EXHIBIT 10.31
LICENSE AGREEMENT
BY AND BETWEEN
NAUTICA APPAREL, INC.
AND
AUTHENTIC FITNESS CORPORATION
MARCH 1, 2003
PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT AND FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
LICENSE AGREEMENT
This License Agreement made and entered into as of March 1, 2003 by and between
Nautica Apparel, Inc., a Delaware corporation having an address at 00 Xxxx 00xx
Xxxxxx, Xxx Xxxx, XX 00000 ("LICENSOR"), and Authentic Fitness Corporation, a
Delaware corporation having an address at 0000 Xxxxxxx Xxxx., Xxx Xxxxxxx,
Xxxxxxxxxx 00000 ("LICENSEE").
WHEREAS, LICENSOR is the owner of the xxxx "NAUTICA" which is registered in
the United States and elsewhere and the other names, marks and logos set forth
in Schedule A hereto (collectively, the "Nautica Names and Marks");
WHEREAS, LICENSOR engages, either directly or indirectly, in the business
of marketing and selling apparel and accessories bearing the Nautica Names and
Marks;
WHEREAS, the Nautica Names and Marks have acquired a reputation for a high
standard for quality and, through usage, have acquired distinctiveness and have
become associated in the public's mind with the business of LICENSOR; and
WHEREAS, LICENSOR is willing to grant to LICENSEE, and LICENSEE desires to
acquire from LICENSOR, upon the terms and conditions hereinafter set forth, an
exclusive license with respect to the Nautica Names and Marks set forth on
Schedule A hereto for the Licensed Products in the Territory, as set forth in
Schedule B of the Agreement;
NOW, THEREFORE, in consideration of these recitals, of the following mutual
covenants and other good and valuable consideration, LICENSOR and LICENSEE agree
as follows:
SECTION 1
Schedules/Definitions
1.1 Attached hereto are the following Schedules which are herein
incorporated by reference:
Schedule A - Images of the Nautica Names and Marks.
Schedule B - Schedule of certain terms and conditions.
1.2 Certain terms used herein and in the Schedules shall have the
definitions assigned to them in the context in which they appear. Such
definitions shall be equally applicable to both the singular and plural forms of
the terms defined, and words of any gender shall include each other gender where
appropriate, and words such as "herein", "hereof" and "hereunder", and words of
similar import, shall refer to this Agreement, including the Schedules hereto
which are an integral part of the Agreement, as a whole and not to any
particular section or part thereof.
SECTION 2
Grant of Rights
2.1 Grant of Rights. (a) Subject to the terms and conditions of this Agreement,
LICENSEE shall have the exclusive right to use the Nautica Names and Marks
solely in connection with the exercise of the rights described in Item 4 of
Schedule B hereto, in the
1
Territory, described in Item 3 of Schedule B hereto, with respect to the
products described in Item 5 of Schedule B hereto (the "Licensed Products").
LICENSEE acknowledges and agrees that: (i) the rights granted to LICENSEE
hereunder are limited and only apply to the use of the Nautica Names and Marks
which are specifically set forth on Schedule A hereto; (ii) LICENSEE shall have
the exclusive right to use the trademark "Nautica", whether or not in
combination with any other names or marks, on the Licensed Products in the
Territory, pursuant to the terms of this Agreement; (iii) LICENSEE shall have no
right to use the Nautica Names and Marks in connection with any other name or
xxxx whether or not such other name or xxxx is used to identify a separate
derivative line, for example, "Nautica Jeans", etc., unless LICENSOR shall
otherwise agree in writing; (iv) LICENSOR reserves the right for itself and for
its other licensees the exclusive right to use all other names and marks
containing the word "Nautica" on all products other than the Licensed Products
in the Territory; and (v) LICENSOR reserves the right for itself the exclusive
right vis a vis the LICENSEE to use the Nautica Names and Marks in connection
with any other name or xxxx to market and sell the Licensed Products through the
Internet; provided however, that LICENSOR shall purchase such Licensed Products
from LICENSEE and subject to the rights granted to LICENSEE in Item 4(a) of
Schedule B. Without any loss of generality to the foregoing, LICENSEE
acknowledges and agrees that LICENSOR reserves the right for itself and for its
other licensees the right to use all names and marks containing the word
"Nautica" and all names and marks which derive from, relate to or are otherwise
similar to the names and marks specifically shown on Schedule A hereto. Except
to the extent rights to use the Nautica Names and Marks are specifically granted
to LICENSEE hereunder, LICENSOR reserves for itself and its other licensees all
other rights to use the Nautica Names and Marks. In the event of any dispute
between LICENSEE and LICENSOR or between LICENSEE and any other licensee of
LICENSOR in the Territory with respect to whether particular merchandise is a
"Licensed Product", such dispute shall be resolved by LICENSOR in its sole
reasonable determination and such determination shall be binding upon LICENSEE
and such other licensee.
(b) Notwithstanding anything to the contrary in the foregoing, in the event that
LICENSOR, determines, in its sole judgment, that it is desirable to license a
"Diffusion Brand", as defined below, for marketing the Licensed Products in the
Territory then, LICENSOR shall first advise LICENSEE in writing of its intention
to negotiate with regard to such Diffusion Brand. LICENSEE shall have thirty
(30) days from the date of LICENSOR's letter within which to respond in writing
to LICENSOR, either affirming or declining its interest in entering such
negotiations with LICENSOR. LICENSEE's failure to respond to LICENSOR during
such time shall be deemed a rejection of LICENSOR's inquiry. If LICENSEE, in
fact, advises LICENSOR of its desire to license a Diffusion Brand to include one
or more categories of the Licensed Products, then LICENSEE shall provide
LICENSOR with a business plan and the parties thereupon shall attempt in good
faith to negotiate an amendment to the License Agreement. Such negotiation
period shall not exceed thirty (30) days. In the event that LICENSOR and
LICENSEE do not enter into such an amendment to the Agreement during this time
limit, LICENSOR may enter into an agreement with a third party for the licensing
of such rights in the Territory. Nothing herein shall obligate LICENSOR to reach
an agreement on the terms of such an amendment with LICENSEE. For purposes of
this provision, a Diffusion Brand shall mean a brand derived from and closely
associated with the Nautica Names and Marks, but not bearing the Nautica Names
and Marks as a brand name. The parties agree that if LICENSOR purchases or
develops a separate line or brand not derived from or associated with the
Nautica Names and Marks, such separate brand shall not be a Diffusion Brand
merely by a disclosure that such brand is a Nautica company, or similar
disclosure.
2
(c) In the event that LICENSOR grants the Diffusion Brand rights specified
in Section 2.1 (b) above to a third party other than LICENSEE and LICENSEE
reasonably shall determine that it has been adversely affected thereby, LICENSEE
shall have the right to terminate this License Agreement by giving written
notice of such termination, to be effective upon the expiration of twelve (12)
months from the date of the written notice ( the "Termination Date"). Such
termination shall be subject to all applicable rights of LICENSEE to dispose of
inventory hereunder and all obligations of LICENSEE hereunder (except those
which expressly survive expiration or termination) shall terminate on and as of
the Termination Date.
2.2 Rights Personal. The rights granted hereby (the "License") are personal
to LICENSEE and limited to the extent of the grant of such rights and LICENSEE
shall not have the right to exercise the rights described in Item 4 of Schedule
B hereto other than subject to such limitation, nor shall LICENSEE have the
right to license others to exercise such rights with respect to the Licensed
Products within or without the Territory.
2.3 Term. This Agreement shall be effective upon the execution and delivery
of this Agreement by the parties hereto and the satisfaction of all conditions
precedent, if any, set forth in Item 6 of Schedule B. Unless sooner terminated
as provided in this Agreement, the term of the License granted hereby to
LICENSEE shall expire on the date set forth in Item 7(a) of Schedule B hereto
(the "Term"). Provided that LICENSEE has complied with all of its obligations
under this Agreement, LICENSOR agrees to enter into negotiations with LICENSEE
to renew the License upon such terms and conditions as may be mutually agreed to
by LICENSOR and LICENSEE unless terms for renewal of this Agreement are
otherwise specifically provided for in Item 7(b) of Schedule B, in which event,
such terms as set forth in Schedule B shall govern. If this Agreement is
renewed, "Term" shall mean the term of the Agreement as renewed.
2.4 Personal Benefit. LICENSEE expressly represents and warrants that the
License has been acquired to exercise the rights described in Item 4 of Schedule
B hereto with respect to the Licensed Products in the Territory and not for
transfer or other disposition of the License to others, except as specifically
otherwise provided herein.
SECTION 3
Nautica Names and Marks
3.1 Validity and Use.
(a) LICENSEE acknowledges the validity, value and proprietary nature
of the Nautica Names and Marks, including all goodwill associated therewith,
whether generated by LICENSOR, LICENSEE or other licensees, and agrees that they
are, and shall remain, the exclusive property of LICENSOR. LICENSEE's use of the
Nautica Names and Marks shall inure to the benefit of LICENSOR. LICENSEE shall,
at LICENSEE's expense, assign and convey to LICENSOR any such rights to or
interest in the Nautica Names and Marks as LICENSEE may acquire by reason of the
use thereof. LICENSEE shall not, by use, registration or any other means,
establish title to the same or confusingly similar names, logos, trademarks,
service marks and slogans, or other source identifying indicia analogous to the
same.
3
(b) LICENSEE shall comply with any and all applicable national,
provincial, state and local laws, regulations and interpretations thereof
relating to the use of the Nautica Names and Marks, including, but not limited
to, any which requires the registration of the Nautica Names and Marks. LICENSEE
shall, prior to or contemporaneous with such compliance, provide LICENSOR with
copies of all documents filed by LICENSEE, together with an explanation of the
reasons therefor, and copies of the law or regulations applicable. Any
registration of the Nautica Names and Marks shall specify that LICENSEE's use
thereof is only as a licensee of LICENSOR, is limited to the Territory and will
terminate with the termination of the License. No such registration shall create
in LICENSEE any property right in or privilege to the use of the Nautica Names
and Marks, which survive the termination of the License.
(c) LICENSEE shall not interfere with the use or registration of the
Nautica Names and Marks by LICENSOR or by any other licensee of LICENSOR.
LICENSEE shall not use the Nautica Names and Marks or any confusingly similar
names, logos, trademarks, service marks, slogans , or other source identifying
indicia analogous to the same, or refer in any way to the fact that it is a
licensee of LICENSOR, in connection with any business activity or in the
operation of any business entity other than as authorized by this Agreement.
3.2 Right to Change; Cooperation. LICENSOR shall have the right,
exercisable from time to time, to make any changes it deems necessary in and to
the Nautica Names and Marks. LICENSEE shall cooperate with LICENSOR in effecting
any such changes by following all reasonable directions of LICENSOR relating
thereto, after reasonable notice and opportunity to dispose of the Licensed
Products bearing or incorporating the Nautica Names and Marks in such earlier
form or format.
3.3 Sub-Licensing/Manufacturing.
(a) LICENSEE shall not, in any manner, authorize or purport to
authorize another to use the Nautica Names and Marks, except to the extent
specifically provided herein. Notwithstanding the foregoing, LICENSEE may have
the Nautica Names and Marks affixed to Licensed Products being manufactured
outside the Territory, provided LICENSEE takes all commercially reasonable
precautions to prevent labels, tags and other indicia of the Nautica Names and
Marks from being used otherwise than in connection with the Licensed Products
for distribution and sale within the Territory. LICENSEE shall not manufacture
the Licensed Products in Myanmar or Saipan unless Licensor shall have provided
its approval hereunder and such countries as LICENSOR shall advise LICENSEE are
prohibited based on their noncompliance with applicable labor laws and
LICENSOR's Code of Conduct, as required in the manufacturing agreement
("Supplier Agreement"), attached hereto as Exhibit A, and made a part of this
Agreement or such other reasons as LICENSOR shall in its sole discretion
determine.
(b) Code of Conduct. LICENSOR's Code of Conduct ("Code") applies to
any entity manufacturing, or otherwise in the line of production of, Licensed
Products (including the components thereof). LICENSEE must ensure that LICENSEE
and all third party manufacturers, subcontractors and suppliers ("Suppliers")
comply with the terms of the Code and evidence such compliance by:
(i) prior to the commencement of the manufacturing of Licensed
Products, executing, and having all Suppliers execute, the
Code in the form attached hereto, retaining such documents
in a safe place and providing such documents immediately to
LICENSOR at its request; and
4
(ii) displaying and using its commercially reasonable good faith
efforts to cause all Suppliers to display the Code, in a
clearly visible location in LICENSEE's manufacturing
facilities (if applicable) and in the manufacturing
facilities of LICENSEE's Suppliers, at all times during the
term of this Agreement.
(c) Monitoring Program. LICENSEE agrees that prior to the commencement
of the manufacturing of Licensed Products, it will have in effect, to the
satisfaction of LICENSOR, a program of monitoring manufacturing facilities,
whether operated by LICENSEE or by Suppliers, that is sufficient to ensure their
compliance with the Code and all applicable laws and regulations pertaining to
wages, overtime compensation, benefits, hours, hiring and employment, workplace
conditions and safety, the environment, collective bargaining, and freedom of
association, and that the other products manufactured by Supplier and the
components thereof are made without the use of child (persons under the age of
15 or younger than the age for completing compulsory education, if that age is
higher than 15), prison, indentured, exploited, bonded, forced or slave labor.
Such compliance will be evidenced by LICENSEE, upon execution of this Agreement,
by executing and abiding by the Certification in the form presented on the
Supplier Agreement, as may be amended from time to time, and executing and
abiding by any such other form as may be provided by LICENSOR from time to time.
If LICENSEE uses an agent for monitoring Suppliers, then such agent(s) shall be
approved by LICENSOR. If LICENSEE already has in place such agent(s) pursuant to
a preexisting contract, then LICENSOR shall be authorized to engage its own
agent to monitor LICENSEE's Suppliers on an as needed basis, but at least once
quarterly, at LICENSEE's expense.
(d) Third Party Manufacturing Agreement. All of LICENSEE's third party
manufacturing agreements must substantively conform with the Supplier Agreement,
attached hereto as Exhibit A and made a part hereof, as may be amended from time
to time by LICENSOR. Within thirty (30) days after establishing a new
arrangement with a Supplier, LICENSEE must inspect each Supplier and provide
approval, signed by an authorized employee or agent of LICENSEE that such
Supplier is in compliance with this Section 3.3, and will obtain and immediately
provide to LICENSOR, at LICENSOR's request, the properly executed Supplier
Agreement from each such Supplier, and/or such other forms as reasonably may be
provided by LICENSOR from time to time. Within thirty (30) days after
establishing a new arrangement with a Supplier, LICENSEE must obtain and provide
to LICENSOR, at LICENSOR's request, the signature of an authorized
representative from each Supplier on a Certification substantially in the form
set forth in the Supplier Agreement, or such other form as reasonably may be
provided by LICENSOR from time to time. In the event LICENSEE has knowledge of,
has reason to believe, or should have reason to know that, any Supplier is in
material breach of the Supplier Agreement and/or Certification, as the case may
be, LICENSEE must immediately notify LICENSOR and LICENSEE shall, at its sole
expense, take immediate action to rectify such breach, including, where LICENSOR
deems it necessary, immediate termination of its relationship with such
Supplier. If LICENSEE fails to take immediate action or such action is not
successful, LICENSEE will assign its rights to proceed against such Supplier to
LICENSOR and LICENSOR will, at LICENSEE's expense, have the right to pursue all
available remedies to protect its rights. Notwithstanding the foregoing,
LICENSEE acknowledges that it is obligated under all of the provisions of this
Agreement to ensure that the production of Licensed Products is in compliance
with the terms and conditions of this Agreement. If LICENSOR shall have
requested that LICENSEE take specific effective steps with respect to
non-compliance or unauthorized conduct by any Supplier under this provision and
LICENSEE shall have refused to or failed to take any such action, then
LICENSEE's refusal or failure shall be deemed to be a material breach of this
Agreement.
