INTERNATIONAL RETAIL STORE LICENSE AGREEMENT
This International Retail Store License Agreement (“Agreement”) is made and entered into as of July 1, 2015 (“Effective Date”), by and between PAUL FRANK INDUSTRIES LLC, a Delaware limited liability company, (“PFI”), with its principal place of business at 10100 Santa Monica Blvd., Suite 500, Los Angeles, CA 90067, and The Café Co., Ltd., with its principal place of business at 79/99 Moo7, Chai Phat Village, Saimai, Bangkok 10220, Thailand (“Retailer”) with reference to the following facts:
(a) PFI is the owner of the Property, as defined below, used to identify and distinguish merchandise that it manufactures and sells or licenses third parties to manufacture and sell (“PFI Products”).
(b) Retailer desires to operate retail stores bearing the PAUL FRANK and/or THE PAUL FRANK STORE names which will sell exclusively PFI Products.
(c) The parties wish to set forth in this Agreement the terms and conditions under which PFI authorizes Retailer to operate the Stores and sell PFI Products in the Stores.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the parties hereby agree as follows:
1. CERTAIN DEFINITIONS.
1.1 “Gross Sales” shall mean the actual gross sales revenue achieved by Retailer from the sale of PFI Products, excluding only any freight or delivery charges separately stated. Sales tax collected from the customer by Retailer is accounted for separately from the sales price, and Retailer pays such sales tax directly to the taxing authority. Sales tax is not subject to the royalty fee.
1.2 “Licensed Purpose” shall mean the operation of the Stores selling exclusively PFI Products and promotional or marketing activities for the Stores.
1.3 “PFI Products” or “Products” shall mean all products manufactured by PFI or its licensees including, but not limited to, Food and beverages: non-alcoholic beverages, pre-prepared and/or pre-packaged foods (such as pancakes, waffles, crème brulee, chocolate pizza, brownies, popsicles, cookies), any exception is subject to licensor’s prior written approval. Non-food and beverage Paul Frank products (e.g., cushions, tumblers, insulated water bottles, cups, utensils, napkins, waffle machines, mugs, etc.), must be sourced from existing Paul Frank licensees as follows: first from local (Taiwan) licensees, then from Paul Frank licensees outside of the territory but only if existing Paul Frank licensees within the territory do not offer such product. Any exception is subject to licensor’s prior written approval. Paul Frank Café and kitchen wares and table wares are to be manufactured by Pegasus and subject to licensor approval, and for sale only in Pegasus cafes. Paul Frank Café food and beverage suppliers and menus are subject to licensor approval.
1.4 “Property” shall mean all trademarks, copyrights, designs related to PFI and other intellectual property as may be designated in writing by PFI. For clarification purposes, “Property” shall include, but shall not be limited to, the name “Paul Frank” as the name of the Stores and in connection with the sale, marketing and promotion of Products and the examples as set forth in Exhibit 1.
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1.5 “Store”/”Stores” shall mean the Paul Frank cafés operated by Retailer and located at the following locations, with plans to open 8 additional stores total within 5 years:
(a) Store Location: Thailand
Address: Central Westgate, Bangkok – scheduled to open in 2015
(b) Store Location: Thailand
Address: Zpell Shopping Mall, Bangkok – scheduled to open in 2015
(c) Store Location: Thailand Address:
1.6 “Term” shall have the meaning set forth in Section 11.1.
1.7 “Territory” shall have the meaning set forth in Section 3.1.
2. GRANT OF LICENSE.
2.1 Subject to the terms and conditions of this Agreement, PFI hereby grants Retailer a nontransferable, nonexclusive license (without the right to sublicense) to operate the Stores and to sell, offer to sell, display, advertise, promote and market only the Products in the Stores, and to advertise, promote and market the Stores, and to use the Property solely in connection with the Stores solely within the Territory and solely during the Term (the “License”). Retailer may advertise the Stores via the Internet in a manner targeted to the Territory but shall not solicit or take orders for or sell any Products over the Internet or sell Products through any channel of distribution other than the Stores. The license and rights granted herein shall be limited to the Licensed Purpose only, and only within the Territory Retailer shall, prior to Retailer’s publication of any Internet advertising shall submit to PFI, at Retailer’s expense, representative artwork, concepts, creative material and proposed domain name. Retailer shall not commence use of such Internet advertising unless and until PFI shall have approved in writing Retailer’s submission.
