended every
quarter based upon actual sales. This Advertising Expenditure and budget shall
become effective immediately upon execution of this Agreement irrespective of
the commencement date of the initial term of this Agreement.
4.9. Approval of Packaging, Labeling. No packaging, labeling or
advertising, including cooperative advertising shall be used without the
Licensor Approval. Before
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
27
publication of any advertisement or promotion, Licensee shall submit every
element of the advertisement or promotion for Licensor Approval. Any approval
granted hereunder shall be limited in scope to the proposed use by the Licensee.
Any additional uses that Licensee desires to use that were not part of the
initial request to Licensor shall also require Licensor Approval. Samples of
initial packaging, labeling and advertising, and samples of any revisions,
changes, modifications or substitutions thereof, shall be submitted to Licensor
sufficiently far in advance (but in no case less than twenty (20) days) prior to
expected requests for the approval of packaging, labeling or advertising
pursuant to this Section shall be accompanied by at least two (2) samples of the
object for which approval is sought. Licensee shall use its reasonable best
efforts to ensure that all advertising and promotional plans used by Licensee in
connection with the Licensed Products, in any form and in any medium, shall be
consistent with the prestige associated with Licensor's Trademark and the
quality of the Licensed Products. All packaging, labeling and advertising of
Licensed Products shall use Licensor's Trademark, but no other trademark or
trade name shall be used except as shall be required by applicable law or with
Licensor Approval. Licensee shall not be permitted to use its name on the
Licensed Products, packaging and other materials displaying Licensor's Trademark
other than with Licensor Approval. Any advertising materials provided by
Licensor to Licensee shall be so provided at Licensee's cost and the price
therefor shall be Licensor's cost of producing and providing the materials.
Licensor agrees that if rejection nor approval is forthcoming from Licensor
within twenty (20) days of submission by Licensee, such material shall be
considered approved.
4.10. Showroom. The Licensee may, at its election, establish and staff a
separate showroom for the presentation and sale of the Licensed Products either
directly or through independent sales representatives. The Licensee will use its
reasonable efforts to maintain, operate, decorate and staff the showroom in a
manner consistent with the prestige and image associated with the Licensor's
Trademark. The Licensee and the Licensor shall mutually agree on the design,
layout and decoration of the showroom, all expenses incurred with respect to the
design, construction, operation and maintenance of such showroom shall be borne
by the Licensee or the Licensee's sales agents. The Licensee shall admit the
Licensor's employees to use its showroom and shall sell to such employees for
their personal use, but not for subsequent resale, such Licensed Products on the
same terms as the Licensee offers its own employees.
ARTICLE 5: LICENSE FEES AND ACCOUNTING
5.1. Initial Payment. Licensee agrees to pay to Licensor an initial
payment of One Million Dollars ($1,000,000). The Initial Payment shall be paid
within sixty (60) days after execution of this Agreement by Licensee and is
non-refundable. This initial payment shall not be credited against future
royalties or any other obligation owed to Licensor under the Terms of this
Agreement. In addition to the above described initial
28
payment, Licensee shall also immediately issue to Licensor upon execution of
this Agreement Four Hundred Twenty Eight Thousand Seven Hundred Forty-Three
(428,743) shares of Licensee's common stock (the "Shares"). Certificates
evidencing the Shares shall be delivered to Licensor within sixty (60) days
after execution of this Agreement. Licensee represents and warrants that the
Shares, upon issuance, will be duly authorized, fully paid, non-assessable and
free and clear of all liens, charges and encumbrances.
Licensor agrees to sell not more than 12,500 shares of Licensee's common
stock held by Licensor during any calendar quarter from the date hereof through
and including March 31, 2002. In addition, Licensor agrees to, until March 31,
2002, execute a Lock-Up Agreement with regard to any shares of Licensee's common
stock now or hereafter owned by Licensor in a form identical to agreements
signed by all other Directors of Licensee.
5.2. Amount of Royalty. The Licensee shall pay the Licensor a royalty
rate of - * - on products which incorporate the Licensed Patents, - * - on
products which incorporate Licensor's Trade Dress, - * - on products which
incorporate Licensed Technology, Intellectual Property and Resultant
Intellectual Property, and - * - on products which bear any of the Licensed
Marks or Copyrights; provided however that the total royalty for all Licensed
Products shall not be less than nor exceed - * - of the Net Sales of all
Licensed Products sold under this Agreement.
Additionally, it is agreed that the following sliding scale of royalty
rates shall be applied to Net Sales above - * - in any single year:
For Net Sales between - * - and - * - the Royalty Rate shall be-
* - ;
For Net Sales between - * - , the Royalty Rate is - * - , and;
For Net Sales above - * - , the Royalty Rate is - * - .
Notwithstanding the foregoing, for the period beginning January 1, 2000
through December 31, 2000, the royalty rate on Net Sales above - * - shall be
- - * - .
Licensee shall not ship FOB the country of manufacture to any Domestic
third party.
Royalties are due in monthly installments within twenty (20) calendar
days of the end of the month on Licensed Products sold in that month. For
purposes of this Section, a Licensed Product shall be considered "sold" upon the
date of shipment. It is the intention of the parties that Royalties will be
based on bona fide sales in which Licensee
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
29
(or its sublicensees) sells Licensed Products to its direct customers in arms'
length transactions.
In addition to the royalty payments described above, Licensee shall
grant to Licensor on January 1 of each calendar year an option to purchase not
less than Fifty Thousand (50,000) shares of Licensee common stock at the fair
market value on the date of grant exercisable for a ten (10) year period. Upon
closing of the Licensee's purchase of the Licensed Intellectual Property, no
further options shall be granted to Licensor under this Agreement.
5.3. Guaranteed Minimum Royalties. For each Annual Period during the
Term of this Agreement there shall be a Minimum Guaranteed Royalty which shall
be paid by Licensee to Licensor as specified below, in millions of U.S. dollars.
- ------------------------------------------------------------------------------------------------------
Calendar Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
- ------------------------------------------------------------------------------------------------------
Guaranteed * * * * * * * * * * * *
Minimum
Royalty
- ------------------------------------------------------------------------------------------------------
If the royalties actually paid by Licensee or Licensor in any Annual
Period are less than the amount described above, then Licensee shall pay to
Licensor the shortfall within ninety (90) days after the end of the calendar
year.
