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EXHIBIT 10.43
XXXXXX XXXXX, INC.
and
OUTLET HOLDINGS INC.
AGREEMENT made the 31st day of October 1996 by and between
XXXXXX XXXXX, INC. a New York corporation with offices at 000 Xxxx 00xx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 (hereinafter referred to as "CKI") and OUTLET HOLDINGS
INC., a Delaware corporation, (which is a wholly-owned subsidiary of DESIGNER
HOLDINGS LTD.) with offices at 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(hereinafter referred to as the "Operator").
W I T N E S S E T H:
In consideration of the premises and the mutual covenants
herein contained, the parties agree as follows:
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Definitions
As used in this Agreement, the following terms have the
meanings specified or referred to below:
"Affiliates" shall mean those persons, firms, corporations or
other entities controlled by, controlling or under common control with Operator
or CKI, as applicable.
"Annual Period" shall have the meaning set forth in Section 2.
"Articles" shall mean the products and merchandise bearing the
Xxxx or the trademark "CK/Xxxxxx Xxxxx" listed on Exhibit 1(a); "Exclusive
Articles" shall mean (i) Articles bearing the trademark "CK/Xxxxxx Xxxxx" in the
form "CK/Xxxxxx Xxxxx Jeans" and/or the form "CK/Xxxxxx Xxxxx Khakis", as
defined in the Jeans License, and other Articles referred to as such on Schedule
1(a); and "Non-Exclusive Articles" shall mean Articles other than the Exclusive
Articles, referred to as such on Schedule 1(a).
"Business Day" shall mean any date that is not a Saturday,
Sunday or a legal holiday on which banking institutions in the State of New York
are authorized or required to close. However, the Stores will be open and
operating on certain non-Business Days, as are consistent with normal retail
operations and requirements of their respective leases.
"CKI" shall have the meaning set forth in the preamble to this
Agreement.
"CRK Advertising" is the division of CKI responsible for the
development and placement of advertising relating to the Xxxx, and other
trademarks of CKI.
"CRK Fee" shall have the meaning set forth in Section 7(c).
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"Jeans License" shall mean the license agreement dated 4
August 1994, as amended, regarding the use of the trademark "Xxxxxx Xxxxx" only
in the form "Xxxxxx Xxxxx Jeans" and the trademark "CK/Xxxxxx Xxxxx" in the form
"CK/Xxxxxx Xxxxx Jeans".
"Xxxx" shall mean the name and trademark "Xxxxxx Xxxxx" in the
form attached hereto as Exhibit A. The term "Xxxx" shall not include any
variation, modification or derivative of the xxxx "Xxxxxx Xxxxx", including,
without limitation, the xxxx "CK/Xxxxxx Xxxxx" or "CK/Xxxxxx Xxxxx Jeans".
"Net Sales" shall have the meaning set forth in Article 6.
"Off-Price Articles" shall mean Articles sold at less than
full price (or regular price) retail only, including only: (i) customary
end-of-season merchandise, (ii) damaged merchandise, irregulars or
other-than-first-quality merchandise, (iii) excess inventory, or (iv) as may be
approved by CKI from time to time, consistent with CKI's past practices.
"Operator" shall have the meaning set forth in the preamble to
this Agreement.
"Royalty" shall mean a percentage of Net Sales of all Articles
as set forth in Section 6.
"Stores" shall mean free-standing "outlet" stores in which
only Off-Price Articles are sold identified by the Xxxx and operating under the
name "Xxxxxx Xxxxx Outlet Store".
"Term" shall have the meaning set forth in Section 2.
"Territory" shall have the meaning set forth in Section 1(a).
Section 1 - Grant
1. (a) Operator is hereby granted the right, and accepts the
obligation, for the duration of this Agreement, to establish, to maintain and
operate Stores throughout the Xxxxxx Xxxxxx,
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Xxxxxx xxx Xxxxxx ( the "Territory"). The operations of the Stores shall consist
only of the off-price (not full-price or regular price) retail sale of Off-Price
Articles, (i) constituting Exclusive Articles and/or (ii) constituting those
categories of Non-Exclusive Articles. No products other than such Off-Price
Articles shall be shown or offered for sale in the Stores. The license granted
hereby applies solely to Operator and may not be assigned or sublicensed to any
other party, except as set forth in Section 16(b).
(b) Operator shall conduct and operate the Stores
under the name "Xxxxxx Xxxxx Outlet Stores", and shall register and file
statements, including fictitious name certificates, of its use of such name with
proper authorities and/or governmental offices where the same may be mandatory.
Operator shall not use the name "Xxxxxx Xxxxx", "CK/Xxxxxx Xxxxx", "CK" or any
portion or derivative thereof or any name similar thereto in the conduct of its
business except: (i) as provided in the preceding sentence, (ii) as provided in
Section 1(a), (iii) by selling Articles bearing any such name or trademark or
(iv) as may be otherwise consented to by CKI, in writing. Operator shall comply
with the quality standards established by CKI (and as the same may be amended
from time to time by CKI in its discretion) in conducting the operations of the
Stores.
(c) Except as set forth in Section 1.1(d), while this
Agreement is in force, CKI will not operate or grant any third party the right
to operate Stores within the Territory for the sale of Exclusive Articles
constituting Off-Price Articles.
(d) CKI retains all rights: (i) to manufacture,
distribute and sell Off-Price Articles, other Articles and any other products,
with or without the Xxxx, and, in connection therewith, to utilize any and all
channels of distribution (including the right to sell Off-Price Articles in its
own facilities directly to consumers) and to establish and operate retail
outlets of any type or description (except for the
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establishment and operation of Stores within the Territory selling Exclusive
Articles while this Agreement remains in effect), and (ii) to grant others the
rights to do so. CKI also retains the right to open, operate and maintain up to
two (2) free-standing outlet stores bearing the Xxxx for the sale of Articles
sold by CKI (or its licensees or authorized user of the Xxxx) constituting the
"Xxxxxx Xxxxx" Women's Collection and the "CK/Xxxxxx Xxxxx" Women's and Men's
Bridge Collections (such a store is currently operating in Secaucus, New Jersey
but CKI may relocate such store from time to time). Operator also acknowledges
that Xxxxxx Xxxxx Underwear, Inc. has the right to open free-standing stores
(and "CK/Xxxxxx Xxxxx" stores or stores bearing any other trademark of CKI),
including outlet stores, for the sale of products covered by their agreement and
that the opening and operation of such Stores does not constitute a breach of or
default under this Agreement. Operator will fully cooperate with CKI and its
authorized licensee, to the extent any of the same owns and/or operates or
intends to own and/or operate any full price retail store primarily for the sale
of Non-Exclusive Articles constituting the "CK/Xxxxxx Xxxxx" Women's Bridge
and/or "CK/Xxxxxx Xxxxx" Men's Bridge or Clothing lines (such third party being
hereinafter referred to as a "Third Party Store Operator". For purposes hereof,
"fully cooperate" may include, at Operator's option, entering into a joint
venture arrangement, on mutually agreeable terms with such Third Party Store
Operator pursuant to which Operator and such Third Party Store Operator operate
outlet stores for the sale of such Non-Exclusive Articles and, as agreed between
Operator and such Third Party Operator, other Articles, but in any event
Operator in its discretion shall sell to such Third Party Operator reasonable
quantities of Exclusive Articles on reasonable terms of purchase and sale and
reasonable discounts. Any retail store or outlet operated by CKI or by any third
party pursuant to a license from CKI shall not be opened in the same center
where any outlet store then being operated by Operator hereunder is located,
without Operator's consent.
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(e) In the event CKI desires to enter into an outlet
store license, commensurate with the terms hereof, for any jurisdiction or
jurisdictions in Central or South America, CKI shall give Operator written
notice (the "First Offer Notice") specifying the material terms and conditions
of any such proposed outlet store license (the "First Offer Terms"). If Operator
desires to enter into a proposed outlet store license for any such jurisdiction
on the First Offer Terms, Operator shall so notify CKI within 30 days after
receipt of the First Offer Notice, and the parties shall thereon use their
reasonable commercial efforts to enter into a definitive outlet store license
agreement for such jurisdiction (or jurisdictions) on mutually acceptable terms
within 45 days following Operator's response to CKI. If no definitive agreement
is reached within the 45-day period, CKI shall have the right to enter into an
outlet store license with a third party within 60 days thereafter on terms and
conditions no less favorable to CKI than the First Offer Terms. After such 60
day period has expired, CKI shall be obligated to deliver a First Offer Notice
and comply with the provisions of this section. CKI may not enter into any such
outlet store license without having complied with the provisions of this
Section.
Section 2 - Term
2. (a) The term of this Agreement (the "Term") shall commence
as of the date of execution of this Agreement and continue through 31 December
2004 unless sooner terminated in accordance with the provisions hereof. The
period through 31 December 1997 and each calendar year thereafter during the
Term shall be referred to herein as an "Annual Period."
