License Agreement - Paris Hilton Entertainment Inc. and Parlux Fragrances Inc.
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and effective as of the
6th day of January 2005 (the "effective date"), by and between PARIS HILTON
ENTERTAINMENT INC., with offices at 250 North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210 ("Licensor"), and PARLUX FRAGRANCES, INC., a public Delaware
corporation with offices at 3725 S.W. 30th Avenue, Ft. Lauderdale, Fl. 33312
("Licensee") (together the "Parties").
W I T N E S S E T H :
WHEREAS, by way of a master license (the "Master License") from Ms.
Paris Hilton, an individual with a mailing address of c/o Ms. Wendy White, 250
North Canon Drive, 2nd Floor, Beverly Hills, CA 90210, to Licensor, Licensor has
the sole and exclusive rights to license the Licensed Mark (as hereinafter
defined) pursuant to the terms hereof; and,
WHEREAS, the Parties entered into a license agreement on May 19, 2004
in which Licensor granted Licensee the sole and exclusive rights to manufacture
and distribute fragrances and related products bearing the Licensed Mark( the
"Fragrance License"); and,
WHEREAS, Licensee is familiar with the business of manufacturing,
promoting and selling Articles (as hereinafter defined) and Licensee desires to
obtain from Licensor, the exclusive right and license to use the Licensed Mark
in the Territory (as hereinafter defined) for use on and in connection with the
manufacture, promotion, distribution and sale of Articles; and,
WHEREAS, Licensor is willing to grant the license pursuant to the terms
contained herein.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto covenant and agree as follows:
ARTICLE 1
DEFINITIONS
The following definitions shall apply:
A. TERRITORY. All countries of the world and all duty-free-shops,
ships, airplanes, military bases and diplomatic missions of every country of the
world, including the world-wide web.
B. ARTICLES. Men's and women's watches and other time pieces.
C. LICENSED MARK. The trademark PARIS HILTON and such other trademarks
as are, from time to time, agreed to by Licensor. Licensor has filed an
application to register the Licensed Mark for Articles: (i) in the United States
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Patent and Trademark Office on July 27, 2004, Serial No. 76/604,205; and, (ii)
in the 25 cooperating countries of Europe in a CTM application filed on October
4, 2004, Serial No. 4059631; and (iii) in Japan, Paris Hilotn word mark filed on
October 5, 2004 in International Classes 3 (perfume); 14 (watches and clocks)
and 25 (clothing); Application No. 2004-91278 in the name of Paris Hilton,
personally. The trademark examiner sent a priority action on December 9, 2004.
This letter did not mention any opposition by Genender Intl..
D. NET SALES. The sales price at which Licensee or any Subsidiary or
Affiliate (as hereinafter defined) bills its Non-Subsidiary or Affiliate
customers for Articles less: (i) all returns of damaged, defective or other
merchandise, uncollectible accounts, trade and cash discounts and allowances,
and taxes directly applicable to the sale of Articles (such as sales, use, value
added or similar taxes); (ii) all freight and shipping charges, insurance costs
and duties and other governmental charges paid by the Licensee to the extent
stated separately on any invoice; (iii) all receipts from the sale of
discontinued and close-out merchandise (which shall include only Articles sold
at a discount of 25% or more from the normal price charged to that specific
customer and then only to the extent that the aggregate gross sales thereof in
any contract year do not exceed fifteen percent (15%) of total gross sales);
and, (iv) all receipts from the sale of samples, displays, brochures,
gift-with-purchase and similar advertising and promotional materials and
packaging supplies. Notwithstanding the terms of sub-section (iii) above,
Licensee shall not be excused from paying royalties on the sales of the Articles
in which the Licensee receives a minimum gross margin of 25%, in which gross
margin is defined as sales price to the customer less Licensee's cost of goods
and shipping.
E. SUBSIDIARY. Any corporation or other entity which is 100% directly
or indirectly owned by Licensee.
F. AFFILIATE. Any corporation or other entity which is at least 50% owned by
Licensee.
ARTICLE 2
GRANT OF LICENSE RIGHTS
RIGHTS GRANTED. Upon the terms and conditions of this Agreement,
Licensor hereby grants to Licensee, during the term of this Agreement, the sole
and exclusive right and license to use the Licensed Mark in the Territory as a
trademark in connection with the manufacture, promotion, sale and distribution
solely of the Articles and on all packaging materials, containers and
promotional materials related to the Articles and in connection with the
publicity, sales and advertising of the Articles, including in newspapers,
magazines, radio, television, cinema and similar media presently existing or
that may exist in the future. Articles may be sold through the channels
customarily used to sell similar products of comparable prestige and quality in
the ordinary course of business as described in paragraph A of Article 7 below.
Licensor shall not, during any period this Agreement is in effect, grant any
rights to any third party in connection with the Articles for the Trademark or
any other trademark which includes PARIS HILTON or any derivative thereof.
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ARTICLE 3
EXCLUSIVITY OF LICENSE
Licensor will not grant any other license effective during the term of
this Agreement for the use of the Licensed Mark on or in connection with the
Articles in the Territory. Licensor and Ms. Paris Hilton may use or grant others
the right to use the Licensed Mark on or in connection with goods of all other
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types and descriptions (with the acknowledgement that Licensor has previously
granted a license to Licensee contained in Fragrance License) in the Territory.
