Exhibit 10.33
DRAFT: 5/23/00
THIS AGREEMENT made as of the 1st day of November, 2000, between GOTTEX
MODELS LTD., an Israeli corporation with offices at New Industrial Zone, Or
Xxxxxx, Israel ("GOTTEX ISRAEL"), GOTTEX MODELS (USA) CORP., a New York
corporation with offices at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("GOTTEX
USA") (GOTTEX ISRAEL and GOTTEX USA shall be collectively referred to as
"GRANTORS") and BREAKING WAVES, INC., a New York corporation, with offices at
000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("GRANTEE").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, GOTTEX ISRAEL holds the registration of the trademark "GOTTEX"
(the "XXXX") in the United States of America, its territories and possessions
(Registration Number 1,009,971) and in Canada (Registration Number __________)
for swimwear and related accessories as set forth in such registrations, copies
of which have been furnished to GRANTEE; and
WHEREAS, GOTTEX ISRAEL has authority to use and to license the use of the
XXXX in the United States, its territories and the possessions, and in Canada
(the "TERRITORY") in connection with the manufacture, distribution, sale and
advertising of the GOODS (as hereinafter defined);
WHEREAS, GOTTEX ISRAEL has granted GOTTEX USA a nonexclusive
nontransferable right and license to use the XXXX in connection with the sale,
promotion and advertising of certain products, including GOODS (as hereinafter
defined) in the United States;
DC 174881.1 02272 00307
5/23/00 3:15 PM
-1-
WHEREAS, it is the intention of the parties hereto that GRANTEE be
permitted to use the XXXX solely for the purposes, in the manner, and to the
extent provided for in this Agreement, and
WHEREAS, GOTTEX ISRAEL wishes to have GOTTEX USA perform certain functions
in connection with the licensing of the XXXX to GRANTEE as hereinafter set
forth,
NOW, THEREFORE, it is agreed as follows:
1. License Grant.
Subject to the provisions of Xxxxxxx 0 xxxxxx, XXXXXX XXXXXX grants to
GRANTEE, during the Term (as hereinafter defined) of this Agreement, the sole
and exclusive right in the TERRITORY to use the XXXX, on the terms contained in
this Agreement, in connection with the manufacture, sale, distribution at
wholesale and advertising within the TERRITORY of girls' swimwear and related
coverups in the following categories (hereinafter referred to individually or
collectively, as the case may be, as the "GOODS"):
Toddlers 2T to 4T
Children 4 to 6X
Girls 7 to 14
Chubbies 8-1/2 to 16-1/2
Pre-teen 8T to 14T.
GOTTEX ISRAEL shall not effect any other grant during the Term of this Agreement
to use the XXXX in connection with the manufacture, sale, distribution at
wholesale and advertising within the TERRITORY of the GOODS, and GOTTEX USA
agrees not to use the XXXX during the Term of this Agreement in connection with
the manufacture, sale, distribution at wholesale and advertising within the
Territory of the GOODS.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-2-
2. Special Limitations.
(a) GRANTORS each reserve the unqualified right to use the XXXX in any
manner and at all times and to license, franchise or otherwise exploit the XXXX
in connection with the manufacture, distribution, advertisement and sale of the
GOODS outside the TERRITORY, and in connection with the manufacture,
distribution, advertisement and sale within the TERRITORY of any and all
articles of merchandise other than the GOODS.
(b) (i) GRANTEE shall not sublicense the license or any of the rights
herein granted.
(ii) GRANTEE shall not contract or subcontract, except as provided in
this Paragraph (ii), for the performance of any of its rights and
obligations under this Agreement. GRANTEE may contract for the manufacture
of the GOODS, provided that GRANTEE shall take any and all action necessary
to ensure that GRANTEE'S contractors only manufacture GOODS which fully
conform to all the applicable terms and conditions of this Agreement. Such
action shall include, without limitation, obtaining a written agreement
from each contractor, which shall promptly be delivered to GRANTORS, to the
effect that such contractor shall manufacture the GOODS in strict
conformity with this Agreement; that such contractor shall not claim any
right to use the XXXX except in connection with the manufacture of the
GOODS; that such contractor shall not question, attack, or in any other
manner impugn the validity of the XXXX, its registration, or GRANTORS'
rights in and to the XXXX; and that upon expiration or earlier termination
for whatever reason of this Agreement, such contractor shall immediately
discontinue the use of the XXXX. However, all the acts committed by
GRANTEE'S contractors in connection with the matters contemplated by this
Agreement, whether committed with or without GRANTEE'S knowledge or
consent, shall be deemed to be the acts of GRANTEE. Whenever in this
Agreement it is provided that GRANTEE shall take any action or
DC 174881.1 02272 00307
5/23/00 3:15 PM
-3-
refrain from taking any action with respect to the manufacture of the GOODS, and
GRANTEE has contracted for the manufacture of the GOODS, such provision shall
also require the GRANTEE to have caused its contractor to so act or refrain from
acting.
(c) GRANTEE recognizes that GOTTEX ISRAEL is the sole owner of the XXXX and
that, on the date of this Agreement, GOTTEX ISRAEL has the sole right to grant
the license herein granted. GRANTEE shall not question, contest or in any manner
impugn the validity of the XXXX, its registrations, or GRANTORS' rights with
respect to the XXXX or in and to the license herein granted, including, but not
limited to, in any action in which enforcement of the provisions of this
Agreement is sought. GRANTEE shall not become an adverse party to litigation in
which others shall contest the validity of the XXXX or GRANTORS' rights in and
to the XXXX and GRANTEE shall not in any way seek to avoid its obligations under
this Agreement, except as provided in Sub- section 10(d) herein, because of the
alleged invalidity of the XXXX or GRANTORS' rights.
