EXECUTION COPY - CONFIDENTIAL
EXHIBIT 10.3.5
***PORTIONS OF THIS EXHIBIT MARKED BY BRACKETS ("[***]") OR OTHERWISE INDICATED
HAVE BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT. THE OMITTED
PORTIONS HAVE BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***
LICENSE AGREEMENT
between
SPALDING SPORTS WORLDWIDE, INC.
and
SPORT XXXXX, INC.
Dated as of May 3, 2001
*** CONFIDENTIAL TREATMENT REQUESTED ***
TABLE OF CONTENTS
PAGE
1. DEFINITIONS....................................................................................................1
1.1 "ACCOUNTING"...............................................................................................1
1.2 "AFFILIATE"................................................................................................1
1.3 "ASSIGNABLE INTELLECTUAL PROPERTY".........................................................................2
1.4 "CLAIMS"...................................................................................................2
1.5 "CONFIDENTIAL INFORMATION".................................................................................2
1.6 "DESIGN INTELLECTUAL PROPERTY".............................................................................2
1.7 "DISTRIBUTOR"..............................................................................................2
1.8 "EVENT OF INSOLVENCY"......................................................................................2
1.9 "GUARANTEED MINIMUM ROYALTIES".............................................................................2
1.10 "INDEMNIFIED PARTY".......................................................................................2
1.11 "INDEMNIFYING PARTY"......................................................................................2
1.12 "INITIAL TERM"............................................................................................2
1.13 "INTELLECTUAL PROPERTY"...................................................................................3
1.14 "INTRODUCTION"............................................................................................3
1.15 "LICENSE".................................................................................................3
1.16 "LICENSED PRODUCTS".......................................................................................3
1.17 "LICENSED TRADEMARKS".....................................................................................3
1.18 "MANUFACTURER"............................................................................................3
1.19 "MARKETING FUND EXPENDITURES".............................................................................3
1.20 "NET SALES"...............................................................................................3
1.21 "OWNERSHIP RIGHTS".......................................................................................3
1.22 "PERSON"..................................................................................................3
1.23 "PROJECTED ANNUAL SALES"..................................................................................3
1.24 "REMAINING INVENTORY".....................................................................................3
1.25 "RENEWAL TERM"............................................................................................4
1.26 "REQUIRED POLICY".........................................................................................4
1.27 "TECHNOLOGY INTELLECTUAL PROPERTY"........................................................................4
1.28 "TERM"....................................................................................................4
1.29 "TERRITORY"...............................................................................................4
1.30 "SPALDING COMPETITOR".....................................................................................4
1.31 "SPALDING DISTRIBUTOR"....................................................................................4
1.32 "TRADEMARK"...............................................................................................4
2. TERM...........................................................................................................4
2.1 INITIAL TERM...............................................................................................4
2.2 MARKETING DATE.............................................................................................4
2.3 RENEWAL TERM...............................................................................................4
3. LICENSE........................................................................................................5
3.1 GRANT OF LICENSE...........................................................................................5
3.2 LICENSE FEE................................................................................................5
3.3 NO TRADEMARK SUBLICENSES...................................................................................5
3.4 NO LIMITATIONS ON SPALDING.................................................................................6
4. DEVELOPMENT....................................................................................................6
4.1 RESEARCH, DESIGN AND DEVELOPMENT...........................................................................6
4.2 DEVELOPMENT ASSISTANCE.....................................................................................6
4.3 DEVELOPMENT EXPENSES.......................................................................................6
i
*** CONFIDENTIAL TREATMENT REQUESTED ***
5. INTELLECTUAL PROPERTY..........................................................................................6
5.1 OWNERSHIP OF DESIGNS AND OTHER INTELLECTUAL PROPERTY.......................................................6
5.2 PROHIBITED USE OF LICENSED TRADEMARKS......................................................................7
5.3 OWNERSHIP OF LICENSED TRADEMARKS...........................................................................7
5.4 REGISTRATION AND PROTECTION OF LICENSED TRADEMARKS.........................................................8
5.5 TRADEMARK NOTICE...........................................................................................9
5.6 INFRINGEMENTS..............................................................................................9
5.7 GOOODWILL.................................................................................................10
6. ROYALTIES.....................................................................................................10
6.1 ROYALTIES.................................................................................................10
6.2 BREACH OF ROYALTY OBLIGATION..............................................................................11
6.3 GUARANTEED MINIMUM ROYALTIES..............................................................................11
6.4 PAYMENTS..................................................................................................12
6.5 CURRENCY..................................................................................................13
7. PROJECTED ANNUAL SALES........................................................................................13
8. RECORDS AND RIGHT TO AUDIT....................................................................................14
9. MARKETING.....................................................................................................14
9.1 MARKETING FUND............................................................................................14
9.2 APPROVAL OF MARKETING PLAN AND MATERIALS..................................................................15
9.3 TRADE SHOWS...............................................................................................15
9.4 LICENSEE'S SHOWROOM.......................................................................................15
9.5 LICENSEE'S SHOWROOM.......................................................................................15
10. COMPLIMENTARY PRODUCTS......................................................................................16
11. QUALITY CONTROL OF LICENSED PRODUCTS.........................................................................16
11.1 PRODUCT APPROVAL.........................................................................................16
11.2 APPROVAL OF MANUFACTURERS................................................................................17
11.3 LICENSED TRADEMARKS......................................................................................17
11.4 OTHER MARKINGS...........................................................................................17
11.5 SPALDING'S GUIDING PRINCIPLES FOR CHOOSING BUSINESS PARTNERS.............................................18
12. DISTRIBUTION.................................................................................................18
12.1 APPROVAL OF DISTRIBUTION.................................................................................18
12.2 NO RESALE................................................................................................18
12.3 FILL RATES...............................................................................................19
13. SURPLUS, DEFECTIVE OR DEFICIENT LICENSED PRODUCTS............................................................19
13.1 SURPLUS OR OBSOLETE PRODUCTS.............................................................................19
13.2 DEFECTIVE OR DEFICIENT LICENSED PRODUCTS.................................................................19
13.3 DISPOSAL OF REMAINING INVENTORY..........................................................................19
14. WARRANTY.....................................................................................................20
14.1 SPALDING WARRANTY........................................................................................20
14.2 LICENSEE WARRANTY........................................................................................20
15. DISCLAIMER...................................................................................................21
16. INDEMNITY....................................................................................................21
ii
*** CONFIDENTIAL TREATMENT REQUESTED ***
16.1 INDEMNIFICATION BY SPALDING..............................................................................21
16.2 INDEMNIFICATION BY LICENSEE..............................................................................21
16.3 INDEMNIFICATION PROCEDURES...............................................................................22
17. INSURANCE....................................................................................................22
18. CONFIDENTIAL INFORMATION.....................................................................................23
18.1 CONFIDENTIAL TREATMENT...................................................................................23
18.2 FORBIDDEN USE OF CONFIDENTIAL INFORMATION................................................................23
18.3 PRIOR OBLIGATIONS........................................................................................24
19. NON-COMPETITION..............................................................................................24
20. TERMINATION OR EXPIRATION....................................................................................24
20.1 TERMINATION BY SPALDING..................................................................................24
20.2 TERMINATION BY LICENSEE..................................................................................26
20.3 PAYMENTS UPON TERMINATION................................................................................26
20.4 AUTOMATIC EXPIRATION OR TERMINATION OF LICENSE...........................................................26
20.5 RETURN OF PROPERTY.......................................................................................26
20.6 NO RIGHTS AFTER TERM.....................................................................................26
21. APPROVALS, ETC...............................................................................................26
22. EQUITABLE RELIEF.............................................................................................27
23. MISCELLANEOUS................................................................................................27
23.1 INDEPENDENCE OF THE PARTIES..............................................................................27
23.2 SURVIVORSHIP.............................................................................................27
23.3 ENTIRE AGREEMENT.........................................................................................28
23.4 HEADINGS.................................................................................................28
23.5 AMENDMENT................................................................................................28
23.6 WAIVER...................................................................................................28
23.7 ASSIGNABILITY; SUCCESSORS AND ASSIGNS....................................................................28
23.8 REFORMATION; SEVERABILITY................................................................................28
23.9 GOVERNING LAW AND JURISDICTION...........................................................................28
23.10 DELIVERY OF MATERIALS; NOTICES, ETC.....................................................................29
23.11 CONFIDENTIALITY OF AGREEMENT............................................................................29
iii
*** CONFIDENTIAL TREATMENT REQUESTED ***
EXHIBITS
Spalding Product Principles Exhibit 1.16
Licensed Trademarks Exhibit 1.17
Spalding Competitors Exhibit 1.30
Licensee Accounting Statement Exhibit 6.1
Royalty Payment Schedule Exhibit 6.1E
Form of Marketing Plan Exhibit 9.2
Product Development and Approval Process Exhibit 11.1
Form of Manufacturer's Agreement Exhibit 11.2
Guiding Principles for Choosing Business Partners Exhibit 11.5
Account Approval Process and Forms Exhibit 12.1
iv
*** CONFIDENTIAL TREATMENT REQUESTED ***
LICENSE AGREEMENT
THIS
LICENSE AGREEMENT dated as of May 3, 2001, is between SPALDING SPORTS
WORLDWIDE, INC., a corporation organized and existing under the laws of Delaware
and having its principal place of business at 000 Xxxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxxxx 00000 (hereinafter referred to as "Spalding") and SPORT XXXXX,
INC., a corporation organized and existing under the laws of Colorado and having
its principal place of business at 0000 Xxxx 00xx Xxxxxx, Xxxxxx, Xxxxxxxx 00000
(hereinafter referred to as ("Licensee").
WHEREAS, Spalding owns the XXX XXXXX name and certain related
trademarks, signs and symbols (collectively, the "XXX XXXXX Trademarks") for use
on and in connection with sporting goods, footwear, apparel and accessories and
certain other applications;
WHEREAS, Spalding engages in the business of designing, manufacturing,
sourcing, marketing, distributing and selling worldwide sporting goods bearing
the XXX XXXXX Trademarks;
WHEREAS, the XXX XXXXX Trademarks have acquired substantial goodwill,
reputation, fame and distinctiveness throughout the world as a result of the
exclusive and widespread use thereof by Spalding;
WHEREAS, Licensee desires to engage in the research, design,
development, manufacture, sourcing, marketing, advertising, promotion,
merchandising, shipment, distribution, sale and servicing of men's golf inspired
apparel bearing one or more of the XXX XXXXX Trademarks; and
WHEREAS, Spalding desires to grant, and Licensee desires to obtain, a
license to use the XXX XXXXX Trademarks on and in connection with such men's
golf inspired apparel in the Territory (as defined below).
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and undertakings of the parties hereunder, Spalding and Licensee agree
as follows:
1. DEFINITIONS.
Certain initially capitalized terms used in this Agreement shall have
the meanings assigned to them in this Section 1. Other initially capitalized
terms used in this Agreement, but not defined in this Section 1, shall have the
meanings assigned to them as they appear in this Agreement.
