LICENSE AGREEMENT
BETWEEN
TOMMY HILFIGER LICENSING, INC.
AND
PEPE JEANS LONDON CORPORATION
ARTICLE 1. DEFINITIONS...............................................2
1.1 AFFILIATES OF LICENSEE....................................2
1.2 AGREEMENT.................................................3
1.3 ANNUAL PERIOD.............................................3
1.4 CLOSE-OUTS................................................3
1.5 FULL PRICE SALES..........................................3
1.6 GROSS SALES...............................................3
1.7 GUARANTEED MINIMUM ROYALTY................................3
1.8 INDEX.....................................................3
1.9 INVENTORY.................................................3
1.10 INVENTORY SCHEDULE........................................3
1.11 LABELS....................................................3
1.12 LICENSED PRODUCTS.........................................3
1.13 MANUFACTURED PRODUCTS ....................................3
1.14 MINIMUM SALES LEVEL.......................................3
1.15 NET SALES.................................................4
1.16 OFF-PRICE SALES...........................................4
1.17 PERCENTAGE ROYALTY........................................4
1.18 PURCHASED PRODUCTS .......................................4
1.19 SEASONAL COLLECTIONS......................................4
1.20 SECONDS...................................................4
1.21 TERM......................................................4
1.22 TERRITORY.................................................4
1.23 TRADE SECRETS.............................................4
1.24 TRADEMARK.................................................4
ARTICLE 2. GRANT.....................................................4
2.1 LICENSE...................................................4
2.2 RESERVATIONS..............................................5
2.3 TERRITORY.................................................5
2.4 FIRST REFUSAL.............................................5
2.5 EXCLUSIVITY...............................................5
2.6 DEFINITIONAL DISPUTES.....................................6
2.7 BEST EFFORTS..............................................6
2.8 SHOWROOMS AND IN-STORE SHOPS..............................6
2.9 SALES AND DELIVERIES......................................7
2.10 ORGANIZATION..............................................7
2.11 USE OF LICENSED LEGEND....................................7
2.12 PURCHASE OF LICENSED PRODUCTS.............................7
ARTICLE 3. TERM OF THE AGREEMENT.....................................8
3.1 INITIAL TERM..............................................8
3.2 EXTENSION.................................................8
ARTICLE 4. SALES.....................................................8
4.1 SALES/MARKETING AND PRODUCTION PLANS......................8
4.2 MINIMUM SALES LEVELS......................................9
4.3 CERTIFICATION.............................................9
ARTICLE 5. LICENSE FEES..............................................9
5.1 REQUIREMENT OF ROYALTIES..................................9
5.2 GUARANTEED MINIMUM ROYALTY................................9
5.3 ACTUAL ROYALTIES.........................................10
5.4 ROYALTY STATEMENTS.......................................10
5.5 BOOKS AND RECORDS........................................11
5.6 TAXES....................................................11
5.7 UNDERPAYMENTS............................................11
5.8 MANNER OF PAYMENT........................................11
5.9 INTEREST ON LATE PAYMENTS................................11
5.10 NO SET-OFF...............................................12
5.11 PURCHASES BY LICENSOR'S FLAGSHIP STORES..................12
5.12 FINANCIAL STATEMENTS.....................................12
ARTICLE 6. REPRESENTATIONS AND WARRANTIES...........................12
6.1 WARRANTIES AND REPRESENTATIONS OF LICENSOR...............12
6.2 WARRANTIES AND REPRESENTATIONS OF LICENSEE...............14
ARTICLE 7. ADVERTISING..............................................14
7.1 ADVERTISING..............................................14
7.2 ADVERTISING EXPENDITURE..................................15
7.3 APPROVAL OF PACKAGING, LABELING AND ADVERTISING..........15
7.4 USE OF TRADEMARK ON INVOICES, ETC........................15
7.5 LAUNCH...................................................16
ARTICLE 8. QUALITY AND STANDARDS....................................16
8.1 DISTINCTIVENESS AND QUALITY OF THE TRADEMARK.............16
8.2 SHOPS, STORES, RETAIL OUTLETS............................16
8.3 SAMPLES OF MANUFACTURED PRODUCTS.........................17
8.4 NON-CONFORMING PRODUCTS..................................17
8.5 APPROVALS................................................18
8.6 APPROVAL WITHDRAWAL......................................18
8.7 SAMPLES, ARTWORK AND KNOW-HOW............................18
8.8 CONFIDENTIALITY..........................................19
8.9 MANUFACTURE OF LICENSED PRODUCTS BY THIRD PARTIES........19
8.10 MARKING, LABELING AND PACKAGING IN ACCORDANCE
WITH APPLICABLE LAWS.....................................20
8.11 DISPOSAL OF SECONDS AND CLOSE-OUTS.......................20
8.12 ASSISTANCE BY LICENSOR...................................21
8.13 MEETINGS.................................................21
8.14 DESIGN RIGHTS............................................21
8.15 PRICING..................................................22
ARTICLE 9. THE TRADEMARK............................................22
9.1 RIGHTS TO THE TRADEMARK..................................22
9.2 PROTECTING THE TRADEMARK.................................22
9.3 COMPLIANCE WITH LEGAL REQUIREMENTS.......................22
9.4 OWNERSHIP OF COPYRIGHT...................................23
9.5 NOTICE OF INFRINGEMENT...................................23
9.6 COUNTERFEIT PROTECTION...................................23
9.7 USE OF OTHER TRADEMARKS..................................23
9.8 USE OF TRADEMARK ON INVOICES, ETC........................24
9.9 MONITORING...............................................24
ARTICLE 10. INSOLVENCY...............................................24
10.1 EFFECT OF PROCEEDING IN BANKRUPTCY, ETC..................24
10.2 RIGHTS, PERSONAL.........................................24
10.3 TRUSTEE IN BANKRUPTCY....................................24
ARTICLE 11. TERMINATION..............................................25
11.1 OTHER RIGHTS UNAFFECTED..................................25
11.2 TERMINATION WITHOUT NOTICE...............................25
11.3 TERMINATION WITH NOTICE..................................26
11.4 EFFECT OF TERMINATION....................................26
11.5 INVENTORY UPON TERMINATION...............................26
11.6 CONTRIBUTION FROM SEL....................................27
11.7 FREEDOM TO LICENSE.......................................27
11.8 EQUITABLE RELIEF.........................................27
11.9 TERMINATION WITHOUT PREJUDICE............................27
11.10 WAIVER...................................................27
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES.........................28
12.1 NO AGENCY................................................28
ARTICLE 14. BENEFIT..................................................28
14.1 BENEFIT..................................................28
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT..............................28
15.1 ENTIRE AGREEMENT; AMENDMENT..............................28
ARTICLE 16. NON-WAIVER...............................................28
16.1 NON-WAIVER...............................................28
ARTICLE 17. ASSIGNMENT...............................................28
17.1 NO ASSIGNMENT WITHOUT CONSENT............................28
17.2 SALE OF ASSETS...........................................29
17.3 SALE OF STOCK/INTEREST...................................29
17.4 ASSIGNMENT BY LICENSOR...................................29
ARTICLE 18. INDEMNIFICATION AND INSURANCE............................29
18.1 INDEMNIFICATION BY LICENSEE..............................29
18.2 NOTICE OF SUIT OR CLAIM..................................30
18.3 INDEMNIFICATION BY LICENSOR..............................30
18.4 INSURANCE................................................30
ARTICLE 19. SEVERABILITY.............................................31
19.1 SEVERABILITY.............................................31
ARTICLE 20. NOTICES..................................................31
20.1 NOTICES..................................................32
ARTICLE 21. SUSPENSION OF OBLIGATIONS................................32
21.1 SUSPENSION OF OBLIGATIONS................................32
ARTICLE 22. EXHIBITS.................................................33
22.1 EXHIBITS.................................................33
ARTICLE 23. OTHER PROVISIONS.........................................33
23.1 HEADINGS.................................................33
23.2 COUNTERPARTS.............................................33
23.3 CONSTRUCTION.............................................33
23.4 JURISDICTION.............................................33
23.5 COMPLIANCE WITH LAWS.....................................33
EXHIBITS
EXHIBIT A..................................................TRADEMARKS
EXHIBIT B......................................STATEMENT OF ROYALTIES
EXHIBIT C........................................SAMPLE APPROVAL FORM
EXHIBIT D......................................MANUFACTURER AGREEMENT
EXHIBIT E............................................ADVERTISING FORM
EXHIBIT F.................................................TERRITORIES
EXHIBIT G...............................................CERTIFICATION
EXHIBIT 10 (b)
LICENSE AGREEMENT
AGREEMENT made effective as of the 1st day of
February, 1997, by and between TOMMY HILFIGER LICENSING, INC.,
having an address at 913 N. Market Street, Wilmington, Delaware
19801 (hereinafter referred to as "Licensor") and Pepe Jeans
London Corporation, a British Virgin Islands corporation,
having its registered address at Craigmuir Chambers, P.O. Box
71, Road Town, Tortola, British Virgin Islands (hereinafter
referred to as "Licensee").
W I T N E S S E T H :
WHEREAS, the TOMMY HILFIGER trademarks, as
hereinafter defined (collectively the "Trademark"), are unique,
extraordinary and have an established, outstanding reputation
in connection with certain items of clothing and other
products; and
WHEREAS, Licensor has the right to enter into this
Agreement; and
WHEREAS, Licensee recognizes the great value and
goodwill associated with the Trademark and that all rights to
the Trademark and the associated goodwill belong exclusively to
the Licensor and that the Trademark has acquired a secondary
meaning to the public; and
WHEREAS, Licensee desires to obtain an exclusive
right to use the Trademark, on and in connection with the
manufacture, sale and distribution of Licensed Products (as
hereinafter defined) bearing, incorporating or otherwise
utilizing the Trademark in the Territory; and
WHEREAS, Licensor has agreed to grant to Licensee
such license under and subject to the terms and conditions
hereinafter set forth;
NOW, THEREFORE, the parties hereto, in consideration
of the mutual agreements herein contained and promises herein
expressed, and for other good consideration acknowledged by
each of them to be satisfactory and adequate, do hereby agree
as follows:
ARTICLE 1. DEFINITIONS
Definitions. The following terms shall have the
following meanings when used in this Agreement attached hereto:
1.1 AFFILIATES OF LICENSEE shall mean all persons
and business entities, whether corporations, partnerships,
joint ventures or otherwise, which now or hereafter control, or
are owned or controlled, directly or indirectly by Licensee, or
are under common control with Licensee.