Licensor acknowledges that Licensee may manufacture and/or distribute in parts
of the Territory goods similar to the Articles covered by this Agreement which
bear other trademarks. Licensor further acknowledges and consents to Licensee
obtaining other additional licenses for the manufacture and/or distribution of
other similar lines of goods during the term of this Agreement. Licensee will
not, during the term of this Agreement and thereafter, attack either Licensor's
title in and to the Licensed Mark or the validity of this License.
Notwithstanding the foregoing, Licensee acknowledges that Ms. Paris
Hilton has entered into an agreement with the company Guess?, Inc. to act as a
model and spokesperson for their products, some of which are watches, although
the Licensed Mark does not appear on any actual watches. Further, on July 28,
2004 Licensor entered into an agreement with Amazon.com LLC licensing Amazon.com
LLC to jointly create a line of at least 10 pieces of jewelry with Ms. Paris
Hilton bearing the Licensed Mark for sale on an online Paris Hilton Boutique to
be established by Amazon.com LLC. Amazon.com LLC was granted rights to operate
the online Paris Hilton Boutique for six months from the date of first launch
(August 28, 2004) after which at Amazon.com LLC's sole discretion, it may
continue to operate the online Paris Hilton Boutique for a longer period of
time. To date, the Licensed Mark has not been used by Amazon.com LLC on any
watches or time pieces, but only in connection with a 10-piece jewelry line.
Attached is an agreement that Amazon.com has executed that precludes them from
including watches (and other time pieces) from the Paris Hilton Boutique as of
March 1, 2005.
ARTICLE 4
TERM OF AGREEMENT
Subject to the rights of termination set forth in this Agreement, the
initial term of this Agreement shall be for five (5) years commencing on the
execution date above and terminating on June 30, 2010 (the "Initial Term").
Licensee shall have the option to renew this Agreement for an additional
five-year period as long as the Minimum Royalties (as hereinafter defined) for
the Initial Term have been fully paid. Licensee shall notify Licensor of its
intent to either renew or not renew no later than December 31, 2009. Each twelve
(12) month period commencing on each July 1 and ending on June 30 shall
constitute and be referred to herein as an "Annual Period." However, the initial
Annual Period shall commence on the execution date above and shall terminate on
June 30, 2006.
ARTICLE 5
CONFIDENTIALITY
The Parties acknowledge that all information relating to the business
and operations of Licensor and Licensee which they learn or have learned during
or prior to the term of this Agreement is confidential. The Parties acknowledge
the need to preserve the confidentiality and secrecy of such information and
agree that, both during the term of this Agreement and after the expiration or
termination hereof, they shall not use or disclose same, and shall take all
necessary steps to preserve in all respects such confidentiality and secrecy.
The provisions of this paragraph shall not apply with respect to any information
which has entered the public domain through no fault of Parties. The provisions
of this paragraph shall survive the expiration or termination of this Agreement.
<PAGE>
ARTICLE 6
DUTIES OF LICENSEE
A. Best Efforts. During the term of this Agreement, Licensee will use
its best efforts to exploit the rights herein granted throughout the Territory
and to sell the maximum quantity of Articles therein consistent with the high
standards and prestige represented by the Licensed Mark.
B. Design and Sample Making. Licensor shall not be responsible for the
production, design or sample making of the Articles and Licensee shall bear all
costs related thereto.
ARTICLE 7
QUALITY STANDARDS
A. Manufacture of Articles; Quality Control.
(i) The contents and workmanship of Articles shall be at all
times of the highest quality consistent with the reputation, image and prestige
of the Licensed Mark and Articles shall be distributed and sold with packaging
and sales promotion materials appropriate for such high quality Products. The
parties agree that the Articles shall be of such premium quality, prestige and
price similar to that of the Guess?, Fossil, and Jennifer Lopez watches as of
the date of this Agreement.
(ii) All Articles shall be manufactured, labeled, sold,
distributed and advertised in accordance with all applicable national, state
and local laws and regulations.
(iii) Licensee shall submit to Licensor for approval the
proposed watch designs, along with the proposed packaging and other material,
designs, sketches, colors, tags, containers and labels (the "Approval
Package") for Licensor's review, which approval shall not be unreasonably
withheld. In the event that Licensor does not respond to Licensee within 10
days of the receipt of any and all items within the scope of the Approval
Package, any such item shall be deemed approved.
(iv) During the term of this Agreement, upon Licensor's
request, Licensee shall submit, free of charge to Licensor, the then current
production samples of each Article marketed. Production samples submitted by
Licensee for this purpose may be retained by Licensor. Further, Licensee shall
provide Licensor with 100 samples of the various Articles being distributed
each year for Licensor to use for public relations and promotional purposes.
All Articles to be sold hereunder shall be at least equal in quality to the
Approval Package presented to Licensor. Licensor and its duly authorized
representatives shall have the right, upon reasonable advance notice and
during normal business hours, at Licensor's expense, to examine Articles in
the process of being manufactured.
B. Required Markings. Licensee shall cause to appear on all packaging
of Articles, (i) "the trademark, PARIS HILTON" is licensed to "Parlux
Fragrances, Inc."; and such additional legends, markings and notices complying
with the requirements of any law or regulation in the Territory and (ii) such
legends, markings and notices as Licensor, from time to time, may reasonably
request.
C. Distribution. In order to maintain the reputation, image and
prestige of the Licensed Mark, Licensee's normal distribution patterns shall
consist of those retail establishments whose location, merchandising and overall
operations are consistent with the products described in paragraph A (i) of
Article 7 above.
D. Sales Force. During the term of this Agreement, Licensee shall
maintain a non-exclusive sales force suitable to carry out the purpose of this
Agreement.
