THIS LICENSE AGREEMENT (the "AGREEMENT") made as of the 6th day of June,
2005 (the "EFFECTIVE DATE"), by and between XXXXXXX XXXX PRODUCTIONS (LIC),
INC., a Bahamas corporation with offices at 00 Xxxxxxxxx Xxxxx, Xxxxxxxx
Xxxxxxxxx, P.O. Box SS-5212, Nassau, Bahamas ("LICENSOR"), and XXXXXXX CHAUS,
INC., a New York corporation with offices at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("LICENSEE").
WHEREAS, Licensor together with its parents and their subsidiaries,
divisions and affiliates (collectively, the "LICENSOR GROUP") is the exclusive
owner of all right, title and interest in and to the world-famous trade name,
trademark and service xxxx as are now or as may be hereinafter designated by
Licensor as the Licensed Xxxx (as such term is defined in Paragraph 1.1);
WHEREAS, Licensor and the Licensed Xxxx have established a distinctive
reputation for excellence with the public as a leading fashion firm
manufacturing and selling merchandise (directly and through licensees) of the
highest quality, so that the preservation of the reputation and prestige of
Licensor and the Licensed Xxxx are of paramount importance.
WHEREAS, it is the desire and intention of the parties that Licensee be
permitted to use the Licensed Xxxx throughout the Territory (as such term is
defined below) on certain Products (as such term is defined below);
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and other good and valuable consideration, Licensor and Licensee do
hereby respectively grant, covenant and agree as follows:
1. GRANT OF LICENSE
1.1 (a) Licensor hereby grants to Licensee, during the Term (as such term
is defined in Paragraph 2.1), an exclusive license in the United States (defined
to include the Continental United States, Hawaii, Alaska, and Puerto Rico) (the
"TERRITORY") to manufacture and distribute at wholesale Women's Sportswear
("PRODUCTS") bearing the xxxx XXXXXXX XXXX REACTION (the "LICENSED XXXX" or
"BRAND").
WOMEN'S SPORTSWEAR shall consist of the following products in knit and woven
fabrications (including denim): dresses, suits, sport jackets, blazers, jackets,
coats, blouses, overalls, shirts (including T-shirts for use as sportswear),
vests, sweaters, skirts, pants, shorts, jeans and similar approved products. All
Products under this License Agreement shall be limited for sale solely as part
of a better sportswear or better petite sportswear collection. The definition of
"Products" shall not include any other items, specifically not (1) formalwear;
(2) contemporary sportswear; (3) women's classification products, including but
not limited to classification dresses, except as offered for sale in better
sportswear collections; or (4) products to be sold as part of any other
specialty collection, including but not limited to swimwear, intimate apparel,
sleepwear, scarves and other neckwear, outerwear or activewear (including
sweatshirts, sweatpants, golf
1
apparel or other athletic clothing). Licensee will be permitted to manufacture,
distribute and sell certain women's classification or non-sportswear collection
items (e.g. outerwear, activewear, etc.) with Licensor approval consistent with
items found in other better sportswear collections by similarly situated
designers. Such sales shall be restricted to those channels of distribution that
market (i.e. merchandise) such Products in sportswear collection departments and
not into (i) the relevant classification departments or (ii) specialty stores.
The introduction of large and/or maternity sizes shall be subject to Licensor's
prior approval.
(b) The definition of Products shall be limited only to goods marketed
for sale solely in the women's better sportswear or better petite sportswear
department of approved department stores and approved specialty retailers
("APPROVED STORES"). The items within the definition of Products, which are
manufactured, distributed and sold by Licensee using the Licensed Xxxx pursuant
to this Agreement, shall be referred to collectively herein as "ARTICLES."
Licensor hereby grants to Licensee, during the Term, a non-exclusive license in
the Territory to use the Licensed Xxxx in the promotion, marketing and
advertising of the Products in connection with the rights granted herein and in
accordance with the terms of this Agreement. For the sake of clarity, the phrase
"women's better sportswear" is used as a term of art having specific meaning in
the retail apparel business to contrast with other departments in department
stores (e.g. "contemporary sportswear", "juniors' sportswear", "dresses,"
"premium denim", etc.). Licensor specifically reserves its rights with respect
to these other departments and to all other goods bearing the Licensed Xxxx or
bearing any other trademark except the Licensed Xxxx. Such Products may be
substantially similar to Articles in styling, fabrication, color and the like
and may be sold to the same customers to which Articles are sold. It is
understood and agreed, however, that Licensor shall not offer, nor grant the
rights for others to offer, for sale such Products in the women's better
sportswear departments of department stores under the Licensed Xxxx. In the
event "better sportswear" ceases to exist as a specific department within
certain department stores, Licensor and Licensee shall confer in good faith
regarding the department, departments and/or doors in which Licensee shall
exclusively sell the Articles in such stores.
(c) In the event Licensor determines to grant a license to * * *
Licensor will first negotiate in good faith with Licensee with respect to such
license. Within * days of receipt of notification of Licensor's intent to
consider such opportunity, Licensee shall present Licensor with a Business Plan
(as such term is defined below) with respect to * which will include setting
forth the * * for such proposed products bearing the relevant Licensed Xxxx(s).
The parties shall negotiate in good faith with respect to such * * * * * *. If
the parties cannot reach an agreement within * days of receipt of such Business
Plan, Licensor may then negotiate with and enter into an agreement with a third
party regard to such agreement, provided, however,
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that * * *.
(d) In the event Licensor determines to grant a license to use the
Licensed Xxxx in connection solely with the manufacture and distribution of
Articles at wholesale in * Licensor will first negotiate in good faith with
Licensee with respect to such license. Within * days of receipt of notification
of Licensor's intent to consider such opportunity, Licensee shall present
Licensor with a Business Plan (as such term is defined below) with respect to
such license which will include setting forth the * for the Articles. The
parties shall negotiate in good faith with respect to * * *.
If the parties cannot reach an agreement within * * * days, Licensor
may then negotiate with and enter into an agreement with a third party regard to
such agreement, provided, however, that during the initial Term (as defined
below), * * *.
(e) It is expected that the Articles will not typically be sold in the
same doors where Products bearing the "*" trademark are sold. In the doors
where the two lines overlap, * * * *.
1.2 All Articles shall bear a Licensed Xxxx and, except as explicitly
provided hereunder, no Articles shall be sold or otherwise distributed by
Licensee under any xxxx other than a Licensed Xxxx. Licensee shall not use the
Licensed Xxxx together with any other trademarks or name of any other products
(other than Ancillary Branding, as defined in this Paragraph 1.2). Licensor
reserves all rights to the Licensed Xxxx and Ancillary Branding, except as
specifically granted herein to Licensee. Licensor may make such changes as
Licensor deems necessary to the Licensed Xxxx, including without limitation, to
the use, style or appearance of the Licensed Xxxx (for example, REACTION XXXXXXX
XXXX). Additionally, Licensor may, from time to time, provide to Licensee for
use in connection with the marketing, promotion, sale and distribution of
Articles, logotypes, designs or other materials for use on or with the Articles,
including such materials or taglines that may be used separately from the
Licensed Xxxx in labeling, hang tags, displays and similar promotional materials
(collectively, "ANCILLARY BRANDING"). Licensor and Licensee shall work together
in the design and selection of Ancillary Branding, provided, however, that
Licensor shall have ultimate approval rights over such Ancillary Branding.
Licensor shall notify Licensee if it elects to change the form of a Licensed
Xxxx or adopts or revises Ancillary Branding and Licensee shall effect the
change as promptly as commercially practicable thereafter and, in any event, no
later than for the next seasonal collection after the seasonal collection then
in production. If, after the change has been effected, Licensee has an inventory
of Articles bearing the previous form of such Licensed Xxxx or Ancillary
Branding, Licensee may sell
3
off such Articles in the ordinary course pursuant to this Agreement. Also, if,
after the change has been effected, Licensee has an inventory of business
documents bearing the previous form of the Licensed Xxxx or Ancillary Branding,
Licensee may use them up in the ordinary course unless otherwise notified by
Licensor.
1.3 Licensee shall not sell Articles to any customer unless such customer
has been pre-approved by Licensor pursuant to the provisions of Section 5. Upon
execution of this Agreement, Licensee shall provide Licensor a list of proposed
customers organized by brand for pre-approval. During the Term, Licensee may
submit additional customers and Licensor may approve such additional customers
in its sole discretion pursuant to the provisions of Paragraph 4.5 below.
1.4 Licensee acknowledges that the rights granted hereunder do not include
the right to operate a retail or outlet store under any Licensed Xxxx or any
variation or simulation thereof; nor may Licensee, its parents or any of their
subsidiaries, affiliates or principals (collectively, the "LICENSEE GROUP") sell
Articles at retail.
1.5 Licensee shall use commercially reasonable efforts to exploit the
rights herein granted throughout the Territory and, subject to the terms of this
Agreement, to sell Articles consistent with the high standards and prestige
represented by the Licensed Xxxx.
1.6 (a) The license granted hereunder shall expressly exclude (i) mail
order catalogs and other direct mail materials ("DIRECT MAIL"), (ii) Web sites
or otherwise through the World Wide Web, Internet, or other global computer
information network (together, the "INTERNET"), (iii) any electronic sales
vehicles (such as television marketing or interactive television), (iv) retail
stores and outlet stores operating under the Licensed Xxxx (or other marks owned
or controlled by Licensor) located within and without the Territory, (v)
uniforms, (vi) bases and exchanges of the Armed Forces of any country, (vii)
premium and corporate promotional or corporate gift programs and (viii)
duty-free channels (including DFS) (collectively, the "RESERVED CHANNELS").
(b) Licensee shall not, nor shall it authorize any of its customers to
(i) offer Articles for sale through the Reserved Channels or (ii) advertise,
market, promote, publicize or otherwise exploit Articles or any Licensed Xxxx or
otherwise use any Licensed Xxxx through the Reserved Channels or together with
any other trademarks or name or any other products. From time to time, Licensee
may propose specific opportunities to exploit such channels on a non-exclusive
basis. Licensor may approve or disapprove such proposals in its sole discretion.
Licensor may subsequently withdraw its approval of such proposal, and Licensee
shall use its best efforts to remove the Articles from such vehicle.
(c) Licensee acknowledges that Licensor Group may market and sell
Products bearing the Licensed Xxxx not originating from Licensee to consumers in
the Territory through the Reserved Channels and such sales shall not be deemed a
breach of Licensee's exclusivity rights hereunder. Further, Licensee
acknowledges that Licensor
4
Group may, directly or through another licensee, purchase Products bearing the
Licensed Xxxx from third party contractors for sale (i) outside the Territory or
(ii) inside the Territory through the Reserved Channels. To the extent
commercially practicable, Licensor will endeavor to purchase such Products from
Licensee. To the extent that Licensor Group seeks to purchase and Licensee
agrees to sell Articles to Licensor or its affiliates for resale in the Reserved
Channels, the price for such Articles shall be mutually agreed upon and
Paragraph 19.1(a) below shall apply only in the event Licensor is placing the
purchase order for such Articles at the time Licensee's other customers are
placing orders.
1.7 (a) In no event shall Licensee sell Articles or cause Articles to be
sold: (i) to customers for sale outside the Territory; (ii) through the Reserved
Channels (except as provided in Paragraph 1.6(b)); or (iii) to a customer if
Licensee has reason to believe that such customer may sell Articles to customers
located outside the Territory or that such customer may divert Articles,
including by reason of a previous history of diversion of Articles, of other
Products or of any other products, or if Licensor provides notice to Licensee
that it has reason to believe such customer may divert Articles. (To "divert"
means to resell or otherwise transfer goods from approved distribution doors
other than to consumers.)