-2-
1.2 AGREEMENT shall mean this agreement.
1.3 ANNUAL PERIOD shall mean each twelve month
period commencing on April 1 and ending on March 31, except
that the first Annual Period shall be the period commencing on
the date hereof and ending on March 31, 1998.
1.4 CLOSE-OUTS shall mean first quality Licensed
Products which cannot reasonably be sold to regular customers.
1.5 FULL PRICE SALES shall mean sales of Licensed
Products at less than * off of the standard selling price in
the then current line sheet, as amended from time to time.
1.6 GROSS SALES shall mean the invoiced amount of
Licensed Products shipped by Licensee before any deductions for
discounts and returns, insurance and freight.
1.7 GUARANTEED MINIMUM ROYALTY shall mean the
minimum royalties payable in each Annual Period as set forth in
Article 5.2.
1.8 INDEX shall mean the Consumer Price Index for
the United States. If publication of the Index is
discontinued, the parties hereto shall accept comparable
statistics for the United States as computed and published by
an agency or a responsible financial periodical or recognized
authority then to be selected by the parties.
1.9 INVENTORY shall mean Licensee's inventory of
Licensed Products and of related work in progress.
1.10 INVENTORY SCHEDULE shall mean a complete and
accurate schedule of Inventory.
1.11 LABELS shall mean all labels, tags, packaging
material, business supplies and advertising and promotional
materials and all other forms of identification bearing the
Trademark.
1.12 LICENSED PRODUCTS shall mean mens and boys
sportswear (excluding jeanswear and jeans related apparel). In
addition, Licensed Products shall, to the extent permitted by
Licensor from time to time, include accessories and other
products which are produced by other licensees of Licensor.
1.13 MANUFACTURED PRODUCTS shall mean Licensed
Products which are manufactured by or for Licensee through
sources approved by Licensor other than Tommy Hilfiger (Eastern
Hemisphere) Limited ("THEH") and Tommy Hilfiger U.S.A., Inc.
("THUSA").
1.14 MINIMUM SALES LEVEL shall mean the minimum Net
Sales of Licensed Products during each Annual Period as set
forth in Article 4.2.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-3-
1.15 NET SALES shall mean the gross sales price of
Licensed Products to retailers who are not Affiliates of
Licensee, less returns actually allowed and actually received
by Licensee, price allowances and customary and usual trade
discounts granted. Taxes on Net Sales such as value added
taxes or its equivalent shall be deducted and separately
listed. No other deductions shall be taken. It is the
intention of the parties that royalties will be based on the
bona fide wholesale prices at which Licensee sells Licensed
Products to independent retailers in arms' length transactions.
In the event Licensee shall sell Licensed Products to its
Affiliates, royalties shall be calculated on the basis of such
a bona fide wholesale price irrespective of Licensee's internal
accounting treatment of such sale. Licensee shall identify
separately in the statements of operations provided to Licensor
pursuant to Article 5.4 hereof, all sales to Affiliates.
1.16 OFF-PRICE SALES shall mean sales at * or more
off of the standard selling price in the then current
linesheet, as amended from time to time.
1.17 PERCENTAGE ROYALTY shall have the definition
given that term in Article 5.3.
1.18 PURCHASED PRODUCTS shall means Licensed
Products which are sourced through THEH or THUSA in accordance
with Article 2.12(a).
1.19 SEASONAL COLLECTIONS shall mean at least four
(4) collections per annum.
1.20 SECONDS shall mean damaged, imperfect, non-
first quality or defective goods.
1.21 TERM shall mean the Initial Term as defined
Article 3.1 and shall, if not otherwise specifically excluded,
include all Extensions hereinafter defined in Article 3.2.
1.22 TERRITORY shall mean those countries set forth
on Exhibit F, attached hereto.
1.23 TRADE SECRETS shall mean information including
a formula, pattern, compilation, program, device, method,
technique, or process, that derives independent economic value,
actual or potential, from not being generally known to the
public or to other persons who can obtain economic value from
its disclosure or use; and is the subject of efforts that are
reasonable under the circumstances to maintain its secrecy.
1.24 TRADEMARK shall mean the trademark
registrations which are set forth in the annexed Exhibit A and
such trademarks in classes covering the Licensed Products
whether or not registered with the relevant authority in the
Territory, and all combinations, forms and derivatives thereof
which may be hereafter approved by Licensor for use by Licensee
in connection with the Licensed Products subject to any
conditions set forth in any written approval.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-4-
ARTICLE 2. GRANT
2.1 LICENSE. Licensor hereby grants to Licensee an
exclusive license during the Term of the Agreement, subject to
all of the terms and conditions contained in this Agreement to
use the Trademark in connection with the manufacture, distribu-
tion and sale of the Licensed Products in the Territory. Li-
censor further grants to Licensee the right to use the Trade-
mark, subject to Article 11.4 hereof, in connection with estab-
lishing a subsidiary or division to be named "Tommy Hilfiger
Europe BV" or such other name as may be approved by Licensor.
Licensor and any subsidiaries or affiliated companies specifi-
cally reserve the right to establish and offer for sale
Licensed Products through up to * flagship retail locations
throughout the Territory, with a maximum of * flagship loca-
tions per city.
2.2 RESERVATIONS. The license granted in this
Article 2 does not grant any right to Licensee to use the name
"TOMMY" or "HILFIGER" individually or derivatives of the
Trademark. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, it being understood
and acknowledged by Licensee that all rights relating thereto
are reserved by Licensor except for the rights specifically
granted to Licensee in this Agreement. Licensee understands
and agrees that Licensor, and its other licensees and
sublicensees, may manufacture or authorize third parties to
manufacture Licensed Products in the Territory for ultimate
sale outside of the Territory, or to manufacture and sell or
authorize third parties to manufacture and sell products of any
and all types and descriptions other than the Licensed Products
in or outside the Territory. In addition, to the extent it is
legally permissible to do so, no license is granted hereunder
for the manufacture, sale or distribution of the Licensed
Products to be used for publicity purposes, other than
publicity of the Licensed Products, in combination sales,
premiums or giveaways, or to be disposed of under or in
connection with similar methods of merchandising, such license
being specifically reserved for Licensor.
2.3 TERRITORY. Licensee agrees that it will neither
export Licensed Products from the Territory nor sell same to
any entity which it knows or has any reason to believe intend
to export Licensed Products from the Territory. Licensee will
use its best efforts to prohibit its customers from shipping
Licensed Products outside of the Territory.
2.4 FIRST REFUSAL. Licensor agrees that before
granting a license to any third party to use any of the
Trademarks or any other Trademark similar therein for any
products other than Licensed Products in the Territory,
Licensor shall give written notice to Licensee of its intent to
grant such license, and Licensee shall have the right of first
refusal, to be asserted within thirty (30) days in writing, to
obtain such license upon terms no less favorable than those to
be offered to the third party. In the event that Licensor and
Licensee fail to reach an agreement with respect to the
proposed license, then Licensor may enter into a license with
the third party; provided, however, that the terms and
conditions of such license with the third party shall not be
more favorable that those offered to Licensee.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-5-
2.5 EXCLUSIVITY. Licensor shall not authorize third
parties to use the Trademark in connection with the sale and/or
importation of the Licensed Products in the Territory during
the Term hereof without Licensee's prior written approval, but
Licensee acknowledges and consents to Licensor's use of the
Trademarks in connection with the sale and/or importation of
Licensed Products in the Territory. Licensor hereby agrees
that Licensee shall have the exclusive right to import into and
resell the Licensed Products in the Territory.
2.6 DEFINITIONAL DISPUTES. Licensee acknowledges
that due to the nature of the marketplace, the definition of
Licensed Products may change or may not be amenable to precise
delineation. Licensee agrees that if there is a dispute over
the definition of Licensed Products, Licensor shall render a
reasonable written determination which shall be conclusive and
binding on Licensee without legal recourse.
2.7 BEST EFFORTS. At all times while this Agreement
is in effect, Licensee shall use its best efforts to exploit
the License granted hereunder throughout the Territory,
including but not limited to, selling a sufficiently
representative quantity of the Licensed Products of all styles,
fabrications and colors; offering for sale the Licensed
Products so that they may be sold to the consumer on a timely
basis; maintaining a sales force sufficient to provide
effective distribution throughout all areas of the Territory;
and cooperating with Licensor's and any of its licensees'
marketing, merchandising, sales and anti-counterfeiting
programs.
2.8 SHOWROOMS AND IN-STORE SHOPS.
(a) Licensee shall display the Licensed
Products for sale in a separate showroom, designed and
displayed in accordance with Licensor's specifications, apart
from any showroom(s) in which Licensee or another business may
offer other than Licensed Products for sale. Subject to prior
approval by Licensor, Licensee may display the Trademark on
showroom doors and office directories;
(b) Licensor reserves the right to approve the
location of Licensee's primary showroom required by Article
2.8(a) above; and
(c) Not later than by the end of the third
Annual Period, Licensee shall establish and display the
Licensed Products in showrooms designed and displayed in
accordance with Licensor's specifications, apart from any
showroom(s) in which Licensee or another business may offer
other than Licensed Products for sale, to be located in
Dusseldorf, Germany; Paris, France; Madrid, Spain; London,
England; and Amsterdam, Holland.
(d) Licensee will, at Licensor's option,
participate in any in-store shop or main floor fixturing
program with any of Licensee's customers. To that end, to the
extent that the same is not paid for by Licensee's customers,
Licensee shall pay for the necessary fixturing for the display
of the Licensed Products which shall be in keeping with the
specifications and design of the respective shop or main floor
fixtures.
-6-
(e) Not later than the end of the Initial Term,
Licensee shall be offering for sale the Licensed Products in at
least * retail locations (in-store shops or specialty stores)
throughout the Territory.
2.9 SALES AND DELIVERIES. Licensee acknowledges
that the availability and selection of styles, fabrications,
colors and sizes are an integral part of the high reputation
and value which the trade and consumers have come to associate
with the Trademark. Therefore, to protect that reputation and
value, Licensee agrees that its policy of sale, distribution,
and exploitation shall be of a high standard and to the best
advantage, and that the same shall in no way adversely reflect
upon the good name, trademarks and trade names of Licensor or
any of its programs. Licensee further agrees that it will use
due diligence to make certain that at all times no less than *
of the Licensed Products ordered and approved by Licensee for
shipment are shipped timely in compliance with the shipping
schedule recited in each order. Licensee shall at all times
maintain a sales force for the sale of the Licensed Products
which shall be sufficient to provide effective distribution of
the Licensed Products throughout the entire Territory.