1.1 "ACCOUNTING"
Accounting shall have the meaning set forth below in Section 6.1.
1.2 "AFFILIATE"
Affiliate shall have the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange Act of 1934, as amended.
1
*** CONFIDENTIAL TREATMENT REQUESTED ***
1.3 "ASSIGNABLE INTELLECTUAL PROPERTY"
Assignable Intellectual Property shall mean all Design Intellectual
Property and all Spalding Technology Intellectual Property.
1.4 "CLAIMS"
Claims shall have the meaning set forth below in Section 16.1.
1.5 "CONFIDENTIAL INFORMATION"
Confidential Information shall mean any and all information proprietary
to one of the parties hereto, whether or not reduced to writing or other
tangible medium of expression, and whether or not patented, patentable, capable
of trade secret protection or protected as an unpublished or published work
under applicable copyright laws. Confidential Information includes, but is not
limited to, information relating to intellectual property and to business plans,
financial matters, products, services, manufacturing processes and methods,
costs, sources of supply, strategic marketing plans, customer lists, sales,
profits, pricing methods, personnel and business relationships. Confidential
Information shall not include any information that: (i) was already known to the
receiving party prior to its relationship with the disclosing party, as
established by written records; (ii) becomes generally available to the public
other than as a result of the receiving party's breach of this Agreement; (iii)
is furnished to the receiving party by a third party who is lawfully in
possession of, and who lawfully conveys, such information; or (iv) is
subsequently developed by the receiving party independently of the information
received from the disclosing party, as established by the receiving party's
written records. For purposes of this definition, the phrase "receiving party"
shall be deemed to include each Affiliate of the receiving party.
1.6 "DESIGN INTELLECTUAL PROPERTY"
Design Intellectual Property shall have the meaning set forth below in
Section 5.1.
1.7 "DISTRIBUTOR"
Distributor shall mean any distributor or any sales representative with
which Licensee has a contractual relationship for the wholesale distribution of
products.
1.8 "EVENT OF INSOLVENCY"
Event of Insolvency shall have the meaning set forth below in Section
20.1(b).
1.9 "GUARANTEED MINIMUM ROYALTIES"
Guaranteed Minimum Royalties shall have the meaning set forth below in
Section 6.3.
1.10 "INDEMNIFIED PARTY"
Indemnified Party shall have the meaning set forth below in Section
16.3.
1.11 "INDEMNIFYING PARTY"
Indemnifying Party shall have the meaning set forth below in Section
16.3.
1.12 "INITIAL TERM"
Initial Term shall have the meaning set forth below in Section 2.1.
2
*** CONFIDENTIAL TREATMENT REQUESTED ***
1.13 "INTELLECTUAL PROPERTY"
Intellectual Property shall mean copyrights, patents, trade secrets and
other information relating to research and development, inventions, discoveries,
improvements, methods and processes, know-how, algorithms, compositions, works,
concepts, designs, ideas, prototypes, writings, notes and patent applications.
1.14 "INTRODUCTION"
Introduction shall mean, with respect to any Licensed Product, both:
(i) exhibition of such Licensed Product at a press conference, trade show or
similar event; and (ii) accepting orders for sale of commercially reasonable
quantities of such Licensed Product.
1.15 "LICENSE"
License shall mean the grant provided in Section 3.1.
1.16 "LICENSED PRODUCTS"
Licensed Products shall mean men's golf inspired knit tops, pants,
shorts, sweaters, vests and outerwear/rainwear.
1.17 "LICENSED TRADEMARKS"
The term "Licensed Trademark" shall mean the trademark XXX XXXXX as
represented in the attached Exhibit 1.17.
1.18 "MANUFACTURER"
Manufacturer means a manufacturing entity which has been approved in
writing by Spalding as a manufacturer of some or all of the Licensed Products
and which has entered into a Manufacturer's Agreement in accordance with Section
11.2.
1.19 "MARKETING FUND EXPENDITURES"
Marketing Fund Expenditures shall have the meaning set forth below in
Section 9.1.
1.20 "NET SALES"
Net Sales shall mean Licensee's sales of Licensed Products at
Licensee's invoice price for the Licensed Products, less (i) usual and customary
post-sale discounts and (ii) customer returns actually credited. No deductions
in Net Sales shall be made for: (A) cash or other discounts (except as stated in
the previous sentence); (B) commissions; (C) uncollectible accounts; and (D) any
costs incurred in the research, design, development, manufacture, sourcing,
offering for sale, sale, advertising, promotion, shipment, distribution or
exploitation of the Licensed Products.
1.21 "OWNERSHIP RIGHTS"
Ownership Rights shall have the meaning set forth below in Section 5.3.
1.22 "PERSON"
Person shall mean any natural person, corporation, limited liability
company, general or limited partnership, firm or other entity.
1.23 "PROJECTED ANNUAL SALES"
Projected Annual Sales shall have the meaning set forth in Section 7.
1.24 "REMAINING INVENTORY"
Remaining Inventory shall have the meaning set forth below in Section
13.3.
3
*** CONFIDENTIAL TREATMENT REQUESTED ***
1.25 "RENEWAL TERM"
Renewal Term shall have the meaning set forth below in Section 2.2.
1.26 "REQUIRED POLICY"
Required Policy shall have the meaning set forth below in Section 17.
1.27 "TECHNOLOGY INTELLECTUAL PROPERTY"
Technology Intellectual Property shall have the meaning set forth below
in Section 5.1.
1.28 "TERM"
Term shall mean the Initial Term and, if applicable, the Renewal Term.
1.29 "TERRITORY"
Territory shall mean: the United States and its territories and
possessions; and Canada beginning January 1, 2003.
1.30 "SPALDING COMPETITOR"
Spalding Competitor shall mean any Person that is listed in Exhibit
1.30 hereto, which exhibit Spalding may amend, from time to time, with
Licensee's consent.
1.31 "SPALDING DISTRIBUTOR"
Spalding Distributor shall mean any Distributor with which Spalding has
a contractual relationship for the wholesale distribution of Spalding products,
other than Licensed Products.
1.32 "TRADEMARK"
Trademark shall mean any trademark, trade name, trade dress, service
xxxx, logo or other similar identifying xxxx.
2. TERM.
2.1 INITIAL TERM.
The initial term of this Agreement and the License shall commence upon
the date of this Agreement and shall expire on December 31, 2006, or on such
earlier date as either party may terminate this Agreement in accordance with its
terms (the "Initial Term").
2.2 MARKETING DATE
Licensed Product must actively be selling by February, 2002.
2.3 RENEWAL TERM.
Licensee shall have an option to renew this Agreement and the License
for an additional five (5) years commencing on January 1, 2007 and expiring on
December 31, 2011 (the "Renewal Term"). Licensee shall deliver to Spalding
written notice of Licensee's intention to exercise its renewal rights on or
prior to March 31, 2006. Licensee's renewal rights are subject to the following
conditions: (i) the Initial Term has not been terminated before its expiration;
(ii) Licensee has met all royalty payment requirements; (iii) during both the
period on and before the notice date and the period between the notice date for
exercising such option (as described below) and the date the Renewal Term
commences, Licensee shall not be in default in any material respect under this
Agreement, beyond the applicable cure period, if any; and (iv) Licensee has
achieved 100% of Annual Sales Projection for the year 2002 through 2006.
4
*** CONFIDENTIAL TREATMENT REQUESTED ***
3. LICENSE.
3.1 GRANT OF LICENSE
The registered owner of the Licensed Trademark in the United States is
Spalding and the registered owner of the Licensed Trademark elsewhere is Lisco
Sports, Inc. ("Lisco), a Spalding Affiliate. Lisco has licensed Spalding to use
and license others to use the Licensed Trademark outside the United States.
Wherever any provisions of this Agreement including, without limitation, this
Section 3.1 and Section 5 below, refer to any rights of Spalding in and to, or
with respect to, the Licensed Trademark, and such rights are applicable to any
part of the Territory outside the United States, then such references shall also
be deemed to include and contemplate the rights of Lisco.
Spalding hereby grants Licensee the exclusive right and license to
utilize the Licensed Trademark solely upon and in conjunction with the
manufacture, sale and distribution of Licensed Products in the Territory,
subject however to the restrictions and conditions hereinafter set forth. This
grant shall not preclude Spalding licensees of Licensed Products outside the
Territory from sourcing Licensed Products in the Territory for shipment and sale
outside the Territory. Likewise, this grant shall not preclude Licensee from
sourcing Licensed Products outside the Territory for shipment and sale in the
Territory. Licensee acknowledges Spalding's exclusive rights in the Licensed
Trademark and agrees that it will use the same only so long as and only in the
manner authorized by this Agreement. The license granted herein does not include
the right to sublicense the use of the Licensed Trademark. Licensee shall notify
its customers that Licensed Products cannot be exported outside of the
Territory.
Licensee shall be permitted to have the Licensed Products manufactured
solely for it by a third party Manufacturer upon the prior written approval of
Spalding, provided and upon the express condition that prior to the commencement
of such manufacture, said third party Manufacturer shall duly execute and
deliver to Spalding a letter in form and content as attached hereto as Exhibit
11.2. Licensee agrees that the utilization of such a Manufacturer shall not in
any way reduce its obligations to Spalding under this Agreement, including but
not limited to the quality control and trademark notice provisions of this
Agreement. Licensee will be required to participate in Spalding's Global
Business Affiliate Program through which all factories involved in the
production of Spalding's products are audited to ensure that they are in
compliance with local labor laws and Spalding's human rights standards. Any
default by said Manufacturer of said letter or the obligations referenced
therein shall constitute default of this Agreement by Licensee.
3.2 LICENSE FEE.
$[***] non-refundable license fee payable as follows: 50% on signing
and the remaining 50% by December 31, 2001.
3.3 NO TRADEMARK SUBLICENSES.
Licensee shall not have the right to sublicense any of the Licensed
Trademarks; provided, however, that Licensee may authorize the use of the
Licensed Trademarks during the Term by Manufacturers solely for purposes of the
manufacture of Licensed Products for or on behalf of Licensee.
5
*** CONFIDENTIAL TREATMENT REQUESTED ***
3.4 NO LIMITATIONS ON SPALDING.
Except as expressly stated herein, nothing contained in this Agreement
shall in any way restrict, impair, limit or affect Spalding's rights to use, or
to permit third parties to use, the Licensed Trademarks.
4. DEVELOPMENT.
4.1 RESEARCH, DESIGN AND DEVELOPMENT.
Spalding shall permit Licensee to develop the Licensed Products
according to Licensee's specifications for application in Licensed Products, as
designed by Licensee, subject to approval of Spalding. Spalding shall,
throughout the Term, make available to Licensee Spalding Confidential
Information which is necessary, in Spalding's sole opinion, to develop and
manufacture the Licensed Products. Notwithstanding the foregoing, in no event
shall significant new developments or improvements to Licensed Products be
introduced in other men's and boys' apparel products produced by Licensee unless
first or simultaneously offered for use in the Licensed Products. None of the
foregoing shall limit, override or otherwise affect the restrictions hereunder
on Licensee's ability to compete with the Licensed Products.