(b) CKI shall have the right to terminate this
Agreement, effective 90 days following the date of written notice to Operator,
in the event of termination of the Jeans License.
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(c) Operator shall use its commercially reasonable
efforts to exploit the rights herein granted throughout the Territory.
(d) Operator shall have an option to renew this
Agreement for up to an additional four consecutive ten-year renewal terms
provided the following conditions are met: (i) written notice of Operator's
intention to exercise its renewal option is delivered to CKI prior to the final
Annual Period in the then current term; (ii) Operator is in material compliance
with all of the terms and conditions of the Agreement on the date of exercise of
the option and on the last day of the then current term; (iii) Operator meets
the Minimum Net Sales Thresholds set forth in Schedule 2(c) in the United
States, Canada and Mexico for the penultimate Annual Period during the then
current term; (iv) Operator has throughout the term maintained the quality
standards of operations, sales, advertising and promotional activities
commensurate with the prestige, reputation and image of the Xxxx, as they relate
to Stores covered hereunder and the sale of Articles as provided herein; and (v)
control of Operator continues to be maintained by the same parties as those who
control the "licensee" under the Jeans License. Operator shall be deemed to have
maintained the quality standards referred to in the preceding clause (iv) if
either: (x) Operator has not received any notice from CKI of failure to comply
with such quality standards, or (y) if Operator has received such a notice,
Operator has rectified such failure to the reasonable satisfaction of CKI within
30 days (or such longer period as may be provided in Section 13 of this
Agreement). CKI and Operator shall use their respective mutual efforts to
amicably resolve a dispute which might exist with respect to the immediately
preceding sentence.
Section 3 - Decor/Location/Operations
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3. (a) Each Store shall be located at a site, and consist of
the approximate number of square feet, approved in advance by CKI. Operator
shall not make any definitive written commitment with respect to any site or
commence construction at any site without CKI's prior written approval of such
site. Operator shall submit a request for approval of a location together with
details including: square footage, competitors in the area, and the background
of the mall or development or other specific area and its reputation, in order
for CKI to make a determination as to approval or non-approval.
The locations set forth on the attached Schedule 3(a) are approved. CKI may
consider the location of existing or proposed full-price retail stores bearing
the Xxxx, the trademark "CK/Xxxxxx Xxxxx" or any variation, modification, or
derivative thereof, and existing or proposed in-store areas or shops, or
accounts carrying regularly priced merchandise in making such a determination.
If CKI fails to respond by approving or disapproving such request within 15
Business Days following receipt of Operator's request for such approval,
together with the aforementioned details, CKI shall be deemed to have approved
such location.
(b) The Stores shall be clearly designated with the
name "Xxxxxx Xxxxx Outlet Store" in such manner as shall be approved by CKI and
shall incorporate such concepts of design, architectural planning, lay-out,
decor, signage, lighting fixtures and other aspects of decoration, both interior
and exterior, as well as all visual display and merchandising presentations
(including fixturing) as are consistent with the signature look for such Stores,
as it exists from time to time and as specified or approved by CKI, and as are
in accord with applicable legal rules and regulations. The design, layout,
merchandising standards, visual display elements, fixtures and decor of the
Stores, and any audio or video material utilized in the Stores shall be in
accordance with prototype specifications provided by or approved
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by CKI with such modifications as CKI may from time to time provide or approve
(which approval shall not be unreasonably withheld). An example of a visual
standards manual is attached hereto as Exhibit 3(b) as a guideline. For up to
two years following the "Closing Date" as hereinafter defined, expenses for such
decor shall be substantially consistent, on a Store-by-Store basis, with CKI's
expenditures to construct and maintain the decor levels of those outlet stores
maintained by CKI prior to the Closing Date. The decor of each Store shall be
carried out (based on the prototype decor provided or approved by CKI) by an
architect retained by Operator. The fee for such prototype or the fee per square
foot for such prototype, shall be mutually determined by CKI and Operator and
will then be borne by Operator. The decor of each Store, as carried out by such
architect, shall be subject to the approval of CKI (which approval shall not be
unreasonably withheld). If CKI fails to respond within 30 days following receipt
of Operator's written requests for any such approval, together with all
supporting information reasonably necessary in order to make a determination,
CKI shall be deemed to have given such approval. All costs and expenses
(including where applicable advances or deposits and per diem costs of in-house
personnel such as CKI's visual display department) as to prototype decor, and in
connection with the design and build-out, of such Stores shall be borne, and
promptly paid, by Operator. CKI shall provide Operator with estimated costs for
services of CKI's personnel, which shall be generally commensurate with third
party contractor rates for similar services, for Operator's approval (which
approval shall not be unreasonably withheld). CKI shall also provide estimates
for any other services requested by Operator or provided for under this
Agreement, for Operator's (which approval shall not be unreasonably withheld).
Upon CKI's request, Operator will remit applicable advances and/or deposits (of
up to 30% of the total amount due) as to such estimated
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costs and expenses. Amounts relating to costs or expenses in excess of those
approved by Operator on such estimate, shall be subject to Operator's consent.
(c) Operator shall also be responsible for compliance
with all applicable codes, ordinances, and other legal requirements in
connection with the design and buildout of Stores and shall obtain and maintain
all permits, certificates and licenses necessary for the full and proper
operation and maintenance of the Stores.
(d) CKI shall be entitled at its expense to inspect
Stores periodically. CKI shall endeavor (i) to provide reasonable notice as to
such inspections, (ii) to engage in such inspections during regular business
hours (unless otherwise arranged with Operator), and (iii) not to disrupt
Operator's normal operations in connection with such inspections. To the extent
CKI determines that any Store is not maintained in accordance with the
guidelines provided by CKI, Operator shall promptly make such modifications as
CKI shall reasonably require (and deliver to CKI certification that such
corrections have been made) and bear any reasonable costs incurred in connection
therewith, including costs incurred by CKI in carrying out follow-up
inspections to determine compliance with CKI's corrective requirements.
Section 4 - Approval Standard
4. Except as expressly set forth herein, CKI approvals
required hereunder may be based solely on CKI's subjective aesthetic standards
and may be granted or withheld in CKI's sole and absolute discretion, exercised
in good faith.
Section 5 - Purchases
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(a) (i) During each Annual Period Operator shall
purchase a quantity of each category of Articles sufficient (i) to stock each
Store adequately, (ii) to maintain, on an ongoing basis, inventory levels
sufficient to satisfy consumer demand, (iii) to provide at all times for an
ample display and variety of product in the Stores and (iv) to use its
reasonable commercial efforts to follow the overall guidelines for merchandise
allocation of Articles as provided under Section 8 below; in each case subject
to the availability of adequate quantities of such Articles.
(ii) Operator may purchase Non-Exclusive Articles
(other than the "Xxxxxx Xxxxx" Women's Collection line, the "Xxxxxx Xxxxx" Men's
Collection line and the "Xxxxxx Xxxxx" Home Collection line) as indicated in
Section 5(a)(iii) below. However, if CKI requests or permits Operator to
purchase Non-Exclusive Articles included in the "Xxxxxx Xxxxx" Women's
Collection line, the "Xxxxxx Xxxxx" Men's Collection line or the "Xxxxxx Xxxxx"
Home Collection line, Operator may do so, in quantities as may be offered to it,
in Operator's reasonable discretion at discount rates commensurate with the
discount rates currently charged to CKI's existing outlet stores for such
Non-Exclusive Articles, namely 45% off the regular wholesale price for "Xxxxxx
Xxxxx" Women's Collection Articles.
(iii) During the first and second Annual Periods,
Operator will purchase Non-Exclusive Articles constituting the "CK/Xxxxxx Xxxxx"
Women's Bridge line and the "CK/Xxxxxx Xxxxx" Men's Bridge line, as may be
offered to it, in Operator's reasonable discretion but in no event less than
quantities of approximately 10% of CKI's production thereof (representing excess
production), or aggregating approximately $3 million per Annual Period (at
current wholesale prices), at discount rates commensurate with the amounts
currently charged to CKI's existing outlet stores for such Non-Exclusive
Articles, namely 40% off the regular wholesale price.
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(iv) It is expected that the discounts on prices to
be offered to Operator on Articles will be commensurate with those available to
the outlet stores being operated by CKI prior to the date of this Agreement (it
being understood that CKI may not control the prices charged or discounts given
by its licensees and suppliers). CKI hereby assigns to Operator (a) its rights
of first refusal to purchase Off-Price Articles produced by its Jeans Licensee,
and (b) to the extent it may do so, its rights to purchase certain quantities of
Articles constituting Underwear as indicated on Exhibit 5(a)(iv) for the
duration of this Agreement.
(b) Subject to the provisions of Section 5(a), Operator shall
purchase Off-Price Articles, as they exist from time to time, from CKI's
licensees and authorized user of the Xxxx as are made available to it, subject
to normal pricing terms and credit considerations, in order to effect an orderly
method of selling the same to consumers.