2.10 ORGANIZATION. Licensee shall, within thirty
(30) days of the date hereof, establish a separate division of
its company dedicated exclusively to the sale of Licensed
Products throughout the Territory. In lieu of such separate
division, Licensee may form a subsidiary company provided that
such company shall agree in writing to be bound by all of the
terms hereof. Licensee shall, at its sole cost and expense,
employ a head of sales, a production manager and a production
assistant who shall work exclusively with Licensor's
representatives on the Licensee's business arising under this
Agreement and shall report directly to the President of
Licensee or his designee. Licensee shall also employ a
"stylist" to work with Licensor's representatives in the design
of the Licensed Products and to assist in product development.
These individuals will be hired with the prior approval of
Licensor and will be relieved of their duties under this
Agreement at the request of Licensor. In addition, Licensee
shall maintain a separate sales force for the sale of the
Licensed Products. The members of such sales force may not
sell or represent any products other than the Licensed
Products.
2.11 USE OF LICENSED LEGEND. Licensee shall, with
the prior written approval of Licensor, have the right to place
the legend "Licensed by Tommy Hilfiger Licensing, Inc.", or
such other legend which indicates that the Licensed Products
were manufactured, sold and distributed under the license from
the Licensor, on the Licensed Products and on all wrapping or
packaging used in connection therewith, within the Territory.
2.12 PURCHASE OF LICENSED PRODUCTS.
(a) Licensee hereby agrees that all Purchased
Products shall be exclusively purchased by Licensee through
Licensor or its designees, or any other sources approved by
Licensor, and shall be purchased from no other source.
Licensee shall enter into an exclusive buying office agreement
with THEH and THUSA, for the purchases of Purchased Products.
Pursuant to such buying office agreements, Licensee shall pay
to THEH or THUSA a buying office commission of *
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-7-
of the F.O.B. price of all Purchased Products.
(b) In the event Licensee purchases Purchased
Products (other than mens and boys sportswear) from a source
other than Licensor or its designee, which shall in all events
be a source approved by Licensor, Licensee shall pay to
Licensor an administrative fee in the amount equal to * of the
invoice price of all such Purchased Products.
(c) Licensee may only source Licensed Products
directly, without THEH or THUSA, if the type of approved
Licensed Product is not then being sourced by THEH or THUSA.
For example, if THEH and THUSA are, at the applicable time, not
in the business of sourcing tailored clothing through their
sources approved by Licensor, then Licensee may source the
tailored clothing through its sources approved by Licensor. In
such event, such Licensed Products shall be defined as the
Manufactured Products and purchases of such products shall be
excluded from any administrative fee. In no event shall
Licensee be permitted to source Licensed Products through
sources, or even through its own factories, which have not been
approved by Licensor.
ARTICLE 3. TERM OF THE AGREEMENT
3.1 INITIAL TERM. The initial term of this
Agreement shall commence on the date hereof and shall end on
March 31, 2002 (the "Initial Term").
3.2 EXTENSION. Providing that Licensee is not then
in default and is not in default for the balance of the initial
Term, Licensee shall have the right to extend this Agreement
for successive five (5) year terms on six (6) months prior
written notice to Licensor. Licensee acknowledges that the six
(6) month period for notice is necessary in order to maintain
the continuity of Licensor's Licensing and Marketing programs
and the goodwill associated with the Trademark. Licensee
agrees that "time is of the essence" and that Licensee's
failure to exercise its option to renew timely shall be
construed as a decision by Licensee that it has elected not to
renew and shall permit Licensor to immediately replace Licensee
by executing a new License Agreement with third parties, to
commence after this Agreement has concluded, without any
liability to Licensee. Expiration or termination of this
Agreement shall not effect any obligation of Licensee to make
payments hereunder accruing prior to such expiration or
termination.
ARTICLE 4. SALES
4.1 SALES/MARKETING AND PRODUCTION PLANS. On each
January 1 and July 1 of each Annual Period during the Term,
Licensee will submit to Licensor, for Licensor's approval, a
schedule showing in detail the projected sales and marketing
plans for the Licensed Products for each of the next two
quarterly periods. In addition, Licensee will submit to
Licensor upon execution of the Agreement a proposed production
calendar for the Licensed Products. Licensee will work with
Licensor to create a production calendar for Licensed Products
that is agreeable to both parties.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-8-
Licensee shall provide to Licensor, on a monthly basis, monthly
wholesale bookings reports and retail selling reports.
Licensor shall be deemed to have approved the sales and
marketing plans unless Licensor gives Licensee written notice
to the contrary within ten (10) days of receipt of such plans.
4.2 MINIMUM SALES LEVELS. The first bona fide
shipment of Licensed Products to a customer of Licensee shall
occur no later than *. In addition, during each Annual Period,
Licensee shall be required to meet the following minimum levels
of Net Sales of the Licensed Products ("Minimum Sales Levels"):
Minimum Sales
Annual Period Level
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
For purposes of calculating the Minimum Sales Level for each
Annual Period, the Minimum Sales Level shall be calculated
using the rate of foreign exchange in effect at the Midland
Bank PLC at the close of business on the date of each Royalty
or Guaranteed Minimum Royalties payment hereunder. *
4.3 CERTIFICATION. Within sixty (60) days of the
end of each Annual Period, Licensee shall send to Licensor a
certification by a duly authorized officer of Licensee of the
Net Sales of Licensed Products during such Annual Period (the
"Certification"). Within one hundred twenty (120) days of the
end of each Annual Period, Licensee shall send to Licensor the
Certification further certified by Licensee's external
auditors.
ARTICLE 5. LICENSE FEES
5.1 REQUIREMENT OF ROYALTIES. Except as
specifically provided herein, all Licensed Products sold by
Licensee, or its Affiliates or subsidiaries, require the
payment of royalties by Licensee to Licensor as set forth in
this Article 5.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-9-
5.2 GUARANTEED MINIMUM ROYALTY.
(a) In consideration of the rights granted to
Licensee pursuant to this Agreement, Licensee shall, during
each Annual Period or portion thereof calculated on a pro rata
basis, during the Term, pay to Licensor the Guaranteed Minimum
Royalties listed below, payable in quarterly installments in
advance on the first day of each quarter during each year
during the Term hereof, except that for the First Annual
Period, the Guaranteed Minimum Royalties shall be paid in four
(4) equal quarterly installments beginning on *. In the event
that during any Annual Period, the actual payments under
Article 5.3 hereof exceed the entire Guaranteed Minimum Royalty
with respect to that Annual Period, no further Guaranteed
Minimum Royalty payments need be made for such Annual Period.
Guaranteed Minimum
Annual Period Royalty
First *
Second *
Third *
Fourth *
Fifth *
each Annual Period thereafter *
(b) The Guaranteed Minimum Royalty for each
Annual Period from the Second through Fifth Annual Periods only
shall be the greater of the amounts set forth above for such
Annual Periods or * of the Percentage Royalty due for the
immediately preceding Annual Period.
5.3 ACTUAL ROYALTIES. In consideration of the
rights granted to Licensee pursuant to this Agreement, Licensee
shall, during each Annual Period or portion thereof during the
Term and any extension thereof, pay Licensor a royalty (the
"Percentage Royalty") equal to * of Net Sales sold at Full
Price by Licensee and * of Net Sales sold by Licensee at Off
Price.
Percentage Royalties shall be payable in quarterly
installments on January 30, April 30, July 30 and October 30
for the immediately preceding quarter of sale, less Guaranteed
Minimum Royalty payments for such period. All royalties shall
accrue upon the sale of the Licensed Products regardless of the
time of collection by Licensee. For purposes of this Article
5.3, a Licensed Product shall be considered "sold" upon the
date of billing, invoicing, shipping, or payment, whichever
occurs first.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-10-
5.4 ROYALTY STATEMENTS. Licensee will deliver to
Licensor at the time each Percentage Royalty payment is due,
complete and accurate statements, in the form annexed hereto as
Exhibit B, or similar form approved for use by Licensor signed
by a duly authorized officer of Licensee and certified by him/
her as accurate indicating all of the following information by
month: (i) the total invoice price of all Licensed Products
sold during the period covered by such percentage royalty
payment; (ii) the amount of discounts and credits from Gross
Sales which properly may be deducted therefrom, during said
period; and (iii) computation of the amount of percentage
royalty payable hereunder for said period. At least once
annually, or more often at Licensor's request, Licensee will
also deliver to Licensor a certification from its external
auditors that the statement which it accompanies is in
accordance with the requirements of this Article 5.4. Receipt
or acceptance by Licensor of any statement furnished, or of any
sums paid by Licensee, shall not preclude Licensor from
questioning their correctness at any time; provided, however,
that reports submitted by Licensee shall be binding and
conclusive on Licensee in the event of any termination based on
a breach by Licensee arising out of any payment or report.
5.5 BOOKS AND RECORDS. Licensee shall, at its sole
cost and expense, maintain complete and accurate books and
records (specifically including, without limitation, the
originals or copies of documents supporting entries in the
books of account) covering all transactions arising out of or
relating to this Agreement. In addition, Licensor and its duly
authorized representative have the right, during normal
business hours, for the duration of this Agreement and for
three (3) years thereafter, to examine and copy said books and
records and all other documents and materials in the possession
of and under the control of Licensee with respect to the
subject matter and terms of this Agreement. In the event a
sublicense is approved by Licensor as provided hereunder,
Licensee shall also obtain for Licensor the right in any and
all of such sublicenses for Licensor to similarly inspect the
books and records of the sublicensees. The exercise by
Licensor of any right to audit at any time or times or the
acceptance by Licensor of any statement, or payment shall be
without prejudice to any of Licensor's rights or remedies and
shall not bar Licensor from thereafter disputing the accuracy
of any payment or statement and Licensee shall remain fully
liable for any balance due under this Agreement.
5.6 TAXES. Licensee will bear all taxes, duties and
other governmental charges in the Territory relating to or
arising under this Agreement, including without limitation, any
income taxes (except withholding taxes on royalties), any stamp
or documentary taxes or duties, turnover, sales or use taxes,
value added taxes, excise taxes, customs or exchange control
duties or any other charges relating to or on, any royalty
payable by Licensee to Licensor. Licensor shall pay any income
tax whether imposed by the laws of the United States or a
United States state. Licensee shall obtain, at its own cost
and expense, all licenses, Reserve Bank, Commercial Bank or
other bank approvals, and any other documentation necessary for
the transmission of royalties and all other payments relevant
to Licensee's performance under this Agreement. If any tax or
withholding is imposed on royalties, Licensee shall obtain
certified proof of the tax payment or withholding and
immediately transmit it to Licensor.