3. Quality Standards; Design Access.
(a) GRANTEE shall maintain the validity and distinctiveness of the XXXX,
and the high quality and prestigious marketing and advertising of the GOODS, so
as to protect and enhance the goodwill residing in the XXXX. Accordingly:
(i) With regard to each kind of item comprising the GOODS, GRANTEE
shall furnish or cause to be furnished to GOTTEX USA, at its address herein
set forth, for approval or disapproval by GOTTEX USA from time to time, in
its sole and absolute discretion, the following: a sample of the fabric of
which such item is to be manufactured; a sample of the fabric design to be
imprinted on the fabric from which such item is to be manufactured;
detailed specifications of the styling of such item; and three (3) first
run production samples of such item.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-4-
GRANTEE agrees that such items shall not be sold and delivered unless all of
such approvals are first obtained. Furthermore, GRANTEE'S inventory shall be
available to GOTTEX USA at any time for random quality control sampling. All
GOODS manufactured, sold or delivered shall conform to the samples so approved
by GOTTEX USA. GRANTEE shall also furnish or cause to be furnished to GOTTEX
USA, at its address for notice herein set forth, for approval or disapproval by
GOTTEX USA, in its sole and absolute discretion, all advertising, labeling,
packaging and boxing of the GOODS and GRANTEE agrees that the same shall not be
used unless such approval is first obtained. GOTTEX USA shall give its approval
or disapproval within the following periods after receipt of the material to be
approved, together with a written request for such approval referring to this
paragraph: with regard to fabrics and fabric designs, five (5) business days;
with regard to styling, fifteen (15) business days; and with regard to finished
GOODS and all other items requiring GOTTEX USA'S approval hereunder, ten (10)
business days. If not disapproved by GOTTEX USA within the applicable period,
GOTTEX USA shall be deemed to have given its approval.
(ii) GRANTEE shall sell only to retail outlets whose operations are
consistent with the quality and prestige of the articles sold by GRANTORS
under the XXXX; for example, mid and upper level department stores such as
Xxxx, Federated and Dillards. Without limiting the generality and
application of the foregoing, GRANTEE shall sell to department stores,
specialty store chains, specialty stores and entities engaged in mail
order, but not to mass merchandisers or discounters. The particular
stores/entities engaged in mail order to which GRANTEE intends to sell the
GOODS shall be subject to the prior written approval of GOTTEX USA, to be
granted or withheld in GOTTEX USA'S sole and absolute discretion, and
GRANTEE shall not sell the GOODS to any store/entity engaged in mail order
not so approved. GOTTEX USA shall give its approval or disapproval of such
stores/entities engaged in mail order within fifteen (15)
DC 174881.1 02272 00307
5/23/00 3:15 PM
-5-
business days after receipt of a written request for such approval referring to
this paragraph, but if a store/entity engaged in mail order has not been
disapproved by GOTTEX USA within such fifteen (15) business day period, GOTTEX
USA shall be deemed to have given its approval. GRANTEE shall supervise the use
of the XXXX by its customers and shall use its best efforts to ensure that they
advertise, display and promote the XXXX in a manner consistent with this
Agreement.
(iii) The showroom or showrooms in which GRANTEE shows the GOODS to
prospective purchasers shall reflect the high quality and prestige
associated with the XXXX. Prior to the opening of any such showroom,
GRANTEE shall notify GOTTEX USA in writing of the showroom's location and
provide GOTTEX USA'S representatives with access to the premises for GOTTEX
USA'S approval or disapproval, in its sole and absolute discretion, of the
location and appearance, including, without limitation, all furnishings of
the showroom; and GRANTEE shall not show GOODS on any premises not so
approved by GOTTEX USA. GOTTEX USA shall give its approval or disapproval
of a showroom within fifteen (15) business days after its representatives
have visited the premises for this purpose, but if a showroom is not
disapproved with such fifteen (15) business day period, GOTTEX USA shall be
deemed to have given its approval.
(iv) GRANTEE shall use the XXXX only in the form in which it is
registered and shall not use any variations thereof or an abbreviated form
of the XXXX. The GOODS and the packaging material used in connection with
the GOODS shall bear a label employing the XXXX approved in writing in
advance by GOTTEX USA, in its sole and absolute discretion. GRANTEE shall
duly display all notices with respect to the XXXX as are or may be required
by the applicable trademarks laws and regulations in effect from time to
time in the TERRITORY. Any advertising, labeling, office stationery,
invoices, etc., containing the XXXX shall include an R in a circle adjacent
to the XXXX. GOTTEX USA
DC 174881.1 02272 00307
5/23/00 3:15 PM
-6-
shall give its approval or disapproval within fifteen (15) business
days after receipt of such item with a written request for such approval
referring to this paragraph, but if not disapproved by GOTTEX USA within
such fifteen (15) business day period, GOTTEX USA shall be deemed to have
given its approval.
