Sublicense Agreement - Entertainment Management Services Iinc. and SMG Entertainment Inc.
SUBLICENSE AGREEMENT
THIS AGREEMENT made and entered into this __ day of January, 2005, by
and between ENTERTAINMENT MANAGEMENT SERVICES, INC., a New York corporation with
its principal office at 533-535 West 27th Street, New York, NY 10001 or designee
("Licensor") and SMG Entertainment, Inc., a Florida corporation ("Licensee").
W I T N E S S E T H:
WHEREAS, LICENSOR is the exclusive licensee of the SCORES trademarks
and related intellectual property listed on Exhibit A (the "Scores Trademarks")
and has the right to sublicense the same on the terms set forth herein; and
WHEREAS, Licensee is the owner and operator of an adult-entertainment
night club located at 17450 Biscayne Boulevard, North Miami, FL (the "Location")
that will conduct business under the name "Scores - Miami"; and
WHEREAS, Licensee will hereby receive the right and license to use the
Scores Trademarks in connection with the operation of the Location, and the sale
of certain merchandise, for the Term (as defined below) (the "Business");
NOW, THEREFORE, for and in consideration of the promises, covenants,
and agreements contained herein, and for other good and valuable consideration,
receipt of which is hereby acknowledged by both parties, the parties agree as
follows:
1. LICENSE GRANT.
(a) Business. Licensor hereby grants to Licensee and Licensee accepts,
a non-exclusive license to use the Scores Trademarks during the Term in
connection with the Business subject to the terms and conditions of
this License Agreement. Licensor hereby grants to Licensee and Licensee
accepts, an exclusive lease of, and license to the ScoresMiami.com URL
for the website for the Business
(b) Merchandising. Licensor hereby grants to Licensee, on the terms and
conditions set forth herein, a non-exclusive license during the Term to
use the Scores Trademarks in connection with the retail sale of
commercial merchandise, including tee-shirts, sweatshirts, sweat pants,
jackets, baseball hats, key rings, and other similar merchandise, all
to be sold at and out of the Business including the right to sell any
merchandise utilizing the Scores Trademarks relative to the Business
over the Internet on a site maintained by the Business and by mail
order, catalog or at any other location or in any other channel
specific to the Business, provided further, that Licensee will purchase
all merchandise from Licensor at cost plus a 25% markup. If Licensee
desires to acquire any merchandise through any third-party, such third
party must sign a license agreement approved in writing by Licensor,
and any such acquisition must be approved, in writing, by Licensor, in
Licensor's sole discretion.
2. LICENSE FEES AND OTHER PAYMENTS:
(a) License Fees. (i) Beginning on the one hundred twenty first (121st)
day of operation as Scores Miami at the Location, Licensee agrees to
pay the following as a license fee ("License Fee"):
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On Gross Revenues greater than $1,500,000.00 per annum
("Excess Gross Revenues"), the License Fee will be 4.99% of
Excess Gross Revenues (the "Excess Fee").
"Gross Revenues" means 100% of Licensee's receipts received from the Business'
operation, less all actual local sales taxes paid, amounts specifically
designated by customers on credit card receipts as "tips for service," credit
card discount fees, taxi cab commissions, complementary food and beverage sales
(subject to reasonable limitations). Gross Revenues include all revenues from
operation of the Business including, but not limited to, Liquor Revenue, Beer
Revenue, Champagne Revenue, Shot Girl House Fees, Wine Revenue Non-Alcoholic
Beverage Revenue, Food Revenue, Party Revenue, Admission Fees Club, Admission
Fees Private Rooms, Room Rental, Humidor Revenue, Cigar Revenue, Cigarette
Revenue, Candy Revenue, Novelty Revenue, Valet Revenue, Coat Check Revenue,
Concession - Cigarette, Concession - Bathroom, Concession - Massage, Concession
- Tarot, Dressing Room Rent, House Fees Entertainers, House Fees DJ's, House
Fees Floor Manager, House Fees Service Personnel, Feature - Calendar, Feature -
Novelty, Feature - Video, Feature - Cigar and Internet Revenue and will also
include the fee charged to customers for the purchase of Diamond Dollars(R) and
the fee paid by entertainers for cashing in Diamond Dollars(R).
(b) Merchandise Royalties. Licensee will purchase all re-sellable
Merchandise from Licensor, or Licensor's authorized affiliate. Licensee
will pay for all such Merchandise on a cost plus twenty-five percent
(25%) markup basis, unless otherwise agreed.