5.4 Minimum Net Sales of Licensed Product. The Licensee shall be
required to meet Minimum Net Sales in each Annual Period commencing January 1,
2005, as follows: Calendar 2005, 2006, 2007 and 2008, Net Sales must be in
excess of - * - of the prior calendar year Net Sales. Calendar 2009, 2010 and
2011 Net Sales must be in excess of - * - of the prior calendar year Net Sales.
If the Licensee shall fail to meet these obligations, then the Licensor
may terminate this Agreement as provided in Section 9.2 hereof.
5.5 Renewal Minimum Net Sales. The term of this License begins January
1, 2000 and the initial term of this License ends December 31, 2004. After
December 31, 2004, the License will, unless Licensee's notice of intent not to
renew is received by Licensor by July 1, 2004, renew for an additional four (4)
years if, but only if, the Licensee has generated the Net Sales in the calendar
year 2004 in excess of - * - divided between Domestic Net Sales and
International Net Sales in the same ratio as
* Pursuant to a request for confidential treatment, this information has been
omitted and filed separately with the Securities and Exchange Commission.
30
actual Net Sales during calendar year 2002, or as shall otherwise be mutually
agreed by the parties. If the Licensee has met the minimum renewal Net Sales
addressed above, this Agreement shall be renewed until December 31, 2008. After
December 31, 2008, the License will, unless Licensee's notice of intent not to
renew is received by Licensor by July 1, 2008, renew for an additional three (3)
years if, but only if, the Licensee shall have generated Net Sales in the
calendar year 2008 in excess of - * - divided between Domestic Net Sales and
International Net Sales in the same ratio as Net Sales during calendar year 2006
or as mutually agreed. Should the Licensee elect to renew the License but fail
to meet the required minimum net sales for the years 2004 or 2008, this
Agreement shall remain in effect, in the sole discretion of the Licensor, for a
period not to exceed one calendar year after January 1, 2005, or January 1, 2009
respectively. If Licensee elects not to renew this Agreement, Licensee shall not
be required to pay any royalties to Licensor for any periods following the
termination of this Agreement.
In the event either of the renewal Net Sales minimums are not
obtained, Licensee shall have no right to renew this Agreement as of the
relevant dates.
5.6 Mulligan Provision for Minimum Guaranteed Sales. The actual Net
Sales may be less than minimum Net Sales set forth in Section 5.4 of this
Agreement for one Annual Period during each Renewal Term without causing a
default under this Agreement.
5.7. Method of Paying Royalties to Licensor. All Royalties due hereunder
shall be paid to the Licensor at P.O. Box. 968, Flagstaff, AZ 86002, in United
States dollars without any transfer charges. Licensor shall have the right to
require the Licensee to make payment to any bank designated by Licensor.
Licensor shall also have the right to require that payment be made by wire
transfer. If any payment is rejected by the Licensee's bank, the Licensor may
demand subsequent payments to be made by certified checks.
5.8. Penalty on Delinquent Payments. If the payment of any installment
of Royalties or any other fee due under this Agreement is delinquent, interest
shall accrue on the unpaid principal amount of such installment from and after
the date which is ten (10) calendar days after the date the same became due
pursuant to Article 5.1 at Ten Percent (10%) per annum.
5.9. Accounting. Licensee shall at all times keep an accurate account of
all operations within the scope of this Agreement and shall render a full
statement of such operations in writing to Licensor with each Royalty payment as
described in Section 5.2 hereof. Such statements shall include all aggregate
gross sales, trade discounts, merchandise returns, sales of miscuts, damaged
merchandise and net sales prices of all
* Pursuant to a request for confidential treatment, this information has
been omitted and filed separately with the Securities and Exchange Commission.
31
sales for the previous month. Such statements shall be in sufficient detail to
be audited from the books of Licensee. Once annually, which may be in connection
with the regular annual audit of Licensee's books as set forth in Section 5.10,
Licensee shall furnish an annual statement of the aggregate gross sales, trade
discounts, merchandise returns and net sales price of all Licensed Products made
or sold by Licensee certified by Licensee's independent accountant. Each monthly
financial statement furnished by Licensee shall be certified by Licensee's chief
financial officer or controller.
5.10. Licensor's Authority to Audit Licensee. Licensor and its duly
authorized representatives, on reasonable notice, shall have the right for the
duration of the Agreement and for three (3) years thereafter, during regular
business hours, to examine the books of account and records and all other
documents, materials, and inventory in the possession or under the control of
Licensee with respect to all subject matters relevant to this Agreement. All
such books of account, records and documents shall be maintained and kept
available by Licensee for at least the duration of this Agreement and for at
least three (3) years thereafter. Licensor shall have free and full access
thereto and shall have the right to make copies therefrom. If as a result of any
examination of Licensee's books and records it is shown that Licensee's payments
to Licensor hereunder with respect to any twelve (12) month period were less
than the amount which should have been paid to Licensor by greater than Two and
Three Quarters Percent (2-3/4%) of the amount which would have been paid during
such twelve (12) month period, Licensee shall, in addition to reimbursement of
any underpayment with interest from the date on which each payment was due at
the rate set forth in Article 5.2 hereof, promptly reimburse Licensor for the
cost of such examination. Additionally, if the examination shows that any
expenditure required to be made by Licensee has not been fully made by an amount
within five percent (5%) of the required amount, the Licensee shall immediately
make the required expenditure and shall reimburse Licensor for the costs of
examination. Licensee shall also provide Licensor each year with a copy of its
annual report as soon as it is made available to Licensee's shareholders.
5.11. Financial Statements. Licensee shall provide Licensor (a) a
certified, audited financial statement by an independent certified public
accountant to be delivered to Licensor within thirty (30) days of filing such
statement with the Securities and Exchange Commission and (b) a six (6) month
interim unaudited financial statement to be delivered to Licensor within thirty
(30) days of filing such statement with the Securities and Exchange Commission.
In the event no such statements are filed with the Securities and Exchange
Commission, Licensee shall nonetheless provide Licensor with such statements
every six (6) months.
32
ARTICLE 6: REPRESENTATIONS AND WARRANTIES
6.1. Express Warranties. Licensee hereby expressly warrants all of the
following:
A. That the Licensed Products shall be in material compliance
with the Specifications;
B. That the Licensed Products and the Work done comply with all
applicable laws in force on the date the Licensed Products are produced;
C. To the best of Licensee's knowledge, that no technology used
by Licensee except for any Licensed Intellectual Property infringe any patent,
copyright, trade secret, trademark, or other proprietary right of any third
party.