(b) Licensor and Licensee acknowledge and agree that it is in their
mutual interests to take reasonable and appropriate steps to prevent diversion
of Products bearing the Licensed Marks, and shall cooperate to establish coding,
marking or other, similar standards for Articles, consistent with industry
practices, in order to monitor and trace the source of any diversion activities.
Licensee shall cooperate reasonably with Licensor and its affiliates in the
implementation of their anti-diversion and anti-counterfeiting measures,
contributing to enforcement efforts on a pro rata basis. Licensor shall attempt
in good faith to minimize enforcement costs consistent with the levels of
diverted and/or counterfeit products bearing the Licensed Marks actually
detected in the Territory, and whenever possible, Licensor will provide
reasonable notice and request Licensee approval, not to be unreasonably
withheld, before incurring costs pursuant to this Paragraph 1.7(b). Any amounts
recovered by the parties in connection with an enforcement action provided for
in this Paragraph 1.7(b) shall be applied in accordance with Paragraph 11.5
below. Licensor covenants and agrees that it shall require its other licensees
to take steps to prevent diversion of Products bearing the Licensed Xxxx,
including by way of example and not limitation, diversion of Products into the
Territory that are meant for sale outside the Territory, consistent with the
obligations upon Licensee hereunder.
1.8 (a) Nothing herein shall be deemed to prevent the Licensor Group or any
of its other licensees or third party contractors from manufacturing Products
bearing the Licensed Xxxx in the Territory for distribution outside the
Territory or otherwise in keeping with the terms herein, provided that such use
is consistent with Licensor's obligations under Paragraph 1.7(b).
5
(b) Licensee acknowledges that nothing herein grants Licensee any
rights, including without limitation, the right of first refusal, to use any
Licensed Xxxx outside the Territory other than * as set forth in Paragraph 1.1
(d) and the Licensor Group may, on its own or through agreements with other
licensees or third parties, use any Licensed Xxxx for any purpose, including in
connection with the manufacture, distribution and sale of Products, outside the
Territory, provided that such use is consistent with Licensor's obligations
under Paragraph 1.7(b). Upon request by Licensor, Licensee shall cooperate with
the Licensor Group (or such licensee or third party as it may designate) in
connection therewith and, specifically, shall provide the Licensor Group for
itself or on behalf of its licensee (but only in instances where such licensee
is restricted by law from importing Licensee's Articles into its territory) or
designated third party, without charge, with such design and styling
information, including technical manufacturing specifications, as may be
necessary or appropriate to enable the production of Products consistent with
Articles produced by Licensee, provided that such use is consistent with
Licensor's obligations under Paragraph 1.7(b). In connection therewith or when
otherwise requested by Licensor, Licensee shall provide the Licensor Group for
itself or on behalf of its licensee (but only in instances where such licensee
is restricted by law from importing Licensee's Articles into its territory) or
designated third party with disk copies of the graded patterns and markers for
the Articles which any such affiliate or third party desires to include in its
collections and copies of such other materials as may be necessary for the
production of those Products. With respect solely to these items, Licensee's
cost thereof shall be reimbursed to Licensee. In the event Licensor requests
that Licensee include in its collection Products designed by a third party
licensee of Licensor, Licensor shall provide Licensee with any available disk
copies of the graded patterns and markers for such Products and copies of such
other materials as may be available for the production of those Products.
1.9 Licensee acknowledges that the Licensor Group and/or its licensees may
purchase Articles bearing the Licensed Xxxx from Licensee or Products bearing
the Licensed Xxxx from third parties for use as promotional items in conjunction
with the sale or marketing inside and/or outside the Territory of items not
constituting Articles (e.g. "gift with purchase").
2. TERM
2.1 The term of this Agreement shall commence on the Effective Date and,
unless otherwise terminated as provided herein, shall continue through December
31, 2010 (the "TERM"). The period commencing on the Effective Date and ending on
December 31, 2006 and each twelve (12) month calendar year commencing on each
January 1st thereafter during the Term shall constitute and shall be referred to
herein as an "ANNUAL PERIOD."
2.2 (a) Provided that Net Sales (as such term is defined in Paragraph
8.1(c) below) in the * Annual Period are at least the greater of: (i) * * or
(ii) * of the Guaranteed Minimum Net Sales (as such term is defined in Section 7
below) in the * Annual Period, and
6
provided further, that Licensee is not in default beyond the expiration of any
applicable grace or cure period of the terms, covenants and conditions of this
Agreement, Licensee shall have the option to extend the Term for an additional
period of three (3) years commencing January 1, 2011 and terminating December
31, 2013 (the "RENEWAL OPTION"). Licensee may exercise the Renewal Option by
giving written notice that shall be received by Licensor no later than March 1,
2010. Time is of the essence with regard to the provisions of this Paragraph
2.2. In all other respects, all of the terms, covenants and provisions of this
Agreement shall remain in full force and effect during the periods covered by
the Renewal Option.
(b) The effectiveness of any exercise of the Renewal Option is
expressly contingent upon Licensee achieving * * * * * * (as set forth below)
and not otherwise being in material default beyond the expiration of any
applicable grace or cure period of the terms, covenants and conditions of this
Agreement at the end of the fifth Annual Period of this Agreement.
(c) Absent an agreement by and between the parties, Licensee shall
have no right to renew this Agreement beyond December 31, 2013.
3 DESIGN PROCESS
3.1 (a) During each Annual Period, and subject to the Approval procedures
set forth in Section 5, Licensee shall manufacture, distribute and sell at least
four collections of Articles with additional designs to be injected in the line
during the season as required by market conditions upon Licensor's request.
(b) No later than September 15th of an Annual Period or at such other
time (s) as the parties may mutually agree, Licensee shall submit to Licensor a
merchandising plan (the "MERCHANDISING PLAN") covering the subsequent two
seasons, the form of which will be provided by Licensor. Each Merchandising Plan
shall cover all Product classifications by style, by color, by volume, by
calendar rollout, by distribution door level (i.e. "A", "B" and "C" doors) and
such other information as Licensor may reasonably request. Licensee shall work
with Licensor in developing a buying matrix from the Merchandising Plan.
(c) No later than September 15th of each Annual Period during the
Term, Licensee shall prepare and submit to Licensor a two-year business plan
(the "BUSINESS PLAN"), the form of which is attached hereto and made a part
hereof as "EXHIBIT 2" as such form may be amended by Licensor from time to time
and provided to Licensee. Each Business Plan shall cover the upcoming two Annual
Periods (including, as applicable, Annual Periods within the Renewal Option or
"potential" Annual Periods after the end of the then Term, even if this
Agreement has no renewal) and shall include any other information that Licensor
may reasonably request.
7
(d) No later than September 15th of each Annual Period during the
Term, the parties shall jointly develop an annual marketing, advertising and
promotion plan (the "MARKETING PLAN") covering the upcoming Annual Period. The
Marketing Plan shall include all expenditures by medium and any other
information that Licensor may reasonably request, all by Licensed Xxxx and by
jurisdiction. Licensee shall also submit to Licensor by the end of February and
July of each Annual Period, a complete copy of its marketing, advertising and
promotional expenditures for the preceding six (6) months along with copies of
supporting documentation for the foregoing, such as invoices and tear sheets.
Licensee shall submit the Merchandising Plan, Marketing Plan and Business
Plan for the initial Annual Period promptly following execution of this
Agreement. No Merchandising Plan, Business Plan or Marketing Plan shall be
implemented without Licensor's prior written approval, pursuant to the Approval
provisions set forth in Section 5. Licensee shall at any time as requested by
Licensor promptly: (i) update any Merchandising Plan or Business Plan and (ii)
provide assistance in the update of any Marketing Plan.
(e) Licensee shall appoint and maintain at all times during the Term,
a divisional president and at least one vice president dedicated to the Articles
and to Licensee's operations pursuant to this Agreement. Said personnel shall
operate in conjunction with Licensor to facilitate the design, production,
advertising and distribution of Articles. At all times the staffing must be
sufficient to support the business properly and to endeavor to maximize sales by
Brand. All personnel required pursuant to this Paragraph 3.1(e) shall be
employees of Licensee but shall be subject to Licensor's approval prior to
appointment and at all times thereafter during the Term. In the event Licensor
shall revoke or withdraw said approval at any time during the term hereof,
Licensor and Licensee shall consult regarding the designation of a replacement
to perform such functions, subject to the provisions of this Paragraph 3.1(e).
3.2 Prior to each collection, Licensee shall submit to Licensor materials,
designs, sketches, colors, samples, and ideas for use in connection with
Articles for approval pursuant to the terms of Section 5. Any and all such items
shall be approved by Licensor in writing using the approval form attached hereto
as "EXHIBIT 2", which form may be amended from time to time (the "APPROVAL
FORM"). Licensee shall receive any such approval by Licensor prior to the use of
any of such items.
3.3 Licensor may, in its sole discretion, prepare and deliver to Licensee
sketches and ideas for Articles. In connection with such design direction,
Licensor may, in its sole discretion, purchase design samples. Licensee shall
reimburse Licensor for any such design samples purchased by Licensor and
provided to Licensee, provided such purchases shall * * * in any Annual Period
without Licensee's prior written approval. All designs created or approved by
Licensor shall be and remain Licensor's sole and exclusive property. Licensee
shall use all sketches and other materials provided by or approved by Licensor
solely in connection with the manufacture, distribution and sale of Articles
pursuant to this Agreement.
8
Licensor may use and permit others to use any such sketches and other material,
provided that such use does not conflict with any rights granted to Licensee
hereunder.
3.4 Licensee shall be responsible for the production of all samples as well
as for the production of Articles and Licensee shall bear all costs in
connection therewith.
3.5 Licensor hereby acknowledges that Licensee is a party to other
licensing arrangements with other parties for the manufacture and distribution
of products with labels and trademarks other than the Licensed Xxxx.
Consequently:
(a) As of the date hereof, Licensee has provided Licensor with a
complete list of all such trademarks and existing businesses, including the
names of all such parties and a complete description of the product lines
thereunder, such list being attached hereto as EXHIBIT 3.
(b) During the Term, in the event the Licensee Group intends to enter
into any other * * * ("PROPOSED TRANSACTION") * * * * * * Licensee shall
promptly notify Licensor in writing of such arrangement (the "TRANSACTION
NOTIFICATION") to the extent such notice is permitted by law, it being
understood that Licensor may be required to enter into a confidentiality
agreement with respect to such notice. Such notice shall include the * * *. In
the event that the Proposed Transaction is for: * * * * * Licensee and Licensor
agree to * * *. Goods shall be deemed * for purposes of (a), (b) and (c) above
if they * * * * *. In the event the parties do not reach agreement and Licensee
Group nevertheless proceeds with the * * Licensor may, in its sole discretion,
elect to * *.
3.6 The parties acknowledge and agree that the Licensor Group (or any of
them) is and will be in the future a party to other licensing arrangements with
other parties for the manufacture and distribution of merchandise other than the
Products under the Licensed Xxxx. Consequently, Licensee shall, to the fullest
extent possible, avoid any conflicts between or among the definitions of any
apparel, accessories or other articles licensed by Licensor under such third
party agreements, including the Products
9
hereunder. In the event of a conflict between or among the definitions of
apparel or accessories licensed under such third party Licensor agreements, and
the Products hereunder, Licensor reserves the right to resolve any such
conflict, taking into account the natural channels of distribution of the
Articles and other apparel, and the protection of the Licensed Xxxx. Licensor's
decision in resolving such conflicts shall be made in good faith and shall be
final and binding. In the event Licensee, directly or indirectly, engages in any
conduct that infringes on the legal rights of parties licensed under
arrangements with the Licensor Group for products manufactured or sold under the
Licensed Xxxx, whether in the Territory or other jurisdictions, Licensee shall
cease such activity upon written notice of Licensor.