<PAGE>
ARTICLE 8
GUARANTEED MINIMUM ROYALTY
In consideration of both the license granted and the services to be
performed by Ms. Paris Hilton hereunder, Licensee shall pay to Licensor an
annual Guaranteed Minimum Royalty as follows:
ANNUAL PERIOD GUARANTEED MINIMUM ROYALTY
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Year 1 (Execution date - 6/30/06) * (due upon execution hereof)
Year 2 (7/1/06 - 6/30/07) *
Year 3 (7/1/07 - 6/30/08) *
Year 4 (7/1/08 - 6/30/09) *
Year 5 (7/1/09 - 6/30/10) *
In the event that the Initial Term of this Agreement is extended for an
additional five-year term (July 1, 2010 - June 30, 2015, the "Extended Term")
the Guaranteed Minimum Royalty for each Annual Period of the Extended Term shall
be *.
The Guaranteed Minimum Royalty payable for each Annual Period shall be
paid to Licensor on a monthly basis in 12-equal installments on the first of
every month starting with the payment of the Guaranteed Minimum Royalty for Year
2 on July 1, 2006.
The Guaranteed Minimum Royalty for each Annual Period shall be credited
against the Sales Royalty for only the same Annual Period as provided in Article
9 below.
ARTICLE 9
SALES ROYALTY; WITHHOLDING TAXES; COMMISSION TO RICK HILTON
A. Licensee shall pay to Licensor a Sales Royalty on each Annual
Period's Net Sales of *. The Sales Royalty payable hereunder shall be accounted
for and paid on a quarterly basis within forty-five (45) days after the close of
the prior quarter's sales, along with the Guaranteed Minimum Royalty that may be
due. In other words, the actual Sales Royalty will be paid 45-days in arrears
computed on the basis of Net Sales during the quarter ending 45 days before the
period upon which royalties are being paid, with a credit for any Guaranteed
Minimum Royalty and Sales Royalty payments previously made to Licensor.
B. If applicable, Licensee shall compute any payment, on behalf of
Licensor, for all taxes (other than United States Federal, state or local income
taxes) which any governmental authority in the Territory may impose on Licensor
with respect to royalties paid by Licensee to Licensor. The amount of such taxes
shall be deducted from payments of royalties, provided that Licensor is entitled
under applicable law to credit the amount of such taxes against its United
States Federal Income Tax obligations. Licensee shall furnish Licensor with an
official receipt (together with a translation thereof if not in English)
promptly after each such payment of taxes. In the event such taxes are not paid
when due, all resulting penalties and interest shall be borne by Licensee.
<PAGE>
C. No payment of Sales Royalty for any Annual Period in excess of
payments of Guaranteed Minimum Royalty for the same Annual Period shall be
credited against the Guaranteed Minimum Royalty due to Licensor for any other
Annual Period.
D. Payment of the initial Guaranteed Minimum Royalty shall be as
follows:
(1) * to: "Rick Hilton". c/o Ms. Wendy White, 250 North Canon
Drive, 2nd Floor, Beverly Hills, CA 90210; and,
(2) * to: Paris Hilton Entertainment Inc. c/o Ms. Wendy
White, 250 North Canon Drive, 2nd Floor, Beverly Hills, CA
90210
E. All other Guaranteed Minimum Royalties and other Royalties shall be
paid as follows:
(1) 5% of amounts due to: "Rick Hilton" c/o Ms. Wendy White,
250 North Canon Drive, 2nd Floor, Beverly Hills, CA 90210;
and,
(2) 95% of amounts due to: Paris Hilton Entertainment Inc. c/o
Ms. Wendy White, 250 North Canon Drive, 2nd Floor, Beverly
Hills, CA 90210.
F. In addition to the Sales Royalty and Guaranteed Minimum Royalties
that Licensee is obligated to pay pursuant to the terms hereof, Licensee shall
further pay Mr. Rick Hilton, a commission for negotiating this Agreement of * of
the actual Sales Royalty and Guaranteed Minimum Royalty (paid to Licensor and
Rick Hilton) throughout the term of this Agreement and any extensions thereof.
This * commission shall be paid to Rick Hilton at the time that the Sales
Royalty is due to Licensor. The * commission shall be paid on the initial
Guaranteed Minimum Royalty due upon execution hereof, so that Rick Hilton shall
received * (Guaranteed Minimum Royalty) + * (commission) upon execution hereof,
or * .
ARTICLE 10
ADVERTISING
Licensee agrees to spend in the United States for "consumer
advertising" (as defined below) * of Net Sales during each Annual Period.
For the other markets in the Territory, Licensee or its distributors
will jointly spend not less than * of Net sales in such markets during each
Annual Period.
"Consumer Advertising" shall be understood to include newspapers,
magazines, television, radio, billboards (including related artwork and
production charges for these five categories), retailer demonstration charges,
retailer's catalogues, gifts-with-purchase including the gift aspect of value
sets, direct mail, remittance envelopes, billing inserts , product samples,
pamphlets, free goods (including those to Licensor for events and other public
relation activities), window and counter displays (including testers, dummies,
counter cards and other visual aids), special events, contests, publicity and
promotions and cooperative advertising.
