Intellectual Property License and Preservation Agreement - Martha Stewart and Martha Stewart Living Omnimedia Inc.
Intellectual Property License and Preservation Agreement
INTELLECTUAL PROPERTY LICENSE AND PRESERVATION AGREEMENT,
dated as of [ ], 1999 (the "Agreement"), by and between Martha Stewart
("Licensor") and Martha Stewart Living Omnimedia, Inc. (the "Company").
WHEREAS, Licensor is the exclusive owner of all right, title
and interest in and to (i) her image, signature, voice and likeness and goodwill
appurtenant thereto, (ii) certain rights of publicity in and to her name, image,
likeness, voice, signature and other elements of her persona and identity, (iii)
all rights in and to her name, other than those owned by the Company and (iv)
all common law and statutory rights in the foregoing (collectively, the
"Property");
WHEREAS, Licensor and a predecessor of the Company have
previously entered into certain agreements relating to the license of certain
intellectual property, including the Property (the "Predecessor Agreements");
and
WHEREAS, Licensor and the Company wish to terminate the
Predecessor Agreements and enter into this Agreement, on the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual premises set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. The Company's Acknowledgment of Licensor's Rights. The Company
hereby acknowledges that (a) Licensor exclusively owns all right, title and
interest throughout the world (the "Territory") in and to the Property, which
Property has intrinsic value, and (b) Licensor otherwise reserves all rights to
the Property except those specifically granted to the
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Company herein. Licensor represents and warrants to the Company that, as of the
date hereof and other than as set forth in the Predecessor Agreements, she has
the power and authority to license the Property on the terms and conditions of
this Agreement.
2. Use of the Property. (a) Subject to the terms and conditions of this
Agreement, Licensor hereby licenses to the Company the exclusive right to use,
and to authorize others to use, pursuant to the terms hereof, any of the
Property throughout the Territory on or in connection with any products and
services of the Company (such products and services (including the magazine
Martha Stewart Living) are referred to herein as the "Licensed Products" and the
"Licensed Services") during the term of this Agreement. During the term of any
license pursuant to this Agreement, the Company shall use commercially
reasonable efforts to preserve the historical goodwill of the Property, the
Licensed Products and the Licensed Services. All use of the Property and
Licensed Services shall inure solely to the benefit of Licensor. The use of the
Property by the Company or any sublicensee thereof shall be of a quality at
least substantially consistent with the Historical Standard (as defined below);
provided that any use of the Property by the Company while Licensor is in
Control (as defined below) shall be conclusively presumed to meet the Historical
Standard. The "Historical Standard," as of any date, shall mean the quality,
style and image of the Licensed Products or Licensed Services as the Property
has been used by the Company after February 3, 1997 and before the earlier of
(1) such date or (2) the date that Licensor ceases to be either (x) Chairman of
the Board or Chief Executive Officer or (y) the owner, directly or indirectly,
of in excess of 50% of the outstanding voting power of the Company (the
circumstances in either clause (x) or (y) being referred to as "Control," and
such period since February 3, 1997 being referred to as the "Historical
Period"). At any time that
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Licensor is not in Control (other than due to a Termination Trigger, as defined
in subparagraph (b) of this paragraph 2), (i) subject to Licensor's prior
written approval, which shall not be unreasonably withheld or delayed, the
Company may continue to use the Property in connection with new businesses not
planned or developed while Licensor was in Control, and (ii) the Company may
develop, use and register new derivatives of the Property not developed while
Licensor was in Control, so long as such new Derived Marks (as defined in
paragraph 5(a)) are substantially consistent with the image, look and goodwill
of the Property at the time when Licensor ceased to be in Control or to which
Licensor (or her legal representative, heirs or estate) have consented in
writing (such businesses and derivatives, "New Uses"). For clarity, New Uses
shall not include reasonable extensions of the lines of business in which the
Company is engaged or planned to be engaged at any time that Licensor is in
Control, which extensions shall be included in the license contained herein.
After Licensor's death or disability, the Company may use the Property for
additional New Uses, provided that any such businesses and derivatives are
substantially consistent with the image, look and goodwill of the Property at
the time at which Licensor ceased to be in Control, or to which Licensor (or her
legal representative, heirs or estate) have consented in writing. The Company
shall keep Licensor (or her legal representative, heirs or estate) advised of
any New Uses in a timely manner, so that such entity may confirm the Company's
compliance with the terms hereof. Subject to the terms and conditions of this
Agreement, Licensor hereby grants to the Company the exclusive right to use and
exploit in any and all media her name, image, likeness and voice as it appears
in any and all television programs and/or videos (including content developed
for the Company's on line businesses) produced by or for the Company (or its
predecessor), whether such television programs and/or videos were produced,
aired, marketed or sold prior to, on, or after, the date of this Agreement,
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provided that the grant in this sentence shall be limited to the use of such
programs and/or videos (i) substantially as a whole (it being acknowledged and
understood that the Company shall have the right to edit such programs and/or
videos for time and commercials and to add bumpers and introductions), (ii) as
part of a collection or similar compilation (such as "Best of" programs or
videos) of Licensor appearances relating to the business colloquially known as
of the date hereof as "Martha Stewart Living Television", (iii) in any other
manner used by the Company while Licensor was in Control or (iv) regarding
excerpts of such programs and/or videos, as part of the advertising, promotion
and/or marketing of either of the foregoing.
