MAXX INTERNATIONAL INC
8-K, EX-10.2, 2000-10-11
NON-OPERATING ESTABLISHMENTS
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                                                                    Exhibit 10.2


                              SUBLICENSE AGREEMENT
                               TELEPHONE PRODUCTS


AGREEMENT made as of the day of June, 2000  ("Effective  Date"),  by and between
TREASURES OF ST.  PETER'S IN THE VATICAN,  LTD.,  a New York  corporation,  with
offices  at  39  West  29th  Street,  New  York,  NY  10001  ("TSV"),  and  MAXX
INTERNATIONAL,  INC.,  a New York  corporation  with offices at 130 S. El Camino
Drive, Beverly Hills, CA 90212 ("Sublicensee").

                                    RECITALS

     A. TSV has the exclusive right and license (the "License") with Capitola di
San  Pietro  in  Vaticano   ("Licensor")   for  the   manufacture  and  sale  of
reproductions of the Works of Art, or the details thereof, located in the Museum
of the  Treasures  of St Peters in the Vatican,  utilizing  all  trademarks  and
copyrights  pertaining thereto,  owned by the Licensor,  in certain parts of the
world (the  "Reproductions")  TSV has the right to sublicense  any of the rights
granted to it by the License,  as long as any such  sublicense does not conflict
with any term or conditions of the License.

     B.  Sublicensee  desires  to obtain  from TSV an  exclusive  sublicense  to
manufacture and sell certain Products (as defined herein), utilizing one or more
of the  Reproductions  and TSV is  willing  to grant  such  sublicense  upon and
subject to the terms and conditions hereof.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:

1. Grant of Sublicense.  TSV hereby grants to Sublicensee the exclusive right to
manufacture  or  produce  and sell  the  Products  (as  defined  herein)  in the
Territory  (as  defined  herein)   Sublicensee  shall  not  have  the  right  to
sublicense, or assign, any of its rights hereunder, except as set forth below.

     a. The term "Products" is defined herein as products and services  relating
to telephones  including,  but not limited to, long distance and local services,
pre-paid and post paid calling cards,  800 and the like  telephone  services and
paging Each product or the literature  attached to such product or service shall
be imprinted with one or more of the Reproductions (the "Products").

     b. The Sublicensee is restricted from marketing and selling the Products by
or through a fundraising program or through a retail store operation.

<PAGE>


     c. The term  "Territory"  as defined herein shall include the continents of
North and South America, Asia and Australia (the. "Territory").

     d.  The  Sublicensee  may  sub-sublicense  or  assign  part  of its  rights
hereunder in the Territory outside the continental United States of America, all
of which are subject to and conditioned  upon the prior written  approval of TSV
including,  but not limited to,  approval of all agreements  with such assignee,
co-venturers  or  similar  party,  provided  that (i) the gross  revenue of such
assignee,  co-venturer  or similar  party  shall be deemed to be included in the
definition of Net Sales of Products set forth in subparagraph 4 b iv below, (ii)
such third parties shall agree to be subject to all covenants of the Sublicensee
contained in this Agreement,  and (iii) such prior written approval of TSV shall
not be unreasonably withheld.

     e. Where  Products are marketed as part of a promotional  tie-in,  premium,
giveaway or similar method of  merchandising,  proceeds from the distribution of
such  Products  shall be  included  in Net Sales of Products as if they had been
distributed at retail, unless otherwise agreed in writing by TSV.

2.  Acceptance.  Sublicensee  hereby accepts the rights and  privileges  granted
hereunder  Sublicensee further  acknowledges and agrees that in the event of any
conflict  between this  Agreement and the License,  the provisions of the latter
shall control.

3 Term.  The term of the  Sublicense  shall  commence on the Effective  Date and
shall continue in effect until February 7, 2006, unless sooner terminated as set
forth  herein,  or until the  License is  terminated  by the  Licensor  thereof,
whichever event first occurs.