(v) GRANTEE shall not use all or part of the XXXX in the name of any
corporation or other business entity. GRANTEE may use the XXXX on invoices,
order forms, stationery, telephone and directory listings; provided, that
GRANTEE undertakes for itself, its agents and any party participating in
the marketing of the GOODS that such use shall be solely in conjunction
with the sale of the GOODS under the XXXX and that this utilization of the
XXXX shall clearly indicate the name and address of GRANTEE, and, if
required in writing by GOTTEX USA, that the XXXX is licensed by GOTTEX
ISRAEL, and, if required in writing by GOTTEX USA, this utilization of the
XXXX shall include a specific description of the GOODS. GRANTEE must obtain
GOTTEX USA'S prior written approval, which shall be granted or withheld in
its sole and absolute discretion, of the form in which it uses the XXXX on
its invoices, order forms, stationery and telephone and directory listing.
GOTTEX USA shall give its approval or disapproval within fifteen (15)
business days after receipt of such item with a written request for such
approval referring to this paragraph, but if not disapproved by GOTTEX USA
within such fifteen (15) business day period, GOTTEX USA shall be deemed to
have given its approval.
(vi) Except as required by law, no other trademarks shall appear on
the GOODS or in any promotional material used in connection with the GOODS.
(vii) GOTTEX USA shall have sole and absolute discretion with respect
to all approvals required hereunder, including approvals relating to the
design and quality of the GOODS manufactured, distributed, sold and
advertised pursuant to
DC 174881.1 02272 00307
5/23/00 3:15 PM
-7-
this Agreement and all advertising, promotion, labeling, packaging and
boxing of the GOODS. As used in this Section 3 only, "business days" shall
mean regular business days on which Xx. Xxx Xxxxx, GOTTEX USA'S Chief
Financial Officer, is in the United States of America. However, in the
event that Xx. Xxxxx is to be out of the United States for a period of five
(5) or more consecutive business days, a designee shall be appointed by
GOTTEX USA to act on its behalf.
(b) GOTTEX USA shall provide GRANTEE, on a timely basis, with access to
GRANTORS' other lines of swimwear and, to the extent they are proprietary to
GRANTORS, the designs and fabric designs therefor. Subject to GOTTEX USA'S
approval, which shall be granted or withheld in its sole and absolute
discretion, GRANTEE shall have the right to adapt for its own use in designing
the GOODS bearing the XXXX any proprietary swimwear and related coverup design
of GRANTORS and the right to replicate for use in manufacturing the GOODS
bearing the XXXX any proprietary fabric design of GRANTORS used by GRANTORS for
their other lines of swimwear and related coverups. At GOTTEX USA'S sole and
absolute discretion, and subject to an appropriate grant of rights to GRANTORS
from the proprietor of any fabric design, not proprietary to GRANTORS, used by
GRANTORS for other lines of swimwear and related coverups, GRANTORS shall grant
to GRANTEE the right to replicate such fabric designs for use in manufacturing
the GOODS bearing the XXXX.
4. Royalties and Advertising Expenditures.
(a) Each month during the License Year (as hereinafter defined) GRANTEE
shall pay to GOTTEX USA, at GOTTEX USA'S address for notice herein set forth, a
royalty of seven percent (7%) of GRANTEE'S Net Sales during the preceding month
for the right to use the XXXX in accordance with this Agreement ("Monthly
Royalty"). "Net Sales," as used in this Agreement, shall mean gross sales of
GOODS by GRANTEE in the TERRITORY, less freight
DC 174881.1 02272 00307
5/23/00 3:15 PM
-8-
charges if and to the extent that they are paid by GRANTEE'S customers, usual
and customary trade discounts, and credits for returns actually made, if any.
The Monthly Royalty shall be due and payable on the 20th day of the month
immediately following the month of shipment.
(b) GRANTEE shall pay GOTTEX USA, at GOTTEX USA'S address for notice herein
set forth, a guaranteed minimum royalty ("Guaranteed Royalty") of Seventy
Thousand Dollars ($70,000) in the first License Year (November 1, 2000 - October
31, 2001), One Hundred Five Thousand Dollars ($105,000) in the second License
Year (November 1, 2001 - October 31, 2002), and One Hundred Forty Thousand
Dollars ($140,000) in the third License Year (November 1, 2002 - October 31,
2003). To the extent the Monthly Royalties paid by June 20 in each License Year
(November 1 - October 31) shall not at least equal the Guaranteed Royalty for
that License Year, GRANTEE shall, no later than June 30 of that License Year,
pay GOTTEX USA the difference between the sum of the Monthly Royalties already
paid for that License Year and the Guaranteed Royalty for that License Year.
GRANTEE shall also continue to pay to GOTTEX USA the Monthly Royalties provided
in Subsection 4(a) hereof based on Net Sales, but GRANTEE shall receive a credit
against such payments to be made in the balance of the License Year for the
amount paid to GOTTEX USA pursuant to the immediately preceding sentence. If, by
June 20 in any License Year, GRANTEE shall have paid GOTTEX USA Monthly
Royalties under Subsection 4(a) hereof totaling not less than the Guaranteed
Royalty for such License Year, GRANTEE shall not be obligated to make any
Guaranteed Royalty payment under this Subsection 4(b), but shall continue to pay
the Monthly Royalties provided for in Subsection 4(a) hereof based on Net Sales.