Licensee hereby expressly warrants, to the best of its knowledge, all of the
following:
D. It has the full right, power and authority to enter into this
Agreement and to perform all of its obligations hereunder;
E. It is financially capable of undertaking the business
operations which it conducts and of performing its obligations hereunder;
F. It is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its state of incorporation;
G. All necessary corporate acts have been effected by it to
render this Agreement valid and binding upon it.
6.2. Licensee's Obligations upon Breach of Warranty. Upon breach of the
warranty as defined in Section 6.1, Licensee shall use its best efforts to
remedy the problem or defect so as to bring the Licensed Product or Licensee's
operations into compliance with the warranty within a period of fifteen (15)
calendar days from the date Licensee is notified of or first becomes aware of
the breach. Such remedy by Licensee shall be without any additional charge to
the Licensor. After Licensee has submitted a proposed remedy under this Section,
Licensor shall then accept or reject the proposal. Should Licensor reject a
proposed remedy by Licensee under this Section, Licensor may at its option
require Licensee to make another proposal, or alternatively, Licensor may
terminate this Agreement and proceed as provided in Article 9. This Section
shall be deemed non-exclusive as to Licensor's rights upon breach of warranty by
Licensee, and upon any termination of this Agreement under this Section,
Licensor shall be free to pursue any legal remedies Licensor may have due to
breach of warranty.
33
ARTICLE 7: TERM
7.1. Term. Subject to termination as provided in this Agreement, the
Term of this Agreement shall commence on January 1, 2000. The initial term of
this Agreement is from January 1, 2000 through and including December 31, 2004
and can be renewed, if at all, only in the event Licensee has met the renewal
minimum net sales requirements specified elsewhere in this Agreement. The second
term of this Agreement commences on January 1, 2005 and runs through December
31, 2008 and can only be renewed for another term in the event Licensee has met
the renewal minimum net sales requirements specified elsewhere in this
Agreement. The third term of this Agreement shall be from January 1, 2009 to
December 31, 2011. The second and third terms of this Agreement shall be
referred to herein as "Renewal Terms." The initial term and all Renewal Terms,
if any, shall be referred to herein as the "Term."
ARTICLE 8: INSOLVENCY
8.1. Effect of Proceeding in Bankruptcy, Etc. If either party institutes
for its protection or is made a defendant in any proceeding under bankruptcy,
insolvency, reorganization or receivership law, or if either party is placed in
receivership or makes an assignment for benefit of creditors or is unable to
meet its debts in the regular course of business, the other party may elect to
terminate this Agreement immediately by written notice to the other party
without prejudice to any right or remedy the terminating party may have,
including, but not limited to, damages for breach to the extent that the same
shall be recoverable.
8.2. Rights Granted Are Personal to Licensee. The Licenses and rights
granted hereunder are personal to Licensee. No assignee for the benefit of
creditors, receiver, trustee in bankruptcy, sheriff or any other officer or
court charged with taking over custody of Licensee's assets or business, shall
have any right to continue performance of this Agreement or to exploit or in any
way use of Licensor's Trademark or other rights hereby licensed if this
Agreement is terminated pursuant to Section 8.1, except as shall be required by
law.
8.3. Financing Consent. During the term of this License Agreement, the
Licensor agrees to the following blanket consent for any lender of the Licensee
enabling such lender to sell any of the Licensed Products, in the event that a
lender forecloses on all or a portion of the assets of the Licensee in
connection with any loan or loans made to the Licensee, whether secured or
unsecured.
In this regard, the Licensor irrevocably and unconditionally
grants and agrees to grant to any future lender or lenders of the Licensor
(including any trustee or agent for such lenders), the right to sell the
Licensed Products only upon foreclosure by the lender or lenders on the
Licensee's inventory if the Licensor has not purchased the inventory as
provided in Section 9.6 hereof, provided such lender or lenders pay royalties
due as specified in this Agreement and the advertising percentage specified in
this Agreement, less any credit for any unused prepaid royalties previously paid
by the
34
Licensee. The right to sell the Licensed Products by the lender or lenders shall
exist for one hundred twenty (120) days after foreclosure commences (tolled for
any period during which any lender is prevented by law or court order from
exercising the right) subject to the terms of this Agreement. Such sales of the
Licensed Product shall be in a commercially reasonable manner as specified in
the Uniform Commercial Code. Nothing herein shall constitute an assumption, by
any foreclosing lender or lenders, of any obligation of the Licensee under this
Agreement beyond those payments specified in this Agreement. This blanket
consent shall terminate upon the termination for any reason of any lender's or
lenders' security interest in the Licensed Products. No further documentation
shall be required from the Licensor for the purposes of extending this Agreement
to a future lender or lenders of the Licensee.
8.4. Trustee in Bankruptcy. Notwithstanding the provisions of Section
8.2 above, in the event that, pursuant to the applicable bankruptcy law (the
"Code"), a trustee in bankruptcy, receiver or other comparable person, of
Licensee, or Licensee, as debtor, is permitted to assume this Agreement and does
so and, thereafter, desires to assign this Agreement to a third party, which
assignment satisfies the requirements of the Bankruptcy Code, the trustee or
Licensee, as the case may be, shall notify Licensor of same in writing. Said
notice shall set forth the name and address of the proposed assignee, the
proposed consideration for the assignment and all other relevant details
thereof. The giving of such notice shall be deemed to constitute an offer to
Licensor to have this Agreement assigned to Licensor or its designee for such
consideration, or its equivalent in money, and upon such terms as are specified
in the notice. The aforesaid offer may be accepted by Licensor only by written
notice given to the trustee or Licensee, as the case may be, to such party. If
Licensor fails to deliver such notice within the said fifteen (15) calendar
days, such party may complete the assignment referred to in its notice, but only
if such assignment is to the entity named in said notice and for the
consideration and upon the terms specified therein. Nothing contained herein
shall be deemed to preclude or impair any rights which Licensor may have as a
creditor in any bankruptcy proceeding.
ARTICLE 9: TERMINATION
9.1. Termination With Notice and 10 Day Opportunity to Cure.
A. If Licensee breaches any of the following obligations and does
not cure said breach within ten (10) days of notification of termination,
Licensor may terminate this Agreement:
(i) If Licensee shall engage in any Competitive Activity
described in Section 1.9(i);
35
(ii) If Licensee institutes proceedings seeking relief
under a bankruptcy act or any similar law, or otherwise violates the provisions
of Article 8 thereof;
(iii) If Licensee transfers or agrees to transfer
substantially all of its property, its shares of stock, or this Agreement;
(iv) If Licensee shall sell unapproved merchandise in
violation of this Agreement; or
(v) If Licensee shall, without the prior written consent
of Licensor, use Licensor's Trademark, on any products in a manner which
violates the terms of this Agreement.
B. Termination will become effective automatically unless
Licensee completely cures, to the reasonable satisfaction of the Licensor, the
breach within ten (10) calendar days of the giving of such notice.
9.2. Termination with Notice and 30-Day Opportunity to Cure.
A. If Licensee breaches any of its obligations or warranties
under this Agreement other than those specified in Section 9.1 above, and does
not cure or commence to cure said breach and proceeds diligently thereafter,
within thirty (30) days of notification of termination to Licensee specifying
the breach, Licensor may terminate this Agreement.
B. Termination will become effective automatically unless
Licensee completely cures, to the reasonable satisfaction of the Licensor, the
breach within thirty (30) calendar days of the giving of such Notice, or if the
breach cannot be cured within said thirty (30) day period and the Licensee shall
have commenced to cure the breach and proceeds diligently thereafter.
Termination based upon Licensee's failure to comply with the Guaranteed Minimum
Royalty set forth in Section 5.3 or the Minimum Net Sales set forth in Section
5.4 shall become effective thirty (30) calendar days after the giving of the
notice should the breach fail to be cured.
C. If such notice relates to product quality, Licensee shall not
ship the Licensed Products for which notice has been given, except as provided
herein, while cure is pending as set forth in Section 9.2(B).
9.3. Effect of Termination.
A. Upon notice of any termination and Licensee's failure to cure
or commence to cure and to proceed diligently thereafter, Licensee agrees that
he shall have no claim for damages (including without limitation loss of
anticipated profits) on account thereof. The sole right and remedy of Licensee
shall be payment as described below.
36
Upon receipt of any such notice of termination and Licensee's failure to cure or
commence to cure and to proceed diligently thereafter, Licensee shall take steps
to mitigate any losses and, unless the notice requires otherwise, work with
Licensor to fill outstanding orders and otherwise maintain the quality and
goodwill associated with, inter alia, Licensor's Trademark. Upon notice of
termination and Licensee's failure to cure or commence to cure and to proceed
diligently thereafter, Licensor, at its option, shall be permitted to actively
participate in, and, if Licensor deems reasonably necessary to protect such
quality and goodwill, direct the operations of Licensee solely with respect to
any further sale or disposition of Licensed Products. Without limiting the
generality of the foregoing, any notice by Licensor regarding termination of
this Agreement may require that Licensee:
(i) Immediately discontinue work on the Licensed
Products;
(ii) Provide Licensor with the right to conduct a
physical inventory of the Licensed Products in Licensee's possession or control;
(iii) Place no further orders or subcontract for
equipment, materials, services or facilities, other than as may be necessary or
required for completion of such portion of work under this Agreement that is in
process or that is not terminated;
(iv) Promptly make every reasonable effort to obtain
cancellation upon terms satisfactory to Licensor of all orders and subcontracts
to the extent they relate to the performance of work terminated, or assign to
Licensor those orders and subcontracts, and revoke agreements specified in such
notice;
(v) Assist Licensor, as specifically requested, in the
maintenance, protection and disposition of property acquired by Licensor under
this Agreement;
(vi) Submit to Licensor a final report describing in
detail all Work that has been completed, all Work in progress, the state of
development of the Licensed Products, and all Resultant Intellectual Property;
and
(vii) Deliver to Licensor, or dispose as Licensor shall
direct, all materials, supplies, or work in progress in respect of this
Agreement and all documents, media and things, relating, referring to or
comprising confidential information and/or Resultant Intellectual Property.
B. On the termination of this Agreement for any reason whatsoever
all of the rights granted to Licensee under this Agreement shall immediately
terminate and revert to Licensor; all Royalties on sales theretofore made shall
become immediately due and payable; Licensee shall immediately discontinue all
use of the Licensed Marks, Licensed Patents, Licensor's Trade Dress and all
other Technology and Intellectual Property rights hereby granted. Licensee shall
no longer use the Licensor's Trademark,
37
any variation, imitation or simulation thereof, or any of the Licensed Marks or
Licensor's Trade Dress, used in connection with sale of Licensed Products;
Licensee will promptly transfer to Licensor, at a price equal to Licensee's
actual cost, any registrations or trademark applications and rights with regard
to any trademark used in connection with Licensed Products or other of
Licensor's Products which it may have possessed at any time; Licensee shall
deliver to Licensor, at a price equal to Licensee's actual cost, all sketches,
designs, and the like in its possession or control, designed or approved by
Licensor, and all Packaging and Advertising materials in Licensee's possession
or control; if Licensor does not want Licensee's Packaging and Advertising,
Licensee shall destroy those materials under the supervision of Licensor, and
Licensee shall supply to Licensor a certificate of full destruction of all such
materials signed by a duly authorized officer of Licensee. Licensee shall
further transfer title and deliver to Licensor in the manner, time, and extent
directed by Licensor, at a price equal to Licensee's actual cost, work in
progress, completed articles, spare parts, documentation, drawings, client
lists, and other property necessary or helpful to Licensor in completing work in
progress and distribution of finished and future Product.
C. Upon Licensee's complete performance of the obligations set
forth in this Article 9, Licensor will pay to Licensee an amount determined in
accordance with the following, without duplication of any item:
(i) All amounts due and not previously paid to Licensee
for work completed in accordance with this Agreement prior to notice of
termination, and for work thereafter completed as may be specified in such
notice;
(ii) The cost of settling and paying claims arising out
of the termination of work under sub-contracts or orders as provided above in
this section;
(iii) The reasonable costs arising out of assisting
Licensor in the maintenance, protection and disposition of property acquired
under this Agreement; and
(iv) Any other reasonable costs incidental to such
termination of work.
9.4. Mistaken Termination for Cause. If after notice of termination of
this Agreement under the provisions set forth in Sections 9.1 or 9.2, it is
determined for any reason that Licensee was not in default under that provision
or that default was excusable under the provisions of this Agreement, this
Agreement shall be reinstated and the Licensee's sole remedy shall be the same
as if the notice of termination had been issued pursuant to Section 9.3(c).
9.5. Force Majeure. In the event that either party is unable to perform
any of its obligations under this Agreement or to enjoy any of the benefits of
this Agreement because of a Force Majeure Event, the party who has been so
affected shall timely give notice to the other party and shall use its
reasonable efforts to do everything reasonably
38
possible to resume performance. Upon receipt of such notice, all obligations
under this Agreement shall be temporarily and immediately suspended. If the
period of non-performance exceeds sixty (60) calendar days from the receipt of
notice of the Force Majeure Event, the party whose ability to perform has not
been so affected may, by giving written notice, contact another entity to
perform the affected obligations until such time as performance can be resumed.
If the period of non-performance exceeds six (6) months, the party whose ability
has not been so affected may, by written notice, terminate this Agreement in the
manner specified in Section 9.3. If during the term of this Agreement, there are
promulgated any amended or new laws, ordinances, codes or regulations not known
or foreseeable at the time of signing of this Agreement which affect the cost or
time for performance of this Agreement, Licensee shall timely notify Licensor in
writing and submit reasonably detailed documentation of such effect in terms of
both time and cost of performing the Agreement. Upon concurrence by Licensor as
to the effect of such amended or new laws, ordinances, codes or regulations, an
equitable adjustment in the compensation and time of performance will be made by
an appropriate Change.
9.6. Inventory Upon Termination. Upon the termination of this Agreement
for any reason whatsoever, Licensee shall immediately deliver to Licensor an
Inventory Schedule. The Inventory Schedule shall be prepared as of the close of
business on the date of such termination and shall reflect the landed, duty paid
cost of each such item, as accounted for in Licensee's books according to GAAP.
Notwithstanding the other provisions of this Article 9, Licensor thereupon shall
have the option exercisable by notice in writing delivered to Licensee within
thirty (30) calendar days after its receipt of the complete Inventory Schedule,
to purchase any or all of the Inventory for which the Licensee does not have
orders for an amount equal to the landed, duty paid cost. If Licensor sends such
notice to Licensee, Licensor may collect and pay for the Products within thirty
(30) calendar days. At the end of such period, any Licensed Products remaining
in Licensee's possession shall be destroyed or disposed of in a fashion approved
in writing by Licensee.
9.7. Post-Termination Transition and Freedom to License. In the event of
termination of this Agreement, Licensor shall be free to license to others the
rights herein licensed, and all such licenses with respect to the manufacture
and sale of Licensed Products in the Territory shall immediately become
non-exclusive. In order to maintain the continuity of Licensor's licensing and
marketing programs and the goodwill associated with the Licensed Marks, upon
termination, Licensor shall have the option to immediately replace Licensee by
executing new license agreements with third parties and take steps to commence
sales of Licensed Products before the termination of the License without any
liability to Licensor.
9.8. Equitable Relief. Notwithstanding the arbitration provisions of
Section 15.9, Licensor and Licensee shall be entitled to equitable relief by way
of temporary and permanent injunction and such other and further relief as any
court with jurisdiction shall deem just and proper.
39
9.9. Termination Without Prejudice. Termination of this Agreement
pursuant to and conditions hereof shall be without prejudice to the terminating
party's other rights and remedies at law or in equity.
9.10. Waiver. It is expressly understood that under no circumstances
shall Licensee be entitled, directly or indirectly, to any form of compensation
or indemnity from Licensor as a consequence to the termination of this
Agreement, whether as a result of the passage of time, or as the result of any
other cause of termination referred to in this Agreement. Without limiting the
generality of the foregoing, by its execution of the present Agreement, Licensee
hereby waives any claim which it has or which it may have in the future against
Licensor arising from any alleged goodwill created by the Licensee for the
benefit of Licensor or from the alleged creation or increase of a market for
Licensed Products.
9.11. Noncompetition by Licensee. During the performance of this
Agreement and for two years thereafter, Licensee agrees not to engage in
Competitive Activity or to perform the same or similar services as rendered
hereunder for any person or entity other than Licensor, and not to take any
employment or engagement in which Licensee would reasonably be expected to call
upon, use or disclose any rights hereby licensed unless, prior to proposing to
perform such services or take such employment, Licensee shall: (a) provide
written notice to Licensor identifying all parties and locations involved; and
(b) respond in writing, with particularity, to any written inquiry by Licensor
mailed within ten (10) calendar days of receipt of said written notice regarding
the presence or absence of particular features or concepts in the proposed
services or employment; and (c) deliver to Licensor a written certification
signed by an authorized officer of Licensee that no Confidential Information
shall be disclosed or used, and that Licensee's activities shall not violate any
provision of this Agreement.
ARTICLE 10: INDEMNIFICATION
10.1. Licensee. Licensee shall indemnify and hold Licensor and its
officers, agents and employees harmless from and against any and all liability,
claims, causes of action, suits, damages and expenses, including reasonable
attorneys' fees and expenses in actions involving third parties or between the
parties hereto, which they, or any of them are or become liable for, or may
incur, or be compelled to pay by reason of any acts, whether of omission or
commission, that may be committed or suffered by Licensee or any of its
servants, agents or employees in connection with Licensee's performance of this
Agreement in connection with Licensed Products manufactured by or on behalf of
Licensee or otherwise in connection with Licensee's business. This
indemnification shall apply regardless of whether the claim asserted alleges the
active or passive negligence or participation of Licensor. If any action or
proceeding shall be brought or asserted against Licensor in respect to which
indemnity may be sought from Licensee under this Section, Licensor shall
promptly notify Licensee thereof in writing, and Licensee shall assume and
40
direct the defense thereof, however, Licensor shall have the right to reasonably
approve the selection of legal counsel hired by Licensee to defend such claim,
and if Licensor does not reasonably approve of Licensee's selection, Licensor
has the right to hire separate legal counsel at Licensee's expense. If Licensor
approves of Licensee's selection of counsel, nonetheless, Licensor may
thereafter, at its own expense, be represented by its own counsel in such action
or proceeding.
10.2. Indemnity Against Liens. The Licensee shall pay for all labor,
materials, and services furnished in connection with the performance of the Work
covered by this Agreement, including all costs and expenses for which a lien
might be imposed on property of Licensor. The Licensee shall indemnify and hold
Licensor harmless from all liability, damage, cost, or expense, including, but
not limited to attorneys' fees, by reason of any lien filed against property of
Licensor incidental to the performance of the Work covered by this Agreement.
The Licensee shall furnish Licensor on written demand satisfactory evidence that
all such costs and expenses have been paid. In case such evidence is not
furnished, Licensor may retain, from money due the Licensee, such amount as in
Licensor's opinion may be necessary to pay such costs and expenses, until
satisfactory evidence is furnished that all such liabilities have been
discharged. The obligations imposed by this Section shall not be limited by any
other provision in this Agreement.
10.3. Third Party Rights to Technology. Licensee shall indemnify and
hold Licensor harmless from any loss, liability and/or costs, including
reasonable attorneys' fees, arising out of or existing because of the claim that
the use or sale of any technology used by Licensee (except for any Licensed
Intellectual Property registered in Licensor's name prior to the execution of
this Agreement), or product embodying the technology delivered by Licensee
constitutes an infringement or violation of any patent, trademark, copyright,
trade secret or other proprietary rights.
Licensor shall indemnify and hold Licensee harmless from any
loss, liability and/or costs, including reasonable attorneys' fees, arising out
of or existing because of the claim that the use or sale of any technology used
by Licensor, or product embodying the technology delivered by Licensor
constitutes an infringement or violation of any patent, trademark, copyright,
trade secret or other proprietary rights.
10.4. Independent Covenants. The foregoing indemnity provisions of
Sections 10.1, 10.2, and 10.3 hereof shall be deemed independent covenants, and
shall survive completion of o\r any termination or cancellation of this
Agreement, or any claimed breach thereof. The prevailing party shall be entitled
to be reimbursed by the other party for all expenses, including reasonable
attorneys' fees paid or otherwise incurred to enforce the provisions of this
Section.
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ARTICLE 11: INSURANCE
11.1. Insurance to Be Obtained by Licensee.
A. Licensee shall maintain in effect at all times during the term
of this Agreement insurance, including without limitation workers' compensation,
comprehensive general liability, product liability, property damage, advertising
liability, and automobile liability insurance against all losses, claims,
demands, proceedings, damages, costs, charges and expenses for injuries or
damages, costs, charges and expenses for injuries to any person or property
arising out of or in connection with this Agreement which are the result of the
fault or negligence of Licensee, its agents and sublicensees. Such insurance
shall be for coverage on an occurrence basis in the amount of not less than
Three Million Dollars ($3,000,000) for personal injury and One Million Dollars
($1,000,000) for property damage. Licensee shall also provide insurance covering
theft and destruction of Licensed Products.
B. The specification of liability coverages and limits herein
shall not relieve or limit the responsibilities of Licensee under this
Agreement.
C. Licensee is solely responsible for determining whether
additional coverage or greater limits are required to protect Licensee's
interests from hazards or claims in excess of the specified minimum insurance.
Where special or unusual hazards peculiar to the Work are foreseeable, Licensee
shall take such steps as are necessary to insure itself against such hazards and
be responsible for any damage which results from the occurrence of such hazards
in connection with this project prior to the start of Work by Licensee.
D. Each policy of insurance shall contain a clause which provides
in the event of cancellation or expiration of the policy or of any change in the
policy of any nature, thirty (30) calendar days advance written notice will be
sent to Licensor.
E. Licensee shall deposit with Licensor a complete package of
certificates of insurance signed by the insurer. None of the insurance required
hereunder shall be canceled, changed or allowed to lapse until the Agreement has
been completed
F. Licensor and Teva Sport Sandals, Inc. or its successor or
assign shall be named as additional insureds.
ARTICLE 12: OWNERSHIP OF INTELLECTUAL PROPERTY AND TECHNOLOGY
12.1. Ownership of Copyright. Licensee hereby agrees that any Copyright
which shall have arisen under this Agreement or has arisen in the past in any
sketch, design, print, package, label, tag or the like, or used with the
Licensor's Trademark or on Licensed Products are the property of Licensor.
Licensee shall use its reasonable efforts to not, at any time, do any act or
thing which shall adversely affect any rights of Licensor's rights in such
sketches, designs, prints, packages, labels, tags and the like, and
42
shall, at Licensor's request, do all things reasonably required by Licensor to
preserve and protect said rights.
12.2. Rights to the Trademark and Other Intellectual Property. Licensee
acknowledges the great value of the goodwill associated with the Licensed
Intellectual Property hereby licensed and/or used in connection with Licensed
Products. Licensee will use its reasonable efforts to not, at any time, do, or
otherwise suffer to be done any act or thing which shall, in any way, adversely
affect any of Licensor's rights in any Licensed Marks or any registrations
thereof or other intellectual property which, directly or indirectly, shall
reduce the value of the Licensed Marks or detract from its reputation. Licensee
shall not file or prosecute a trademark or service mark application or
applications to register any trademark in respect of the Licensed Products. The
restrictions of this Section similarly apply to Copyrights, patents, and other
Intellectual Property. Licensee hereby agrees to promptly disclose each
application for registration of Intellectual Property related to the Licensed
Products and hereby assigns legal ownership in any and all such trademarks or
other Intellectual Property for which Licensee has filed applications or
received registrations and shall have ownership in these corrected immediately
by executing assignments to Licensor of such intellectual property.
12.3. Licensee's Use of Trademarks and Copyrights Inures to Licensor's
Benefit. All uses of the Licensed Intellectual Property by Licensee in
advertising, promotions, labels and packaging are used by Licensee for the
account and benefit of the Licensor. The use of any such rights pursuant to this
Agreement shall be for the benefit of Licensor and shall not vest in Licensee
any title to or right or presumptive right to continue such use.
12.4. Licensee to Perform a Clearance Search of All Trademarks Used in
Connection with Licensed Products. All trademarks that Licensee proposes to use
on Licensed Products shall receive Licensor Approval. Licensor shall not grant
approval unless Licensee provides evidence that the proposed trademarks do not
infringe upon the rights of third parties. This shall be evidenced by a
trademark search printout performed on a known trademark database, such as
Thomson & Thomson, and a clear explanation, through opinion of counsel, of how
Licensee concluded from the search that such a trademark would not infringe the
rights of third parties. Notwithstanding any search, if Licensee submits a
trademark to Licensor pursuant to Article 12.4 for use in connection with
manufacture or sale of the Licensed Products, Licensee shall hold Licensor free
from liability and shall indemnify Licensor for any and all damages, costs, and
the like, including reasonable attorneys' fees.
12.5. Licensee Shall Not Attack Licensor's Title in Intellectual
Property. Licensee shall not, during the term of this Agreement or thereafter,
(a) attack Licensor's title or rights in and to Licensed Intellectual Property
used in connection with Licensor's Products in any jurisdiction or attack the
validity of this License or (b) contest the fact that Licensee's rights under
this Agreement are solely those of a licensee, manufacturer
43
and distributor and such rights shall cease upon termination of this Agreement.
The provisions of this Section shall survive the termination of this Agreement.
12.6. Molds and Designs Used Only on Licensed Products. Licensee
acknowledges and agrees that Licensor owns or shall own all rights in designs
relating to the Licensed Products, regardless of whether such designs were
created by Licensor or created on behalf of Licensor by the Licensee. Licensee
agrees to make, procure and execute all assignments necessary to vest ownership
of design rights in Licensor. Licensee shall place appropriate notices,
reflecting ownership by Licensor, on all the Licensed Products, packaging, tags,
labels and advertising and promotional materials. Licensee shall not do or allow
to be done anything which may adversely affect any of Licensor's design rights.
All designs used by Licensee for the Licensed Products shall be used exclusively
for the Licensed Products and may not be used under any other trademark or
private label without the prior written consent of Licensor. Licensee shall
disclose and freely make available to Licensor any and all developments or
improvements it shall make relating to the Licensed Products and to their
manufacture, promotion and sales, including, without limitation, developments
and improvements in any machine, process or product design that may be disclosed
or suggested by Licensor or regarding any patent or trademark which Licensee is
entitled to utilize.
12.7. Assignment of Rights to Resultant Intellectual Property. Licensee
hereby assigns, and agrees to assign to Licensor all right, title and interest
in the United States and all foreign countries in and to all Resultant
Intellectual Property, including any and all patents, patent applications,
copyright registrations, design registrations, trademarks, trade secrets, rights
under international treaties, or any other protection available for Resultant
Intellectual Property in any country. Licensee agrees to obtain valid and
enforceable agreements from its employees and any subcontractor obligating
assignment of ownership rights in Resultant Intellectual Property from such
employees or subcontractors to Licensee, which ownership shall then pass to
Licensor under this Section.
12.8. Licensee's Duty to Preserve Resultant Intellectual Property.
Licensee shall not at any time take, induce or permit any action or omission
inconsistent with or tending to impair or diminish Licensor's rights in and to
the Resultant Intellectual Property. Licensee shall not at any time use any
Resultant Intellectual Property for any purpose whatsoever other than in
connection with tasks or services performed on behalf of Licensor.
12.9. Licensor's Rights in Licensee's Technology. With respect to all
Technology delivered to Licensor or otherwise embodied in any Licensed Product
which does not embody or comprise Resultant Intellectual Property, Licensee
hereby grants Licensor a royalty-free, perpetual, non-exclusive license, with
rights of sublicense and assignment under any and all intellectual property
rights, including patents, copyrights, trademark and trade secret rights which
Licensee may own to make, use, duplicate and sell such Technology.
44
ARTICLE 13: INFRINGEMENT OR DILUTION
13.1. Notice of Infringement. Licensee shall notify Licensor in writing
of any infringement, dilution or imitation of the Licensed Intellectual Property
by any third party promptly when the same shall come to the attention of the
Licensee. Licensor will thereupon take such action as it deems advisable, and
Licensee shall cooperate with and assist Licensor in the prosecution of any such
suit, as Licensor may reasonably request. In no event, however, will Licensor be
required to take any action if it deems it inadvisable to do so and Licensee
will have no right to take any action without the prior written consent of
Licensor.
13.2. Licensor Control Over Litigation. Licensor shall have full control
over any such action, including, without limitation, the right to select
counsel, to settle on any terms it deems advisable in its discretion, to appeal
any adverse decision rendered in any court, to discontinue any action taken by
it, and otherwise to make any decision in respect thereto as it deems advisable
in its discretion. Licensor shall bear all reasonable, out-of-pocket expenses
connected with the foregoing. Any recovery as a result of such action shall
belong solely to Licensor, and Licensee shall have no claim to any part of such
recovery. Licensee may, upon receiving the prior written consent of Licensor,
participate in any action taken by or proceeding instituted by Licensor through
separate counsel of Licensee's own choosing and at Licensee's sole expense,
provided that Licensor at all times shall retain full control over such action
in accordance with this Section.
ARTICLE 14: CONFIDENTIALITY
14.1. Non-disclosure and Use by Licensee. Licensee shall not, at any
time, disclose any Confidential Information or use any Licensor's Confidential
Information other than as required to perform the tasks for which Licensee is
engaged by Licensor without Licensor Approval. Similarly, Licensor shall respect
the confidentiality and not use or disclose, other than to carry out the terms
hereof, Licensee Confidential Information.
14.2. Delivery by Licensee of Confidential Information. Upon completion
of this Agreement or upon request by Licensor, which request shall be made no
more frequently than monthly, Licensee shall deliver to Licensor any of
Licensor's Confidential Information reasonably requested by Licensor, as well as
all documents, media, items and technology comprising, embodying or relating to
the Confidential Information, as well as any other documents or things belonging
to Licensor that shall be in Licensee's possession. Licensee shall deliver to
Licensor all copies of documents, data, and the like embodying such Confidential
Information, and shall not take or retain any copies thereof, except as
authorized and under conditions set forth by Licensor.
45
14.3. Secrecy. Licensee shall not release any information concerning the
Work or any part thereof, including the price paid for the Work, in the form of
advertising or publication, including news releases or professional Articles,
without Licensor's prior written permission, except as is required by law.
ARTICLE 15: OTHER PROVISIONS
15.1. Severability. If any provision or any portion of this Agreement
shall be construed to be illegal, invalid or unenforceable, such provision shall
be deemed stricken and deleted from this Agreement to the same extent and effect
as if never incorporated herein. All other provisions of this Agreement and
remaining portion of any provision which is not found to be illegal, invalid or
unenforceable in part shall continue in force and effect.
15.2. Non-waiver. No waiver, modification or cancellation of any term or
condition of this Agreement shall be effective unless executed in writing by the
party charged therewith. No written waiver shall excuse the performance of any
acts other than those specifically referred to herein. The fact that the
Licensor has not previously insisted upon the Licensee expressly complying with
any provision of the Agreement shall not be deemed to be a waiver of the
Licensor's future right to require compliance in respect thereof. Licensee
specifically acknowledges and agrees that the prior forbearance in respect of
any act, term or condition shall not prevent Licensor from subsequently
requiring full and complete compliance thereafter.