(c) Website Maintenance. Licensee will pay a fee of $500.00 per month
for website maintenance.
(d) Royalty Reports. Licensee shall furnish Licensor with written
reports describing in detail all sales relative to the Business. The
reports shall be prepared and sent to Licensor not later than seven (7)
days following the 15th and last day of each month. Reports will be
adjusted on a quarterly basis (if necessary), not later than ten (10)
days after each calendar quarter period ending in March, June,
September and December of each year. Reports will set forth Gross
Revenues on a weekly basis.
(e) Payment. Payment of the Excess Fee shall be made within seven (7)
days of the end of each month commencing in the month immediately
following the month in which Licensee's Gross Revenues exceed
$1,500,000.00 and continuing until the end of the then-current calendar
year. Merchandise will be paid for as and when billed (net 30 days).
Website maintenance will be payable monthly.
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3. APPROVAL BY LICENSOR. In order to preserve the value, goodwill and
reputation of the Scores Trademarks, Licensee and Licensor shall
consult each other during the Term hereof with regard to any marketing,
advertising or promotional activities pursuant to the Business and
Licensor will have the right to approve all advertisements,
promotional, marketing and other similar materials, including but not
limited to the images and format of Diamond Dollars (R) for the
Location. Furthermore, prior to releasing or using any promotional,
marketing, advertising or other similar materials which have not been
approved by Licensor in the twenty-four (24) month period preceding the
proposed use or in the event Licensee intends to utilize any such
materials which have been used in the past 24 months but intends to do
so in a media not used by Licensor in the 24-month period preceding the
proposed use, Licensee shall first obtain the prior written consent of
Licensor for such use, which shall not be unreasonable withheld. In
connection with obtaining such consent, Licensee shall send copies of
all materials and media for the proposed use so that Licensor can
thoroughly evaluate the proposed use. Licensor agrees to inform the
Licensee of its decision regarding any approvals within twenty-four
(24) hours of receiving all materials and media for approval.
4. COMPLIANCE WITH APPLICABLE LAWS AND STANDARDS. Licensee is
responsible for the compliance with all applicable laws and safety
standards regarding the operation of the Business, the Location, other
licensed locations and the use of the Scores Trademarks herein.
Licensor's approval of submissions pursuant to Paragraph 3 above in no
way affects, alters, diminishes or waives Licensee's obligations
hereunder or under Licensee's obligation to indemnify Licensor as set
forth herein below.
5. BOOKS AND RECORDS. Licensee shall, for a minimum of three (3) years
from their rendition, keep full and accurate books of account, records,
data and memoranda representing Licensee's sales. Licensee further
gives Licensor the right, at its own cost and expense, to examine said
books and records on reasonable notice, such examination to be
conducted in such a manner as to not unreasonably interfere with the
business of Licensee. Licensee shall reasonably cooperate with Licensor
in the event the owner of the Scores Trademarks requests an audit.
Licensor or its representatives shall not disclose to any other person,
firm, or corporation any information acquired as a result of any
examination, provided, however, that nothing contained herein shall be
construed to prevent Licensor and/or its duly authorized
representatives from using or disclosing said information in any court,
arbitration, or other action instituted to enforce the rights of
Licensor hereunder.
6. INTELLECTUAL PROPERTY RIGHTS.
(a) All copyrights, trademarks and/or patents in the Scores Trademarks
and related intellectual property belong solely to Licensor and are
within the scope of the license granted herein. Upon termination of
this Agreement all intellectual property rights and rights granted
herein in the Scores Trademarks immediately revert to Licensor or the
owner of the Scores Trademarks and Licensee agrees to return to
Licensor all original artwork, models, samples, prototypes, renderings
and drawings incorporating the Scores Trademarks. All use by Licensee
of the intellectual property rights of the Scores Trademarks shall
inure to the sole benefit of Licensor and the owner of the Scores
Trademarks. Licensee shall execute any and all documents necessary to
confirm said reversions of rights and hereby appoints Licensor its
attorney-in-fact to execute any such documents in the event Licensee is
unwilling or unable to do so. Licensee acknowledges the exclusive
ownership of all intellectual property rights in and to the Scores
Trademarks by the owner of the Scores Trademarks and will not take any
action to interfere with or challenge said ownership, including but not
limited to registering or attempting to register the same or similar
marks or properties anywhere in the World, nor commence or participate
in cancellation or opposition proceedings.
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7. WARRANTIES.