4.2 DEVELOPMENT ASSISTANCE.
Licensee shall provide a team of its employees for the Licensed
Products, including a head product designer, a technical designer, a brand
manager and a sales manager. Such employees shall be required to execute
agreements confirming assignment of Assignable Intellectual Property to Spalding
and undertaking obligations of confidentiality and non-competition similar to
those agreed to by the parties to this Agreement. At least one brand manager
will work exclusively on the Licensed Products. Licensee agrees to hire a senior
level designer specifically for the Xxx Xxxxx business.
4.3 DEVELOPMENT EXPENSES.
Licensee shall reimburse Spalding for all reasonable out-of-pocket
expenses which may be actually incurred by Spalding or its designees, at
Licensee's request or with Licensee's approval, in connection with Licensee's
research, design, development, manufacture or sale of the Licensed Products,
including, but not limited to, round trip transportation costs, hotel and meal
charges and other reasonable expenses, but excluding salary of such Spalding
employees or designees. Expenses such as material and sample costs shall be
borne solely by Licensee.
5. INTELLECTUAL PROPERTY.
5.1 OWNERSHIP OF DESIGNS AND OTHER INTELLECTUAL PROPERTY.
Licensee agrees that with respect to any developments or innovations in
technology, used or usable in apparel, all designs, inventions, discoveries,
developments, improvements, methods, processes, know-how, compositions, works,
concepts and ideas (whether or not patentable or capable of trade secret or
copyright protection) (together, referred to as "Technology Intellectual
Property") created, developed or reduced to practice by Spalding (whether alone,
jointly with Licensee or with others), shall be the sole property of Spalding
(collectively, "Spalding Technology Intellectual Property").
6
*** CONFIDENTIAL TREATMENT REQUESTED ***
All Technology Intellectual Property created, developed or reduced to practice
by Licensee other than that used in the Licensed Products (whether alone or with
others, not including Spalding) shall be the sole property of Licensee.
Licensee further agrees that, all designs, trade-dress, design patents,
other identifying marks, and design related concepts and ideas (whether or not
patentable or capable of trade secret or copyright protection) created,
developed or reduced to practice by Licensee or Spalding (whether alone, jointly
or with others) in the course of researching, designing, developing,
manufacturing, sourcing, modifying, improving or altering apparel products in an
attempt to create Licensed Products (together, referred to as the "Design
Intellectual Property") shall be the sole property of Spalding and shall be used
by Licensee exclusively for the Licensed Products. In the event Spalding uses or
permits another licensee to use designs of Licensed Products for the production
of men's apparel products, Spalding and Licensee will mutually agree on a
compensation package for Licensee.
Licensee shall promptly and fully disclose any Technology Intellectual
Property or Design Intellectual Property created, developed or reduced to
practice by Licensee hereunder and hereby assigns and agrees to assign to
Spalding, or its designees, its full right, title and interest in and to all
Design Intellectual Property. Licensee agrees that, both during and after the
Term, Licensee shall, at Spalding's request and expense, execute any and all
applications for patents, copyrights or other rights and otherwise provide
assistance to assign the Design Intellectual Property and Spalding Technology
Intellectual Property developed hereunder to Spalding and to permit Spalding to
enforce any patents, copyrights or other rights in and to both the Design
Intellectual Property and such Technology Intellectual Property. All
copyrightable works of Design Intellectual Property that Licensee creates shall
be considered "works made for hire."
5.2 PROHIBITED USE OF LICENSED TRADEMARKS.
During the Term and at all times thereafter, Licensee shall not use any
of the Licensed Trademarks: (i) as a portion of, or in combination with, any
other trademarks; (ii) as all or part of a corporate name, trade name or other
designation used by Licensee to identify its products, services or business; or
(iii) for any purpose other than as trademarks for the Licensed Products. At no
time shall Licensee use any name, trademark, service xxxx, trade name, trade
dress or logo in connection with the Licensed Products, which use, and the size,
placement and form of which, have not been approved in writing in advance by
Spalding, except as required by applicable law. In the event of such authorized
use, Licensee shall, at Spalding's option, assign said other trademarks,
designs, logos, or endorsements to Spalding upon termination of this Agreement,
and in the event of such assignment Licensee will execute and deliver to
Spalding any documents requested by Spalding necessary to effect such
assignment.
5.3 OWNERSHIP OF LICENSED TRADEMARKS.
Licensee acknowledges that Spalding has sole and exclusive ownership of
all right, title and interest in and to the Licensed Trademarks (including,
without limitation, all registrations and applications therefor). Licensee
further acknowledges, represents and warrants that it has not acquired, and
shall not acquire (whether by operation of law, by this Agreement or otherwise),
any right, title, interest or ownership in or to the Licensed Trademarks or any
part thereof (collectively, "Ownership Rights"). Should any Ownership Rights
become vested in Licensee, Licensee agrees to assign, and hereby assigns, such
Ownership Rights to Spalding free of additional consideration. Licensee shall
provide, at Spalding's cost, and execute all documents necessary in Spalding's
sole
7
*** CONFIDENTIAL TREATMENT REQUESTED ***
opinion, to effectuate and record each such assignment to Spalding. Licensee
recognizes the value of the goodwill associated with the Licensed Trademarks
and acknowledges that all rights therein belong exclusively to Spalding and
further acknowledges that the Licensed Trademarks have acquired secondary
meaning in the mind of the public. All use of the Licensed Trademarks and all
goodwill and benefit arising from such use shall inure to the sole and
exclusive benefit of Spalding. Licensee shall not knowingly, during the Term
or at any time thereafter, damage, injure or impair the validity and
subsistence of the Licensed Trademarks. Licensee shall not attack, dispute or
challenge Spalding's Ownership Rights in or to the Licensed Trademarks or the
validity of this Agreement, nor shall Licensee assist others in so doing. All
trademarks, logos, designs, and/or slogans appearing on or in connection with
the Licensed Products shall be the sole and exclusive property of Spalding.
Licensee agrees to assign, and hereby assigns, all Ownership Rights to
Spalding. At the request and expense of Spalding, Licensee shall provide and
execute all documents necessary to effectuate and record such assignments to
Spalding.
5.4 REGISTRATION AND PROTECTION OF TRADEMARK
Except as otherwise agreed in writing, in no event shall Licensee deviate
in any manner in its use of the Licensed Trademark from the form of the
Trademark set forth in the attached Exhibit 1.17.
Licensee agrees to cooperate fully and in good faith with Spalding for
the purpose of securing and preserving Spalding's right(s) in and to the
Licensed Trademark. If Spalding requests, Licensee shall, at Spalding's expense,
file and prosecute one or more applications for trademark registrations in the
appropriate office(s) or class(es) in the name of Spalding, or, if Spalding so
requests in writing, any other name designated by Spalding. It is agreed that
nothing contained in this Agreement shall be construed as an assignment or grant
to Licensee of any right, title or interest in or to the Licensed Trademark, it
being understood that all rights relating thereto are reserved by Spalding,
except for the license granted hereunder to Licensee. Licensee hereby agrees
that upon expiration or termination of this Agreement for any reason, Licensee
will be deemed automatically to have assigned, transferred and conveyed to
Spalding any and all copyrights, trademark or service xxxx rights, equities,
goodwill, or other right, title or interest in and to the Licensed Trademark and
any variation thereof which may have been obtained by Licensee or which may have
vested in Licensee in pursuance of any endeavors covered hereby. Licensee will
execute, and hereby irrevocably appoints Spalding its attorney-in-fact to
execute, if Licensee refuses to do so, any documents requested by Spalding to
accomplish or confirm the foregoing. All artwork and designs involving the
Licensed Trademark, or any reproduction thereof, shall, notwithstanding their
invention or use by Licensee, be and remain the sole property of Spalding and
Spalding shall be entitled to use the same and to license the use of the same by
others. Spalding shall have the sole right to determine whether or not legal or
other action shall be taken to protect the Licensed Trademark, and Spalding
shall have sole control over the form of such action and any settlement of such
disputes with third parties with respect to such action. Licensee shall
cooperate fully in the prosecution of any action to protect the Licensed
Trademark at Spalding's expense.
Licensee agrees that it will not in any way register or use the Licensed
Trademark or any similar name alone or in conjunction with any other words as a
tradename or trademark, nor will the Licensed Trademark be used by Licensee in
the name of any corporation, partnership or other business entity.
8
*** CONFIDENTIAL TREATMENT REQUESTED ***
5.5 TRADEMARK NOTICE
Licensee agrees that its name and address must appear on the Licensed
Products. Whenever the Licensed Trademark is used, there shall also be a notice
of the fact that the Licensed Trademark is owned as follows: "THE XXX
XXXXX-REGISTERED TRADEMARK- Trademark is owned by and used under license from
Spalding Sports Worldwide, Inc. and Lisco Sports, Inc, a Spalding affiliate" or
such other notice as specified by Spalding from time to time in form size and
location approved by Spalding in writing.
Licensee agrees that as an essential condition hereof, it will cause the
foregoing appropriate notice or any other notice specified by Spalding to so
appear on each and every Licensed Product (either tag, label, imprint, or
packaging) and in all advertising prepared by or for Licensee. All shall be
submitted by Licensee to Spalding for its written approval prior to use by
Licensee. Approval by Spalding shall not constitute waiver of Spalding's rights
or Licensee's duties under any provision under this Agreement.
5.6 INFRINGEMENTS.
Licensee shall inform Spalding forthwith if Licensee learns of any
goods or activities which infringe (or may infringe) the Licensed Products, or
learns of any other infringement of the Licensed Trademarks or of any other
intellectual property rights now or hereafter owned by Spalding. Licensee shall
provide complete information, cooperation and assistance to Spalding concerning
each such infringement (including, without limitation, cooperation and
assistance in any further investigation or legal action). Upon learning of such
infringement, Spalding shall diligently review the conditions surrounding such
infringement. Spalding shall have the right, but not the obligation, at its sole
discretion and expense, to take such action as Spalding considers necessary or
appropriate to enforce Spalding's and Licensee's rights, including, without
limitation, legal action to suppress or eliminate such infringement or to settle
any such dispute or action and, if requested by Licensee, Spalding shall
consider the addition of Licensee as a party to any such action. Spalding shall
also be entitled to seek and recover all costs, expenses, and damages resulting
from such infringement. Licensee shall be entitled to receive any amounts
recovered by Spalding from any such action taken by Spalding with respect to any
goods or activities which infringe (or may infringe) only the Licensed Products
which are allocated to Licensee as a result of such infringement pursuant to a
final judicial determination, after reduction for the fees, costs and expenses
of such action.
