EXHIBIT 10.47 **
Execution
Copy
DATED May
1, 2007
SWICO LIMITED
and
MOVADO GROUP, INC.
and
MGS DISTRIBUTION
LIMITED
____________________________________________
JOINT VENTURE
AGREEMENT
____________________________________________
** CONFIDENTIAL
PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED FROM:
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THE FOLLOWING
PAGES OF THE FOUR DISTRIBUTORSHIP AGREEMENTS ANNEXED HERETO
COLLECTIVELY AS ANNEX B: TOMMY HILFIGER AGREEMENT - PAGES 6 AND 18;
JUICY COUTURE AGREEMENT – PAGES 6, 7 AND 19; HUGO BOSS
AGREEMENT – PAGES 6 AND 18; LACOSTE AGREEMENT – PAGES
38 AND 39 AND SCHEDULE VIII;
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ANNEX B TO
(WHICH IS THE LAST PAGE OF) THE SERVICE AGREEMENT ANNEXED HERETO AS
ANNEX C;
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AND FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION
(“SEC”) PUSUANT TO RULE 24b-2 OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (“1934
ACT”)
TABLE OF CONTENTS
1.
INTERPRETATION [INSERT PAGE NUMBER]
2.
ESTABLISHMENT OF THE COMPANY
[INSERT PAGE NUMBER]
3.
BUSINESS OF THE COMPANY AND INITIAL
OPERATIONS [INSERT PAGE
NUMBER]
4.
CORPORATE GOVERNANCE AND MANAGEMENT
[INSERT PAGE
NUMBER]
5.
REPORTING AND INFORMATION RIGHTS
[INSERT PAGE
NUMBER]
6.
RESTRICTIONS ON TRANSFER OF SHARES
[INSERT PAGE
NUMBER]
7.
SWICO CHANGE OF CONTROL
[INSERT PAGE NUMBER]
8.
FINANCIAL PERFORMANCE [INSERT PAGE NUMBER]
9.
BUY OUT RIGHT [INSERT PAGE NUMBER]
10.
COVENANTS [INSERT PAGE NUMBER]
11.
REPRESENTATIONS AND WARRANTIES
[INSERT PAGE NUMBER]
12.
FEES AND EXPENSES [INSERT PAGE NUMBER]
13.
CONFIDENTIALITY [INSERT PAGE NUMBER]
14.
PUBLICITY [INSERT PAGE NUMBER]
15.
TERMINATION AND BREACH [INSERT PAGE NUMBER]
16.
NOTICES [INSERT PAGE NUMBER]
17.
MISCELLANEOUS [INSERT PAGE NUMBER]
18.
GOVERNING LAW AND JURISDICTION
[INSERT PAGE NUMBER]
Annex
A: The Company governing documents
Annex
B: Distribution Agreements
Annex
C: Service Agreement
Annex
D: 5-year business plan
THIS JOINT
VENTURE AGREEMENT is made
on the 1st day of May, 2007
SWICO
LIMITED a company
incorporated under the laws of England, having its registered
office at Meadway House, Meadway, Haslemere, Surrey GU27 1NN,
England, registered number 469666 (“ Swico ”)
;
MOVADO
GROUP, INC. a company
incorporated under the laws of New York, having its principle
office at 650 From Road, Paramus, NJ 07652,
U.S.A. (“ MGI ”);
MGS DISTRIBUTION LIMITED
a corporation incorporated under the
laws of England, having its registered office c/o Swico, Meadway,
Haslemere, Surrey GU27 1NN, England, registered
number (“
Company ”).
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MGI wishes to
develop its activities in the United Kingdom through, among other
actions, the development of licensed brands and direct access to
the market.
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Swico is a
watch distributor in the United Kingdom and is currently the
distributor there of Hugo Boss watches under an agreement with
MGI’s Affiliate, MGI Luxury Group, S.A., dated May 1, 2005
(“Swico HB Distributorship”). In order to
grow and secure the current business of its domestic markets, Swico
is searching for new brands for distribution and a strong partner
to develop for the long term.
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In view of
their satisfactory relationship and common objectives, Swico and
MGI (collectively, the “ Shareholders ”) wish to
create a joint venture relationship through ownership in the
Company of, respectively, a 51% interest by MGI (or an entity that
is owned 100% by MGI) and a 49% interest by Swico.
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The
Shareholders wish to set forth herein certain matters relating to
the establishment of the Company, the management and operations
thereof, as well as the transfers by the Shareholders of their
interests in the Company.
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NOW
THEREFORE , in
consideration of the premises and the mutual covenants set forth
herein, the Shareholders agree as follows:
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Definitions : Unless the context otherwise
requires, the following terms shall have the following meanings for
purposes of this Agreement.
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"
Affiliate " means, with respect to any Person, any other
Person that, either directly or indirectly through one or more
intermediate Persons, controls, is controlled by or is under common
control with such first Person.
"
Control " of a Person means (i) ownership of more than
50% of the equity share capital or voting rights of such Person or
(ii) the power to direct the management or policies of a
Person, whether through the ownership of more than 50% of the
voting power of such Person, through the power to appoint at least
half of the members of the board of directors or similar governing
body of such Person, through contractual arrangements or
otherwise.
" Person
" means any natural person, firm, company, governmental authority,
joint venture, partnership, association or other entity (whether or
not having separate legal personality).
" Related
Party " means (i) any shareholder, director or officer of the
Company, (ii) any Relative of a shareholder, director or officer of
the Company and (iii) any Person in which any shareholder,
director or any officer of the Company or any Relative thereof has
any interest, other than a passive shareholding of less than 5% in
a company whose shares are listed on a recognized investment
exchange or dealt in on the Alternative Investment Market of the
London Stock Exchange.
"
Relative " of a natural Person means any spouse, parent,
grandparent, child, grandchild or sibling of such Person and any
offspring of any of the foregoing.
" Shares
" means the ordinary shares [of £1 each] in the capital of
the Company.
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The following
terms are defined in the indicated Clause:
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"Confidential
Information"
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“Distribution Agreements”
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“Lock-up
Expiration Date”
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"Transferring
Shareholder"
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“Swico
Change of Control”
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“Swico HB
Distributorship”
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ESTABLISHMENT OF THE COMPANY
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Contributions . MGI shall subscribe for
51 Shares at a subscription price of £408,000, representing
51% of the total Shares to be in issue. Swico shall
subscribe for 49 Shares at a subscription price of £392,000,
of which £372,000 shall be satisfied by Swico procuring the
transfer to the Company of its inventory of Hugo Boss watches in
saleable condition and related display material and spare parts for
such watches, the aggregate fair market value of which is
£372,000, and the balance of the subscription price of
£20,000 shall be paid by Swico in cash so that the
shareholding of Swico shall represent 49% of the total Shares to be
in issue. The Memorandum and Articles of Association of
the Company are attached hereto as Annex A.
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BUSINESS OF
THE COMPANY AND INITIAL OPERATIONS
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Principal
Business . The
business of the Company shall be to sell, market and distribute in
the United Kingdom certain watch brands pursuant to the
Distribution Agreements (as defined below) (the " Business
") in accordance with the Business Plan (as defined in Clause
8.1 below) and to engage in such other
businesses or activities or make such other investments as may be
approved by the Shareholders from time to time in accordance with
this Agreement.
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Distribution
Agreements . MGI shall, or shall cause its
appropriate Affiliate to, enter into exclusive distribution
agreements, substantially in the form attached hereto as Annex B,
except as the parties may otherwise agree (the “
Distribution Agreements ”), with the Company, and the
Company will enter into the Distribution Agreements, pursuant to
which MGI or its appropriate Affiliate shall grant to the Company
the exclusive right to distribute HUGO BOSS, TOMMY HILFIGER,
LACOSTE and JUICY COUTURE watches in the United Kingdom. Swico and
MGI agree that, upon the effective date of the Distribution
Agreement relating to the distribution of HUGO BOSS watches, they
will take all action or cause their Affiliates, as the case may be,
to take all action, to terminate the Swico HB
Distributorship. In addition, subject to
Clause 10.2.2, MGI will, or will cause its appropriate
Affiliate to, offer to the Company substantially similar watch
distribution agreements in the United Kingdom for any other brands
which may hereafter be licensed to MGI or any of its Affiliates,
subject, in each case, to the terms, conditions and limitations set
forth in each licence, and the Company shall enter into, and the
Shareholders will take all action to cause the Company to enter
into, such distribution agreements. All references in this
Agreement to “Distribution Agreements” shall include
all such additional distribution agreements as may be entered into
from time to time by the Company and MGI or any of its Affiliates.
Any failure by MGI or its Affiliates to offer or execute such
additional distribution agreements shall be deemed to be a material
breach by MGI of this Agreement, and any failure by either
Shareholder to take all action to cause the Company to enter into
such additional distribution agreements shall be deemed to be a
material breach by such Shareholder of this Agreement
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Service
Agreement . Swico shall enter into a service
agreement, substantially in the form attached as Annex C, with the
Company (the “Service Agreement”), and the Company
shall enter into the Service Agreement with Swico pursuant to which
Swico shall provide to the Company certain services relating to the
day-to-day operations of the Business.
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Swico shall
arrange in consultation with MGI the hiring of adequate staff,
including sales staff, by the Company. Such staff shall include
sales staff derived from employees of Swico currently dedicated to
the HUGO BOSS brand. Swico shall assume the costs of transferring
the employment of such employees to the Company.
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All employees
shall be employed by the Company at market-standard rates of
compensation with market-standard benefits. Employees transferred
from Swico will benefit from the terms and conditions applicable to
their employment on the date of transfer ; provided however that
the Company shall in no event assume any liability or obligation
(including, without limitation, pension liabilities or other
accrued liabilities) owed by Swico to any such employees which
arose prior to the date of their transfer. If, notwithstanding the
foregoing, the Company shall be deemed to have assumed any such
liability or obligation, then Swico will indemnify, defend and hold
the Company harmless against and in respect of all such liabilities
and obligations. Swico shall indemnify and hold harmless
the Company from and against any losses and expenses arising from
any claim by any employee of Swico relating to such transfers or
the transactions contemplated hereby, including without limitation
any tax liability or any claim by any such employee that such
employee’s employment should have been transferred to the
Company.
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All agreements
with employees (including those relating to compensation,
commissions, benefits other agreements) shall be set forth in
writing and made available for review by, and, if required pursuant
to Clause 4.3.1, the approval of, the Chairman (as defined
below).
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Insurance . Swico shall cause the Company to be
covered by Swico’s group umbrella insurance policies as part
of the services provided pursuant to the Services Agreement, with
the exception of marine insurance for goods in transit which
coverage shall be provided by MGI as part of its umbrella coverage
for Affiliates . The Company shall reimburse to MGI
MGI’s incremental costs incurred relating to such insurance
coverage promptly upon receipt from MGI of an invoice
therefor.
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Systems . At any time after the combined
sales of the Company for any fiscal year exceed £10 million,
upon the request of MGI, the Company shall implement and the
Shareholders shall take all action to cause the Company to
implement, and Swico shall (in connection with the services
provided by it under the Service Agreement) implement, MGI’s
information technology systems for accounting/financial
reporting.