5
(e) Supplier Reports. In addition to all other reports required by
this Agreement, in order to maintain LICENSOR's high standard of quality control
and to ensure that appropriate measures are taken against counterfeiting,
LICENSEE shall provide a report to LICENSOR, on a quarterly basis, with the
following information:
(i) the name and address of each Supplier;
(ii) the type of Licensed Products manufactured by each Supplier;
(iii) the quantity of Licensed Products anticipated to be
manufactured by each Supplier;
(iv) the type of components provided by each Supplier; and
(v) any other relevant information regarding all such entities,
as reasonably requested by LICENSOR.
(f) Inspection of Facilities. LICENSEE will regularly, and not less
than two (2) times per year, inspect or designate a third party to inspect the
facilities it utilizes and those facilities utilized by Suppliers for compliance
with this provision and will take all reasonable action necessary to cure any
deficiencies. LICENSEE further agrees that it will terminate any agreement with
any such Supplier found to be in material default or in material non-compliance
on three (3) separate inspections. LICENSOR and its duly authorized
representatives will have the right to inspect all facilities utilized by
LICENSEE, and LICENSEE shall ensure in its arrangements with its Suppliers that
LICENSOR (or its designee) shall also be provided access to the premises and
records of Suppliers in connection with the manufacture, storage or distribution
of Licensed Products, and for LICENSOR to examine: (a) LICENSEE's manufacturing
facilities, residential facilities (if any) and any manufacturing and/or
residential facility operated by any of LICENSEE's Suppliers; (b) LICENSEE's and
any of its Suppliers' books, records and documents necessary to evidence such
entities' compliance with the Code and all applicable laws, rules and
regulations; and (c) LICENSEE's and its Suppliers' books, records and documents
relating to the use of chemicals and dyes in the fabrics, trim, garments and
other merchandise manufactured hereunder. For purposes of this Agreement, all
such books, records and documents shall be maintained by LICENSEE and LICENSEE
shall provide in its Supplier Agreements that Suppliers shall maintain such
books, records and documents in a secure and readily accessible location for a
period of three (3) years from their creation. LICENSOR shall have the right to
review such inspection reports and related information or correspondence and
communications. In the event that LICENSOR determines that any inspection
indicates that the inspected facilities may not be materially complying with the
Code or applicable laws to LICENSOR's reasonable satisfaction, LICENSEE shall
pay LICENSOR for the cost of any subsequent inspections of such facilities by
LICENSOR or its representatives to address Code or legal compliance.
3.4 Prohibited Uses of the Nautica Names and Marks. LICENSEE shall not use
the Nautica Names and Marks, any facsimiles thereof or any confusingly similar
names or marks as part of its name or in the name of any bank account of
LICENSEE without the prior written consent of LICENSOR.
3.5 Unauthorized Use by Others. LICENSEE shall (a) promptly report to
LICENSOR any unauthorized use of the Nautica Names and Marks or confusingly
similar names or marks, (b) as specified below, cooperate with LICENSOR in
precluding unauthorized use of the Nautica Names and Marks or any confusingly
similar names, marks, logos or slogans and
6
(c) promptly notify LICENSOR of, and cooperate in the defense of, any suits
filed against LICENSEE challenging the validity of any or all of the Nautica
Names and Marks.
After receipt of such report and/or notification notice from LICENSEE,
LICENSOR shall take such action to stop such unauthorized use or defend such
claim and otherwise act promptly to protect the Nautica Names and Marks and
Nautica Products in the Territory as LICENSOR in its sole discretion shall
determine. LICENSEE shall, at LICENSOR'S expense, if so required by LICENSOR,
join LICENSOR as a party to any action brought by LICENSOR for such purposes.
LICENSEE agrees that LICENSOR shall have the sole power to take legal action
with respect to the infringement of its designs or the protection of the Nautica
Names and Marks. Notwithstanding anything to the contrary in the foregoing, in
the event that LICENSEE shall request LICENSOR to take legal action with respect
to product diversion or counterfeiting of products bearing the Nautica Names and
Marks, LICENSOR shall, with counsel of LICENSOR's choosing but at LICENSEE's
sole cost and expense, take such action as LICENSOR shall deem appropriate;
provided that arrangements are made, and assurances given, in each case
reasonably satisfactory to LICENSOR, relating to the payment of the costs and
expenses of such action.
3.6 Other Trademarks, Trade Names and Logos Used on the Licensed Products.
No trademarks, trade names or logos (collectively, "Secondary Trademarks") other
than the Nautica Names and Marks may be used on, or in conjunction with, the
Licensed Products, without the approval of LICENSOR, which may be granted or
denied in its sole discretion. If LICENSOR approves the use of Secondary
Trademarks on, or in conjunction with, the Licensed Products, then the ownership
of the Secondary Trademarks must be assigned to LICENSOR by LICENSEE, as a
condition of LICENSOR's approval.
SECTION 4
Payments, Reports and Records
4.1 Percentage Royalties. In consideration of the License granted
hereunder, LICENSEE agrees to pay LICENSOR royalty payments equal to the
percentage of net sales of the Licensed Products as set forth in Item 8 of
Schedule B (the "Percentage Royalties") hereto during each royalty year as set
forth in Item 9 of Schedule B hereto (each, a "Royalty Year"). Any sale by
LICENSEE or its affiliates, associates or subsidiaries of (i) the Licensed
Products or (ii) products of apparel and accessories copied from the Licensed
Products of LICENSOR or any design or sketch obtained from LICENSOR, and/or
containing design elements uniquely associated with LICENSOR, all subject to
other applicable provisions herein, including in particular, Section 5.4 herein
or any Licensed Product whether or not bearing the Nautica Names and Marks for
the purpose of computing Percentage Royalties due LICENSOR. Amounts due LICENSOR
hereunder shall be deemed to be held by LICENSEE in trust for the benefit of
LICENSOR until actually paid to LICENSOR.
4.2 Minimum Royalty; Payments. Notwithstanding anything to the contrary
contained in this Agreement, LICENSEE shall pay to LICENSOR during the Term
guaranteed minimum royalty payments in the amounts and at the times set forth in
Item 10 of Schedule B hereto (each, a "Minimum Royalty"). The excess of
Percentage Royalties over Minimum Royalties, if any, due LICENSOR shall be paid
within thirty (30) calendar days after the end of each calendar quarter
("Royalty Quarter") of each Royalty Year, all as specifically set forth in
Schedule B hereof.
7
4.3 Currency and Taxes. All payments to LICENSOR shall be made in United
States currency. Payments based upon net sales of the Licensed Products
denominated in an currency other than in United States dollars shall be
converted into United States dollars at the New York foreign exchange selling
rate as published in The Wall Street Journal (or other comparable source in the
event that The Wall Street Journal fails to publish such exchange rate) on the
last business day each Royalty Quarter in which such net sales occur. LICENSOR
shall bear the tax to be levied under law applicable in the Territory on the
income of LICENSOR arising under this Agreement, provided, however, that
LICENSEE shall bear all value added taxes, if any, to be levied under law
applicable in the Territory. In the event that LICENSEE deducts any tax from the
amounts due to LICENSOR hereunder, LICENSEE shall provide LICENSOR on an annual
basis with a report of such deductions, as well as a tax certificate showing the
calculation and the payment of such tax.
4.4 Periodic Royalty Statements. LICENSEE shall, for each month of each
Royalty Year, commencing with the first month following the execution of this
Agreement and continuing until a final certification of wind-up is delivered,
furnish LICENSOR with a detailed monthly statement (the "Monthly Statement"),
certified to be accurate by an authorized officer of LICENSEE, showing
cumulatively for all accounts and separately for each account for each Licensed
Product the following: (a) the line, item, design, number, description and price
of the Licensed Products, by country, sold or distributed during the preceding
month , (b) any actual returns of the Licensed Products made during the
preceding month, (c) the amount of Royalties earned by LICENSOR stated in US
dollars and (d) LICENSEE's best judgement of the increase or decrease in the net
wholesale sales volume as defined on Schedule B hereto. Such Monthly Statements
shall be furnished to LICENSOR within ten (10) business days after the end of
each month for which such Monthly Statement is made. Percentage Royalties,
payable to LICENSOR shall be paid quarterly as set forth in Section 4.2.
Additionally, on a quarterly basis, LICENSEE shall provide to LICENSOR, a
reforecast of LICENSEE'S net wholesale sales volume for the then current Royalty
Year. The form of the report provided to LICENSEE by LICENSOR is attached hereto
and made a part hereof as Exhibit B.
In addition, LICENSEE shall furnish LICENSOR, annually, commencing with the
first Royalty Year and continuing until a final certification of wind-up is
delivered, with a detailed statement (the "Annual Statement"), certified to be
accurate by an authorized officer of LICENSEE, showing cumulatively and
separately for each Licensed Product the following: (i) the line, item, design,
number, description and price of the Licensed Products, by country, sold or
distributed during the preceding Royalty Year; (ii) any actual returns of
Licensed Products made during the preceding Royalty Year; and (iii) the amount
of payment due LICENSOR. Such Annual Statements shall be furnished to LICENSOR,
within thirty (30) days after the end of the Royalty Year for which such
Statement is made and shall be accompanied by payment to LICENSOR of any amounts
of royalty in excess of minimum royalties paid that may be due LICENSOR. The
Monthly and Annual Statements shall be furnished to LICENSOR whether or not
there is any distribution or sales of Licensed Products during the preceding
month, and whether or not any amounts are then due LICENSOR. The failure or
refusal of LICENSEE to timely furnish any Monthly Statement or Annual Statement
substantially in the form required by LICENSOR or payments shall be deemed a
substantial and material breach of this Agreement and shall entitle LICENSOR,
without any prejudice to any other right which LICENSOR may have under law, in
contract or in equity for such breach, to terminate the License, subject to the
applicable notice and right to cure provisions of Section 10.1 hereof. The
receipt or acceptance by LICENSOR of any Monthly Statement or Annual Statement
furnished pursuant hereto or of any payments made hereunder (or the cashing of
any checks paid hereunder) shall not preclude LICENSOR from questioning the
correctness thereof at any time. In the event that any inconsistencies or
mistakes are established with regard to such statements or payments, that are
not disputed by evidence
8
submitted by LICENSEE in good faith shall immediately be rectified and the
appropriate payment shall immediately be made by LICENSEE. The form of the
report provided to LICENSEE by LICENSOR is the same as that required for the
Monthly Statement, attached hereto and made a part hereof as Exhibit B,
calculated for the entire Royalty Year.
4.5 Periodic Retailer Performance Report. LICENSEE shall, within ten (10)
days after the end of every month during the Term, commencing with the end of
the first month following the execution of this Agreement and continuing until a
final certification of wind-up is delivered, furnish LICENSOR with a detailed
statement (the "Monthly Retailer Performance Report"), showing the following:
(i) sales of Licensed Products by account in dollars; (ii) stock of Licensed
Products on hand in dollars; and (iii) sales of Licensed Products by style in
units. LICENSEE shall also furnish LICENSOR with a detailed statement (the
"Quarterly Retailer Performance Report") showing the following: (i) sales of
Licensed Products by accounts; and (ii) stock of Licensed Products on hand in
dollars; The Quarterly Retailer Performance Report shall be furnished to
LICENSOR within ten (10) business days after the end of every calendar quarter
during the Term, commencing with the end of the first calendar quarter following
the execution of this Agreement and continuing until a final certification of
wind-up is delivered. Notwithstanding the foregoing, the Monthly Retailer
Performance Reports and the Quarterly Retailer Performance Reports shall be
furnished only with respect to those accounts, which LICENSOR has designated in
the Exhibit C, as LICENSOR may amend, from time to time; and with respect to any
information which must be obtained from or provided by retailers, LICENSEE's
obligation to provide any such information shall be subject to availability
(i.e., whether such retailers have provided or will provide such information.)
Subject to the foregoing, the failure or refusal of LICENSEE to timely furnish
any Monthly Retailer Performance Report or Quarterly Retailer Performance Report
more than twice in any 12 month period following notice by LICENSOR of such
failure and the opportunity to cure in accordance with Section 10.1 herein shall
be deemed a substantial and material breach of this Agreement and shall entitle
LICENSOR, without any prejudice to any other right which LICENSOR may have under
law, in contract or in equity for such breach, to terminate the License.
SECTION 5
Quality of Licensed Products; Approval of Designs, etc.
5.1 Licensed Products to be of High Quality. LICENSEE agrees (a) that the
Licensed Products and their manufacture, distribution and packaging shall be of
a high standard and of such style, appearance and quality as shall, in the
reasonable judgment of LICENSOR, be adequate and suited to their exploitation to
the best advantage and to the protection and enhancement of the material and the
goodwill pertaining thereto; provided however, that LICENSEE understands and
agrees that such reasonable judgement of LICENSOR may be based upon or reflect
LICENSOR's subjective standards of quality, taste, aesthetics, marketability and
suitability for use in conjunction with the Nautica Names and Marks (b) that the
Licensed Products shall be manufactured, sold, distributed and advertised in
accordance with all applicable laws, (c) that the policy of sale, distribution,
and/or exploitation by LICENSEE shall be of a high standard and to the best
advantage of the Nautica Names and Marks, the Licensed Products and/or LICENSOR
(d) that the same shall in no manner reflect adversely upon the Nautica Names
and Marks, the Licensed Products or LICENSOR and (e) that each of the Licensed
Products shall be sold with a permanent Nautica brand identification thereon.
LICENSEE further agrees that all rights granted herein shall be exploited and/or
exercised so as not to interfere with, detract from, or alter the concepts used
by LICENSOR or known to the public;
9
and that LICENSEE shall use its best efforts to preserve the concepts therein.
In particular, LICENSEE acknowledges that any merchandising of the Licensed
Products by LICENSEE as may be permitted hereunder shall be in full conformity
with the foregoing.