In the event Spalding decides to take no action, Spalding shall
promptly inform Licensee of the reasons for such refusal. Licensee may inform
Spalding in writing of its objection to such refusal. Upon providing written
evidence to Spalding's satisfaction that such infringement has resulted or is
likely to result in a material loss of sales by Licensee of Licensed Products in
a country in the Territory where Spalding is the registered owner of the
Licensed Trademarks in the registration classifications applicable to the
Licensed Products, Licensee may request that Spalding (i) take action, at
Spalding's expense, to enforce Spalding's rights in the Licensed Trademarks
against such infringement or (ii) permit Licensee to take action, at Licensee's
expense on Spalding's behalf. Spalding shall negotiate in good faith with
Licensee the terms and conditions under which Spalding will approve such
request. Licensee acknowledges that any decision by Spalding to withhold
approval of Licensee's request shall not be deemed unreasonable if Spalding
applies such diligence, commercial reasonableness and other standards in making
such decision consistent with Spalding's application of such standards to the
enforcement of its rights in the Licensed Trademarks with respect to its other
products.
9
*** CONFIDENTIAL TREATMENT REQUESTED ***
In the event Spalding permits Licensee to enforce such rights of Spalding,
Licensee shall give Spalding, at least 30 days after receipt of such permission,
written notice of its intent to enforce Spalding's rights. In the event Licensee
chooses to enforce Spalding's rights, (i) Licensee (A) shall employ counsel
which is reasonably satisfactory to Spalding, (B) shall provide to Spalding
satisfactory periodic updates, and (C) may settle any such claim only with the
prior written consent of Spalding, and (ii) Spalding shall have the right to
employ separate counsel and to participate in such action. Licensee shall bear
the reasonable fees, costs and expenses of such separate counsel if, in the
exercise of Spalding's reasonable judgment, Licensee shall not have employed
satisfactory counsel to represent Spalding. In the event Licensee takes action
to enforce Spalding's rights pursuant to the previous sentence and as a result
of such action Licensee or Spalding recover any dollar amounts pursuant to a
damage award or settlement, such dollar amounts which apply to infringement of
the Licensed Products shall be distributed as follows: (i) if Spalding did not
participate in such action, Licensee shall own 100% of such dollar amounts; (ii)
if Spalding participated in such action alongside Licensee, Spalding and
Licensee shall share such dollar amounts equally (after reduction for fees
(including reasonable counsel fees), costs and expenses of such action); and
(iii) if Spalding assumes control of such action, Spalding shall own 100% of
such dollar amounts (after reduction for fees (including reasonable counsel
fees), costs and expenses of such action). Such dollar amounts which do not
apply to infringement of Licensed Products shall be owned by Spalding (after
reduction for fees (including reasonable counsel fees) to the extent not already
covered under the previous sentence. In the event Spalding decides to take no
action, and Licensee either takes no action or takes action but makes no
recovery, and Licensee provides written evidence to Spalding's reasonable
satisfaction that such infringement has resulted in a material loss of sales by
Licensee of Licensed Products in a country in the Territory where Spalding is
the registered owner of the Licensed Trademarks in the registration
classifications applicable to the Licensed Products, Spalding and Licensee agree
to negotiate in good faith an adjustment to Guaranteed Minimum Royalties and
Projected Net Sales as may be reasonably appropriate for such affected country
based on the demonstrated material loss of sales.
5.7 GOODWILL
Licensee recognizes the goodwill inherent in the Licensed Trademark and
acknowledges that the goodwill attached thereto belongs to Spalding and that
such Licensed Trademark has secondary meaning in the minds of the public.
Licensee agrees that it will not during the term of this Agreement or thereafter
attack or contest property rights of Spalding in and to the Licensed Trademark
or attack or contest the validity of the Licensed Trademark.
In order to maintain said goodwill, Licensee will promptly and to the
satisfaction of Spalding resolve any consumer complaints that may arise from
time to time with regard to Licensed Products or any promotion thereof.
6. ROYALTIES.
6.1 ROYALTIES.
Licensee shall pay to Spalding a royalty of [***] ([***]%) of
Licensee's Net Sales. Such royalties shall accrue when the Licensed Products are
shipped, distributed or billed, whichever occurs earliest.
10
*** CONFIDENTIAL TREATMENT REQUESTED ***
Licensee shall pay royalties due hereunder no later than thirty (30)
days after the end of each fiscal quarter. Commencing with the first quarter of
2002, Licensee shall provide to Spalding with each royalty payment a detailed
written accounting of Licensed Products sold or otherwise disposed of by
Licensee during such period in each country or territory (the "Accounting") in
the form of Exhibit 6.1.
On December 15 of each contractual year Licensee shall pre-pay to
Spalding an estimate of the royalties that Licensee reasonably expects to be due
for fourth quarter shipments. The following January 25 Licensee will report to
Spalding its actual earned royalties during fourth quarter, and if actual
royalties due Spalding are greater than the estimated amount paid to Spalding on
December 15, then Licensee will pay the difference to Spalding with its January
25 statement. If the estimate was greater than actual royalties, Licensee can
credit the difference to the following quarterly royalties due Spalding.
All royalty payments to be made hereunder by Licensee shall be paid to
Spalding in United States dollars into an account as and where designated by
Spalding from time to time.
All royalty payments shall be paid without any discharge or release of
Licensee from liabilities and responsibility accruing prior to such termination,
including, but not limited to, the payment of royalties in accordance with this
Agreement. Nothing in this Section shall prejudice the rights of action or
remedies which Spalding might otherwise have in connection with the enforcement
or breach of this Agreement.
6.2 BREACH OF ROYALTY OBLIGATION.
The failure or refusal of Licensee to timely furnish any Accounting or
make royalty payments within ten (10) days after receiving notice from Spalding
that such Accounting or royalty payment is late shall be deemed a substantial
and material breach of this Agreement and shall entitle Spalding, without any
prejudice to any other right which Spalding may have under law, in contract or
in equity for such breach, to terminate this Agreement and the License granted
hereunder. In the event that any inconsistencies or mistakes are discovered in
such statements or payments, they shall immediately be made (i) if payment is
due Spalding, by wire transfer or immediately available funds to an account
specified by Spalding or (ii) if payment is due Licensee, by reduction of
royalties to be paid to Spalding for the next quarter or, if discovered during
or after the final quarter of the Term, by wire transfer of immediately
available funds.
6.3 GUARANTEED MINIMUM ROYALTIES.
In no event shall the amount of royalties paid to Spalding during any
year be less than the amounts set forth below (the "Guaranteed Minimum
Royalties") and shall be paid in accordance with the schedule of Exhibit 6.1E.
11
*** CONFIDENTIAL TREATMENT REQUESTED ***
GUARANTEE MINIMUM ROYALTIES (A'$)
INITIAL TERM
January 1, 2002 - December 31, 2002 $[***]
January 1, 2003 - December 31, 2003 $[***]
January 1, 2004 - December 31, 2004 $[***]
January 1, 2005 - December 31, 2005 $[***]
January 1, 2006 - December 31, 2006 $[***]
RENEWAL TERM
January 1, 2007 - December 31, 2007 $[***]
January 1, 2008 - December 31, 2008 $[***]
January 1, 2009 - December 31, 2009 $[***]
January 1, 2010 - December 31, 2010 $[***]
January 1, 2011 - December 31, 2011 $[***]
Commencing on the effective date of this Agreement, and on or before
the 25th day of the month following the conclusion of each quarter of each year
(April 25, July 25, October 25, January 25) Licensee shall pay Spalding
twenty-five percent (25%) of the total annual minimum royalty to the extent such
amount exceeds the cumulative amount of the earned royalties for that year of
the Term. However if during the course of a particular year Licensee's total
royalty payments to Spalding (earned and minimum royalties) exceed the total
minimum royalty for that year, then only earned royalties shall be paid to
Spalding by Licensee during the balance of that year (see Exhibit 6.1E).
If the shipments in any specified one-year period are not sufficient to
provide royalties equal to the minimum royalty credit for the excess of the
minimum royalty over the actual earned royalty shall not be carried forward into
the next period.
6.4 PAYMENTS.
Unless otherwise specified in writing by Spalding, all payments by
Licensee under this Agreement shall be made in U.S. Dollars to Spalding or to a
bank or other organization designated by Spalding. All U.S. Dollar payments to
be made hereunder calculated on the basis of Net Sales or F.O.B., out as shown
in Section 6. (e.g., royalties) in the Territory shall be calculated by first
converting the local currency amount into the equivalent U.S. Dollar amount,
based on the currency exchange rate provided to Licensee by its principal
financial institution for such payment, which shall be a leading U.S. or
European commercial financial institution. Licensee shall provide Spalding with
sufficient documentation to support the currency exchange rate and conversion to
U.S. Dollars with its payment. Such payments shall be made by bank check,
certified funds, wire transfer or corporate check (subject to collection), at
the election of Spalding.
12
*** CONFIDENTIAL TREATMENT REQUESTED ***
When overdue, such payments shall bear interest at an annual rate of eighteen
percent (18%) (or such lower rate as may then be the highest rate legally
available) from the time such payment is due until payment is received by
Spalding. All payments by Licensee to Spalding shall be made without set-off or
counterclaim and free and clear of, and without deduction for, or withholding
of, any taxes, levies, imports, duties, charges, fees, deduction conditions or
condition withholdings of any nature now or hereafter imposed or levied by any
country or any political subdivision or authority thereof, except for compulsory
deductions or withholdings that Licensee is required by law to make with respect
to withholding taxes on royalties or other revenue payable by Licensee to
Spalding hereunder. Licensee shall provide Spalding with written evidence of any
such withholding paid by Licensee.
Payment outside the U.S. are to be made by wire transfer.
6.5 CURRENCY.
If Licensee is prevented by law from paying U.S. Dollars to Spalding as
required herein, Spalding shall have the right to require Licensee to deposit
the amount of U.S. Dollars payable (or, at Spalding's option, the then current
equivalent of such amount of U.S. Dollars in another currency available to
Licensee in one or more banks in the Territory designated by Spalding and for
Spalding's account. Such right shall be in addition to all other legal and
equitable rights available to Spalding (including, without limitation, the right
to terminate this Agreement immediately or any time thereafter upon notice for
the failure to receive in U.S. Dollars as so required).
7. GUARANTEED ANNUAL SALES.
7.1 GUARANTEED ANNUAL MINIMUM SALES
a) For the purposes of determining whether the conditions precedent to
Licensee's renewal rights under Section 2.2 have been satisfied and whether
Spalding has the right to terminate this Agreement for Licensee's failure to
meet its minimum sales obligations, Guaranteed Annual Sales for each year during
the Initial Term shall be equal to the amounts set forth below:
GUARANTEED ANNUAL MINIMUM SALES
(U.S.'$) DOLLARS
January 1, 2002 - December 31, 2002 $[***]
January 1, 2003 - December 31, 2003 $[***]
January 1, 2004 - December 31, 2004 $[***]
January 1, 2005 - December 31, 2005 $[***]
January 1, 2006 - December 31, 2006 $[***]
RENEWAL TERMS
January 1, 2007 - December 31, 2007 $[***]
January 1, 2008 - December 31, 2008 $[***]
January 1, 2009 - December 31, 2009 $[***]
January 1, 2010 - December 31, 2010 $[***]
January 1, 2011 - December 31, 2011 $[***]
13
*** CONFIDENTIAL TREATMENT REQUESTED ***
b) Guaranteed Minimum Sales will be calculated at [***]% of Projected Net
sales.