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CORPORATE
GOVERNANCE AND MANAGEMENT
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General . The Shareholders shall use their
respective voting powers at general meetings of the Company (each a
" Shareholders Meeting "), and shall take all other actions
necessary, including action that may be taken through its
shareholding in the Company, to give effect to all of the
provisions of this Agreement, the Distribution Agreements and the
Service Agreement. In the event of any conflict between
the terms of this Agreement, on the one hand, and the terms of the
governing documents of the Company on the other hand, the terms of
this Agreement shall prevail.
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Appointment . The Company shall be managed by a
Managing Director. The Shareholders expect that Swico, based on its
knowledge of the watch market in the United Kingdom, will furnish a
recommendation for Managing Director to the Company for
consideration. The Shareholders shall cause the Company to appoint
as Managing Director the person recommended by Swico, following the
prior approval of MGI, which shall not be withheld without good
reason. For the purposes of the preceding sentence,
“good reason” shall include, without limitation,
failure of the candidate to have satisfactory relations with
retailers and failure of the candidate to have achieved
satisfactory financial results (as compared to forecasted results)
. The Shareholders will cause the Company to remove the
Managing Director upon request by Swico for any or no reason, or
upon request by MGI, for good cause. For the purposes of
the preceding sentence, “good cause” shall include,
without limitation, the failure of the Managing Director to
properly manage the day-to-day activities of the Company, including
without limitation the failure of the Managing Director to comply
with the requirements set forth in Clause 4.2.3(b) below. The
Managing Director shall devote all of his or her professional time
to the business and operations of the Company; provided that if Mr.
Keith Sheppard becomes the Managing Director, he shall devote such
of his professional time to the business and operations of the
Company as reasonably necessary.
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Remuneration . The remuneration of the Managing
Director shall be determined and paid by the Company, subject to
approval by the Chairman. The Managing Director shall
not have a separate employment contract, except as required by law
and in no event shall the Managing Director be entitled to any
severance payment of any kind whatsoever in the event of the
termination of his employment by or resignation from the
Company.
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Duties and
Powers of the Managing Director .
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Subject to the
rights of the Chairman, the Board or of the Shareholders to approve
certain specific decisions and actions as set forth in
Clauses 4.3.1, 4.3.2, 4.4.5 or 4.5.1 or as provided by applicable law, the
Managing Director shall conduct the day-to-day activities of the
Company.
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The Managing
Director shall:
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promote the
development of the Business;
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ensure the
continuity of the sales team management;
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promote the
continuity and development of customer relationships;
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liaise with
Swico to ensure the continuity of the Swico personnel providing
services to the Company pursuant to the Service
Agreement;
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prepare for
review and approval by the Chairman a draft annual strategic plan,
business plan and budget consistent with the Business Plan, and
implement the approved annual strategic plan, business plan and
budget;
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communicate
regularly with the Chairman regarding the operations of the Company
including meeting not less than quarterly with the Advisory
Committee to discuss and review any material financial, commercial
or strategic developments or issues, including, without limitation,
any action taken by the Managing Director under
Clause 4.2.3(c);
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cause the
Company to adhere to the MGI group ethics and control policies as
communicated by MGI from time to time and to comply with all
procedures relating to MGI internal control over financial
reporting;
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manage the
employees of the Company; and
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comply with the
requirements of this Agreement.
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Without
limiting the provisions of sub-clause (a) above, the Managing
Director may take the following actions without the prior approval
of the Chairman or of the Board:
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hire or
terminate the employment of personnel having annual compensation of
less than £50,000;
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grant
individual salary increases up to 10% higher than the increase
based on the general cost of living index, or equivalent index in
the United Kingdom, so long as total salary increases for such
annual period do not exceed the budgeted salary
increases;
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negotiate and
execute on behalf of the Company any commercial agreements in the
ordinary course of business, consistent with past practice, if any,
involving annual expenditures not to exceed the applicable budgeted
amount for such expense category, or, absent a specific budgeted
amount, the amount set forth in the Business Plan, or, absent any
specific amount in the Business Plan, £50,000; and
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make payments
from and deposits into the bank accounts of the Company in the
ordinary course of business, consistent with past practice, if any,
and to the extent not otherwise inconsistent with any other
provision of this Agreement.
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Duties and
Powers. The Chairman, who
shall be appointed in accordance with Clause 4.4.2, shall have
a role in the management of the business of the Company, as
provided herein. Without limiting the foregoing, the
prior approval of the Chairman is required for any of the following
decisions and actions to be taken, it being understood that the
failure of the Managing Director to obtain the prior approval of
the Chairman, or, failing approval by the Chairman, the approval of
the Board, with respect to any of the following shall be
deemed to be a material breach by Swico of this Agreement referred
to under Clause 15.2 of this
Agreement; provided, that, in the event any annual budget has not
been duly approved on or before December 31
st of any year, then the Business Plan (during the
first 5 years of this Agreement) or the budget of the previous year
(after the fifth year of this Agreement) shall continue to apply on
a temporary basis pending such approval:
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hiring or
termination of the employment of personnel with annual compensation
in excess of £50,000 or of any Person who is a Relative of
any Board member appointed by Swico or of the Managing
Director;
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any action or
decision that would represent a deviation of more than 5% with
respect to any individual budget or Business Plan line
item;
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acquisition of
fixed assets exceeding £50,000 individually or in the
aggregate during any year, except to the extent specifically
provided in the approved budget;
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any material
change to the marketing, sales or technology policies established
by the Board;
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incurrence of
any liability in excess of £15,000 individually or
collectively in any month, except to the extent specifically
provided in the approved budget;
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initiation or
settlement of any litigation or claim exceeding
£35,000;
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entering into
any contract not in the ordinary course of the business of the
Company;
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entering into
any commercial agreements involving an annual amount exceeding
£50,000, except to the extent specifically provided in the
approved budget;
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any decision or
approval required in connection with the Service Agreement;
and
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making payments
from the bank accounts of the Company other than in the ordinary
course of business, except as otherwise expressly permitted by this
Agreement.
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With respect to
the foregoing decisions and actions, the Managing Director shall
notify the Chairman of the Managing Director’s recommendation
for such decision or action. The Chairman shall use
reasonable efforts to inform the Managing Director of his decision
thereon within five business days after such
notification. In the event the Chairman has not notified
its decision to the Managing Director within such five business day
period, the Managing Director may consider that the Chairman
disagrees with the recommendation of the Managing Director and may
submit such proposed decision or action to the Board for decision
in accordance with Clause 4.3.3. If the Chairman
repeatedly fails to notify the Managing Director within such five
business day period of its decision on any recommendation from the
Managing Director, then Swico shall have the right to request that
MGI replace the Chairman, which request MGI will consider in good
faith.
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Disagreement
of Managing Director and the Chairman . Should the Managing Director and
the Chairman disagree with respect to any of the decisions or
actions set forth in Clause 4.3.1, either the Managing
Director or the Chairman may submit such proposed decision or
action to the Board for decision in accordance with this
Agreement.
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Service
Agreement. The Managing Director shall consult
the Chairman with respect to all decisions relating to the Service
Agreement. The Chairman shall have the opportunity to be
present (including by telephone) or represented at all material
discussions or reporting in connection with the Service Agreement,
and the Managing Director shall provide the Chairman with copies of
all material written communications and summaries of all material
oral communications with Swico relating to the Service
Agreement. It is the intention of the Shareholders that
the Chairman shall have the right in its sole discretion to make
any decision to terminate the Service Agreement on behalf of the
Company in accordance with Clause 5(b)
thereof. [Therefore, in the event the Chairman instructs
the Managing Director to terminate the Service Agreement, the
Managing Director shall so terminate the Service Agreement in
accordance with the terms thereof.] Any failure of the
Managing Director to so follow the instructions of the Chairman
expressed in compliance with the Service Agreement shall be deemed
to be a material breach of this Agreement by Swico.
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Number and
Composition . The board of directors of the
Company (the “ Board ”) shall at all times shall
be comprised of four members (each, a “ Director
”), two of whom shall be designated by MGI and two of whom
shall be designated by Swico.
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Chairman . The Board shall be presided by a
Chairman (the “ Chairman ”). He shall
be designated (and may be removed at any time) by MGI from among
the members of the Board appointed by MGI in accordance with
Clause 4.4.1 , provided ,
that MGI shall consult in good faith with Swico prior to so
appointing the Chairman. The Chairman shall not have a
second or casting vote at any meeting of the Board or at any
committee thereof.
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Removal and
Replacement of Directors.
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Each
Shareholder shall be entitled to remove and replace any Director
appointed by it as provided by Clause 4.4.1.. Each such Shareholder
shall indemnify the Company and keep the Company fully indemnified
against any loss or damage or liability (including without
limitation all reasonable legal costs and expenses incurred)
suffered by the Company resulting from the removal or substitution
of any representative Director, or arising from any negligent act
or omission of such representative Director.
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Meetings of the
Board shall take place at least once every six-month
period.
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A meeting of
the Board may be called by the Chairman or by any Director by
giving notice in writing to the Company and the other Directors
specifying the date, time and agenda for such
meeting. Not less than seven (7) days' notice
shall be given to all Directors; provided , however ,
that such notice period (i) shall not apply in the case of an
adjourned meeting and (ii) may be reduced with the written
consent of all of the Directors.
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All meetings of
the Board shall require the presence in person, of both Directors
appointed by MGI and both Directors appointed by
Swico. Any Director may, by written notice to all
Directors transmitted by mail, electronic mail or facsimile,
appoint his fellow representative Director as his alternate to
attend and vote for such Director at any Board meeting and in which
case such Director shall have two votes.
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The adoption of
any resolution of the Board shall require the unanimous approval of
all Directors present or represented at a duly constituted meeting
of the Board. In the event the required affirmative vote
is not obtained as to any proposed resolution, then the proposed
resolution will not be adopted and, if it would have resulted in a
modification of the Business Plan or this Agreement, the
modification will not be adopted. The Board shall not at
any meeting adopt any resolution covering any matter that is not
specified on the agenda for such meeting unless all Directors are
present at such meeting.
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Meetings of the
Board, subject to applicable law, may be conducted via telephone or
videoconference, with such participation constituting presence for
purposes of the quorum requirement. Meetings of the
Board shall take place in England.
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The costs of
attendance of Directors at meetings of the Board shall, to the
extent permitted by law, be borne by the Company.
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Any action that
may be taken by the Directors at a meeting of any Board may be
taken by a written resolution signed by all of the Directors in
lieu of a meeting.