(c) Notwithstanding the provisions of Subsection 4(a), if GRANTEE makes
sales of GOODS bearing the XXXX on a "Close-Out" or "Off-Price" basis during any
License Year, and (x) Net Sales other than Net Sales of Close-Out or Off-Price
GOODS in that
DC 174881.1 02272 00307
5/23/00 3:15 PM
-9-
License Year exceed the amount on which the Guaranteed Royalty for that License
Year is based (One Million Dollars ($1,000,000) in the first License Year, One
and One Half Million Dollars ($1,500,000) in the Second License Year, and Two
Million Dollars ($2,000,000) in the third License Year), and (y) GRANTEE's Net
Sales of Close-Out or Off-Price GOODS bearing the XXXX during that License Year
represent no more than twenty-five percent (25%) of GRANTEE's Net Sales during
that License Year, the royalty rate applicable to Net Sales of Close-Out or
Off-Price GOODS bearing the XXXX shall be three and one half percent (3 1/2%).
For purposes of this Agreement, "Close-Out" or "Off-Price" sales shall mean
GOODS sold at forty percent (40%) or more off the listed price of such GOODS.
(d) As used in this Subsection (d), the term "Advertising" shall refer to
advertising placed by GRANTEE in the following categories: print media
advertising; electronic media advertising; point-of-sale advertising in any
medium; co-op advertising in any medium; and direct mail advertising. In each
License Year, GRANTEE shall use its best efforts to advertise the GOODS in the
TERRITORY. In this regard, GRANTEE shall expend in each License Year for
Advertising (including, without limitation, production costs, agency fees, and
media costs) at least the following amounts (the "Advertising Minimums"):
(i) first License Year: Twenty Thousand Dollars ($20,000) plus two
percent (2%) of Net Sales in excess of One Million Dollars ($1,000,000) in
such License Year;
(ii) second License Year: Thirty Thousand Dollars ($30,000) plus two
percent (2%) of Net Sales in excess of One Million Five Hundred Thousand
Dollars ($1,500,000) in such License Year; and
DC 174881.1 02272 00307
5/23/00 3:15 PM
-10-
(iii) third License Year: Forty Thousand Dollars ($40,000) plus two
percent (2%) of Net Sales in excess of Two Million Dollars ($2,000,000) in
such License Year.
To the extent that the Advertising Minimum for any License Year is not expended
by GRANTEE in that License Year, GRANTEE shall be obligated to expend such
unspent amount for Advertising in the subsequent License Year, in addition to
the Advertising Minimum for such subsequent License Year; provided that if in
any License Year GRANTEE does not expend at least eighty percent (80%) of the
entire sum required to be spent by it in that License Year, GRANTEE shall pay
GOTTEX USA, within thirty (30) days after the end of that License Year, in
addition to any royalties or other amounts payable by GRANTEE to GOTTEX USA, a
sum equal to such unspent amount. Within thirty (30) days after the expiration
of this Agreement or its earlier termination for any reason, GRANTEE shall pay
to GOTTEX USA a sum equal to the unspent balances, if any, of the Advertising
Minimums for the License Year in which such termination occurred and for all
prior License Years.
(e) Any amounts due pursuant to Subsections 4(a), (b), (c) and (d) which
are not paid to GOTTEX USA by GRANTEE within five (5) business days of the due
date shall bear interest at the rate of one and one half per cent (1 1/2%) per
month from such due date until paid.
(f) Receipt or acceptance by GOTTEX USA of any Guaranteed or Monthly
Royalty payments made by GRANTEE which are less than the total amount due GOTTEX
USA pursuant to this Section 4 shall not be deemed to be a waiver of GOTTEX
USA'S rights in or to the balance of the royalties due GOTTEX USA.
5. Books, Records and Statements.
(a) GRANTEE shall maintain for three (3) years following the close of each
License Year accurate books and
DC 174881.1 02272 00307
5/23/00 3:15 PM
-11-
records which disclose: the amount of sales of the GOODS and the amount of
sales, if any, which were made on a Close-Out or Off- Price basis; the amount of
credits for returns and trade discounts; the amounts spent by GRANTEE in
advertising the GOODS and the manner in which such sums were expended; and the
amount of all royalties payable hereunder by GRANTEE and the manner in which
such royalties were determined.
(b) GRANTEE shall deliver to GOTTEX USA, within thirty (30) days after
January 31, April 30, July 31, and October 31 in each License Year, a statement
certified to be true and correct by GRANTEE's Chief Financial Officer, which
discloses: the total gross invoice price of the GOODS sold during the period and
the License Year to date, clearly indicating what percentage of the total is
comprised of Close-Out or Off-Price sales, the amount of credits for returns and
trade discounts, the amounts spent by GRANTEE in advertising the GOODS and the
manner in which such sums were expended, and a computation of the amount of
royalties payable hereunder in respect of Net Sales for the period and the
License Year to date. The statement shall be in sufficient detail to be audited
from the books of GRANTEE. Notwithstanding the foregoing, if the Monthly
Royalties payable for the period from November 1 - May 31 of any License Year do
not exceed the Guaranteed Royalty payable for the same period, GRANTEE shall not
be obligated to render its first such statement for that License Year until July
31 of that License Year, and such statement shall encompass all Net Sales and
royalties from the preceding November 1 through the preceding June 30.
(c) GRANTORS, at their expense, shall have the right at any time during
regular business hours, upon fifteen (15) business days notice to GRANTEE, to
examine or audit the books and accounts and records of GRANTEE which pertain to
the subject of this Agreement at GRANTEE'S office located as herein stated.