(c) Operator shall sell Articles only to consumers in or from
the Stores. Operator shall comply, and cause its employees to comply, with the
standards and restrictions reasonably proposed by CKI and accepted by Operator
and/or developed by Operator to ensure the prevention of sale to other
retailers, jobbers or third parties wishing to engage in parallel market sales,
such as limitations on the number of items sold to any single customer. All
Articles shall be sold together with such packaging, labels, tags and other
"Xxxxxx Xxxxx", "CK/Xxxxxx Xxxxx" or other authorized identification as are
shipped with such Articles by CKI or CKI's authorized licensees or other
authorized user of the Xxxx as well as with price tickets or tags, in a form
subject to CKI's prior approval (which approval shall not be unreasonably
withheld), affixed to the Articles. Operator shall permit CKI's employees to
purchase Articles at the Stores at discounts of 20% from the prices otherwise
charged.
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(d) CKI shall act in good faith and use its
commercially reasonable efforts to supply and ship, and where applicable to
request the licensees and authorized user of the Xxxx (suppliers) to supply and
ship, promptly such Articles as are ordered by Operator, subject to their
respective rights (if any) to reject orders. Such shipments shall be made in
accordance with Operator's instructions, subject to reasonable credit
considerations and on such terms as may be agreed by Operator and the party
supplying such Articles. CKI shall not be liable for delay, cancellation,
modification or reduction of any orders; provided that as to orders accepted by
CKI, CKI will use its commercially reasonable efforts to ship Articles it has in
inventory which are available for shipment. Operator shall deal directly with
the supplier of each category of Articles, and will look solely to such supplier
in the event of any breach or default by such supplier and acknowledges that CKI
will not be liable or responsible in any event, except to the extent it is the
supplier of Articles or fails to fulfill its obligations in the first sentence
of this Section 5(d). This Agreement shall not prevent CKI or any supplier from
modifying, curtailing or discontinuing production of Articles.
(e) In order to maintain the high quality standards,
reputation and prestige of the Xxxx, the products and other merchandise bearing
the Xxxx and other trademarks of CKI and CKTT and to prevent confusion in the
market among consumers regarding the business and operations of the Stores,
Operator agrees not to take any action which could reasonably result in (i)
confusion among consumers that the Stores constitute full-price "Xxxxxx Xxxxx"
or "CK/Xxxxxx Xxxxx" retail stores or (ii) damage to the high quality standards,
reputation and prestige of the Xxxx and the distribution channels (including
existing Stores) in which Articles are sold.
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Section 6 - Royalty; Minimum Guaranteed Royalty
6. (a) In consideration of the license granted hereunder,
Operator shall pay to CKI an amount equal to seven percent (7%) of Operator's
Net Sales of all Articles during each Annual Period (the "Royalty"). "Net Sales"
shall mean the invoiced amount of Articles sold to customers less returns, sales
taxes and shipping costs separately stated on the invoice. The amounts payable
by Operator for any Annual Period shall in no event be less than the amount set
forth below (the "Minimum Guaranteed Royalty"):
Annual Period (Year) US$ -- Minimum Guaranteed Royalty
-------------------- ---------------------------------
Each of 1st (1996-1997) US $2 million
2nd (1998) and 3rd (1999)
4th (2000) and each sub- the greater of (i) US $2 million or
sequent Annual Period (ii) 75% of the average Royalty earned
during the three previous Annual Periods.
(b) The Royalty payments hereunder shall be accounted
for and paid quarterly, within 30 days following the close of each calendar
quarter. The Royalty payable for each quarterly period during each Annual Period
shall be computed on the basis of Net Sales from the beginning of such Annual
Period through the last day of such quarterly period with a credit for the
Minimum Guaranteed Royalty and earned Royalty, if any, theretofore paid to CKI
in respect of such Annual Period. The Minimum Guaranteed Royalty for each Annual
Period will be paid, in advance, in four (4) equal installments on or before the
first day of each January, April, July and October, during each Annual Period.
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The Minimum Guaranteed Fee for the 1st Annual Period shall be paid in five equal
installments: on the date hereof; on 1 January 1997; on 1 April 1997; on 1 July
1997 and on 1 October 1997.
(c) Operator shall deliver to CKI at the time each
Royalty payment is due statements signed by the Chief Financial Officer of
Operator and certified by him as accurate, indicating, separately for each of
the U.S., Mexico and Canada and each Store, by month, and separately for each
category of Exclusive Articles and each category of Non-Exclusive Articles, the
amount of gross sales, credits or deductions therefrom, Net Sales, and a
computation of the amount of the Royalty payable. Each such statement shall also
include, separately for each jurisdiction, the amount and details of any
advertising or promotional expenditures incurred by Operator during such period
pursuant to Section 7 and the amount of the CRK fees due for such period. All
amounts payable under this Agreement shall be paid in US dollars and all foreign
currency amounts shall be translated into US dollars by using the exchange rate
in effect for each such currency on the last day of the quarterly period in
respect of which such payment is being made, as published in the Wall Street
Journal (Xxx-Xxxxx Telerate).
(d) Operator shall furnish to CKI, not later than 120
days following the close of each Annual Period during the term of this Agreement
(or portion thereof), a report certified by its independent certified public
accountants covering the Annual Period (or portion thereof) and containing
separately for (i) the United States, (ii) Mexico, and (iii) Canada, the
aggregate amount of Net Sales for the Annual Period and a calculation of the
Royalty for each such area of the Territory, and the amount of advertising or
promotional expenditures and CRK fees incurred.
(e) The Minimum Guaranteed Royalty for any Annual
Period will be credited only against the Royalty for the same Annual Period. In
no event shall any payment of Royalty for any
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Annual Period in excess of payments of Minimum Guaranteed Royalty for the same
Annual Period be credited against the Minimum Guaranteed Royalty due to CKI for
any other Annual Period.
(f) Operator shall prepare and maintain, in
accordance with generally accepted accounting principles consistently applied,
complete and accurate books of account and records covering all transactions
relating to this Agreement and Operator's performance hereunder. CKI and its
duly authorized representatives have the right, during regular business hours
and upon at least five Business Days' prior notice, for the duration of this
Agreement and for three years thereafter, no more than two times in each Annual
Period, to examine said books of account and records and all other documents and
material in the possession or under the control of Operator or its affiliates
with respect to the subject matter and the terms of this Agreement, and , to the
extent Operator can make them available, the work papers of Operator's auditors,
relating to the annual statements referred to in Section 6(d) provided, that,
Operator's auditors receive their customarily required indemnity upon release of
such work papers. All such books of account, records and documents will be kept
available by operator for at least three years after the Annual Period to which
they relate.
(g) If, as a result of any examination of Operator's
books and records, it is shown (to the reasonable satisfaction of Operator's
regular outside accounting firm) that the amount of Royalty computed as earned
by CKI was less than the amount of Royalty which should have been computed as
earned, such discrepancy shall be immediately paid by Operator to CKI. If the
amount of the discrepancy is five percent (5%) or more of the amount of Royalty
originally computed as earned, Operator will also promptly reimburse CKI for the
cost of such examination and will pay interest on the amount of such discrepancy
computed in accordance with Section 13(a).
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Section 7 - Advertising/Promotion
7. (a) Operator shall expend such amounts for advertising and
promotion of the Stores and the Xxxx during each Annual Period as are consistent
and customary with industry standards for outlet stores which advertising and/or
promotion shall be subject to the approval of CKI (which approval shall not be
unreasonably withheld or delayed).
(b) Any and all advertising, promotion and publicity
of the Xxxx and the Stores shall be of a type, quality and style consistent with
advertising and promotion of outlet stores by CKI and shall be subject in all
instances to CKI's prior approval. To ensure compliance with the quality
standards and procedures commensurate with the reputation, image and prestige of
the Xxxx, any "on sale" arrangement shall be subject to review and approval of
CKI, as to duration, timing and any and all advertising or promotion thereof
(including signage) shall be subject to CKI's approval.
(c) CRK Advertising operates as the advertising
agency responsible for advertising campaigns relating to "Xxxxxx Xxxxx"
activities and has developed certain expertise regarding the image of the Xxxx
and "Xxxxxx Xxxxx" advertising. Operator acknowledges and agrees that CKI shall
have complete control over all aspects of advertising including the content of
advertisements and promotional materials, and the placement thereof. Operator
shall remit to CRK (i) a fee, equal to fifteen percent (15%) of the expenditures
made pursuant to Section 7(a) related to advertising developed or to be
developed by CRK Advertising, or (ii) out-of-pocket costs incurred or to be
incurred by CRK Advertising in connection with the provisions of this Section .
Payments shall be remitted by Operator within 30 days of the date of invoice
(unless earlier payment is required as specified on an estimate or invoice
including, if reasonably required by CKI, advance payments or deposits).