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Authority of
Board . The
Board shall make all major decisions of the Company and all
decisions outside the day- to-day business of the Company, except
for (i) those decisions and actions that may be taken without
such prior approval by the Managing Director alone or with the
approval of the Chairman, in accordance with Clauses 4.2.3(c)
or 4.3.1 and (ii) those decisions and actions that
require the approval of the Shareholders in accordance with
Clause 4.5.2. In addition, the Board shall decide
on any matter submitted to it by the Managing Director or the
Chairman in case of disagreement between the Managing Director and
the Chairman. Without limiting the foregoing, the following
decisions and actions shall require the prior approval of the
Board:
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any acquisition
or disposition of assets exceeding £15,000 individually or in
any calendar month, other than as specifically approved by the
Chairman or provided in the approved budget;
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entry into any
lease or sublease arrangement of real property;
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any change to
the agreed dividend policy set forth in Clause 10.1 ;
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incurrence of
indebtedness for borrowed money;
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acquisition of
the equity of another Person;
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any
participation in any joint venture or partnership; and
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any material
modification to the Business Plan (other than merely adopting
annual budgets), including, without limitation, any such
modification that results in: (i) a decrease in profitability
by more than two percent (2.0%); (ii) an increase of expenses
by more than five percent (5.0%) of the budgeted amount for such
category of expenses; or (iii) an increase in working capital
of more than five percent (5.0%);
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approval of the
annual budget and strategic plans and business plans proposed by
the Managing Director and approved by the Chairman.
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Shareholder
Meetings and Approval.
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Meetings of
the Shareholders . Shareholder meetings shall be
promptly convened by the Chairman upon delivery to the Chairman of
a written request therefor by any two
Directors. Shareholder Meetings may otherwise be
convened as permitted or required by law.
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Shareholder
Approval . The
following actions and decisions relating shall require the approval
of the Shareholders by a vote of at least 75% of all voting
rights:
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increase,
amortization or reduction of capital;
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merger,
spin-off, consolidation or transfer of any portion of the business
or assets of any Company;
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nomination of
the statutory auditor;
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approval of the
annual accounts and affectation of the profit;
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approval of
agreements with any Related Party;
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transformation
of the corporate form of the Company;
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dissolution,
liquidation or reorganization or restructuring of the Company;
and
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all other
matters for which shareholder approval is required in accordance
with applicable law.
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REPORTING
AND INFORMATION RIGHTS
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Information
Rights . Each
Shareholder and its authorized representatives, the Chairman, and
each Director shall have the right, upon reasonable prior notice,
during normal business hours to inspect from time to time the books
and accounting records of the Company, to make extracts and copies
therefrom at its own expense and to have full access to all of the
Company's employees, property and assets. The Managing
Director shall ensure that the foregoing rights and access are
provided.
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Books and
Records . The
Company shall, and in particular the Managing Director shall cause
the Company to, maintain proper, complete and accurate books of
account in accordance with generally accepted accounting principles
as applied by MGI and its Affiliates. The Company shall
have its accounts audited annually in accordance with such
standards by a reputable firm of international accountants
appointed by the Shareholders. The Shareholders agree to
take all action to cause the Company to appoint as statutory
auditor the firm designated by MGI, with the initial firm serving
as auditor to be PricewaterhouseCoopers.
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Reports . The Company shall have or shall
arrange to have furnished to it under the Service Agreement, or
otherwise, sufficient accounting, technological and administrative
personnel and infrastructure to satisfy the normal reporting
requirements of the MGI group, as communicated by MGI to the Board
and to the Managing Director from time to time, as well as the
requirements of applicable law. Without limiting
the foregoing, the Company shall, and in particular the Managing
Director shall cause the Company to, provide to the Board
(i) unaudited financial data for the period just ended
within 3 weeks after the end of each fiscal year and
within 2 weeks after the end of each quarter (ii) within 2
months after the end of each fiscal year, the annual audited
financial statements of the Company for such fiscal years,
(iii) within two weeks after the end of each
quarter, quarterly unaudited financial statements of the Company
for such quarter, (iv) within 20 days after the end of each
month, a management report including without limitation key
operating metrics (e.g. sales and return statistics), a comparison
of operating results with the relevant operating budget and
an explanation of material differences between actual
results and the budgeted amounts, if any and (v) such other
reports as the Board may determine. The failure of the
Managing Director to comply with the foregoing reporting
requirements within one week after notice of non-delivery of the
report shall be deemed to be a material breach of this Agreement by
Swico.
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Budgets and
Business Plans . The Managing Director shall prepare
proposed annual operating and capital budgets and business plans
for the Company, which shall be submitted to the Chairman and to
the Board for approval.
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RESTRICTIONS
ON TRANSFER OF SHARES
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Limitation
on Transfers . No Shareholder shall sell, give,
assign, pledge, encumber, grant a security interest in or otherwise
dispose of any Shares (each, a " Transfer "), except as
expressly permitted by this Clause 6 . Any attempt to Transfer any
Shares in violation of the preceding sentence shall be null and
void, and the Company shall not register any such
Transfer.
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Transfers . Notwithstanding any other provision
of this Agreement, no Transfer may be made unless (a) the
transferee has agreed in writing to be bound by the terms and
conditions of this Agreement and (b) the Transfer complies in
all respects with the other applicable provisions of this Agreement
and the governing documents of the Company. The
non-transferring Shareholder shall cooperate with the transferring
Shareholder in respect of all transfers permitted
hereunder.
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Transfers to
Affiliates . Any Transfer by a Shareholder to an
Affiliate thereof (a “ Permitted Transferee ”)
may be made on the condition that the Permitted Transferee shall be
bound by and agrees to all of the provisions of this Agreement and;
provided , that the transferring Shareholder shall obtain
the written consent to such Transfer from the other Shareholder,
which shall not be unreasonably withheld. Any Transfer
made in accordance with the previous sentence may be made without
compliance with the provisions of Clause 6.4 or 6.5
. If a Permitted Transferee after any such Transfer
ceases to be an Affiliate of the transferring Shareholder, such
Permitted Transferee shall transfer such Shares back to such
transferring Shareholder.
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Prohibited
Transfers . Notwithstanding anything in this
Agreement to the contrary, no Transfers, other than Transfers
permitted pursuant to Clause 6.3
, shall be made prior to July 1, 2012 (the “ Lock-up
Expiration Date ”).
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Transfers to
Third Parties.
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Transfer
Notice . If a
Shareholder (the " Transferring Shareholder ") receives a
bona fide offer to acquire Shares and the Transferring Shareholder
proposes to accept such offer, the Transferring Shareholder shall
send written notice (the " Transfer Notice ") to the Company
and the other Shareholder (the " Offeree "), which notice
shall state (i) the name of the Transferring Shareholder,
(ii) the name and address of the proposed transferee (the "
Transferee "), (iii) the number of Shares to be
Transferred (the " Offered Shares "), (iv) the amount
and form of the proposed consideration for the Transfer,
(v) the other terms and conditions of the proposed Transfer
and (vi) confirmation that the Transferee is willing to
purchase the Shares held by the Offeree on the same terms and
conditions. In the event that the proposed consideration
for the Transfer includes consideration other than cash, the
Transfer Notice shall include a calculation of the fair market
value of such consideration and an explanation of the basis for
such calculation. The total value of the consideration
for the proposed Transfer is referred to herein as the " Offer
Price ", and the “ Offer Price Per Share ”
shall equal the Offer Price divided by the number of Offered
Shares.
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Rights of
Offeree . For
a period of 30 days after delivery of a Transfer Notice (the "
Offer Period "), the Offeree shall have the right by
delivering written notice to the Transferring Shareholder to such
effect (the “ First Refusal Right ”) to
(i) purchase in aggregate all, but not less than all, of the
Offered Shares at a purchase price equal to the Offer Price,
(ii) purchase 100% of the Shares held by the Transferring
Shareholder and any Permitted Transferees to which the Transferring
Shareholder shall have transferred Shares at a price equal to the
Buyout Price, (iii) sell all of the Shares owned by it to the
Transferee at a price equal to the Offer Price Per Share multiplied
by the number of shares held by the Offeree and otherwise pursuant
to the terms and conditions set forth in the Transfer Notice (the
“ Tag Along Right ”) or (iv) withhold its
consent to the sale by the Transferring Shareholder to the
Transferee in its absolute discretion, in which event the
Transferring Shareholder shall not consummate such Transfer. The
notice delivered by the Offeree to the Transferring Shareholder
shall state which of the foregoing alternatives (i-iv) the Offeree
has elected.
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Sale to
Third-Party Purchaser . Unless the Offeree shall have
elected during the Offer Period in accordance with Clause
6.5.1 to exercise its First Refusal
Right, its Tag Along Right, to be bought out or to withhold its
consent to the sale by the Transferring Shareholder to the
Transferee, the Transferring Shareholder may Transfer all of the
Offered Shares to the Transferee identified in the Transfer Notice
on the terms and conditions set forth in the Transfer Notice;
provided , that the Transfer shall be completed within three
months after the giving of the Transfer Notice.
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Change of
Control of Swico . Swico shall provide to MGI at least
forty five (45) days prior notice of any Swico Change of
Control. MGI shall have the right to purchase all of the
Shares held by Swico and all Permitted Transferees to which Swico
shall have transferred Shares at the Buyout Price, by sending
notice to such effect to Swico within thirty (30) days after
receipt of such notice.
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Definition
of Swico Change of Control . A “ Swico Change of
Control ” shall be deemed to occur if (i) any
competitor of MGI acquires more than 5% of the shares or voting
rights of Swico or any Affiliate thereof (or, in the event the
shares of Swico become publicly traded on a recognized investment
exchange, such competitor acquires more than 10% of the shares or
voting rights of Swico or any Affiliate thereof) or (ii) Mr.
Keith Sheppard ceases to spend at least 50% of his time in the
active day-to-day management of Swico or its Affiliates for any
reason other than death or permanent disability. For the
purposes of this Clause 7.2 ,
Fossil, Swatch Group, Callanan International, Egana, Binda, Vestal
and Advance, and any of their successors in interest, shall be
deemed to be competitors of MGI, and, whether any other Person
shall be considered to be a competitor of MGI shall be determined
using reasonable judgment after taking into consideration the
price, market position and placement at point of sale of the
products of such Person.
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Business
Plan . Attached hereto as Annex D is the
agreed business plan for the Company setting out specific financial
performance measures annually for the period ending January 31,
2012 and containing the underlying principles and assumptions on
the basis of which the Shareholders agree that the Business will be
run for the duration of this Agreement (such business plan, as
expressly duly modified by the Shareholders in accordance with the
terms of this Agreement, the “ Business Plan
”).
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Poor
Financial Performance Year 5 . In the event that, (i) based
on the audited consolidated financial statements of the Company for
the years ended January 31, 2008 through January 31, 2012, the
Company has a cumulative loss or (ii) based on the audited
consolidated financial statements of the Company for the years
ended January 31, 2011 and January 31, 2012, the Company has failed
to attain an average annual return on sales of at least 3%, then
either Shareholder may elect by notice to the other Shareholder on
or before April 30, 2012 to dissolve the Company, and both
Shareholders shall vote in favour of such dissolution at the
Shareholder Meeting duly convened for such purpose and shall
otherwise co-operate in respect thereof.
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Poor
Financial Performance Year 10 . In the event that, based on the
audited consolidated financial statements of the Company for the
years ended January 31, 2015 to January 31, 2017, the Company has
failed to attain an average annual return on sales of at least 5%,
then either Shareholder may elect by notice to the other
Shareholder on or before April 30, 2017 to dissolve the Company,
and both Shareholders shall vote in favour of such dissolution at
the Shareholder Meeting duly convened for such purpose and shall
otherwise co-operate in respect thereof.