4. MANUFACTURE OF ARTICLES: QUALITY CONTROL
4.1 Licensee acknowledges that Licensor has established a reputation for
excellence with the public as a leading fashion firm manufacturing and selling
merchandise (directly and through licensees) of high quality. Consequently, the
preservation of the reputation and prestige of Licensor and the Licensed Xxxx is
of paramount importance. Accordingly, Articles shall be of a standard of quality
consistent with approved Product prototypes as provided under Section 5 and
shall be distributed and sold with packaging and sales promotion materials
appropriate for such Products.
4.2 The styles, designs, packaging, contents, workmanship and quality of
all Articles shall be approved by Licensor in writing, using the Approval Form
and pursuant to the provisions of Section 5, prior to the distribution or sale
thereof. Licensor may take all actions which it deems necessary, in Licensor's
sole discretion, to ensure that Articles sold hereunder are consistent with the
reputation and prestige of the Licensed Xxxx. It is expressly agreed and
acknowledged by the parties hereto that Licensee shall promptly produce
reasonable quantities of samples of specific Articles, groups of Articles or
styles of Articles as requested by Licensor. Thereafter, if approved by Licensor
in accordance with the provisions of Section 5, Licensee shall offer such
Articles for sale as part of Licensee's product assortment.
4.3 Prior to the offer for sale of a particular Article, Licensee shall
deliver to Licensor for its approval pursuant to the provisions of Section 5,
free of charge, one sample of each such Article together with the tags, labels
and packaging to be used in connection therewith (the "ARTICLE MATERIALS").
Prior to distribution of each Article, Licensee shall deliver to Licensor for
its approval, free of charge, one production sample of each such Article
together with the Article Materials. After sale or distribution of an Article
has commenced, Licensee shall, upon the request of Licensor, submit to Licensor
then current production samples of each Article together with the Article
Materials so that Licensor may be assured of the maintenance of the required
quality standards. After any sample is approved, Licensee shall not deviate
therefrom without the prior written approval of Licensor. Licensee shall also
submit to Licensor samples of each Article for any reasonable business purpose
upon Licensor's request therefor free of charge. Articles sold hereunder shall
be consistent in quality with the approved samples. Licensor and its
representatives, upon reasonable advance notice and scheduled so as not
10
to unduly disrupt Licensee's manufacturing operations, may examine Articles in
the process of being manufactured and inspect all facilities utilized in
connection therewith.
4.4 (a) Licensee shall manufacture (or cause to be manufactured), sell,
label, package, distribute and advertise Articles in accordance with all
applicable laws and regulations, provided, however, that in the event Licensee
violates this provision, Licensee shall have the opportunity to cure such
violation in accordance with Paragraph 13.1. Licensee shall use and display the
Licensed Xxxx only in such form and manner as are approved by Licensor, pursuant
to the provisions of Section 5.
(b) Licensee shall provide Licensor, at Licensor's reasonable request,
a complete list of facilities manufacturing Articles or components thereof
bearing the Licensed Xxxx (including names, addresses and contact information).
(c) Licensee shall cause to appear on all Articles and Ancillary
Branding, all advertising, promotional and publicity material used in connection
therewith, and any printed matter on which the Licensed Xxxx appears, such
legends, markings and notices as Licensor may request in writing. Subject to the
provisions of Paragraph 1.2, no such printed matter shall include any other
name, xxxx or designation other than the Licensed Xxxx, except as required by
applicable laws or regulations. Before using or releasing any such material,
Licensee shall submit to Licensor, for its written approval pursuant to the
provisions of Section 5, proposed advertising, promotional and publicity copy,
finished artwork for tags, labels, packaging, point-of-sale materials and the
like and all printed matter on which the Licensed Xxxx appears. After any
sample, copy, artwork or other material is approved, Licensee shall not deviate
therefrom without the prior written approval of Licensor, provided, however,
that in the event Licensee breaches the foregoing, Licensee shall have the
opportunity to cure such breach in accordance with Paragraph 13.1. If Licensor
shall disapprove of any sample Article, any sample tag, label, packaging or the
like, or any advertising, promotional or publicity material or any other printed
matter, Licensee shall promptly cease and desist from any use thereof.
4.5 (a) In order to maintain the reputation, image and prestige of Licensor
and the Licensed Xxxx, Licensee's distribution patterns shall consist solely of
such high-end department stores and specialty retailers whose location,
merchandising and overall operations are consistent with the quality of the
Articles and the reputation, image and prestige of the Licensed Xxxx. Licensee
shall only sell Products to such department stores and specialty retailers
approved in advance by Licensor in writing ("APPROVED STORES") using the
approval form attached hereto as "EXHIBIT 4" (which form may be amended from
time to time and provided by Licensor to Licensee) and pursuant to the
provisions of Section 5. Additionally, Licensee shall only sell Products from
the current seasonal collections to Approved Stores, except for Products from
the immediately preceding season, which are being sold off to Approved Stores in
the ordinary course. Licensee shall submit to Licensor the amount of Products
Licensee wishes to distribute to an Approved Store, categorized by Brand for
Licensor's prior written approval pursuant to the provisions of Section 5. Once
such approval is given, Licensor subsequently may,
11
by written notice to Licensee, withdraw its approval of an Approved Store, an
individual door (i.e., a single branch of a multiple-unit retailer) of an
otherwise Approved Store or the amount sold to such Approved Store or door, for
any business reason, including but not limited to: (i) diversion of Articles or
other goods; (ii) advertising, marketing, promotion, offering for sale or sale
of Articles in a manner that would be a breach of or default under this
Agreement if done by Licensee; (iii) failing to continue to meet Licensor's
standards, including by reason of the manner in which such customer
merchandises, offers for sale or sells Articles; (iv) sale of Articles or other
goods not purchased from authorized sources; (v) being incompatible with the
image of the Articles or the Licensed Xxxx; or (vi) failing to sell a reasonable
cross-section of in-season Articles and/or other goods bearing the Licensed Xxxx
purchased from authorized sources. In instances in which Licensor withdraws
approval for a retailer or door pursuant to (iii), (v) or (vi) above or for a
similar reason not associated with wrongful conduct, Licensee may fulfill
existing orders for the then-current season for such retailer or door. Licensee
acknowledges that retailers approved for a particular Brand may not necessarily
be approved for another Brand.
(b) Licensor may at any time and in its sole discretion designate an
Approved Store to which Licensee is selling Products in accordance with 4.5(a)
as an "* * *" Sales to * * * are subject to the * * * * * * In the event,
Licensee wishes to sell Closeouts, Licensee shall submit to Licensor for prior
approval pursuant to the provisions of Section 5 a schedule of * * *.
(c) In addition, Licensee undertakes to monitor and supervise the
merchandising and display of the Articles to be sold at retail so that the
Licensed Xxxx wherever used is properly and correctly displayed and the Articles
are in fact shown and sold as quality and prestige merchandise consistent with
the worldwide reputation and prestige of the Licensed Xxxx. In the event
Licensor should find any fact inconsistent with the foregoing, then Licensor
shall notify Licensee thereof and Licensee shall supervise the retail location
concerned in rectifying such inconsistency. Should such retail location fail to
rectify the same within a reasonable time period, then Licensee shall cease to
supply the Articles to said retail location.
(d) Licensee shall provide Licensor, within five business (5) days
after the end of each month during the Term, with a complete and itemized list
of all orders booked during the preceding month broken out by Brand, by customer
and by retail door (if and when such information is available by retail door).
(e) Licensee shall provide Licensor with a complete wholesale customer
list on a quarterly basis (including names, addresses and such other information
as Licensor may reasonably request).
12
4.6 In an endeavor to ensure the highest level of customer service to all
consumers, and only in the event Licensor shall so request, Licensee shall place
the number "0-000-XXX-XXXX" (collectively the "CONSUMER PHONE") or any other
phone designation as well as and any domain name that Licensor shall designate
for the Brand (e.g. xxx.xxxxxxxxxxx.xxx) (collectively the "WEB SITES") on all
Article Materials and other printed matter that are used in conjunction with the
Articles at retail. Licensor shall administer, coordinate and pay for all
expenses related to said Consumer Phone and Web Sites; provided, however, in the
event consumer complaints relating to the Articles shall constitute a materially
disproportionate share of such consumer complaints, Licensor reserves the right
to charge Licensee for its pro rata share of costs associated with said Consumer
Phone and Web Sites. Licensee shall cooperate with Licensor to satisfy all
reasonable consumer demands as may be deemed appropriate by Licensor for: (a)
replacement goods or merchandise credits; and (b) inquiries related to the
availability of Articles or other information reasonably required to service the
consumers. The provisions of this Paragraph 4.6 shall survive the termination or
expiration of this Agreement for a period of one (1) year subsequent to said
termination or expiration.
4.7 In the event that Licensee determines to construct any concept shops or
shop-in-shops, they shall be built in accordance with concepts of design,
architectural planning, construction materials, layout, decor and other aspects
of decoration as provided in writing by Licensor and shall be subject to
Licensor's prior written approval pursuant to the provisions of Section 5. All
expenses in connection with the design, development or construction of any such
shops shall be borne by Licensee at its sole cost and expense.
4.8 The styles, designs, appearance, components, images, materials,
manufacturing facilities and sources, workmanship and quality of all product
fixtures for the sale and marketing of Articles shall be approved by Licensor in
writing prior to the manufacture, distribution or sale thereof. From time to
time and at any time during this Agreement, Licensor may provide written
specifications for the fixtures, which must be strictly followed by Licensee.
Fixtures bearing the Licensed Xxxx or other proprietary image or design of
Licensor not approved by Licensor may not be used, sold or disposed of in any
way without Licensor's prior written approval pursuant to the provisions of
Section 5. All expenses in connection with the design, development or
construction of any such fixtures shall be borne or reimbursed by Licensee at
its sole cost and expense.
13
5. APPROVALS
5.1 Licensor's approvals pursuant to this Agreement, except as otherwise
expressly provided, may be based solely on Licensor's subjective standards and
may be withheld in Licensor's sole and absolute discretion. Licensor shall use
commercially reasonable efforts to respond to requests for approval as soon as
possible and in any event within seven (7) business days except as otherwise
specifically provided herein. Any item not either approved or unapproved in
writing within seven (7) days shall be deemed unapproved, provided, however,
that upon request Licensor must then provide reasons for such disapproval within
three (3) business days.
5.2 Licensor's approval of any designs, materials, printed matter, samples
or any and all things related thereto or contemplated under this Agreement, for
use in connection with any particular collection of Articles shall constitute
approval for such use only in connection with the then-current seasonal
collection by Brand and shall not constitute approval of the use of any such
materials in connection with any other collection of Articles.
5.3 Any failure by Licensee to obtain Licensor's approval in accordance
with this Agreement, or the use by Licensee of any designs, materials, sources,
printed matter, samples or any and all things related thereto or contemplated
under this Agreement, in absence of Licensor's prior written approval, shall be
deemed to be a material default of this Agreement and shall be subject to the
rights and remedies of Licensor as provided herein.
6. ADVERTISING; SHOWROOM
6.1 (a) The Licensor Group shall promote, market and advertise the Licensed
Xxxx and shall administer the budget for such advertising, marketing and
promotion. As a contribution to said advertising, marketing and promotion,
Licensee shall pay to Licensor Group a fee (the "ADVERTISING FEE") for each
Annual Period in an amount equal to * * *: (i) the actual * for such Annual
Period; and (ii) the * * *, as such term is defined below, for such Annual
Period. During each Annual Period, Licensee shall pay the Advertising Fee to
Licensor Group in equal installments at the same time installments of Guaranteed
Minimum Royalty, as such term is defined in Paragraph 7.1 below, for such Annual
Period are payable hereunder. Each such installment shall total, at a minimum, *
* * of the total minimum Advertising Fee based upon *, despite prior payments in
any given Annual Period. Any additional Advertising Fee payable to Licensor
Group, or any refund of Advertising Fee payable to Licensee, for an Annual
Period shall be accounted for and paid in the same manner and at the same time
that Sales Royalty, as such term is defined below, is to be accounted for and
paid hereunder.