-11-
5.7 UNDERPAYMENTS. If, upon any examination of
Licensee's books and records pursuant to Article 5.5 hereof,
Licensor shall discover any royalty underpayment by Licensee,
Licensee will make all payments required to be made to correct
and eliminate such underpayment within ten (10) days of
Licensor's demand. In addition, if said examination reveals a
royalty underpayment of * or more for any royalty period,
Licensee will within ten (10) days of demand reimburse Licensor
for the cost of said examination.
5.8 MANNER OF PAYMENT. All payments required by
Licensee hereunder shall be made to Licensor in Delaware in
U.S. Dollars, and all references to dollars throughout this
Agreement shall mean U.S. Dollars. The amount of payment shall
be calculated using the rate of foreign exchange in effect at
the Midland Bank PLC at the close of business on the date of
payment. In the event that Licensee is required to withhold
certain amounts for payment to the appropriate governmental
authorities, Licensee will supply to Licensor the official
receipts evidencing payment therefor.
5.9 INTEREST ON LATE PAYMENTS. In addition to any
other remedy available to Licensor, if any payment due under
this Agreement is delayed for any reason, interest shall accrue
and be payable, to the extent legally enforceable, on such
unpaid principal amounts from and after the date on which the
same became due, at a per annum equal to the lower of *
percentage points above the prime rate of interest in effect,
at the time the late payment was due, at Chase Manhattan Bank
in New York, New York, U.S.A. and the highest rate permitted by
law in New York.
5.10 NO SET-OFF. The obligation of Licensee to pay
royalties hereunder shall be absolute notwithstanding any claim
which Licensee may assert against Licensor. Licensee shall not
have the right to set-off, compensate or make any deduction
from such royalty payments for any reason whatsoever.
5.11 PURCHASES BY LICENSOR'S FLAGSHIP STORES.
Beginning on the first day of each of Licensee's market periods
(opening of each selling season), retail flagship stores in the
Territory owned by Licensor or one of its subsidiaries or
affiliates (the "Flagship Stores") may purchase Licensed
Product at no more than the *. Licensee agrees to fill the
orders of the Flagship Stores in at least the same manner which
Licensee fills orders from its other customers. In addition,
Flagship Stores may contract for special programs of Licensed
Product at a price equal to no more than the *. No royalty or
advertising payment shall be due on purchases of Licensed
Product (including Closeouts, Seconds or special programs) by
Flagship Stores and such purchases shall not be counted for
purposes of meeting any Minimum Sales Level.
5.12 FINANCIAL STATEMENTS. Licensee shall provide
Licensor (a) a certified, audited financial statement to be
delivered to Licensor within five (5) months after the end of
each fiscal year of Licensee and (b) a six (6) month interim
unaudited financial statement to be delivered to Licensor
within sixty (60) days after the end of the six (6) month
period. The year end financial information must be prepared by
a chartered accountant having no interest in Licensee's
business and approved
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-12-
by Licensor.
ARTICLE 6. REPRESENTATIONS AND WARRANTIES
6.1 WARRANTIES AND REPRESENTATIONS OF LICENSOR.
Licensor hereby represents, warrants and covenants that:
(a) it has the full right, power and authority
to enter into this Agreement and to license Licensee with
respect to all the rights granted hereunder;
(b) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(c) necessary corporate acts have been effected
by it to render this Agreement valid and binding upon it; and
(d) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commissions or fees to any such
person in relation hereto. Licensor agrees to indemnify
Licensee against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable
attorneys' fees) to any person, firm or corporation claiming
commissions or fees in connection with this Agreement or the
transactions contemplated hereby as a result of an agreement
with or services rendered to Licensor.
6.2 WARRANTIES AND REPRESENTATIONS OF LICENSEE.
Licensee hereby represents, warrants and covenants that:
(a) it has the full right, power and authority
to enter into this Agreement and to perform all of its
obligations hereunder;
(b) it is financially capable of undertaking
the business operations which it conducts and of performing its
obligations hereunder;
(c) it is a corporation duly organized, validly
existing and in good standing under the laws of the
jurisdiction of its incorporation;
(d) all necessary corporate acts have been
effected by it to render this Agreement valid and binding upon
it; and
(e) in its negotiations relative to this
Agreement, it has not utilized the services of any finder,
broker or agent and it owes no commission or fees to any such
person in relation hereto. Licensee agrees to indemnify
Licensor against, and hold it harmless from, any and all
liabilities (including, without limitation, reasonable legal
fees) to any person, firm or corporation
-13-
claiming commissions or fees in connection with this Agreement
or the transactions contemplated hereby as a result of an
agreement with or services rendered to Licensee.
ARTICLE 7. ADVERTISING
7.1 ADVERTISING. All advertising and promotion in
connection with Licensed Products, including cooperative
advertising whereby Licensee provide their customers with a
contribution be it in the form of actual monetary contribution,
credit or otherwise, shall be placed with an agency approved by
Licensor. Licensee will pay, advertising invoices directly as
they become due. Licensee agrees to use its best efforts to
advertise and promote the Licensed Products during each Annual
Period in order to make the Trademark a well known name within
the Territory and to maintain the high standards of the
Trademark.
7.2 ADVERTISING EXPENDITURE. Licensee agrees that,
during each of the First and Second Annual Periods, it shall
spend the greater of * dollars or * of the actual Net Sales,
and for each such Annual Period thereafter, shall spend the
greater of * of the Minimum Sales Level or * of the actual Net
Sales for each such Annual Period, for direct media advertising
of the Licensed Products not including any cooperative
advertising, trade shows, sampling, or any other promotional or
sales material normally produced for the sale of the Licensed
Products (the "Advertising Expenditure"). If in any Annual
Period the Advertising Expenditure has not been made, then
Licensee shall spend such amount for advertising within the
first ninety (90) days of the subsequent Annual Period. If the
Advertising Expenditure has not been expended by the end of
said ninety (90) day period, then the amount which should have
been expended and which was not expended shall be paid over to
Licensor to be used by Licensor for advertising the Trademark
provided, however, that if Advertising Expenditure has not been
made prior to the termination of this Agreement, the unexpended
Advertising Expenditure shall, within twenty (20) days, be paid
over to Licensor absolutely. Proof of expenditure shall be
submitted each quarter using the Advertising Expenditure Form
(Exhibit E).
7.3 APPROVAL OF PACKAGING, LABELING AND ADVERTISING.
No packaging, labeling or advertising, including cooperative
advertising may be used without the prior written approval of
Licensor. Before publication of any advertisement or
promotion, Licensee shall submit every element of the
advertisement or promotion to Licensor for approval using an
"Advertising Approval Form", as provided by Licensor. Any
approval granted hereunder shall be limited to use during the
Seasonal Collection of the Licensed Products to which such
advertising relates and shall be further limited to use (e.g.
television or print) for which approval by Licensor was
granted. Samples of initial packaging, labeling and
advertising, and samples of any revisions, changes,
modifications or substitutions thereof, shall be submitted to
Licensor sufficiently far in advance to permit Licensee time
to make such changes as Licensor shall deem necessary. All
requests for the approval of packaging, labeling or advertising
pursuant to this Article 7.3 shall be accompanied by at least
two (2) samples of the object for which approval is sought.
Licensee shall use its best efforts to ensure that all
advertising and promotional plans used by Licensee in
connection with the Trademark, in any
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-14-
form and in any medium, shall be consistent with the prestige
of the Trademark and the quality of the Licensed Products. All
packaging, labeling and advertising of Licensed Products shall
use the Trademark, but no other trademark or trade name shall
be used except as may be required by applicable law or
permitted by Licensor. Licensee shall not be permitted to use
their names on the Licensed Products, packaging and other
materials displaying the Trademark other than as specifically
approved by Licensor. Any advertising materials provided by
Licensor to Licensee shall be so provided at Licensee's cost
and the price therefor shall be Licensor's cost of producing
and providing the same.
7.4 USE OF TRADEMARK ON INVOICES, ETC. The use of
the Trademark by Licensee on invoices, order forms, stationery
and related matter and in advertising in telephone or other
directory listings is permitted only upon Licensor's prior
written approval of the format in which the Trademark is to be
so used, the juxtaposition of the Trademark with other words
and phrases, and the content of the copy prior to the initial
such use of the Trademark and prior to any material change
therein; provided, however, that each such use of the Trademark
is only in conjunction with the manufacture, sale, distribution
or advertisement of Licensed Products pursuant to this
Agreement.
7.5 LAUNCH. In addition to the Advertising Payments
required under Articles 7.1 and 7.2, Licensee agrees to host,
at Licensee's expense, a launch event or distribute a gift
package to the fashion and financial press and to major retail
accounts during the initial selling season for the first
Seasonal Collection to be sold under this Agreement. Such
event shall be comparable to similar launch events hosted by
Licensor's other licensees of the Trademark and shall
reasonably reflect the prestige of the Trademark and the
relative significance of Licensed Products to Licensor. In no
event shall Licensee be required to spend more than * dollars
on such launch event or gift package.
ARTICLE 8. QUALITY AND STANDARDS
8.1 DISTINCTIVENESS AND QUALITY OF THE TRADEMARK.
Licensee shall maintain the distinctiveness of the Trademark
and the image and high quality of the goods and merchandise
bearing the mark presently manufactured and sold by Licensor
and its other licensees, and the prestigious marketing of same
as hitherto and presently maintained by Licensor and its other
licensees. Licensee agrees that, with respect to all Licensed
Products manufactured or sold by it, the same will be of high
quality as to workmanship, fit, design and materials used
therein, and shall be at least equal in quality, workmanship,
fit, design and material to the samples of Licensed Products
submitted by Licensee and approved by Licensor pursuant to
Article 8.3 hereof. All manufacturing and production shall be
of a quality in keeping with the prestige of the Trademark. In
addition, Licensee acknowledges that in order to preserve the
goodwill attached to the Trademark, the Licensed Products
should be sold at prices and terms reflecting the prestigious
nature of the Trademark, and the reputation of the Trademark as
appearing on goods of high quality and reasonable price, it
being understood, however, that Licensor is not empowered to
fix or regulate the prices for which the Licensed Products are
to be sold, either at the wholesale or retail level.