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Buy-Out
Right . MGI
shall have the right to purchase the Shares of Swico and all
Permitted Transferees to which Swico shall have transferred Shares
hereunder on July 1, 2017 and each fifth anniversary thereof (each
such date or, if such date is not a business day, the next
following business day, a “ Buy-Out Date ”), by
notice to Swico at least eighteen (18) months prior to any Buy-Out
Date, at the Buy-Out Price (as defined below). Upon
receipt of such notice, Swico and any such Permitted Transferees
shall be required to so transfer their Shares to MGI on the Buy-Out
Date.
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Buy-Out
Price . The
“ Buy-Out Price ” shall equal the product of
(i) the percentage of total Shares held by the transferring
party(ies) and (ii) 5 multiplied by the “ Cash Flow
Value ” (which is hereby defined as the average annual
operating cash flow (EBIT) for the three fiscal years prior to the
Buy-Out Date based on the audited consolidated financial statements
of the Company), plus the net asset value of the Company (on a
consolidated basis) on the Buy-Out Date (or minus the net liability
value of Company (on a consolidated basis) on the Buy-Out Date, as
the case may be).
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Dividend
Policy. The
Parties agree that a dividend equal to 75% of the distributable
profits of the Company on a consolidated basis in any year shall be
declared as a dividend to the Shareholders on or before the
15 th
month after the end of such year, to
the extent permitted by applicable law; provided , that such
policy may be modified or waived pursuant to decision of the
Board.
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During the term
of this Agreement, neither Swico nor its Affiliates shall without
the prior consent of MGI, within any country where the Company
regularly conducts business and distributes products, directly or
indirectly distribute, sell or market any fashion watch brand that
is competitive with any licensed brand distributed by or on behalf
of MGI or any of its Affiliates in such country. Whether any
fashion watch brand is competitive with any of MGI’s or its
Affiliates’ licensed brands will be determined where
applicable by reference to the applicable licence agreement itself;
provided however that brands marketed by or on behalf of any
of the following companies or their Affiliates shall be deemed to
be competitive with the MGI licensed brands: Fossil, Swatch Group,
Callanan International, Egana, Binda, Vestal and
Advance. Whether any other fashion brand shall be
considered to be competitive with any MGI licensed brand shall be
determined using reasonable judgment after taking into
consideration brand message, price, market position, final consumer
profile and placement at point of sale. The Shareholders
will consider appropriate exemptions from this provision in the
event the Company commences to distribute products in any country
other than the United Kingdom, where Swico or any of its Affiliates
have pre-existing business.
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If Swico
breaches any of the provisions of Clause 10.2.1 (the “ Non-Compete
Covenant ”), MGI shall be released from its obligation to
appoint the Company as distributor for any new MGI licensed
brands.
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Swico agrees
that the Non-Compete Covenant is reasonable in geographical and
temporal scope and in all other respects. If any court
determines that the Non-Compete Covenant, or any part thereof, is
invalid or unenforceable, the remainder thereof shall not thereby
be affected and shall be given full effect without regard to the
invalid portions.
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If any court
determines that the Non-Compete Covenant is unenforceable because
of the duration or geographic scope of such provision, such court
shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such
provision shall then be enforceable.
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Non-Solicitation . During the term of this Agreement
and until the second anniversary of the valid termination or
expiration thereof, neither MGI and its Affiliates, on the one
hand, nor Swico and its Affiliates, on the other hand, shall
recruit any employee, officer or director of the other for
employment or as a consultant.
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REPRESENTATIONS AND WARRANTIES
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Each
Shareholder represents to the other Shareholder that:
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such
Shareholder has the full power and authority to enter into, execute
and deliver this Agreement and to perform the transactions
contemplated hereby and, if such Shareholder is not a natural
Person, such Shareholder is duly incorporated or organized and
existing under the laws of the jurisdiction of its incorporation or
organization;
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the execution
and delivery by such Shareholder of this Agreement and the
performance by such Shareholder of the transactions contemplated
hereby have been duly authorized by all necessary corporate or
other action of such Shareholder;
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assuming the
due authorization, execution and delivery hereof by the other
Shareholder, this Agreement constitutes the legal, valid and
binding obligation of such Shareholder, enforceable against such
Shareholder in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally; and
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the execution,
delivery and performance of this Agreement by such Shareholder and
the consummation of the transactions contemplated hereby will not
(a) violate any provision of the organizational or governance
documents of such Shareholder; (b) require such Shareholder to
obtain any consent, approval or action of, or make any filing with
or give any notice to, any governmental authority in such
Shareholder's country of organization or any other Shareholder
pursuant to any instrument, contract or other agreement to which
such Shareholder is a party or by which such Shareholder is bound,
or (c) conflict with or result in any breach of or default under
any of the terms and conditions of any instrument, contract or
other agreement by which such Shareholder is bound.
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Each
Shareholder shall bear its own fees and expenses in connection with
the preparation, execution and performance of this Agreement and
the other documents contemplated hereby.
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General
Obligation . Each Shareholder undertakes that it
shall not reveal, and shall use its reasonable efforts to ensure
that its directors, officers, managers, partners, members,
employees, legal, financial and professional advisors and bankers
(collectively, " Representatives ") do not reveal, to any
third party any Confidential Information without the prior written
consent of the Company or the Shareholder concerned, as the case
may be. The term " Confidential Information " as
used in this Agreement means (a) any information concerning
the organization, business, technology, finance, transactions or
affairs of the Company and each Shareholder or any of their
respective directors, officers or employees (whether conveyed in
written, oral or in any other form and whether such information is
furnished before, on or after the date of this Agreement) and
(b) any information or materials prepared by a Shareholder or
its Representatives that contains or otherwise reflects, or is
generated from, Confidential Information.
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Exceptions . The provisions of Clause
13.1 shall not apply to:
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disclosure of
Confidential Information that is or becomes generally available to
the public other than as a result of disclosure by or at the
direction of a Shareholder or any of its Representatives in
violation of this Agreement;
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disclosure by a
Shareholder to its Representatives;
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disclosure,
after giving prior notice to the other Parties to the extent
practicable under the circumstances and subject to any practicable
arrangements to protect confidentiality, to the extent required
under the rules of any stock exchange or by applicable laws or
governmental regulations or judicial or regulatory process or in
connection with any judicial process regarding any legal action,
suit or proceeding arising out of or relating to this Agreement;
or
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disclosure by
any Shareholder of Confidential Information concerning the Company
that is reasonably necessary in the ordinary course of business or
otherwise in connection with transactions or proposed transactions
of the Company.
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Disclosure
to Third Parties . Upon any Shareholder entering into
negotiations with any Person with a view to Transferring any Shares
to such Person, information in respect of the Company that is
reasonably necessary to permit such Person to evaluate the business
of the Company may be provided to such Person, provided that
such Person has executed a confidentiality agreement in such form
as may be reasonably required by the Board; and provided
further that if such Person is involved in a business in
competition with that of the Company, the Board may prohibit the
disclosure of any such Confidential Information as the Board may
determine.
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Except as
required by law or regulations of any stock exchange or by any
governmental authority, no publicity release or public announcement
concerning the relationship or involvement of the Parties shall be
made by any Shareholder without advance approval thereof by the
other Shareholder, which approval shall not be unreasonably
withheld.
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Term . This Agreement shall become
effective upon the execution hereof by the Shareholders and the
Company and shall continue in effect until the earlier to occur of
(a) the date on which the Company goes into liquidation or
dissolution, any property or assets of the Company are placed in
the hands of a receiver, trust custodian or liquidator or a winding
up order in respect of the Company is issued, or (b) the date
on which this Agreement is validly terminated in accordance with
Clause 15.2 or (c) any date
agreed upon in writing by the Shareholders or (e) where all the
Shares are held by one Person.
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Upon the
material breach of this Agreement by any Shareholder, the
non-breaching Shareholder may provide to the breaching Shareholder
notification of such material breach, setting forth in reasonable
detail therein the nature of such material breach. The
breaching Shareholder and the non-breaching Shareholder shall meet
to discuss in good faith the material breach and the cure thereof.
Following such discussion, formal notification (the “
Notification ”) may be given by the non-breaching
Shareholder to the breaching Shareholder of the breach and
requesting that the breaching Shareholder cure the
breach.
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If the
breaching Shareholder shall not have cured such breach within 30
days after delivery of the Notification, the non-breaching
Shareholder may, without prejudice to any other legal remedies it
may have, within 60 days after expiration of such 30-day period,
[(i) elect to terminate this Agreement and the Distribution
Agreements], and dissolve and liquidate the Company (and the
breaching Shareholder shall take all actions to co-operate in
respect of the implementation of such dissolution and liquidation
(including voting in favour thereof at the shareholder meeting duly
convened for such purpose)) or (ii elect to purchase the
interests held by the breaching Shareholder and any Permitted
Transferees thereof in the Company at a price equal to the product
of (a) the percentage of total Shares held by the breaching
Shareholder (and any Permitted Transferees thereof) and
(b) 90% of 5 multiplied by the Cash Flow Value, plus the net
asset value of the Company (on a consolidated basis) on the Buy-Out
Date (or minus the net liability value of the Company
(on a consolidated basis) on the Buy-Out Date, as the case may
be). Notwithstanding the foregoing, if the Breach occurs
during the 5 first years of activity (to January 31, 2012), such
price will be equal to the multiple of (a) the percentage of
total Shares held by the breaching Shareholder (and any Permitted
Transferees thereof) and (b) 5 multiplied by the annual
operating cash flow for the last fiscal year prior to the Buy-Out
Date based on the audited consolidated financial statements of the
Company, plus the net asset value of the Company (on a consolidated
basis) on the Buy-Out Date (or minus the net liability value of the
Company (on a consolidated basis) on the Buy-Out Date, as the case
may be). Alternatively the non-breaching Shareholder may
offer to purchase the Shares held by the breaching Shareholder and
any Permitted Transferees thereof in the Company at any other price
to be negotiated by the Parties.
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A
“material breach” for purposes of this Clause
15.2 shall include the breach by a
Shareholder of the provisions of this Agreement (including without
limitation of the management rules, the decision-making process or
the non-compete or non-solicitation undertakings) or a breach of
the provisions of the Distribution Agreements or the Service
Agreement (with any beach thereof by any Affiliate of MGI being
attributed to MGI and any breach thereof by any Affiliate of Swico
being attributed to Swico) resulting, in any of the foregoing
events in damages to the Company in excess of
£35,000. Any material breach of, or actions
inconsistent with, the terms of this Agreement (i) by the
Managing Director or any Director designated by Swico shall be
attributed to Swico, and (ii) by the Chairman or any Director
designated by MGI shall be attributed to MGI.
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Damages . In no event shall any Shareholder
be required to pay indirect or consequential damages in respect of
any breach by such Shareholder of any provision of this Agreement,
except in the event of fraud.
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Each notice or
other communication hereunder shall be in writing and delivered or
sent to the relevant Shareholder at its address or fax number set
out in Schedule 1 (or such other address or fax number as the
addressee may specify to the other Parties). Any notice
or other communication shall be deemed to have been
delivered (a) if given or made by letter, when actually
delivered to the relevant address; and (b) if given or made by
fax, upon dispatch and the receipt of a transmission report
confirming dispatch.