(b) The use of the Property by the Company pursuant to this Agreement
shall be on a royalty-free basis except as set forth in the next sentence of
this Section 2(b). In the event that Licensor's employment with the Company is
terminated by the Company without Cause, or Licensor terminates her employment
for Good Reason (each as defined in any employment agreement between Licensor
and the Company or its subsidiaries or, if there be no such agreement, the last
such agreement) (such a termination, a "Termination Trigger"), Licensor (or her
legal representative, heirs or estate, as the case may be) shall receive a
royalty in perpetuity of 3% of revenues (whether products, advertising,
publication sales, distribution fees or any other revenues) derived from
Licensed Products or Licensed Services of any kind, or which in any way include
any of the Property (including as a portion of any Derived Marks) (as defined in
paragraph 5(a)). Payment of the royalty amounts shall be accompanied by
reasonable written detail of the basis therefor. Such royalty amounts shall be
payable each calendar quarter, shall be subject to a late payment fee of the
greater of 10% or 2% over the Company's then-applicable cost of borrowing (such
amount, the "Interest Rate") in the event not paid within 60
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days of the end of the applicable quarter, Licensor (or her legal
representative, heirs or estate, as the case may be) shall have the right to
audit the royalty payments no more than once per year, and any underpayments
shall be immediately due and payable upon conclusion of the audit, plus interest
at the Interest Rate from the 60th day following the end of the applicable
quarter with respect to which the underpaid amount was due.
(c) Upon a Termination Trigger, the license provided herein shall
become non-exclusive with respect to all then-active businesses of the Company
and shall not include a license to use the Property in connection with New Uses.
Upon a Termination Trigger, the Company shall automatically be deemed to have
granted Licensor an exclusive perpetual, worldwide, royalty free license to use
the Property as, or as part of, a trademark, service mark or trade name, for any
goods or services Licensor desires, to the extent, if any, that said mark or
name is likely to cause confusion with or otherwise infringe or violate the
Company's rights in any mark or name the Company owns (the "Termination Trigger
License"). The Termination Trigger License shall include, without limitation,
the right to use the Property in connection with any goods or services which
compete directly with goods or services of the Company. Notwithstanding the
foregoing, Licensor shall not have the right to use any mark or name which is
identical to any mark or name owned by the Company. The quality of Licensor's
goods and services sold pursuant to the Termination Trigger License (the
"Licensor Goods/Services") shall be of at least the same kind of quality as
goods and services sold by the Company as of the date of the Termination
Trigger, and the Company shall have the right to take reasonable steps to
monitor the quality of the Licensor Goods/Services. Upon Licensor's reasonable
request, the Company shall use its commercially reasonable best efforts to
register trademarks and/or service
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marks which are the subject of the Termination Trigger License and shall take
reasonable steps to maintain any such registrations, in the Company's name and
at the Company's sole expense. The Company shall, at its expense, take any
action reasonably requested by Licensor to protect any trademark, service mark
or trade name which is the subject of the Termination Trigger License.
(d) Notwithstanding any other provision of this Agreement, but subject
to any employment or other agreement that Licensor may have from time to time
with the Company, the license provided herein shall not prohibit Licensor from:
(i) writing books, articles, movies, plays, scripts or other literary products
in areas other than businesses of the Company covered by this Agreement; (ii)
making speeches or public appearances (including on radio, television, in films
or over the Internet or similar media) for any purpose other than the promotion
of a product that competes in any material respect with the Licensed Products
and Licensed Services; (iii) using the Property to endorse products or engage in
business activities other than those covered by this Agreement, including the
exclusivity provisions hereof; (iv) becoming a director, employee, partner,
advisor, member, consultant or shareholder of, investor in or otherwise be
engaged with any other company, corporation, partnership or other entity; and
(v) activities which are incidental and do not significantly infringe on the
Company's rights hereunder.
(e) Any sublicense by the Company of the Property shall contain
protections with respect to the Property consistent with the terms hereof and
shall acknowledge that such sublicensee does not obtain any ownership rights in,
or goodwill to, the Property.
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3. Term. The term of this Agreement shall commence on the date of the
initial public offering of the Company's common stock and shall be perpetual,
subject to the provisions of this Agreement.