GRANTEE shall render all possible assistance to GRANTORS and its accountants in
connection therewith. GRANTORS shall be entitled
DC 174881.1 02272 00307
5/23/00 3:15 PM
-12-
to exercise its inspection right twice each License Year during the Term of this
Agreement and twice in each twelve (12) month period during the period of three
(3) years after the expiration or termination of this Agreement. If any
examination or audit reveals any underpayment to GOTTEX USA, GRANTEE shall
immediately pay GOTTEX USA the amount of the deficiency with interest (computed
at the rate provided in Subsection 4(e) from the date of the original due date).
The costs of such examinations shall be borne solely by GRANTORS and their duly
authorized representatives unless such examination or audit discloses an
underpayment of royalties in excess of two percent (2%) in the period being
audited, in which event GRANTEE shall reimburse GRANTORS for all reasonable
costs incurred in connection with such examination, including reasonable fees
and reimbursable expenses of GRANTORS' certified public accountant or other
representative.
6. Term of Agreement.
(a) This Agreement shall commence on the date first herein written and its
term shall continue, for a period of three years, unless sooner terminated
according to its terms and conditions (the "Term"). "License Year" as used in
this Agreement shall mean each period of November 1 to October 31 during the
Term.
(b) No later than March 1, 2003, each party shall provide the other in
writing with its intention as to whether or not it wishes to renew this
Agreement for an additional three year term. If all parties indicate their
intention to renew, they shall use the period between March 1 and November 1,
2003 to negotiate the terms of the renewal. If any party does not wish to renew
this Agreement, or the parties are unable to agree on the terms of the renewal,
this Agreement shall expire as of the close of October 31, 2003.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-13-
(c) All of GOTTEX USA'S rights and GRANTEE'S obligations under Section 4
with respect to royalties and other sums provided to be paid after expiration or
earlier termination of the Term or earlier termination of this Agreement shall
survive such expiration or termination.
(d) In the event of termination of this Agreement prior to its expiration
on October 31, 2003, for any reason other than by breach or bankruptcy of
GRANTEE, GRANTEE shall have the privilege, on a non-exclusive basis, until the
end of the License Year in which termination occurred (the "Sell-Off Period"),
to continue to sell under the XXXX, until the end of that License Year, any of
the GOODS then contained in GRANTEE'S inventory of stock on hand on such
termination date, solely in order to dispose of such inventory, subject to all
of the other terms of this Agreement not inconsistent with those in this
Subsection 6(d). GRANTEE'S privilege to sell the GOODS under the XXXX as
provided in this Subsection 6(d) shall also be subject to the following:
(i) Within ten (10) days of the termination date of this Agreement,
GRANTEE shall deliver to GOTTEX USA a statement of the amount of its then
existing inventory of GOODS, and the quantity of such existing GOODS shall
not exceed a reasonable inventory based upon GRANTEE'S selling requirement
of the GOODS at that time of the License Year. GRANTEE'S sales of the GOODS
during the Sell-Off Period shall not exceed the amount of such inventory
disclosed in the statement.
(ii) GRANTEE shall pay to GOTTEX USA as royalties, in United States
currency, seven percent (7%) of its Net Sales during the Sell-Off Period.
The royalties shall be paid by GRANTEE to GOTTEX USA within twenty (20)
days of the end of each calendar month during the Sell-Off Period and of
the last day of such period. Any late payment of such royalties shall bear
interest at the rate provided for in Subsection 4(e) herein.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-14-
(iii) Within twenty (20) days of the end of each calendar month during
the Sell-Off Period and of the last day of such period, GRANTEE shall
deliver to GOTTEX USA a statement, certified to be correct by GRANTEE'S
Chief Financial Officer, which discloses the same information as required
in Subsection 5(b) herein, in sufficient detail to be audited from the
books of GRANTEE.
(e) In lieu of GRANTEE'S rights to dispose of GRANTEE'S inventory on hand
of the GOODS in the event of the expiration or earlier termination of this
Agreement, GRANTORS may, at their option, purchase from GRANTEE such inventory
on hand on such expiration or termination date which is good and usable for a
purchase price of sixty percent (60%) of GRANTEE'S regular list price for such
GOODS. GRANTEE shall not be responsible to pay GRANTORS percentage royalties on
the sale of any GOODS to GRANTORS pursuant to this subsection.
(f) It is understood by GRANTEE that GRANTORS may grant a license or
licenses to use the XXXX in connection with the manufacture, distribution, sale
and advertising of GOODS in the TERRITORY, the shipment of which shall not
commence until after the expiration or earlier termination of the Term of this
Agreement.
7. Breach.
(a) In the event GRANTEE fails to fulfill any of the terms and conditions
of this Agreement or of any other agreement with GRANTORS respecting the XXXX,
GRANTORS shall each have the right, on written notice specifying such default,
to terminate this Agreement effective thirty (30) days after the date GRANTEE
receives such written notice as provided in Section 15 herein, unless such
default is cured by GRANTEE within such thirty (30) day period, provided that if
such default in question shall be GRANTEE'S failure to pay any sums due
hereunder or thereunder as
DC 174881.1 02272 00307
5/23/00 3:15 PM
-15-
and when so due, such cure period shall be seven (7) days rather than thirty
(30) days. GRANTEE may make payment of amounts claimed hereunder under protest
in order to prevent a threatened breach and thereafter seek repayment thereof in
an arbitration proceeding held pursuant to Section 18 hereof, provided that if
such arbitration is not requested within thirty (30) days following such payment
under protest, such protest shall be deemed to have been withdrawn. Except as
otherwise provided in this Agreement, GRANTORS' exercise of their rights,
pursuant to this Subsection 7(a), to terminate this Agreement shall be without
prejudice to any other legal or equitable remedy to which GRANTORS may be
entitled by reason of GRANTEE's breach of any term or condition of this
Agreement.