5.2 Quality Control and Approvals. The nature, quality, color, design and
style of the Licensed Products and other materials produced or used under the
License or on or in connection with which the Nautica Names and Marks are used,
including, without limitation, packaging, labeling, artwork, graphics and
advertising and promotional materials, shall be subject to LICENSOR's prior
written approval or consent. Without limiting the generality of the foregoing,
in connection with the submission of any of the foregoing to LICENSOR for its
approval and consent, LICENSOR may, but shall not be obligated to, engage
counsel to conduct clearance searches and to obtain a legal opinion with respect
to their use. In the event that LICENSOR elects in its sole discretion, not
subject to review, to so engage counsel and/or to conduct such searches,
LICENSEE shall, within ten (10) days after receipt of an invoice from LICENSOR,
pay LICENSOR the reasonable cost of engaging such counsel to conduct such
clearance searches and to render the opinion as aforedescribed; provided
however, that LICENSEE understands and agrees that such reasonable judgement of
LICENSOR may be based upon or reflect LICENSOR's subjective standards of
quality, taste, aesthetics, marketability and suitability for use in conjunction
with the Nautica Names and Marks. LICENSEE's obligations under Section 6.3 of
this Agreement shall not be diminished or affected in any way by whether or not
LICENSOR elects to conduct such searches or to obtain such opinion. In addition,
as part of the approval process, LICENSEE shall furnish to LICENSOR, free of
cost for LICENSOR's review pre-production samples of each of the Licensed
Product. Such samples shall be furnished to LICENSOR prior to the sale,
marketing or distribution by LICENSEE of any of the Licensed Products. LICENSEE
agrees to make such changes in the Licensed Products as are reasonably requested
by LICENSOR; provided however, that LICENSEE understands and agrees that such
reasonable judgement of LICENSOR may be based upon or reflect LICENSOR's
subjective standards of quality, taste, aesthetics. LICENSEE shall provide
LICENSOR at no charge with at least (1) complete line of the Licensed Products
and such additional Licensed Products as reasonably may be needed for quality
control, public relations purposes, advertising and other legitimate business
purposes. Such sample line will be in size 6 unless only available in size 8
unless the parties shall agree otherwise.
5.3 Approval Standard. LICENSEE acknowledges and agrees that, unless
otherwise specifically provided for in this Agreement, all approvals required
from the LICENSOR shall be granted or denied by LICENSOR in LICENSOR's sole,
absolute and reasonable discretion which may be based upon or reflect LICENSOR's
subjective standards of, quality, taste aesthetics, marketability and
suitability for use in conjunction with the Nautica Names and Marks.
5.4 Designs and Copyrights. LICENSEE acknowledges and agrees that, as
between LICENSOR and LICENSEE, all of the right, title and interest, including
but not limited to copyrights and patents in and to:
(a) each and every design of any and all Licensed Products and/or
elements and/or features thereof (hereinafter collectively referred to as
"Designs of Licensed Products", is as follows:
(i) Designs of Licensed Products that are or have been developed
by or for LICENSOR shall belong to LICENSOR;
10
(ii) Designs of Licensed Products that are or have become
uniquely and exclusively (as between LICENSOR and LICENSEE)
associated and/or identified with the Licensed Products
shall belong to LICENSOR, irrespective of whether LICENSOR,
LICENSEE or a third party developed same;
(iii) Designs of Licensed Products that are not uniquely
associated or identified with the Licensed Products may be
used on a non-exclusive basis in perpetuity by LICENSEE or
LICENSOR.
(b) any and all advertising, labeling or promotional material bearing
the Nautica Names and Marks shall belong exclusively to LICENSOR; and
(c) LICENSEE and/or LICENSOR shall execute any and all documents
necessary to bring the foregoing into effect. Further, LICENSEE shall take all
reasonable and necessary steps to ensure, that if any the Designs of the
Licensed Products, advertising and labeling and promotional materials, used
thereon or in conjunction with the Licensed Products, are created by third
parties, that such ownership rights are secured for LICENSOR by LICENSEE.
Anything to the contrary in the foregoing not withstanding, LICENSOR
understands and agrees that LICENSEE is in the business of manufacturing and
designing products in the same product categories as the Licensed Products. The
parties understand that the construction, fabrication, silhouettes and other
product developments proprietary to LICENSEE, other than those developed
exclusively for LICENSOR by LICENSEE or a third party, shall belong to LICENSEE
and may be used by LICENSEE for any other products without being subject to the
payment of Percentage Royalties hereunder; but may also be used by LICENSOR on a
royalty free basis in perpetuity in accordance with the foregoing provisions of
subparagraphs (a) through (c) of this Section 5.4.
SECTION 6
Additional Covenants and Representations and Warranties
6.1 Distribution, Marketing and Sales Participation. In addition to
LICENSEE's covenants contained in other sections of this Agreement, LICENSEE
agrees:
(a) to assign the number and type of employees described in Item 11 of
Schedule B hereto to work on matters solely related to the distribution,
marketing and sale of the Licensed Products and the development and enhancement
of the Nautica Names and Marks in the Territory;
(b) to send, at LICENSEE's sole cost and expense, one or more persons
to work with LICENSOR's staff for the purpose of educating LICENSEE as to the
image and concept of the Nautica Names and Marks and the implementation of such
image and concept in the Territory;
(c) to participate, at its own cost and expense, in a minimum number
of design meetings specified in such Item 11 of Schedule B during each 12
calendar month period commencing from the date of execution of this Agreement at
the locations described in Item 11, unless another location is agreed to by
LICENSOR;
11
(d) to pay all reasonable costs and expenses, including without
limitation, cost for lodging, travel (business class) and meals, incurred by two
representatives of LICENSOR in participating in any meeting or attending trade
shows, as set forth in Item 13 of Schedule B, hereof, for the Licensed Products
outside of New York City;
(e) as set forth in Section 14.12 hereof, to keep confidential, and
not disclose to any third party, any non-public information regarding LICENSOR
or LICENSOR's strategy, plan or concept regarding the manufacturing, marketing,
distribution and sale of the Licensed Products or the development and
enhancement of the Nautica Names and Marks, including, without limitation, this
Agreement or any of the terms herein;
(f) not to take any intentional action, directly or indirectly, to
circumvent the spirit of the parties in entering this Agreement;
(g) other than as required or permitted by this Agreement (including,
in particular, Section 5.4 herein), not to design, manufacture, sell, distribute
or promote any products copied from the Licensed Products or any related design
element uniquely associated with Licensor and obtained from LICENSOR.
(h) unless otherwise provided in Item 12 of Schedule B hereto, to
operate the business authorized by this Agreement in a manner in which the
personnel provided for in Item 12 shall be designated to work exclusively on the
Nautica business. LICENSOR and LICENSEE each acknowledges and agrees, however,
that Licensee may, for efficiency and cost - effectiveness, use personnel,
resources and services also used by LICENSEE in connection with other business
and activities conducted by LICENSEE, which may include but may not necessarily
be limited to, sales staff, (not including sales management), personnel and
support and clerical personnel.
(i) to use its commercially reasonable best efforts to deliver the
Licensed Products to the approved accounts in a timely fashion, in compliance
with the requirements of the LICENSOR approved accounts.
(j) to comply with such additional covenants set forth in Item 13 of
Schedule B hereto.
6.2 Standards of Operation. LICENSEE shall, at all times, actively promote,
cultivate, develop and expand sales of the Licensed Products in the Territory
and shall give prompt, courteous and efficient service to the public in
accordance with the highest standards of honesty, integrity and fair dealing and
shall not discredit, dishonor or otherwise injure the goodwill and reputation of
LICENSOR, the License, the Nautica Names and Marks or other licensees of
LICENSOR.
6.3 Loss, Injury or Damage. LICENSEE shall defend, protect, indemnify and
hold harmless LICENSOR and any of its affiliates, subsidiaries, agents, officers
and directors, during and after the term of the License, from and against the
full amount of any and all claims, demands, losses, liabilities and expenses,
including but not limited to reasonable attorney's fees, whether arising during
or after the term of the License, and whether alleged or proven, which arise out
of: (a) the LICENSEE's use of the Nautica Names and Marks, (b) a claim by a
third party based upon the conduct of Licensee, (c) the acts or omissions of
LICENSEE or any of the LICENSEE's agents, servants or employees, (d) the
inaccuracy or incorrectness in any material respect as of the date hereof of any
representation or warranty made by LICENSEE and (e) the default by LICENSEE in
the performance of any of its material obligations under this
12
Agreement. LICENSEE shall, at all times during this Agreement and the period
thereafter during which any claim might be asserted against LICENSOR, maintain
comprehensive general liability insurance, covering personal injury and property
damage, extended to include products liability and completed operations in
amounts sufficient to respond to any and all claims, liabilities, damages,
expenses, including reasonable attorney's fees arising out of this Agreement,
but not less than $5,000,000 per occurrence and naming LICENSOR and Nautica
International, Inc., as well as their parent and affiliates, as additional
insureds. Upon execution of this Agreement and thereafter upon LICENSOR's
request, LICENSEE agrees to promptly provide LICENSOR with Certificates of
Insurance evidencing the coverage required by this Agreement and providing
LICENSOR with thirty (30) days prior notice of any change or cancellation in
this coverage.
6.4 Delinquency Charges. Amounts not paid when due shall accrue interest
from the date due until paid at the rate of one and one-half percent (1 1/2 %)
per month, or the maximum interest permitted by applicable laws, whichever is
less.
6.5 Compliance with Laws. LICENSEE shall comply with all applicable
foreign, and domestic national, federal, provincial, state, county and municipal
statutes, laws, ordinances, regulations, rules or orders (collectively,
"Regulations"), including without limitation, all Regulations regarding use of
child labor, safety for workers, human rights and consumer protection and shall
obtain, at its own expense, any variances, special exceptions, zoning approvals
and all licenses and other permits required by governmental authorities.
All Licensed Products manufactured and distributed by, or on behalf of, LICENSEE
must be marked, labeled, packaged, advertised, and distributed in accordance
with this Agreement, in accordance with all applicable Regulations in the
Territory, and in such a manner as will not tend to mislead or deceive the
public or damage the reputation of the Nautica Names and Marks. Further, all
Licensed Products shall be manufactured in compliance with the Nautica Code of
Conduct. All Licensed Products manufactured in the United States of America
(whether by LICENSEE, or Licensee's Suppliers will be manufactured in compliance
with all applicable requirements of Sections 6, 7, and 12 of the Fair Labor
Standards Act, as amended, and all regulations and orders of the United States
Department of Labor under Section 14 thereof, and applicable state and local
laws pertaining to child labor, minimum wage and overtime compensation; and all
Licensed Products manufactured outside the United States (whether by Licensee,
Licensee's manufacturer or by manufacturer's contractors) will be manufactured
in compliance with the wage, overtime compensation, benefits, hour, hiring and
employment, workplace conditions and safety, environmental, collective
bargaining, freedom of association laws of the country of manufacture and
without the use of child (persons under the age of fifteen or younger than the
age for completing compulsory education, if that age is higher than 15), prison,
indentured, bonded, forced or slave labor.
This Section 6.5 shall not be construed to prevent LICENSEE from engaging in a
bona fide contest of the validity or applicability of any law.
6.6 Right to Inspect. LICENSEE shall, during regular business hours and,
upon advance notice but not more than twice in any Royalty Year , permit
LICENSOR or its authorized representatives, to visit and remain in the business
offices of LICENSEE to: (b) inspect, examine and test any merchandise,
furnishings, fixtures, equipment, supplies, signs or other items used by
LICENSEE in connection with the merchandising of the Licensed Products, (b)
observe the nature, quality, quantity and value of the goods sold and of the
customer service rendered, (c) examine, audit and copy any of LICENSEE's books
and records pertaining to LICENSEE's performance pursuant to this Agreement,
including sales of the Licensed Products
13
and any payments due LICENSOR hereunder and (d) observe the manner and method in
which LICENSEE operates. LICENSOR may require LICENSEE to remove any item of
inventory, equipment, furnishing, decor or merchandise used in connection with
the merchandising of the Licensed Products which, are not in material compliance
with LICENSOR's approval hereunder or, if approved, is in substandard or
unsaleable condition. In the exercise of its rights hereunder, LICENSOR shall
not unreasonably interfere with LICENSEE's business operations. LICENSOR agrees
to keep confidential all information obtained from LICENSEE with respect to the
business of LICENSEE, unless LICENSOR is required by applicable law, regulations
or the interpretation thereof to make such disclosure (subject to any protective
order obtained by LICENSEE); provided however, if LICENSOR uncovers a violation
of the terms hereof or a discrepancy is found with respect to any information
provided by LICENSEE to LICENSOR and such violation or discrepancy is not
promptly resolved to the satisfaction of LICENSOR, then LICENSOR shall be
permitted to disclose such information in order to enforce its rights.
6.7 Opportunity to Investigate. LICENSEE represents, warrants and covenants
that LICENSEE has fully investigated, to LICENSEE's satisfaction, LICENSOR, the
Licensed Products and the right and license represented by this Agreement. The
parties acknowledge, however, that LICENSEE was only provided by LICENSOR with
the June 2001 and June 2002 sales reports of the predecessor licensee, Apparel
Ventures, Inc., which the parties understand and agree are unaudited reports of
a third party, which have not been verified by LICENSOR or LICENSEE. LICENSEE
has otherwise relied on its own examination of the merits and risks involved in
deciding to enter into this Agreement.
6.8 Representations and Warranties of LICENSEE. LICENSEE represents and
warrants that:
(i) The execution and delivery of this Agreement and the performance
of the transactions contemplated hereby have been duly authorized by all
appropriate corporate action;
(ii) The performance by LICENSEE of any of the terms and conditions of
this Agreement on its part to be performed does not and will not constitute a
breach or violation of any judgment, decree or order or any agreement or
understanding, written or oral, to which it is a party or by which it is bound;
(iii) LICENSEE is duly organized and validly incorporated under the
laws of Delaware and is in good standing under such laws and is qualified to do
business in every jurisdiction in the Territory where such qualification is
necessary;
(iv) There are no adverse proceedings, claims or actions pending or
threatened against LICENSEE which would impair or adversely affect LICENSEE's
ability to perform and comply with all terms, conditions and provisions
contained in this Agreement;
(v) LICENSEE has the right, power and authority to enter into this
Agreement and receive the rights and license granted hereby;
(vi) LICENSEE has the financial capacity and technical and business
know how and technical ability to manufacture and distribute the Licensed
Products in compliance with this Agreement in a timely manner in compliance with
requirements of the LICENSOR approved retailers; and
(vii) The additional representations and warranties, if any, set forth
in Item 13 of Schedule B hereto are true and correct.