4. Quality, Style and Image of Products and Services Provided in
Connection with Property. At any time Licensor is not in Control, upon
reasonable request and to the extent necessary to protect Licensor's rights
under this Agreement, Licensor or her designee, successor or assignee shall have
the right to request and receive, at no cost to her, a sample of each Licensed
Product and Licensed Service, as well as a prototype of each type of all
promotional, advertising and marketing material used in connection therewith,
for the purpose of evaluating the quality, style and image of the same. In the
event that in Licensor's reasonable and good faith judgment, any Licensed
Product or Licensed Service fails (other than in an immaterial manner) to
satisfy the Historical Standard, then promptly upon written notice by Licensor
to the Company, the Company and Licensor shall cooperate in good faith to make
necessary appropriate changes (if any) in the quality, style or image of such
Licensed Product or Licensed Service to comply with the standard provided for
herein, provided that nothing in this sentence shall be deemed to affect the
substantive rights and obligations of the parties hereunder.
5. The Properties. (a) Subject to the terms hereof, including Section
2(a), the Company may combine any designation with the Property so as to form a
new trademark, service mark, trade name or company name (such names or Property,
the "Derived Marks"). The Derived Marks shall include any names or marks used by
the Company prior to the date hereof which include or are derived from any
Property. Subject to the terms of this Agreement, the Company shall be the owner
of the Derived Marks (but not of the Property incorporated therein).
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(b) The Company acknowledges that it is not, and will not become by
virtue of this Agreement, the owner of any right, title or interest in and to
the Property in any form or embodiment. The Company shall not at any time commit
any act anywhere in the world which would reasonably be expected to have a
material adverse effect on Licensor's rights in and to the Property, or any
registrations therefor or any applications for registration thereof. The Company
shall never challenge anywhere in the world Licensor's ownership of or the
validity of the Property, any application for registration therefor or any
rights therein or thereto, except as otherwise expressly provided herein.
(c) The Company, at its expense, shall file appropriate registrations
in its own name or in the name of a Company subsidiary of any Derived Marks so
as to preserve the goodwill thereof and Licensor's rights in the Property, shall
prosecute and defend such registrations and all common law rights in the Derived
Marks and Property consistent with good commercial practices, and shall use all
reasonable commercial efforts to defend and otherwise protect the Derived Marks
and the Property, provided that following a Termination Trigger, Licensor shall
have the right to reasonably direct and control such actions with respect to the
Property, in each case at the Company's expense. At the request of Licensor, her
legal representative, heirs or estate, and at the Company's expense, the Company
shall prosecute, including by filing lawsuits or other actions, any potential
infringement, dilution, libel, slander or other diminution in the goodwill or
other denigration of the Property by any third party, unless outside
intellectual property counsel to the Company advises that there is no reasonable
basis for such action. The Company shall be entitled to the proceeds, or other
legal remedies, of any such action. The Company may also institute such actions
where not requested by Licensor, her legal
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representative, heirs or estate, in the event the Company determines that the
protection of the Property or the Derived Marks reasonably requires such action.
In the event that the Company learns of any infringement or other violation of
rights in or to the Property, it shall promptly notify Licensor thereof.
(d) At Licensor's request, the Company shall execute all documents
reasonably requested by Licensor to confirm Licensor's ownership of rights in
and to the Property. The Company shall cooperate at Licensor's reasonable
request in connection with the filing and prosecution of applications to
register the Property and in connection with the maintenance and renewal of such
registrations as may issue. Licensor and the Company shall cooperate in good
faith, taking into account their respective interests in and rights to the
Property, to determine whether or not such applications are filed and prosecuted
and registrations are maintained. The Company shall pay all costs and expenses
of any such filings or proceedings.
(e) If one party hereto reasonably requests of the other to take an
action in connection with the foregoing, the other party shall cooperate in
connection with any such action, including, without limitation, by being a
plaintiff or co-plaintiff and by causing its officers, directors, and employees
to execute documents and to testify. If the Company desires to take action with
respect to a violation or infringement of the Property, it shall consult with
Licensor and shall not take actions which Licensor reasonably requests not to be
taken. All costs and expenses of the actions described in this paragraph shall
be borne by the Company.
(f) The Company shall take actions to protect the Derived Marks and the
goodwill related thereto consistent with the provisions of this Section.
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6. Indemnity. (a) The Company hereby saves and holds Licensor, her
heirs, estate, successors and assigns (the "Indemnified Parties") harmless of
and from, and indemnifies and agrees to defend them against any and all losses,
liability, damages and expenses (including, without limitation, reasonable
attorney's fees and expenses) which they may incur or be compelled to pay, or
for which they may become liable or be compelled to pay in any action, claim or
proceeding against her, for or by reason of any acts, whether of omission or
commission, that may be committed or suffered by the Company or any of its
officers, directors, employees, agents or servants in connection with the
Company's performance of its obligations under this Agreement, the use
(including sublicensing) of the Property and the Derived Marks or the breach by
the Company of any covenant contained herein. The indemnification rights
provided for herein shall also apply to any use by the Company of the Property
or any Derived Marks prior to the date hereof.