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No
Partnership . The Shareholders expressly do not
intend hereby to form a partnership, either general or limited,
under any jurisdiction's partnership law. The
Shareholders do not intend to be partners one to another, or
partners as to any third party, or create any fiduciary
relationship among themselves, solely by virtue of their status as
Shareholders.
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Discrepancies . If there is any discrepancy between
any provision of this Agreement and any provision of the governing
documents of the Company, the provisions of this Agreement shall
prevail, and the Parties shall procure that such governing
documents are promptly amended, to the extent permitted by
applicable law, in order to conform with this Agreement.
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Amendment . This Agreement may not be amended,
modified or supplemented except by a written instrument executed by
each of the Parties.
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Waiver . No waiver of any provision of this
Agreement shall be effective unless set forth in a written
instrument signed by the Shareholder waiving such provision. No
failure or delay by a Shareholder in exercising any right, power or
remedy under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of the same preclude any
further exercise thereof or the exercise of any other right, power
or remedy. Without limiting the foregoing, no waiver by
a Shareholder of any breach by the other Shareholder of any
provision hereof shall be deemed to be a waiver of any subsequent
breach of that or any other provision hereof.
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Entire
Agreement . This Agreement (together with the
agreements attached as Annexes hereto) constitutes the whole
agreement between the Parties relating to the subject matter hereof
and supersedes any prior agreements or understandings relating to
such subject matter.
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Severability . Each and every obligation under
this Agreement shall be treated as a separate obligation and shall
be severally enforceable as such and in the event of any obligation
or obligations being or becoming unenforceable in whole or in
part. To the extent that any provision or provisions of
this Agreement are unenforceable they shall be deemed to be deleted
from this Agreement, and any such deletion shall not affect the
enforceability of this Agreement as remain not so
deleted.
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Assignment;
Binding on Transferee . The provisions of this Agreement
shall be binding upon and inure to the benefit of the Parties
hereto and their respective successors and Permitted Transferees
and transferees under Clause 6.5
from and after the effective date hereof. Neither Party
may transfer its rights and obligations under this Agreement
without the prior written consent, which shall not be unreasonably
withheld, of the other Party.
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GOVERNING
LAW AND JURISDICTION
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This Agreement
shall be governed by and construed in accordance with the laws of
England.
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Any dispute or
claim arising out of or in connection with or relating to this
Agreement, or the breach, termination or invalidity hereof,
including any claim for injunctive relief, shall be finally settled
by arbitration under the Rules of Conciliation and Arbitration of
the International Chamber of Commerce (the " Rules ") as are
in force at the time of any such arbitration. For the
purpose of such arbitration, there shall be three arbitrators
appointed in accordance with the Rules. The place of
arbitration shall be in London. All arbitration
proceedings shall be conducted in the English
language. Judgment upon any arbitral award
rendered hereunder may be entered in any court having jurisdiction,
or application may be made to such court for a judicial acceptance
of the award and an order of enforcement, as the case may
be.
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Each
Shareholder shall co-operate in good faith to expedite (to the
maximum extent practicable) the conduct of any arbitral proceedings
commenced under this Agreement.
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The costs and
expenses of the arbitration, including, without limitation, the
fees of the arbitrators shall be borne equally by each party to the
dispute or claim, and each party shall pay its own fees,
disbursements and other charges of its counsel.
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Any award made
by the arbitrators shall be final and binding on each of the
Parties that were parties to the dispute. The
Shareholders expressly agree to waive the applicability of any laws
and regulations that would otherwise give the right to appeal the
decisions of the arbitrators or to seek specific performance in
another forum so that there shall be no appeal to any court of law
for the award of the arbitrators, and a Shareholder shall not
challenge or resist the enforcement action taken by any other the
other Shareholder in whose favour an award of the Arbitration Panel
was given.
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IN WITNESS
WHEREOF , the undersigned
have executed this Agreement on the date first above
written.
SWICO
LIMITED MOVADO
GROUP, INC.
By: /s/ Keith
R.
Sheppard By:
/s/ Timothy F. Michno
Name: K.R.
Sheppard Name:
T.F. Michno
Title:
C.E.O. Title:
General Counsel
By: /s/ Keith
R. Sheppard
Title: Managing
Director
C:\Documents
and Settings\Debra\My DocumentsSmithsons\MGI-Swico JV Agmt
(draft 220207).doc
Schedule 1
SHAREHOLDERS
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Principle
Office: 650 From Road, Paramus, NJ 07652
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Address for
notification: same, to the attention of Jon Step, with a copy
to:General Counsel, Movado Group, Inc., 650 From Road, Paramus, NJ
07652, U.S.A.
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Registered
Office: Meadway House, Meadway, Haslemere, Surrey GU27 1NN
England
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Address for
Notification: same as Registered
Office ,
to theattention of Keith Sheppard
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SERVICE AGREEMENT
BETWEEN
SWICO LIMITED
MOVADO GROUP, INC
and
MGS DISTRIBUTION LIMITED
——————————————————
Dated as of May 11, 2007
——————————————————
SERVICE AGREEMENT
SERVICE AGREEMENT, dated as of May 11, 2007
(this “ Agreement ”), between SWICO LIMITED a
corporation incorporated under the laws of England, having its
registered office at Meadway, Haslemere, Surrey GU27 1NN, England,
registered number 469666 (“Swico”), MOVADO
GROUP, INC., a corporation incorporated under the laws of New York,
having its principle office at 650 From Road, Paramus, NJ 07652
(“MGI”) and MGS DISTRIBUTION
LIMITED, a corporation incorporated under the laws of
England, having its registered office at c/o Swico,
Meadway, Haslemere, Surrey GU27 1NN,
England, registered number 6183896
(“Company”).
W I T N E S S E T H:
WHEREAS, Swico has entered into a Joint Venture
Agreement, dated as of May 11, 2007 with the Company and MGI (the
“JV Agreement”), pursuant to which Swico and MGI have
taken, respectively, a 51% and 49% interest in the Company and have
established a joint venture relationship relating to the sale,
marketing and distribution of certain watch brands in the United
Kingdom; and
WHEREAS, it is contemplated in the JV Agreement
that Swico will provide certain services to the Company pursuant to
a services agreement to be entered into between Swico and the
Company; and
WHEREAS, set forth in this Agreement are the
terms and conditions of the services to be provided by Swico to the
Company as contemplated by the JV Agreement.
NOW, THEREFORE, the parties hereto agree as
follows:
19.1 Services
Provided by Swico
. During the term of this Agreement,
Swico shall provide to the Company the services described on Annex
“A” hereto and otherwise as set forth in this Agreement
(the “Services”), in each case as requested by the
Company.
. The Company shall obtain the
Services exclusively from Swico during the term of this
Agreement.
Section 2. Logistics
Services
(a) Warehouse. Swico will
maintain a warehouse facility and fulfillment center at the address
first set forth above or at such other location as may be
reasonably acceptable to the Company (the “Facility”)
and within such Facility will maintain a secure, contiguous
dedicated area in such location as the Company shall reasonably
request exclusively for the storage of watches owned, consigned to
and/or to be sold by the Company (“Merchandise) sufficient
for all the Merchandise on hand at any one time in the Facility to
be stored in such area (“Secure
Area”). Swico will employ such measures to ensure
that the Secure Area is reasonably secure and that the Merchandise
kept therein is reasonably protected from loss and
damage. Such measures shall include (a) keeping the
Facility protected by alarms at all times; (b) providing full time
(twenty-four (24) hour/seven (7) day) video cameras; (c) utilizing
secured rolling cages for shipping and receiving and (d) using
other measures as the Company shall reasonably
request. Swico at all times will keep all Merchandise on
hand in the Facility in the Secure Area except those individual
items in receiving (as provided in section 2(b)) and in shipping
(as provided in section 2(c)).
(b)
Receiving. Swico will receive all Merchandise
and all related materials, including, without limitation, boxes,
warranty cards, operating manuals, advertising material and the
like, and all other materials shipped to it, either by MGI, any of
its Affiliates or from retailers or other customers
(“Accounts”) returning Merchandise directly to the
Facility, and, upon receipt of such Merchandise, Swico will verify
that the correct quantity, stock keeping unit (“SKU”)
and technical reference numbers are received and will visually
check each item received for defects, damage or other observable
non-conforming variances. In addition to the Merchandise to be
received from MGI, its Affiliates and Accounts as described above,
Swico acknowledges that as of the date hereof, it is holding
certain additional Merchandise of the Company consisting of TOMMY
HILFIGER, LACOSTE and HUGO BOSS watches which are part of the
Merchandise to be used for the fulfillment of Customer Orders as
provided hereunder. Swico shall make appropriate records of and
will store all Merchandise so verified and checked in the Secure
Area. All non-conforming Merchandise will be segregated
from conforming Merchandise and stored in a separate location
within the Secure Area pending disposition in accordance with such
instructions as the Company shall advise, and a record will be made
thereof by the employee performing the check, identifying each
non-conforming item by shipment or bill of lading number, order
number, date of receipt, SKU and technical reference number, and
such other information as the Company shall require. Swico will
send the Company weekly “Discrepancy and Defective
Reports” setting out in detail all non-conforming Merchandise
and all shortages in shipments received in the prior
week.
(c)
Shipping . Swico will pick, pack and ship all
Merchandise ordered by Accounts (“Customer Orders”) in
accordance with such procedures and instructions as the Company
shall advise from time to time. All Merchandise
shipped to Accounts will be packaged with box, operating manual,
warranty card, invoices, packing slips and such other documents,
packaging material, if any, as the Company shall instruct; provided
that MGI or its Affiliate shall have furnished such material to
Swico (except the invoices and packing slips which Swico shall
print itself). Swico will ship all Merchandise in fulfillment of
Customer Orders by seventy two (72) hours courier delivery, or
otherwise as the Company shall instruct, at the Company’s
expense, within twenty-four (24) hours after Swico’s receipt
of each such order. The Company will obtain insurance coverage for
any and all such Merchandise in transit from the Facility to any
Account.
(d)
Records All bills of lading for
all such shipments will be retained by Swico for at least twelve
(12) months after which time, unless sooner requested, such
documents shall be sent to the Company.
(e)
Information Systems . Swico at all times will maintain an
information system with full functionality, and adequate, as
reasonably determined by MGI, for the accurate and timely reporting
of all information pertaining to the Merchandise, including
inventory on hand, Merchandise available to ship, open orders,
sales and shipments made and such other information as required by
MGI and the Company (“Information
System”). Swico will perform periodic cycle counts
of the Merchandise and, once yearly, will conduct
a physical inventory of Merchandise on hand and furnish
the Company and MGI with a written report detailing by SKU all such
Merchandise and reconciling the inventory of Merchandise on hand
with Customer Orders received and all shipments made in fulfillment
thereof (respectively), each item of Merchandise so shipped
identified by SKU and technical reference number and such other
information as MGI or the Company shall require from time to time
. Swico will notify MGI and the Company in advance of
any annual physical inventory and each of them shall each have the
right to have a representative present during such
inventory.