(b) If GRANTEE contests the validity of a termination, its only remedy in
the event its contest is successful shall be money damages; GRANTEE shall have
no right to specific performance by GRANTORS or to injunctive relief of any kind
whatever.
8. Insolvency.
(a) Any of the following events shall constitute an "Insolvency Event of
Default": (i) the insolvency of either of the GRANTORS or GRANTEE, or the making
by either of the GRANTORS or GRANTEE of an assignment for the benefit of
creditors, or (ii) the filing by either of the GRANTORS or GRANTEE of, or the
entry of an order for relief against either of the GRANTORS or GRANTEE in any
voluntary or involuntary proceeding under any bankruptcy, insolvency,
reorganization or receivership law, including, but not limited to, the
Bankruptcy Code, or an admission seeking relief as therein allowed, or if any
such proceeding which shall have been commenced against either of the GRANTORS
or GRANTEE remains undismissed for a period of thirty (30) days, or (iii) the
appointment of a receiver for all or a substantial portion of either of the
GRANTORS' or GRANTEE'S property, or (iv) the
DC 174881.1 02272 00307
5/23/00 3:15 PM
-16-
assumption of custody, attachment, or sequestration by a court of competent
jurisdiction of all or a substantial portion of either of the GRANTORS' or
GRANTEE'S property. If any party undergoes an Insolvency Event of Default,
either of the other parties may elect to terminate this Agreement by written
notice without prejudice to any right or remedy it may have, including, but not
limited to, damages for breach of any term or condition of this Agreement.
(b) No assignee for the benefit of creditors, receiver, liquidator, trustee
in bankruptcy, sheriff or any other officer of the court or official charged
with taking over custody of either of the GRANTORS' or GRANTEE'S assets or
business, shall have any right to continue performance of this Agreement, and
this Agreement may not be assigned by operation of law.
9. Discontinuance of Use of the XXXX.
Upon the termination, expiration or cancellation of this Agreement for any
reason, GRANTEE shall immediately discontinue the use of the XXXX and thereafter
shall no longer use the XXXX or any variation or simulation thereof, or any word
or xxxx similar thereto, for any purpose whatsoever or, directly or indirectly,
manufacture, market, distribute, sell or advertise the GOODS with the XXXX;
provided, however, GRANTEE shall have the right to dispose of those GOODS then
in GRANTEE'S inventory of stock on hand in accordance with the terms and
conditions of Subsections 6(d) and 6(e) of this Agreement.
10. Infringement and Maintenance of the XXXX.
(a) GRANTEE shall promptly give GRANTORS written notice of all
infringements or possible infringements of the XXXX of which GRANTEE has
knowledge, with any available evidence of such infringements or possible
infringements. GRANTORS may, in their sole and absolute discretion, commence,
prosecute or settle
DC 174881.1 02272 00307
5/23/00 3:15 PM
-17-
any infringement action or proceeding or assert any claim of infringement of the
XXXX. In any infringement action, proceeding or claim brought by GRANTORS,
GRANTEE, at GRANTORS' expense, shall cooperate with GRANTORS as requested by
GRANTORS.
(b) Except as provided in Subsection 10(d) herein, GRANTORS agree to
indemnify and save harmless GRANTEE against any damage, expense (including
reasonable attorneys' fees), liability or demand arising out of any claim made
in any suit, action or proceeding commenced by third parties (including, without
limitation, against GRANTORS and GRANTEE jointly) (herein collectively referred
to as "Action") that GRANTEE does not have the exclusive right to use the XXXX
as granted by this Agreement. GRANTEE shall promptly notify, in writing,
GRANTORS of any such Action. GRANTORS shall have the right to defend any such
Action through attorneys of their own selection. GRANTEE shall cooperate with
GRANTORS in such defense as requested by GRANTORS, at GRANTORS' expense. The
terms of settlement of any such Action shall be within the sole and absolute
discretion of GRANTORS.
(c) In the event that present trademark registrations for the XXXX do not
encompass the GOODS hereunder licensed, GOTTEX ISRAEL, at its expense, shall
cause appropriate trademark registration applications to be filed and GRANTEE
shall cooperate by providing necessary samples, invoices or other documents.
(d) In the event GRANTEE'S use and enjoyment of the XXXX as licensed
hereunder is materially restricted by reason of a successful opposition of any
trademark registration application as aforesaid, or as a result of any Action as
aforesaid, and provided that GRANTEE is not in breach of any of the terms and
conditions of this Agreement, GRANTEE'S sole remedy shall be to cancel this
Agreement upon thirty (30) days' written notice.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-18-
11. Copyright Ownership; Secrecy.
(a) Any and all copyrights which may exist, or come into being, with
respect to any and all fabric designs, swimwear and clothing designs, package
designs, prints, labels, advertising or promotional materials used pursuant to
this Agreement shall be the property of GOTTEX ISRAEL. If not created by either
of the GRANTORS, they shall be deemed works made by GRANTEE for hire. Without
limiting the foregoing, GRANTEE hereby assigns all of its right, title and
interest, whether under copyright or otherwise, in and to such fabric designs,
swimwear and clothing designs, package designs, prints, labels, advertising or
promotional materials to GOTTEX ISRAEL as and when they are created. GRANTEE
shall place appropriate copyright notices thereon in the name of GOTTEX ISRAEL.
