License Agreement - Kmart of Michigan Inc. and Kmart Corp.
LICENSE AGREEMENT
THIS AGREEMENT made and entered into from this 26th day of October
2000, by and between KMART OF MICHIGAN, INC. (Licensor"), a Michigan
corporation, having its sole place of business at 3250 West Big Beaver Road,
Suite 329, Troy, Michigan 48084, and KMART CORPORATION ("LICENSEE"), a Michigan
corporation, having its principal place of business at 3100 West Big Beaver
Road, Troy, Michigan 48084.
WITNESSETH
WHEREAS, Licensor is the owner of the trademarks and service marks and
registrations and applications therefor (hereinafter referred to as the "Marks")
as further described in Schedule A (hereinafter "Licensed Products and
Services") attached hereto and made a part hereof;
WHEREAS. The Marks have achieved widespread recognition among members
of the general public;
WHEREAS, Licensee acknowledges the above facts and desires to use the
Marks;
NOW THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties hereto agree as follows:
1. OWNERSHIP
Licensor warrants that to its knowledge it has good and valid
title to the Marks.
2 GRANT OF LICENSE
(a) Licensor hereby grants to licensee, and Licensee hereby
accepts, the exclusive right, license and privilege to use the
Marks in the United States and its territories upon the terms
and conditions set forth herein for the products and services
identified thereby in Licensor's federal registrations and
applications and as listed is Schedule A (hereafter, the
"Licensed Products and Services").
(b) Nothing contained in this agreement shall be constructed
as a assignment or grant to Licensee of any right, title, or
interest in the Licensed Properties, it being understood and
acknowledged by Licensee that all rights and goodwill relating
thereto are reserved by Licensor except for the license
granted hereunder expressly provided in this Agreement or
amendments hereto.
(c) Licensee acknowledges and affirms Licensor's ownership and
exclusive right, title, and interest in and to the Marks.
Licensee agrees that it will not directly or indirectly attack
or impair the title of Licensor to the Marks, the validity of
this Agreement, or any of Licensor's registration or
applications therefor.
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Licensee further agrees not to file any state or federal
applications for any mark or trade name featuring the Marks or
any term confusingly similar thereto.
3. TERM
The initial term of this Agreement shall be from the date
above written until January 1, 2010. This License Agreement
shall automatically renew at the end of such initial term and
any renewal term for successive ten (10) years terms, provides
that Licensee has not given to the other party written notice
of its intention not to renew at least six (6) months prior to
the expiration of the initial term or any renewal terms of
this Agreement.
4. LICENSE FEES
(a) In consideration of the rights granted hereunder, Licensee
shall pay to Licensor License Fees in accordance with the
following schedule:
With respect to Kmart stores and Big Kmart stores,
the License Fees shall be 1.1% of Net Sales of all
departments except Department 33, Pantry, in which
case the License Fees shall be 0.5% of Net Sales.
With respect to Super Kmart stores, the License Fees
shall be 0.8% of Net Sales of all departments except
Department 33, Pantry, in which case the License Fees
shall be 0.5% of Net Sales and Department 47,
Meldisco footwear, in which case the License Fees
shall be 1.1% of Net Sales. "Net Sales" for purposes
of this Agreement means gross sales of all
departments in Licensee's Kmart, Big Kmart and Super
Kmart stores in the United States and its
territories, weather such sales are for cash, credit
or deferred payment, without diminution for credit
loses, excluding only sales, use or excise taxes
passed on the customers for credit. License Fees
shall be paid on or before the 12th business day of
each fiscal quarter with respect to Net Sales during
the preceding quarter.
(b) Licensee agrees to keep adequate and complete records
showing the sales of Licensed Products or Services and to
annually prepare and submit to Licensor a report of the same
in form satisfactory to Licensor. Such records shall include
all information necessary to verify the total amount and
computation of License Fees due and paid hereunder, and shall
be open to inspection by Licensor upon reasonable notice
during Licensee's regular business hours, as Licensor deems
appropriate to confirm such data.
(c) In the event of any dispute between the parties regarding
the payment or computation of License Fees, Licensee, shall
upon request, produce to Licensor such audited and unaudited
records as may be necessary to verify the information, and
shall meet with Licensor, in a good faith effort to resolve
such dispute. In the event the parties are unable to resolve
such dispute, the parties shall instruct an independent
accounting firm as the parties may agree upon to conduct an
audit of
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the disputes License Fees. Such audit shall be made with
particular reference to all applicable terms of this Agreement
and the determination so made by such firm as to correct
computation of License Fees, shall be binding on both parties.