14
SECTION 7
Advertising and Promotion
7.1 Advertising of the Licensed Products. LICENSEE acknowledges and agrees
that advertising and promotion of Licensed Products are in the best interest of
LICENSEE. During the term of this Agreement, LICENSEE shall pay LICENSOR for
advertising and publicizing the Nautica Names and Marks for the Licensed
Products in the Territory for each Royalty Year, the amounts set forth in Item
14, of Schedule B. LICENSEE shall consult in good faith with LICENSOR concerning
LICENSEE'S participation in co-op advertising programs, and. LICENSEE shall use
its commercially reasonable good faith efforts to adhere to LICENSOR's co-op
advertising standards and policies and to ensure that retailers adhere to such
standards and policies. LICENSEE shall at the end of each Royalty Quarter during
each Royalty Year, provide to LICENSOR detailed quarterly reports outlining
advertising expenditures for such Royalty Quarter, in a form acceptable to
LICENSOR. LICENSOR shall, from time to time throughout each Royalty Year,
provide to LICENSEE evidence of expenditures by LICENSOR to advertise and
publicize the Licensed Products in the Territory. Except for trade advertising
and coop advertising neither of which shall be deducted by LICENSEE from the
amounts due LICENSOR pursuant to Item 14 of Schedule B hereof, LICENSOR shall
have the sole right to produce all advertising and promotion materials.
7.2 Best Efforts of LICENSEE. LICENSEE shall diligently and continuously
use and exert its reasonable best efforts throughout the Territory during the
entire Term of the License to distribute and sell the Licensed Products, to make
and maintain adequate arrangements for the distribution of the Licensed Products
and to promote and expand their sales hereunder to the highest levels
practicably obtainable. Without limiting the generality of the foregoing,
LICENSEE shall take all action and do all things which LICENSOR reasonably
believes are necessary, desirable or appropriate to promote, market and
distribute the Licensed Products to the levels set forth in this Agreement.
SECTION 8
Relationship of the Parties
8.1 Independent Contractor. Nothing herein contained and no acts or
assistance given or rendered by LICENSOR or LICENSEE shall be construed to
constitute LICENSOR or LICENSEE as partners, joint venturers, agents or
employees of each other. LICENSEE acknowledges that it is an independent
contractor. Neither LICENSOR nor LICENSEE shall authorize any contract,
agreement, warranty, representation or create any obligation, express or
implied, on behalf of the other and neither party shall otherwise hold itself
out as an agent or representative of the other party nor permit any other person
within its control to do so.
8.2 LICENSOR's Right to Assign. LICENSOR may assign or otherwise transfer
all or any part of the rights, obligations and benefits under this Agreement to
any party whom LICENSOR shall deem capable of fulfilling LICENSOR's obligations
under this Agreement; provided however, that such assignment or transfer shall
be subject to all of LICENSEE'S rights hereunder and all of the terms and
conditions of this Agreement.
15
SECTION 9
Records, Books and Accounting
9.1 Books and Records. LICENSEE shall, so long as the License is in effect
and for four (4) years thereafter, maintain and retain true and accurate books
and records covering all transactions by it relating to the License, the
Licensed Products, LICENSOR or this Agreement. LICENSEE shall promptly furnish
to LICENSOR such books, records, reports, designs, patterns and other
information, financial or otherwise, relating to the foregoing, which LICENSOR
may from time to time request, as authorized hereunder and subject to LICENSOR's
obligation to retain them as confidential as set forth in Section 6.6, hereof.
9.2 Annual Statements.
(a) So long as the License is in effect, LICENSEE shall furnish to
LICENSOR, within 90 days after the end of each of its fiscal years, certified
financial statements of its ultimate parent, The Warnaco Group, Inc., on a
consolidated basis prepared in accordance with generally accepted accounting
principles.
(b) LICENSOR shall be entitled upon reasonable advance notice, during
normal business hours, but not more than twice per Royalty Year to have
LICENSEE's books and records examined or audited with respect to any period or
periods relevant to this Agreement. LICENSEE shall cooperate fully with the
persons or entities making such examination or audit on behalf of LICENSOR. If
the examination or audit establishes that any report with respect to which the
examination or audit is conducted shows a misstatement of any of the financial
obligations, expenditures, net or gross sales or any other financial requirement
or report, which misstatement for such period is more than five (5%) percent,
then LICENSEE shall bear the reasonable costs and expenses of such examination
or audit and LICENSEE shall, within ten (10) days after demand by LICENSOR pay
all such costs and expenses and all undisputed royalty payments or other
required payments, if any, which shall be owing based upon such established
misstatement. If the examination or audit does not disclose a misstatement of
more than five (5%) percent in any such category, then LICENSOR shall bear the
costs and expenses of such examination or audit.
SECTION 10
Default, Termination or Expiration
10.1 Event of Default. The occurrence of any of the following will
constitute an event of default ("Event of Default") and material breach of this
Agreement by LICENSEE:
(a) LICENSEE shall have sold any Licensed Products, the design or
quality of which has not been previously approved by LICENSOR hereunder and
LICENSEE shall have continued to sell or recommenced the sale of such Licensed
Products after receiving notice of such unauthorized activity and after having
failed to discontinue such unauthorized sales, within fifteen (15) days of
receiving written notice from LICENSOR;
(b) LICENSEE shall have directly sold to any account not approved by
LICENSOR or to a third party that LICENSEE knew or reasonably should have known
intended to sell to an unapproved account, if such sales continue to occur
following fifteen (15) days written notice from LICENSOR.
(c) LICENSEE shall have failed to make a payment of Minimum Royalty
due LICENSOR within five (5) days after the same shall have become due or
LICENSEE shall have failed to make a payment of any other undisputed amount due
under this Agreement or any other undisputed amount owed by the LICENSEE under
any other agreement with LICENSOR or any
16
entity controlled by, controlling or under common control with LICENSOR
("Affiliate of LICENSOR") after the same shall have become due and such failure
shall continue for fifteen (15) days after LICENSEE's receipt of written demand
therefor from LICENSOR or any Affiliate of LICENSOR, as the case may be;
provided however, that the LICENSEE is required to present LICENSOR with
substantiation for all amounts that it is disputing hereunder;
(d) LICENSEE shall fail to procure and maintain with respect (or cause
to be procured and maintained) insurance required to be maintained in accordance
with the provisions of Section 6.3 hereof or such insurance shall lapse or be
cancelled and LICENSEE, within thirty (30) days of LICENSOR'S notice thereof,
shall not have rectified such breach so the LICENSOR and other entities required
to be additional named insureds, hereunder, under such coverage shall have
uninterrupted coverage;
(e) LICENSEE shall have failed to perform or observe (or caused to be
performed and observed) any other material term or condition to be performed or
observed by it under this Agreement or under any other related agreement with
LICENSOR or any Affiliate of LICENSOR, which failure (A) is capable of being
cured but is not cured within fifteen (15) days after LICENSEE's receipt of
notice from LICENSOR of such failure or (B) is not capable of being cured;
(f) any representation or warranty made by LICENSEE under this
Agreement, or under any other related agreement with LICENSOR or any Affiliate
of LICENSOR, which shall have been proven to have been incorrect in any material
respect at the time made;
(g) LICENSEE shall engage in any conduct, take any action or fail to
take any action which, in the reasonable judgment of the LICENSOR, has
materially injured the Nautica Names and Marks or to LICENSOR;
(h) LICENSEE shall sell transfer, encumber, assign or sublicense any
right granted to LICENSEE under this Agreement otherwise in violation of the
provisions of this Agreement and except as allowed under applicable United
States Federal Bankruptcy laws as related to LICENSEE and the Uniform Commercial
Code, as amended from time to time, only as applicable in the State of New York
to license agreements;
(i) any consent, authorization, license, certificate or approval of,
or registration with or declaration to, any government entity ("Governmental
Entity") in connection with this Agreement to obtain and transfer United States
dollars freely to LICENSOR or to LICENSOR's designee (or any other relevant
currency) out of any relevant country is modified in a manner unacceptable to
LICENSOR or is withheld, or is revoked, suspended, cancelled, withdrawn,
terminated or not renewed, or otherwise ceases to be in full force and LICENSEE
does not meet its payment obligations hereunder;
(j) any consent, authorization, license, certificate or approval of,
or registration with or declaration to, any Government Entity in connection with
this Agreement required by LICENSEE to authorize the execution, delivery,
validity, enforceability or admissibility in evidence of this Agreement or the
performance by LICENSEE of its obligations under this Agreement is withheld, or
is revoked, suspended, cancelled, withdrawn, terminated or not renewed, or
otherwise ceases to be in full force; provided however, that the resulting
termination shall only be effective for the affected country or jurisdiction in
the Territory;
17
(k) LICENSEE shall use any channel of trade to market, sell or
distribute the Licensed Products which is not approved by LICENSOR or, if
approved by LICENSOR, or such approval is revoked, suspended, cancelled,
withdrawn, terminated or not renewed, or otherwise ceases to be in full force
and effect, or LICENSEE shall use any marketing technique that is unlawful, all
subject to a ten (10) day notice and cure period;
(l) Intentionally Omitted;
(m) LICENSEE or any guarantor of LICENSEE (all such guarantors
individually and collectively referred to as "Guarantor") shall not have the
ability to pay its debts as they become due, become insolvent, dissolves, or
declared by a court of competent jurisdiction to be legally incompetent or cease
to exist;
(n) LICENSEE or Guarantor shall enter into an agreement with its
creditors to reduce its obligations to them or to defer their fulfillment, make
a general assignment for the benefit of its creditors, commence any proceeding
relating to it seeking discharge or reduction of its debts, an arrangement,
composition, reorganization or any other form of relief from its creditors or
from a court or governmental agency pursuant to any bankruptcy, reorganization,
arrangement, readjustment of debt, receivership, dissolution or liquidation law,
statute or procedure of any jurisdiction (national, federal, provincial state or
foreign) for the relief of financially distressed debtors (each of the foregoing
a "Debtor Relief Procedure") all subject to applicable United States Federal
Bankruptcy laws as related to LICENSEE and the Uniform Commercial Code, as
amended from time to time, only as applicable in the State of New York to
license agreements;
(o) a Debtor Relief Procedure shall be instituted, initiated or
commenced against LICENSEE or Guarantor hereunder for any obligation of LICENSEE
or Guarantor and an order for relief is entered or the petition is controverted
but is not dismissed within thirty (30) days after the commencement of the case
or the substantial equivalent occurs or the Debtor Relief Procedure is not
dismissed or otherwise terminated within thirty (30) days of its commencement;
(p) LICENSEE or Guarantor shall take any action to effect any event
described in Sections 10.1 (xiii), 10.1 (xiv) or 10.1 (xv);
(q) Intentionally Omitted;
(r) a final judgment known to LICENSEE and in an amount not less than
five hundred thousand Dollars ($500,000) against LICENSEE remains unsatisfied
for thirty (30) days (unless a supersedeas or other appeal bond has been filed)
and LICENSEE's rights under this Agreement shall be seized, taken over or
foreclosed by a government official in the exercise of his duties, or seized,
taken over or foreclosed by a creditor, lien holder or lessor; or a levy of
execution has been made upon the License and it is not discharged within a
reasonable time of such levy;
(s) LICENSEE or Guarantor shall be convicted of a crime that has
materially injured the NAUTICA Trademarks;
(t) LICENSEE shall submit to LICENSOR on two or more separate
occasions within any Royalty Year a monthly, quarterly or annual report, or
financial statement, or supporting records which misstates any of the
information contained therein for any period by
18
more than seven percent (7%), unless such misstatement has been made in good
faith and is promptly cured by LICENSEE;
(u) it becomes unlawful for LICENSEE to perform any of its obligations
under this Agreement and LICENSOR and LICENSEE are unable to agree on
alternative, lawful arrangements or this Agreement becomes wholly or partly
invalid or unenforceable;
(v) LICENSEE suspends or ceases or announces the pending suspension or
cessation to carry on all or a substantial part of its business;
(w) the existence, validity, enforceability, priority or ownership of
the rights of LICENSOR as owner of the Nautica Names and Marks and as LICENSOR
of the Nautica Names and Marks are challenged by LICENSEE or any other person
claiming by, through or under LICENSEE;
(x) any transfer or assignment of this Agreement or the rights and
obligations of LICESENSEE hereunder shall have occurred in violation of the
terms, conditions, limitations and permissions provided herein.
(y) LICENSEE shall, in the reasonable judgment of LICENSOR, fail to
possess the necessary personnel to conduct its business in accordance with and
under this Agreement;
(z) Intentionally omitted;
(aa) Intentionally omitted;
(bb) LICENSEE receives written notice from LICENSOR that, in the
reasonable judgment of LICENSOR, LICENSEE is not promoting, marketing or
distributing the Licensed Products in accordance with this Agreement and
LICENSEE shall have failed to submit to LICENSOR, within thirty (30) days of
such notice, a detailed business and marketing plan, including an advertising
budget and distribution plan satisfactory to LICENSOR, in LICENSOR's sole
discretion, for promoting, marketing and distributing the Licensed Products to
the highest level practically attainable.
10.2 Rights of LICENSOR Upon Occurrence of an Event of Default.
(a) Upon the occurrence of any Event of Default, LICENSOR may, by
notice to LICENSEE, do all or any of the following at LICENSOR's option (in
addition to such other rights and remedies which LICENSOR may have by statute or
otherwise but subject to any requirements of applicable law):
(i) following any applicable cure period, if there has been no
cure, terminate the License;
(ii) for LICENSEE's account, do anything that may reasonably be
required to cure any default and recover from LICENSEE all
reasonable costs, including legal fees and expenses incurred
in doing so with interest;
(iii) proceed by appropriate court action or actions to enforce
performance of this Agreement and to recover any damages for
the breach hereof, including all amounts payable hereunder;
and
19
(iv) accelerate those payments due hereunder for the next
succeeding four Royalty Quarters, from and after the date of
any "Event of Default" which remains uncured within the
allowable cure periods as set forth in Section 10.1 hereof;
provided however, that such acceleration shall not be in
lieu of any and all other rights that LICENSOR may have to
pursue its legal remedies under this Agreement.
(b) Following the expiration or earlier termination of the License,
LICENSEE shall:
(i) promptly pay LICENSOR all sums owed to it from LICENSEE
without set-off, counterclaim, abatement or other
diminution, but in no case later than fifteen (15) days
after termination of the License;
(ii) subject to Section 10.2 (c) hereof, immediately and
permanently discontinue and thereafter refrain from the use
of any of the Nautica Names and Marks, or any names, marks
or other indicia or operating systems which are or may be
confusingly similar to the Nautica Names and Marks and
permanently remove, at the LICENSEE's expense, all signs or
other store furnishings containing any of the Names or Marks
or other things, the use of which is prohibited in the
absence of a valid license or other written consent from
LICENSOR; and
(iii) immediately and permanently discontinue all advertising, if
any, placed by LICENSEE which contains or makes reference to
any of the Nautica Names and Marks or other things the use
of which is prohibited in the absence of a valid license or
other written consent from LICENSOR and cancel, to the
extent possible, all such advertising already placed or
contracted for which would otherwise be published,
broadcast, displayed or disseminated after the date of
termination.