(b) In the event that an Indemnified Party receives notice of a claim
as to which indemnification is sought, such party shall reasonably promptly
notify the Company thereof, except that the failure to so notify shall not
exempt the Company from its obligations hereunder, except to the extent that
such failure has actually prejudiced the Company's legal position with respect
to the claim. Upon receipt of notice, the Company shall advise the Indemnified
Party that it has assumed the defense thereof. The Indemnified Party shall have
the right, at the expense of the Company, to retain legal counsel to participate
in and monitor the defense of the claim, provided that the Company shall have
the right to direct and control such defense. The Company shall not, without
Licensor's written consent, settle or compromise any claim or consent to entry
of any judgment which does not include as an unconditional term
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thereof the giving by the claimant or the plaintiff to the Indemnified Party of
a release from all liability in respect of such claim, nor shall the Company
settle or compromise any claim relating to the Property or the Derived Marks
which would limit the use by Licensor of the Property in any manner whatsoever
without Licensor's consent.
(c) In connection with any action by the Company to enforce, protect or
defend the Property or the Derived Marks, Licensor may elect to retain counsel
of her own choosing, in addition to Company counsel, in order to monitor and
participate in such action. The Company agrees to consider in good faith the
views of such counsel and to keep Licensor and such counsel reasonably informed
of the progress of any such action, subject to the preceding sentence. The
reasonable fees and expenses of such counsel shall be paid for by the Company.
(d) The Company shall maintain in effect at all times errors and
omissions insurance, in customary amounts taking into account the size of the
Company, the value of the Property and the obligations of the Company hereunder,
and shall name Licensor and the other Indemnified Parties hereunder as
beneficiaries thereof for purposes of this Agreement.
7. Certain Remedies. (a) The parties agree that the remedies at law for
any material breach or threatened material breach of this Agreement, including
monetary damages, are inadequate compensation for any loss and that the
nonbreaching party shall be entitled to seek specific performance of this
Agreement. The parties hereto waive any defense to such claim that a remedy at
law would be adequate. In the event of any actual or threatened material default
in, or material breach of, any of the terms hereof, the party aggrieved thereby
shall have the right
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to seeks specific performance and injunctive or other equitable relief with
respect to its rights hereunder, in addition to any remedies available at law.
In the event that a Termination Trigger has occurred and the
Company fails to pay the royalty amounts due for any two consecutive quarters,
Licensor, after providing the Company with 10 business days' notice, during
which the Company may cure such failures, shall have the right to terminate this
Agreement, subject to a three-month sell-off period for the Company with respect
to its then-current inventory. To the extent that the Company has entered into
any agreement with a third party that is not terminable on such notice and which
involves the Property or any Derived Marks, the Company shall seek to terminate
such agreement as soon as reasonably practicable and shall pay to Licensor a 10%
royalty on any revenues derived by the Company under such agreement from and
after the date of termination under this paragraph. Termination of this
Agreement for any reason shall not affect Licensor's right to royalties for any
prior period, nor the indemnity and other obligations of the Company hereunder.
8. Miscellaneous. (a) This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement executed
by the parties hereto or their respective successors and legal representatives.
(b) This Agreement is assignable by the Company to any successor of the
Company which acquires all or substantially all of the assets or businesses of
the Company or to an acquiror, whether by sale, merger, recapitalization or
other business combination, of all or substantially all of the assets or
businesses of the Company without Licensor's consent,
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provided that any such successor or assignee shall provide Licensor with a
written agreement that it shall be bound by all the terms of this Agreement.
This Agreement shall be assignable by Licensor to any entity controlled by her,
and inure to the benefit of and be binding upon the successors, legal
representative, heirs and assigns of Licensor. Except as specified in this
Section 8(b), this Agreement is not assignable.
(c) All notices and other communications under this Agreement shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Licensor:
Martha Stewart
48 Turkey Hill Road South
Westport, CT 06880
If to the Company:
Martha Stewart Living Omnimedia, Inc.
20 West 43rd Street
New York, New York 10036
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this Section. Notices and communications shall be effective when
actually received by the addressee.
(d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
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(e) Licensor and the Company acknowledge that this Agreement supersedes
any other agreement between them concerning the subject matter hereof, including
the Predecessor Agreements.
(f) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
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Martha Stewart
MARTHA STEWART LIVING OMNIMEDIA, INC.
By:
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Name:
Title:
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