The cost of such audit shall be born equally by both Licensee
and Licensor.
5. QUALITY CONTROL
(a) Licensee warrants that all Licensed Products and Services
bearing the Marks shall be of a nature that shall be
consistent with the high standards of quality and excellence
established over the years with respect to the Marks. Licensee
shall comply to the Licensed Products and Services. The
initial quality standard for each Licensed Product and Service
shall be that currently maintained by Licensee. In the event
Licensee wishes to add a new product or service or change the
quality of an existing product or service, Licensee shall
advise Licensor of the description of such product or service
or the revised quality standard for an existing product or
service. Unless Licensor shall have advised Licensee in
writing of Licensor's objections to such new product or
service or changes to an existing product or service within
thirty (30) days of receipt, Licensor shall be deemed to have
approved such new product or service or change to existing
product or service.
(b) Licensee shall furnish or make available to Licensor a
reasonable number of representative samples of the Licensed
Product and Services to permit Licensor to determine that such
Licensed Products and Services meet the quality standards set
forth herein. The costs associated with the submission and
testing of such samples shall be borne by Licensee. Licensor
shall have the right to inspect Licensee's places of business
(during normal business hours) to assure compliance with the
quality standards established by Licensor. If so notified in
writing by Licensor, Licensee shall not offer or provide any
products or services whose nature or quality does not comply
with the quality standards established by Licensor.
(c) Licensee shall comply with such standards and instructions
as Licensor may establish from time to time with respect to
the style, appearance and manner of use of the Marks. Upon the
request of Licensor, copies or accurate reproductions of all
materials displaying the Marks such as labels, advertising and
promotional materials, letterhead, business cards, signs and
the like, shall be provided to Licensor for review as to form
and content. In accordance with Licensor's instructions,
Licensee shall cease or modify any use of the Marks that
Licensor deems not to be in compliance with the applicable
standards or instructions.
6. GOODWILL
(a) License recognizes the great value of the goodwill
associated with the Marks and acknowledges that the Marks and
all rights therein and goodwill
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attached thereto, inure to, benefit and belong exclusively to
Licensor. Licensee shall at all times recognize the validity
of the Mark and Licensor's right and title therein. Licensee
shall not, during the term of this Agreement or thereafter,
attached, impair or put in issue the title or any rights of
Licensor in and to the Marks or attack the validity of the
license granted herein.
(b) The parties understand and agree that Licensor's primary
objective in entering into this Agreement is the further
protection and enhancement of its uniquely valuable trademarks
and service marks. Accordingly, the parties agree that it
would be the result of a mutual mistake of fact if any
activity permitted or contemplated hereunder threatened to
injure or diminish the image or reputation of Licensor or any
of its trademarks or service marks; and Licensee covenants and
agrees that, notwithstanding any other provision f this
Agreement, it shall never take or continue any action which it
knows or has reason to know would result in or cause a boycott
of any product or service bearing Licensor or any of its marks
or products or services (such as boycott, threatened injury,
and diminishment hereafter referred to as "Injury to
Licensor"). In the event any action taken or continued by
Licensee results, or threatens to result, in Injury to
Licensor, Licensee agrees promptly to take all steps necessary
to avoid or stop the occurrence of such Injury to Licensor.
7. PROTECTION OF RIGHTS
(a) Licensee agrees to assist Licensor in the protection and
defense of any of Licensor's rights in the Marks, in filing
and prosecution of any trademark applications, renewals, and
the like, in the recording of this Agreement or any other
relevant agreements, and in doing of any other acts with
respect to the marks, including the prevention of the use
thereof by any unauthorized persons and that in the judgement
of Licensor may be necessary or desirable under any law,
regulation or decree of the United States.
(b) Licensee shall notify Licensor promptly in writing of any
infringements or imitations by other of the Marks which come
to Licensee's attention and Licensor shall have the sole right
to determine whether or not any action shall be taken on
account of any infringements or imitations. If Licensor so
desires it may prosecute any claims or suits in its own name
or join Licensee as a party thereto, all at Licensor's
expense.