7.2 ANNUAL SALES PROJECTIONS (A'S)
January 1, 2002 - December 31, 2002 $[***]
January 1, 2003 - December 31, 2003 $[***]
January 1, 2004 - December 31, 2004 $[***]
January 1, 2005 - December 31, 2005 $[***]
January 1, 2006 - December 31, 2006 $[***]
RENEWAL TERMS
January 1, 2007 - December 31, 2007 $[***]
January 1, 2008 - December 31, 2008 $[***]
January 1, 2009 - December 31, 2009 $[***]
January 1, 2010 - December 31, 2010 $[***]
January 1, 2011 - December 31, 2011 $[***]
8. RECORDS AND RIGHT TO AUDIT
Licensee shall keep accurate records of all operations affecting
royalty payments and marketing related expenditures hereunder, and shall permit
Spalding or its designee, upon reasonable notice and during normal business
hours, to inspect all books and records relating to Licensee's performance
hereunder, as well as the methods employed to produce such books and records,
and to make copies of or extracts therefrom throughout the Term and for a period
of two (2) years thereafter. As part of such inspection, Spalding shall have the
right to have Licensee's books of accounts and records audited at Spalding's
expense; provided, however, if any such audit reveals a payment deficiency in
the amount owed to Spalding under this Agreement of five percent (5%) or more
for any quarter or year included in the Term, then Licensee shall pay, in
addition to such deficiency, all costs of such audit.
9. MARKETING.
9.1 MARKETING FUND.
a) Licensee shall spend on marketing, advertising and promotional
activities and materials ("Marketing Fund Expenditures") a dollar amount
(including in each case, consumer advertising and associated costs, fixtures and
corner shops, co-op advertising, trade advertising, PR, catalogs, trade show
booths, and showroom fixtures, but excluding, in each case, research, salary,
overhead and other administrative expenses, showroom expenses, and other
indirect costs and expenses) which is at least equal to [***]% of actual Net
Sales.
b) An additional [***]% of Net Sales shall be paid directly to Spalding
to support integrated brand marketing opportunities for the Xxx Xxxxx brand as
per Exhibit 6.1E which is attached.
14
*** CONFIDENTIAL TREATMENT REQUESTED ***
9.2 APPROVAL OF MARKETING PLAN AND MATERIALS.
Spalding and Licensee will develop mutually acceptable business and
marketing plans which address the subjects set forth in Exhibit 9.2, including,
types of media for Licensee's advertising and merchandising programs, proposed
advertising, promotional, marketing, distribution and sales strategies and
targets for the Licensed Products (the "Business and Marketing Plans").
The Marketing Plan shall assign responsibility for completing the
actions set forth in the Marketing Plan. Spalding shall have absolute control
over the creation and production of advertising, promotional, merchandising and
other marketing materials for which Spalding is responsible. Spalding shall
approve in advance all advertising, promotional, merchandising and other
marketing materials for which Licensee is responsible, including without
limitation: (i) all containers, packaging, labels, tags and the like; (ii) all
advertising, promotional, merchandising and other marketing materials; (iii) all
stationery, business cards and invoices; and (iv) all other transaction
documents and business materials. Licensee shall submit such materials in their
proposed final form to Spalding at least thirty (30) business days before the
proposed publication or release of such materials.
9.3 TRADE SHOWS.
Licensee may display, at its expense, Licensed Products at trade shows
and the like, but only within booths or separate and distinct areas displaying
the Licensed Products and only in a manner consistent with the presentation of
other Spalding products. For trade shows attended by both Licensee and Spalding,
Licensee shall display, at Licensee's expense, Licensed Products at trade shows
only in Spalding's booth, except as agreed otherwise by Spalding in writing.
Expenses (of the type included as Marketing Fund Expenditures pursuant to
Section 9.1a) incurred by Licensee under this Section 9.3 shall be credited
against Marketing Fund Expenditures.
9.4 LICENSEE'S SHOWROOM.
Licensee shall have a showroom with a distinct area devoted
exclusively to the Licensed Products. The location, minimum square footage and
design of and display of Licensed Products at the showroom must be approved in
advance by Spalding in its reasonable discretion.
9.5 CUSTOMER SERVICE
Licensee acknowledges that the reputation and success of Spalding and the
Licensed Trademark are dependent on the excellence in levels of customer
service. Therefore, Licensee agrees to use best efforts to continuously provide
customer service on Spalding branded business at a high level of quality,
commensurate with the excellence normally expected from a well-known, national
brand Licensee, including, but not limited to, the following:
1. Adequate levels of inventory to satisfy customer needs by consistently
shipping orders at a minimum of [***] percent ([***]%) complete;
2. Timely schedules of shipment against customer requests by consistently
shipping [***] percent ([***]%) of customer orders within fifteen (15)
days of the due date; if the order was placed within lead times.
15
*** CONFIDENTIAL TREATMENT REQUESTED ***
3. A customer service representative whose principal function is to handle
customer inquiries regarding the Licensed Products and who will
consistently answer a minimum of [***] percent ([***]%) of
customer/consumer inquiries within five (5) working days of receipt;
4. A toll free number for customer use.
5. At the end of each contract year, Licensee shall submit in writing to
Spalding a list of all its Spalding licensed customer/consumer
complaints and action steps taken to satisfy the customer or consumer.
10. COMPLIMENTARY PRODUCTS.
During each year included in the Term, Licensee shall provide to
Spalding, free of charge, (i) two (2) representative sample set from top of
production of the Licensed Products for Spalding's advertising and promotional
purposes and (ii) one (1) representative sample set from sales sample production
of the Licensed Products at Spalding's request for product development archives.
11. QUALITY CONTROL OF LICENSED PRODUCTS.
11.1 PRODUCT APPROVAL.
Licensee shall assure at all times that the quality of Licensed
Products: (i) is of a high standard consistent with the quality of XXX
XXXXX-REGISTERED TRADEMARK- products; (ii) otherwise conforms with the
specifications, performance standards and quality standards of Spalding products
and of Licensee's other products of similar brand position and selling price;
and (iii) is of a standard consistent with the prestige and reputation which the
Licensed Trademarks have developed heretofore. Licensee additionally shall
assure that at all times the Licensed products: (x) are sourced, manufactured,
labeled, distributed, marketed, advertised, promoted and sold by its Affiliates,
Distributors, employees, manufacturers, and agents in accordance with all
applicable laws and regulations; and (y) do not infringe any patents, industrial
design rights, copyrights or other intellectual property rights of others.
Licensee and Spalding shall follow the Product Development and Approval Process
set forth in Exhibit 11.1.
Only approved samples shall serve as the quality standards for the
functioning of such components and the design and visual appearance of such
Licensed Products. Licensee shall assure that each marketed unit of such
Licensed Products meets such standards and shall effect and enforce an adequate
quality control procedure for such purpose. Such quality control processes
procedures will be disclosed to Spalding in advance, and Spalding will receive
seasonal reports on the results of such quality control evaluations.
At least once during each year included in the Term (or more often if
reasonably requested by Spalding), Licensee shall submit no less than [***]
then-current production samples as requested by Spalding, so that Spalding may
assure itself of the maintenance of such quality standards.
16
*** CONFIDENTIAL TREATMENT REQUESTED ***
Such samples shall be submitted free of charge to Spalding, and shall be
delivered to Spalding no more than thirty (30) days after Spalding's request.
Such samples may be retained by Spalding free of charge and shall not be counted
against Spalding's allotment of complimentary Licensed Products under Section
10.
Spalding shall have the right, at any time after the approval of a
Licensed Product, to revoke or suspend such approval in the event that Spalding
determines that such Licensed Product fails to meet the standards of the
pre-production samples approved by Spalding. Upon being notified of any such
revocation or suspension of such approval, Licensee shall immediately cease
production of the relevant Licensed Product(s) and, under Spalding's oversight,
shall inspect all of its inventory of such Licensed Product(s). Licensee shall
perform the necessary steps to render first quality any inspected items that are
classified as eligible for "rework". All other defective or deficient products
shall be handled in accordance with Section 13.2.
11.2 APPROVAL OF MANUFACTURERS.
Any Manufacturer engaged by Licensee to manufacture the Licensed
Products must be approved in writing in advance by Spalding. Licensee shall
require each such approved Manufacturer to enter into a Manufacturer's Agreement
substantially in the form attached hereto as Exhibit 11.2. Spalding agrees that
it will not disclose the name of such approved Manufacturer to a third party
without obtaining the Licensee's prior written approval, unless the identity of
such Manufacturer would not be deemed to be Confidential Information.
Spalding shall have the right, upon reasonable notice to Licensee, to
visit and remain in the business offices and sourcing and manufacturing plants
of Licensee during normal business hours to: (i) inspect, examine and test any
merchandise, furnishings, fixtures, equipment, supplies, signs or other items
used by Licensee in connection with the sourcing, manufacturing or merchandising
of the Licensed Products, (ii) observe the nature, quality, quantity and value
of the goods sold and of the customer service rendered by Licensee pursuant to
this Agreement and (iii) observe the manner and method in which Licensee
operates hereunder. Spalding may require Licensee to remove any item of
inventory, equipment, furnishing, decor or merchandise used in connection with
any display of the Licensed Products which Spalding has not approved or is not
of substantially the same quality as approved.
11.3 LICENSED TRADEMARKS.
Licensee shall place and display the Licensed Trademarks on and in
connection with the Licensed Products only in such form and manner as are
specifically approved in writing in advance by Spalding.
11.4 OTHER MARKINGS.
Licensee shall also cause to appear on the Licensed Products and on (i)
their containers, packaging, labels, tags, and the like, (ii) all marketing,
advertising and promotional materials and (iii) all stationery, business cards,
invoices and other transaction documents and business materials which display
any of the Licensed Trademarks, such other legends, markings and notices as may
be required by law or regulation in the Territory or as Spalding may reasonably
request.
17
*** CONFIDENTIAL TREATMENT REQUESTED ***
11.5 SPALDING'S GUIDING PRINCIPLES FOR CHOOSING BUSINESS PARTNERS
Licensee and its Affiliates shall comply with Spalding's Guiding
Principles for Choosing Business Partners attached hereto as Exhibit 11.5 in
manufacturing or sourcing the Licensed Products.
12. DISTRIBUTION.
12.1 APPROVAL OF DISTRIBUTION.
Licensee shall submit, for Spalding's prior written approval, a
distribution plan which states the intended distribution channels and wholesale
and retail accounts for the Licensed Products for each country within the
Territory based on qualitative criteria. Except as may be prohibited by
applicable law, Licensee shall not sell the Licensed Products in the Territory
to anyone other than those retailers and Distributors approved in advance and in
writing by Spalding. Licensee and Spalding shall follow the account approval
process attached hereto as Exhibit 12.1. Licensee shall not sell the Licensed
Products outside of the Territory to anyone other than Spalding, Spalding's
Affiliates and franchisees and Spalding Distributors. In no event shall Licensee
distribute (or permit the distribution of) any Licensed Products to any
close-out dealers, brokers, mass merchandisers, discount department stores,
wholesale clubs or other channels which do not specialize in the merchandising
of high-quality products, unless Spalding has given its prior written consent to
such distribution.