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(d) Operator recognizes that its public actions and
statements can affect the image of CKI, the Xxxx, the Articles and other
trademarks of CKI, licensees, and other authorized user of the Xxxx, and
licensed products. Accordingly, (i) the use and release of any and all
promotional material (printed or otherwise) relating to the Stores or Operator's
activities pursuant to this Agreement or by Operator's Affiliate pursuant to the
Jeans License, in the nature of press releases, interviews or other public
relations events, and (ii) any other corporate release, data or information
which Operator has reason to believe might become public and, if so, could
affect such image, will be prepared or conducted in consultation with, and,
except as may be required by law, subject to the prior approval of CKI (through
CKI's Public Relations Department) (such approval not to be unreasonably
withheld or delayed). After any such approval, Operator will not modify or
permit the modification of the approved material or activity or release in any
material respect unless such modification is specifically approved by CKI
(through CKI's Public Relations Department) (such approval not to be
unreasonably withheld or delayed).
Section 8 - Personnel/Standards/Operations
8. (a) CKI may make recommendations as to suitable personnel
and procedures, and will have the right to approve the selection of the General
Manager, for the Stores (and to approve any replacement thereof), which General
Manager's employment shall be devoted exclusively to the operations of the
Stores. CKI's right to approve shall not be unreasonably withheld. In the event
CKI has reason to be dissatisfied with a "sitting" General Manager, CKI will
notify Operator and the parties will endeavor through their reasonable efforts
to resolve the same to both parties' satisfaction.
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(b) No later than 30 September of each Annual Period,
Operator will submit to CKI Operator's business plan for the next succeeding
Annual Period, in a format reasonably approved by CKI illustrating among other
matters, the actual to date, and expected allocation or merchandise mix of each
category of Articles. In connection with its review of such business plans CKI
will review the merchandise mix of categories of Articles for sale in the Stores
and may by notice given to Operator by 1 November of any Annual Period provide
guidelines to Operator for such merchandise mix the subsequent Annual Period, to
ensure a reasonable minimum space allocation and minimum quantities of
categories of Articles, for a reasonable presentation within the Stores, subject
in all cases to availability of such Articles.
(c) Operator will provide CKI with such reasonable
additional information at the time the business plan is submitted pursuant to
Section 8(b) above regarding operations hereunder as CKI may from time to time
reasonably request.
(d) The Stores will be operated and maintained by
Operator continuously and in accordance with merchandising policies, methods and
plans consistent with the standards heretofore maintained for the outlet stores
by CKI prior to the Closing Date, and as may be hereafter reasonably set forth
or approved of by CKI, from time to time, during the term of this Agreement.
Operator will promptly pay the expense of reproduction and editing any customer
service manuals and product information training packages, based upon estimates
provided Operator for its approval (which approval shall not be unreasonably
withheld).
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(e) Operator shall use such packaging, advertising
materials, promotional materials, and supplies as have been previously utilized
or provided by CKI or as may be subsequently approved by CKI in connection with
Stores (which approval shall not be unreasonably withheld).
(f) Operator shall (i) keep the Stores in a clean and
sanitary condition and in good repair at all times, (ii) refurbish the Stores as
reasonably required from time to time, consistent with the "Xxxxxx Xxxxx" image
as it applies to outlet stores as then currently existing, (iii) comply with all
reasonable requests of CKI relating to the maintenance of the physical state of
the Stores, and improvements thereto, (iv) maintain a reserve adequate to
finance such repair and restoration as may from time to time be required, (v)
conform to all applicable health, building and tax regulations, and (vi) pay for
and keep always in good force all appropriate licenses which are required in
connection with its operations. As long as the Stores have been built and are
maintained in accordance with the approved or required specifications, Operator
shall not be required to entirely or substantially renovate a Store, or make
material modifications to a Store, within four (4) years of the original
build-out or renovation.
(g) CKI may from time to time, review the operations
of the Stores and require such changes as it deems necessary or reasonably
desirable to ensure exploitation of the rights hereunder and compliance with the
quality standards commensurate with the image, prestige and reputation of the
Xxxx.
(h) Operator will hire and maintain, as employees
(including sales and visual display), such personnel as shall be necessary and
sufficient to provide prompt, courteous and quality service to customers of the
Store and, except with respect to part-time employees, who will devote
themselves exclusively to the operations of the Stores in accordance with the
terms of this Agreement.
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Such employees shall be under the full direction and control of Operator and
shall not in any way be deemed employees of CKI.
Section 9 - Financial Requirements
9. (a) Operator shall provide to CKI: (i) copies of its
quarterly financial statements, within 45 days after the close of each quarterly
period; and (ii) copies of its annual audited financial statements within 90
days after the close of each Annual Period.
(b) Operator shall be solely responsible for all the
expenses of the Stores (including all expenses relating to design and decor),
and for taxes and levies of any and all kinds in connection with the Stores and
the income derived by Operator therefrom; and CKI shall not be liable for any
such expenses, taxes or levies, or disbursements otherwise paid or incurred in
connection with the establishment, maintenance or operation of the Stores.
Operator shall indemnify and save CKI, Xx. Xxxxxx Xxxxx and their officers,
directors and employees harmless from any and all claims, lawsuits, demands,
actions and causes of action that may arise or be asserted against any such
indemnified person by reason of the establishment, maintenance or operation of
the Stores, (except for product liability claims with respect to Articles
produced by CKI or of advertising developed by CRK Advertising in accordance
with Section 7(c) above which is determined to be libelous of any person
depicted therein) or by reason of Operator's use of the name "Xxxxxx Xxxxx" or
the Xxxx, and to pay all counsel fees and expenses in defending same. It is
understood and agreed that CKI has not authorized or empowered Operator to use
the name "Xxxxxx Xxxxx" or the Xxxx in any capacity other than use in
conformance with the terms of this Agreement (except as may be provided in the
Jeans License) or to sign the name "Xxxxxx Xxxxx" to any
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contracts, documents, bills, checks, drafts, notes, mortgages, bonds, leases,
bills of sales, or any other instruments in writing, or to hold itself out as a
partner, co-venturer or agent of CKI.
(c) While operating the Stores, Operator shall not own or
otherwise have any interest, financial or otherwise, in any other business of a
substantially similar nature, such as retail outlets engaged in the sale of
products of one or several other designers, and shall devote itself exclusively
to the operations of Stores as provided in this Agreement. Employees of Operator
(except for part-time employees and except for certain financial, accounting and
similar "back office" personnel) shall exclusively devote themselves to the
operations hereunder and shall have no involvement in any business of a
substantially similar nature, such as retail outlets of any of Operator's
Affiliates engaged in the sale of products of other designers. Operator will
notify CKI, in writing, in advance in the event any of its Affiliates decides to
enter into an arrangement providing for its engagement by any such designer
(describing the arrangement and the name of the designer and products involved).
Section 10 - Insurance/Security
10. Operator shall procure and maintain in full force and effect at all
times during the term of this Agreement (which may be obtained in conjunction
with a policy or policies maintained under the Jeans License) an insurance
policy or policies protecting Operator, the Xxxxxx Xxxxx Trademark Trust
("CKTT"), CKI, and their respective officers, directors, partners, and
employees, and Xx. Xxxxxx Xxxxx, individually, against any loss, liability, or
expense whatsoever arising from or in connection with the Store or by reason of
Operator's establishment, maintenance, operation, or occupancy of the Store,
whether the same occurs or the cause arises on or off such premises. CKTT, CKI
and Xxxxxx Xxxxx shall be additional
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named insureds in such policy or policies. Such policy or policies shall be
written by a responsible insurance company or companies acceptable to CKI and
shall include general liability insurance with respect to the operations
hereunder and this Agreement, with a limit of liability of not less than U.S.
$5,000,000. In addition, Operator shall adequately insure the premises,
equipment, furnishings, fixtures and inventory in the Store in accordance with
standard full and extended coverage insurance policies. Upon the signing of this
Agreement and annually thereafter, certificates of insurance showing compliance
with the foregoing requirements shall be furnished by Operator to CKI. Such
certificates shall state that the policy or policies will not be canceled or
altered without at least thirty (30) days prior written notice to CKI. The
maintenance of such insurance and the performance by Operator of its obligations
under this paragraph shall not relieve Operator of liability under the
indemnification provisions set forth in Section 9 above.