(b) The Licensor Group shall use a portion of the Advertising Fee for
institutional advertising of the Licensed Xxxx, as it so determines, which may
include the
14
cost of catalog advertising, Licensor's Websites and other electronic media and
which may or may not include the Articles. In the event such advertising
includes the Articles, Licensee shall cooperate with the Licensor Group in
connection with such advertising and, if requested by Licensor, shall produce
and deliver samples of Articles to Licensor for use in connection therewith at
no cost to Licensor.
6.2 (a) During the Term, Licensee shall maintain at Licensee's expense, a
separate showroom for each Brand exclusively for the display of Articles. Said
showrooms shall be located in the borough of Manhattan and shall be located,
designed, decorated, staffed, maintained and re-modeled, if deemed necessary in
Licensor's reasonable judgment, in a manner commensurate with the reputation and
prestige of the Licensed Xxxx and shall be subject to the prior written approval
of Licensor. In connection therewith, Licensee shall also maintain separate
telephone numbers and listings under the name "XXXXXXX XXXX REACTION LADIES
SPORTSWEAR." Licensee may also maintain a showroom presence in the Licensor
Group's corporate showroom for the display of Articles. Any such display shall
be built by the Licensor Group, provided, however, all costs associated with the
building of such display, shall be at Licensee's sole cost and expense, in an
amount * * * per square foot. In addition, Licensee shall pay * * * associated
with the display ("DISPLAY SERVICES FEE"). Said Display Services Fee shall * * *
per square foot per annum. The Display Services Fee shall commence on the day
Licensee takes possession of any such premises. Licensee and the Licensor Group
shall enter into a separate agreement setting forth the particulars prior to any
such possession by Licensee.
(b) Under no circumstances shall the Licensed Xxxx be used in
combination with any other marks or products used by Licensee in conjunction
with the telephone listings or showroom detailed in Paragraph 6.2(a) above.
Licensee must submit representative copies of printed matter used by Licensee in
the course of its business that contain the Licensed Xxxx, including but not
limited to, stationery, letterheads, envelopes, invoices and business cards to
Licensor for prior written approval pursuant to the provisions of Section 5.
(c) When Licensee participates in trade shows, separate areas shall be
maintained exclusively for the display of Articles under each Brand, subject to
Licensor's prior approval. At Licensor's request, Licensee shall also
participate and cooperate in trade shows in which the Licensor Group
participates, and pay its pro rata share of any expenses incurred by the
Licensor Group in connection therewith. Such pro rata share shall be paid within
twenty (20) days from the presentment of an invoice therefor.
(d) For each Annual Period, Licensee shall pay toward the expenses
incurred by the Licensor Group in connection with any Licensor Group fashion or
"runway" shows ("FASHION SHOW FEE"). For each Annual Period, the Fashion Show
Fee shall be * * *. Amounts due under this Paragraph shall be paid within twenty
(20) business days from the presentment of an invoice therefor. In the event
Licensor Group decides to produce a fashion or "runway" show exclusively for the
15
Licensed Xxxx, the Fashion Show Fee shall be the costs incurred by the Licensor
Group in connection with such fashion or "runway" show divided by the licensee
participants. In the event Licensor does not have a fashion or "runway" show in
an Annual Period, Licensor shall allocate the Fashion Show Fee to an alternate
brand building marketing event.
(e) At Licensor's request and with Licensee's prior approval, Licensee
Group shall participate in charitable donations and similar endeavors together
with the Licensor Group, provided Licensee Group's donations shall * * * per
Annual Period. Where donations are made on a joint basis, Licensor will inform
the relevant charity of the extent of Licensee Group's participation and where
donations result in public recognition, seats at charitable dinners or similar
benefits, Licensor shall attempt to ensure that Licensee Group participates in
such benefits in proportion to the level of Licensee Group's contribution.
6.3 (a) In addition to the Advertising Fee and the Campaign Fee (as set
forth below), Licensee shall spend in each Annual Period the amounts necessary
or appropriate to promote, advertise and market the Articles to maximize sales
of Articles consistent with the approved Marketing Plan and reflecting the image
and prestige of the Articles and the Licensed Xxxx. Upon Licensor's request
therefore, Licensee shall submit to Licensor documentary evidence in a form
reasonably satisfactory to Licensor that substantiates all such expenditures.
(b) In the event Licensee requests Licensor Group to furnish
advertising and/or marketing services to assist Licensee's advertising and
marketing efforts relating specifically to the Articles and Licensor Group
agrees to provide such services, Licensee shall reimburse Licensor for * * * * *
*, as well as an agency fee of * * * * or the then-prevailing market rate for
providing such services. In advance of performing services or incurring expenses
under this Paragraph 6.3(b), Licensor shall submit an estimate of the
anticipated services and reimbursable costs and expenses (which estimate shall
reflect a contingency of * for such reasonable additional expenses as may be
incurred in the course of performing such services).
(c) All amounts due to the Licensor Group under this Paragraph 6.3
shall be payable by Licensee within twenty (20) days from the presentment of an
invoice therefor.
6.4 In addition to the Advertising Fee and Licensee's obligations with
respect to Paragraph 6.3, commencing in the Third Annual Period, for each Annual
Period, Licensee shall pay to Licensor not less than * * *: (i) the actual * for
such Annual Period; or (ii) the * * * * for such Annual Period (the "CAMPAIGN
FEE"). The Campaign Fee shall be spent on product-specific advertising in the
Licensor Group's national advertising campaign that includes Licensee's Articles
(i.e. the Articles must appear in the image in
16
question). Upon the reasonable request of Licensee, Licensor shall provide
Licensee with supporting documentation for expenditures made in connection with
the foregoing. Payments relating to the Campaign Fee are to be made at the same
time installments of the Guaranteed Minimum Royalty are payable hereunder. Under
no circumstances shall the minimum Campaign Fee be refundable. In each Annual
Period, Licensor shall provide Licensee with two (2) product specific collateral
images delivered in an electronic file format at no additional charge (the costs
for such collateral images being credited from the Campaign Fee collected
hereunder).
6.5 In addition to the Advertising Fee, Licensee shall expend the following
amounts to support the initial launch of the Products: a total of Four Million
Dollars ($4,000,000) in the first two Annual Periods (the "LAUNCH FEE"), such
amounts to be spent in accordance with a launch plan (which may include national
print advertising, outdoor advertising, television or radio advertising or
similar prestige image advertising but not co-op advertising, fixtures or point
of sale materials) proposed by Licensor and approved by Licensee in its sole
discretion prior to any expenditure.
6.6 Licensee shall not be required to pay the Advertising Fee and Campaign
Fee for * up to and including * of Licensee's Net Sales in any Annual Period.
Licensee shall pay the Advertising Fee and Campaign fee on such sales in excess
of * of Net Sales.
6.7 In the event Licensee wishes to generate its own press releases or
publicity of any kind including, but not limited to, interviews, relating to any
or all of the Licensed Xxxx or the Articles, such releases or publicity shall be
submitted to Licensor for Licensor's prior written approval. Licensee shall
promptly submit to Licensor any and all news releases, advertising, publicity or
promotional materials from any and all media and in any and all forms in which
the Licensed Xxxx or the Articles appear as soon as such items are made
available to Licensee. In all instances, Licensee shall fully cooperate with
Licensor's duly authorized public relations representative. Notwithstanding the
foregoing, the prohibitions of this Paragraph 6.5 shall be waived with respect
to any or all of Licensee's publications or materials which are required by any
law, statute, regulation or rule required of any publicly-held company.
6.8 At any time upon reasonable notice, Licensor may change or direct that
procedures (but not the minimum amounts expended) be changed regarding the
advertising, marketing, publicity and promotion of the Articles pursuant to this
Article.
7. GUARANTEED MINIMUM ROYALTY AND GUARANTEED MINIMUM NET SALES
7.1 Licensee shall attain Guaranteed Minimum Net Sales by Brand in each
Annual Period as set forth below. In each Annual Period, the Guaranteed Minimum
Net Sales by Brand for such Annual Period shall be the greater of: (i) the
relevant Guaranteed Minimum Net Sales Thresholds for such Annual Period as set
forth below; or (ii) * of the actual Net Sales by Brand for the previous Annual
17
Period, in which event, the relevant Guaranteed Minimum Net Sales Threshold for
such Annual Period, as set forth below, shall be increased to reflect such
amount. The Guaranteed Minimum Royalty for each Annual Period will be set based
on the application of the rates set forth in Paragraph 8.1 below to the
Guaranteed Minimum Net Sales Thresholds as adjusted.
XXXXXXX XXXX
REACTION
GUARANTEED MINIMUM
ANNUAL PERIOD NET SALES THRESHOLD
-----------------------------------
1 2006 $*
-----------------------------------
2 2007 $*
-----------------------------------
3 2008 $*
-----------------------------------
4 2009 $*
-----------------------------------
5 2010 $*
-----------------------------------
7.2 In the event Licensee shall properly exercises its option to extend the
Term in accordance with Paragraph 2.2 hereinabove, and such option does not
subsequently expire for failure to satisfy any condition in this Agreement, then
the Guaranteed Minimum Net Sales in the Renewal Term shall be as set forth
below.
XXXXXXX XXXX
REACTION
GUARANTEED MINIMUM
ANNUAL PERIOD NET SALES THRESHOLD
--------------------------------------
6 2011 * OF NET SALES IN 2010
--------------------------------------
7 2012 * OF NET SALES IN 2011
--------------------------------------
8 2013 * OF NET SALES IN 2012
--------------------------------------
7.3 In each Annual Period, the Guaranteed Minimum Royalty (as well as the
minimum Advertising Fee and minimum Campaign Fee otherwise consistent with the
terms of this Agreement) shall be paid in four (4) equal quarterly installments
payable on the first day of January, April, July, and October during each such
Annual Period, provided that the first such payment is not due until January
2006. In the event that application of the alternate percentage minimum set
forth in Paragraph 7.1 above shall require adjustment of a January payment,
reconciliation shall be made in accordance with Paragraph 9.2 below.
7.4 The Guaranteed Minimum Royalty by Brand for each Annual Period may be
credited only against the Sales Royalty by Brand for the same Annual Period.
Further, no payment of Guaranteed Minimum Royalty shall be refundable.
7.5 If the * of Licensee determined in accordance with Generally Accepted
Accounting Principles ("*") falls below * at the end of any quarterly reporting
period, Licensee shall so notify Licensor immediately in writing. In such event,
Licensor
18
may require Licensee to * * * * * shall contain terms and conditions reasonably
determined by Licensor and, once issued, shall * no later than January 15th, as
updated to reflect the total amounts payable for the new Annual Period. In the
event Licensee fails to deliver * due in accordance with this Paragraph 7.5,
Licensor shall have the option of * * * *. In the event the * is restored to *,
Licensee shall no longer be required to renew the * * * * * *. In the event the
* ever falls below * Licensee shall so notify Licensor immediately in writing
and Licensor shall have the option of * upon written notice, subject to the
provisions of this Agreement with respect to termination. Licensee's failure to
notify Licensor as required shall be deemed a material breach of this Agreement.
7.6 In the event Licensee shall fail to make any payment required under
this Agreement, Licensor Group shall be entitled to deduct or set off such
payment from amounts owed by Licensor Group to Licensee hereunder.
8. SALES ROYALTY
8.1 (a) In each Annual Period, Licensee shall pay to Licensor a Sales
Royalty on "Net Sales" (as defined below) for the Licensed Xxxx in the amount
of: (i) * of actual full price Net Sales for Net Sales up to and including * and
(ii) * of actual full price Net Sales for Net Sales greater than *.