It is expressly understood by Licensee that the XXX XXXXX-REGISTERED
TRADEMARK- collection will be distributed through on course "green grass"
specialty stores, department stores, and upscale off course specialty stores
with similar price points and positioning subject to Spalding's approval.
Licensee may sell Licensed Products to its customers via
business-to-business e-commerce upon Licensee's demonstration of its
technological and operational capabilities to Spalding's reasonable
satisfaction. Licensee shall not sell Licensed Products directly to consumers
through e-commerce or direct mail. At such times as Spalding, in its absolute
discretion, determines whether and how (e.g., Spalding, Licensee or third party)
such distribution will take place, Spalding and Licensee shall negotiate
mutually acceptable terms to apply to such sales. Nothing in this paragraph
shall be deemed to grant, nor to grant to Licensee the authority to grant, to
any of Licensee's customers the right to sell Licensed Products to consumers via
e-commerce without Spalding's prior written approval; provided, however, that
Licensee's customers which are approved by Spalding to sell other Spalding
footwear or apparel products to consumers via e-commerce shall be deemed
approved, for so long as such approval remains in effect.
12.2 NO RESALE.
Licensee and its Affiliates shall not sell Licensed Products which it
knows or has reason to know are destined for resale to or in any countries or
other jurisdictions outside the Territory, except to Spalding's Affiliates or
Spalding Distributors.
18
*** CONFIDENTIAL TREATMENT REQUESTED ***
Licensee shall, to the extent not prohibited by applicable law, expressly
communicate to its customers that resale of Licensed Products outside the
Territory (or solicitation in the European Union countries) is prohibited and
shall discontinue all direct and indirect sales of Licensed Products to any
customer who violates such prohibition.
12.3 FILL RATES.
Licensee shall, at all times, achieve an average order fill rate of at
least [***]% in any given season.
13. SURPLUS, DEFECTIVE OR DEFICIENT LICENSED PRODUCTS.
13.1 SURPLUS OR OBSOLETE PRODUCTS.
Licensee shall use its best reasonable efforts to manufacture the
Licensed Products in quantities consistent with anticipated demand therefor, so
as not to result in excessive inventory build-up. Licensee shall have the right
to sell, with Spalding's prior written approval, such surplus and/or obsolete
Licensed Products third party resellers; provided that the merchandise sold in
such outlet stores is not from the current season's collection and that Spalding
has the right of first refusal to purchase such merchandise at a discount from
published wholesale price of [***]%. Spalding shall inform Licensee of its
intent to exercise its right of first refusal within 15 days after receipt of
Licensee's written offer to Spalding. If Spalding does not exercise its right of
first refusal and Licensee does not sell such surplus and obsolete products to a
pre-approved third party, then Licensee may, alternatively, sell such products
to Spalding at a mutually agreed upon price. Licensee shall pay to Spalding a
royalty on sales of Excess or Obsolete Product at a [***]% royalty rate.
Such royalties and sales shall be applied towards Guaranteed Minimum
Royalties and to determine Licensee's compliance with the minimum Net Sales
requirements of Section 20.1(d) hereunder. Licensee shall submit in writing, for
approval, all customers for distribution of such surplus and obsolete Licensed
Products. Spalding may revoke, in its reasonable judgment, its approval of a
customer (subject to applicable law) and will promptly inform Licensee in
writing of the reasons for such revocation.
13.2 DEFECTIVE OR DEFICIENT LICENSED PRODUCTS.
Licensee shall xxxx any irregular or defective product "FD" or "IRR"
and may sell such product through its outlet stores, or, alternatively, to
Spalding at a mutually agreed upon price, if and only if: (i) such
irregularities or defects are minor and cosmetic in nature and do not affect the
function or intended use of such product, (ii) such product does not exceed
[***]% of Net Sales in any year, and (iii) Licensee pays to Spalding a royalty
on such sales other than sales to Spalding, which royalties shall not be
credited towards Guaranteed Minimum Royalties hereunder. Licensee will destroy
or alter all other irregular or defective product so as to be free from all
Licensed Trademarks and references to Spalding so as not to be confusingly
similar, in Spalding's reasonable discretion, to the Licensed Products.
13.3 DISPOSAL OF REMAINING INVENTORY.
Licensee will provide Spalding with a full statement of the styles and
amount of unsold Licensed Products in inventory on the expiration or termination
of this Agreement (collectively, the "Remaining Inventory").
19
*** CONFIDENTIAL TREATMENT REQUESTED ***
If Licensee provides such statement, Licensee shall have the right to sell-off
any such inventory during the Sell-off Period (as defined below); provided,
however, that Spalding reserves its right to deny, in its reasonable judgment,
Licensee's sell-off rights in the event Spalding terminates the
License
Agreement for Licensee's breach of any of the following obligations, and, in the
case of clauses (i) and (ii) below, so long as such breaches are continuing: (i)
maintenance of the Required Policy; (ii) payment of royalties or Licensee Fee;
(iii) trademark usage; (iv) sale to unauthorized accounts; or (v) sale of
Licensed Products which Licensee knows or has reason to know are destined for
resale to or in any countries or other jurisdictions outside the Territory
(except to Spalding's Affiliates or franchisees or Spalding Distributors) or
failure to discontinue (to the extent permitted by law) all direct and indirect
sales of Licensed Products to any customer who violates the resale prohibition.
The applicable Sell-off Period shall be the period beginning on the date of
termination or expiration of the
License Agreement and ending upon the
liquidation of the last remaining inventory, but in no event later than six (6)
months after the date of termination or expiration of the
License Agreement.
Licensee's proposed sell-off arrangements shall be subject to Spalding's prior
written approval, which approval shall not be unreasonably withheld or delayed,
shall be consistent with the reputation, prestige and goodwill of the Licensed
Trademarks and shall maintain Spalding's image and reputation. Licensee shall
not advertise such sell-off. Licensee shall pay Spalding a royalty on sales of
such inventory, but such royalties shall not be applied towards meeting
Guaranteed Minimum Royalties. Licensee shall alter or destroy any remaining
unsold inventory. Spalding has the right to approve and to supervise the manner
of alteration and destruction. At Spalding's option, Licensee shall sell any
Remaining Inventory to Spalding at the price provided in Section 13.1.
14. WARRANTY.
14.1 SPALDING WARRANTY.
Spalding represents and warrants to Licensee that: (i) it is able to
enter into and perform under this Agreement; (ii) it is the registered owner of
the Licensed Trademarks in the Territory in the registration classifications
applicable to the Licensed Products in the countries in the Territory as set
forth in Section 1.29; (iii) it is able and has the right to license all of
Spalding's rights to the Licensed Trademarks (or such alternative marks, as
applicable) in the Territory for purposes of this Agreement and the Licensed
Trademarks do not violate the intellectual property rights of third parties; and
(iv) it has not made, and will not make, any commitments to others inconsistent
with, or in derogation of, such rights.
14.2 LICENSEE WARRANTY.
Licensee represents and warrants to Spalding that: (i) it is able to
enter into and perform under this Agreement; (ii) it has the right to use any
trademarks other than the Licensed Trademarks it may use on or in connection
with the Licensed Products; (iii) it has not made, and will not make, any
commitments inconsistent with, or in derogation of, such rights; (iv) by
entering into and performing under this Agreement it is not, and shall not be,
in conflict with any prior obligations to third parties; (v) the Licensed
Products and all associated materials are, and shall be, free from any claims of
infringement of any third party's proprietary or other intellectual property
rights (including, without limitation, trade secret, patent, copyright and
trademark rights, but excluding the use of the Licensed Trademarks in accordance
with this Agreement); (vi) the Licensed Products and all associated materials
are, and shall be, free from material defects in design, material and
20
*** CONFIDENTIAL TREATMENT REQUESTED ***
workmanship and are, and shall be, safe and suitable for their intended and
foreseeable uses; (vii) the Licensed Products and all associated materials
are, and shall be, free from any claim of product liability; and (viii) the
Licensed Products and all associated materials shall meet the requirements of
all applicable statutes, rules, regulations, decrees, orders, standards and
guidelines.
15. DISCLAIMER.
Nothing in this Agreement shall be deemed to be a representation or
warranty by Spalding that the Licensed Products or Licensed Trademarks will be
free from claims of infringement of the patents, trademarks (except for
Licensee's use of the Licensed Trademarks permitted hereunder), trade dress,
copyrights or other intellectual property rights of any third party. Except as
provided in Section 16.1, Spalding shall have no liability whatsoever to
Licensee or any other Person for, or on account of, any injury, loss or damage,
of any kind or nature, sustained by, or any damage assessed or asserted against,
or any other liability incurred by or imposed upon, Licensee or any other
Person, arising out of or in connection with or resulting from: (a) the
manufacture, use or sale of Licensed Products; (b) the use of any Confidential
Information disclosed by Spalding; or (c) any advertising, promotional or
merchandising activities by Licensee, its directors, officers, employees, agents
and Affiliates in connection with the Licensed Products. Licensee shall hold
Spalding, and each of its directors, officers, employees, agents and Affiliates,
harmless in the event that Spalding, or any of its directors, officers,
employees, agents or Affiliates, is held liable with respect thereto.
16. INDEMNITY.
16.1 INDEMNIFICATION BY SPALDING.
Spalding shall indemnify and hold harmless Licensee and each of its
directors, officers, employees, agents and Affiliates from and against any and
all claims, actions, suits, proceedings, losses, damages and expenses
(including, without limitation, reasonable attorneys', consultants' and experts'
fees) (collectively, "Claims") arising out of or relating to any (i) inaccuracy
or breach of Spalding's representations, warranties, covenants or other
obligations hereunder or (ii) Licensee's use of the Licensed Trademarks in
accordance with this
License Agreement.
16.2 INDEMNIFICATION BY LICENSEE.
Licensee shall indemnify and hold harmless Spalding and each of its
directors, officers, employees, agents and Affiliates from and against any and
all Claims arising out of or relating to: (i) any inaccuracy or breach of
Licensee's representations, warranties, covenants or other obligations
hereunder; (ii) the design, development, manufacture, sourcing, marketing,
advertising, promotion, merchandising, shipment, distribution, sale, servicing
or use of any Licensed Products (including, without limitation, any (A) product
liability claims, (B) claims of personal injury, death or property damage, (C)
claims made under any guaranties made or warranties given (in each case, whether
express or implied) by Licensee with respect to such Licensed Products or (D)
any similar or other claim based on strict liability, negligence or warranty
(whether express or implied)); (iii) the distribution or sale of Licensed
Products in any of the countries in the Territory where Spalding's application
for registration of the Licensed Trademarks in the registration classification
applicable to the Licensed Products is pending, prior to such registration being
obtained; or (iv) any use of the Licensed Trademarks by Licensee in violation of
this Agreement.