Section 11 - Xxxx/Copyright
11. (a) Based upon the representations and warranties set forth in
Section 15(a) as to ownership of the Xxxx, Operator acknowledges that the CKTT
is the owner and CKI is a beneficial owner of all right, title and interest in
and to the Xxxx in any form or embodiment thereof; Operator also acknowledges
that CKTT (and CKI, as beneficial owner) is the owner of the goodwill attached
or which shall become attached to the Xxxx in connection with the business and
goods in relation to which the same has been, is or will be used. Sales by
Operator and the operations of the Stores hereunder shall be deemed to have been
made by CKTT for purposes of trademark registration and all uses of the Xxxx by
Operator shall inure to the benefit of CKTT. Any copyright which may be created
in any package, design,
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label, tag, other form of printed material or the like, bearing the Xxxx or
directly relating to the Xxxx shall be the property of CKI. Any proprietary
right and/or interest in and to the fixtures and/or furnishings and/or
decorations used in the Store which comprise a part of the "Xxxxxx Xxxxx"
signature look or the prototype decor or which become identified with the Xxxx
or Xx. Xxxxxx Xxxxx shall be the property of CKI. Operator shall take all
reasonable actions required by CKI to preserve and protect such rights. No
right, title or interest in or to the Xxxx except the right to use the Xxxx as
specified herein on and in connection with the Stores is granted by this
Agreement to Operator. Operator will not at any time do or suffer to be done any
act or thing (to the extent Operator controls any such act or thing) which may
in any way adversely affect any rights of CKTT or CKI in and to the Xxxx or any
registration thereof or which, directly or indirectly, may reduce the value of
the Xxxx or detract from its reputation, image or prestige that of CKTT, CKI, or
Xx. Xxxxxx Xxxxx.
(b) At CKI's request, Operator shall execute any documents
reasonably required by CKTT or CKI to confirm CKTT's ownership or CKI's
beneficial ownership of all rights in and to the Xxxx, in and to any copyright,
and/or in and to any signature fixtures, furnishings or decorations or prototype
decor and the respective rights of CKTT, CKI and Operator pursuant to this
Agreement.
(c) Operator shall never challenge CKTT's ownership of or
CKI's use of or rights in or to, or the validity of the Xxxx or any application
for registration thereof, or any trademark registrations thereof, or any rights
of CKTT and CKI therein.
(d) In the event that Operator learns of any infringement or
imitation of the Xxxx in the Territory or of any use by any person of a
trademark similar to the Xxxx, it shall promptly notify CKI thereof. CKI
thereupon shall take such action as it deems advisable for the protection of its
rights in
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and to the Xxxx, and if requested to do so by CKI, Operator will co-operate with
CKI in all reasonable respects. Such cooperation shall not require Operator to
take any legal action or to bear any costs for the same. Operator's co-operation
(such as providing information) shall be at its own expense. Out-of-pocket costs
of Operator (other than legal expenses) shall be reimbursed by CKI. Legal
actions taken by CKI shall be at CKI's expense. In no event, however, shall CKI
be required to take any action if it deems it inadvisable to do so and Operator
shall have no right to take any action with respect to the Xxxx without CKI's
prior written approval.
(e) Any copyright which may be created in any material or
using or used in connection with the Xxxx and the prototype decor shall be the
property of CKI. Operator shall take all reasonable actions required by CKI to
preserve and protect such rights.
Section 12 - Lease/Liens
12. (a) Operator will not execute a lease, nor execute a renewal of or
extension of any existing lease of the premises in which a Store is currently
located, unless such lease: (i) contains the landlord's consent to the
assignment of such lease (at CKI's option) by the Operator to CKI or its
designees in connection with the termination of this Agreement, (ii) provides
that copies of all notices under any such lease regarding breach or
non-compliance by Operator shall be concurrently sent to CKI, (iii) affords CKI
the opportunity to concurrently effectuate a cure of any such breach or
non-compliance in the event Operator fails to do so, (iv) is not longer than
five years (unless otherwise agreed to by CKI) and in no event longer than the
then current term of this Agreement. Operator shall ensure that the terms of any
lease for a Store are consistent with the provisions of this Agreement.
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(b) Operator shall neither grant a security interest in any of
the Articles, nor mortgage, pledge, grant a security interest in or otherwise
assign as security, sell, transfer, assign, lease, or sublease the premises in
which any Store is located or any part thereof, or any equipment, furnishings,
or fixtures located therein, or any interest which Operator may have in any part
thereof, unless the holder of such interest acknowledges CKI as beneficial owner
and "licensor" of the Xxxx, and provides for any disposition of Articles in
accordance with the terms of this Agreement and in the manner approved by CKI.
Section 13 - Breach/Default
13. (a) If Operator shall fail to make any payment when due CKI
(including payments due in accordance with their terms, but if terms are not
specified then not later than 30 days following the date of invoice derived from
services or expenses referred to in or relating to this Agreement), or any
payment to any licensee, or payment to any authorized user of the Xxxx (or other
trademark of CKI) with respect to its purchase of Articles, as provided
hereunder, (i) Operator agrees to pay interest on such amount at a rate equal to
two percentage points above the prime rate per annum being charged by Chase Bank
as of the close of business on the date such payment becomes due (but not more
than the maximum rate of interest which legally can be charged to corporations)
from and including the date such payment initially becomes due until the date
such amount is paid in full, and (ii) if such default shall continue uncured for
a period of ten days after CKI shall have given Operator written notice of such
default. CKI shall have the right to terminate this Agreement forthwith by
giving written notice thereof to Operator.
(b) If Operator fails to perform any of the terms, conditions,
agreements or covenants in this Agreement affecting or relating in any way to
the Xxxx and/or use which may adversely
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affect the Xxxx or the trademark "CK/Xxxxxx Xxxxx", and such default is
incurable, or if such default is curable but continues uncured for a period of
fifteen (15) days after notice thereof has been given in writing by CKI setting
forth with reasonable specificity such default, CKI may in its sole discretion,
terminate this Agreement forthwith by written notice. If Operator fails to
continuously operate the Stores, and/or any Store remains closed for a period of
more than 21 days (except for fire, destruction or other force majeure events,
inventory, remodeling, relocation or vacation period), or more than five percent
(5%) of the Stores in any jurisdiction remains closed for more than fifteen (15)
days (with the same exceptions), and if such closure shall continue for a period
of fifteen (15) days after notice thereof has been given in writing by CKI, CKI
may in its sole discretion terminate this Agreement forthwith by written notice.
(c) If (i) Operator shall default in respect of the payment of
any amounts owing under any financial obligation, the outstanding principal
amount of which equals or exceeds US $5 million dollars and such default remains
uncured after the relevant grace period, if any, and the creditor thereunder
exercises its rights (whether of termination, acceleration, or otherwise), then
CKI shall have the right to terminate this Agreement by written notice
forthwith; provided, that, if and to the extent that Operator is disputing such
acceleration in good faith and the entire amount of the financial obligation is
provided for in the form of a bond, letter of credit or other reasonably
acceptable third party guarantee, CKI may not terminate this Agreement until
such time as Operator is no longer disputing such acceleration or such bond,
letter of credit or other third party guarantee is no longer in full force and
effect. Operator shall provide prompt written notice to CKI in the event of any
such default and shall advise of the relevant grace period and the action or
intended action of the applicable creditor (including a copy of any notices
received by Operator from such creditor). Notwithstanding the foregoing, in the
event either Operator enters into
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a material debt instrument with a third party commercial lender which provides
for a default threshold higher than US $5 million dollars, then the US $5
million amount of the financial obligation referred to above shall be increased
to such higher amount, provided notice and satisfactory evidence of the same is
delivered to CKI.
(d) If CKI or Operator shall otherwise fail to perform any of
the terms, conditions, agreements or covenants in this Agreement on its part to
be performed, and such default shall continue uncured for a period of 30 days
after notice thereof has been given in writing setting forth with reasonable
specificity such default by the non-defaulting party, the non-defaulting party
may, at its sole election, terminate this Agreement by giving written notice to
the other; provided that to the extent that any such default is curable but not
within such 30 day period and if the defaulting party is diligently proceeding
to cure such default, such default will not constitute grounds for a termination
of this agreement if it is cured within seventy-five (75) days.
(e) In the event Operator files a petition in bankruptcy, or
is adjudicated a bankrupt, or if a petition in bankruptcy is filed against it,
or if it becomes insolvent, or makes an assignment for the benefit of its
creditors, or files a petition or otherwise seeks relief under or pursuant to
any federal or state bankruptcy, insolvency or reorganization statute or
proceeding, or if it discontinues its business, or if a custodian, receiver or
trustee in bankruptcy is appointed for it or a substantial portion of its
business or assets, or it discontinues business operations relating to the
Stores for any reason for more than 60 days (except as referred to above), this
Agreement shall terminate automatically and forthwith.
(f) No assignee for the benefit of creditors, custodian,
receiver, trustee in bankruptcy, sheriff or official charged with taking over
custody of Operator's assets or business shall have
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the right to continue this Agreement or to exploit or in any way use the Xxxx if
this Agreement terminates pursuant to Section 13(e) above.