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-15-
8.2 SHOPS, STORES, RETAIL OUTLETS. The Licensed
Products sold by Licensee may be sold only to those specialty
shops, department stores and retail outlets which carry high
quality and prestige merchandise and whose operations are
consistent with Licensor's reputation and its sales policies
and with the prestige of the Trademark and only to those
customers expressly approved by Licensor. Prior to the opening
of each selling season (and whenever Licensee shall wish to
sell Licensed Products to customers not previously approved by
Licensor), Licensee shall submit a written list of the proposed
customers to Licensor for Licensor's prior written approval,
which approval may be given or withheld at Licensor's sole
discretion, based upon whether it deems that the proposed
customer shall enhance the quality and prestige of the
Trademark. Licensor shall have the right to withdraw any such
approval on written notice to Licensee. Licensee shall not (a)
market or promote or seek customers for the Licensed Products
outside of the Territory; (b) establish a branch, wholly owned
by subsidiary, distribution or warehouse with inventories of
Licensed Products outside of the Territory; (c) sell or
distribute any Licensed Products to wholesalers, jobbers,
diverters, catalog vendors or any other entity which does not
operate retail stores exclusively; (d) sell the Licensed
Products directly to the public in retail stores; (e) use the
Licensed Products as giveaways, prizes or premiums, except for
promotional programs which have received the prior written
approval of Licensor; or (f) sell the Licensed Products to any
third party or Affiliate of Licensee or any of its directors,
officers, employees or any person having an equity
participation in or any other affiliation to Licensee, without
the prior written approval of Licensor. Licensee shall include
and shall enforce the following as a term and condition of sale
to all of its customers:
"Resale Restrictions. Buyer shall not directly
or indirectly distribute, market or sell the
Products to any party other than consumers or
end users without obtaining the prior written
consent of Seller."
8.3 SAMPLES OF MANUFACTURED PRODUCTS. Before
Licensee shall sell or distribute any Manufactured Products in
any Seasonal Collection, Licensee shall submit samples of each
of such Manufactured Products to Licensor for its prior written
approval, which approval may be withheld by Licensor in its
sole and absolute discretion. Any such request for approval
shall be submitted to Licensor on the form annexed hereto as
Exhibit C. Such samples shall be submitted sufficiently far in
advance to permit Licensee time to make such changes as
Licensor deems necessary. Any approval given hereunder shall
apply only to that Seasonal Collection for which it is
submitted to Licensor. Once samples have been approved,
Licensee will manufacture only in accordance with such approved
samples and will not make any changes for manufacture without
Licensor's prior written approval. All samples of Manufactured
Products submitted to Licensor pursuant to this Article 8.3
shall be provided at Licensee's sole cost and expense.
Licensee shall submit to Licensor a reasonable number of
additional samples of Manufactured Products upon Licensor's
reasonable request. No Manufactured Products (including
samples) shall be distributed and/or sold by Licensee pursuant
to this Agreement unless such Manufactured Products are in
substantial conformity with and at least equal in quality to
the samples previously approved by Licensor in accordance with
this Article 8.3.
8.4 NON-CONFORMING PRODUCTS. In the event that any
Licensed Product is, in the judgment of Licensor, not being
manufactured, distributed or sold with first quality
workmanship or
-16-
in strict adherence to all details and characteristics
furnished by Licensor, Licensor shall notify Licensee of the
specific nature of the problem in writing and Licensee shall
promptly repair or change such Licensed Product to conform
thereto. If a Licensed Product as repaired or changed does not
strictly conform after Licensor's request and such strict
conformity cannot be obtained after Licensee is given a
reasonable opportunity to do so, Licensor may direct that the
Trademark shall be promptly removed from the item. In such
event, the item may be sold by Licensee, provided such miscut
or damaged item does not contain any labels or other
identification bearing the Trademark without Licensor's prior
approval. Notwithstanding anything in this Article 8.4 to the
contrary, sales of all products of Licensor's design whether or
not bearing the Trademark, shall nonetheless be subject to
royalty payments pursuant to Article 5 hereof. Licensor may
purchase at Licensee's expense any Licensed Products found in
the marketplace which, in Licensor's judgment, are inconsistent
with approved quality standards and bill such costs to
Licensee. Licensee must pay all royalties due on sales of
nonconforming goods. Licensor may require Licensee to recall
any Licensed Products not consistent with approved quality
standards. Licensee shall use its best efforts to comply.
8.5 APPROVALS. All approvals required or permitted
by this Agreement must be in writing from Licensor to Licensee.
All matters requiring approval of Licensor or the exercise of
its discretion shall be at the sole subjective discretion of
Licensor. A submission for approval shall be deemed
disapproved unless Licensor delivers a notice of approval
within twenty (20) days. Licensor shall provide an explanation
for disapprovals. Licensor has no obligation to approve,
review or consider any item which does not strictly comply with
the required submission procedures provided that Licensor
designates the procedure which was not followed. Approval by
Licensor shall not be construed as a determination that the
approved matter complies with all applicable regulations and
laws. No disapproved item shall be manufactured, sold, used,
distributed or advertised. Licensee may revise any disapproved
item and resubmit it. Licensee must strictly comply with all
of Licensor's decisions. The parties will adjust the approval
forms as appropriate. Upon reasonable notice, Licensor may
withdraw approval of any previously approved item. In the
event that it is reasonably necessary for Licensor to do on-
site approvals, Licensee will pay any and all expenses and air-
fare incurred by Licensor with respect to such on-site
approvals.
8.6 APPROVAL WITHDRAWAL. If the style, appearance
or quality of any Licensed Product ceases to be acceptable to
Licensor, Licensor shall have the right in the exercise of its
sole discretion to withdraw its approval of such Licensed
Product. Upon receipt of written notice from Licensor of its
election to withdraw such approval, Licensee shall immediately
cease the use of the Trademark in connection with the
promotion, advertising, sale, manufacture, distribution or use
of such Licensed Product(s). Notice of such election by
Licensor to withdraw approval shall not relieve Licensee from
its obligation to pay royalties on sales of such Licensed
Product(s) made by Licensee to the date of disapproval or
thereafter as permitted. Licensee may, however, complete work
in process and utilize materials on hand provided that it
submits proof of such work in progress and fabric inventory to
Licensor.
8.7 SAMPLES, ARTWORK AND KNOW-HOW. Licensor shall,
at least four (4) times during each Annual Period, make
available to Licensee certain samples, designs, colors, fabric
-17-
samples, tags, labels, packaging and artwork available to
Licensor, and the cost of providing such materials shall be
borne by Licensee. All right, title and interest in and to
samples, sketches, designs, and other materials furnished to
Licensee by Licensor, whether created by Licensor or Licensee,
including any modifications or improvements thereof which may
be created by Licensor, Licensee are hereby assigned to and
shall be the sole property of Licensor as between Licensee and
Licensor and are licensed hereunder solely and exclusively for
use in connection with the manufacture and sale of Licensed
Products in the Territory. Licensor may use and permit others
to use said designs and other materials in any manner it
desires, provided that such use does not conflict with any
rights granted Licensee hereunder. Licensee specifically
acknowledges that such designs and other materials may be used
by Licensor and other licensees on Licensed Products in
jurisdictions outside the Territory and on products other than
Licensed Products anywhere in the world. In addition to the
foregoing, for marketing purposes, Licensor shall, upon
reasonable request, make available to Licensee, such of the
following which are available to Licensor: (a) reports on
marketing policy of Licensor; (b) reports on color, style and
fabric trends; (c) samples of advertising materials; (d)
display ideas; and (e) labels, hangtags and packaging.
8.8 CONFIDENTIALITY. Licensee acknowledges that it
will receive from Licensor prints, designs, ideas, sketches,
and other materials or Trade Secrets which Licensor intends to
use on or in connection with lines of merchandise other than
the Licensed Products and which have not as yet found their way
into the channels of distribution. The parties recognize that
these materials are valuable property of Licensor. Licensee
acknowledges the need to preserve the confidentiality and
secrecy of these materials and agrees to take all necessary
steps to ensure that use by it, or by its contractors will in
all respects preserve such confidentiality and secrecy.
Licensee shall take all reasonable precautions to protect the
secrecy of the materials, samples, and designs described in
this Article 8.8 prior to their commercial distribution or the
showing of samples for sale, and shall not sell any merchandise
employing or adapted from any of said designs except under the
Trademark. Licensor shall take all reasonable precautions to
protect the secrecy of the original designs created by Licensee
for Licensed Products prior to their advertisement, commercial
distribution or the showing of samples for sale. Neither
Licensor nor Licensee shall, at any time during the term of
this Agreement, disclose or use for any purpose, other than as
contemplated by this Agreement, any revealed or otherwise
acquired confidential information and data relating to the
business of the other.
8.9 MANUFACTURE OF LICENSED PRODUCTS BY THIRD
PARTIES.
(a) Licensee shall execute the attached
Exhibit G, within thirty (30) days from execution of this
Agreement evidencing that all Licensed Products manufactured
hereunder (whether by Licensee, Licensee's suppliers, or any
contract sewing shops or other designated contract facilities)
will be manufactured in compliance with the wage and hour laws
of the country of manufacture and without the use of child
(under the age of 14), prison or slave labor;
(b) Licensee shall not utilize any factory
(whether operated by a third party manufacturer or a third
party manufacturer's contract sewing shop or other designated
contract
-18-
facility) in the manufacture of Licensed Products (including
all components thereof) unless (a) it has been inspected and
approved, in writing, by an authorized employee or agent of
Licensee; (b) Exhibit G is executed by each such third party
manufacturer or a third party manufacturer's contract sewing
shop or other designated contract facility; and (c) Licensee
shall obtain the signature of an authorized representative from
each third party manufacturer used by Licensee on a brief
agreement designated to protect Licensor's rights in the
Trademark (see Exhibit D). Licensee acknowledges that it shall
remain primarily liable and completely obligated under all of
the provisions of this Agreement in respect of such
subcontracting arrangements.
(c) Licensee shall provide access to Licensor's
representative, upon reasonable notice, to (i) Licensee's
manufacturing facility and any manufacturing facility operated
by any third party manufacturer or such third party
manufacturer's contract sewing shops or other designated
contract facilities which are utilized for all or part of the
manufacture of Licensed Products, and (ii) all books and
records relating to employee wages, employee timecards,
evidence of employee age, shipping documents, cutting reports
and other documentation relating to the manufacture and
shipment of Licensed Products;
(d) Licensee acknowledges that it has in effect
(or will promptly develop) a program of monitoring
manufacturing facilities either operated by third party
manufacturers or any such third party manufacturers' contract
sewing shops or other designated contract facilities for
compliance with the requirements of Article 8.9(a) above; and
(e) Licensee shall exercise best efforts to
ensure that all shipping documents which accompany all Licensed
Products include the following language (either pre-printed or
"stamped"):
"We hereby certify that the merchandise covered by this
shipment was manufactured in compliance with all
applicable requirements of the wage and hour laws of the
country of manufacture and without the use of child (under
the age of 14), prison or slave labor. We further certify
that we have in effect a program of monitoring any
suppliers, contract sewing shops and other designated
contract facilities which manufactured Tommy Hilfiger
(Registered) brand merchandise for compliance with the
requirements set forth above. We also certify that this
shipment is in compliance with all laws applicable to the
designation of country of origin on products, accurately
states the country of origin on all products; the marking
of shipments with proper country of origin and shall be
shipped under legally issued and valid export licenses or
visas."