(c) Notwithstanding anything herein to the contrary, in the event of
the expiration or earlier termination of this Agreement, LICENSEE shall have a
period of one hundred and twenty (120) days after the earlier of termination of
the License or expiration of, whichever is the first to occur, within which to
sell the Licensed Products on hand, in process, in transit, or on order on the
date of termination or expiration, as the case may be, and to continue on a
nonexclusive basis to use the Nautica Names and Marks in connection therewith in
compliance with all the terms and conditions of this Agreement, including the
payment of earned royalties. LICENSEE shall furnish to LICENSOR within fifteen
(15) days after the termination of the License or expiration of the Term,
whichever is the first to occur, a statement listing Licensed Products on hand,
in process, in transit or on order on the date of expiration or termination of
the License. After such one hundred and twenty (120) day period, LICENSEE shall
immediately discontinue such sale of the Licensed Products and the use of the
Nautica Names and Marks except for the sale, at the option of LICENSOR, to
LICENSOR or to its designee of Licensed Products at a price equal to LICENSEE's
cost thereof. In this case, no earned royalties shall be paid or payable with
respect to Licensed Products sold to LICENSOR or its designee. If LICENSOR shall
decide not to purchase such remaining Licensed Products, then LICENSEE shall
destroy such remaining Licensed Products or donate them to a charity
20
approved by LICENSOR or dispose of them otherwise in accordance with LICENSOR'S
written consent.
10.3 Termination by LICENSEE.
(a) LICENSEE may terminate this Agreement on thirty (30) days prior
written notice in the event that LICENSEE is permanently enjoined from using the
Nautica Names and Marks on the Licensed Products in the Territory; provided
however, with regard to the Licensed Products that are on hand, in process or in
transit ("Inventory"), LICENSEE shall offer to sell the Inventory to LICENSOR at
cost. If LICENSOR chooses not to purchase the Inventory, LICENSOR shall, in its
sole discretion, allow LICENSEE to sell the Inventory outside of the Territory
for a period not to exceed one hundred and twenty (120) days or to remove the
Nautica Names and Marks from the Inventory and sell the Inventory until
depleted.
(b) However, if the LICENSEE is preliminarily enjoined from using the
Nautica Names and Marks on the Licensed Products in the Territory, the
LICENSEE'S royalty obligations, other than its obligation to pay royalties
earned during the period of time prior to the preliminary injunction and to
submit reports as set forth in the Agreement, shall be abated until there is a
final court determination or other settlement concerning the preliminary
injunction.
(c) Anything to the contrary in this Agreement notwithstanding, if the
permanent or preliminary injunction applies to one or more of the listed
Licensed Products but not all of the Licensed Products or to one or more, but
not all of the countries, in the Territory, then this Agreement may be
terminated and/or the royalty obligations abated, as set forth above, only with
regard to the specific Licensed Products and the specific countries in the
Territory which are the subject to the permanent or preliminary injunction.
10.4 Termination Costs. LICENSEE and LICENSOR acknowledge that the manner
and notice of termination set forth in this Agreement is reasonable and that,
upon termination, no payment or indemnity for loss of goodwill, loss of profit,
investments made, or otherwise shall be due to LICENSEE. LICENSEE further
acknowledges that it has the capacity and staff to comply with this Agreement,
and undertakes to bear, upon termination of this Agreement, all costs and
liabilities arising out of labor matters and its relationship with the its
retail accounts and any other customers. LICENSEE waives any rights it might
otherwise have under any applicable United States or foreign statutes,
regulations or decrees governing termination of license agreements.
SECTION 11
Assignment and Transfer
11.1 LICENSEE shall not sell, assign, transfer, encumber, hypothecate,
permit to become subject to a security interest (subject to the Uniform
Commercial Code, as amended from time to time, and only as applicable in the
State of New York to license agreements) or otherwise dispose of any right,
title or interest in the License or this Agreement, in whole or in part,
voluntarily or involuntarily, directly or indirectly, without the prior written
consent and approval of the LICENSOR provided, however, that, as used herein, a
change of ownership or control of LICENSEE shall not constitute a transfer or
assignment of this License in violation of this Agreement if LICENSEE complies
with the following terms and conditions:
(a) LICENSEE shall provide prior written notice to LICENSOR (subject,
as may be applicable, to written confidentiality undertakings by LICENSOR),
advising LICENSOR
21
of the anticipated change of ownership or control of LICENSEE, including the
identification of the prospective purchaser;
(b) LICENSEE shall ensure that all persons or entities acquiring such
ownership or control of LICENSEE (i) are profitable during the current and prior
two (2) fiscal years (ii) of suitable reputation, expertise, and financial
strength, with a Current Ratio (the ratio of current assets to current
liabilities) of at least 2 (iii) capable of performing all terms and conditions
of this Agreement; and (iv) are not engaged in the manufacture, distribution or
sale of Licensed Products under a designer name or competitive brand identified
herein; and (v) shall be subject to and comply in all respects with the terms,
conditions, limitations and undertaking of LICENSEE hereunder;
(c) LICENSEE shall ensure that, at LICENSOR's request, such person or
entity acquiring such ownership or control of LICENSEE shall deliver any
additional written undertakings or covenants to confirm any or all of the
foregoing.
11.2 Notwithstanding anything to the contrary, above, if LICENSOR shall
reasonably object to any new purchaser or entity controlling LICENSEE and
reasonably determines that such change of control or ownership of LICENSEE would
cause injury to the Nautica Names and Marks or LICENSOR, LICENSOR shall promptly
advise LICENSEE in writing of all of LICENSOR'S objections and concerns. If
LICENSEE is unable to address or resolve all such objections or issues
reasonably raised by LICENSOR, then LICENSOR shall have the right to terminate
this Agreement, provided that such termination shall be effective no earlier
than 12 months from the date of such notice of termination, unless the assignee
commits an uncured Event of Default under the Agreement. Except as specified
herein, during such 12 month period, LICENSOR acknowledges that such change of
ownership or control may have occurred and shall not, by itself, constitute a
default or violation hereof.
11.3 In the event that LICENSEE attempts to assign the Agreement and the
above conditions are not met, LICENSOR shall have the right to terminate the
Agreement and the provisions of Section 10.2 shall apply.
SECTION 12
Remedies
12.1 Other Rights. In addition to the right to termination, LICENSOR may
take, upon any Event of Default when not cured within the applicable cure
period, if any, by LICENSEE, whatever action it deems reasonably necessary to
protect its rights and interests under this Agreement. The termination of this
License by LICENSOR shall not be deemed an election of remedies by LICENSOR and
any such termination shall be without prejudice to any rights or remedies which
LICENSOR may otherwise have against LICENSEE under law, in contract or in equity
for breach of this Agreement.
12.2 Equitable Relief. LICENSEE acknowledges that its failure to cease the
use of the Nautica Name and Marks or to cease the manufacture, sale or
distribution of the Licensed Products at the termination or expiration of the
License, except as expressly provided herein, will result in immediate and
irreparable damage to LICENSOR and to the rights of any subsequent licensee.
LICENSEE acknowledges and admits that there is no adequate remedy at law for
such failure, and LICENSEE agrees that in the event of such failure, LICENSOR
shall be entitled to equitable relief and such other and further relief as any
court with jurisdiction may deem just and proper.
22
12.3 Costs of Collection, Enforcement and Defense. LICENSEE shall pay all
costs and expenses caused LICENSOR, including attorneys' fees, incurred by
LICENSOR to enforce its rights under this Agreement, including, but not limited
to, the collection of any amounts owed to LICENSOR by LICENSEE, the seeking of a
temporary restraining order or injunction, or the obtaining of damages.
12.4 Consent to Jurisdiction. LICENSEE irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts located in New
York City (both Federal and State) for any actions relating to this Agreement
and the transactions contemplated hereby (and LICENSEE agrees not to commence
any action relating thereto, except in such courts), and further each party
agrees that service of any process, summons, notice or document by registered
mail, return receipt requested to LICENSEE or LICENSOR shall be effective
service of process for any action brought against LICENSEE or LICENSOR in any
such court. LICENSEE and LICENSOR irrevocably and unconditionally waives any
objection to the laying of venue of any action, suit or proceeding relating to
this Agreement or the transactions contemplated hereby in the courts located in
New York City (both Federal and State).
SECTION 13
Payments and Withholding
13.1 Payment Information. All payments due under this Agreement shall be
made by wire transfer in United States dollars in funds that are immediately and
irrevocably available to LICENSOR, as set forth in Item 16 of Schedule B hereto.
13.2 Payment Obligations. Whenever any payment to be made hereunder would,
without this provision, be due and payable on a day which is not a business day
in New York City, it shall be due on the next succeeding business day. Nothing
in this Agreement shall, however, relieve LICENSEE from its obligation or
payment of amounts due under this Agreement, including default interest for
payments not made when due for any reason whatsoever. If LICENSEE is unable to
remit payments due to restrictions imposed by laws or regulations applicable in
the Territory, or other legitimate authority, LICENSEE, with the reasonable
assistance of LICENSOR, shall determine an alternative means of payment as
promptly as possible.
13.3 Application of Payments. LICENSOR shall apply payments received from
or for the account of LICENSEE first to accrued, unpaid interest due LICENSOR
and next to other sums due LICENSOR other than royalty payments, notwithstanding
any direction by LICENSEE to the contrary.
13.4 Payments to be Made Without Set-off, Deduction, etc.. LICENSEE agrees
not to assert any set-offs, counterclaims or reductions whatsoever, or to make
any deductions for bad debts, discounts or any cost incurred in the marketing,
sale, distribution or exploitation of the Nautica Names and Marks from the
royalty, interest or other payments due LICENSOR hereunder, except and only to
the extent specifically provided in this Agreement.
SECTION 14
General Provisions
14.1 Cumulative Remedies. All rights and remedies conferred upon LICENSOR
by this Agreement and by law shall be cumulative of each other and neither the
exercise nor the
23
failure to exercise any such right or remedy shall preclude the exercise of any
other right or remedy.
14.2 Non-Waiver. No failure by either party to take any action on account
of any default by the other party, whether in a single instance or repeatedly,
shall constitute a waiver of any such default or of any performance required of
the other party . No express waiver by either party of any provision or
performance of any term or condition of this Agreement or of any default by the
other party shall be construed as a waiver of any other or future provision,
performance or default.
14.3 Validity. If any provision of this Agreement shall be invalid or
unenforceable either in its entirety or by virtue of its scope or application to
given circumstances such provision shall be deemed modified to the extent
necessary to render the same valid or as not applicable to given circumstances,
or deemed to be excised from this Agreement, as the situation may require. This
Agreement shall be construed and enforced as if such provision had been included
herein as so modified in scope or application or had not been included herein,
as the case may be. In the event such total or partial invalidity or
unenforceability of any provision of this Agreement exists only with respect to
the laws of a particular jurisdiction, this Section 14.3 shall operate upon such
provision only to the extent that the laws of such jurisdiction are applicable
to such provision.
14.4 Notices.
(a) Any notices, reports, requests or demands to be given by either
party to the other under the provisions of this Agreement shall be forwarded by
facsimile transmission and shall be confirmed by certified or registered air
mail, return receipt requested, charges prepaid, to the telephone numbers and
addresses as set forth in Item 17 of Schedule B hereto.
(b) All notices, reports, requests or demands shall be deemed given on
the date any such facsimile transmission is transmitted and confirmed regardless
of whether or not received. Failure to receive confirmation by registered mail
shall not affect the validity of the notices, reports, requests or demands
transmitted by facsimile transmission.
(c) The parties hereto may change the address for notices by giving
notice of change of address given in the manner provided above.
14.5 Entire Agreement. This Agreement including all Schedules and Exhibits
hereto contains the entire agreement and understanding of the parties with
respect to the subject matter hereof, and all prior understandings and
agreements between the parties hereto relating to the subject matter hereof are
hereby superseded. This Agreement may be modified only by a writing signed by
all parties to be bound by the modification.
14.6 Binding Effect. This Agreement shall be binding upon and shall inure
to the benefit of the parties and signatories hereto, their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
14.7 Controlling Law. This Agreement, including all matters relating to the
validity, construction, performance and enforcement thereof, shall be governed
by the laws of the State of New York applicable to agreements wholly made and to
be performed therein.
14.8 Counterparts. This Agreement may be executed in any number of
identical counterparts, each of which shall be deemed an original, and all of
which, when taken together, shall constitute one and the same document.
24
14.9 Survival. The representations, warranties, covenants, obligations and
indemnities of LICENSEE and LICENSOR contained in this Agreement or in any
ancillary document referred to hereunder shall survive the termination of the
License and this Agreement.
14.10 Neither Party to be Deemed Drafter. This contract is to be deemed to
have been prepared jointly by the parties hereto; any uncertainty or ambiguity
existing herein shall not be interpreted against either party but according to
the application of rules of contracts generally.
14.11 English Language. All statements, reports, notices and
correspondences required hereunder shall be in the English language and the
English language version of the Agreement shall be deemed to be the only
agreement between the parties.
14.12 Confidentiality. LICENSEE and LICENSOR agree, and shall cause their
respective agents, representatives, affiliates, employees, officers and
directors, to: (i) treat and hold as confidential (and not disclose or provide
access to any Person to) all non-public information relating to trade secrets,
processes, patent and trademark applications, product development, price,
customer and supplier lists, pricing and marketing plans, policies and
strategies, details of client and consultant contracts, operations methods,
product development techniques, business acquisition plans, new personnel
acquisition plans and all other confidential information with respect to the
business of LICENSOR or LICENSEE, as the case may be, (ii) in the event that
LICENSEE or any such agent, representative, Affiliate, employee, officer or
director becomes legally compelled to disclose any such information, provide
LICENSOR with prompt written notice of such requirement so that LICENSOR may
seek a protective order or other remedy or waive compliance with this Section
14.12, (iii) in the event that such protective order or other remedy is not
obtained, or either party waives compliance with this Section 14.12, furnish
only that portion of such confidential information which is legally required to
be provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information; provided however, that this
sentence shall not apply to any information that, at the time of disclosure, is
available publicly and was not disclosed in breach of this Agreement by the
other party its agents, representatives, affiliates, employees, officers or
directors; provided further, that with respect to Intellectual Property,
specific information shall not be deemed to be within the foregoing exception
merely because it is embraced in general disclosures in the public domain. In
addition, with respect to Intellectual Property, any combination of features
shall not be deemed to be within the foregoing exception merely because the
individual features are in the public domain unless the combination itself and
its principle of operation are in the public domain. Each party agrees and
acknowledges that remedies at law for any breach of its obligations under this
Section 14.12 are inadequate and that, in addition thereto, either party shall
be entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach.
Each party acknowledges and agrees that its public actions and
statements can affect the image of the other party, the Nautica Names and Marks,
the Licensed Products, other licensees of LICENSOR and the other names and marks
of the LICENSOR or LICENSEE. Accordingly, the release of all corporate
statements, data or information by either party concerning this Agreement shall
be prepared in consultation with, and subject to the prior approval of, the
other party; provided however, that if either or the parties or their parent
corporations is a publicly-held corporation, subject to the requirements of
securities laws and regulations, then, to the maximum extent consistent with
applicable law or regulations, if such parties believe it is required to make a
press release concerning this Agreement, such party shall must give the other
party notice of and an opportunity to comment on such press release.