(g) In the event that, notwithstanding the provisions of
Section 13(d) above, pursuant to the Bankruptcy Code or any amendment or
successor thereto (the "Code"), a trustee in bankruptcy of Operator (the
"Trustee") or Operator as debtor (the "Debtor") is permitted to assume this
Agreement and does so and, thereafter, desires to assign to a third party (i)
this Agreement, (ii) the inventory of Articles covered hereby, or (iii)
Operator's entire interest in the Stores and all property used in connection
therewith which assignment satisfies the requirements of the Code; the Trustee
or Debtor, as the case may be, shall notify CKI of same in writing (the
"Notice"). The giving of the Notice shall be deemed to constitute the grant of
an option to CKI to have this Agreement assigned to it or to its designee for
such consideration, or its equivalent in money, and upon such terms, as are
specified in the Notice, provided, however, that if no specific value is placed
on the inventory described in clause (ii) above or on the interest in the Stores
and the property described in clause (iii) above, the values set forth in
paragraph 13(b) and (c), respectively, shall be deemed specified in such Notice.
The aforesaid option may be exercised in whole or in part only by written notice
given by CKI to the Trustee or Debtor, as the case may be, within 15 days after
CKI's receipt of the Notice from such party or such shorter period of time as
may be required by the court in the bankruptcy proceedings. If CKI fails to give
its notice to such party within the exercise period, such party may complete the
assignment referred to in its Notice, but only to the entity named in the Notice
and upon the terms specified therein. Nothing contained herein shall be deemed
to preclude or impair any rights which CKI may have as a creditor in any
bankruptcy or other proceeding.
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(h) Notwithstanding any termination in accordance with the
foregoing, CKI shall have and hereby reserves all the rights and remedies which
it has, or which are granted to it by operation of law, with respect to the
collection of sums due, earned or payable by Operator pursuant to this
Agreement, to be compensated for damages for breach of this Agreement, and to
enjoin the unlawful or unauthorized use of the Xxxx without the necessity of
posting any bond or proving any actual damages (which injunctive relief may be
sought prior to or in lieu of termination).
(i) Any notice of termination sent pursuant to this Agreement
shall be in writing and shall set forth the reason or reasons in reasonable
detail for the termination and the effective date of such termination.
Section 14 - Termination
14. Upon the expiration or termination of this Agreement:
(a) Operator shall promptly pay all unpaid amounts payable by
Operator to CKI, its licensees, or authorized user of the Xxxx.
(b) All of Operator's rights to open Stores shall terminate
and immediately revert to CKI, but the existing Stores operated by Operator may
continue on a non-exclusive basis through the current terms of their respective
leases (subject to Operator's compliance with all the applicable provisions of
this Agreement including, without limitation, the payment of Royalty on Net
Sales) for a period not longer than six months beyond the effective date of
termination of this Agreement. During such period, Operator will continue to
stock such Stores with Articles consistent with Section 5 hereof and cooperate
with CKI and its licensees and authorized user of the Xxxx as reasonably
requested. If any event occurs
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during such six month period that would permit CKI to terminate this Agreement
(if it had not already been terminated),all of Operator's rights under this
Section 14(b) shall, upon written notice from CKI, terminate and immediately
revert to CKI.
(c) Except as otherwise provided in Section 14(b) above,
Operator shall immediately discontinue the use of all names, trademarks, signs,
structures, and forms of advertising relating to the Stores, the Xxxx, and the
business and products thereof, and will make or cause to be made such changes in
signs, buildings, and structures as CKI may reasonably direct, effectively to
reasonably distinguish the new business from its former appearance. If after
CKI's demand Operator shall fail or omit to make or cause to be made such
changes promptly, then CKI shall have the right to enter upon the premises on
two (2) Business Days' notice, without being guilty of trespass or any other
tort, and to make or cause to be made such changes at the expense of Operator,
which expense Operator shall pay on demand;
(d) Operator shall not thereafter directly or indirectly at
any time or in any manner identify itself or any business as a current or former
Store or as otherwise associated with CKI in connection with the Stores, or use
any colorable imitation thereof as may be protectible under trademark law or any
xxxx substantially identical to or deceptively similar to the Xxxx in any manner
or for any purpose in connection with the Stores, or utilize for any purpose any
trade name, trademark, service xxxx or other commercial symbol or trade dress
that would indicate or suggest that the former Store is connected to or
associated with CKI.
(e) CKI may remove from the Stores any or all Articles. CKI
shall in its discretion either remit to Operator, or shall deduct from amounts
due it by Operator, an amount equal to
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the lesser of (i) fair market value and (ii) the original cost to Operator of
the Articles so removed. Subject to the preceding sentence, Operator may
continue the sale of Articles on a non-exclusive basis as provided in Section 14
(b) above.
(f) Operator shall be deemed to have offered to sell, assign
and transfer to CKI (or at CKI's option, its designee), the Operator's entire
interest in the Stores and all property used in connection therewith (except for
the inventory removed in accordance with Section 14(e) above) for an amount
equal to the lesser of the (i) net depreciated cost to Operator and the (ii)
fair market value as to each such Store. To the extent CKI or its designee
accepts such offer (in whole or in part, as to any one or more Stores), such
interest and property shall be transferred promptly to CKI or to its designee
and payment therefor shall be made to Operator (which payment may be made by
deducting the same from amounts due CKI by Operator). To the extent CKI declines
to accept such offer as to any one or more Stores, Operator may then offer to
sell, assign, and transfer such remaining interest and property with respect to
any such Store to a third party;
(g) Operator shall be deemed to have offered to assign to CKI
or to its designee the leases of the premises in which each Store is located for
the aggregate payment of (i) US $1.00 per Store, in the event this Agreement is
terminated by CKI due to breach or default by Operator, or (ii) fair market
value, in the event of other termination of this Agreement. CKI may accept such
offer as to any one or more Stores by giving notice thereof in writing to
Operator within 30 days after the date of such expiration or termination. In the
event CKI accepts such offer as to assignment of any such lease, that lease
shall be assigned promptly to CKI or to its designee. In the event CKI declines
to accept such
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offer as to assignment of any such lease, Operator may then take such action as
it desires with respect to that lease, and
(h) if applicable, immediately take such action as may be
reasonably required to cancel any registered user agreements relating to its use
of the Xxxx.
(i) In the event CKI, after such termination date, grants a
store license for outlet stores, CKI may transfer any or all rights relating to
any or all such Stores previously covered by this Agreement to its designee (or
designees).
Section 15 - Representations
15. (a) CKI Representations. CKI represents and warrants that it has
full right, power and authority to enter into this Agreement including the right
to grant this license to use the Xxxx contemplated by this Agreement and to
perform all of its obligations hereunder, and that no broker or finder retained
by CKI brought about this transaction. CKTT is the owner of, and CKI is a
beneficial owner of, all of the trademark applications and registrations for the
Xxxx (and other trademarks) with respect to certain products, in the
jurisdictions in the Territory set forth on Schedule 15(a). CKI is not the
beneficial owner of the Xxxx or of applications or registrations therefor for
underwear, sleepwear and certain loungewear. To CKI's knowledge, the use of the
trademark "Xxxxxx Xxxxx" by Operator pursuant to the terms and provisions of
this Agreement does not infringe upon any trademark owned by any third party or
the rights of any third party to use such trademark in the Territory pursuant to
the terms and provisions of this Agreement, subject to the provisions of Section
1(d) above, subject to the preceding sentence and subject to the disclosures set
forth on Schedule 13.2 contained in the Jeans License.
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(b) Operator Representations. Operator represents and warrants
that it has full right, power and authority to enter into this Agreement and to
perform all of its obligations hereunder, and that no broker or finder brought
about this transaction.
Section 16 - Miscellaneous
16. (a) All reports, approvals and notices required or permitted by
this Agreement to be given to a party shall be in writing and shall be deemed to
be duly given if (i) mailed by certified or registered mail, return receipt
requested, (ii) shipped by overnight courier or (iii) sent via facsimile with
fax confirmation of such receipt to the party concerned at the address set forth
below (or at such other address as such party may specify by notice to the
other).
If to CKI:
Xxxxxx Xxxxx, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxx-Xxxxxxx
Tel. No. (000) 000-0000
Fax No. (000) 000-0000
and to:
Xxxxx, Xxxxx & Di Xxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xx Xxxxx, Esq.
Tel. No. (000) 000-0000
Fax No. (000) 000-0000
If to Operator:
Designer Holdings Ltd.
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Outlet Holdings Inc.
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: CEO Xxxxxx Xxxxx
Tel. No. (000) 000-0000
Fax No. (000) 000-0000
With copies to:
Designer Holdings Ltd.
Xxxxxx Xxxxx Jeanswear Company
Attention: Xxxx X. Xxxxx III
Tel. No. (000) 000-0000
Fax No. (000) 000-0000
(b) Operator acknowledges and recognizes: that it has been
granted the license herein and CKI has entered into this Agreement because of
its particular expertise, knowledge, judgement, skill and ability; that it has
substantial and direct responsibilities to perform this Agreement in accordance
with all of the terms contained herein; that CKI is relying on Operator's unique
knowledge, experience and capabilities to perform this Agreement in a specific
manner consistent with the high standards of integrity and quality associated
with CKI and its business; that the granting of the license under this Agreement
creates a relationship of confidence and trust between Operator and CKI; and
that this Agreement is one under which applicable law excuses CKI from accepting
performance from, or rendering performance to, a person or entity other than
Operator, within the meaning of Section 365(c) and (e) of the Bankruptcy Code
(Title 11, U.S. Code) ("Code"). Neither this Agreement nor the license or other
rights granted hereunder may be assigned, sublicensed or otherwise transferred.