     3.1 TSV  grants to  Sublicensee  a right of first  refusal  to enter into a
sublicense  covering products  substantially  similar to the products herein but
covering Territory which includes  continents,  or countries not included in the
Territory contained herein and the renewal of this Sublicense. Upon TSV offering
this  right of first  refusal  to  Sublicensee,  Sublicensee  shall have 60 days
thereafter to accept.

4. Royalties. In consideration of the rights granted to it under this Agreement,
Sublicensee agrees to pay to TSV the following royalties or sublicense fees (the
"Royalties"):

     a. An Advance Royalty in the amount of $500,000 payable as follows:

     (i)  $100,000 upon execution of this Agreement

     (ii) $100,000 30 days after execution of this Agreement

     (iii) $100,000 30 days thereafter

     (iv) $100,000 30 days thereafter

     (v)  $100,000 30 days thereafter

The Advance  Royalty shall be  non-refundable,  but will be applied and credited
against the Royalties due and payable to TSV pursuant to Paragraph  4.b. and 4.c
(i).

<PAGE>

Any  Royalties  payable by  Sublicensee  pursuant to  Paragraph  4.b.(i) for the
initial  quarter of the term hereof,  in excess of the initial four  payments of
the Advance  Royalty,  shall be applied and credited  against the final  Advance
Royalty payment.

     b. Royalties  shall be equal to five (5%) of the Net Sales of Products,  as
defined below, by Sublicensee during the term of this Agreement.

     (i) Royalties shall be payable  quarterly within twenty (20) days after the
end of each such quarter.

     (ii) Sublicensee shall render to TSV with each payment of Royalties, or for
each quarter of the  Sublicense,  a statement,  certified as true and correct by
Sublicensee's chief financial officer, setting forth such information reasonably
required by TSV.

     (iii) Net Sales of Products  by  Sublicensee  shall mean gross  revenues of
Sublicensee (and of any subsidiary,  affiliate, co-venturer or approved assignee
or sublicensee  thereof) from the sale of Products,  less applicable sales, use,
value added or similar taxes assessed on sales, authorized returns,  allowances,
discounts, credit card merchant discount charges and breakage.

     c. The following  Minimum Royalties shall be payable during the term hereof
as follows:

(i)   Effective Date through 9-15-2001                        $500,000
(ii)  for the next 12 months ending 9-15-2002                 $600,000
(iii) for the next 12 months ending 9-15-2003                 $750,000
(iv)  for the next 12 months ending 9-15-2004                 $900,000
(v)   for the next 12 months ending 9-15-2005                 $1,000,000
(vi)  for the balance of the term ending February 7, 2006     $1,100,000 annual
                                                               amount (prorated)

In the event  aggregate  Royalties  paid pursuant to Paragraph 4.b. based on Net
Sales  of  Products  during  any of the  foregoing  periods  do  not  equal  the
applicable Minimum Royalties, Sublicensee shall pay any deficiency amount to TSV
within twenty (20) days following the end of the applicable period.

5. Covenants of Sublicensee. Sublicensee further covenants and agrees:

     a. to use,  apply  and  direct  its best  efforts  to  promote  the sale of
Products within the Territory.

     b. To conduct all of  Sublicensee's  operations  hereunder in compliance in
all material  respects with all applicable  laws,  rules and  regulations of all
applicable governmental authorities.

<PAGE>

     c. to use its best  efforts not to cause or permit the  Products to be sold
to retailers or wholesalers for the sale thereof outside the Territory.

     d. not to utilize or employ any promotional or advertising  material in the
sale of Products that is unethical, immoral or offensive to good taste, or which
is not consistent with moral or religious principles.

     e. to submit to TSV for its  review and  approval,  prior to the public use
thereof,  any such  promotional  or  advertising  material  proposed  for use in
connection with the sale by Sublicensee of Products under this Agreement.

     f. to submit to TSV for its  review and  approval,  prior to the public use
thereof,  two (2) copies of each  different  design for  Products  and three (3)
samples of each  different  type or design of Product to be sold by  Sublicensee
hereunder.

     g. not to utilize in connection  with  advertising  or Product  sales,  any
name, logo or other markings  identifying or depicting Licensor other than those
prescribed  and  approved by TSV or for which TSV's prior  written  approval has
been obtained.

     h. not to  contact  any  officials  or  representatives  of TSV's  Licensor
without  coordination  through and obtaining of the prior  written  consent from
TSV.