25
All future communications by LICENSEE to its accounts respecting the
subject matter of this Agreement shall be substantially similar to the press
release. Except to the extent it reasonably believes it is required by law to do
otherwise, or to the extent required to enforce or defend a claim brought under
this Agreement or to comply with compulsory legal process, each party will keep
the terms of this Agreement confidential.
[SIGNATURE PAGE FOLLOWS]
26
IN WITNESS WHEREOF, LICENSOR and LICENSEE have caused this Agreement to be
executed and entered into as of the date set forth above.
NAUTICA APPAREL, INC.
By: /s/ Xxxxxxxxxxx Xxxx
-----------------------------
Name: Xxxxxxxxxxx Xxxx
Title: President
AUTHENTIC FITNESS CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxxxxx
-----------------------------
Name: Xxxxxxx X. Xxxxxxxxxxx
Title: President
27
SCHEDULE A
TO
LICENSE AGREEMENT
Licensed Marks
Nautica, Nautica Blue and Nautica Competition, attached
28
SCHEDULE B
TO
LICENSE AGREEMENT
Item 1. Date of License Agreement: As of March 1, 2003
Item 2. Name of LICENSOR and LICENSEE:
LICENSOR: Nautica Apparel, Inc.
a Delaware corporation
LICENSEE: Authentic Fitness Corporation,
a Delaware corporation
Item 3. Territory: The United States, its territories and
possessions, including St. Croix, St. Xxxxxx, St.
Xxxx, St. Xxxxxx, St. Maarten, and the
Commonwealth of Puerto Rico Canada, Mexico, and
the Caribbean Islands, namely; Antigua, Xxxxxxxx,
Xxxxxxx, Xxxxxxxx, Xxxxxxx, Xxxx, Xxxxxxxx,
Xxxxxxxxx Xxxxxxxx, British Virgin Islands, Haiti,
Jamaica, Aruba, Curacao, Montserrat, St. Kitts,
Nevis, St. Lucia, Trinidad and Tobago, Turks and
Caicos Islands, Guadeloupe, Martinique, St.
Xxxxxxx, Grenada, Antilles, Bonaire, Bequia, Saba,
St. Barthelemy, St. Eustatius and the Cayman
Islands; and all United States military bases,
wherever located.
In the event that LICENSOR, determines, in its
sole judgment, that it is desirable to expand the
countries within the Territory for the Licensed
Products, then LICENSOR shall, first advise
LICENSEE in writing of its intention to negotiate
with regard to additional countries located in
(collectively the "Additional Countries").
LICENSEE shall have thirty (30) days from the date
of LICENSOR's letter within which to respond in
writing to LICENSOR, either affirming or declining
its interest in entering such negotiations with
LICENSOR. LICENSEE's failure to respond to
LICENSOR during such time shall be deemed a
rejection of LICENSOR's inquiry. If LICENSEE, in
fact, advises LICENSOR of its desire to expand the
definition of the Territory to the Additional
Countries, then the parties thereupon shall
attempt in good faith to negotiate an amendment to
the License Agreement to incorporate such
countries. The parties shall attempt to conclude
negotiations within sixty (60) days or such longer
period as may be agreed by the parties. In the
event that LICENSOR and LICENSEE do not enter into
such an amendment to the Agreement during this
time limit or any agreed extension thereof,
LICENSOR may enter into an agreement with a third
party for the licensing of such rights in the
Additional Countries. Nothing herein shall
obligate LICENSOR or LICENSEE to reach an
agreement on the terms of such an amendment with
LICENSEE
29
Item 4. Rights
Granted: LICENSOR hereby licenses LICENSEE to manufacture,
as set forth in Section 3.3 of the Agreement and
market, distribute and sell the Licensed Products
on an exclusive basis in the Territory and only
using Authorized Methods of Distribution.
Item 4 (a) Authorized
Methods of
Distribution: The Authorized Methods of Distribution for
LICENSEE to market and sell the Licensed Products
are limited to: to first class department stores
and specialty stores, and other retail outlets and
methods of distribution dealing in products
similar in quality to the Licensed Products (i.e.,
high fashion and high quality products) and whose
operations are consistent with the high standards
of quality, taste and prestige associated with the
Nautica Names and Marks, all as approved by
LICENSOR in writing. In the event that LICENSOR
regularly sells products under the Nautica Names
and Marks to a broader range of wholesale and
retail accounts, which may include lower tier
department and specialty stores, and mass
merchandisers, then such channels of distribution
shall be included herein as an Authorized Method
of Distribution. LICENSEE may sell Licensed
Products to wholesale jobbers for re-sale to third
parties whose operations are consistent with the
Authorized Methods of Distribution; provided,
however, (1) that sales of Licensed Products to
jobbers shall not exceed 2% of total Net Sales of
Licensed Products in any Royalty Year, (2) sales
to jobbers shall be limited to discontinued
Licensed Products, and (3) such sales to jobbers
shall be governed by the limits set forth in Items
13 (h) and (i) of this Schedule B. LICENSEE shall
not sell any Licensed Products to diverters, or
any other entity which does not sell through
channels of distribution consistent with
Authorized Methods of Distribution. LICENSEE shall
not sell Licensed Products by catalog, over the
Internet or by any other means or medium whether
now known or to be developed, unless approved by
LICENSOR in writing, or unless such catalog, web
site or other medium is operated by or related to
an Approved Account and/or (3) sell or distribute
any Licensed Products to "off-price accounts" as
defined in Item 13 (h) hereof, unless approved by
LICENSOR in writing, which shall be in LICENSOR's
sole reasonable discretion provided, however,
LICENSOR agrees that LICENSEE shall be able to
sell the Licensed Products to LICENSOR's
International Licensees as identified by LICENSOR
for sale through LICENSOR approved freestanding
spaces wholly owned and operated by such
LICENSOR's International Licensees and to Nautica
Limited, conditioned on LICENSEE paying royalties
on such sales as specified in Item 8 hereof, and
LICENSEE shall also have the right to sell to one
factory outlet store located at its business
premises in Los Angeles, California at the mailing
address of 0000 Xxxxxxx Xxxxxxxxx and to
LICENSEE'S SPEEDO AUTHENTIC FITNESS Retail stores.
In addition, if approved by
30
LICENSOR once they are developed, LICENSEE shall
have the right to sell to other full price retail
stores owned or operated by LICENSEE.
Item 5. Licensed Products: Nautica Women's Collection Swimsuits, Collection
Separates Swimsuits, Nautica Blue Swimsuits,
Nautica Beachwear, Nautica Women and Girl's Sizes,
and fashion swimwear cover-ups and accessories to
include; beachwear jackets, beachwear dresses,
beachwear skirts, beachwear shorts, beachwear
pants, beachwear tops, swim fins (flippers),
kickboards, paddles and non-prescription goggles
(hereinafter collectively referred to as "Swimwear
Accessories"). The Licensed Products do not
include racing/competitive swimwear, caps or
accessories.
LICENSOR and LICENSEE agree that if within 12
months from the Effective Date above, or if at any
time thereafter, LICENSEE fails to market,
distribute and/or sell in each country within the
Territory or, with respect to the Caribbean, in
any Caribbean country, any of the following
Licensed Product categories:(i) Nautica Women's
Collection Swimsuits, (ii) Collection Separates
Swimsuits, (iii) Nautica Blue Swimsuits, (iv)
Nautica Beachwear, (v) Nautica Women and Girl's
Sizes, (vi) Nautica Competition or (vii) Swimwear
Accessories; then, LICENSOR, in addition to all
other remedies available to it, shall give
Licensee six (6) months written notice of its
intention to terminate the right under this
Agreement with respect to each such unused
category or categories within such countries
and/or with respect to the countries themselves,
if none of the Licensed Products have been sold
there. With respect to the Caribbean Islands, for
purposes of this provision, the sale of any
Licensed Products in any jurisdiction or country
in the Caribbean Islands shall be deemed to be a
sale in all jurisdictions and countries therein.
Item 6. License Effective Date/Conditions Precedent:
This Agreement shall not be effective against LICENSOR, and
LICENSEE shall have no rights under this Agreement, until the
satisfaction of each and every one of the following conditions:
1. Execution and delivery of this Agreement by both LICENSOR
and LICENSEE;
2. LICENSEE's payment to LICENSOR of U.S. $ ***
3. Execution and delivery of the unconditional written guaranty
shown in Exhibit E hereto by The Warnaco Group, Inc.
guaranteeing the obligations of LICENSEE under this
Agreement.
Item 7(a) Date of Expiration: June 30, 2007
31
Item 7(b)Renewal Terms
This License Agreement shall be renewable for an additional two
years. Such renewal, if any, shall be on such terms and
conditions as LICENSOR and LICENSEE may agree upon in writing,
provided that:
(i) LICENSEE is in full compliance with all provisions
hereunder; and
(ii) ***
Within forty-five (45) days from the end of the Royalty Year
ending June 30, 2006, LICENSEE shall provide LICENSOR with an
annual statement, certified to be correct by an officer of
LICENSEE, which sets forth the actual net wholesale sales volume
for such Royalty Year. If the actual net wholesale sales volume
for such Royalty Year is less than ***, LICENSOR shall be
entitled to terminate this Agreement, effective upon the
expiration of the notice period set forth below, by notifying the
LICENSEE of such termination in writing within fifteen (15) days
of receipt of such annual statement.
There shall be no right to renew this Agreement for additional
terms beyond that set forth above. However, the parties may chose
to renew the Agreement thereafter upon such terms and conditions
as they may mutually agree in writing.
Item 8. Royalties:
LICENSEE shall pay LICENSOR in each Royalty Year ***. As used
herein, "net wholesale sales volume" shall mean gross wholesale
sales of the Licensed Products shipped by LICENSEE, exclusive of
transportation costs or taxes separately stated on the invoice,
less returns, markdowns and allowances in the ordinary course of
business, but such returns, markdowns and allowances shall not
exceed ***, without the approval of LICENSOR, which shall not be
unreasonably withheld, provided, however, such returns, markdowns
and allowances shall in no event exceed *** in any one Royalty
Year. Except as specifically provided for above, no other
deductions shall be made, including, without limitation,
deductions for other discounts, markdowns, advertising
allowances, rebates, donations, uncollectable accounts or costs.
Item 9. Royalty Years and Royalty Quarters:
As used herein, a "Royalty Quarter" shall mean a calendar quarter
except that the first Royalty Quarter of the first Royalty Year
shall commence as of the date hereof and end on September 30
2003. As used herein, a "Royalty Year" shall mean the Year
commencing July 1 and ending June 30 except that the first
Royalty Year shall commence on the date hereof and end on June
30, 2004.
Item 10. Minimum Royalties, Guaranteed Minimum Sales and Projected Sales:
Minimum Royalties for the first Royalty Year shall be U.S. $***
payable as follows:
32
U.S. $***
To be determined based on final decision on the Royalty Year
***
***
Notwithstanding anything to the contrary contained above or
elsewhere in this Agreement, LICENSEE shall not, in any one
Royalty Year, be required to remit any amount in respect of
royalty payments to the extent that, but only to the extent that,
the aggregate amount of all royalties paid on or before the date
of such remittance for such Royalty Year exceeds the greater of
(1) the aggregate amount of Percentage Royalties due and payable
for such Royalty Year or (2) the aggregate Minimum Royalties due
and payable for such Royalty Year through to such date. This
provision shall not limit the requirement for LICENSEE to pay any
additional amounts determined to be due pursuant to any audit
conducted by LICENSOR for the then current year and/or any prior
year(s) or any other amounts then due, as set forth in this
Agreement.
The excess of Percentage Royalties over Minimum Royalties, if
any, due LICENSOR shall be paid within thirty (30) calendar days
after the end of each calendar quarter ("Royalty Quarter") of
each Royalty Year.
The Guaranteed Minimum Sales of the Licensed Products during each
Royalty Year shall be:
Initial Term:
Royalty Year 1-ending 06/30/04 $***
Royalty Year 2-ending 06/30/05 $***
Royalty Year 3-ending 06/30/06 $***
Royalty Year 4-ending 06/30/07 $***
Renewal Term:
Royalty Year-ending 06/30/08 $***
Royalty Year-ending 06/30/09 $***
The Projected/Forecasted Sales of the Licensed Products for the
Royalty Years set forth above are:
Royalty Year 1 $***
Royalty Year 2 $***
Royalty Year 3 $***
Royalty Year 4 $***
Renewal Term:
Royalty Year 5 $***
Royalty Year 6 $***
33
Item 11. LICENSEE shall employ an exclusive staff for the design,
development, marketing and sales management of the Licensed
Products, and the development and enhancement of the Nautica
Names and Marks in the Territory.
LICENSEE shall, on an annual basis, at LICENSEE's sole cost and
expense, send two (2) of LICENSEE's employees to work with
LICENSOR's staff for the purpose of educating LICENSEE as to the
image and concept of the Nautica Names and Marks and the
implementation of such image and concept in the Territory.
LICENSEE shall, at its own cost and expense, send the appropriate
number of LICENSEE's employees as determined by LICENSOR to
attend at least four design and/or marketing meetings at the
offices of the LICENSOR during each 12 calendar month period.
Item 12. The President and other exclusive senior personnel, namely, vice
presidents, directors, managers, designers, and product
merchandisers involved exclusively in LICENSEE's business shall
be individuals approved by LICENSOR, which approval shall be
granted in LICENSOR's sole reasonable judgement.
Item 13. Additional Covenants:
LICENSEE understands, covenants and agrees that:
(a) All labels, packaging, marketing materials, fixturing,
signage and POS (point of sale) images used for the Licensed
Products shall be subject to the approval of LICENSOR, which
approval may be granted or withheld at LICENSOR's sole
discretion. LICENSEE acknowledges and agrees that such approval
by LICENSOR may be based upon or reflect LICENSOR's subjective
standards of quality and aesthetics taste, marketability and
suitability for use in conjunction with the Nautica Names and
Marks.
(b) LICENSEE shall utilize LICENSOR's designated label and tag
suppliers or other approved resources for use on or with the
Licensed Products; provided that, LICENSOR shall not receive
consideration from such suppliers for such purchases. LICENSEE
shall negotiate the terms of its business relationship directly
with these suppliers.
(c) The reasonable cost of samples, prints, artwork and
inspiration provided to LICENSEE by LICENSOR for product
development shall be at the sole cost of LICENSEE. LICENSEE shall
be obligated to pay for such costs within thirty (30) business
days of receipt of invoices from LICENSOR.
(d) LICENSEE agrees to pay LICENSOR a reasonable design fee as
set forth below for designing fixturing, visuals, LICENSEE's
showroom, press events, tradeshows, photo shoots and other
similar events, which design work shall be performed by
LICENSOR's designated design and architectural staff, and shall
be billed to LICENSEE at a rate of $50.00 to $100.00 per hour.
LICENSEE shall pay LICENSOR for such design work within thirty
days after the date of LICENSOR's invoice.
34
(e) LICENSEE shall discuss and agree with LICENSOR on the
suggested retail prices for the Licensed Products, to be
presented solely in full compliance with the law.