(a) Licensor hereby warrants that, to the best of its knowledge, the
granting of the license hereunder or the subsequent commercial
exploitation of the license does not violate the intellectual property
or contract rights of any third party. Licensor further warrants that
it has not intentionally violated the rights of any third party in
granting Licensee this license.
(b) Licensee hereby warrants that, the acceptance of the license
granted hereunder or the subsequent commercial exploitation of the
license does not violate the intellectual property or contract rights
of any third party. Licensee further warrants that it has not
intentionally violated, and will not intentionally violate, the rights
of any third party in accepting this license.
8. OFFENSIVE LITIGATION. Licensee agrees to give Licensor prompt
notification of any third party actions that would constitute an
infringement of the rights granted to it by this Agreement. Licensor
shall prosecute, at its own discretion, infringement actions against
any third party infringers and any recoveries obtained therein shall
belong exclusively to Licensor. Licensee shall, at Licensor's expense,
cooperate in all respects with Licensor's prosecution of said suits,
including but not limited to being named as a party in any such suit,
producing documents, appearing as witnesses, etc.
9. INDEMNIFICATION.
(a) Licensor agrees to indemnify and hold harmless Licensee from and
against any and all damage, loss, and expense incurred as a result of
the breach of any of Licensor's warranties herein. Any claims made
against Licensee which would result in Licensor becoming obligated to
indemnify Licensee hereunder shall not permit Licensee to withhold any
amounts due Licensor hereunder.
(b) Licensee agrees to indemnify, defend, and hold harmless Licensor,
its agents and employees from and against any and all loss and expense
arising out of any claims of personal injury, product liability,
wrongful death, negligence, strict liability or any other legal action,
in addition to the breach of any of its warranties hereunder or the
violation of any applicable law or safety standard based on the use of
the Scores Trademarks by or on behalf of Licensee and/or its
subsidiary, affiliated or controlled company (if any). Licensee shall
maintain, at its sole cost and expense, premises liability, liquor
liability, workman's compensation (in the amount required by the State
of Illinois), plate glass insurance (as per Licensee's lease),
commercial liability coverage and other customary insurance. The
premises, commercial, and liquor policies must provide coverage of at
least $3,000,000/$3,000,000, naming Licensor as an additional insured,
and providing that such policy cannot be canceled without thirty (30)
days prior written notice to Licensor. In the event any claim is made
against Licensor in excess of the limits of Licensee's insurance set
forth above, Licensor may, at Licensee's expense, retain counsel of its
own choosing to defend said claims. All insurance shall be primary and
not contributory. Licensee agrees to provide Licensor with a copy of
the insurance declarations and/or certificates within 20 days following
the date of this Agreement. Licensee shall indemnify, defend and hold
harmless Licensor, its agents, employees and affiliate or parent
corporations from and against any and all loss and expense arising out
of any breach by Licensee of any term of, or warranty made in, this
Agreement.
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10. TERMINATION.
(a) In case either party fails to perform under or commits or allows to
be committed a breach of any of the several covenants and conditions
herein contained, the other party shall notify such party in writing of
such failure or default and such party shall then have the right to
remedy such failure or default within thirty (30) days. If the default
has not been cured within said thirty (30) days of notice to the
defaulting party, then the aggrieved party may terminate this Agreement
immediately by a further notice in writing. If Licensor shall send
notice of default to Licensee based on a failure to pay royalties, then
Licensee shall cure such default within ten (10) days of notice.
(b) Any termination under this paragraph will be without prejudice to
the rights and remedies of either party with respect to any provisions
or covenants arising out of breaches committed prior to such
termination.
(c) If a petition in bankruptcy is filed by or against Licensee, or
Licensee becomes insolvent, or makes an assignment for the benefit of
creditors, or any other arrangement pursuant to any bankruptcy law, or
if Licensee discontinues its business or if a receiver is appointed for
it or its business, to the fullest extent permitted by law at the time
of the occurrence, the license hereby granted shall automatically
terminate without any notice whatsoever being necessary. In the event
this License is so terminated, Licensee, its receivers,
representatives, trustees, agents, administrators, successors, and/or
assigns shall have no right to sell, use, exploit or in any way deal
with or in the Scores Trademarks or anything relating to it whatsoever
except with and under the special consent and instructions of Licensor
in writing, which they shall be obliged to follow.
(d) Upon cessation of all business operations by the Licensee at the
Location for a period of greater than one hundred eighty (180) days for
any reason other than Force Majeure, this Agreement shall terminate
automatically.