TSV shall have the right to approve or disapprove any items  submitted  pursuant
to  Paragraphs  5. e. and 5. f. above,  and will  exercise good faith efforts to
provide  Sublicense with a written response within twenty 20 business days after
its  receipt of a  submission.  In the event of  disapproval,  TSV shall  notify
Sublicense  of the  reasons  for such  disapproval.  TSV shall not  unreasonably
withhold or delay any such approval.

6. Covenant of TSV. TSV further covenants and agrees:

     a. to make available to Sublicense for copying,  at Sublicensee's  cost and
expense,  any  reproductions,  transparencies,  slides or photos of the Works of
Art,  in  TSV's  possession  from  time to  time,  and  shall  otherwise  assist
Sublicense in obtaining  details of artwork for purposes of  developing  designs
for Products.

     b. to use good faith  efforts to take such  actions as are  determined,  in
TSV's sole discretion, to be commercially reasonable, to enjoin any infringement
of the rights granted to Sublicensee herein.

7.  Review  by  TSV/Licensor.  It is  understood  and  agreed  that  TSV has the
obligation  under the License to submit to its  Licensor  for review a sample of
each Product to be manufactured and/or sold by Sublicensee hereunder.  TSV shall
not unreasonably withhold or delay any such approval.

<PAGE>

8. Books and Records. While this Agreement remains in effect, and for the period
of two (2) years  thereafter,  Sublicensee  shall keep and maintain complete and
accurate  books and  records of all its  productions  and sales of  Product,  in
sufficient  detail to  enable  determination  of  Royalties  payable  hereunder.
Sublicensee shall permit TSV, by its duly authorized agents and representatives,
to examine and audit  Sublicensee's  books and records during reasonable advance
written  notice,  for the prupose of verifying any payment  required  under this
Agreement and Sublicensee's  compliance with its obligations  hereunder.  In the
event any amounts due and payable to TSV have been  underpaid  by three  percent
(3%) or more, Sublicensee shall pay promptly to TSV the cost of such examination
and audit,  in  addition  to the amount of such  underpayment.  Any  payments or
statements  not  challenged  within three (3) years of receipt  thereof shall be
deemed accepted.

9. Termination.  TSV shall have the right to terminate this Agreement by written
notice  delivered to  Sublicensee  upon the  occurrence  of any of the following
events:

     a. If the  Sublicensee  fails to make  payments and submit  statements  and
reports as required by Paragraph 4 hereof.

     b.  If  Sublicensee   becomes  subject  to  any  voluntary  or  involuntary
insolvency,  bankruptcy or similar proceedings, or an assignment for the benefit
of creditors is made by  Sublicensee,  and the same remains  undischarged  for a
period of thirty (30) days.

     c. If  Sublicensee  breaches any other therm or provision of this agreement
and fails to cure such breach  within  thirty (30) days after receipt of written
notice  from  TSV,  sent  by  certified  or  registered  mail,   specifying  the
particulars of such breach.

     Notwithstanding   contrary  provisions  contained  herein,  any  notice  of
termination from TSV shall not become effective if Sublicensee  shall remedy the
violation  stated  within such notice  within  thirty (30) days of receiving the
notice.  TSV shall give good  circumstances of the violation,  the good faith of
Sublicensee and the factors involved in completing the remedy.