(b) "NET SALES" shall mean gross sales amount of Articles shipped by
the Licensee Group, less: (i) customary industry trade or term discounts (which
shall not exceed * ); (ii) returns; (iii) freight and taxes; and (iv)
markdowns and allowances (which shall not exceed * of the gross sales amount
of Articles in any Annual Period). No deduction shall be made for other
discounts, uncollectible accounts or costs incurred by Licensee.
(c) To the extent sales to approved * are expected to exceed * of
Licensee's Net Sales in any Annual Period, Licensee shall obtain Licensor's
approval for any further sales to approved off-price outlets in such Annual
Period. If sales to approved off-price outlets exceed * of Licensee's Net Sales
in any Annual Period, Licensee shall pay Sales Royalty on such sales in excess
of * of Net Sales as if these sales were made at full wholesale prices.
Notwithstanding the above, if sales to * exceed * of Licensee's Net Sales in any
Annual Period, Licensee shall be deemed to be in default for purposes of
Paragraph 13.1 hereunder. From time to time, Licensee may propose a specific
opportunity such as a one-time sell off or special production run to an * and
Licensor may approve or
19
disapprove such proposal in its sole discretion with the terms governing such
opportunity to be determined by the parties at such time.
(d) Licensee agrees not to designate sales prices so low or discounts
so high as to adversely affect the image, reputation and prestige of the
Licensed Xxxx and the consistency of Licensor's worldwide marketing efforts.
Licensee shall set its wholesale prices and suggested retail prices at a level
that would encourage the development of sales thereof while maintaining the
image and prestige of the Licensed Xxxx and the quality of the Articles.
However, Licensee shall set its wholesale prices and suggested retail prices for
each Category in its sole discretion.
8.2 For each Annual Period, the Sales Royalty, Advertising Fee and Campaign
Fee shall be accounted for and paid quarterly within thirty (30) days from March
31, June 30, September 30 and December 31. The Sales Royalty, Advertising Fee
and Campaign Fee payable for each accounting and payment period (the "PAYMENT
PERIOD") during each Annual Period shall be computed on the basis of Net Sales
during such Payment Period, with a credit for any quarterly installment payments
theretofore made to Licensor for such applicable Payment Period only, provided,
however, that in no Payment Period shall the total payment of Sales Royalty,
Advertising Fee and Campaign Fee based on Guaranteed Minimum Net Sales be less
than * of the total Guaranteed Minimum Net Sales for the then-current Annual
Period, subject to further reconciliation in subsequent Payment Periods. Any
refund of Sales Royalty, Advertising Fee and/or Campaign Fee owed to Licensee
shall be calculated in the Payment Period reconciling each Annual Period and
paid within thirty (30) days of reconciliation.
8.3 No payment of Sales Royalty for any Annual Period in excess of payments
of Guaranteed Minimum Royalty by Brand for the same Annual Period shall be
credited against the Guaranteed Minimum Royalty by Brand due to Licensor for any
other Annual Period.
8.4 Licensee shall not be entitled to nor shall take deductions or set-offs
from any payments required to be made under this Agreement for any reason.
9. SALES STATEMENT
9.1 (a) Licensee shall deliver to Licensor, at the time each Sales Royalty
payment is due, a statement (the "QUARTERLY STATEMENT") signed and certified as
accurate by Licensee's chief financial officer, setting forth the just completed
Payment Period and the Annual Period-to-date: (i) the number and invoice price
of all Articles invoiced or shipped to Licensee's customers, the amount of
discounts and returns which properly may be deducted from Net Sales, all by
Brand, by customer, by month, and in the aggregate; (ii) the amount of Sales
Royalty due and payable; and (iii) the amounts spent by Licensee for
advertising, marketing and other promotional activities, by Brand and by type of
activities and in the aggregate.
20
(b) (i) Licensee shall deliver to Licensor monthly, within two (2)
weeks after the end of each month commencing with the first month during which
Articles are shipped, detailed sell-in reports, in both units and dollar
amounts, covering the preceding month and the Annual Period-to-date, by Brand,
by customer, by door, by style or stock keeping unit and by collection, with a
comparison to the corresponding period during the preceding Annual Period; (ii)
Licensee shall deliver to Licensor detailed weekly sell-through reports
(including sales and stock information for "this year," "last year" and
"planned"), by Brand, by customer, by door and by collection, with information
presented for the week, the month-to-date, the season-to-date and the Annual
Period-to-date. The final such report for each month also shall include the
required information by style. Each weekly sales report shall cover the
proceeding Sunday through Saturday and shall be delivered by telefax no later
than the following Friday.
(c) Each of the Quarterly Statements and Licensee's other statements,
reports and other items to be delivered under this Paragraph 9.1 shall be
prepared in a format reasonably acceptable to Licensor which may be amended from
time to time upon written notice to Licensee.
9.2 Licensee shall deliver to Licensor, not later than forty-five (45) days
after the end of each Annual Period, a statement signed and certified by a
certified public accountant, relating to the entire Annual Period and setting
forth the same information required of Licensee in accordance with Paragraph 9.1
above. Licensee shall also provide a copy of Licensee's audited annual report
certified by a certified public accountant including a separate breakout of
financial statement data for revenues and expenses associated with this License
Agreement (which breakout need not be certified by Licensee's certified public
accountants). If any such statement should indicate that there had been an
underpayment or overpayment of Sales Royalty in any Annual Period, then Licensee
shall pay or Licensor shall refund such amount (as the case may be) within
thirty (30) days of the receipt by Licensor of such statement.
10. BOOKS AND RECORDS; AUDITS
10.1 Licensee shall maintain complete and accurate books of account and
records as required under this Agreement (including the originals or copies of
documents supporting entries in the books of account) covering all transactions
relating to this Agreement and/or the distribution and sale of Articles,
including but not limited to invoices, credits and shipping documents. At any
reasonable time during the Term and for three (3) years thereafter, Licensor
may, upon five (5) days prior written notice to Licensee, cause an audit to be
made of Licensee's records and documents relating to this Agreement, but in no
event more than twice in any Annual Period. Any such audit performed by Licensor
or Licensor's certified public accountant or other auditing professional shall
be conducted so as to minimize disruption to Licensee's business operations. All
such records and documents shall be kept available for at least five (5) years
from the date thereof, including after the end of the Term, but in any event no
less than the applicable period required by law.
21
10.2 If, as a result of any audit of Licensee's books and records, such
audit discloses a deficiency in the payment of any amount due hereunder, such
deficiency shall become immediately due and payable with interest at the rate
provided in Paragraph 13.1 below from the date when such payment should have
been made, provided that Licensee may contest in good faith a finding of
deficiency, or the amount thereof, which objection shall be resolved by good
faith negotiation of the parties or pursuant to the arbitration provisions set
forth in Section 18 hereunder. In the event the deficiency for any 12 month
period shall be in excess of * (excluding mathematical, clerical, or similar
good-faith error) of the amount actually paid for the subject period, Licensee
shall pay to Licensor upon demand the cost of such audit as well as all costs
associated with two (2) subsequent actual audits. In the event such a deficiency
should occur on more than one occasion, or if the deficiency in any 12 month
period is in excess of * (excluding mathematical, clerical, or similar
good-faith error), then Licensee shall be deemed in default, and Licensor, in
addition to all other remedies at law, in equity or otherwise provided herein,
shall have the option to terminate this Agreement upon ten (10) days notice.
11. THE LICENSED XXXX; COPYRIGHTS; PATENTS
11.1 The Licensee Group shall not use the Licensed Xxxx, in whole or in
part, as a corporate name, trade name or domain name.
11.2 The Licensee Group acknowledges that as between the Licensee Group and
the Licensor Group the Licensor Group is the owner of all right, title and
interest in and to the Licensed Xxxx in the Territory in any form or embodiment
thereof and is also the owner of the goodwill attached or which shall become
attached to the Licensed Xxxx in connection with the business and goods in
relation to which the same has been, is or shall be used. Sales of Articles by
Licensee shall be deemed to have been made by Licensor for purposes of trademark
registration and all uses of the Licensed Xxxx by Licensee shall inure to the
benefit of Licensor. Licensee shall not do or cause any act or thing which may
reasonably be expected to adversely affect any rights of Licensor in and to the
Licensed Xxxx or any registrations thereof. The Licensee Group shall not sell
Articles as "seconds", "irregulars", "damaged", etc. without the prior written
approval of Licensor pursuant to the provisions of Section 5.
11.3 Licensee shall use the Licensed Xxxx in the Territory strictly in
compliance with all legal requirements and shall use such markings in connection
therewith as may be required by Licensor pursuant to Paragraph 4.4(c).
11.4 The Licensee Group shall never challenge the Licensor Group's
ownership of or the validity of the Licensed Xxxx or any application for
registration thereof, or any trademark registration thereof, or any rights of
the Licensor Group therein, nor shall the Licensee Group seek to register the
Licensed Xxxx or any variation or simulation thereof within or without the
Territory. Further, the Licensee Group shall cooperate fully, and at Licensor's
sole cost and expense, with any reasonable request by the Licensor Group in
connection with any application, registration or filing in connection with the
Licensed
22
Xxxx. The provisions of this Paragraph 11.4 and the Licensee Group's obligations
hereunder shall survive the expiration of termination of this Agreement.
11.5 The Licensor Group shall take such action as it deems advisable for
the protection of its rights in and to the Licensed Xxxx and the Licensee Group
shall fully cooperate with the Licensor Group in connection therewith. Licensee
agrees to bear all costs and fees for enforcement and anti-counterfeiting
efforts associated with the Articles. Licensor shall attempt in good faith to
minimize enforcement costs consistent with the levels of counterfeit products
bearing the Licensed Marks actually detected in the Territory, and whenever
possible, Licensor will provide reasonable notice and request Licensee approval,
not to be unreasonably withheld, before incurring costs pursuant to this
Paragraph 11.5(b). The Licensor Group shall not be required to take any action
if it deems inadvisable to do so, and the Licensee Group may not take any action
with respect to the Licensed Xxxx without Licensor's prior written approval.
Licensee shall notify Licensor promptly after the Licensee Group becomes aware
of: (a) an infringement or threatened infringement of the Licensed Xxxx; or (b)
any actionable imitation of the Licensed Xxxx or the Articles or of their
packaging or advertising. In such notice, Licensee shall identify the alleged
infringer or imitator and shall specify in reasonable detail the nature of the
acts constituting such infringement or actionable imitation. With respect to any
amounts recovered by the parties in connection with an enforcement action
provided for in this Paragraph 1.7(b), Licensor and Licensee shall first recover
their respective actual legal out-of-pocket expenses and fees, or equitable
proportions of them. With respect to any recovery in excess of expenses and
fees, the parties shall divide such amounts equally.
11.6 All intellectual property rights contained in the Articles or Article
Materials whether (i) created by Licensor Group or (ii) created by Licensee
Group and approved by Licensor (collectively the "ARTICLE RIGHTS") shall be
owned solely by Licensor. All copyrights in the Article Rights created by
Licensee shall be considered works made for hire. In the event such copyrights
are deemed not to be works for hire or any other Article Rights are not
considered the property rights of Licensor, Licensee shall be deemed hereby to
have assigned to Licensor all right, title and interest, in and to all such
Article Rights held by Licensee including without limitation, all copyrights and
patents. At any time and from time to time and upon the request by Licensor, and
at the expense of Licensor, Licensee shall (x) execute, acknowledge and deliver,
or cause to be done, executed, acknowledged and delivered all such further
deeds, assignment, transfers and conveyances as may be reasonably required for
the better assigning, transferring, granting and confirming to Licensor and its
successors and assigns of the Licensor's rights as set forth herein, or (y)
otherwise assist Licensor in procuring registrations for Licensor's rights as
set forth herein including without limitation any patents or copyright
registrations. Licensee shall enter into written agreements on these same terms
with all freelance individuals creating work, copyrightable or otherwise, in
connection with the Articles or Article Materials and shall make any such
agreements available for review by Licensor at Licensor's request.