(e) This agreement shall also terminate should Licensee sell the
business or the assets of the business. Upon such a termination,
Licensee shall give Licensor at least sixty (60) days advance written
notice. Upon such sale, all rights and obligations of the parties
relative to this agreement shall cease and be of no further force or
effect.
11. TERM. Subject to Paragraph 10, the Term of this Agreement shall
commence on the date the Business opens at the Location and continue
for an initial term of three (3) years with successive three (3) year
renewals which will be automatic unless the Agreement is terminated in
accordance with its terms, or if Licensee is in default of its payment
obligations. Upon cessation of operation by the Location for a period
of greater than one hundred eighty (180) days for any reason other than
Force Majeure, this Agreement shall automatically terminate. If the
Business is not opened at the Location within 180 days of execution of
this Agreement, Licensor may terminate this Agreement in its sole
discretion. Licensee agrees to keep Licensor apprised of its progress
to opening as Scores-Miami.
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12. REPRESENTATION. It is expressly agreed and understood that neither
party hereto is the agent or legal representative of the other and
neither party has the authority, express or implied to bind the other
or pledge its credit. This Agreement does not create a partnership or
joint venture between the two parties.
13. FORCE MAJEURE. It is understood and agreed that in the event of an
act of the government, war, terrorism, fire, flood or other natural
disaster, or labor or manufacturing strikes which prevent the
performance of this Agreement, such nonperformance will not be
considered a breach of this Agreement, and such nonperformance shall be
excused while, but not longer than, the conditions described herein
prevail. The period of Force Majeure shall not exceed twelve (12)
months.
14. NOTICES. All notices, whenever required in this Agreement, will be
in writing and sent by certified mail, return receipt requested to the
addresses set forth above. Notices will be deemed to have been given
two business days following mailing. A copy of all notices to Licensor
shall be sent via regular mail to:
15. CONTROLLING LAW. This Agreement shall be construed in accordance
with the laws of the State of New York, United States of America and
jurisdiction over the parties and subject matter over any controversy
arising hereunder shall be in the Courts of the State of New York,
County of York or the Federal courts therein. Both parties hereby
irrevocably consent to said jurisdiction and venue.
16. ASSIGNMENT. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, but neither this Agreement, nor any of the rights,
interests or obligations hereunder shall be assigned by Licensee
without the prior written consent of Licensor, and any attempts to do
so without the consent of Licensor shall be void and of no effect.
17. ENTIRE AGREEMENT. This writing constitutes the entire agreement and
understanding between the parties. No other oral or written agreements
or representations exist or are being relied upon by either party, all
being merged herein. Any modifications or additions hereto must be made
in writing and signed by both parties.
18. MISCELLANEOUS.
(a) The paragraph headings used herein are for reference purposes only
and do not effect the meaning or interpretation of this Agreement. If
any provisions of this Agreement are for any reason declared to be
invalid or illegal, the remaining provisions shall not be affected
thereby.
(b) The failure of either party to enforce any or all of its rights
hereunder as they accrue shall not be deemed a waiver of those rights,
all of which are expressly reserved.
(c) This Agreement may be executed in more than one counterpart, all of
which shall be deemed to be originals.
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19. SECURITY INTEREST.
(a) In order to induce Licensor to enter into this Agreement and to
secure the complete and timely performance of Licensee's obligations
hereunder, Licensee hereby grants to Licensor a security interest in
the license granted under this Agreement as well as Licensee's
receivables in connection therewith. In the event Licensee defaults
under this license and Agreement, Licensor may enforce against Licensee
all the rights and remedies of a secured creditor upon default under
all applicable laws. In the event Licensee files for bankruptcy under
the U.S. Bankruptcy laws, Licensor may enforce all rights and remedies
of a secured creditor under the U.S. Bankruptcy Code.
(b) Licensee agrees to execute any and all documents necessary to
perfect Licensor's security interest in this license including, but not
limited to, Financing Statement Form UCC-1 and any other security
agreements and financing statements evidencing said security interests
in such form as may be recorded and perfected according to the laws of
the State of New York and the U.S. Patent and Trademark Office.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
ENTERTAINMENT MANAGEMENT SMG Entertainment, Inc.
SYSTEMS , INC.
By: By:
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Richard Goldring, President , General Manager
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Schedule A
1. U.S. Trademark Registration No. 1855829 for SCORES SHOWROOM with design
(INT 25, 41, 42);
2. U.S. Trademark Registration No. 1830135 for SCORES (INT. 6, 41, 42)
[ADD ADDITIONAL TRADEMARKS WITH RESPECT TO DIAMOND DOLLARS]
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