(f)
Risk of Loss . Except for any loss or
damage not covered by the insurance procured pursuant to Section
2(g) hereof and resulting from Swico’s breach of this
Agreement or gross negligence or willful misconduct, the Company
shall at all times bear all risk of loss of or damage to the
Merchandise in the Facility, and, subject to Section 2(h) hereof,
until delivery thereof is made to the appropriate Account in
fulfillment of a Customer Order.
(g)
Insurance . Swico shall procure on
behalf of the Company and shall maintain in effect at all times
adequate insurance coverage for the Merchandise in the Facility
against all expected risks, including theft and
destruction. The Company, on behalf of itself and all
parties claiming by, through or under it, releases and discharges
Swico from all claims and liabilities arising from or caused by any
casualty or hazard covered in whole or in part by such insurance on
the Merchandise and waives any right of subrogation which might
otherwise exist in or accrue to any person on account
thereof.
(h)
Indemnity . Except as provided in Sections 2(f)
or 2(g), Swico shall be liable for, and shall indemnify and hold
the Company harmless against, any loss or damage arising out of any
act or omission on the part of Swico or its officers, employees,
agents, contractors and representatives in respect of or relating
to any of the Merchandise.
(i)
Physical Inventory . Each of MGI and the Company
in its sole discretion, at its sole expense and upon reasonable
notice to Swico, reserves the right to conduct, from time to time
subsequent to the date hereof, physical inventories of Merchandise
held by Swico and to audit Swico's applicable inventory and sales
records and all other books and records pertaining to this
Agreement. Swico agrees to fully cooperate and assist in
conducting any such inventory and/or audit. Swico shall
have the right to observe and participate in the conduct of the
inventory by MGI or the Company. Swico shall be solely
responsible for shrinkage exceeding 0.20% annually (
i.e. , difference between book and physical inventory)
evidenced by either a physical inventory conducted by Swico or as a
result of a physical inventory conducted by MGI or the
Company. Swico shall prepare and submit to the Company,
within ten (10) days after the completion of any physical inventory
performed by or for Swico, a report reconciling the Company’s
outstanding Merchandise to physical inventory on hand (the
"Reconciliation Report"). The Reconciliation Report
shall list each item of Merchandise by SKU and by technical
reference number. In the event of a discrepancy between
the Reconciliation Report prepared by Swico and the results of any
inventory conducted by MGI or the Company, the parties hereto shall
attempt in good faith to mutually agree on the resolution of such
discrepancies failing which resolution within thirty (30) days, the
discrepancy will be reconciled by PricewaterhouseCoopers whose
determination shall be binding. The costs for such independent
accountants shall be borne equally by the parties.
(j) Title . Title to
the Merchandise shall remain and be vested at all times solely in
the Company, and Swico will not, and will not permit any other
person to, encumber the Merchandise or assert any interest, claim,
lien, or right in or in respect of the
Merchandise. Swico hereby waives any security interest
it may have or that it may be entitled to assert as a matter of law
in the Merchandise, including, without limitation, any
warehouseman’s lien. Swico will not issue any
warehouse receipt or any other document or instrument, negotiable
or non-negotiable, in respect of any of the Merchandise to any
person or entity other than the Company.
SECTION
3. REPORTING AND
PLANNING.
(a) SWICO
shall provide to the Company before the 10th day of each month a
full written quality report regarding all Services provided by
Swico for the preceding month. Such report shall include
relevant details regarding all such Services in order to permit the
Company to monitor the quality and volume of the Services provided,
including (i) shipment indicators, (ii) repairs indicators, (iii)
returns indicators, (iv) bookkeeping indicators and (v) other
information as reasonably requested by the Company.
(b) At
least once per Quarter, the Managing Director of Swico and/or the
Chairman of Swico, and the Managing Director of the Company and the
Chairman of the the Company shall discuss the scope of the Services
provided hereunder, the expectations of the Company for the
following month with respect to Services anticipated to be required
for such following month and generally any issues related to the
Services provided hereunder .
Section 4. Prices and
Billing .
Prices for Services
. The prices for the Services shall
be as set forth on Annex B and shall consist of the Base Fee and
the Commission (as such terms are defined on Annex
B). Any modification to such prices for any reason
whatsoever shall require the approval in writing of the Chairman
and the Managing Director of the Company, on the one hand, and
Swico, on the other hand.
. Swico shall submit to the Company
on or after the 15th day of each month an invoice in the amount of
the monthly Base Fee due for Services rendered hereunder by Swico
during the preceding month. Such invoice shall include
all reasonable detail regarding the Services provided and shall be
payable by the Company within 30 days after the date of delivery
thereof to the Company. In addition, and together with payment of
the Base Fee, the Company shall pay Swico the Commission as set
forth on Annex B together with a statement of net sales on the
basis of which the Commission was calculated.
SECTION
5. TERM AND
TERMINATION.
. Unless otherwise terminated
pursuant to Section 5(b), this Agreement will terminate upon
termination of the JV Agreement. Section 7 shall survive
any such termination.
. (a) In the event the
Company shall have obtained a good-faith written proposal of a
third party to provide all of the Services hereunder for a price
equal to 85% (or less) of the actual amounts invoiced for such
Services by Swico (based on the average of such actual amounts over
the preceding six-month period), the Company may provide notice to
Swico (including a copy of such proposal) of the
Company’s intention to terminate this Agreement
with respect to all of the Services; provided, that Swico shall
have the right to continue to provide the Services upon the terms
and conditions set forth in such third-party proposal by notice to
such effect to the Company within 60 days following delivery by the
Company of its notification to Swico. Should Swico
fail to so accept to provide the Services upon the terms and
conditions set forth in such third-party proposal within such time
period, the Company may terminate this Agreement by notice to
Swico, such termination to be effective on the tenth business day
after such notification of termination.
In the event of a material breach by Swico of
its obligations hereunder, which shall include without limitation
continuing provision of substandard Services, the Company may
provide notice of such material breach of Swico. Such
notification shall include reasonable details regarding the nature
of the material breach, and Swico and the Chairman and Managing
Director of the Company shall meet to discuss the circumstances of
such material breach and possibilities for the cure
thereof. If Swico shall not have cured such material
breach within 60 days after such notification, the Company may
terminate this Agreement by delivery of written notice to Swico,
such termination to be effective immediately upon delivery of such
notification.
. No party shall be responsible for
failure or delay in the performance of any Services, nor shall any
party be responsible for failure or delay in receiving such
Service, if caused by an act of God or public enemy, war,
terrorism, government acts or regulations, fire, flood, embargo,
quarantine, epidemic, labor stoppages beyond its reasonable
control, accident, unusually severe weather or other cause similar
to the foregoing beyond their control (herein called “Force
Majeure”); provided, that the party affected by Force Majeure
shall have exercised all reasonable efforts to avoid or minimize
the effects of such event or condition.
SECTION
7. CONFIDENTIALITY .
(a)
Confidential Information
. Each party recognizes that in the
performance of this Agreement confidential and/or proprietary
information belonging to any other party regarding the Services may
be disclosed or become known to any other party or its respective
affiliates (“Confidential
Information”). Unless otherwise expressed in
writing to the other party, information that is exchanged between
the parties shall be presumed to be confidential and/or
proprietary. Each party agrees to take, and to cause its
affiliates to take, such precautions as such party normally takes
with its confidential and/or proprietary information to hold in
confidence all confidential and/or proprietary information with
respect to the Services that belong to the other party.
. This Section 7 shall not apply
to:
information which, at the time of disclosure, is
in the public domain;
information which, after its disclosure, becomes
part of the public domain by publication or otherwise, except in
breach of this Agreement;
information which Swico or the Company shall
receive from a third party; provided , however , that
the third party has the right to disclose the Confidential
Information to Swico or the Company, as the case may be;
or
information which is required by law, rule or
regulation (including the rules of any stock exchange on which such
party’s securities are listed) to be disclosed;
provided that the disclosing party provides prompt notice of
such disclosure (and to the extent practicable, shall provide such
notice prior to such disclosure).
SECTION
8. MISCELLANEOUS .
. All communications provided for
hereunder shall be in writing and shall be deemed to be given when
delivered in person or by overnight courier with receipt, when
telefaxed and received, or 5 days after being deposited with the
postal service, first-class, registered or certified, return
receipt requested, with postage paid and,
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Meadway,
Haslemere, Surrey GU27 1NN, England
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Attention :
Keith Sheppard
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c/o
Swico at the address above:
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And a copy to
MGI by email at: tmichno@movadogroup.com
or to such
other address as any such party shall designate by written notice
to the other party hereto.
(b) Standard of
Care Swico shall provide the
Services in all material respects using substantially the same
diligence and care as it uses in performing similar services in
respect of its own businesses.
. This Agreement shall inure to the
benefit of and be binding on the parties hereto and their
respective successors and permitted assigns. This
Agreement shall not be assigned by any party hereto without the
express prior written consent of the other parties, and any
attempted assignment, without such consent, shall be null and void.
This agreement could be assigned by Swico to any of its Affiliates
(as defined in the JV Agreement).
(d) Amendment; Waiver.
This Agreement may be amended, supplemented or otherwise modified
only by a written instrument executed by each of the parties
hereto. No waiver by any party of any of the provisions
hereof shall be effective unless explicitly set forth in writing
and executed by the party so waiving. Except as provided
in the preceding sentence, no action taken pursuant to this
Agreement, including any investigation by or on behalf of any
party, shall be deemed to constitute a waiver by the party taking
such action of compliance with any representations, warranties,
covenants, or agreements contained herein, and in any documents
delivered or to be delivered pursuant to this
Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed
as a waiver of any subsequent breach.
. This Agreement does not create any
rights, claims or benefits inuring to any Person that is not a
party hereto (except, where specifically so provided, for
affiliates of the parties who are entitled to receive Services) nor
create or establish any third party beneficiary hereto.
. This Agreement and the rights and
duties of the parties hereunder shall be governed by, and construed
in accordance with, the laws of England.
. Any dispute or claim arising out of
or in connection with or relating to this Agreement, or the breach,
termination or invalidity hereof, including any claim for
injunctive relief, shall be finally settled by arbitration under
the Rules of Conciliation and Arbitration of the International
Chamber of Commerce (the "Rules") as are in force at the time of
any such arbitration. For the purpose of such
arbitration, there shall be three arbitrators appointed in
accordance with the Rules. The place of arbitration
shall be in London. All arbitration proceedings shall be
conducted in the English language. Judgment upon
any arbitral award rendered hereunder may be entered in any court
having jurisdiction, or application may be made to such court for a
judicial acceptance of the award and an order of enforcement, as
the case may be. Each of Swico and the Company shall cooperate in
good faith to expedite (to the maximum extent practicable) the
conduct of any arbitral proceedings commenced under this Agreement.
The costs and expenses of the arbitration, including, without
limitation, the fees of the arbitrators, shall be borne equally by
each party to the dispute or claim, and each party shall pay its
own fees, disbursements and other charges of its counsel. Any award
made by the arbitrators shall be final and binding on each of the
Parties that were parties to the dispute. The Parties
expressly agree to waive the applicability of any laws and
regulations that would otherwise give the right to appeal the
decisions of the arbitrators or to seek specific performance in
another forum so that there shall be no appeal to any court of law
for the award of the arbitrators, and a Shareholder shall not
challenge or resist the enforcement action taken by the other
Shareholder in whose favor an award of the Arbitration Board was
given.