Licensor undertakes at Licensee's request to make Ms. Paris Hilton
("PH") available at reasonable intervals and for reasonable periods (which shall
involve a maximum of four (4) appearances during the first Annual Period and a
maximum of two (2) appearances each Annual Period thereafter) for promotional
tie-ins serving to associate PH with the Articles. Licensee shall also be
entitled to the use of PH's likeness for advertising and promotional purposes
<PAGE>
upon Licensor's approval first being obtained in each instance, which approval
shall not be unreasonably withheld or delayed. Licensor shall make every
reasonable effort, in light of PH's busy schedule, at the request of the
Licensee, to arrange for PH's cooperation for publicity photographs, launch
parties, personal appearances and radio and TV interviews (which shall be
included in PH's obligations of four (4) and two (2) appearances discussed
above). Licensee shall reimburse Licensor for the reasonable costs involved in
providing PH plus one other individual, selected by Licensor, plus her Mother
and Father if they wish to attend, with first-class travel, lodging, food and
other related expenses mutually agreed upon in advance of each appearance
attended by PH at Licensee's request. If PH fails to appear for a scheduled
Licensor approved event, Licensee will have the right to deduct up to $20,000 of
its non-refundable out of pocket expenses incurred in connection with each
specific event from the Sales Royalty. The failure to appear at a scheduled
event could have a material adverse effect on the Licensee's ability to market
the Articles.
ARTICLE 11
SALES STATEMENT; BOOKS AND RECORDS; AUDITS
A. Sales Statement. Licensee shall deliver to Licensor at the time each
Sales Royalty payment is due, a reasonably detailed report signed by a duly
authorized officer of Licensee indicating by quarter the Net Sales and a
computation of the amount of Sales Royalty payable hereunder for said period.
Such statement shall be furnished to Licensor whether or not any Articles have
been sold during the period of which such statement is due.
Licensee shall deliver to Licensor, not later than ninety (90) days
after the close of each Annual Period during the term of this Agreement (or
portion thereof in the event of prior termination for any reason), a statement
signed by a duly authorized officer relating to said entire Annual Period,
setting forth the same information required to be submitted by Licensee in
accordance with the first paragraph of this Article and also setting forth the
information concerning expenditures for the advertising and promotion of
Articles during such Annual Period required by Article 10 hereof.
B. Books and Records; Audits. Licensee shall prepare and maintain, in
such manner as will allow its accountants to audit same in accordance with
generally accepted accounting principles, complete and accurate books of account
and records (specifically including without limitation the originals or copies
of documents supporting entries in the books of account) in which accurate
entries will be made covering all transactions, including advertising
expenditures, arising out of or relating to this Agreement. Licensee shall keep
separate general ledger accounts for such matters that do not include matters or
sales related to this Agreement. Licensor and its duly authorized
representatives shall have the right, for the duration of this Agreement and for
one (1) year thereafter, during regular business hours and upon seven (7)
business days advance notice (unless a shorter period is appropriate in the
circumstances), to audit said books of account and records and examine all other
documents and material in the possession or under the control of Licensee with
respect to the subject matter and the terms of this Agreement, including,
without limitation, invoices, credits and shipping documents, and to make copies
of any and all of the above. All such books of account, records, documents and
materials shall be kept available by Licensee for at least two (2) years after
the end of the Annual Period to which they relate. If, as a result of any audit
of Licensee's books and records, it is shown that Licensee's payments were less
than the amount which should have been paid by an amount equal to * or more of
the payments actually made with respect to sales occurring during the period in
question, Licensee shall reimburse Licensor for the cost of such audit and shall
make all payments required to be made to eliminate any discrepancy revealed by
said audit within ten (10) days after Licensor's demand therefore.
<PAGE>
ARTICLE 12
INDEMNIFICATION AND INSURANCE
A. Indemnification of Licensor. Licensee hereby agrees to save and hold
Licensor and its agents harmless of and from and to indemnify them against any
and all claims, suits, injuries, losses, liability, demands, damages and
expenses (including, subject to subparagraph D below, Licensor's reasonable
attorneys' fees and expenses) which Licensor may incur or be obligated to pay,
or for which either may become liable or be compelled to pay in any action,
claim or proceeding against it, for or 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, including but not limited to those arising out of the alleged
defect in any Article produced by Licensee under this Agreement, the
manufacture, labeling, sale, distribution or advertisement of any Article by
Licensee in violation of any national, state or local law or regulation or the
breach of Article 5 hereof. The provisions of this paragraph and Licensee's
obligations hereunder shall survive the expiration or termination of this
Agreement.
B. Insurance Policy. Licensee shall procure and maintain at its own
expense in full force and effect at all times during which Articles are being
sold, with a responsible insurance carrier acceptable to Licensor, a public
liability insurance policy including products liability coverage with respect to
Articles with a limit of liability not less than $3,000,000. It shall be
acceptable if such coverage is provided by a product liability policy and an
additional umbrella policy. Such insurance policies shall be written for the
benefit of Licensee and Licensor and shall provide for at least thirty (30) days
prior written notice to said parties of the cancellation or substantial
modification thereof. Licensor shall be a named insured on each such policy.
Such insurance may be obtained by Licensee in conjunction with a policy which
covers products other than Articles.
C. Evidence of Insurance. Licensee shall, from time to time upon
reasonable request by Licensor, promptly furnish or cause to be furnished to
Licensor evidence in form and substance satisfactory to Licensor of the
maintenance of the insurance required by subparagraph B above, including, but
not limited to, copies of policies, certificates of insurance (with applicable
riders and endorsements) and proof of premium payments. Nothing contained in
this paragraph shall be deemed to limit in any way the indemnification
provisions of the subparagraph A above.