21
*** CONFIDENTIAL TREATMENT REQUESTED ***
Licensee's obligations under this Section shall not be in any way limited to or
restricted by (a) Licensee's available insurance coverage, or (b) any of
Spalding's prior approvals granted under this Agreement with respect to any
Licensed Products.
16.3 INDEMNIFICATION PROCEDURES.
Each party hereto shall promptly after obtaining knowledge thereof
notify the other party of any Claims against any Person arising out of or
relating to any Licensed Products, including, without limitation, product
liability claims or other Claims subject to indemnification hereunder relating
to the research, design, development, manufacture, sourcing, marketing,
advertising, promotion, merchandising, shipment, distribution, sale, servicing
or use of any Licensed Product. In the event that any Claim is made as a result
of which a party or any of its directors, officers, employees, agents or
Affiliates (collectively, an "Indemnified Party") may become entitled to
indemnification by the other party (an "Indemnifying Party"), the Indemnifying
Party shall, at its expense, have the right to participate in, and, at its
option, to assume the defense of such Claim with counsel reasonably satisfactory
to the Indemnified Party. Promptly upon becoming aware of such Claim, the
Indemnified Party shall give the Indemnifying Party notice thereof; provided,
however, that the omission so to notify the Indemnifying Party shall not relieve
the Indemnifying Party from any liability which it may have to the Indemnified
Party, except to the extent that the Indemnifying Party is actually prejudiced
by such omission. If the Indemnifying Party elects so to assume the defense of
such Claim, following its notice of such election to the Indemnified Party, the
Indemnifying Party shall not be liable to the Indemnified Party pursuant to such
Section for any legal or other expenses subsequently incurred by the Indemnified
Party in connection with the defense of such Claim, except to the extent
otherwise provided below. Any settlement of any Claim shall require the mutual
consent of the Indemnifying Party and the Indemnified Party, which consent shall
not be unreasonably withheld or delayed, but which shall include as a term
thereof the giving by the claimant or plaintiff to the Indemnified Party of an
unconditional release from all liability with respect to such Claim.
Notwithstanding the right of the Indemnifying Party to assume the defense of any
Claim to which the Indemnified Party may become a party or target, the
Indemnified Party shall have the right to employ separate counsel and to
participate in the defense of such action. The Indemnifying Party shall bear the
reasonable fees, costs and expenses of such separate counsel, if: (i) the use of
the counsel chosen by the Indemnifying Party to represent the Indemnified Party
would present such counsel with a conflict of interest; (ii) the defendants in,
or targets of, such Claim include both the Indemnified Party and the
Indemnifying Party, and the Indemnified Party shall have reasonably concluded
that there may be legal defenses available to it which conflict with those
available to the Indemnifying Party (in which case the Indemnifying Party shall
not have the right to direct the defense of such Claim on behalf of the
Indemnified Party); (iii) in the exercise of the Indemnified Party's reasonable
judgment, the Indemnifying Party shall not have employed satisfactory counsel to
represent the Indemnified Party within a reasonable time after notice of the
institution of such Claim; or (iv) the Indemnifying Party shall not have assumed
the defense of such Claim.
17. INSURANCE.
Licensee shall maintain, at its own expense, in full force and effect at all
times during which Licensed Products are sold and if written on a "claims made"
basis for a period of six (6) years thereafter (or a tail policy providing
comparable coverage) a commercial general liability insurance policy providing
at least Three Million Dollars (US $3,000,000) of coverage (including coverage
for
22
*** CONFIDENTIAL TREATMENT REQUESTED ***
products liability), and an excess liability insurance policy providing an
annual aggregate of Three Million U.S. Dollars (U.S. $3,000,000) insuring
exclusively against events involving the Licensed Products (collectively, the
"Required Policy"). The Required Policy must be written on either an occurrence
basis or on a claims-made basis and shall name Spalding as an additional named
insured. The Required Policy shall provide for at least thirty (30) days' prior
written notice to Spalding of the cancellation or any substantial modification
thereof (including, without limitation, any reduction of the aggregate limit of
coverage). If Licensee cancels or substantially modifies the Required Policy
without replacement or substitute coverage or fails to keep the Required Policy
in full force and effect, Spalding shall have the right, at anytime thereafter,
without prejudice to its other rights, to terminate this Agreement and the
License, effective immediately upon notice to Licensee of such termination.
Spalding shall review annually the insurance requirements pursuant to this
Section and, if Spalding, in its good faith and reasonable business judgment
based upon past claims history of Licensee, dollar volume of sales beyond
Projected Annual Sales or current market conditions, believes that such
requirements do not adequately protect Spalding, Spalding shall have the right
to require Licensee to increase its insurance coverage to levels which Spalding,
in exercising such judgment, believes will be necessary to adequately protect
Spalding. In addition, Spalding shall have the right, but not the obligation, to
purchase such additional coverage and to be reimbursed by Licensee for all costs
related thereto.
Upon execution of this Agreement, and as Spalding may request from time
to time, Licensee shall provide Spalding with certificates of insurance or a
copy of the policies evidencing the coverage outlined in this Section. Renewal
certificates for such policies shall be issued at least ten (10) days prior to
the policy expiration.
18. CONFIDENTIAL INFORMATION.
18.1 CONFIDENTIAL TREATMENT.
The parties acknowledge that during the course of their performance
under this Agreement, each party may learn Confidential Information of the other
party. Each party agrees to take reasonable steps to protect such Confidential
Information and further agrees that it shall not: (i) use such Confidential
Information except as required in the normal and proper course of performing
under this Agreement; (ii) disclose such Confidential Information to a third
party; or (iii) allow a third party access to such Confidential Information
(except as may otherwise be required by law) without, in each case, obtaining
the prior written approval of the other party; provided, however, that such
restrictions shall not apply to Confidential Information which a party has
requested be subject to a confidentiality order but nonetheless is required to
be revealed to an adjudicating body in the course of litigation. The foregoing
restrictions shall continue to apply after the expiration or termination of this
Agreement, regardless of the reason for such expiration or termination, and
shall continue to apply for so long as the confidential nature of such
information is maintained. All Confidential Information is, and shall remain,
the property of the party which supplied it. Each party shall take reasonable
steps to xxxx its Confidential Information which is in written form with
appropriate legends; provided, however, that the failure so to xxxx such
Confidential Information shall not relieve the other party of its obligations
hereunder.
18.2 FORBIDDEN USE OF CONFIDENTIAL INFORMATION.
Neither party hereto shall: (i) use Confidential Information of the
other party in connection with products which are not Licensed Products; or (ii)
disclose Confidential Information of the other
23
*** CONFIDENTIAL TREATMENT REQUESTED ***
party to, or allow access to such Confidential Information by, anyone not
associated with the research, design, development, manufacture or sale of
Licensed Products pursuant to this Agreement, without the prior written
consent of such other party.
18.3 PRIOR OBLIGATIONS.
Neither party shall intentionally disclose to, or use on behalf of, the
other party any information which is proprietary to a third party, unless
written authorization from such third party is first obtained in form and
substance satisfactory to the other party.
19. NON-COMPETITION.
Neither Licensee nor any subsidiary of Licensee shall, except with
Spalding's prior written consent, (i) at any time prior to the termination or
expiration of the
License Agreement engage, either directly or indirectly, in
the research, design and development of, and (ii) at any time prior to the
termination or expiration of the
License Agreement and the applicable Sell-off
Period (as defined in Section 13.3) thereafter, engage, either directly or
indirectly, in the manufacture, sourcing, marketing, advertising, promoting,
merchandising, shipping, distributing or selling, any children's apparel
products (a) which, in Spalding's reasonable judgment are based upon, are
derived from, replicate patterns used for or are confusingly similar to any
Licensed Product or other Spalding apparel products, or (b) for or on behalf of
any Spalding Competitor (the "Prohibited other Activities"). Notwithstanding
these restrictions, Licensee may (a) continue to research, design, develop,
manufacture, market, advertise, promote, distribute or sell children's apparel
products under pre-existing arrangements; and (b) continue to research, design,
develop, manufacture, market, advertise, promote, distribute or sell children's
apparel products for third parties under pre-existing arrangements who become
Spalding Competitors after the date of the
License Agreement; provided that none
of the activities permitted in (a) and (b) may violate any other provisions of
the License Agreement (the "Prohibited Activities).
For purposes of the foregoing paragraph, the term "directly or
indirectly" shall mean Licensee's direct or indirect, sole or joint, (i)
ownership, management, operation, control or investment in the securities of
(except ownership of 10% or less of the equity securities of any publicly traded
Licensee), (ii) loans or advances to, or (iii) engagement of, a third party in
connection with the Prohibited Activities.
20. TERMINATION OR EXPIRATION
20.1 TERMINATION BY SPALDING
Spalding shall have the right, without prejudice to any other rights it
may have, to terminate this Agreement, effective immediately upon giving notice
to Licensee, upon the occurrence of any of the following, so long as the same
shall be continuing at the time such notice is given:
24
*** CONFIDENTIAL TREATMENT REQUESTED ***
a) If Licensee: (i) commences or voluntarily becomes subject to the commencement
of a case or proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under applicable bankruptcy, insolvency or
equivalent laws of any country in the Territory; (ii) involuntarily becomes
subject to the commencement of a case or proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
applicable bankruptcy, insolvency or equivalent laws, and such case or
proceeding shall remain undismissed and unstayed for a period of 60 days; (iii)
has appointed for it or for any substantial part of its property a
court-appointed receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official; (iv) makes an assignment for the benefit of its
creditors; (v) defaults on any obligation which is secured, in whole or in part,
by a security interest in the Licensed Products; (vi) fails generally to pay its
debts as they become due; or (vii) takes corporate action in furtherance of any
of the foregoing (an "Event of Insolvency");
b) If Licensee's management responsible for the business contemplated by this
Agreement changes, or if Licensee sells, or otherwise disposes of, all or
substantially all of Licensee's business or assets to a third party or parties
or effective control of Licensee is transferred and in either case whether in a
single transaction or in a series of transactions, and whether directly or
indirectly, (except, however, that any direct or indirect transfer of assets or
issuance of any shares of Licensee or the voting rights of such shares pursuant
to a public offering or to any transferee that (i) is not a Spalding Competitor,
(ii) is of sufficient financial strength, and (iii) has a reasonably acceptable
image and reputation is permitted), or if there is a material adverse change in
the business and financial condition of Licensee which adversely affects its
ability to perform hereunder. Notwithstanding the foregoing, Spalding agrees
that it will not withhold its consent to such transaction(s) unreasonably and
that it will not request any additional financial or economic consideration upon
any change of control.
c) The discontinuation of the design, manufacture, distribution and sale of the
Licensed Products for 30 days or more (or 120 days if discontinuation is a
result of force majeure);
d) If Licensee's actual Net Sales of Licensed Products for any years is less
than [***] percent ([***]%) of the applicable Projected Annual Sales for such
year; or
If Licensee materially breaches any of: (i) its trademark use
obligations under Section 5; (ii) its obligation to furnish any Accounting or
royalty payments under Section 6.2; (iii) its obligation to spend at least the
Marketing Fund Expenditures as required under Section 9.1; or (iv) its insurance
coverage obligations; and such breach is still continuing as of the date of
notice of termination.