8.10 MARKING, LABELING AND PACKAGING IN ACCORDANCE
WITH APPLICABLE LAWS. All Licensed Products manufactured,
distributed or sold by Licensee shall be marked, labeled,
packaged, advertised, distributed and sold in accordance with
this Agreement, in accordance with all applicable laws, rules
and regulations in the Territory, and in such a manner as will
not tend to mislead or deceive the public. At the request of
Licensor, Licensee shall cause to be placed on all Licensed
Products appropriate notice designating Licensor as the
copyright or design patent owner thereof,
-19-
as the case may be.
8.11 DISPOSAL OF SECONDS AND CLOSE-OUTS.
(a) Seconds. Licensee shall only sell Licensed
Products which are Seconds in a way which shall not reduce the
value of the Trademark or detract from its reputation and shall
obtain the express prior written consent of Licensor with
respect to the terms and method of such disposal. All Seconds
approved for sale by Licensor shall be clearly marked "Seconds"
or "Irregular". The percentage of Seconds of any of the
Licensed Products which may be disposed of pursuant to this
Article 8.11(a) shall not, in any event, exceed * of the total
number of units of Licensed Products distributed or sold by
Licensee.
(b) Close-Outs. All Close-Outs shall be sold
only with Licensor's prior written approval, which Licensor may
withhold in its sole discretion, through retail outlets and
traditional and accepted dealers in such merchandise and upon
such terms and conditions as Licensee, in its reasonable
discretion, determines appropriate and shall not be sold to any
person which Licensee know, or have reason to know, will export
such Close-Outs from the Territory. The percentage of Close-
Outs of any of the Licensed Products which may be disposed of
pursuant to this Article 8.11(b) shall not, in any event,
exceed * of the total number of units of such Licensed Products
distributed or sold by Licensee in each Annual Period.
8.12 ASSISTANCE BY LICENSOR. Licensee shall have
the right to cause its personnel to reasonably visit Licensor's
offices, factories, showroom, and other places of business, and
also to attend Licensor's sales meetings in order to obtain
additional know-how and assistance. The scheduling of such
visits shall be at times mutually convenient to the parties
hereto. In connection with such visits, Licensee shall bear
all air-fare to and from, and subsistence expenses of
Licensee's representatives. In the event Licensee requests Mr.
Tommy Hilfiger or any other member(s) of Licensor's staff to
make a personal appearance, to attend any function, to visit
Licensee's manufacturing plants or facilities or to attend any
design meetings, Licensee shall pay all of the reasonable
expenses in connection therewith, including air travel and
hotel accommodations, and other reasonable services of
Licensor's choosing. Licensee shall reimburse Licensor for all
reasonable expenses so incurred by Licensor at Licensee's
request.
8.13 MEETINGS. Licensor may from time to time but
no more than twice a year hold a meeting of Licensor's
licensees/distributors. Licensee agrees upon receipt of
reasonable notice to attend any such meeting(s) at its own
expense.
8.14 DESIGN RIGHTS. Licensee acknowledges and
agrees that Licensor owns or shall own all design rights
relating to the Licensed Products, regardless of whether such
designs were created by Licensor or by or on behalf of
Licensee. Licensee agrees to make, procure and execute all
assignments necessary to vest ownership of design rights in
Licensor. Licensee shall place appropriate notices, reflecting
ownership of design rights by Licensor, on all the Licensed
Products, packaging, tags, labels and advertising and
promotional materials. Licensee shall not do or allow to
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-20-
be done anything which may adversely affect any of Licensor's
design rights. All designs used by Licensee for the Licensed
Products shall be used exclusively for the Licensed Products
and may not be used under any other trademark or private label
without the prior written consent of Licensor. Licensee shall
disclose and freely make available to Licensor any and all
developments or improvements it may make relating to the
Licensed Products and to their manufacture, promotion and
sales, including, without limitation, developments and
improvements in any machine, process or product design, that
may be disclosed or suggested by Licensor or regarding any
patent or trademark which Licensee is entitled to utilize.
8.15 PRICING. Licensee acknowledges that in order
to preserve the goodwill attached to the Trademark, the
Licensed Products should be sold at prices and terms reflecting
the prestigious nature of the Trademark, it being understood,
however, that Licensor is not empowered to fix or regulate the
prices for which the Licensed Products are to be sold, either
at the wholesale or retail level.
ARTICLE 9. THE TRADEMARK
9.1 RIGHTS TO THE TRADEMARK. Licensee acknowledges
the great value of the goodwill associated with the Trademark.
Licensee will not, at any time, do, or otherwise suffer to be
done any act or thing which may, in any way, adversely affect
any rights of Licensor in and to the Trademark or any
registrations thereof or which, directly or indirectly, may
reduce the value of the Trademark or detract from its
reputation. Nothing contained in this Agreement shall be
construed as an assignment or grant to Licensee of any right,
title or interest in or to the Trademark, or any of Licensor's
other trademarks, it being understood that all rights relating
thereto are reserved by Licensor, except for the License
hereunder to Licensee of the right to use and utilize the
Trademark only as specifically and expressly provided herein.
Licensee shall not file or prosecute a trademark or service
mark application or applications to register the Trademark in
respect of the Licensed Products or any other goods or
services. Licensee shall not, during the term of this
Agreement or thereafter, (a) attack Licensor's title or right
in and to the Trademark in any jurisdiction or attack the
validity of this License or the Trademark or (b) contest the
fact that Licensee's rights under this Agreement (i) are solely
those of a manufacturer and distributor and, (ii) subject to
the provisions of Article 11 hereof, cease upon termination of
this Agreement. The provisions of this Article 9.1 shall
survive the termination of this Agreement.
9.2 PROTECTING THE TRADEMARK. Licensee shall
cooperate fully and in good faith with Licensor for the purpose
of securing, preserving and protecting Licensor's rights in and
to the Trademark. At the request of Licensor, Licensee shall
execute and deliver to Licensor any and all documents and do
all other acts and things which Licensor deems necessary or
appropriate to make fully effective or to implement the
provisions of this Agreement relating to the ownership or
registration of the Trademark.
9.3 COMPLIANCE WITH LEGAL REQUIREMENTS. Licensee
will use the Trademark in the Territory strictly in compliance
with the legal requirements therein. Whenever any Trademark is
used
-21-
on any item of packaging or labeling or in any advertisement,
it must be followed, in the case of a registered trademark by
the registration symbol, i.e., (Registered), and in the case of
all other trademarks by the symbol TM, or other appropriate
symbols of similar import acceptable to Licensor. Licensee
shall duly display all other notices with respect to the
Trademark, on the Licensed Products and otherwise, as are or
may be required by the trademark laws and regulations
applicable within the Territory. Upon expiration or
termination of this Agreement for any reason whatsoever,
Licensee will execute and deliver to Licensor any and all
documents required by Licensor terminating any and all
trademark registrations, Registered User agreements and other
documents regarding this Trademark.
9.4 OWNERSHIP OF COPYRIGHT. Any copyright which may
be created under this Agreement in any sketch, design, print,
package, label, tag or the like designed or approved or used
with the Trademark by Licensor will be the property of
Licensor. Licensee will not, at any time, do, or otherwise
suffer to be done, any act or thing which may adversely affect
any rights of Licensor in such sketches, designs, prints,
packages, labels, tags and the like and will, at Licensor's
request, do all things reasonably required by Licensor to
preserve and protect said rights.
9.5 NOTICE OF INFRINGEMENT. Licensee shall notify
Licensor in writing of any infringement or imitation of the
Trademark or the use by any person of any trademarks or
tradenames confusingly similar to the Trademark promptly as
same may come to the attention of Licensee. Licensor will
thereupon take such action as it deems advisable for the
protection of the Trademark and its rights therein, and
Licensee shall assist Licensor in the prosecution of any such
suit, as Licensor may reasonably request, at Licensor's
expense. In no event, however, will Licensor be required to
take any action if it deems it inadvisable to do so and
Licensee will have no right to take any action with respect to
the Trademark without the prior written consent of Licensor.
In the event a third party infringes the use of the Trademark
in the Territory on items similar to the Licensed Products,
Licensor shall take all advisable and necessary measures to
protect the Trademark and Licensee agrees that, at Licensor's
request, it will pay * of the costs incurred therefor,
including judicial expenses and legal fees.
9.6 COUNTERFEIT PROTECTION. Licensee shall use its
best efforts to prevent counterfeiting of the Licensed
Products. All Licensed Products shall bear and use any
reasonable counterfeit preventive system, devices or labels
designated by Licensor. At its option, Licensor may supply the
system, devices or labels (provided that they are supplied on a
timely basis), which Licensee must use and for which Licensee
shall pay all reasonable costs in advance.
9.7 USE OF OTHER TRADEMARKS. At all times while
this Agreement is in effect, neither Licensee, nor any company
affiliated with Licensee, owned or controlled by Licensee,
under common ownership with or having common stockholders as
Licensee, in which the owner of Licensee is a partner, or in
which Licensee is a partner, shall act as a licensee or
distributor in the Territory of any products included in
Article 1.12 under any name directly competitive with Licensor,
other than "Pepe Jeans" and its derivatives and related
trademarks, without the prior written approval of Licensor.
Nothing herein is to be construed so as to prohibit Licensee
from acting as a manufacturer only of such products under a
name competitive with Licensor, providing that Licensee shall
not be
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-22-
the licensee or distributor thereof. The design and style of
any such products or any of Licensee's private label products
must be clearly distinguished from the Licensed Products (the
foregoing shall be exclusive of any products previously
designed by Licensee or any of its Affiliates pursuant to other
license agreements in effect between Licensor and Licensee or
any of its Affiliates). If such consent is given, unless
prohibited by other agreements, Licensee shall provide Licensor
with samples of any clothing products, lines or collections
Licensee manufactures or has manufactured for it or distributed
for it which do not bear the Trademarks. A breach of this
clause shall constitute a violation of Licensee's obligation to
use its best efforts to exploit this license. The design,
merchandising, packaging, sales and display of all of
Licensee's non-licensed products shall be separate and distinct
from the Licensed Products. Licensee shall maintain a separate
area for exhibition of the Licensed Products wherever the
Licensed Products are sold.