D. Notice. Licensor will give Licensee notice of any action, claim,
suit or proceeding in respect of which indemnification may be sought and
Licensee shall defend such action, claim, suit or proceeding on behalf of
Licensor. In the event appropriate action is not taken by Licensee within thirty
(30) days after its receipt of notice from Licensor, then Licensor shall have
the right, but not the obligation, to defend such action, claim, suit or
proceeding. Licensor may, subject to Licensee's indemnity obligation under
subparagraph A above, be represented by its own counsel in any such action,
claim, suit or proceeding. In any case, the Licensor and the Licensee shall keep
each other fully advised of all developments and shall cooperate fully with each
other in all respects in connection with any such defense as is made. Nothing
contained in this paragraph shall be deemed to limit in any way the
indemnification provisions of the subparagraph A above except that in the event
appropriate action is being taken by Licensee by counsel reasonably acceptable
to Licensor, with respect to any not-trademark or intellectual property, action,
claim, suit or proceeding. Licensor shall not be permitted to seek
indemnification from Licensee for attorneys' fees and expenses incurred without
the consent of Licensee. In connection with the aforesaid actions, claims and
proceedings, the parties shall, where no conflict of interest exists, seek to be
represented by common reasonably acceptable counsel. In connection with actions,
claims or proceedings involving trademark or other intellectual property matters
<PAGE>
which are subject to indemnification hereunder, Licensor shall at all times be
entitled to be represented by its own counsel, for whose reasonable fees and
disbursements it shall be entitled to indemnification hereunder.
ARTICLE 13
THE LICENSED MARK
A. Licensee shall not join any name or names with the Licensed Mark so
as to form a new mark, unless and until Licensor consents thereto in writing.
Licensee acknowledges the validity of the Licensed Mark, the secondary meaning
associated with the Licensed Mark, and the rights of Licensor with respect to
the Licensed Mark in the Territory in any form or embodiment thereof and the
goodwill attached or which shall become attached to the Licensed Mark in
connection with the business and goods in relation to which the same has been,
is or shall be used. Sales by Licensee shall be deemed to have been made by
Licensor for purposes of trademark registration and all uses of the Licensed
Mark by Licensee shall inure to the benefit of Licensor. Licensee shall not, at
any time, do or suffer to be done, any act or thing which may in any way
adversely affect any rights of Licensor in and to the Licensed Mark or any
registrations thereof or which, directly or indirectly, may reduce the value of
the Licensed Mark or detract from its reputation. Licensee will use its best
efforts to distribute Articles in the proper channels comparable to those of the
brands outlined in Article 7 A (i) herein.
B. At Licensor's request, Licensee shall execute any documents,
including Registered User Agreements, reasonably required by Licensor to confirm
the respective rights of Licensor and Ms. Paris Hilton in and to the Licensed
Mark in each jurisdiction in the Territory and the respective rights of Licensor
and Licensee pursuant to this Agreement. Licensee shall cooperate with Licensor,
in connection with the filing and the prosecution by Licensor of applications to
register or renew the Licensed Mark for Articles sold hereunder in each
jurisdiction in the Territory where Licensee has reasonably requested the same.
Such filings and prosecution outside the U.S. shall be in the name of Licensor
or Ms. Paris Hilton, as they may decide, the expense of which will be split
evenly between the Licensor and Licensee. Nothing contained herein shall
obligate Licensor to prosecute any trademark application outside the U.S. which
is opposed or rejected in any country after the application is filed, provided,
however, that any such prosecution shall go forward if (a) Licensee requests
same; (b) Licensee pays for same directly; and (c) such prosecution is in
Licensor's (or Ms. Paris Hilton's) name and directed by Licensor. Licensor shall
cooperate fully with any such prosecution.
C. Licensee shall use the Licensed Mark in each jurisdiction in the
Territory strictly in compliance with the legal requirements obtained therein
and shall use such markings in connection therewith as may be required by
applicable legal provisions. Licensee shall cause to appear on all Articles and
on all materials on or in connection with which the Licensed Mark is used, such
legends, markings and notices as may be reasonably necessary in order to give
appropriate notice of any trademark, trade name or other rights therein or
pertaining thereto.
D. Licensee shall never challenge the validity of the Licensed Mark or
any application for registration thereof, or any trademark registration hereof,
or any rights of Licensor therein. The foregoing shall not be deemed to prevent
Licensee from asserting, as a defense to a claim of breach of contract brought
against Licensee by Licensor for failure to perform its obligations hereunder,
that its ceasing performance under this Agreement was based upon Licensor's
failure to own the Licensed Mark in the United States of America, provided that
it is established in a court of law that Licensor does not own the Licensed
Mark, that the Licensed Mark is owned by a third party so as to preclude the
grant of the license provided herein.
<PAGE>
E. In the event that Licensee learns of any infringement or imitation
of the Licensed Mark or of any use by any person of a trademark similar to the
Licensed Mark, it promptly shall notify Licensor thereof. In no event, however,
shall Licensor be required to take any action if it deems it inadvisable to do
so.