     Following  termination  or expiration of this  Agreement,  including,  as a
result of the termination of TSV's License,  Sublicensee shall return all copies
of all Reproductions of the Works of Art, shall cease all production of Products
(except for Products in process),  and shall  exercise  commercially  reasonable
efforts  to sell its  remaining  inventory  of  Products,  subject to payment of
Royalties with respect to such sales as provided for herein.  Sublicensee  shall
have a period of ninety (90) days,  commencing with the expiration or other such
termination  date, in which to sell-off Products which are on hand or in process
as of such date.

     Upon termination or expiration, all royalties under this Agreement shall be
immediately due and payable, and Sublicensee shall send TSV a complete inventory
report and accounting  with full payment due, within ninety (90) days after such
expiration or

<PAGE>

termination.  Thereafter,  all remaining  Products and  component  parts thereof
shall be destroyed and Sublicensee  shall promptly  deliver to TSV a certificate
of destruction evidencing same. Sublicensee agrees that (i) its failure to cease
the  manufacture,  sale and/or  distribution  of Products upon the expiration or
termination  of this  Agreement  will result in the  immediate  and  irreparable
damage to TSV,  (ii) there is no adequate  remedy at law for such  failure,  and
(iii) in the event of such failure,  TSV shall be entitled to injunctive relief.
TSV shall be  entitled  to recover  from  Sublicensee,  in addition to any other
remedies  in the  event of  default,  any and all  attorneys'  fees,  costs  and
expenses,  including  collection  agency  fees,  costs and  expenses,  including
collection agency fees, incurred by TSV to enforce the provisions hereof.

10.  Relationship  of Parties.  The parties  understand  and agree that  nothing
herein  contained shall be construed to place the parties in the relationship of
joint venturers,  partners or agents of the other, that neither party shall make
any representation to the contrary,  and that neither party shall have the power
to obligate or bind the other in any manner whatsoever.

11.  Insurance.  Sublicensee  agrees to obtain and maintain at its own expense a
comprehensive  general liability insurance policy,  from a recognized  insurance
company and in form  reasonably  acceptable  to TSV,  providing  coverage of the
minimum  amounts of  $1,000,000  per event and  $3,000,000  in the  aggregate to
insure  against  all claims of third  parties,  with TSV named as an  additional
insured,  and with an  endorsement  that such  insurance  may not be canceled or
amended except upon thirty (30) days prior written notice to TSV.

12. Indemnification.  Sublicensee agrees to indemnify,  hold harmless and defend
TSV and its agents and representatives (with counsel acceptable to TSV) from and
against any and all claims, demands, losses, liabilities,  judgements, costs and
expenses,  including  attorneys' fees and expenses,  arising out of or resulting
from the sale of Products Sublicensee pursuant to this Agreement.

13.  Assignment.  The rights  granted  hereunder  are of a  personal  nature and
Sublicensee  shall not, directly or indirectly,  assign,  transfer or sublicense
any of its rights under this Agreement without the prior written consent of TSV,
which  consent  will  not be  unreasonably  withheld  or  unduly  delayed.  This
Agreement  shall be binding upon and inure to the benefit of the parties  hereto
and their permitted successors and assigns.

14. Governing Law. The validity, interpretation, construction and performance of
this Agreement shall be governed by the law of the State of New York.

15. Dispute  Resolution/Jurisdiction.  Any controversy, claim or dispute arising
out of or in any way relating to this Agreement,  or the breach  thereof,  shall
be:

     a. If the amount  thereof is less than  $75,000,  it shall be  resolved  by
arbitration  under the  Commercial  Rules of  American  Arbitration  Association
(except to the extent in conflict

<PAGE>

with the provisions of sub-paragraph  15.c. below),  with such arbitration to be
held in New York, New York and to be binding upon the parties.

     b. If the amount thereof is $75,000, or more, the parties hereby consent to
the exclusive  jurisdiction of the United States District Court for the Southern
District  of New York  for the  resolution  of all  matters  pertaining  to this
Agreement.

     c. With respect to  arbitrations,  the parties  agree that, if the rules of
the AAA so allow:

     (i) arbitrations shall be conducted before a single arbitrator  selected by
the parties in accordance with the applicable rules of the American  Arbitration
Association.