. This Agreement and the Joint
Venture Agreement contain the entire agreement and understanding
between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings
relating to such subject matter; provided that in the event any
provision of this Agreement and the JV Agreement are in conflict in
relation to the matters addressed by this Agreement, the provisions
of this Agreement shall prevail. Any capitalized term
used but not defined herein shall have the meaning given such term
in the Joint Venture Agreement. Neither party shall be liable or
bound to any other party in any manner by any representations,
warranties or covenants relating to such subject matter except as
specifically set forth herein or in the JV Agreement.
. If any provision of this Agreement
shall be declared by any court of competent jurisdiction to be
illegal, void or unenforceable, all other provisions of this
Agreement shall not be affected and shall remain in full force and
effect.
(j)
Employees Notwithstanding anything
contained in this Agreement, (i) the individuals employed by
Swico who provide Services pursuant to this Agreement shall in no
respect be considered employees of the Company for
purposes of this Agreement; (ii) Swico shall act as the sole
employer of the individuals it employs and shall not delegate any
employment functions to the Company; (iii) Swico shall have
the sole responsibility for the day-to-day control and supervision
of the individuals whom it employs in connection with this
Agreement and (iv) Swico retain any and all liability with
respect to the actions, activities and conduct of such individuals
in full (including any employment-related claims, litigation or
other assertions of liability or responsibility).
(k) Scope of
Relationship . The parties acknowledge and agree
that the relationship between them under this Agreement is that of
independent contractors and nothing contained in this Agreement or
otherwise shall be construed to constitute or create a partnership,
agency relationship or joint venture between such
parties. No party has the power or authority to act on
behalf of any other party, except as expressly set forth in this
Agreement or as authorized in writing by the other
party.
. From time to time after the date
hereof, as and when requested by a party hereto and at such
party’s expense, the other party shall, and shall cause its
affiliates to, execute and deliver all documents and instruments
and take all other actions as the requesting party may reasonably
deem necessary or desirable to evidence or effectuate any of the
transactions contemplated hereby.
[Signature page follows]
IN WITNESS WHEREOF, the parties have executed
this Services Agreement as of the date first written
above.
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________________________________
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________________________________
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MGS
DISTRIBUTION LIMITED.
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By:________________________________
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Finance:
Cost / Profit
centers management,
Processing
sales and purchase invoices into the accounting system;
Matching of
accounting system and bank accounts;
Invoice check
and approval follow-up,
Preparing bank
disbursements for signature and approval;
Preparation of
quarterly management accounts (monthly P&L, quarterly
balance-sheet);
Preparation of
monthly sales analysis;
Preparation of
monthly management reports;
Preparation of
Forecasts,
Preparation of
Treasury reporting,
Preparation of
statutory and US GAAP financial statements
Maintenance of
credit control management, processing of customer
payments,
Preparation of
payroll journals for processing by outsourced payroll
bureau;
Accounting
closing process;
Maintaining
cashbook records and reconciling to the accounting system and bank
accounts;
Reconciliation
of accounting records to supporting schedules
Preparation of
statutory and US GAAP financial statements
Tax
:
Tax declaration
with external auditors,
Tax control
organization,
Insurance
:
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Arrange for inclusion of the Company
under Swico’s umbrella coverage (except for marine insurance
for goods in transit)
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Check of
insurance coverage and premium follow-up,
Management of
all insurance claims,
Contact with
corporate insurance and medical care,
IS:
Follow-up of
outsourced IS maintenance provider for network, PC and
printers,
Follow-up of
upgrades or purchase for both Soft and Hardware;
Provide
basic service for Helpdesk (include trouble shooting/PC
setup);
Support
various inquiries/troubles about core business
application;
Purchase
:
Negotiation
with suppliers,
Management of
general purchases : phones, cars, office supplies, copiers and
faxes, logistic costs,
Follow-up of
free-lancers contracts,
Human
Resources:
Administration
of outsourced payroll bureau, income taxes and national insurance
declaration;
Follow-up and
update of HR files, contracts update,
Reporting to
authorities regarding HR data,
Part-time
agency management,
Sales
Customer Service:
Support for
forecasts, and monthly reporting,
Processing
sales orders provided by Sub.;
Taking
telephone sales orders from retail customer and seeking approval
from Sub;
Dealing with
retail consumer queries regarding product availability and
pricing;
Providing
back order information to Sub on request;
Maintaining
product descriptions and pricing as approved by Sub;
Invoicing (post
shipment) sales
After-sales
Customer Service:
Invoicing
retail customers and end consumers for spare parts, after-sales
services and repairs;
Customer
receivables follow-up,
Support for
forecasts, reporting.
Logistics:
Arrangement of import and export of
the goods and POS materials;
QC work for
imported products and returns from the trade based on the QC
standard;
Physical
stock taking on quarterly basis;
Storage of
goods for resale, i.e. watches, straps and bracelets (incl. branded
packaging);
Storage of
marketing and promotional materials,
Maintenance of
perpetual inventory records for the above;
Shipment of
goods & invoices to retail customers in accordance with sales
orders;
Shipment of
after-sales serviced watches to retail customers and end
consumers;
Shipment of
after-sales spare parts to retail customers and end
consumers;
Shipment of
branded displays and visuals to retail customers;
Shipment of
branded catalogues and price list to retail customers and end
consumers;
Participation
to mailing actions,
012200-0075-02839-NY02.2382231.11
Prices for the Services
Swico’s
total compensation for the duration of this Agreement for all
Services rendered shall consist of an annual base fee, in the
amount set forth below (“Base Fee”), and a commission
(“Commission”) equal to * by any distributor (other
than the Company) appointed as the exclusive distributor of such
Products in that country (“Distributor”). For purposes
of this Agreement, “Products” means watches sold under
any brand (other than TOMMY HILFIGER) which is licensed to MGI or
any Affiliate of MGI; provided such watches are also sold by the
Company. The term “net sales” means the price for the
Products invoiced by the Distributor, net of taxes, freight,
duties, insurance and any discounts.
Annual Base
Fee (£)
Year 1
: *
Year 2
: *
Year 3
: *
Year 4
: *
Year 5
: *
Year 6
: *
Each year after
year 6 the annual Base Fee shall be three percent (3.0%) more than
the Base Fee in the immediately preceding year.
*CONFIDENTIAL
PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
JUICY COUTURE
DISTRIBUTORSHIP AGREEMENT
THIS AGREEMENT is made and entered into as of
May 11, 2007 (the “Effective Date”) by and between
SWISSAM PRODUCTS LTD. a corporation duly incorporated under the
laws of Hong Kong having its principal office at 1406 World Finance
Centre, North Tower, Harbour City, Tsimshatsui, Kowloon, Hong Kong
(hereinafter referred to as “Supplier”) and MGS
DISTRIBUTION LIMITED, a corporation incorporated under the laws of
England having its principle office at c/o Swico, Meadway, Surrey
GU 27 1NN, England (hereinafter referred to as the
“Distributor”).
RECITALS
WHEREAS, Swico Limited (“Swico”),
Movado Group, Inc. (“MGI”) and
Distributor have entered into a Joint Venture Agreement,
dated May 11, 2007 (the “JV Agreement”),
pursuant to which Swico and MGI have established a joint venture
relationship relating to the sale, marketing and distribution of
certain watch brands in the United Kingdom.
WHEREAS, this Agreement is one of the
Distribution Agreements as defined in the JV Agreement.
WHEREAS
Supplier is an Affiliate (as defined in the JV Agreement) of MGI
and is engaged in the development, design, manufacture,
distribution and sale of the Products (as hereinafter defined) and
Supplier desires to appoint Distributor and Distributor desires to
be appointed, as the exclusive distributor of the Products in the
Territory (as hereinafter defined), in accordance with the terms
and conditions set forth hereinafter;
NOW, THEREFORE,
in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
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In this
Agreement, except where the context otherwise requires, the
capitalized terms listed below shall have the respective meanings
assigned to them as follows:
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means as to
either party, a person or entity which controls, is under common
control with, or is controlled by such party.
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means premium
and incentive accounts and other corporate accounts which have been
approved in writing by Licensor under the JC License for the
purchase of Products solely for the use of the employees of such
accounts.
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means watches
manufactured by or for Supplier and bearing one
or more of the Trademarks
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means the
United Kingdom (excluding Travel Retail Accounts).
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means the
licensor under the JC License, including any successors and
assigns.
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means the
license agreement between SWISSAM PRODUCTS LIMITED, MOVADO GROUP,
INC. and L.C. LICENSING, INC., as the same may be amended from time
to time, pursuant to which Supplier has the right to use the
Trademarks in connection with the manufacture, marketing,
advertising, sale and distribution of the Products.
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means retail
and outlet stores, including flagship stores, owned or operated
by Licensor or by any of its Affiliates.
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means all
trademarks licensed to Supplier by Licensor under the JC License
and used on or in connection with the Products, including, without
limitation, JUICY, JUICY COUTURE or any other product that contains
the name JUICY.
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“Travel
Retail
Accounts” means
any account whose retail business consists of in-flight
duty free retail sales operations.
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Unless
otherwise defined herein, each capitalized term used herein shall
have the meaning as set forth in the JC License.
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Subject to the
terms and conditions contained herein, for the term of this
Agreement, Supplier hereby appoints Distributor as the exclusive
wholesale distributor for marketing, distribution and sales of the
Products in the Territory (with the exception of sales to Corporate
Accounts), and Distributor hereby accepts such
appointment. Notwithstanding anything to the contrary
contained herein, Supplier may permit Distributor to
sell Products to certain Corporate Accounts located
within the Territory on a case by case basis subject to the
approval by Licensor as provided in theJC License and as Supplier
may, in its sole and absolute discretion designate in writing from
time to time.
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2.2 Distributor
shall purchase all Products directly from Supplier, or from one or
more other sources nominated in writing by Supplier, subject to
Distributor’s right to purchase Products (a) from other
distributors with which Supplier has contracted for the
distribution of the Products (“Approved Distributors”)
that are located in Switzerland, the European Union, the European
Economic Area or any other country with which the European Union
has concluded a free trade agreement (in the aggregate, the
“European Area”) and (b) from approved retailers that
satisfy the conditions set forth in Section 8.2 hereof
(“Approved Retailers”) located in the European Area
(provided that prior to exercising such right Distributor receives
written confirmation from Supplier that each such other distributor
is an Approved Distributor and that each such retailer is an
Approved Retailer). Such Approved Distributors and Approved
Retailers, only, are included within and comprise the JC selective
distribution network.
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2.3 Distributor
shall sell the Products only to Approved Retailers in the Territory
and, within the European Area, only within the JC selective
distribution network. Distributor shall refrain, outside
the Territory and in relation to the Products, from actively
soliciting orders, establishing any branch or maintaining any
distribution depots. In no event will Distributor sell
or continue selling Products to any retailer that does not satisfy
the conditions in Section 8.2 of this Agreement.