(b) Any and all of GRANTORS' swimwear or coverups, or fabric designs by
GRANTORS or GRANTEE, and any and all samples or prints prepared from such
designs, are, shall become and shall remain the property of GOTTEX ISRAEL and/or
GOTTEX USA, and, as between GRANTEE and GRANTORS, are to be used by GRANTEE
exclusively in connection with the manufacture and sale of the GOODS bearing the
XXXX in accordance with this Agreement. Accordingly, GRANTEE shall not
manufacture, distribute, sell or advertise any articles of merchandise which
employ or are prepared, manufactured or adapted from such designs, or the
samples prepared from such designs, except under the XXXX and in accordance with
this Agreement.
(c) Any and all samples or prints prepared by GRANTEE not based on
GRANTORS' swimwear, coverups or fabric designs, for use in connection with the
manufacture and sale of the GOODS bearing the XXXX in accordance with this
Agreement shall also be the property of the GOTTEX ISRAEL and/or GOTTEX USA and
shall be used exclusively in connection with the manufacture and sale of the
GOODS bearing the XXXX in accordance with this Agreement.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-19-
GRANTEE shall not manufacture, distribute, sell or advertise any articles of
merchandise which employ or are prepared, manufactured or adapted from such
samples or prints, except under the XXXX and in accordance with this Agreement.
(d) GRANTEE shall cause all GOODS, packaging, prints, labels, advertising
and promotional materials manufactured or produced under its supervision
pursuant to this Agreement to bear a copyright notice in the following form:
(i) For GOODS:
Gottex Models Ltd.
(ii) For all other materials:
20__Gottex Models Ltd. (insert year of first publication)
(e) GRANTEE shall take all precautions necessary to protect the secrecy of
all swimwear, coverup, and fabric designs licensed to GRANTEE pursuant to
Subsection 3(b) of this Agreement, and of any and all samples prepared from such
designs, prior to the showing of the corresponding articles of the GOODS for
commercial distribution. GRANTEE shall not disclose, except as may be otherwise
authorized by this Agreement, any information received pursuant to this
Agreement and not generally available to the public, to any other person during
the Term of this Agreement or for a period of three (3) years thereafter.
12. Indemnity and Insurance.
(a) GRANTEE shall indemnify and save and hold GRANTORS harmless from and
against any and all liabilities, claims, causes or actions, damages and
expenses, including reasonable attorneys' fees and expenses, which GRANTORS
becomes liable for, or may
DC 174881.1 02272 00307
5/23/00 3:15 PM
-20-
incur by reason of any acts, whether of omission or commission, that may be
committed or suffered by GRANTEE or any of its servants, agents, or employees in
connection with GRANTEE'S performance of this Agreement or in connection with
GOODS manufactured by or for GRANTEE, notwithstanding any approval which may
have been given by GRANTORS. The provisions of this subsection shall not apply
to damages arising out of claims by third parties based upon infringement or
other violation of a third party's statutory or common law trademark rights.
(b) GRANTEE shall, within thirty (30) days after the execution of this
Agreement, obtain from an insurance company reasonably acceptable to GOTTEX USA
and maintain in full force and effect for the duration of this Agreement and for
one (1) year thereafter, public and products liability insurance in the minimum
amount of TWO MILLION DOLLARS ($2,000,000) per occurrence in order to protect
GRANTORS against any liabilities with which they may be charged because of
damage or injuries suffered by any servants, agents, contractors, employees or
customers of GRANTEE or by the general public, resulting from the use or sale of
the GOODS imported, manufactured, distributed, advertised or sold by GRANTEE or
GRANTEE'S contractors. GRANTEE agrees to cause the names of GRANTORS to be
entered in such policy as additional named insureds and to deliver to GRANTORS a
certificate thereof. Said insurance shall provide that it cannot be cancelled or
reduced without the insurer first giving GRANTORS thirty (30) days' advance
written notice thereof. GRANTEE shall assume and save GRANTORS harmless from any
and all liability, loss, cost or damage, including reasonable attorneys' fees,
on account of services rendered to customers or for any injury to persons or
property occurring in the performance of this Agreement or in connection with
the manufacture, sale, distribution, advertising or use of the GOODS by or on
behalf of GRANTORS, notwithstanding any approval which may have been given by
GRANTORS, except as is provided in Section 10 herein.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-21-
(c) GRANTEE shall, upon GRANTORS' request, promptly furnish or cause to be
furnished to GRANTORS complete copies of policies or certificates of insurance,
with proof of premium payments.
13. Best Efforts.
GRANTEE shall use its best efforts in the manufacture, distribution, sale,
promotion and advertising of the GOODS in order to maintain the value of the
goodwill residing in the XXXX, and to produce the maximum amount of royalties
under this Agreement consistent with the standards of quality prescribed by this
Agreement.
14. Relationship Between the Parties.
(a) Nothing herein shall be construed to deem the parties' relationship to
be a partnership or joint venture.
(b) GRANTEE shall not represent itself as the agent or representative of
GRANTORS for any purpose and shall have no right to create or assume any
obligation of any kind, expressed or implied, for or on behalf of GRANTORS,
except as herein provided.
15. Notices.
(a) Any notice, report, demand, waiver, consent, approval or disapproval
required herein shall be in writing and shall be given personally or by
messenger, courier, confirmed facsimile transmission or by registered or
certified mail, return receipt requested, addressed as follows:
DC 174881.1 02272 00307
5/23/00 3:15 PM
-22-
if to GOTTEX ISRAEL at:
Gottex Models Ltd.