Any attempted assignment or transfer, whether voluntary or by operation of law,
directly or indirectly, shall be void and of no force or effect. For purposes
hereof, any transaction resulting in Operator ceasing to be controlled
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by the same parties as those who control the "licensee" under the Jeans License
without the prior written approval of CKI shall be deemed a violative transfer
prohibited hereunder. Notwithstanding the foregoing, Operator may sublicense
this Agreement to an Affiliate provided such Affiliate at all times remains a
wholly-owned subsidiary of Designer Holdings Ltd., a Delaware corporation,
provided that such sublicense agreement and any and all modifications and
amendments thereto are satisfactory in form and substance to CKI. The
substantial beneficial owners of Operator's ultimate parent, together with their
percentage ownership, are as indicated on Schedule 16(b) hereof. Operator shall
notify CKI of any change in the ownership of its capital stock by such
beneficial owners, within three Business Days following such change and shall so
notify CKI of any transaction described in the preceding sentence. Except as
otherwise provided herein, this Agreement shall inure to the benefit of and
shall be binding upon the parties and permitted successors and assigns.
(c) Operator acknowledges that all information relating to the
business and operations of CKI and its Affiliates which it learns during the
term, or has learned during negotiation, of this Agreement (hereinafter referred
to as "CKI's Data"), are valuable property of such entities. Operator
acknowledges the need to preserve the confidentiality and secrecy of CKI's Data
and agrees that, both during the term of this Agreement and after the
termination hereof, it shall not use (except use required to fulfill the
provisions of this Agreement during the term of this Agreement), or disclose
same, except as required by law or except as may be reasonably necessary in
connection with any lawful or governmental proceeding (provided that Operator
shall take reasonable steps to ensure its confidentiality in any such
proceeding), and it shall use all reasonable efforts to ensure that use by it or
by its authorized designees (which use and which designees shall be solely as
necessary for, and in connection with, the manufacture,
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distribution, sale advertising or promotion of Articles or the Stores) shall
preserve in all respects such confidentiality and secrecy. Operator hereby
indemnifies CKI and its Affiliates against any damage of any kind which may be
suffered by any of them as a result of any willful breach by Operator or its
said designees of the provisions of this paragraph. Notwithstanding the
foregoing, Operator's obligation to retain CKI's Data as confidential shall
terminate at such time and to the extent that such becomes available on a
non-confidential basis or becomes public knowledge and in the public domain
through no fault of Operator.
(d) CKI acknowledges that all information relating to the
business and operations of Operator and its Affiliates which it learns during
the term, or has learned during negotiation, of this Agreement (hereinafter
referred to as "Operator's Data"), are valuable property of such entities. CKI
acknowledges the need to preserve the confidentiality and secrecy of Operator's
Data and agrees that , both during the term of this Agreement and after the
termination hereof, it shall not use (except use required to fulfill the
provisions of this Agreement during the term of this Agreement), or disclose
same , except as required by law or except as may be reasonably necessary in
connection with any lawsuit or governmental proceeding (provided that CKI shall
take reasonable steps to ensure its confidentiality in any such proceeding), and
it shall use all reasonable efforts to ensure that use by it or by its
authorized designees shall preserve in all respects such confidentiality and
secrecy. CKI hereby indemnifies Operator against any damage of any kind which
may be suffered by any of this as a result of any willful breach by CKI or its
said designees of the provisions of this paragraph. Notwithstanding the
foregoing, CKI's obligation to retain Operator's Data as confidential shall
terminate at such time and to the extent that such
37
38
becomes available on a non-confidential basis or becomes public knowledge and in
the public domain through no fault of CKI.
(e) This Agreement contains the entire understanding and
agreement between the parties hereto with respect to the subject matter hereof,
supersedes all prior oral or written understandings and agreements relating
thereto, and may not be modified, discharged or terminated orally.
(f) Nothing herein contained shall be construed to constitute
the parties hereto as partners or as joint venturers, or either as agent of the
other, and Operator and CKI shall have no power to obligate or bind the other in
any manner whatsoever. CKI shall have no responsibility for the Operation of the
Stores or personnel or for any decisions that may be made in connection
therewith regardless or whether CKI advised Operator in connection with or
approved any of the same. In no event will this Agreement, or the operation of
any Store hereunder by Operator be deemed to constitute doing business at the
location of any such Store by CKI.
(g) This Agreement shall be considered as having been entered
into the State of New York and shall be construed and interpreted in accordance
with the laws of that state applicable to agreements made and to be performed
therein. However, disputes regarding the Xxxx shall be resolved in accordance
with the Federal trademark laws and related laws, statutes, rules and
regulations of the United States unless there are no Federal laws, statutes,
rules or regulations dispositive of such a dispute in which event such dispute
shall be resolved in accordance with the laws of the State of New York. Each
party also acknowledges that the choice of any law, other than the law of New
York, to govern the construction and enforcement of this contract including its
provisions for term, termination and renewal would be contrary to their
expectations and deprive them of the stability, predictability and uniformity of
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39
interpretation and enforcement that they seek to establish by this Agreement.
The parties agree that the law of New York is the most appropriate choice of law
because the Agreement was negotiated and executed in New York City, Operator is
headquartered in New York and New York County is the most mutually convenient
forum for the resolution of any disputes that may arise under or in connection
with this Agreement.
(h) No waiver by either party, whether express or implied, of
any provision of this Agreement, or of any breach or default, shall constitute a
continuing waiver of such provision or of any other provision of this Agreement.
Acceptance of payments by CKI shall not be deemed a waiver of any violation of
or default in any of the provisions of this Agreement by Operator.
17. If any provision or any portion of any provision of this Agreement
shall be held to be void or unenforceable, the remaining provisions and the
remaining portion of any provision of this Agreement held void or unenforceable
in part shall continue in full force and effect.
18. Each party acknowledges that the provisions of this Agreement on
the governing law, jurisdiction and venue, term, termination and renewal are
material terms of the Agreement that affect the financial, economic, and other
consideration provided by each party to the Agreement and that neither party
would have entered into this Agreement absent those provisions and unless they
were enforceable according to their terms.
19. Operator, Xxxxxx Xxxxx Jeanswear Company ("CKJC") and Designer
Holdings Ltd. ("DSH") agree that at all times during the term of this Agreement
Operator shall be and remain a wholly-owned subsidiary of DSH. Furthermore,
simultaneously with execution of this Agreement, each of CKJC and
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40
DSH is executing a guarantee of Operator's obligations in the form attached
hereto as Exhibit 19(A) or 19(B).
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement the day and year first above written.
XXXXXX XXXXX, INC.
By: ____________________________
OUTLET HOLDINGS INC.
By: ____________________________
40
41
Agreed to as to Section 19:
XXXXXX XXXXX JEANSWEAR COMPANY
By: ____________________________
DESIGNER HOLDINGS LTD.
By: ____________________________
42
Schedule 1(a)
Articles
Exclusive Articles:
Womens and Girls CK/Xxxxxx Xxxxx Jeans
Mens and Boys CK/Xxxxxx Xxxxx Jeans
Womens and Girls CK/Xxxxxx Xxxxx Khakis
Mens and Boys CK/Xxxxxx Xxxxx Khakis
Womens Sheer Hosiery - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Womens Socks - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Mens Socks - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Womens Xxxxxx Xxxxx Collection Shoes
Mens Xxxxxx Xxxxx Collection Shoes
Womens CK/Xxxxxx Xxxxx Belts
Mens Leather Accessories - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Mens and Womens Xxxxxx Xxxxx Collection Eyewear
Womens Xxxxxx Xxxxx Collection Scarves
Mens Xxxxxx Xxxxx Collection Scarves
Womens Xxxxxx Xxxxx Swimwear
Mens and Womens CK/Xxxxxx Xxxxx Footwear and Womens CK/Xxxxxx Xxxxx Handbags and
Accessories
Non-Exclusive Articles:
Women's Xxxxxx Xxxxx Collection
Mens Xxxxxx Xxxxx Collection
Mens CK/Xxxxxx Xxxxx Bridge
Womens CK/Xxxxxx Xxxxx Bridge
Mens CK/Xxxxxx Xxxxx Clothing
Xxxxxx Xxxxx Home Collection
Mens Underwear - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Womens Underwear - Xxxxxx Xxxxx and CK/Xxxxxx Xxxxx
Fragrances under the "Xxxxxx Xxxxx" license
or such other lines of Non-Exclusive Articles, any or all of which only as may
be approved by CKI from time to time.