     (ii) the  decision of the  arbitrator  shall be rendered  within sixty (60)
days after the close of hearings and shall be binding  upon all  parties,  and a
judgment or decree upon the decision  rendered by the  arbitrator may be entered
in any court of competent jurisdiction.

     (iii)  at the  request  of any  party,  arbitration  proceedings  shall  be
conducted  confidentially;  in which case all  documents,  testimony and records
shall be received,  heard and maintained by the  arbitrator in confidence  under
seal,  available for inspection only by the  Association,  the parties and their
respective attorneys and experts, each of whom shall agree in writing to receive
such information confidentially and to maintain such information in confidence.

     (iv) hearings in the  arbitration  proceeding  shall commence  within sixty
(60) days after the selection of the arbitrator.

     (v) each party consents to the service of process in the arbitration or out
of any of the aforementioned courts by mailing copies thereof by certified mail,
postage prepaid,  such service to become effective three (3) business days after
such mailing.  Nothing  herein shall effect  either  party's right to service of
process in any other manner prescribed by law.

16. Notices. All notices,  requests and other communications  hereunder shall be
in writing and shall be mailed, postage prepaid, to the parties as follows:


If to TSV, to:

John Loata, President
Treasurers of St. Peter's in the Vatican, Ltd.
39 West 29th Street
New York, NY 10001

With a copy to:

<PAGE>

Joseph S. Williams, Esq.
14 Tinker Lane
Greenwich, CT 06830

If to Sublicensee, to:

Michael Solomon, Chief Executive Officer
MAXX International Inc.
130 S. El Camino Drive
Beverly Hills, CA 90212

Or to such other  address as either  party may, by written  notice,  give to the
other.

17. Confidentiality. Except as required by request of, or to fulfill obligations
to, the  Licensor  or any  affiliated  entity,  applicable  legal or  accounting
requirements or disclosure  obligations relative to security offerings,  each of
the parties for  itself,  and its  respective  representatives  and  affiliates,
covenants  and agrees  that if shall treat and  safeguard  as  confidential  and
secret and shall not use or disclose to others any  proprietary or  confidential
information  (the  "Protected   Information")   disclosed  to  it,  its  agents,
representatives,  officers, directors, employees or advisors with respect to the
transactions  contemplated  herein. Each of the parties and its affiliates shall
return to the others all Protected  Information  furnished to any of them or any
of their agents, representative,  officers, directors, employees or advisors and
shall maintain such confidentiality during the applicable term hereof, and for a
period  of two (2)  years  after  the  term.  For  purposes  of this  provision,
Protected  Information shall not include (i) sales and royalty  information,  or
(ii) information  which is, at the time of its disclosure,  in the public domain
or  otherwise  becomes  available to party on a  non-confidential  basis from an
independent source which not prohibited from revealing such information.

18.  Entire  Agreement.  There  are no  representations,  warranties,  promises,
agreement,  or  covenants  other than those  contained  herein.  This  Agreement
constitutes  the entire  agreement  between the parties and supersedes any prior
agreements or understanding relating to the subject matter hereof.

19.  Counterparts.  This Agreement may be executed and delivered in counterparts
with facsimile  signatures,  and all such executed facsimile  counterparts shall
constitute  one and the same  agreement  having  the same force and effect as an
executed original.


<PAGE>

IN WITNESS  WHEREOF,  the parties have executed,  or caused this Agreement to be
executed, as of the date first above written.

                                      "TSV"

                                             TREASURES OF ST. PETER'S
                                             IN THE VATICAN,LTD.


                                         By: /s/ John Loata
                                             ---------------------------
                                             John Loata, President


                                      "SUBLICENSE"

                                             MAXX INTERNATIONAL, INC.


                                         By: /s/ Michael Solomon
                                             ---------------------------
                                             Michael Solomon
                                             Chief Executive Officer



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