9.8 USE OF TRADEMARK ON INVOICES, ETC. The use of
the Trademark by Licensee on invoices, order forms, stationery
and related materials in advertising in telephone or other
directory listings is permitted only upon Licensor's prior
written approval of the format in which the Trademark is to be
so used, the juxtaposition of the Trademark with other words
and phrases, and the content of the copy prior to the initial
such use of the Trademark and prior to any material change
therein; provided, however, that each such use of the Trademark
is only in conjunction with the manufacture, sale, distribution
or advertisement of Licensed Products pursuant to this
Agreement.
9.9 MONITORING. Licensee shall actively monitor use
of the Trademark by Licensee and its customers and shall use
its best efforts to see that such use does not impair the image
or reputation heretofore or hereafter established by Licensor
for products bearing the Trademark; provided, however, that the
Licensee shall have no obligation to place any unlawful
restriction on its customers.
ARTICLE 10. INSOLVENCY
10.1 EFFECT OF PROCEEDING IN BANKRUPTCY, ETC. If
either party institutes for its protection or is made a
defendant in any proceeding under bankruptcy, insolvency,
reorganization or receivership law, or if either party is
placed in receivership or makes an assignment for benefit of
creditors or is unable to meet its debts in the regular course
of business, the other party may elect to terminate this
Agreement immediately by written notice to the other party
without prejudice to any right or remedy the terminating party
may have, including, but not limited to, damages for breach to
the extent that the same may be recoverable.
10.2 RIGHTS, PERSONAL. The license and rights
granted hereunder are personal to Licensee. No assignee for
the benefit of creditors, receiver, trustee in bankruptcy,
sheriff or any other officer or court charged with taking over
custody of Licensee's assets or business, shall have any right
to continue performance of this Agreement or to exploit or in
any way use the Trademark if this Agreement is terminated
pursuant to Articles 11.1 and 11.2, except as may be required
by law.
10.3 TRUSTEE IN BANKRUPTCY. Notwithstanding the
provisions of Article 10.2 above,
-23-
in the event that, pursuant to the applicable bankruptcy law
(the "Code"), a trustee in bankruptcy, receiver or other
comparable person, of Licensee, or Licensee, as debtor, is
permitted to assume this Agreement and does so and, thereafter,
desires to assign this Agreement to a third party, which
assignment satisfies the requirements of the Code, the trustee
or Licensee, as the case may be, shall notify Licensor of same
in writing. Said notice shall set forth the name and address
of the proposed assignee, the proposed consideration for the
assignment and all other relevant details thereof. The giving
of such notice shall be deemed to constitute an offer to
Licensor to have this Agreement assigned to Licensor or its
designee for such consideration, or its equivalent in money,
and upon such terms as are specified in the notice. The
aforesaid offer may be accepted by Licensor only by written
notice given to the trustee or Licensee, as the case may be,
within fifteen (15) days after Licensor's receipt of the notice
to such party. If Licensor fails to deliver such notice within
the said fifteen (15) days, such party may complete the
assignment referred to in its notice, but only if such
assignment is to the entity named in said notice and for the
consideration and upon the terms specified therein. Nothing
contained herein shall be deemed to preclude or impair any
rights which Licensor may have as a creditor in any bankruptcy
proceeding.
ARTICLE 11. TERMINATION
11.1 OTHER RIGHTS UNAFFECTED. It is understood and
agreed that termination by either party on any ground shall be
without prejudice to any other remedies which the terminating
party may have.
11.2 TERMINATION WITHOUT NOTICE. If any of the
following grounds for termination shall occur, this Agreement
shall thereupon forthwith terminate and come to an end without
any need for notice from Licensor:
(a) If Licensee shall make an unauthorized
disclosure of confidential information, Trade Secrets, or
materials given or loaned to Licensee by Licensor;
(b) If Licensee institutes proceedings seeking
relief under a bankruptcy act or any similar law, or otherwise
violates the provisions of Article 10.1 thereof;
(c) If Licensee transfers or agrees to transfer
substantially all of its property, its shares of stock or, this
Agreement in violation of Article 17 thereof;
(d) If Licensee shall sell unapproved
merchandise in violation of Article 8.3 hereof;
(e) If Licensee shall, without the prior
written consent of Licensor, use the Trademark in an
unauthorized or improper manner;
-24-
(f) If Licensee shall use the Trademark in
connection with another trademark or name; and/or
(g) If Licensee shall place or participate in
any advertising prohibited by Article 7.
11.3 TERMINATION WITH NOTICE. If Licensee breaches
any of its obligations under this Agreement, other than those
specified in Article 11.2 above, Licensor may terminate this
Agreement by giving Notice of Termination to Licensee.
Termination will become effective automatically unless Licensee
completely cures the breach within fifteen (15) days of the
giving of such Notice. Termination based upon Licensee's
failure to comply with the Minimum Sales Levels set forth in
Article 4.2 shall become effective thirty (30) days after the
giving of the Notice. If the notice relates to royalties or to
product quality, pending cure Licensee shall ship no Licensed
Products; if Licensee does ship, it shall automatically forfeit
its right to cure and the License shall be terminated. Upon
the giving of a Notice of Termination for the second time, for
any reason, Licensee shall no longer have the right to cure any
violation, and termination shall be effective upon the giving
of the Notice.
11.4 EFFECT OF TERMINATION. On the termination of
this Agreement for any reason whatsoever: all of the rights of
Licensee under this Agreement shall forthwith terminate and
immediately revert to Licensor; all royalties on sales
theretofore made shall become immediately due and payable;
Licensee shall forthwith discontinue all use of the Trademark,
except that Licensee may have a period of ninety (90) days
after such termination to consummate all sales of Licensed
Products which were firm upon the delivery of the Inventory
Schedule in accordance with Article 11.5 hereof and to sell the
balance of the Inventory not purchased by Licensor, and
royalties with respect thereto shall be due on such ninetieth
day. Licensor shall have the right to conduct a physical
inventory of the Licensed Products in Licensee's possession or
control. Licensee will completely remove the Trademark from
Licensed Products and destroy all hangtags and labeling
attached to such Licensed Products. Licensee shall, at
Licensee's expense, either return to Licensor all remaining
Inventory after such ninetieth (90th) day or destroy all
remaining Inventory under the supervision of Licensor.
Licensee shall no longer use the Trademark, any variation,
imitation or simulation thereof, or any Trademark similar
thereto; Licensee shall immediately take all necessary steps to
change its or any Affiliate's corporate name to omit any
reference to or use of the Trademarks; Licensee will promptly
transfer to Licensor, free of charge, all registrations,
filings and rights with regard to the Trademark which it may
have possessed at any time; and Licensee shall thereupon
deliver to Licensor, free of charge, all sketches, designs,
colors and the like in its possession or control, designed or
approved by Licensor, and all Labels supplied by Licensor in
Licensee's possession or control. Licensor shall have the
option, exercisable upon notice to Licensee within thirty (30)
days of termination, to negotiate the purchase of the Labels
which have not been supplied by Licensor. If such negotiations
do not result in the purchase of the Labels not supplied by
Licensor, Licensee shall destroy the Labels under the
supervision of Licensor, and Licensee, shall supply to Licensor
a certificate of destruction thereof signed by a duly
authorized officer of Licensee.
11.5 INVENTORY UPON TERMINATION. Upon the
termination of this Agreement for any
-25-
reason whatsoever, Licensee shall immediately deliver to
Licensor an Inventory Schedule. The Inventory Schedule shall
be prepared as of the close of business on the date of such
termination and shall reflect direct cost of each such item
(not including overhead or any general or administrative
expenses). Licensor thereupon shall have the option,
exercisable by notice in writing delivered to Licensee within
thirty (30) days after its receipt of the complete Inventory
Schedule, to purchase any or all of the Inventory for an amount
equal to the price as determined as follows: (i) as to
Manufactured Products, the price shall be Licensee's standard
cost (the actual manufacturing cost); and (ii) as to Purchased
Products, the price shall be Licensee's landed costs, which
shall, for the purposes hereof, mean the F.O.B. price together
with customs, duties, brokerage, freight and insurance. In the
event such notice is sent by Licensor, Licensor may collect the
Inventory referred to therein within ninety (90) days after
Licensor's said notice. Licensor will pay such Licensee for
such Inventory upon such collection. In the event such notice
is not sent, Licensee may dispose of the Licensed Products
within ninety (90) days of the date of termination; provided,
however, that any advertising used during such period shall be
subject to Licensor's prior written approval and such
disposition of the Licensed Products shall be subject to
Licensee's obligations hereunder, including, but not limited to
payments to be made to Licensor. At the end of such ninety
(90) day period, any Licensed Products remaining in Licensee's
possession shall, at the request of Licensor, be destroyed.
11.6 CONTRIBUTION FROM SEL. SEL International
Investments Corp. ("SEL"), hereby agrees to make (or cause a
subsidiary to make) capital contributions to Licensee in an
amount equal to at least * in the aggregate, over the first
three (3) Annual Periods. Licensee shall dedicate and,
promptly after the receipt of any portion of such
contributions, notify Licensor of the amount received and
utilize the total amount of such funds received for the support
and development of the business contemplated hereunder.
11.7 FREEDOM TO LICENSE. In the event of
termination of this Agreement or the receipt by Licensor of a
notice of termination from Licensee, Licensor shall be free to
license to others the use of the Trademark in connection with
the manufacture and sale of Licensed Products in the Territory,
but only if the sale of such Licensed Products in the Territory
produced pursuant to such third party agreement is prohibited
until after the termination of this Agreement.
11.8 EQUITABLE RELIEF. Licensor and Licensee shall
be entitled to equitable relief by way of temporary and
permanent injunction and such other and further relief as any
court with jurisdiction may deem just and proper.
11.9 TERMINATION WITHOUT PREJUDICE. Termination of
this Agreement pursuant to and conditions hereof shall be
without prejudice to the terminating party's other rights and
remedies at law or in equity
11.10 WAIVER. It is expressly understood that under
no circumstances shall Licensee be entitled, directly or
indirectly, to any form of compensation or indemnity from
Licensor as a consequence to the termination of this Agreement,
whether as a result of the passage of time, or as the result of
any other cause of termination referred to in this Agreement.
Without limiting the
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-26-
generality of the foregoing, by its execution of the present
Agreement, Licensee hereby waives any claim which it has or
which it may have in the future against Licensor arising from
any alleged goodwill created by the Licensee for the benefit of
the said parties or from the alleged creation or increase of a
market for Licensed Products.