43
INDEX
Definitions................................................... 2
1. Grant................................................ 3
2. Term................................................. 6
3. Decor/Location/Operations............................ 7
4. Approval Standard.................................... 10
5. Purchases............................................ 10
6. Royalty; Minimum Guaranteed Royalty.................. 13
7. Advertising/Promotion................................ 16
8. Personnel/Standards.................................. 18
9. Financial Requirements............................... 20
10. Insurance/Security................................... 22
11. Xxxx/Copyright....................................... 23
12. Lease/Liens.......................................... 25
13. Breach/Default....................................... 26
14. Termination.......................................... 30
15. Representations...................................... 33
16. Miscellaneous........................................ 33
Exhibit A Xxxx
Exhibit 3(a) Store Locations
Exhibit 3(b) Visual Standards
Exhibit 5(a)(iv) Purchase Rights
Exhibit 19(A) CKJC Guarantee
Exhibit 19(B) DHI Guarantee
Schedule 1(a) Articles
Schedule 2(c) Minimum Net Sales Threshold -- Renewal Contingencies
Schedule 16(b) Substantial Shareholders of Parent
44
Schedule 2(c)
Minimum Net Sales Thresholds (U.S., Canada, Mexico) -- Renewal Contingencies
Year (Annual Period) U.S. $
------------------------ ------
2003 7 The greater of (i) 100 million and (ii) 2
million multiplied by the number of Stores
in existence during such Annual Period.
2015 19 The minimum net sales threshold for the
prior term, multiplied by a fraction, the
numerator of which is the CPI (all Cities
- All Urban Consumers) for December of the
respective Annual Period and the
denominator o/*f which is the CPI (all
Cities - all Urban Consumers) for December
of the 18th Annual Period.
2025 29 The minimum net sales threshold for the
prior term, multiplied by a fraction, the
numerator of which is the CPI (all Cities
- All Urban Consumers) for December of the
respective Annual Period and the
denominator of which is the CPI (all
Cities - all Urban Consumers) for December
of the 28th Annual Period.
2035 39 The minimum net sales threshold for the
prior term, multiplied by a fraction, the
numerator of which is the CPI (all Cities
- All Urban Consumers) for December of the
respective Annual Period and the
denominator of which is the CPI (all
Cities - all Urban Consumers) for December
of the 38th Annual Period.
45
Schedule 16(b)
Substantial Shareholders of Parent
46
Exhibit 5(a)(iv)
47
X. Xxxxx-Xxxxxxx Disk 71
Outlet Stores License
24 October 1996
Draft 4
STORE LICENSE AGREEMENT
BETWEEN
XXXXXX XXXXX, INC.
and
OUTLET HOLDINGS INC.
48
Exhibit A
49
Exhibit 19(a)
GUARANTEE
In order to induce Xxxxxx Xxxxx, Inc. ("CKI") to enter into the license
agreement dated as of the date hereof (the "Agreement") with Outlet Holdings
Inc. ("Operator") which is being executed simultaneously herewith and in
consideration of the covenants and promises made by CKI in the Agreement, the
undersigned (the "Guarantor"), being an affiliate of Operator, unconditionally
guarantees (i) that Operator will perform and observe each and every agreement,
covenant, representation, warranty, term and condition of the Agreement to be
performed or observed by Operator, and upon Operator's failure to do so, the
Guarantor will promptly perform and cause the same promptly to be performed and
observed and (ii) the due and punctual payment of all sums of whatever character
which may become payable by Operator pursuant to the Agreement will be paid by
the Operator (including amounts which would be paid but for the operation of the
automatic stay under Section 362(a) of the Bankruptcy Code, 11 U.S.C 362(a) or
any other provision of bankruptcy law) (clauses (i) and (ii) referred to as the
"Guaranteed Obligations"). If for any reason whatsoever any sum hereinabove
referred to, or any part thereof, shall not be paid promptly when due, the
Guarantor will immediately pay the same regardless of whether CKI has taken
steps to enforce any rights against Operator to collect any of said sums and
regardless of any other condition of contingency.
Notwithstanding anything to the contrary contained herein, to the
extent this Guarantee relates to the payment of sums due to CKI under the
Agreement, it is a Guarantee of payment and not of collection and a continuing
guarantee which will remain in full force and effect and be binding upon the
undersigned until payment in full by Operator to CKI of all sums due pursuant to
the Agreement.
The representation, warranties, obligations, covenants, agreements, and
duties of the Guarantor under this Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following
with respect to the Agreement although without notice to or the further consent
of the Guarantor: (i) the waiver by Operator of any agreement, covenant,
warranty, representation, term or condition contained in the Agreement; (ii) the
extension, in whole or in part, of the time for the payment by Operator of any
sums owing or payable under the Agreement, or of the time or performance by
Operator of any of its other obligations under or arising out of the Agreement;
(iii) the modification or amendment (whether material or otherwise) of any of
the obligations of Operator under the Agreement; (iv) any failure, omission,
delay or lack on the part of CKI to enforce, assert or exercise any right, power
or remedy conferred on CKI in the Agreement or otherwise; (v) any discharge of
Operator from any of the Guaranteed Obligations in a bankruptcy or similar
proceeding.
No failure on the part of CKI to exercise, and no delay in the exercise
of, any right, remedy or power hereunder will operate as covenant, term or
condition under the Agreement or in the payment of any sums payable by it
thereunder.
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This Guarantee shall terminate and be of no further force and effect on
the later of (x) the payment in full of all amounts outstanding under the
Agreement and (y) the termination of the Agreement.
This Guarantee will be construed and enforced under the laws of the
State of New York applicable to agreements made and to be performed in said
state.
The Guarantee cannot be changed, discharged or terminated orally.
The Guarantor hereby waives acceptance of this Guarantee.
XXXXXX XXXXX JEANSWEAR COMPANY
Dated:
New York, NY By: ____________________________
Name:
Title:
51
Exhibit 19(b)
GUARANTEE
In order to induce Xxxxxx Xxxxx, Inc. ("CKI") to enter into the license
agreement dated as of the date hereof (the "Agreement") with Outlet Holdings
Inc. ("Operator") which is being executed simultaneously herewith and in
consideration of the covenants and promises made by CKI in the Agreement, the
undersigned (the "Guarantor"), being the sole shareholder of Operator,
unconditionally guarantees (i) that Operator will perform and observe each and
every agreement, covenant, representation, warranty, term and condition of the
Agreement to be performed or observed by Operator, and upon Operator's failure
to do so, the Guarantor will promptly perform and cause the same promptly to be
performed and observed and (ii) the due and punctual payment of all sums of
whatever character which may become payable by Operator pursuant to the
Agreement will be paid by the Operator (including amounts which would be paid
but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C 362(a) or any other provision of bankruptcy law)
(clauses (i) and (ii) referred to as the "Guaranteed Obligations"). If for any
reason whatsoever any sum hereinabove referred to, or any part thereof, shall
not be paid promptly when due, the Guarantor will immediately pay the same
regardless of whether CKI has taken steps to enforce any rights against Operator
to collect any of said sums and regardless of any other condition of
contingency.
Notwithstanding anything to the contrary contained herein, to the
extent this Guarantee relates to the payment of sums due to CKI under the
Agreement, it is a Guarantee of payment and not of collection and a continuing
guarantee which will remain in full force and effect and be binding upon the
undersigned until payment in full by Operator to CKI of all sums due pursuant to
the Agreement.
The representation, warranties, obligations, covenants, agreements, and
duties of the Guarantor under this Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following
with respect to the Agreement although without notice to or the further consent
of the Guarantor: (i) the waiver by Operator of any agreement, covenant,
warranty, representation, term or condition contained in the Agreement; (ii) the
extension, in whole or in part, of the time for the payment by Operator of any
sums owing or payable under the Agreement, or of the time or performance by
Operator of any of its other obligations under or arising out of the Agreement;
(iii) the modification or amendment (whether material or otherwise) of any of
the obligations of Operator under the Agreement; (iv) any failure, omission,
delay or lack on the part of CKI to enforce, assert or exercise any right, power
or remedy conferred on CKI in the Agreement or otherwise; (v) any discharge of
Operator from any of the Guaranteed Obligations in a bankruptcy or similar
proceeding.
52
No failure on the part of CKI to exercise, and no delay in the exercise
of, any right, remedy or power hereunder will operate as covenant, term or
condition under the Agreement or in the payment of any sums payable by it
thereunder.
This Guarantee shall terminate and be of no further force and effect on
the later of (x) the payment in full of all amounts outstanding under the
Agreement and (y) the termination of the Agreement.
This Guarantee will be construed and enforced under the laws of the
State of New York applicable to agreements made and to be performed in said
state.
The Guarantee cannot be changed, discharged or terminated orally.
The Guarantor hereby waives acceptance of this Guarantee.
DESIGNER HOLDINGS LTD.
Dated:
New York, NY By: ____________________________
Name:
Title:
