FIFTH AMENDMENT TO LICENSE AGREEMENT
EXHIBIT 10.3
*CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND IS THE TYPE THAT THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FIFTH AMENDMENT TO LICENSE AGREEMENT
Reference is made to the license agreement between Coach Services, Inc. (“Licensor”)1 and Movado Group, Inc. and Swissam Products Limited (collectively, “Licensee”) dated January 13, 2015, as amended by the First Amendment dated January 6, 2020, the second amendment dated August 25, 2021, the Third Amendment dated July 1, 2022, and the Fourth Amendment dated August 16, 2023 (collectively, the “License Agreement”). This Fifth Amendment is made and effective as of January 1, 2024 (“Fifth Amendment Effective Date”), but with the understanding that the terms of this Fifth Amendment apply retroactively to govern the Parties’ performance under the License Agreement from and after July 1, 2023. Each of Licensor and Licensee is a “Party” and are collectively the “Parties.” Capitalized terms used but not defined in this letter have the respective meanings given to them in the License Agreement.
1 Licensor and Coach IP Holdings, Inc. are subsidiaries of Tapestry, Inc. Licensor holds the exclusive right to use, exploit, and sublicense all trademark rights owned by Coach IP Holdings, Inc., including, without limitation, the Licensed Marks in connection with the manufacture and sale of Licensed Products within the Territory.
WHEREAS, the Parties now desire to amend certain provisions of the License Agreement, on and subject to the terms and conditions set forth in this Fifth Amendment.
NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
6.4 Licensee shall handle all customer inquiries and complaints relating to the Licensed Products in a manner substantially consistent with its present practice and shall provide substantially the same service, warranties, and repair and replacement rights to wholesale purchasers and consumers of the Licensed Products as Licensee presently provides. Licensee shall be solely responsible for all costs associated with (a) the handling of customer inquiries and complaints relating to the Licensed Products, and (b) the provision of service, warranties, repair and replacement relating to the Licensed Products, provided, however, that for Licensed Products purchased by Licensor from Licensee for sale in Licensor’s factory outlet stores, Licensor shall be solely responsible for all costs associated with the handling of all returns of such Licensed Products to Licensor's factory outlet stores. Notwithstanding the foregoing, Licensee shall remain responsible for any general quality issues with respect to the Licensed Products.
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11.1 Licensee shall pay to Licensor a royalty based on Licensee’s Net Sales (defined as invoice price less Deductions) of the Licensed Products to all Non-Licensor Channels. If in any Contract Year the aggregate Deductions (as defined below) on sales of Licensed Products in Non-Licensor Channels exceed [***] of Licensee’s total gross sales of Licensed Products, Licensee shall pay a royalty on the amount of such excess Deductions. In addition, if in any Contract Year the aggregate Discounts (as defined below) on sales of Licensed Products in any Non-Licensor Channel specified in the table below exceed the applicable Discount Cap indicated in such table, Licensee shall pay a royalty on the amount of such excess Discounts.
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“Deductions” consist of credits for returns of Licensed Products; and allowances, markdowns, rebates, pricing adjustments, shortage credits and damage allowances, in each case granted after the initial invoice is issued. “Deductions” exclude taxes, freight charges, prepayment terms (including any added charge or price load charge), operational, administrative, or logistical chargebacks, and debt reconciliation, co-op expenses, and/or any advertising or marketing relating expenses, unless pre-authorized in writing by Licensor.
“Discounts” consist of the aggregate amount by which the initial invoice price of Licensed Products sold by Licensee falls short of the suggested local retail price of such products.
Additional Definitions. The following terms appearing in Section 11.1 are defined as follows:
Allowances |
Debits taken by customers (e.g., markdown allowances) |
Credits |
Accounts receivable credit |
Damage allowances |
Credits for documented damaged Licensed Products, subject to a prior negotiated rate |
Markdowns |
Markdowns on Licensed Products (e.g., markdowns based on date and style list) |
Operational, Administrative, or Logistical Chargebacks |
Chargebacks from customers based on administrative or logistical issues (e.g., ASN, no packing slip, fill rate violations) |
Prepayment terms |
Discounts or allowances based on payment timing |
“Subject to Sections 11.1 and 11.2, for Contract Years FY 2024-2028 the base royalty rate applied to Licensee’s sales shall be [***] on Net Sales of all Licensed Products sold to Non-Licensor Channels.”
“Licensee shall make the following guaranteed minimum royalty payments (“GMR”) in each Contract Year:
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“Licensee shall make its Royalty payments to Licensor on a quarterly basis, together with a statement setting forth the quarterly sales of the Licensed Products to Non-Licensor Channels and by Licensee-Affiliated Retailers. All Royalty payments shall be made in U.S. Dollars. Licensee shall not pay royalties on its sale of Licensed Products to Licensor Channels. Licensee’s GMR payments are due and payable in equal quarterly installments within thirty (30) days of the later of (i) the beginning of each Contract Year quarter beginning July 1, 2024 or (ii) the date on which Licensor submits the related invoice to Licensee. If Licensee’s Royalty payment obligations exceed Licensee’s required GMR payments for any Contract Year, Licensee shall pay such amounts within thirty (30) days of the end of the Contract Year.
“In respect of Licensor’s costs associated with, and in support of Licensor’s sales of Licensed Products through Licensor Channels (including, without limitation, via Dropship, as set forth in Section 12.13), Licensee shall pay to Licensor [***].”
12.4 Beginning with Contract Year 2021, Licensee agrees that at a minimum it will make the following advertising expenditures in connection with the Licensed Products:
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In the event Licensee fails to make the foregoing minimum advertising expenditures in connection with the Licensed Products in any Contract Year, Licensee shall have [***] to make advertising expenditures sufficient to cover the shortfall. Any such advertising expenditures made to cover a previous Contract Year’s shortfall shall not be credited toward Licensee’s minimum required advertising expenditures for the Contract Year in which such shortfall expenditures are made. “Net sales” as used in this paragraph shall mean all sales on the basis of which the royalty is calculated under Paragraphs 11.1 and 11.2 hereof. All amounts are shown in U.S. Dollars.
Deletions and Clarifications.
“During the term, Licensee shall create and provide Licensor and each approved Retailer (including Online Watch Retailers) with such photographs of each SKU of Licensed Products as are necessary for Licensor and such Retailers to advertise the Licensed Products on the Websites, including one hero image and two alternative images (the “Product Images”). During the term, Licensor shall create and provide Licensee (which in turn shall provide each approved Retailer (including Online Watch Retailers)) with artwork, photographs (excluding the Product Images), lists, and descriptions of Licensed Products, editorial content, product sequencing, and related products (i.e., “suggested sells”), approved forms of Licensor’s logos, trademarks, trade names, and other materials reasonably necessary for Licensor and any Retailers (including Online Watch Retailers) to advertise the Licensed Products on the Websites (collectively, together with the Product Images, “Content”). All Content shall be owned by Licensor. Any display of Content on the Websites or otherwise shall be subject to Licensor’s prior written consent. Licensee may request that Licensor provide to Licensee Content that is being used by Licensor on its Coach websites (including, without limitation, ▇▇▇▇▇.▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇), and any other Coach website operated by or for Licensor, which request Licensor shall evaluate in its sole reasonable discretion on a case-by-case basis. Licensee will comply with all reasonable timelines and guidelines established by Licensor and provided to Licensee in writing from time to time, with respect to any Licensee requests for and/or use of any Content.
Content shall also be used in connection with Licensee’s sale and distribution of Licensed Products via drop shipment pursuant to the Licensee Dropship Agreement dated October 1, 2021 (the “Drop Ship Agreement, attached as Exhibit 1). Licensee shall produce the Product Images in a manner consistent with the technical specifications set forth in the Drop Ship Agreement, and with Licensor’s creative instructions and direction.
Licensee and Licensor agree and intend that all elements of the Content are Works Made For Hire within the meaning of the United States Copyright Act of 1976 and shall be the property of Licensor, who shall be entitled to use and license others to use such works of authorship. To the extent such works of authorship are not Works Made For Hire as defined by the United States Copyright Act of 1976, Licensee shall assign to Licensor copyright in such works of authorship, and Licensee irrevocably appoints Licensor as its attorney-in- fact to execute such documents if Licensee fails to return executed copies of such documents to Licensor within five (5) days following submission. Licensee waives all moral rights in works of authorship created pursuant to this Agreement. Licensee is responsible for obtaining all rights, permissions, and clearances necessary to create, copy, reproduce, display, disseminate, and otherwise use the Content, to allow Licensor and any Retailers to use the Content, and to transfer and assign all rights in the Content to Licensor.”
“Licensor shall keep and maintain at its regular place of business, or at such off site document storage facility as Licensor shall use from time to time for the retention of business records generally, complete and accurate records and accounts in accordance with Generally Accepted Accounting Principles substantiating the information required to be reported by Licensor under Paragraphs 8.2 and 12.7 hereof, for at least [***] years following the creation of such record or account or for such other period of time as specified in Licensor’s written record retention policy. The audit look-back
period shall not exceed [***] Contract Years. By way of illustration, if an audit is conducted in 2028, then the audit period may only go back to the beginning of [***]. ”
“Should an audit disclose that Licensee underpaid royalties for any given year, Licensee shall forthwith and upon written demand pay Licensor the amount owed, together with interest thereon, at a rate of [***] per annum calculated from the due date of such royalties unless Licensee shall, by written notice sent to Licensor within [***] days after notice to Licensee of such audit results, reasonably dispute the same in which event the parties shall each name an independent auditor who shall together appoint a third auditor to make a determination as to the matter, which determination shall be binding on the parties.”
“Notwithstanding anything to the contrary in Paragraph 14.2, if Licensee files a petition in bankruptcy, or by an equivalent proceeding is adjudicated a bankrupt, or if a petition in bankruptcy is filed against Licensee and is not dismissed within sixty (60) days, or if Licensee becomes insolvent or makes an assignment for the benefit of creditors or any arrangement pursuant to any bankruptcy law, or if Licensee discontinues its business or if a receiver is appointed for Licensee, or if Licensee assigns, sublicenses, transfers, or otherwise encumbers its rights, duties, and obligations under this Agreement without the written consent of Licensor in violation of Section 18, this Agreement shall automatically terminate without any notice whatsoever being necessary, to the full extent allowed by applicable law.”
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AGREED AND ACCEPTED |
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COACH SERVICES, INC., |
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MOVADO GROUP, INC. |
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for the Coach brand |
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Senior Director, Licensing |
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Senior VP MGI - Director Swissam |
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9/12/2024 |
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9/12/2024 |
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SWISSAM PRODUCTS LIMITED |
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Title: |
Senior VP MGI - Director Swissam |
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Date: |
9/12/2024 |
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