F. Licensor shall not be required to protect, indemnify or hold
Licensee harmless against, or be liable to Licensee for, any liabilities,
losses, expenses or damages which may be suffered or incurred by Licensee as a
result of any infringement or allegation thereof by any other person, firm or
corporation, other than by reason of Licensor's breach of the representations
made and obligations assumed herein. Licensor and Ms. Paris Hilton make no
warranties or representations as to the registrability of the Licensed Mark in
the various trademark offices around the World, except that Licensor warrants
and represents that Ms. Paris Hilton has a pending trademark application for the
Licensed Mark in the United States Patent and Trademark Office in International
Class 14 for watches and jewelry; Serial No. 76/604,205 of July 27, 2004 and a
CTM application in the 25 cooperating countries of Europe for jewelry, Serial
No. 4059631 of October 4, 2004. However, Licensor and Ms. Paris Hilton, to the
best of their knowledge, are not aware of any registrations or pending
registrations in International Class 14 or otherwise, that would preclude or
restrict Licensee from selling the Articles anywhere in the Territory. However,
Licensor is aware of an existing registration owned by Genender International,
Inc. of 44 Century Drive, Wheeling, IL 60090 for the mark HILTON for watches in
International Class 14, Reg. No. 2,218,182 of January 19, 1999.
ARTICLE 14
DEFAULTS; TERMINATION
A. The following conditions and occurrences shall constitute "Events of
Default" by Licensee:
1. the failure to pay Licensor the full amount due it under
any of the provisions of this Agreement by the prescribed date for such payment;
2. the failure to deliver full and accurate reports pursuant
to any of the provisions of this Agreement by the prescribed due date therefore;
3. the making or furnishing of a knowingly false statement in
connection with or as part of any material aspect of a report, notice or request
rendered pursuant to this Agreement;
4. the failure to maintain the insurance required by Article
12;
5. the use of the licensed mark in an unauthorized or
unapproved manner;
6. Licensee's use of other trademarks or in association with
the Articles, without prior written consent of Licensor;
7. the commencement against Licensee of any proceeding in
bankruptcy, or similar law, seeking reorganization, liquidation, dissolution,
arrangement, readjustment, discharge of debt, or seeking the appointment of a
receiver, trustee or custodian of all or any substantial part of Licensee's
property, not dismissed within sixty (60) days, or Licensee's making of an
assignment for the benefit of creditors, filing of a bankruptcy petition, its
acknowledgment of its insolvency or inability to pay debts, or taking advantage
of any other provision of the bankruptcy laws;
8. the material breach of any other material promise or
agreement made herein.
B. In the event Licensee fails to cure (i) an Event of Default within
thirty (30) days after written notice of default is transmitted to Licensee
under Article 14 A.3, A.5, A.6, or A.7; or (ii) Licensee fails to cure any other
Event of Default within sixty (60) days after written notice of default is
transmitted to Licensee or within such further period as Licensor may allow,
this Agreement shall, at Licensor's option, be terminated, on notice to
Licensee, and all the prorated Guaranteed Minimum Royalties for the Annual
Period as in Article 8 above shall become due, without prejudice to Licensor's
<PAGE>
right to receive other payments due or owing to Licensor under this Agreement or
to any other right of Licensor, including the right to damages and/or equitable
relief.
C. Upon the termination of this Agreement, in the event this Agreement
is not renewed as provided in Article 4 above, or in the event of the
termination or expiration of a renewal term of this Agreement, Licensee, except
as specified below, will immediately discontinue use of the Licensed Mark, will
not resume the use thereof or adopt any colorable imitation of the Licensed Mark
or any of its parts, will promptly deliver and convey to Licensor (free of all
liens and encumbrances) (i) all plates, engravings, silk-screens, or the like
used to make or reproduce the Licensed Mark and the Designs, but not the bottle
mold or tooling which Licensor shall be entitled to purchase or recover as
provided below; and (ii) all items affixed with likeness or reproductions of the
Licensed Mark, whether Articles, labels, bags, hangers, tags or otherwise, and,
upon request by Licensor, will assign to Licensor such rights as Licensee may
have acquired in the Licensed Mark. In the event that this Agreement expires or
is terminated by Licensor due to Licensee's default, Licensor shall have an
option, but not an obligation, to purchase the bottle mold and tooling for the
Articles, free of all liens and other encumbrances, at a price equal to
Licensee's cost for same established by submission of bill(s) from supplier and
satisfactory proof of payment for same. Licensor shall pay such cost as follows:
50% (fifty) at closing and the balance paid by six (6) equal monthly payments.
Licensor shall, at the time it exercises its purchase option, enter into a
security agreement with Licensee with respect to the mold, which shall entitle
Licensee to foreclose on its security interest in the mold in the event Licensor
fails to make any installment payment due within fifteen (15) days after
receiving notice of default. Licensor shall exercise its aforesaid option within
thirty (30) days after Licensee's submission of documents establishing cost.
Notwithstanding the foregoing, if Licensor has terminated this Agreement due to
Licensee's default, Licensor, at its option, shall be entitled, in exercising
its purchase option, to deduct from the cost price an amount equal to the sales
and guaranteed minimum royalties Licensor is entitled to recover, for which
deduction Licensee shall receive a credit. In the event Licensor exercises its
aforesaid option, Licensee shall be precluded forever from using the bottle
molds or tools and from selling or otherwise transferring or licensing any
rights whatsoever in the molds or tools to any third party. In the event that
Licensor does not exercise its aforesaid option, Licensee shall not use the
bottle molds or tools or sell or otherwise transfer or license any rights
whatsoever in the bottle mold or tools to any third party for a period of two
(2) years after the determination of the fair market value. In the event of any
permitted use of the bottle mold and/or tools by Licensee, Licensee shall not
use in connection therewith the Licensed Mark, any trademark confusingly similar
thereto, any trade dress associated with the Articles, any advertising or
promotional materials used in connection with the Articles or any other markings
or materials which would cause a reasonable consumer to believe that any new
items sold using the bottle mold and tools are authorized by Licensor or in some
way associated with the Licensed Mark. Any permitted sale or license of the
bottle mold and/or tools by Licensee shall prohibit in writing the purchaser or
licensee from using the Licensed Mark, and confusingly similar trademark and any
such trade dress, advertising, promotional materials, markings or other
materials and shall expressly make Licensor a third party beneficiary of such
provision.