ARTICLE 12. RELATIONSHIP BETWEEN THE PARTIES
12.1 NO AGENCY. Licensee shall not represent itself
as the agent or legal representative of Licensor, Licensor's
affiliates or Tommy Hilfiger for any purpose whatsoever and
shall have no right to create or assume any obligation of any
kind, express or implied, for or on behalf of them in any way
whatsoever. Licensor shall similarly not represent itself as
the agent or legal representative of Licensee.
ARTICLE 13. INTENTIONALLY OMITTED
ARTICLE 14. BENEFIT
14.1 BENEFIT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto, and, subject
to Article 17 hereof, their successors and assigns.
ARTICLE 15. ENTIRE AGREEMENT; AMENDMENT
15.1 ENTIRE AGREEMENT; AMENDMENT. This Agreement
constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof and this Agreement may not
be amended or modified, except in a writing signed by both
parties hereto.
ARTICLE 16. NON-WAIVER
16.1 NON-WAIVER. The failure of either party to
enforce at any time any term, provision or condition of this
Agreement, or to exercise any right or option herein, shall in
no way operate as a waiver thereof, nor shall any single or
partial exercise preclude any other right or option herein; and
no waiver whatsoever shall be valid unless in writing, signed
by the waiving party, and only to the extent herein set forth.
ARTICLE 17. ASSIGNMENT
17.1 NO ASSIGNMENT WITHOUT CONSENT. The license and
rights granted to Licensee hereunder are personal in nature,
and Licensee may not and shall not sell, transfer, lease,
sublicense
-27-
or assign this Agreement or its rights and interest hereunder,
or any part hereof, by operation of law or otherwise, without
the prior written consent of Licensor, which consent may be
withheld by Licensor in its sole and absolute discretion,
except that Licensee shall have the right, upon written notice
to Licensor, to assign or sublicense this Agreement to
Affiliates of Licensee; provided, however, that in such event
Licensee agrees to guarantee the performance and obligations of
such corporation, subsidiary or Affiliate under this Agreement.
17.2 SALE OF ASSETS. A sale or other transfer of
all or substantially all of the assets of Licensee or a change
in the control of Licensee other than as permitted under
Article 17.1 shall be deemed an assignment of Licensee's rights
and interests under this Agreement to which the terms and
conditions of Article 17.1 of this Agreement shall apply.
17.3 SALE OF STOCK/INTEREST. Any transfer, by
operation of law or otherwise, of Licensee's interest in this
Agreement (in whole or in part), a fifty (50%) percent or
greater interest in one or in a series of transactions in
Licensee (whether stock, partnership, interest or otherwise) or
any interest directly or indirectly to a competitor of Licensor
shall be deemed an assignment of Licensee's rights and interest
under this Agreement to which the terms and conditions of
Article 17.1 of this Agreement shall apply. The issuance of
shares of stock to other than the existing shareholders or
their affiliates is deemed to be a transfer of that stock for
purposes of this Article. If after the date hereof, there is a
transfer of less than a fifty (50%) percent interest in
Licensee to a non Affiliate of Licensee, then any other
transfer of an interest in Licensee to a non Affiliate of
Licensee which when added to the total percentage previously
transferred totals a transfer of greater than fifty (50%)
percent interest of Licensee, shall be deemed an assignment of
Licensee's interest in this Agreement within the meaning of
this Article to which the terms and conditions of Article 20.1
shall apply.
17.4 ASSIGNMENT BY LICENSOR. Licensor shall have a
complete and unrestricted right to sell, transfer, lease or
assign its rights and interests in this Agreement to any
domestic or foreign corporation or other business entity,
providing that such transferee agrees to be bound by all of the
terms hereof and is the holder of the Trademark in the
Territory. When Licensor wishes to sell, transfer, lease or
assign its rights and interests in this Agreement, Licensor
shall do so on notice to Licensee.
ARTICLE 18. INDEMNIFICATION AND INSURANCE
18.1 INDEMNIFICATION BY LICENSEE. Licensee does
hereby indemnify and hold harmless Licensor, Tommy Hilfiger,
and their directors, officers, employees, agents, officials and
related companies from and against any and all losses,
liability, damages and expenses (including reasonable
attorneys' fees and expenses) which they or any of them may
incur or be obligated to pay in any action, claim or proceeding
against them or any of them, for or by reason of any acts,
whether of omission or commission, that may be committed or
suffered by Licensee or any of their servants, agents or
employees in connection with Licensee's performance of this
Agreement, including but not limited to:
-28-
18.1.1. any alleged defect in any Licensed
Product, regardless of whether the action is based upon
negligence or strict liability, and regardless of whether the
alleged negligence of Licensor is characterized as "passive" or
"active";
18.1.2. the manufacture, labeling, sale,
distribution or advertisement of any Licensed Product by
Licensee;
18.1.3. any violation of any warranty,
representation or agreement made by Licensee pertaining to a
Licensed Product;
18.1.4. the claim of any broker, finder or
agent in connection with the making of this Agreement or any
transactions contemplated by this Agreement.
The provisions of this Article and Licensee's obligations
hereunder shall survive any termination or rescission of this
Agreement.
18.2 NOTICE OF SUIT OR CLAIM. Licensee shall
promptly inform Licensor by written notice of any suit or claim
against Licensee relating to Licensee's performance under this
Agreement, whether such suit or claim is for personal injury,
involves alleged defects in the Licensed Products manufactured,
sold or distributed hereunder, or otherwise.
18.3 INDEMNIFICATION BY LICENSOR. Licensor does
indemnify and hold harmless Licensee, against any and all
liabilities, damages and expense (including reasonable
attorneys' fees, costs and expenses) which Licensee may incur
or be obligated to pay in any action or claim against Licensee
for infringement of any other person's claimed right to use a
trademark in the Territory, but only where such action or claim
results from Licensee's use of the Trademark in the Territory
in accordance with the terms of this Agreement and where
Licensee is not at fault. Licensee shall give Licensor prompt
written notice of any such claim or action, and thereupon
Licensor shall undertake and conduct the defense of any suit so
brought. It is understood, however, that if there is a dispute
between Licensor and Licensee as to whether the suit was
brought as a result of Licensee's failure to use the mark in
accordance with the terms of this Agreement, Licensee may be
required to conduct such defense unless and until it is
determined that no such misuse of the Trademark occurred and
that Licensee are not at fault. In the event appropriate
action is not taken by Licensor within thirty (30) days of its
receipt of notice from Licensee, Licensee shall have the right
to defend such claim or action in its own name, but no
settlement or compromise of any such claim or action may be
made without the prior written approval of Licensor. In either
case, Licensor and Licensee shall keep each other fully advised
of all developments and shall cooperate fully with each other
and in all respects in connection with any such defense is
made. Such indemnification shall be deemed to apply solely to
the amount of the judgment, if any, against Licensee, and sums
paid by Licensee in connection with its defense. Such
indemnification shall not apply to any damages sustained by
Licensee by reason of such claimed infringement other than
those specified above. The provisions of this Article and
Licensor's obligations hereunder shall survive any termination
or rescission of this Agreement.
-29-
18.4 INSURANCE.
(a) Requirements. Without limiting Licensee's
liability pursuant to the indemnity provisions of this
Agreement, Licensee shall maintain commercial general liability
insurance in the amount of at least * (combined single limit
per occurrence) with a broad form property damage liability
coverage. This insurance shall include broad form blanket
contractual liability, personal injury liability, advertising
liability, products and completed operations liability. Each
coverage shall be written on an "occurrence" form.
(b) Theft and Destruction Coverage. Licensee
shall purchase insurance against theft and destruction of the
Licensed Products which shall (1) be written on an "all risk"
basis; (2) provide that Licensee shall be reimbursed for loss
in an amount equal to the manufacturer's selling price for the
products (this may be accomplished by either a selling price
endorsement or business interruption insurance); (3) provide
that Licensor is added as a loss payee in respect to losses to
Licensed Products as their interests may appear; (4) be in
effect while goods are on premises owned, rented or controlled
by Licensee and while in transit or storage; and (5) include a
brand and label clause stating, among other things, that the
insurer will pay the cost of removing Licensor's name from
damaged merchandise and relabeling goods.
(c) General Provisions. The insurance
described in subArticles 18.4(a) and 18.4(b) shall include:
(1) an endorsement stating that Licensor shall receive at least
thirty (30) days written notice prior to cancellation or non-
renewal of coverage; (2) an endorsement naming Licensor as an
additional insured; and (3) a mutual waiver of subrogation for
insured property losses.
(d) Approved Carrier/Policy Changes. All
insurance shall be obtained from an insurance company approved
by Licensor which approval shall not be unreasonably withheld.
Licensee shall give at least thirty (30) days prior written
notice to Licensor of the cancellation of, or any modification
in, such insurance policy that would affect Licensor's status
or benefits thereunder. This insurance may be obtained for
Licensor by Licensee in conjunction with a policy which covers
products other than the Licensed Products.
(e) Evidence of Coverage. No later than thirty
(30) days from the effective date hereof, Licensee shall
furnish to Licensor evidence, in form and substance
satisfactory to Licensor, of the maintenance and renewal of the
required insurance including, but not limited to, copies of
policies with applicable riders and endorsements, and
certificates of insurance.
(f) Territory. The insurance set forth in this
Section must cover all countries in the Territory in which
Licensee sells or manufactures Licensed Products.
ARTICLE 19. SEVERABILITY
19.1 SEVERABILITY. If any provision or any portion
of any provision of this Agreement
* This information has been omitted pursuant to a request
for confidential treatment filed with the Securities and
Exchange Commission.
-30-
shall be construed to be illegal, invalid, or unenforceable,
such shall be deemed stricken and deleted from this Agreement
to the same extent and effect as if never incorporated herein,
but all other provisions of this Agreement and any remaining
portion of any provision which is not deemed illegal, invalid
or unenforceable in part shall continue in full force and
effect.
ARTICLE 20. NOTICES
20.1 NOTICES. All reports, approvals and notices
required or permitted to be given under this Agreement shall,
unless specifically provided otherwise in this Agreement, be
deemed to have been given if personally delivered or if mailed
by certified or registered mail,
if to Licensor, to: TOMMY HILFIGER LICENSING, INC.
913 N. Market Street
Wilmington, Delaware 19801
Attention: Mr. Joel Horowitz
President
Copy to: Steven R. Gursky, Esq.
Gursky & Associates, P.C.
21 East 40th Street