23
12. INDEMNITY; INSURANCE
12.1 (a) Licensee shall hold Licensor, Xx. Xxxxxxx Xxxx, individually, and
the Licensor Group, as well as the directors, officers, employees and agents,
and their respective successors and assigns, of the Licensor Group, harmless
from and shall indemnify each of them against any losses, liabilities, damages
and expenses (including interest, penalties and reasonable attorneys' fees and
expenses) which any of them may incur or become obligated to pay to a third
party, or for which any of them may become liable to pay to a third party in any
action, claim or proceeding against any of them, by reason of any representation
or warranty on the part of Licensee being untrue in any material respect or by
reason of any acts, whether of omission or commission, by Licensee, the Licensee
Group, any of their contractors, suppliers or any of their respective
affiliates, agents or employees arising out of or related to this Agreement.
Licensee's indemnification obligation also shall apply to any action, claim or
proceeding against any of the indemnitees brought by or on behalf of any of
Licensee's affiliates, customers, contractors or suppliers arising out of or
relating to their relationships or dealings with Licensee, the termination
thereof or otherwise.
(b) Licensor shall hold the Licensee Group and its directors,
officers, employees and agents, and their respective successors and assigns,
harmless from and shall indemnify each of them against any losses, liabilities,
damages and expenses (including interest, penalties and reasonable attorneys'
fees and expenses) which any of them may incur or become obligated or liable to
pay in any action, claim or proceeding against any of them alleging that the
use, in accordance with the requirements hereof, of (i) the Licensed Xxxx, or
(ii) elements contained in the Ancillary Branding solely provided by Licensor,
infringe upon the trademark rights of a third party.
(c) A party claiming indemnification shall give the indemnifying party
prompt notice of any such action, claim or proceeding. The indemnifying party
then may take such action as it deems advisable to defend the action, claim or
proceeding on behalf of the indemnitee. If appropriate action is not taken by
the indemnifying party timely after its receipt of notice, the indemnitee may
defend the action, claim or proceeding, but with only one counsel reasonably
acceptable to the indemnifying party and at no more than standard rates, and no
compromise or settlement may be made without the approval of the indemnitor and
the indemnitee, which shall not be withheld or delayed unreasonably. In either
case, the indemnitee, and each party shall keep the other fully advised of all
developments and shall cooperate fully with each other in connection with the
defense thereof. The provisions of, and Licensee's obligations under, this
Paragraph 12.1(a) shall survive the expiration or termination of this
Agreement.
12.2 Licensee shall procure and maintain at its own expense in full force
and effect at all times during which Articles are being sold a public liability
insurance policy which shall include products liability coverage with respect to
Articles, with a limit of liability of not less than *. Such insurance policy
shall be written for the benefit of Licensee, with Licensor, Licensor's ultimate
parent, and Xx. Xxxx as additional insureds and shall provide for at least
thirty (30) days prior notice to
24
Licensor of the cancellation or substantial modification thereof. Licensee shall
deliver certificates of such insurance to Licensor within thirty (30) days of
the date hereof and thirty (30) days prior to any renewal or replacement
thereof. Nothing in this Paragraph 12.2 shall be deemed to limit the
indemnification provisions of Paragraph 12.1 (a) above.
13. DEFAULTS
13.1 In the event Licensee fails to make any payment due hereunder and such
default shall continue uncured for a period of ten business (10) days after
receipt of notice from Licensor that such payment was due and payable, Licensor
may terminate this Agreement forthwith by notice thereof to Licensee. Interest
shall be payable with respect to late payments and shall accrue at a rate equal
to two (2) full percentage points over the prime rate being charged in New York,
New York by the Bank of New York as of the close of business on the date the
payment first becomes due. In the event:
(i) Subject to the provisions of Paragraph 19.8, Licensee discontinues to
arrange for the manufacture or discontinues the distribution of
Articles for a period of sixty (60) or more consecutive days after
launch;
(ii) The Licensee Group knowingly or intentionally sells or exports
Articles out of the Territory or otherwise violates the provisions of
Paragraphs 1.6 and 1.7 above;
(iii) Net Sales in any * Annual Periods are less than the * * s in the
relevant Annual Period;
(iv) * in any Annual Period are more than * * of Net Sales by Brand during
such Annual Period in violation of Paragraph 8.1(c) above;
(v) Licensee seriously or repeatedly violates the provisions of Paragraph
13.3; or
(vi) Licensee fails to comply with the requirements of Paragraph 7.4 above,
then in any such event, Licensor may terminate this Agreement forthwith by
notice thereof to Licensee. If Licensor or Licensee fails to perform any of its
non-monetary obligations under this Agreement and such default is not curable
or, if curable, shall continue uncured for a period of thirty (30) days after
notice thereof from the non-defaulting party, then the non-defaulting party, at
its sole election, may terminate this Agreement forthwith by notice thereof to
the defaulting party, provided, however, in the event such defaulting party has
commenced to cure any such breach during said thirty (30) day period which
cannot be completely cured within said thirty (30) day period and is diligently
prosecuting the cure of such breach, such default shall be deemed to have
25
been cured unless and until the defaulting party has not, in fact, cured such
default within ninety (90) days of the initial notice of such default.
13.2 (a) In the event that Licensee files a petition in bankruptcy, is
adjudicated a bankrupt or files a petition or otherwise seeks relief under or
pursuant to any bankruptcy, insolvency or reorganization statute or proceeding,
or if a petition in bankruptcy is filed against it, or it becomes insolvent or
makes an assignment for the benefit of creditors or a custodian, receiver or
trustee is appointed for it, or a substantial portion of its business or assets,
and such petition is not discharged or dismissed within ninety (90) days of its
filing, this Agreement shall terminate automatically without notice.
(b) No assignee for the benefit of creditors, custodian, receiver,
trustee in bankruptcy, or any other officer of the court or official charged
with taking over custody of Licensee's assets or business may continue this
Agreement or exploit the Licensed Xxxx if this Agreement terminates pursuant to
Paragraph 13.2 (a) above.
(c) If, pursuant to the United States Bankruptcy Code or any
amendment, supplement or successor thereto, a trustee in bankruptcy of Licensee,
or Licensee, as debtor, is permitted to assume this Agreement and does so and,
thereafter, desires to assign this Agreement to a third party, the trustee or
Licensee, as the case may be ("DEBTOR"), shall notify Licensor. The notice shall
set forth the name and address of the proposed assignee, the proposed
consideration for the assignment and all other relevant details thereof. The
giving of this notice shall constitute the grant to Licensor of an option to
have this Agreement assigned to it or to its designee for the consideration, or
its equivalent in money, and upon the terms specified in the notice. This option
may be exercised only by notice given by Licensor to Debtor by the 30th day
after Licensor's receipt of the notice from Debtor, unless a shorter period is
deemed appropriate by the court in the bankruptcy proceeding. If Licensor does
not exercise its option in a timely manner, Debtor may complete the assignment,
but only if the assignment is to the entity named in the notice and for the
consideration and upon the terms specified therein. Nothing herein is intended
to impair any rights that Licensor may have as a creditor in the bankruptcy
proceeding.
13.3 Licensee shall not knowingly, nor shall Licensee knowingly suffer or
permit any person or entity engaged in the manufacture or distribution of
Articles, to violate any applicable labor laws or Customs laws (including those
regarding transshipment and improper designation of country of origin). The
Licensee Group may use contractors for the production of Articles
("CONTRACTORS"). However, no prospective Contractor shall be engaged until (i)
the Licensee Group conducts or has conducted its own factory audit of the
prospective Contractor's facilities and Licensee certifies to Licensor that the
prospective Contractor has passed the audit, i.e., satisfied Licensor's then
current standards therefor (as provided in writing to Licensee by Licensor), and
(ii) the prospective Contractor executes and delivers to Licensee and Licensor
an executed original of Licensor's factory guidelines and terms of engagement or
such new form of contractor agreement as may be adopted generally by Licensor
("FACTORY GUIDELINES"). The Contractor's compliance shall be monitored by the
Licensee Group in accordance
26
with Licensor's policies as provided to Licensee in writing. If Licensor objects
to a Contractor, it shall provide Licensee with the basis for its determination,
such as the failure of a Contractor to comply with the requirements of this
Agreement or the Factory Guidelines, the failure of a Contractor to pass
follow-up factory audits or the failure of a Contractor to produce Articles of
the requisite quality. Thereupon, Licensee shall use its commercially reasonable
efforts to correct the problem, if possible, and, if the problem cannot be
corrected or is not corrected within a reasonable period after receipt of
Licensor's aforesaid notice, Licensee immediately shall terminate its engagement
of such Contractor. All costs incurred by Licensee in connection with a factory
audit of prospective Contractor or a current Contractor shall be borne by
Licensee. In the event that Licensor determines to inspect Contractors, either
through a member of the Licensor Group or by means of independent monitors
retained by the Licensor Group, the Licensee Group shall cooperate with and
facilitate such inspections, it being understood, however, that the costs
incurred by the Licensor Group shall be borne by Licensor. In the event that it
comes to Licensor's attention that there is a substantial risk that Contractors
are not in accordance with applicable law or with the Factory Guidelines, the
parties shall confer in good faith to determine appropriate safeguards to ensure
compliance. Any shipment of Articles knowingly produced or accepted in violation
of applicable labor law or Licensor's Factory Guidelines shall be deemed to be
default of this Agreement subject to cure (as appropriate) in accordance with
Paragraph 13.1. Repeated serious violations not cured or otherwise acted upon in
a timely fashion shall result in termination, subject to the rights and remedies
of Licensor.
14. INJUNCTIVE RELIEF
14.1 Licensee recognizes that certain breaches of its obligations,
including but not limited to its obligations under Paragraphs 1.4, 1.8, 1.9(a),
4.1, 4.3, 11 (in its entirety), 15.3 and 19.10 of this Agreement, may give rise
to irreparable harm to Licensor and that monetary damages will be inadequate to
compensate Licensor for such breach. Licensee therefore agrees that, in addition
to any other remedies at law, in equity or otherwise, Licensor shall be entitled
to obtain temporary and permanent injunctive relief from a court of competent
jurisdiction to restrain any breach violation or threatened breach or violation
of Paragraphs 1.4, 1.8, 1.9(a), 4.1, 4.3, 11 (in its entirety), 15.3 and 19.10
of this Agreement without bond and without the necessity of showing actual
monetary damages and that irreparable harm to Licensor shall be presumed with
each such breach, violation or threatened breach by Licensee. Licensee shall
also be entitled to obtain temporary and permanent injunctive relief from a
court of competent jurisdiction to restrain any unauthorized sale or
distribution of Articles by a third party. Each party further agrees that
breaches of the obligations of confidentiality under Paragraph 19.2 may give
rise to irreparable harm to the disclosing party thereunder and that monetary
damages will be inadequate to compensate the disclosing party for such breach.
Each of Licensor and Licensee therefore agrees that, in addition to any other
remedies at law, in equity or otherwise, a disclosing party shall be entitled to
obtain temporary and permanent injunctive relief from a court of competent
jurisdiction to restrain any breach violation or threatened breach or violation
of Paragraph 19.2 of this Agreement without bond and without the necessity of
showing actual monetary damages
27
and that irreparable harm to the disclosing party shall be presumed with each
such breach, violation or threatened breach by the receiving party.
15. RIGHTS ON EXPIRATION OR TERMINATION
15.1 Upon termination of this Agreement by Licensor under *, Licensee shall
pay to Licensor, within thirty (30) days of the date of termination as
liquidated damages solely with respect to Licensee's financial obligations
hereunder, and not as a penalty, a sum equal to the * * * * * * (the "ROYALTY
DAMAGES") as well as any amounts owing as of the time of termination.