2.2 Retailer shall not open a Store or change the location of any Store without the prior written consent of PFI, which consent shall not be unreasonably withheld. The Store premises may be leased by Retailer provided that the terms of any lease contract are acceptable to PFI. Every lease contract must provide that if (a) this Agreement terminates prior to the expiration of the lease, or (b) Retailer chooses to discontinue operation of any Store, then in each case PFI shall have the option (but not the obligation), at its sole discretion, of taking over the lease and continuing to operate the Store.
2.3 Retailer shall source the Products only from PFI licensees with rights to sell PFI Products within the Territory, or from PFI directly. In limited circumstances, Retailer may source PFI Products from PFI licensees located outside of the Territory, which licensees do not have rights to sell the Products into the Territory, subject to PFI’s prior written approval in its sole discretion. For the avoidance of doubt, Retailer may sell the Products only inside the Stores.
3. TERRITORY AND STORE ROLL OUT.
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3.1 The “Territory” shall consist of Thailand. Retailer shall not export, ship, seek customers for, establish any branch for, or distribute the Products outside the Territory, and Retailer shall not use or authorize the use of the Property outside the Territory. Notwithstanding the forgoing, nothing in this Agreement shall limit PFI’s right to distribute Products within the Territory. For purposes of clarity, Retailer shall not have any right to open additional stores utilizing the Property without prior written consent from PFI.
3.2 Rights Retained By PFI. Except as expressly limited herein, PFI (on behalf of itself and its Affiliates) retains all rights with respect to the PFI stores, the Property and the sale of PFI Products, and any other products and services, anywhere in the world, including, without limitation:
(a) the right to operate or grant others the right to operate PFI stores at any location on such terms and conditions;
(b) the right to develop, market, distribute and/or sell, and license others to develop, market, distribute and/or sell products and services, including PFI Products in the Territory, under or in association with the Property;
(c) the right to be acquired by a business operating one or more businesses located or operating within the Territory which compete with the Stores;
(d) Retailer shall have no right to sell PFI Products through any channel of distribution other than freestanding or shopping mall Stores previously approved by PFI. Retailer shall not have the right to distribute or sell PFI Products through or to any other channel of distribution, including without limitation, other stores, websites, catalogues or any type of establishment that sells similar products.
4. GUARANTEE, FEES AND ROYALTIES.
4.1 Minimum Guarantee. Retailer shall pay to PFI a non-refundable, recoupable Guaranteed Minimum Payment of Two Hundred Thousand U.S. Dollars payable as follows: (1) U.S. $50,000 payable upon execution of this Agreement; (2) U.S. $50,000 payable on or before July 30, 2017; (3) U.S. $50,000.00 payable on or before July 30, 2018; and (4) U.S. $50,000.00 payable on or before July 30, 2019. No portion of the Guaranteed Minimum Payment shall be refundable or returnable to Retailer. PFI agrees that the Guaranteed Minimum payments shall be credited and applied against Retailer’s obligation to pay Royalties due to PFI.
4.2 Royalty Payments. Retailer shall pay to PFI a royalty of two percent (2%) of Gross Sales during the period of July 1, 2015 through June 30, 2018; two and a half percent (2.5%) of Gross Sales during the period of July 1, 2018 through June 30, 2019; and three percent (3%) of Gross Sales during the period of July 1, 2019 through June 30, 2020 (“Royalty”). All Royalty payments shall be made on a quarterly basis, not later than thirty (30) days following the end of each March, June, September and December during the Term (and promptly, but not more than ten (10) days after any termination of this Agreement), pursuant to the wire instructions included in the invoice that PFI will provide to Retailer upon execution of this Agreement. All payments shall be paid in full without the right of offset for overage, shortages, damages, partial shipments or shipping delay, and the cost of such transfer (including all bank charges incurred in connection with the transfer) shall be borne by Retailer. Any Royalty payment not received by PFI within thirty (30) days following the end
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of each calendar quarter shall accrue simple interest at the rate of the lesser of one and one- half percent (1 1⁄2%) per month, and the applicable maximum legal rate, from and after the date upon which such payment is due until the date such payment is actually made. Each Royalty payment shall be