(f) Each design for the Licensed Products, including the nature,
quality, color and style of the Licensed Products, shall be
subject to the approval of LICENSOR, which approval may be
granted or withheld at LICENSOR's sole, absolute and unreviewable
discretion. LICENSEE acknowledges and agrees that such approval
by LICENSOR will be based upon LICENSOR's subjective standards of
quality and aesthetics.
(g) LICENSEE shall only sell to accounts which will enhance the
image and prestige of the Nautica Names and Marks and which are
pre-approved by LICENSOR in writing. If such an account would not
enhance the image or prestige of the Nautica Names and Marks, as
determined by LICENSOR in its sole and reasonable discretion,
then LICENSEE shall discontinue selling to such account
immediately, subject to filling bona fide orders previously
accepted by LICENSOR; provided however, that such reasonable
discretion may based upon or reflect LICENSOR's subjective
standards of, quality, taste aesthetics, marketability and
suitability for use in conjunction with the Nautica Names and
Marks. LICENSEE shall submit to LICENSOR a list of accounts for
LICENSOR's prior written approval.
(h) LICENSEE agrees that in no event shall net wholesale sales
volume of the Licensed Products to LICENSOR approved "off-price
accounts" (as hereinafter defined) in any Royalty Year exceed ***
of aggregate net wholesale sales volume for such Royalty Year,
without the approval of LICENSOR, which shall not be unreasonably
withheld, provided however, that such sales to "off-price"
accounts shall not exceed *** of the net wholesale sales volume
in any one Royalty Year. As used herein, "off-price accounts"
means a store or customer that is considered by the industry to
sell predominantly or exclusively at less than normal retail
prices, such as T.J. Maxx. Sales by LICENSEE to off-price
accounts, as are sales by LICENSEE to any account, are subject to
the approval of LICENSOR as provided for in the preceding
paragraph. The reasonable determination by LICENSOR that an
account is an off-price account shall be binding upon LICENSEE.
Further, as a condition of sales to such "off-price accounts"
LICENSEE shall prohibit the "off-price account" from advertising
the availability of the Licensed Products for sale at such
"off-price account"
(i) LICENSEE agrees that in no event shall the sale of
"off-price" Licensed Products exceed *** of net wholesale sales
volume. As used herein, "off-price" merchandise means the
Licensed Products that are sold at a discount of at least ***
below LICENSEE's regular wholesale line price for such
merchandise. In addition to all other remedies that the LICENSOR
may have if LICENSEE violates this provision, for all "off-price
sales" that exceed *** of the net wholesale sales volume,
LICENSEE shall be required to pay royalties at *** on the dollar
value of "off-price" sales that exceed *** of the net wholesale
sales volume.
(j) Anything in this Agreement to the contrary notwithstanding,
LICENSEE agrees to sell reasonable quantities of Licensed
Products at a *** discount, from Licensee's regular full
wholesale price, to all Nautica full price stores owned by
35
LICENSOR and/or its affiliates. Such sales shall not be counted
as "off-price" sales for purposes of this Agreement.
(k) LICENSEE will prepare and market all of the Licensed Products
in exclusive Nautica brand catalogs, and/or through "look books"
and/or CD-ROMS to be reviewed and approved in advance by
LICENSOR, as a condition of distribution. The new exclusive
Nautica brand catalogs, "look books" and/or CD-ROMS must be
produced at least once per Royalty Year, and shall feature all of
the approved Licensed Products. LICENSOR shall have final
approval on the LICENSEE's SKU plan, as well as all other
features of the exclusive Nautica brand catalog, "look books"
and/or CD-ROMS, including but not limited to the models, format,
print, and overall quality.
(l) LICENSEE agrees to participate at appropriate trade shows as
agreed by LICENSOR and LICENSEE. It is agreed that LICENSEE shall
participate in at least five (5) major trade shows per Royalty
Year, as available, which currently shall include the August
ISAM/Magic, Miami Swim Show, Surf Expo, Lyon Swim Show and the
London Swim Show trade show(s). At such trade shows, the Licensed
Products will have a dedicated space built to LICENSOR's design
specifications, provided however, neither the Lyon Swim Show nor
the London Swim Show will have a dedicated space unless LICENSOR
and LICENSEE agree to include the respective country rights in
the Territory. The space, both dedicated and non-dedicated, shall
be funded completely by LICENSEE. LICENSOR's design team shall
provide the design specifications to LICENSEE and LICENSEE shall
be obligated to pay for the LICENSOR's costs associated with such
services and designs. LICENSEE shall be obligated to pay for such
costs within thirty (30) days of receipt of invoices from
LICENSOR.
(m) LICENSEE shall pay for the costs associated with having two
(2) representatives of LICENSOR attend catalog, advertising and
marketing photo shoots of the Licensed Products for the purposes
of supervising the styling and merchandising of the Licensed
Products and for any other legitimate business purposes
associated with this Agreement, as determined by LICENSOR.
(n) LICENSEE also shall pay for all reasonable costs and
expenses, including without limitation costs for lodging, travel
(business class) and meals incurred by representatives of
LICENSOR to attend such business meetings in the offices of
LICENSEE, not to exceed ***.
(o) LICENSEE agrees that it will not manufacture, market,
distribute and/or sell products that are similar to and/or are in
the same product categories as the Licensed Products, under the
following trademarks: *** Further, if LICENSEE enters into an
agreement in the future to manufacture, market and sell a brand
that the LICENSOR reasonably believes in competitive with
LICENSOR, then LICENSOR shall have the right to require that
LICENSEE not assign any of the design, or product merchandising
staff primarily devoted to the Licensed Products to work on such
purportedly competitive products.
36
(p) LICENSEE shall not sell any of the Licensed Products without
the Nautica Names and Marks permanently affixed thereon, unless
LICENSOR shall otherwise approve in writing.
(q) LICENSEE agrees to build a dedicated showroom in New York
City for the Licensed Products at a location acceptable to
LICENSOR and such other locations as may be agreed between the
parties (the "Licensee Showrooms"). The Licensee Showrooms shall
be built by LICENSEE in accordance with the "Nautica concept", as
defined from time to time by LICENSOR, in its sole discretion,
and shall be of the same quality standard and image as the
showroom maintained by Nautica International, Inc. ("NII")
currently located at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx.
LICENSEE shall obtain LICENSOR's reasonable approval with regard
to the size of the Licensee Showroom. LICENSEE agrees to build a
Licensee Showroom on or before the launch of the Licensed
Products. The parties acknowledge and agree that LICENSEE intends
to move its corporate offices (including all showrooms) in or
about October, 2003, and that accordingly, Licensee shall not be
obligated to make substantial expenditures to develop and build
the Licensee Showroom in its current facilities. Thereafter, in
its new premises LICENSEE shall build the Licensee Showroom in
accordance with this provision. LICENSEE further agrees to stock
and maintain the Licensee Showroom at all times during the Term
of this Agreement. The designs and specifications of the
showrooms shall be obtained from LICENSOR by LICENSEE. LICENSEE
shall pay LICENSOR for the reasonable cost associated with
reviewing and/or developing plans for the Licensee Showroom in
LICENSEE's new facilities.
(r) LICENSEE agrees to operate the business through a personnel
grouping or other division of LICENSEE dedicated to the Nautica
business.
(s) LICENSEE shall be obligated to participate in Nautica's
fixturing program for the Licensed Products, as may reasonably be
required by LICENSOR; provided however, that such reasonable
requirement may be based upon or reflect LICENSOR's subjective
standards of, quality, taste aesthetics, marketability and
suitability for use in conjunction with the Nautica Names and
Marks. The amounts required to manufacture and install the
fixturing shall not be accounted for as an advertising
expenditure in LICENSEE's advertising budget, as established in
Item 14 of this Schedule B.
(t) The design of fixtures and each retail corner and
shop-in-shop shall be obtained by LICENSEE from LICENSOR and
LICENSEE shall pay the reasonable cost of obtaining such designs
or specifications from LICENSOR.
(u) Notwithstanding anything to the contrary contained in this
Agreement, LICENSEE acknowledges and agrees that LICENSOR may,
without breach of this Agreement, negotiate with any person or
entity at anytime beginning twelve (12) months prior to the
expiration date of this Agreement (either as to the original
expiration date or the expiration date following renewal,
whichever is applicable) to become the licensee of LICENSOR for
the Licensed Products following the expiration of this Agreement.
Further, at any time, LICENSOR may at any time meet with other
persons in the same business as LICENSEE for informational or any
other reasons; provided however, that LICENSOR complies with the
confidentiality provisions of Section 14.12 of the Agreement.
37
LICENSOR's shall the right to meet and confer or to negotiate
with other prospective licensees shall not in any way affect
LICENSEE's rights, if any, to renew this Agreement. In addition,
in the event that this Agreement is for any reason not renewed
with LICENSEE at least nine (9) months prior to the expiration
date of this Agreement (either as to the original expiration date
or the expiration date following renewal, whichever is
applicable), LICENSEE acknowledges and agrees that LICENSOR may
at any time thereafter, without breach of this Agreement: (i)
enter into a license agreement with one or more licensees for the
Licensed Products in the Territory; and (ii) authorize such new
licensee or licensees to commence developing and presenting a
line of Licensed Products and to begin promoting, marketing and
selling the Licensed Products to the trade, anything to the
contrary contained in this Agreement to the contrary
notwithstanding. LICENSEE acknowledges and agrees that the
provisions of this paragraph are intended to provide, to the
fullest extent practical, a seamless transition to the consumers
of the product lines licensed hereunder from LICENSEE to a third
party or third parties succeeding to the rights of LICENSEE
hereunder.
(v) LICENSEE's proposals for Gifts-With-Purchase ("GWP"),
Purchase with Purchase ("PWP") and gifts given without the
requirement of purchase ("Gifts") shall be presented to LICENSOR
for approval, which approval may be granted or withheld at
LICENSOR'S sole, absolute and unreviewable discretion. All such
Gifts, GWP's, PWP's and other gifts proposed must be of high
quality. If approved, LICENSOR may in its sole discretion attach
such conditions on such gifts as the design, timing, quality, and
royalty amount if any. All approved Gifts, GWP's, PWP's and other
gifts may be given at LICENSEE's sole expense, and shall not be
credited against LICENSEE's required advertising budget as set
forth in Item 14 of this Schedule B. A reasonable number of
samples shall be provided to LICENSOR free of charge to LICENSOR.
Provided that LICENSEE desires to offer women's bags ("Bags) as
Gifts, GWP's or PWP's and LICENSOR's licensee for bags offers to
sell such Bags to LICENSEE and such Bags are of equal or higher
quality and competitively priced with the Bags from other
sources, and such Bags are approved by LICENSOR, LICENSEE agrees
to purchase such Bags from LICENSOR's licensee.
(w) If two (2) times within any Royalty Year, LICENSEE shall not
make any payment due within the time frames (including applicable
notice and cure periods) required in this Agreement, then
LICENSEE agrees to establish and maintain, or cause to be
established and maintained, at all times throughout the remaining
Term, a standby Letter of Credit in favor of LICENSOR,
substantially in the form attached hereto as Exhibit F, issued by
a bank acceptable to LICENSOR, in amounts, as set below:
Royalty Year 1 US $***
Royalty Year 2 US $***
Royalty Year 3 US $***
Royalty Year 3 US $***
Thereafter, LICENSOR shall be authorized to draw down on this
Letter of Credit, without notice, if any amount due pursuant to
this Agreement has not been paid by LICENSEE within ten (10) days
of the time established herein for such payment.
38
Such Letter of Credit shall be valid for a period of not less
than fifteen (15) months. In the event, however, that such Letter
of Credit is for an amount which is not equal to or in excess of
the amount required as set forth above, a replacement Letter of
Credit must be established by LICENSEE. In addition, the Letter
of Credit shall permit partial drawings in integral multiples of
U.S. $***. In the event LICENSOR draws upon such Letter of Credit
in an amount equal to or greater than U.S. $*** in the aggregate,
a new additional Letter of Credit shall be established for the
aggregate amount of such draws. Whenever a replacement or a new
Letter of Credit is required to be established and such
replacement or new Letter of Credit is not established within ten
(10) days thereafter, such failure to establish a replacement or
new Letter of Credit shall be grounds for automatic termination
of the Agreement pursuant to Section 10.2 (i) hereof.
(x) Except as otherwise authorized herein, LICENSEE may not sell
the Licensed Products in its factory outlet stores.
Item 14. Advertising Budget
(a) LICENSEE shall pay to LICENSOR for advertising, marketing,
and brand support (including advertising, marketing and brand
support that also features Nautica brand products in addition to
the Licensed Products) in each Royalty Year the greater of (i)
*** for the current Royalty Year or (i) the amount set forth
below:
1st Royalty Year ending 06/30/04: $***
2nd Royalty Year, ending 06/30/05: $***
3rd Royalty Year, ending 06/30/06: $***
4th Royalty Year, ending 06/30/07: $***
Renewal Term:
5th Royalty Year ending 06/30/08 $***
6th Royalty Year ending 06/30/09 $***
Payments of the Advertising Budget shall be made quarterly at the
beginning of each Royalty Quarter.
The excess of the Advertising Budget over the guaranteed minimum
amount, if any, due LICENSOR shall be paid within thirty (30)
calendar days after the end of each of the first three (3)
Royalty Quarters of each Royalty Year and within Forty Five (45)
days after the end of each Royalty Year.
(b) LICENSEE shall spend trade advertising, marketing, promotion
and special events associated with the Licensed Products in each
Royalty Year the greater of (i) *** for the current Royalty Year
or (ii) the amount set forth below:
1st Royalty Year ending 06/30/04: $***
2nd Royalty Year, ending 06/30/05: $***
3rd Royalty Year, ending 06/30/06: $***
4th Royalty Year, ending 06/30/07: $***
39
Renewal Term:
5th Royalty Year ending 06/30/08 $***
6th Royalty Year ending 06/30/09 $***
All trade Advertising, including the placement thereof (all
excluding Co-op advertising), must be approved by LICENSOR in its
reasonable discretion; provided however, that such reasonable
discretion may based upon or reflect LICENSOR's subjective
standards of, quality, taste aesthetics, marketability and
suitability for use in conjunction with the Nautica Names and
Marks; provided however, if the parties agree, the budget for
trade advertising, or any part thereof, may be spent by LICENSOR
for marketing, advertising and/or brand support in addition to
the amounts specified in subsection (a) of this Item 14.
(c) For the first Royalty Year, in addition to the payments se
forth in Item 14 (a) and (b), LICENSEE shall pay to LICENSOR for
the purpose of advertising, marketing and brand support for the
launch of the Licensed Products the sum of $*** (the "Launch
Budget"). Payments of the Launch Budget shall be made quarterly
at the beginning of each Royalty Quarter. The launch budget is to
be spent by LICENSOR.