ARTICLE 15
RIGHTS ON EXPIRATION OR TERMINATION
A. If this Agreement expires or is terminated, Licensee shall cease to
manufacture Articles (except for work in process or to balance component
inventory) but shall be entitled, for an additional period of twelve (12) months
only, on a non-exclusive basis, to sell and dispose of its inventory subject,
however, to the provisions of paragraph D of this Article. Such sales shall be
made subject to all of the provisions of this agreement and to an accounting for
and the payment of Sales Royalty thereon but not to the payment of Guaranteed
Minimum Royalties. Such accounting and payment shall be made monthly.
<PAGE>
B. In the event of termination in accordance with Article 14 above,
Licensee shall pay to Licensor, the Sales Royalty then owed to it pursuant to
this Agreement or otherwise.
C. Notwithstanding any termination in accordance with Article 14 above,
Licensor shall have and hereby reserve all rights and remedies which it has, or
which are granted to it by operation of law, to enjoin the unlawful or
unauthorized use of the Licensed Mark, and to collect royalties payable by
Licensee pursuant to this Agreement and to be compensated for damages for breach
of this Agreement.
D. Upon the expiration or termination of this Agreement, Licensee shall
deliver to Licensor a complete and accurate schedule of Licensee's inventory of
Articles and of related work in process then on hand (including any such items
held by Subsidiaries, Affiliates or others on behalf of Licensee) (hereinafter
referred to as "Inventory). Such schedule shall be prepared as of the close of
business on the date of such expiration or termination and shall reflect
Licensee's cost of each such item. Notwithstanding anything contained to the
contrary in this Agreement, Licensor thereupon shall have the option,
exercisable by notice in writing delivered to Licensee within thirty (30) days
after its receipt of the complete Inventory schedule, to purchase any or all of
the Inventory, free of all liens and other encumbrances, for an amount equal to
Licensee's cost plus 20%. In the event such notice is sent by Licensor, Licensee
shall deliver to Licensor or its designee all of the Inventory referred to
therein within thirty (30) days after Licensor's said notice and, in respect of
any Inventory so purchased, assign to Licensor all then outstanding orders from
Licensee to its suppliers and to Licensee from its customers. Licensor shall pay
Licensee for such Inventory within twenty (20) days after the delivery of such
Inventory to Licensor. No Sales Royalty shall be payable to Licensor with
respect to any such inventory purchased by Licensor.
ARTICLE 16
SUBLICENSING AND DISTRIBUTION
A. (i) This Agreement and the License or other rights granted hereunder
may be assigned, sublicensed or transferred by Licensee, upon the approval of
Licensor in advance, in writing, which approval will not be unreasonably denied
or delayed. Any transferee shall be required to prove to Licensor that it is
capable of meeting the financial obligations contained herein.
(ii) Consolidation. Notwithstanding anything contained to the
contrary in this Agreement, this Agreement shall not terminate if Licensee is
merged or otherwise consolidated into another entity which is the surviving
entity of equal or superior financial strength.
B. Licensee shall be entitled to use distributors in connection with
its sale of Articles under this Agreement without approval of Licensor. No such
distributor, however, shall be entitled to exercise any of Licensee's rights
hereunder except for the sale of Articles which have been approved by Licensor
hereunder.
ARTICLE 17
MISCELLANEOUS
A. Representations. The parties respectively represent and warrant that
they have full right, power and authority to enter into this Agreement and
perform all of their obligations hereunder and that they are under no legal
impediment which would prevent their signing this Agreement or consummating the
same. Licensor represents and warrants that it has the right to license the
<PAGE>
Licensee the Licensed Mark and that Licensor has not granted any other existing
license to use the Licensed Mark on products covered hereunder in the Territory
and that no such license will be granted during the term of this Agreement
except in accordance with the provisions hereof.
B. Licensor's Rights. Not withstanding anything to the contrary
contained in this Agreement, Licensor shall not have the right to negotiate or
enter into agreements with third parties pursuant to which it may grant a
license to use the Licensed Mark in connection with the manufacture,
distribution and/or sale of products covered hereunder in the Territory or
provide consultation and design services with respect to such products in the
Territory prior to the termination or expiration of this Agreement.
C. Licensor's Retail Stores. In the event Licensor (or Ms. Paris
Hilton) opens one or more retail stores or boutiques selling various products
bearing the Licensed Mark, Licensee agrees to sell Articles to Licensor for sale
in such stores at the established U.S. retail price for the specific Article,
less an additional * discount. Licensee further agrees that any sales pursuant
to this paragraph shall be included in the computation of Net Sales for any
applicable Annual Period hereunder.
D. Governing Law; Entire Agreement. This Agreement shall be construed
and interpreted in accordance with the laws of the State of Florida applicable
to agreements made and to be performed in said State, contains the entire
understanding and agreement between the parties hereto with respect to the
subject matter hereof, supersedes all prior oral or written understandings and
agreements relating thereto and may not be modified, discharged or terminated,
nor may any of the provisions hereof be waived, orally.
E. No Agency. Nothing herein contained shall be construed to constitute
the parties hereto as partners or as joint venturers, or either as agent of the
other, and Licensee shall have no power to obligate or bind Licensor in any
manner whatsoever.