15.2 Notwithstanding the expiration or termination of this Agreement,
Licensor shall have and hereby reserves all rights and remedies which it has, or
which are granted to it by operation of law or equity: (a) to enjoin the
unlawful or unauthorized use of the Licensed Xxxx; (b) to collect any amounts
owed by Licensee pursuant to this Agreement, including but not limited the
Royalty Damages; and (c) to recover any other damages resulting from Licensee's
breach hereof, provided, however that the Royalty Damages shall serve as
liquidated damages for lost Royalty and Advertising Fees and for the costs of
finding another party to replace Licensee. Notwithstanding the expiration or
termination of this Agreement, Licensee shall have and hereby reserves all
rights and remedies which it has, or which are granted to it by operation of law
or equity for breach of this Agreement by Licensor.
15.3 Provided this Agreement is not terminated for default under * * *,
Licensee may, for an additional period of * months only, on a non-exclusive
basis, sell and dispose of its inventory of Articles (the "SELL-OFF ARTICLES").
Upon termination or expiration of this Agreement, the parties shall jointly and
immediately cause a physical inventory to be taken of the Articles held in
inventory by Licensee (including those expected from vendors or committed to
purchasers) which inventory shall be reduced to writing and copies thereof
delivered to and signed by each party. The sales of such Sell-Off Articles are
subject to all of the provisions hereof, including an accounting for and the
payment of Sales Royalty on a quarterly basis; provided, however, Sell-Off
Articles may not be advertised or promoted during such period. Unauthorized sale
or promotion of the Articles in the Territory or elsewhere upon termination or
expiration would cause irreparable damage to Licensor and the prestige of the
Licensed Xxxx. Any violation of this provision shall entitle Licensor to relief
in the form of a temporary restraining order and preliminary injunction.
Licensor reserves the prior right and option to purchase any or all Sell-Off
Articles at a price equal to * *. The accounting and payment shall be due within
thirty (30) days after the close of each three-month period. No payments of
Guaranteed Minimum Royalty made during the Annual Period in which this Agreement
shall terminate or expire shall be credited against any Sales Royalty payable on
the sales of Sell-Off Articles. In no event shall Licensee maintain more than *
inventory of Articles at any time as shall be estimated reasonably and in good
faith.
28
15.4 Except as provided in Paragraph 15.3 above, on the expiration or
termination hereof (except for termination as a result of breach by Licensor):
(a) all rights of Licensee shall terminate forthwith and shall revert
immediately to Licensor, and all payments of Sales Royalties, the Advertising
Fee and the Campaign Fee based upon Net Sales theretofore made, shall become
immediately due and payable; (b) Licensee may no longer use the Licensed Xxxx
and shall promptly transfer to Licensor, free of charge, all registrations,
filings and rights with regard to the Licensed Xxxx which it may have possessed
at any time; and (c) Licensee thereupon shall deliver to Licensor, free of
charge, all samples, sketches and other material in its possession particular or
unique to the Products, including materials which were designed by or approved
by Licensor or used in connection with the business conducted by Licensee
hereunder and all other material in its possession with the Licensed Xxxx
thereon. Nothing in the foregoing shall relieve Licensee of any obligation of
payment arising prior to the effective date of such expiration or termination.
After the expiration or termination hereof, Licensee shall not use or permit
others to use any of said sketches or other material in connection with Products
or any other merchandise.
16. NOTICE
16.1 All reports, approvals, requests, demands and notices required or
permitted hereby shall be in writing and shall be deemed to be duly given (i) if
personally delivered, (ii) one day after dispatch if delivered by
nationally-recognized overnight courier or mail service, such as Federal Express
or Express Mail, or (iii) five business days after dispatch if mailed (by
certified or registered mail, return receipt requested) to the party concerned
at its address set forth below:
To Licensor: at the address set forth on page 1:
Attention: Vice President, Licensing
with a copy to: Chief Financial Officer
c/o Xxxxxxx Xxxx Productions, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
and a copy to: General Counsel
c/o Xxxxxxx Xxxx Productions, Inc.
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
To Licensee: at the address set forth on page 1:
Attention: Chief Executive Officer
29
with a copy to: Dechert LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx
Either party may, from time to time, designate a different address by giving
written notice to the other designating such address.
17. ASSIGNABILITY; BINDING EFFECT
17.1 The performance of Licensee hereunder is of a personal nature and,
therefore, neither this Agreement nor the license or other rights granted
hereunder may be assigned, sublicensed or transferred by Licensee and any such
attempted assignment, sublicense or transfer, whether voluntary or by operation
of law, directly or indirectly, shall be void and of no force or effect. A
Change In Control (as defined below) of Licensee or any parent of Licensee shall
be deemed an assignment hereof. Licensor's consent to any assignment, sublicense
or transfer shall not be a waiver of Licensor's rights with respect to any
further assignment, sublicense or transfer.
17.2 "CHANGE IN CONTROL" shall mean (except as provided below in this
definition) (i) the acquisition by any individual or group, other than Xxxxxxxxx
Xxxxx and her family trusts, in a single transaction or series of transactions
of more than * * of the aggregate voting power of the outstanding equity
securities or interests of Licensee, or (b) the membership in Licensee's Board
of Directors such that more than one-half of the directors are persons whose
election has not been previously recommended by the applicable pre-existing
Board of Directors, or (ii) any merger, consolidation or reorganization of
Licensee, or (iii) any sale or transfer of all or substantially all of the
assets of Licensee to a purchaser or other transferee, in the case of each of
(ii) or (iii), where the stockholders of the Licensee immediately before the
transaction do not own at least * of the combined voting power of the voting
securities of the surviving entity or its parent immediately after the
transaction, provided, however, that any transaction or series of transactions
that are effected solely in connection with a (x) reincorporation, (y) a
reorganization, recapitalization or financing not in connection with the sale of
all or substantially all of the assets or stock or other ownership interests of
Licensee or (z) an underwritten public offering of common stock of Licensee, is
not an Change of Control.
17.3 This Agreement shall inure to the benefit of and shall be binding upon
the parties, their respective successors, Licensor's transferees and assigns and
Licensee's permitted transferees and assigns.
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18. ARBITRATION; COURT ACTIONS
18.1 Except as specifically set forth in Paragraph 14 above or otherwise in
this Agreement, any and all disputes, controversies and claims arising out of or
relating to this Agreement or concerning the respective rights or obligations
hereunder of the parties hereto except disputes, controversies and claims
relating to or affecting in any way Licensor's ownership of or the validity of
the Licensed Xxxx or any registration thereof, or any application for
registration thereof (the "LICENSED XXXX DISPUTES") shall be settled and
determined by arbitration before three arbitrators in New York, New York before
the Commercial Panel of the American Arbitration Association in accordance with
and pursuant to the then existing Commercial Arbitration rules. The arbitrators
shall have the power to award specific performance or injunctive relief and
reasonable attorneys' fees and expenses to any party in any such arbitration and
the courts shall have similar power with regard to that injunctive relief sought
by Licensor, with regard to Licensed Xxxx Disputes or as otherwise provided
herein (collectively "COURT ACTIONS"). However, in any arbitration proceeding
arising under this Agreement, the arbitrators shall not have the power to
change, modify or alter any express condition, term or provision hereof, and to
that extent the scope of their authority is limited. The arbitration award shall
be final and binding upon the parties and judgment thereon may be entered in any
court having jurisdiction thereof. The service of any notice, process, motion or
other document in connection with an arbitration under this Agreement or for the
enforcement of any arbitration award hereunder may be effectuated in the manner
in which notices are to be given to a party pursuant to Paragraph 16 above.
18.2 Court Actions shall be brought in New York, New York in any court
having competent jurisdiction, except that Licensor also may bring an injunctive
proceeding in any jurisdiction where deemed appropriate by reason of its subject
matter. Licensor and Licensee irrevocably submit to the jurisdiction of the
State and Federal courts in New York, New York and the courts in such other
jurisdictions in Court Actions and waive any claim or defense of inconvenient
forum or lack of personal jurisdiction in such forum under any applicable law or
decision or otherwise. Service of any notice, process, motion or other document
in connection with a Court Action may be made in the same manner that notices
may be given under Paragraph 16 above. However, Licensor may serve process in
any manner permitted by the laws of the State of New York, or by the State or
Federal courts located therein, or by the laws or courts of any such appropriate
jurisdiction or any subdivision thereof.
19. MISCELLANEOUS
19.1 (a) Licensee shall sell Articles to the Licensor Group in such
quantities as may be reasonably required. It is understood: (i) that Licensor
orders are subject to reasonable manufacturing calendars consistent with those
for other customers; (ii) that in no event shall Articles ordered by Licensor be
reallocated to other customers without Licensor's prior written approval; (iii)
that Licensee shall not be required to reallocate Articles from other customers
who have prior confirmed orders; and (iv) that Licensor shall have first
priority for all Articles in Licensee's inventory that are not
31
subject to prior confirmed orders by other customers. All such purchases of
Articles shall be billed and paid on terms of sale no less favorable to Licensor
than any other retail customer of Articles of Licensee. In connection with such
sales, Licensee shall deliver to Licensor, free of charge, one sample of each
Article ordered by the Licensor Group (including each color or pattern ordered
for each style). For in-season goods, the price for sales to retail and outlet
stores operating under the Licensed Xxxx (or any other trademark owned or
controlled by Licensor) and to Licensor's catalogs and Websites shall be the
lowest * for such collection, before markdowns and excluding close-outs, less a
* discount. Such initial wholesale selling prices shall not include one-time
special offers to retailers provided such offers do not, in the aggregate,
constitute more than * of the total sales of the relevant Article. Delivery of
such Articles shall not be later than the dates of delivery of the same Articles
to any other customer unless otherwise specified by Licensor. For Closeouts,
Licensor shall have a first option to purchase all such Articles. Accordingly,
before offering any Closeouts to any third party, Licensee shall deliver to
Licensor a schedule of available Closeouts and Licensor shall notify Licensee,
within five (5) business days after the receipt of any such schedule, which, if
any, of the available Closeouts Licensor shall purchase. The price for sales of
Closeouts to retail and outlet stores operating under the Licensed Xxxx (or any
other xxxx owned or controlled by Licensor) and to Licensor's catalogs and
Websites shall be the lower of (i) * for such collection, before markdowns and
excluding close-outs, less a * discount, or (ii) *, defined as the * *. In no
event shall Licensee sell Closeouts to any third party at a price * * without
again offering them to the Licensor Group. No * * shall be due and payable on
any sales under this Paragraph 19.1(b); neither shall Licensee include such
sales in the calculation of * *.
(b) At the request of Licensor, Licensee (or its affiliate) shall sell
any and all Articles available in either Licensee's seasonal collections or in
Licensor retail stores, in such quantities as may be ordered from time to time,
to the Licensor Group or to Licensor's authorized international distributors for
resale outside the Territory (the "FOREIGN DISTRIBUTORS"). The prices to be paid
for Articles sold to such Foreign Distributors shall be * of Licensee's * with *
due to Licensee as a buying agent's commission and * due to Licensor as an
administrative fee. * shall be deemed to mean the * * * not to exceed *. All
other terms of sale shall be * * to said Foreign Distributors than to any other
customer of the Articles. In the event Licensee shall sell Articles to any
Foreign Distributor, Licensee (or its affiliate) shall deal directly with such
Foreign Distributor and shall look solely to it in such dealings. No * shall be
due and payable on any sales under this Paragraph 19.1(b); neither shall
Licensee include such sales in the calculation of its *
32
*. In the event Licensee shall sell custom Articles to any Foreign Distributor,
Licensee (or its affiliate) shall deal directly with such Foreign Distributor
and shall look solely to it in such dealings, provided, however that such
Articles are approved in advanced by Licensor.