8. INDEMNIFICATION
(a) Licensee agrees to indemnify and hold harmless Licensor
from any and all claims arising from the manufacture,
purchase, distribution, sale or use by Licensee of Licensed
Products or Services under this Agreement. This
indemnification shall include but is not limited to claims of
product liability or patent, copyright, trademark or trade
dress infringement or claims of unfair competition or trade
secret misappropriation which are not directly caused by the
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Marks. Licensor agrees to give Licensee prompt notice of such
claims and Licensee has the right and obligation, at its sole
expense, to defend such claims and shall be solely responsible
for satisfying any monetary judgements awarded or any
settlements entered into as a result of such claims. Licensor
may at its sole election participate in any such defense at
its own expense. In any event, Licensee agrees to keep
Licensor fully informed regarding such claims. Licensee shall
not, however, be liable for any actions, claims or cost
incurred solely from the exercise of the license rights
granted Licensee under this Agreement.
(b) Licensor agrees to indemnify and hold harmless Licensee
and its subsidiary companies from any and all claims of
patent, copyright, trademark or trade dress infringement or
claims of unfair competition or trade secret misappropriation
directly caused by Licensee's use of the Marks under this
Agreement. Licensee agrees to give Licensor prompt notice of
any such claims and Licensor has the right and obligation, at
its sole expense, to defend any such claims and shall be
solely responsible for satisfying any monetary judgement
awarded or any settlements entered into as a result of such
claims. Licensee may at its sole election participate in any
such defense at its own expense. In any event, Licensor agrees
to keep Licensee fully informed regarding such claims.
9. DISTRIBUTION
(a) In order to maintain and enhance the goodwill and image of
quality associated by the public with the Marks, Licensee
shall distribute or sell Licensed Products and render the
Licensed Services only from those establishments maintaining a
good business reputation and that are in no way associated, or
thought to be associated, with any illegal, vulgar, obscene,
immoral, unsavory or offensive activities.
(b) Licensee shall, throughout the term hereof, diligently
distribute and sell the Licensed Products and render the
Licensed Services. Nothing in this subparagraph, however,
shall restrict, limit or excuse the performance of any
obligations of Licensee set forth in this Agreement.
10. MANUFACTURERS
(a) Licensor acknowledges that Licensee shall obtain Licensed
Products from manufacturers of Licensee's own choice, or the
performance of Licensed Services from independent contractors
of License's own choice, and that the Marks shall be applied
or affixed to the Licensed Products by said manufacturers or
used rendering the Licensed Services, but only for sale or use
in Licensee's stores.
(b) Licensor may request and Licensee shall provide the
identity of each such manufacturer or independent contractor
used by Licensee.
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(c) Licensee shall be fully responsible to Licensor for the
conduct of those with whom Licensee contracts to insure
compliance with this Agreement.
(d) Licensee warrants and agrees that it shall establish and
maintain a program and policy of requiring Licensee's
suppliers of Licensed Products and Services, domestic and
foreign, to enter into and sign Licensee's "Purchase Order
Terms and Conditions" as attached hereto as Schedule B, or a
substantially equivalent agreement (hereinafter, "purchase
agreement"). Licensee shall use its best efforts to obtain a
signed purchase agreement from each supplier of Licensed
Products or Services prior to sale of such supplier's products
or services in Licensee's stores. Upon request of Licensor,
Licensee shall furnish copies of such purchase agreements to
Licensor.
11. TERMINATION
(a) Without prejudice to any other rights Licensor may have,
Licensor may terminate this Agreement, pursuant to
subparagraph (c):
(i) If Licensee shall fail to make any payments sue
hereunder or to deliver any of the statements
required hereunder;
(ii) If Licensee shall be unable to pay its
obligations when due, or shall make any assignments
for the benefit of creditors, or shall file any
petition under Chapter 11 of Title 11, United States
Code, or shall file a voluntary petition in
bankruptcy, or be adjudicated bankrupt or insolvent,
or if any receiver is appointed for its business or
property, or if any trustee in bankruptcy or
insolvency shall be appointed for Licensee;
(iii) If the quality of the Licensed Products or
Services should become less than that as established
and approved by Licensor; or
(iv) If Licensee shall fail to follow Licensor's
instructions regarding appropriate use of the marks
in connection with the Licensed Products or Services.
(b) In the event this Agreement is terminated for any reason
stated above, Licensee, its receivers, representatives,
trustees, agents, administrators, successors and/or assigns
shall have no right to and shall not sell, exploit or in any
way deal with, or in, any of the Licensed Products or Services
which are subject of this Agreement, or any carton, container,
sign, packaging or wrapping material, advertising, promotional
or display material pertaining thereto, except with and under
the written consent and instructions of Licensor.
(c) In the event of breach by Licensee of any provision of
this Agreement, Licensor shall give Licensee notice in writing
to rectify the breach within forty-five (45) days and if the
breach is not rectified within such period, Licensor shall
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be entitled to exercise any remedies it may have hereunder,
provided that if such breach is capable of being rectified but
incapable, for whatever reason, of being rectified within the
said forty-five (45) days, Licensor shall delay taking action
so long as Licensee shall have begun to rectify such breach
within such period and thereafter proceeds diligently to
complete the rectification of the breach and such breach is
rectified within a reasonable period thereafter.
(d) This Agreement may be terminated at any time by mutual
written agreement of the parties.
12. MARKINGS
Subject to Licensor's instructions and approval, Licensee
shall periodically inform all person from whom Licensee
obtains Licensed Products or Services of the appropriate
trademark and copyright notices to be used in connection with
the advertising, promotion, display and sale of the Licensed
Products and Services.
13. COMPLIANCE WITH APPLICABLE LAWS AND STANDARDS
Licensee warrants and agrees that all Licensed Products and
Services shall comply with al applicable federal, state and
local statutes, standards, regulations and guidelines
pertaining to such products or services.
14. NOTICES
All notices and statements to be given and all payments to be
made pursuant to this Agreement shall be sent by First Class
Mail, Postage prepaid, if to Licensee, to:
Kmart Corporation
3100 West Big Beaver Road
Troy, Michigan 48084
and if to Licensor, to:
Kmart of Michigan, Inc.
3250 West Big Beaver Road
Suite 329
Troy, Michigan 48084
15. CONTROLLING LAW
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The terms and provisions of this Agreement shall be
interpreted in accordance with and governed by the laws of the
State of Michigan. Further, the parties agree that the
jurisdiction and venue for any action brought by either party
shall be in any state or federal court within the Eastern
District of Michigan, Southern Division.
16. NO IMPLIED WARRANTIES
Neither party makes any warranty or representation to the
other except as specifically set forth herein.
17. NO FRANCHISE OR JOINT VENTURE
Nothing contained herein shall be construed to place the
parties in the relationship of franchiser/franchisee, partners
or joint ventures, it being agreed and understood as well that
each party is an independent contractor and is not an agent or
employee of the other party.
18. FURTHER DOCUMENTS
Each party shall, upon request, make execute and deliver such
documents as shall be reasonably necessary or take such action
as may be reasonably requested to fully implement and carry
out the purposes of this Agreement.
19. BINDING EFFECT
In the event of acquisition or merger, all convenants,
agreements, representations, warranties and indemnifications
in this Agreement by and on behalf of either of the parties
shall bind and inure to the benefit of their respective
successors and permitted assignments.
20. ASSIGNMENT
This License may be assigned or sublicensed, in whole or in
part, upon the mutual written consent of the parties. Licensor
reserves the right to approve or disapprove of any proposed
sublicensee and/or to impose additional conditions upon
sublicensees regarding control and use of the Marks.
21. WAIVER
Silence, acquiescence or inaction shall not be deemed a waiver
of any right of either party hereunder, and a waiver shall
only be effective if in writing signed by the party to be
charges and such waiver shall not be construed to contain a
continuing waiver of any other breaches of a same or similar
type of breach specifically set forth therein.
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22. SEVERABILITY
In the event that any part of this Agreement shall be deemed
to be invalid or illegal, then such invalid or illegal portion
shall, so far as possible, not affect the validity or legality
of the reminder of this Agreement, but the parties agree that
they shall meet and attempt to arrive at the modification of
any illegal or invalid part so as to render the same legal and
valid and within the keeping of the original tenor and spirit
of the agreement of the parties.
23. FORCE MAJEURE
Neither party shall be liable for any loss or damage caused by
failure or delay in the performance, observance or fulfillment
of any terms, obligations, provisions or conditions of this
Agreement (including but not necessarily limited to, the
failure to make any payments specifies herein) if such failure
or delay arises either wholly or in part from any cause
reasonably beyond the control of such party.
24. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the
parties with respect to the licensing of the Marks, and
supersedes all prior negotiations, understandings and
agreements, if any, between the parties. This Agreement may
only be amended or modified by written instrument signed by
the parties.
25. TITLES AND HEADINGS
Titles and headings herein are for convenient reference only
and are not part of this Agreement.
26. The parties agree that the terms and conditions of this
Agreement shall be confidential.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the dates indicated below by their duly authorized representatives.
KMART OF MICHIGAN, INC.
Date: __________________________ By: ______________________________________
Title: ___________________________________
KMART CORPORATION
Date: __________________________ By: ______________________________________
Title: ___________________________________