The amounts expended by LICENSEE, if any, for co-operative
advertising shall not be accounted for as an eligible advertising
expenditures for the Advertising Budget or the Launch Budget. IF
LICENSEE desires to use any co-op advertising or promotional
materials in connection with the sale of the Licensed Products,
LICENSEE shall submit to LICENSOR for its approval three months
prior to such use any co-op advertising or promotional materials.
Utilization of the Advertising Budget (including the Launch
Budget) shall be determined in LICENSOR's discretion, after
reasonable consultation with LICENSEE.
Item 15 Merchandise Coordinator Services.
LICENSEE acknowledges and agrees that it is in LICENSEE's best
interest to utilize the services of the staff of LICENSEE's
merchandise coordinator program to work with retailers to
increase sales, to provide product information and to identify
business opportunities. LICENSEE agrees to assign the staff
consistent with accomplishing these objectives of its merchandise
coordination program.
Item 16. Payment Information:
All payments shall be made by wire transfer to:
HSBC Bank USA
000 Xxxxx Xxxxxx
Xxx Xxxx, X.X. 00000
ABA # 000000000
Account Name: Nautica Enterprises, Inc.
Account Number: 610804987
40
Item 17. Addresses for Notice:
To LICENSEE:
Authentic Fitness Corporation
0000 Xxxxxxx Xxxx.
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn: President
And by Facsimile to: 000-000-0000
with a copy to:
Warnaco Inc.
00 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: General Counsel
And by Facsimile to: (000) 000-0000
To LICENSOR:
Nautica Apparel, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: President
And by Facsimile to: (000) 000-0000
with a copy to:
Nautica Enterprises, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
And by Facsimile to: (000) 000-0000
Item 18: Contact information for key personnel. The officer(s) of LICENSEE
assigned to providing all reports due hereunder are set forth on
Exhibit F, attached hereto and made a part hereof.
Financial Reports - CFO
Merchandising Reports - Designer Division President
Tel: 000-000-0000
41
Exhibit A
Supplier Agreement and LICENSOR'S Code of Conduct
42
Exhibit B
Form of Monthly and Annual Royalty Reports
43
Exhibit C
Approved Retail Accounts
Initial
44
EXHIBIT D
LETTER OF Credit [LETTERHEAD OF BANK]
[Date]
[LC No,___________]
Nautica Apparel, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
[Name of Bank] (the "Bank") hereby establishes its Irrevocable Standby Letter of
Credit No. [ ] in favor of Nautica Apparel, Inc., a Delaware corporation, whose
address is 00 Xxxx 00xx Xxxxxx, 0xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, available
by your draft at sight, drawn on us and accompanied by your statement as follows
signed by your President or one of your Vice Presidents:
"The amount of our draft of even date herewith drawn under
[Name of Bank] is owing to Nautica Apparel, Inc., pursuant to the
terms, covenants and conditions contained in the License
Agreement between Nautica Apparel, Inc. and [Licensee], dated as
of (the "License"), as the same may be amended
from time to time and that amount drawn is due and payable under
said License."
[Name of Bank] unconditionally undertakes to remit up to a total of U.S.
$ to the order of the beneficiary, Nautica Apparel, Inc., upon receipt
of a sight draft from beneficiary together with the statement above described in
accordance with the terms of this standby Letter of Credit. Multiple partial
drawings are permitted.
This Letter of Credit is subject to the Uniform Customs and Practice for
Documentary Credits [1984 Revision], International Chamber of Commerce
Publication No. 400.
We engage with you that drafts drawn under and in compliance with the terms of
this Letter of Credit will be duly honored if presented at our above office on
or before [deadline], accompanied by the original of this Letter of Credit.
This Letter of Credit sets forth in full the terms of our undertaking and,
except as expressly stated herein, is not subject to any condition or
qualification whatsoever.
[Name of Bank]
By:
--------------------
Authorized Signature
45
EXHIBIT E
Guaranty
This GUARANTY, dated as of (as the same may be amended from time to
time as permitted hereby, the "Guaranty"), from_____________________________ , a
corporation, having an address at (herein referred to as the "Guarantor"),
to Nautica Apparel, Inc. ("LICENSOR").
WHEREAS, it is a condition precedent to the obligations of the parties to
consummate the License Agreement (the "License Agreement") dated as of the date
hereof between LICENSOR and , a corporation (the "LICENSEE");
WHEREAS, the capitalized terms used herein that are not defined herein are
used herein as defined in the License Agreement;
NOW, THEREFORE, in order to induce LICENSOR to enter into the License
Agreement and for other good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereto agree as follows:
1. Guaranty.
(a) The Guarantor hereby irrevocably and unconditionally guarantees,
without offset or deduction, to LICENSOR, the following (which are
collectively referred to as the "Guaranteed Obligations"): the payment
by the LICENSEE of all payment obligations under the License Agreement
(including, without limitation, royalties, minimum royalties and
advertising expenses) (the "Guaranteed Documents") when due
(including, without limitation, by reason of the License Agreement
being declared in default) strictly in accordance with the terms of
the Guaranteed Documents, and the timely performance of all other
obligations of the LICENSEE thereunder. The Guarantor does hereby
agree that in the event that the LICENSEE fails to pay perform any
Guaranteed Obligation for any reason (including, without limitation,
the liquidation, dissolution, receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization, arrangement,
composition or readjustment of, or other similar proceedings affecting
the status, existence, assets or obligations of, the LICENSEE, or the
disaffirmance with respect to the LICENSEE of the License Agreement or
the other Guaranteed Documents in any such proceeding) within three
days after the date on which such Guaranteed Obligation became due and
payable or is required to be performed, as the case may be, the
Guarantor shall pay or perform (or cause to be performed), as the case
may be, such Guaranteed Obligation forthwith upon the receipt of
notice from LICENSOR (such notice to be sent to the LICENSEE (to the
extent LICENSOR is not stayed or prevented from doing so by operation
of law) and the Guarantor) stating that such Guaranteed Obligation was
not paid when due or not performed when required, as the case may be,
provided that in the event of (i) liquidation, dissolution,
receivership, insolvency, bankruptcy, assignment to the benefit of
creditors, reorganization, arrangement, composition or readjustment
of, or other similar proceedings affecting the status, existence,
assets or obligations of, the Guarantor, or (ii) the breach by the
Guarantor of any of its material agreements made hereunder in any
46
material respect, the Guarantor shall automatically be obligated to
immediately pay all Guaranteed Obligations as if such Guaranteed
Obligations were then due and payable.
(b) The obligations of the Guarantor hereunder shall not be affected by
the genuineness, validity, regularity or enforceability of any of the
LICENSEE's obligations under any of the Guaranteed Documents or any
amendment, waiver or other modification of such Guaranteed Document
(except to the extent of such amendment, waiver or modification), or
substitution, release or exchange of collateral for or other guaranty
of any of the Guaranteed Obligations (except to the extent of such
substitution, release or exchange) without the consent of the
Guarantor, any priority or preference to which any other obligations
of the LICENSEE may be entitled over the LICENSEE's obligations under
any of the Guaranteed Documents, or, to the fullest extent permitted
by applicable law, any other circumstance that might otherwise
constitute a legal or equitable defense to or discharge of the
obligations of a surety or guarantor including, without limitation,
any defense arising out of any laws of the United States of America or
any State thereof which would either exempt, modify or delay the due
or punctual payment and performance of the obligations of the
Guarantor hereunder. Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following
shall not, to the fullest extent permitted by law, affect the
liability of the Guarantor hereunder: (i) the extension of the time
for or waiver, amendment or other modification of, at any time and
from time to time, without notice to the Guarantor, the LICENSEE's
performance of or compliance with any of its obligations under the
Guaranteed Documents (except that such extension or waiver shall be
given effect in determining the obligations of the Guarantor
hereunder), (ii) any assignment, transfer, sublicense, (iii) any
merger or consolidation of the LICENSEE or the Guarantor into or with
any other person or (iv) any change in the ownership of any shares of
capital stock of the LICENSEE.
(c) This Guaranty is an absolute, present and continuing guaranty of
payment and performance and not merely of collectibility and is in no
way conditional or contingent upon any attempt to collect from the
LICENSEE any unpaid amounts due or otherwise to enforce performance by
the LICENSEE. The Guarantor specifically agrees that, without
limitation, it shall not be necessary or required, and that the
Guarantor shall not be entitled to require, that LICENSOR (i) file
suit or proceed to obtain or assert a claim for personal judgement
against the LICENSEE for the Guaranteed Obligations, or (ii) make any
effort at collection of the Guaranteed Obligations from the LICENSEE,
or (iii) foreclose against or seek to realize upon any security now or
hereafter existing for the Guaranteed Obligations, or (iv) file suit
or proceed to obtain or assert a claim for personal judgement against
any other person liable for the Guaranteed Obligations, or make any
effort at collection of the Guaranteed Obligations from any such other
person, or exercise or assert any other right or remedy to which the
LICENSOR is or may be entitled in connection with the Guaranteed
Obligations or any security or other guaranty therefor, or (v) assert
or file any claim against the assets of the LICENSEE or any other
guarantor or other person liable for the
47
Guaranteed Obligations, or any part thereof, before or as a condition
of enforcing the liability of the Guarantor under this Guaranty or
requiring the payment of said Guaranteed Obligations by the Guarantor
hereunder, or at any time thereafter.
(d) The Guarantor agrees that, without limiting the generality of this
Guaranty, if default shall have occurred and be continuing and
LICENSOR shall be prevented by applicable law from exercising its
remedies (any of them) under the License Agreement, LICENSOR (or any
assignee thereof) shall be entitled to receive hereunder from the
Guarantor, upon demand therefor, the sums that would otherwise been
due from the LICENSEE had such remedies been able to be exercised. The
Guarantor hereby unconditionally waives any requirement that, as a
condition precedent to the enforcement of the obligations of the
Guarantor hereunder, the LICENSEE or all or any one or more of any
other guarantors of any of the Guaranteed Obligations be joined as
parties to any proceedings for the enforcement of any provision of
this Guaranty.
2. No Implied Third Party Beneficiaries. This Guaranty shall not be
deemed to create any right in any person except LICENSOR and shall not
be construed in any respect to be a contract in whole or in part for
the benefit of any other person.
3. Waiver; No Setoff; Reinstatement; Subrogation. The Guarantor waives
notice of the acceptance of this Guaranty and of the performance or
nonperformance by the LICENSEE, demand for payment from the LICENSEE
or any other Person, notice of nonpayment or failure to perform on the
part of the LICENSEE, diligence, presentment, protest, dishonor and,
to the fullest extent permitted by law, all other demands or notices
whatsoever, other than the request for payment hereunder and notice to
the extent provided for in Section 1 hereof. The obligations of the
Guarantor shall be absolute and unconditional and shall remain in full
force and effect until satisfaction of all Guaranteed Obligations
hereunder and, without limiting the generality of the foregoing, shall
not be released, discharged or otherwise affected by the existence of
any claims, set-off, defense or other rights that the Guarantor may
have at any time and from time to time against any Party, whether in
connection herewith or any unrelated transactions. This Guaranty shall
continue to be effective or be reinstated, as the case may be, if at
any time any payment of any Guaranteed Obligation is rescinded or must
otherwise be returned by any Party upon the insolvency, bankruptcy,
reorganization, arrangement, readjustment of debt, dissolution,
liquidation or similar proceeding or circumstances with respect to the
LICENSEE, all as though such payment had not been made. The Guarantor,
by virtue of any such payment hereunder to a Party, shall be
subrogated to such Party's claim against the LICENSEE or any other
person relating thereto, provided that the Guarantor agrees that it
shall not exercise any rights of subrogation that it may acquire due
to any payment or payments made hereunder until all of the Guaranteed
Obligations shall have been paid and performed in full.
4. Amendments, Etc. No amendment of or supplement to this Guaranty, or
waiver or modification of, or consent under, the terms hereof, shall
be
48
effective unless evidenced by an instrument in writing signed by the
Guarantor and each Party.
5. Payments. All payments by the Guarantor hereunder in respect of any
Guaranteed Obligation shall be made in United States Dollars and
otherwise as provided in the Guaranteed Document in which such
Guaranteed Obligation is contained. All payments hereunder shall be
made free and clear of, and without deduction or withholding for or on
account of, any taxes, levies, fees, imposts, duties, expenses,
commissions, withholdings, assessments, or other charges, together
with all penalties, fines, additions to tax and interest thereon
(collectively, "Taxes"). If any Taxes shall be required by law to be
deducted or withheld from any payment to any Party hereunder, the
Guarantor shall increase the amount to be paid so that LICENSOR
receives, after deduction or withholding on account of such Taxes, the
full amount of the payment provided for in this Guaranty.
6. Integration; Counterparts; Successors and Assigns. This Guaranty
(a)constitutes the entire agreement, and supersedes all prior
agreements and understandings, both written and oral, among the
Guarantor and LICENSOR, with respect to the subject matter hereof, (b)
may be executed in several counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the
same instrument, and (c) shall be binding upon the successors and
permitted assigns of the Guarantor and shall inure to the benefit of,
and shall be enforceable by LICENSOR to the fullest extent permitted
by applicable laws.
7. Notices. All requests, notices or other communications hereunder shall
be in writing, addressed as follows:
If to the Guarantor:
With a copy to:
If to LICENSOR:
Nautica Apparel, Inc.
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
With a copy to:
Nautica Enterprises, Inc.
49
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Attention: General Counsel
8. No Waivers. No failure on the part of LICENSOR to exercise, no delay
in exercising, and no course of dealing with respect to, any right or
remedy hereunder will operate as a waiver thereof; nor will any single
or partial exercise of any right or remedy hereunder preclude any
other further exercise of any other right or remedy. The remedies
provided hereunder are cumulative, and not exclusive of remedies at
law or equity.
9. Severability. To the fullest extent permitted by applicable law, any
provision of this Guaranty that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating
the remaining provisions hereof or of any provision in any Guaranteed
Document, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
10. GOVERNING LAW. THIS GUARANTY IS DELIVERED IN, AND SHALL (AND THE
RIGHTS AND DUTIES OF THE GUARANTOR AND THE PARTIES SHALL) IN ALL
RESPECTS BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH THE LAWS OF, THE STATE OF NEW YORK.
11. Enforcement Expenses. The Guarantor agrees to pay to any Party any and
all reasonable costs and expenses (including reasonable legal fees,
including, but not limited to, allocated time charges of internal
counsel, and expenses) incurred by LICENSOR in enforcing this
Guaranty.
IN WITNESS WHEREOF, the parties hereto have caused this Guaranty to be duly
executed as of the date first hereinabove set forth.
By: /s/ Xxx X. Xxxxxxxx
--------------------------
Name: Xxx X. Xxxxxxxx
Title: Vice President and
General Counsel
Accepted as of the above date:
NAUTICA APPAREL, INC.
By: /s/ Xxxxxxxxxxx Xxxx
-----------------------
Name: Xxxxxxxxxxx Xxxx
Title: President
50
EXHIBIT F
LICENSEE CONTACT LIST
Financial Reports - CFO
Merchandising Reports - Designer Division President
Tel: 000-000-0000
51