New Industrial Zone
Or Xxxxxx, Israel
Attention: Mr. Simcha Kynan
Fax No.000-000-0-000-0000
with a copy to:
Weksler, Xxxxxxx & Co.
Advocates & Notary
9 Achad Ha'am Xx.
Xxxxxx Xxxxx
Xxx Xxxx 00000
Xxxxxx
Attention: Xxxx Xxxx, Esq.
Fax No. 000-000-0-000-0000
if to GOTTEX USA at:
Gottex Models (USA) Corp.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxx Xxxxx
Fax No. 000-000-0000
with a copy to:
Xxxxxx Xxxxxxxxxx, Esq.
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000
Fax No. 000-000-0000
and if to GRANTEE at:
Breaking Waves, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx Xxxxxxxxx
Fax No. 000-000-0000
DC 174881.1 02272 00307
5/23/00 3:15 PM
-23-
with copies to:
Xxxxxxx.xxx., Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxx Xxxxxxxx
Fax No. 000-000-0000
and
Xxxxxx Xxxxxxxx, Esq.
Todtman, Nachamie, Spizz and Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax No. 000-000-0000.
(b) A notice shall be deemed received upon the date of delivery, but if
given by mail, five days after the day on which it is deposited in the United
States mails, properly addressed postage prepaid as herein provided. Any party
may change its address for the purpose of notice by notice in accordance with
this Section 15.
16. Non-Assignability.
Neither GRANTORS nor GRANTEE shall assign, transfer, pledge, or mortgage
this Agreement to any person or party and any attempted assignment, transfer,
pledge or mortgage shall be null and void, except that GRANTORS may assign or
otherwise transfer this Agreement or any of its rights under this Agreement to
any corporation or other business entity controlled by, controlling, or under
common control with GRANTORS or any principals of GRANTORS.
17. Severability.
In the event that one or more terms and conditions of this Agreement shall
at any time be found to be invalid or otherwise rendered unenforceable, such
terms and conditions shall be severable from this Agreement, so that the
validity and
DC 174881.1 02272 00307
5/23/00 3:15 PM
-24-
enforceability of the remaining terms and conditions of this Agreement shall not
be affected thereby.
18. Applicable Law; Arbitration.
(a) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts made and to be
performed wholly therein.
(b) If any controversy or claim shall arise between GRANTORS and GRANTEE
with respect to the validity of any provision of this Agreement, the
interpretation of any provision of this Agreement, or the rights and obligations
of the parties hereto, other than the provisions hereof concerning GRANTORS'
trademark rights and those concerning GRANTEE'S acknowledgment of and agreement
to protect such rights, and provided that such controversy or claim shall not be
resolved within thirty (30) days after the same shall arise, then such
controversy or claim shall be submitted to the New York, New York office of the
American Arbitration Association for arbitration in accordance with its
Commercial Arbitration Rules as then in effect. Such dispute shall be heard and
resolved by one (1) arbitrator. Such arbitrator shall award any relief which he
may deem fair and proper under the circumstances, without regard to the relief
which would otherwise be available to either party hereto in a court of law or
equity, including without limitation an award of money damages (with interest on
unpaid amounts determined by such arbitrator), specific performance and
injunctive relief. The award of such arbitrator shall be conclusive and binding
on the parties hereto, and judgment upon such award may be entered by any court
having jurisdiction thereof.
19. Force Majeure.
No party hereto shall be liable for damages or otherwise for failure to
satisfy or perform any obligation or
DC 174881.1 02272 00307
5/23/00 3:15 PM
-25-
duty to be satisfied or performed pursuant to the terms and provisions of the
Agreement, if such failure is occasioned by Act of God, war, civil disorder,
strikes, labor disputes, acts or regulations of governmental agencies and
authorities, or similar circumstances beyond the control of the party hereto who
has failed to satisfy or perform, but any such obligation or duty, although the
satisfaction or performance thereof has been postponed pursuant to this section,
shall remain in force and shall be satisfied and performed pursuant to this
Agreement, as soon as such satisfaction and performance becomes legally and
practicably possible.
In the event such event beyond the control of the party obligated to
perform continues for a period in excess of six (6) months, the party to whom
performance is due may terminate this Agreement on thirty (30) days' written
notice.
20. No Waiver; Entire Agreement.
This Agreement is presented to the GRANTEE for signature, but is not to be
construed as an offer and shall not in any way bind GRANTORS until such time as
GRANTORS have executed and delivered this Agreement to GRANTEE. Failure of
GRANTORS or GRANTEE to insist upon strict performance of any of the terms
contained in this Agreement shall not be deemed a waiver of their right to
insist upon strict performance. This Agreement expresses the complete agreement
between the parties, and it may not be modified or amended except in writing
signed by both parties.
21. Headings.
The various headings in this Agreement are for convenience only and shall
not affect the meaning or interpretation of its provisions.
DC 174881.1 02272 00307
5/23/00 3:15 PM
-26-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
GOTTEX MODELS LTD.
By: /s/ Xxxxx Xxxxxx
Name: Xxxxx Xxxxxx
Title: President
GOTTEX MODELS (USA) CORP.
By: /s/ Uzi Evron
Name: Uzi Evron
Title: Chief Financial Officer
BREAKING WAVES, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
Name: Xxxxxxx Xxxxxxxxx
Title: Vice-President
DC 174881.1 02272 00307
5/23/00 3:15 PM
-27-