15.3. Permission Needed to Assign or Sublicense. Licensee shall not
assign or sublicense this Agreement or any interest therein, or any part of this
Agreement without Licensor's prior written consent. However, Licensor may assign
its rights and obligations under this Agreement to any successor without the
consent of Licensee, so long as such successor agrees to be liable for any
obligations, financial or otherwise, arising from this Agreement.
15.4 Form of Notice to Parties. All notices hereunder shall be in
writing and given by registered mail, traceable overnight express mail such as
Federal Express, facsimile, cable or telex addressed to the parties at the
addresses recited in this Agreement or to such other address of which either
party shall advise the other in writing.
Notices will be deemed given on the date it is sent.
If to Licensor:
Mark Thatcher
P.O. Box 968
Flagstaff, AZ 86002
(Fax No.)
46
With copies to:
Charles F. Hauff, Jr., Esq./George H. Lyons
Snell & Wilmer
One Arizona Center
Phoenix, AZ 85004
John Kalinich
Teva Sport Sandals, Inc.
P.O. Box 968
Flagstaff, Arizona 86002
If to Licensee:
Deckers Outdoor Corporation
495-A South Fairview Avenue
Goleta, CA 93117
Attn: Douglas B. Otto
Facsimile #805-967-7862
With copies to:
Joseph E. Nida, Esq.
Nida & Maloney, P.C.
800 Anacapa Street
Santa Barbara, CA 93101
Facsimile #805-568-1955
15.5. Notice of Actions Being Brought. Licensee agrees to notify
Licensor immediately upon the commencement of any actions brought against
Licensee whose outcome may affect the rights of Licensor herein granted, and
Licensor shall have the right at its own expense to appear and defend such
actions.
15.6. Precedence. In the event of conflict between the terms of this
Agreement and any other document, the terms of this Agreement shall govern,
unless such other document expressly purports to modify this Agreement, and is
signed by the parties to this Agreement.
15.7. Survival of Obligations. The provisions of this Agreement, which
by their very nature survive final acceptance under this Agreement shall remain
in full force and effect after such termination.
15.8. Integration. This Agreement, and the appendices hereto, represent
the entire agreement between the parties respecting the subject matter hereof
and supersede all prior discussions, agreements and understandings of every kind
and nature between them. No modification of this Agreement will be effective
unless in writing, expressly purporting to modify this Agreement and signed by
the party against whom enforcement is sought.
47
15.9. Arbitration. All disputes, controversies and claims arising out of
or relating to this Agreement or concerning the respective rights or obligations
hereunder of the parties hereto except disputes, controversies and claims
relating to or affecting in any way Licensor's ownership of or the validity of
the Licensed Mark or any registration thereof, or any application for
registration thereof (hereinafter referred to as "Licensed Mark Disputes") shall
be settled and determined by arbitration in Phoenix, Arizona before the American
Arbitration Association in accordance with and pursuant to the then existing
Arbitration Rules. The arbitrators shall have the power to award fees and
expenses to any party in any such arbitration and the courts shall have similar
power with regard to injunctive relief sought by Licensor pursuant to Article
9.9 hereof. However, in any arbitration proceeding arising under this Agreement,
the arbitrators shall not have the power to change, modify or alter any express
condition, term or provision hereof in any respect, and to that extent the scope
of their authority is expressly limited. The arbitration award shall be final
and binding upon the parties and judgment thereon may be entered in any court
having jurisdiction thereof. The service of any notice, process or motion or
other document in connection with an arbitration under this Agreement or for the
enforcement of any arbitration award hereunder may be effectuated in the manner
in which notices are to be given to a party pursuant to this Agreement.
Notwithstanding the agreement to submit disputes to arbitration, a party shall
have the right of recourse to an appropriate court in a dispute where equitable
relief by way of an injunction may be available.
15.10. Jurisdiction. In the event that a court action becomes necessary,
the Licensor and Licensee consent to the jurisdiction of the courts of the State
of Arizona, including all Arizona State Courts and all Federal Courts of the
State of Arizona.
15.11. Applicable Law. This Agreement will be construed in accordance
with the laws of the State of Arizona.
15.12. Responsibility for Taxes. Licensee shall be responsible for the
payment of all taxes based on work performed or Products delivered pursuant to
this Agreement except for any tax based on Licensor's net income.
15.13. Headings. The headings of the Articles of this agreement are for
convenience only and shall in no way limit or affect the term or conditions of
this Agreement.
15.14. Remedies Cumulative. All remedies available under the law and/or
this Agreement for breach of this Agreement are cumulative and may be exercised
concurrently or separately, and the exercise of any remedy shall not be deemed
an election of such remedy to the exclusion of other remedies.
15.15. Independent Contractor Status. It is expressly understood that
Licensee and Licensor are contractors independent of one another, and that
neither has the authority to bind the other to any third person or otherwise to
act in any way as the
48
representative of the other, unless otherwise expressly agreed to in a writing
signed by both parties hereto. Licensee shall maintain complete control over its
employees and all of its subcontractors and assume liability for such actions as
would occur under the terms of this Agreement.
15.16. Rights of Licensor's Successors in Interest. The rights of
Licensor and the obligations of Licensee under this Agreement shall inure to the
benefit of Licensor's nominees, successors and assigns.
15.17. Construction. This Agreement has been submitted to the scrutiny
of, and has been negotiated by, all parties hereto and their counsel, and shall
be given a fair and reasonable interpretation in accordance with the terms
hereof, without consideration or weight being given to its having been drafted
by any party hereto or its counsel.
15.18. Limitation on Rights of Others. This Agreement is entered into
between the parties for the exclusive benefit of the parties. This Agreement is
not intended for the benefit of any creditor of any party or any other person.
Except to the extent provided by applicable statute, and then only to that
extent, no third party shall have any rights under this Agreement.
15.19. Limitations on Special Damages. Except as provided herein, no
party shall be liable to any other party by reason of this Agreement or any
breach or termination of this Agreement, for any incidental, consequential,
indirect, punitive, exemplary or special damages whether arising out of tort
(including negligence), product liability, or otherwise, and whether or not such
party has been advised of the possibility of such damage for any loss of
prospective profits or incidental, consequential indirect, punitive, exemplary
or special damages.
15.20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed on the 7th day of June, 1999.
Licensor:
/s/ Mark Thatcher
--------------------------------
MARK THATCHER
Licensee:
DECKERS OUTDOOR CORPORATION
By: /s/ Peter Benjamin
--------------------------------
Name: Peter Benjamin
Title: Chief Operating Officer