F. No Waiver. No waiver by either party, whether express or implied, of
any provision of this Agreement, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other provision of
this Agreement. Acceptance of payments by Licensor shall not be deemed a waiver
by Licensor of any violation of or default under any of the provisions of this
Agreement by Licensee.
<PAGE>
G. Void Provisions. If any provision or any portion of any provision of
this Agreement shall be held to be void or unenforceable, the remaining
provisions of this Agreement and the remaining portion of any provision held
void or unenforceable in part shall continue in full force and effect.
I. Construction. This Agreement shall be construed without regard to
any presumption or other rule requiring construction against the party causing
this Agreement to be drafted. If any words or phrases in this Agreement shall
have been stricken out or otherwise eliminated, whether or not any other words
or phrases have been added, this Agreement shall be construed as if those words
or phrases were never included in this Agreement, and no implication or
inference shall be drawn from the fact that the words or phrases were so
stricken out or otherwise eliminated.
H. Force Majeure. Neither party hereto shall be liable to the other for
delay in any performance or for the failure to render any performance under the
Agreement (other than payment to any accrued obligation for the payment of
money) when such delay or failure is by reason of lockouts, strikes, riots,
fires, explosions, blockade, civil commotion, epidemic, insurrection, war or
warlike conditions, the elements, embargoes, act of God or the public enemy,
compliance with any law, regulation or other governmental order, whether or not
valid, or other similar causes beyond the control of the party effected. The
party claiming to be so affected shall give notice to the other party promptly
after it learns of the occurrence of said event and of the adverse results
thereof. Such notice shall set forth the nature and extent of the event. The
delay or failure shall not be excused unless such notice is so given.
Notwithstanding any other provision of this Agreement, either party may
terminate this Agreement if the other party is unable to perform any or all of
its obligations hereunder for a period of six (6) months by reason of said event
as if the date of termination were the date set forth herein as the expiration
date hereof. If either party elects to terminate this Agreement under this
paragraph, Licensee shall have no further obligations for the Guaranteed Minimum
Royalty beyond the date of termination (which shall be prorated if less than an
Annual Period is involved) and shall be obligated to pay any Sales Royalty which
is then due or becomes due.
J. Binding Effect. This Agreement shall inure to the benefit of and
shall be binding upon the parties, their respective successors, Licensor's
transferees and assigns and Licensee's permitted transferees and assigns.
K. Resolution of Disputes. Any controversy or claim arising out of, in
connection with, or relating to this Agreement, shall be determined by
arbitration by a three person arbitration panel at the office of the American
Arbitration Association. Both Parties shall share equally the cost of such
arbitration (except each shall bear its own attorney's fees). Any decision
rendered by the arbitrators shall be final and binding, and judgment may be
entered in any court having jurisdiction.
L. Consolidation. Notwithstanding anything contained to the contrary in
this Agreement (a) this Agreement shall not terminate if Licensor is merged or
otherwise consolidated into another entity which is the surviving entity. (b)
Licensor shall be entitled to assign this Agreement to any Corporation to which
the Licensed Mark is assigned.
M. Survival. The provisions of Articles 11, 12A, 12D, 13, 15, 16, and
17 shall survive any expiration or termination of this Agreement.
N. Paragraph Headings. The paragraph headings in this Agreement are for
convenience of reference only and shall be given no substantive effect.
<PAGE>
ARTICLE 18
NOTICES
Any notice or other communications required or permitted by this
Agreement to be given to a party will be in writing and will be considered to be
duly given when sent by any recognized overnight courier service to the party
concerned to the following persons or addresses (or to such other persons or
addresses as a party may specify by notice to the other):
TO LICENSOR Ms. Paris Hilton c/o Ms. Wendy White
250 North Canon Dr. 2nd Floor,
Beverly Hills, CA 90210
WITH A COPY TO: Robert L. Tucker, Esq., Tucker & Latifi, LLP
160 East 84th Street, New York, NY 10028
Tel: 212-472-6262; Fax: 212-744-6509.
RTucker@TuckerLatifi.com
------------------------
<PAGE>
TO LICENSEE PARLUX FRAGRANCES, INC.
3725 SW 30TH Avenue
Ft. Lauderdale, Florida, 33312
Attention: Ilia Lekach
Chairman & CEO
Fax : (954) 316-8155
WITH A COPY TO: Bingham McCutcheon LLP
399 Park Avenue
New York, New York 10022-4689
Attention: Matthew C. McMurdo, Esq.
Fax: (212) 752-5378
Notice of the change of any such address shall be duly given by either
party to the other in the manner herein provided.
EXECUTED as of the day and year first written above:
PARLUX FRAGRANCES, INC.
By: /s/ Frank A. Buttacavoli 1/26/05
---------------------------
Frank A. Buttacavoli,
Executive Vice President /COO/CFO
PARIS HILTON ENTERTAINMENT INC.
By: /s/ Paris Hilton 1/6/05
---------------------------
Paris Hilton, President
Compliance with the terms of this Agreement shall constitute compliance
with the terms of the Master License. In the event of a termination of the
Master License granted to Licensor, prior to the expiration of this Agreement
(and any extensions thereof) Ms. Paris Hilton warrants and represents that the
successor entity to the rights to the PARIS HILTON trademark shall assume the
obligations and succeed to the rights of the Licensor and the rights of Licensee
shall continue unaffected.
ACKNOWLEDGE and APPROVED:
By: /s/ Paris Hilton 1/6/05
---------------------------
Paris Hilton