19.2 (a) All of the contents of this Agreement and all information relating
to the business, operations and personnel of the members of a party that the
other party learns or has learned during or prior to the Term, including all
financial information and business plans relating to the business of a party or
any of its affiliates, and all concepts, design components, specifications,
creative concepts and marketing, advertising and promotional concepts and plans
that a party provides to the other party or that is approved for use in
connection with Articles ("CONFIDENTIAL INFORMATION"), are their valuable
property. Confidential Information shall not include information or material
that (i) is or becomes generally available to the public other than as a result
of a disclosure by a party in violation of this agreement, (ii) was within the
receiving party's possession prior to its being furnished by or on behalf of the
disclosing party, or (iii) becomes available to the receiving party on a
non-confidential basis from a source other than the disclosing party, provided
that such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the disclosing
party. The parties acknowledge the need to preserve the confidentiality and
secrecy of the Confidential Information. Therefore, during the Term and
thereafter, the parties shall not use or disclose any of the Confidential
Information, except for such use that is permitted under this Agreement or
except as disclosure may be required by applicable law, regulation or legal or
regulatory process. The parties shall take all necessary steps to ensure that
any use by them and those acting on their behalf, including the members of the
Licensor Group and Licensee Group, their Contractors and its suppliers, shall
preserve the confidentiality and secrecy thereof.
(b) All concepts, design components and specifications and all rights
therein, if either submitted by or approved by Licensor for use in connection
with the Articles, shall be the exclusive property of Licensor and may be used
by Licensee only in connection this Agreement. If any concepts, design
components, specifications or other materials so submitted by or approved by
Licensor are not used by Licensee, Licensee shall deliver such items to
Licensor, at Licensee's expense, and shall not use them or permit their use by
others. Whether or not Licensee uses any of these items in connection with the
Products, Licensor may permit others to use them, but only if such use does not
conflict with the rights granted to Licensee hereunder.
(c) Neither Licensee nor any member of the Licensee Group shall
intentionally manufacture or sell any Products or other products bearing designs
or of a styling confusingly similar to the unique or distinctive designs or
unique or distinctive styling of any Articles or authorize any third party to do
so; nor shall Licensee or any member of the Licensee Group intentionally
manufacture or sell (i) any Products or other products using distinctive
materials used for any Articles or (ii) a collection of Products or other
products confusingly similar to any seasonal collection under this Agreement.
Also, Licensee shall implement appropriate internal procedures to ensure that
the provisions of this Paragraph 19.2(c) are not violated.
33
19.3. Notwithstanding anything to the contrary herein, Licensor may
negotiate and enter into agreements with third parties pursuant to which it may
grant licenses to use the Licensed Xxxx in connection with the manufacture,
distribution and/or sale of Products in the Territory, only upon (i) Licensee
failing to provide timely and valid notice of its intent to renew this Agreement
by *, or providing notice of its intent not to renew, (ii) the commencement of
the * Annual Period of the Renewal Term, (iii) Licensee failing to timely cure a
material breach following notice by Licensor, or (iv) Licensee informing
Licensor that it will not cure such material breach. In the event Licensor
enters into such a third party agreement, the third party may not ship its
initial collection of Products prior to the expiration or termination of this
Agreement. Nothing herein shall be construed to prevent the Licensor Group or
any such licensee from showing such Products and accepting orders therefor prior
to the expiration or termination hereof.
19.4. This Agreement shall be construed and interpreted in accordance with
the laws of the State of New York applicable to agreements made and to be
performed in said State, contains the entire understanding and agreement between
the parties hereto with respect to the subject matter hereof, supersedes all
prior oral and written understandings and agreements relating thereto and may
not be modified, discharged or terminated, nor may any of the provisions hereof
be waived orally.
19.5. Nothing herein shall be construed to constitute the parties hereto as
partners or as joint venturers, or either as agent of the other. Under no
circumstances shall Licensee hold itself out as an affiliate or subsidiary of
the Licensor Group or as being associated with the Licensor Group other than as
a duly authorized Licensee of the Licensed Xxxx. Licensee shall have no power to
obligate or bind Licensor in any manner.
19.6. No waiver by a party, whether express or implied, of any provision
hereof, or of any breach or default thereof, shall constitute a continuing
waiver of such provision or of any other provision of this Agreement. Acceptance
of payments by Licensor shall not be deemed a waiver of any violation of or
default under any of the provisions hereof by Licensee.
19.7. Licensor and Licensee represent and warrant to each other that it has
not dealt with any broker, finder or other person in connection with the
negotiation and execution of this Agreement. Each party agrees to and shall
indemnify and hold harmless the other from any and all losses, costs, damages,
and expenses arising out of or in connection with claims of any kind which
assert the inaccuracy or breach by the indemnitor of the above representation
and warranty, including, without limitation, attorneys' fees and court costs.
19.8. Notwithstanding any other provision of this Agreement and except for
any monetary obligations due under this Agreement, any performance by Licensee
or Licensor under this Agreement shall be extended for the period of any delay
caused by an act of God or the public enemy, civil war, insurrection or riot,
fires, explosions, major
34
accidents, governmental priorities, restrictions or allocations or strikes or
labor disputes, but in no event shall such extension be longer than One Hundred
Twenty (120) days. In any such event, the party affected thereby shall promptly
notify the other in writing of such affected party's inability to perform.
19.9. During the Term and for a two (2) year period following the
termination or expiration of this Agreement, Licensor and Licensee each agrees
and represents that it shall not, directly or indirectly, solicit for employment
or employ on any basis whatsoever, any level employee of the other party who, in
such party's reasonable judgment, then holds a position requiring a material
level of responsibility, trust, training, experience or know-how.
19.10. Neither Licensee nor Licensor shall, directly or indirectly, during
the Term or at any time thereafter, do or refrain from doing anything, by words,
actions or other communications: (i) in the case of Licensee, that may adversely
affect, or disparage the reputation, prestige, value, image or impression of the
Licensed Xxxx, Licensor, the Articles, the Licensor Group or any of the Licensor
Group's officers, directors, affiliates, personnel, products, brands, or related
companies, and (ii) in the case of Licensor that may adversely affect, or
disparage the reputation, prestige, value, image or impression of Licensee, the
Articles, the Licensee Group or any of the Licensee Group's officers, directors,
affiliates, personnel, products, brands, or related companies.
19.11. (a) Licensor hereby represents and warrants to Licensee that: (i)
Xxxxxxx Xxxx Productions (LIC) is a corporation duly organized, validly existing
and in good standing under the laws of the Bahamas; (ii) it is the owner of the
Licensed Xxxx in the Territory; (iii) it has all requisite power and authority
to execute and deliver this Agreement and to carry out the transactions
contemplated hereby; and (iv) the execution by Licensor of this Agreement and
the execution of the transactions contemplated hereby do not and shall not (1)
conflict with, result in a breach of the terms and conditions of, or constitute
a default under Licensor's articles of incorporation or bylaws, or any license,
agreement, contract, indenture or other instrument to which Licensor is now a
party or by which Licensor or its assets may be bound or affected, or (2) to the
best of Licensor's knowledge, violate any law, regulation or court order
applicable to Licensor. Licensor further represents and warrants that Licensee's
exercise of the rights granted hereunder, in accordance with the terms of this
Agreement, (x) will not violate or infringe upon the rights of any third party
or entity; (y) that there is no claim, suit, demand, or allegation pending, or
to Licensor's knowledge, threatened, alleging that the use of the Licensed Xxxx
infringes or otherwise violates the rights or any third party or entity; and (z)
that Licensor knows of no basis for any such claim, suit, demand, or allegation.
(b) Licensee hereby represents and warrants to Licensor that: (i) it
is a corporation duly organized, validly existing and in good standing under the
laws of the State of New York; (ii) it has all requisite power and authority to
execute and deliver this Agreement and to carry out the transactions
contemplated hereby; and (iii) the execution by Licensee of this Agreement and
the execution of the transactions contemplated hereby do not and shall not (1)
conflict with, result in a breach of the terms and conditions of, or
35
constitute a default under Licensee's articles of incorporation or bylaws, or
any license, agreement, contract, indenture or other instrument to which
Licensee is now a party or by which Licensee or its assets may be bound or
affected, or (2) to the best of Licensee's knowledge, violate any law,
regulation or court order applicable to Licensee.
19.12 This Agreement may be executed in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. If this Agreement is executed in counterparts, no signatory
hereto shall be bound until all parties named below have duly executed or caused
to be duly executed a counterpart of this Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
the day and year first above written.
XXXXXXX XXXX PRODUCTIONS (LIC), INC.
----------------------------------------
BY:
ITS:
XXXXXXX CHAUS, INC.
----------------------------------------
BY:
ITS:
36
EXHIBIT 1
BUSINESS PLAN AND MARKETING PLAN SAMPLE
I. BUSINESS PLAN
A. SALES OBJECTIVES
1. PROJECTED VOLUMES
2. PROJECTED DOORS
3. DISTRIBUTION STRATEGIES
4. ANALYSIS OF PAST SEASON VOLUMES
5. DOOR PLAN DETAILING PROJECTED PRODUCT ASSORTMENT BY DOOR
B. ADVERTISING, MARKETING, PROMOTION AND PUBLIC RELATIONS OBJECTIVES
C. SHOP-IN-SHOPS
1. STRATEGIES
2. PROJECTED EXPENDITURES BY BRAND, CUSTOMER, DOOR
D. ORGANIZATIONAL STRUCTURE
E. LAUNCHES OF BRANDS, NEW CATEGORIES
F. ANALYSIS OF COMPETITION INCLUDING PRICING
G. QUALITY, SOURCING AND OPERATIONAL ISSUES
II. MARKETING PLAN
A. STRATEGY, INCLUDING EXPENDITURES, BY BRAND AND TYPE OF ADVERTISING
VEHICLES, MARKETING AND PUBLIC RELATIONS
B. LAUNCH ACTIVITIES
C. COLLATERAL SUPPORT
D. MEDIA PLAN
37
1. ADVERTISING SCHEDULE BY BRAND FOR ALL PRINT MEDIA
2. RADIO AND TELEVISION, IF APPLICABLE
38
EXHIBIT 2
XXXXXXX XXXX PRODUCT APPROVAL FORM
LICENSEE: ___________________________
PRODUCT CATEGORY: ___________________
STYLE/ REFERENCE NO: ________________ DATE: ________
LINE: XXXXXXX XXXX NEW YORK _________ COLLECTION: ____________
REACTION XXXXXXX XXXX _________
CONCEPT APPROVAL SKETCH/ DESCRIPTION:
MATERIALS: ____________________________________
____________________________________
____________________________________
APPROVAL SIGNATURE: _________________ DATE: ________
FINAL SAMPLE APPROVAL: ______________ DATE: ________
PRODUCTION APPROVAL: ________________ DATE: ________
39
EXHIBIT 3
PRE-EXISTING BRANDS & CATEGORY PORTFOLIO
40
EXHIBIT 4
RETAIL ACCOUNT STORE APPROVAL FORM
RETAIL ACCOUNT APPROVAL FORM
TO BE SUBMITTED FOR EACH NEW ACCOUNT
APPROVED [ ] NOT APPROVED [ ]
--------------------------------------------------------------------------------
DATE SUBMITTED ___________________________________
DISTRIBUTOR NAME ______________________________________________________
STORE NAME ______________________________________________________
BRAND KC [ ] REACTION [ ]
STORE TYPE
Specialty [ ]
Department [ ]
# of stores [ ]
Address ______________________________________________________
Phone/ fax ______________________________________________________
E-mail ______________________________________________________
Contact name ______________________________________________________
Store markup [ ]
Footwear brands carried 1 __________________________________________________
2 __________________________________________________
3 __________________________________________________
4 __________________________________________________
5 __________________________________________________
6 __________________________________________________
Please attach 3 photos showing: 1) store front 2) interior 3) area proposed for
KC
41