Additionally, if Licensee materially breaches any of its other
representations, warranties or obligations under this Agreement other than those
specified in the preceding paragraph, Spalding shall have the right, without
prejudice to any other rights it may have, at any time thereafter to terminate
this Agreement upon at least thirty (30) days' notice, provided that such breach
is continuing at the end of the relevant notice period. Such termination shall
automatically become effective at the end of the applicable notice period,
unless Licensee has completely remedied such breach to Spalding's reasonable
satisfaction within such applicable notice period.
25
*** CONFIDENTIAL TREATMENT REQUESTED ***
20.2 TERMINATION BY LICENSEE.
If Spalding materially breaches any of its representations, warranties
or covenants under this Agreement, Licensee shall have the right, without
prejudice to any other rights it may have, at any time thereafter to terminate
this Agreement upon at least thirty (30) days' notice, provided that such breach
is continuing at the end of the relevant notice period. Such termination shall
automatically become effective at the end of the applicable notice period,
unless Spalding has completely remedied such breach to Licensee's reasonable
satisfaction within such applicable notice period. In addition, Licensee shall
have the right, without prejudice to any other rights it may have, to terminate
this Agreement effectively immediately on notice to Spalding, upon the
occurrence of an Event of Insolvency with respect to Spalding.
20.3 PAYMENTS UPON TERMINATION.
If this Agreement expires or is terminated for any reason as set forth
in this Agreement before all payments hereunder have been made (including
Guaranteed Minimum Royalties prorated through the date of expiration or
termination), Licensee shall immediately thereafter submit a report and pay to
Spalding any remaining unpaid balance for the year in which such expiration or
termination occurs (whether or not the due date therefor has occurred) and for
any prior years.
20.4 AUTOMATIC EXPIRATION OR TERMINATION OF LICENSE.
The License shall automatically expire or terminate upon the expiration
or termination of this Agreement for any reason; provided, however, that if
Spalding shall have terminated this Agreement only with respect to certain
countries or territories within the Territory, then the License shall,
accordingly, automatically terminate only with respect to the same products or
countries and territories (as the case may be); provided further, that if
Spalding terminates this Agreement only with respect to certain countries or
territories, then Guaranteed Minimum Royalties and Projected Annual Sales shall
be reduced appropriately. Upon such expiration or termination, Licensee shall
immediately cease all use of the License and shall, at Spalding's request, take
all steps and actions as Spalding may deem necessary to reflect or confirm such
expiration or termination and surrender of Licensee's rights to use same.
20.5 RETURN OF PROPERTY.
Each party shall return to the other, promptly upon the expiration or
termination of this Agreement, or at any other time when requested, any and all
property of the other party (including, but not limited to, all Confidential
Information and copies thereof and trade show booths); provided, however, that
Spalding shall have the right to retain free of charge any samples and any
complimentary products supplied to it under this Agreement.
20.6 NO RIGHTS AFTER TERM.
Licensee understands and acknowledges that, with the exception of its
surviving rights as described in Section 23.2 or otherwise in this Agreement, no
rights under this Agreement whatsoever shall extend to Licensee beyond the
expiration or termination of this Agreement. Licensee shall not be entitled to
any compensatory payment in connection with the expiration or termination of
this Agreement or the License granted hereunder for any reason.
21. APPROVALS, ETC.
Except as otherwise provided in this Agreement, all approvals required
or given pursuant to this Agreement shall be in writing.
26
*** CONFIDENTIAL TREATMENT REQUESTED ***
Spalding's approval of Licensed Product samples, artwork or advertising,
promotional or marketing materials shall not be construed to mean that Spalding
has determined that such items conform to the laws or regulations of any
jurisdiction or, in the case of Licensed Product samples, that such samples are
safe or fit for their intended purpose. Spalding may revoke its approval of a
Licensed Product sample at any time, if the Licensed Product subsequently is
determined by Spalding, in its reasonable judgment, to be materially unsafe or
deficient in quality. Additionally, if, following approval of any item for which
approval is required under this Agreement, any significantly unfavorable
publicity or claim should arise or be made in relation to such item, Spalding
shall have the right, in its reasonable business judgment, after consultation
with Licensee, to revoke its approval of such item. In the event of any
revocation of Spalding's approval hereunder, Licensee immediately thereafter (i)
shall discontinue its manufacture, distribution, sale, use and publication of
such item as a Licensed Product and (ii) shall alter all or any part of such
products remaining to be free from all Licensed Trademarks and references to
Spalding so as not to be confusingly similar, in Spalding's discretion, to the
Licensed Products or, if such alteration is impossible, shall destroy any such
product remaining. After Spalding has approved any item for which approval is
required under this Agreement, Licensee shall not make any material change in or
to such approved item without again obtaining Spalding's prior written approval.
In the event that Licensee shall experience any Event of Insolvency or
in the event Spalding determines, in its reasonable judgment, that Licensed
Products sold by Licensee are materially defective or unsafe, Spalding shall
have the right (but shall not be obligated) to require the recall of any
Licensed Product which is, or may be, materially defective or unsafe; provided,
however, that such recall (or failure so to recall) shall not relieve Licensee
of its indemnification obligations under this Agreement.
22. EQUITABLE RELIEF.
Licensee acknowledges and agrees that: (i) its failure to perform its
obligations under this Agreement and its breach of any provision hereof, in any
instance, may result in immediate and irreparable damage to Spalding; (ii) no
adequate remedy at law exists for such damage; and (iii) in the event of such
failure or breach, Spalding shall be entitled to equitable relief by way of
temporary, preliminary and permanent injunctions, and such other and further
relief as any court of competent jurisdiction may deem just and proper, in
addition to, and without prejudice to, any other relief whether in law or in
equity to which Spalding may be entitled.
23. MISCELLANEOUS
23.1 INDEPENDENCE OF THE PARTIES
Neither Licensee nor Spalding shall be construed to be the agent of the
other in any respect. The parties have entered into this Agreement as
independent contractors only, and nothing herein shall be construed to place the
parties in the relationship of partners, joint venturers, agency or legal
representation. Neither Licensee nor Spalding shall have the authority to
obligate or bind the other in any manner as to any third party. Other than with
Spalding, nothing contained herein shall be construed to restrict Licensee's
ability to set its prices with respect to unaffiliated third parties.
27
*** CONFIDENTIAL TREATMENT REQUESTED ***
23.2 SURVIVORSHIP.
All rights and obligations of the parties which, by their express terms
or nature or those arising under Sections 3.2, 3.3, 3.4, 5, 6 (except for
Section 6.4 subject to payment of prorated Guaranteed Minimum Royalties under
Section 20.3), 8, 12.2, 13 through 20, 22 and 23 (together with the defined
terms or other references used in such sections) of this Agreement, shall
survive the expiration or termination of this Agreement and shall continue until
fully performed.
23.3 ENTIRE AGREEMENT.
This Agreement constitutes the entire agreement between the parties
with respect to its subject matter and supersedes all prior agreements,
understandings, commitments, negotiations and discussions with respect thereto,
whether oral or written.
23.4 HEADINGS.
Headings and subheadings in this Agreement are included solely for
convenience of reference and shall not affect the interpretation of, or be
considered a part of, this Agreement.
23.5 AMENDMENT.
This Agreement may not be amended or modified in any respect, except in
writing signed by all parties.
23.6 WAIVER.
The failure of any party to insist upon strict adherence to any
provision of this Agreement on any occasion shall not be considered a waiver of
such party's right to insist upon strict adherence to such provision thereafter
or to any other provision of this Agreement in any instance. Any waiver shall be
in writing signed by the party against whom such waiver is sought to be
enforced.
23.7 ASSIGNABILITY; SUCCESSORS AND ASSIGNS.
This Agreement and the License are personal to Licensee. Licensee shall
not assign or transfer any of its rights or delegate any of its obligations
under this Agreement or the License, without the prior written consent of
Spalding, except as provided otherwise in Section 20.1(b) or elsewhere in this
License Agreement. Any assignment, transfer or delegation of any of Licensee's
rights or obligations in violation of this License Agreement shall be null and
void and of no effect. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties' respective successors and permitted assigns.
23.8 REFORMATION; SEVERABILITY.
The provisions of this Agreement shall be severable. If a court of
competent jurisdiction shall declare any provision of this Agreement invalid,
illegal or unenforceable, the other provisions hereof shall remain in full force
and effect, and such court shall be empowered to modify, if possible, such
invalid, illegal or unenforceable provision to the extent necessary to make it
valid and enforceable to the maximum extent possible.
23.9 GOVERNING LAW AND JURISDICTION.
This Agreement shall be governed by and construed in accordance with
the internal substantive laws of the Commonwealth of
Massachusetts applicable to
agreements made and to be performed entirely therein. Licensee hereby consents
to the exclusive jurisdiction of the courts of the Commonwealth of
Massachusetts
and of the United States District Court for the District of
Massachusetts for
resolution of all claims, differences and disputes which the parties may have
regarding this Agreement.
28
*** CONFIDENTIAL TREATMENT REQUESTED ***
Any judgment or other decision of any such court shall be enforceable, without
further proceedings, against the named party anywhere in the world where such
party is located, does business or has assets.
23.10 DELIVERY OF MATERIALS; NOTICES, ETC.
Materials required to be delivered to any party hereunder shall be
delivered to the address given below for such party. Unless otherwise expressly
stated in this Agreement, any notice, accounting statement, consent, approval or
other communication under this Agreement shall be in writing and shall be
considered given: (i) upon personal delivery or delivery by telecopier (with
confirmation of receipt by receiver), (ii) two (2) business days after being
deposited with an "overnight" courier or "express mail" service, or (iii) seven
(7) business days after being mailed by registered or certified first class
mail, return receipt requested; in each case addressed to the notified party at
its address set forth below (or at such other address as such party may specify
by notice to the others delivered in accordance with this Section):
If to Spalding:
Spalding Sports Worldwide, Inc.
000 Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxxxxx 00000
Attn: Vice President Licensing
If to Licensee:
Sport Xxxxx, Inc.
0000 Xxxx 00xx Xxxxxx
Xxxxxx, Xxxxxxxx 00000
Attn: President
23.11 CONFIDENTIALITY OF AGREEMENT.
Except as required by order of a court or government agency of
competent jurisdiction, this Agreement and its provisions shall be considered
Confidential Information. Spalding and Licensee shall jointly develop and agree
upon any press releases or other public statements to the media to be released
upon or after execution of this Agreement with respect to the financial terms
herein.
29
*** CONFIDENTIAL TREATMENT REQUESTED ***
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date first set forth above.
SPALDING SPORTS WORLDWIDE, IC.
By: ______________________________
Date:_____________________________
SPORT XXXXX, INC.
By: ______________________________
Date:_____________________________
[Exhibits to this Exhibit 10.3.5 have been omitted, but are available to the
Securities and Exchange Commission upon request.]
30
*** CONFIDENTIAL TREATMENT REQUESTED ***