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Distributor
shall use reasonable commercial efforts to advertise, promote,
market, distribute and sell the Products in the
Territory. Without limiting the generality of the
foregoing, Distributor shall at all times maintain adequate stocks
of Products to meet demand for the Products in the Territory by
those retailers, if any, not being direct shipped by Supplier and
Distributor will use reasonable efforts to avoid accumulating
excess inventory not in line with its forecasts. Distributor shall
maintain an adequate sales force for the effective distribution and
sale of the Products in the Territory including at least one (1)
full time watch division manager to supervise/manage a dedicated
sales manager and sales executive for the Products, experienced in
managing a watch distribution business and one (1) full time
marketing manager working on the advertising and promotion of the
Products.
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During the term
of this Agreement Distributor shall not directly or indirectly
distribute any other watch brands which, in the determination of
Supplier, compete with the Products in the Territory. No
other brand licensed to MGI or any Affiliate of MGI shall be deemed
to compete with the Products.
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The parties
acknowledge that under the Joint Venture Agreement each of Swico
and MGI, as the only shareholders of Distributor, has the right
under section 15.2 of the JV Agreement, to dissolve, or to purchase
the other’s interest in, Distributor. Accordingly, if either
Swico or MGI (the “Non-breaching Party”) elects under
the foregoing provision of the JV Agreement to purchase
the other party’s interest in, Distributor and (a) written
notice from Swico and MGI confirming such election has been
provided to Supplier and Distributor and (b) the Non-breaching
Party also notifies Supplier that it wishes this Agreement to be
assigned, then effective upon the date specified in such notice
from the Non-breaching Party (or, absent the specification of any
date, then as soon as reasonably practicable) Supplier shall assign
all of Distributor’s right, title and interest in and under
this Agreement to such Non-breaching Party or to any Affiliate of
such Non-Breaching Party as specified in such notice. Distributor
hereby grants Supplier a power of attorney for purposes of Supplier
executing and delivering on behalf of Distributor any and all
documents or other instruments necessary to effect such
assignment.
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ORDERING,
SHIPMENT AND PRICES
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From time to
time Distributor shall submit purchase orders for the Products to
Supplier. All purchase orders shall be subject to
acceptance by Supplier, which acceptance may, at Supplier’s
option, be evidenced by the issuance of written confirmations or
acknowledgments. Supplier hereby reserves the absolute right to
reject the whole or any part of any purchase order for any
commercially valid reason, including, without limitation,
Distributor’s credit condition or its accumulation of excess
or non-current inventory or its failure otherwise to adhere to the
terms and conditions of this Agreement, notwithstanding that any
such rejection may prevent Distributor from achieving its Minimum
Purchase Requirements. Subject to Sections 3.2 and 11.1, all
purchase orders shall be irrevocable after acceptance by Supplier;
provided, however, that Distributor may reschedule or cancel that
portion of any purchase order pertaining to Products which Supplier
fails to deliver as confirmed within thirty (30) days after the
later of the advised delivery date or shipping date. Distributor
will provide Supplier with a four (4) month rolling forecast of its
anticipated order volume monthly by SKU, for the four (4) month
period. Supplier will use reasonable efforts to deliver
the Products ordered in accordance with the forecast within three
(3) months after acceptance of the purchase order by Supplier and
to deliver all other Product orders within three (3) to five (5)
months after acceptance of the purchase order. As soon
as is reasonably practicable after acceptance of each purchase
order, Supplier shall advise Distributor of the shipping dates
applicable to such order. All shipping dates so advised
are estimates only and Supplier shall not have any liability for
failure to actually ship by such dates or to deliver by
Distributor’s requested delivery dates. Supplier
shall notify Distributor in the event of any anticipated delay in
shipping dates of thirty (30) days or more. Each order submitted by
Distributor will specify a “ship to” address which
shall be Distributor’s address or the address for one of
Distributor’s customers.
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The purchase
prices for all Products purchased by Distributor shall be in Euros
and based on Supplier’s suggested retail price in effect in
the European Union as of the date of shipment. Such prices shall be
calculated based on the discount structure as set forth on Schedule
A annexed hereto. Supplier will provide current price lists for the
Products to Distributor from time to time and shall have the right
to modify such prices at any time; provided, however, that no price
increase shall become effective sooner than sixty (60) days after
written notice thereof to Distributor. Supplier will
give Distributor prior notice of all such price changes. For all
orders shipped before the effective date of any price increase, the
applicable price shall be the price in effect on the date of
shipment. With respect to orders for the Products that
have been accepted by Supplier but which have not been shipped as
of the effective date of a price increase, the applicable price
shall be the price in effect on the date of shipment; provided that
if the price increase is more than ten percent (10%) of the last
applicable price, Distributor shall have the right within ten (10)
days from the effective date of the price increase to cancel all or
any part of the order for the Products subject to such price
increase upon notice to Supplier. All prices are ex-works
Supplier’s distribution facility.
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3.3 Unless
otherwise agreed in writing by Distributor and Supplier, all
Products shall be deemed delivered to Distributor when delivered by
Supplier or Supplier’s freight forwarder or distribution
center into the possession of a carrier designated by
Supplier. Distributor shall bear all risk of loss,
damage or shortage pertaining to the Products after delivery to
carrier for shipment to the designated “ship to”
address on the corresponding purchase order. All costs
of delivery, including, without limitation, all costs for freight,
import licenses, customs duties or other duties or imposts,
insurance and special handling shall be paid by Distributor. All
payments are to be made in Euros in accordance with
Supplier’s standard terms of sale which are incorporated
herein by reference (except to the extent inconsistent with any of
the express terms contained herein) net ninety (90) days after
invoice date. A discount of two percent (2%) is granted
for cash payment in advance.
3.4 No
provisions contained in Distributor’s orders which are
different from or additional to the terms and conditions of this
Agreement shall be binding on the parties hereto or applicable to
the sale of the Products unless signed by a duly authorized
representative of each of the parties as provided by Section 13.9
hereof. Distributor shall have sole
responsibility for invoicing its customers and for the collection
of all amounts due from them for Product shipped to them either by
Distributor or by Supplier in accordance with the “ship
to” designation made on the applicable purchase orders. In no
event shall non-payment by any such customer or any claim or
allegation any customer may have against Distributor constitute
grounds for any off set, deduction, claim or defense on the part of
Distributor against Supplier or in respect of any obligation due to
Supplier and Distributor shall pay Supplier all amounts due to
Supplier in accordance with the terms of this Agreement without off
set or deduction for any amounts claimed to be due to Distributor
by Supplier.
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MINIMUM
TURNOVER REQUIREMENTS
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Each contract
year for the duration of this Agreement, Distributor will make
minimum sales of Products in the Territory (“Minimum Turnover
Requirement”) equal to at least sixty percent (60%) of the
amount of Product sales as budgeted in the Business Plan annexed to
the JV Agreement. Notwithstanding the foregoing there
shall be no Minimum Turnover Requirement for the first contract
year.
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Sales in excess
of the Minimum Turnover Requirement in any contract year shall be
neither carried over nor credited toward the Minimum Turnover
Requirement of a subsequent contract year.
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ADVERTISING AND
PROMOTION
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As used herein
“advertising” means only the publication in print or
broadcast media of advertisements approved by Supplier and
“promotion” means all other forms of Product promotion,
other than advertising, approved by Supplier including, without
limitation, point of sale material, co-op advertising, marketing,
public relations, special events and the like. All
advertising and promotions (including, without limitation, the
methods, media selection, layouts, venue and timing thereof) shall
be subject to the prior written approval of
Supplier. Distributor shall submit all proposed and
promotion materials for approval at least four (4) weeks prior to
the first anticipated use thereof and shall not engage in any
advertising or promotion or use any such materials without
Supplier’s prior written approval. Unless otherwise expressly
approved in writing by Supplier, Distributor will use only such
materials including, without limitation, point of sale material,
packaging, advertising and ancillary material furnished by
Supplier.
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5.2 Distributor
shall conduct all advertising and promotion of the Products in the
Territory at its own expense, subject to matching a portion of such
expenditures by Supplier as hereinafter provided. At a
minimum, Distributor shall expend each contract year for approved
advertising and promotion an amount equal
to * of Distributor’s budgeted sales of
Products for such contract year. Distributor’s budgeted sales
of Products for the first through the fifth contract years are set
forth in Annex D to the JV Agreement and Distributor’s
budgeted sales each contract year thereafter shall be as contained
in the annual business plan and budget as adopted in accordance
with the provisions of the JV Agreement at or before the beginning
of each contract year, or, at such time, if any, that the JV
Agreement is no longer in effect, then as approved by Distributor
in good faith consultation with Supplier, and may be adjusted in
the same manner quarterly. So long as Distributor satisfies its
advertising and promotion commitment as set forth in this Section
5.2,
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*CONFIDENTIAL
PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
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then
Supplier will match such expenditures each contract year by
spending an amount on advertising and/or promotion equal
to * of the Net Invoiced Cost of
Distributor’s Product purchases in such year
(“Supplier’s Advertising Amount”). “Net
Invoiced Cost” means the invoiced price actually paid by
Distributor to Supplier net of all discounts, all costs referred to
in Section 3.3 hereof, all credits for returns and all uncollected
amounts. There shall be deemed included as part of Supplier’s
Advertising Amount each year an amount equal to up to *
of the Net Invoiced Cost of Distributor’s Product purchases
in such year that is spent by Supplier in connection with
JC’s advertising and promotion campaign (“Image
Program”), which final amount shall be determined in
accordance with the requirements of the JC
License. Distributor acknowledges that the way the funds
allocated to the Image Fund will be spent by Supplier is that
Supplier will pay such amount directly to Licensor or its
Affiliates under the JC License. Supplier’s obligation
hereunder to spend Supplier’s Advertising Amount in any
contract year is contingent on Supplier receiving from Distributor
within thirty (30) days after the end of each quarter in such
contract year, a statement setting out and showing
Distributor’s advertising expenditures and promotion
expenditures incurred during such prior quarterly period (supported
by invoices and other documents reasonably acceptable to Supplier,
substantiating the expenditures for Distributor’s approved
advertising and promotion); and provided further that such costs
are no less, on a proportionate basis, than the minimum required
expenditures set forth in this Section 5.2. In the event
Distributor’s actual Product sales for any contract year
(other than the final contract year of this Agreement) exceed the
total budged sales for such year on which its advertising and
promotion expenditures for the year were based, then Distributor
shall spend an amount equal to * of such excess in the
following contract year.
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5.3 Distributor
will use only such materials for fixturing at the point of sale as
are approved by Supplier in writing.
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Quarterly
(beginning with the quarter ending July 31, 2007 and from time to
time at the reasonable request of Supplier, Distributor shall
furnish Supplier with a comprehensive written report in reasonable
detail regarding (i) the advertising, promotions, distribution and
sales of the Products for the immediately proceeding quarter or
such other relevant period as Supplier may reasonably request; (ii)
Distributor’s market analysis; and (iii) such other matters
as Supplier shall request.
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Distributor
will consult with Supplier, as Supplier shall reasonably request
for purposes of determining a marketing plan for distribution of
the Products in the Territory each year. Such plan shall
be followed by Distributor.
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*CONFIDENTIAL
PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
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Distributor
shall promptly notify Supplier of any significant changes in
Distributor’s sales forecasts and shall furnish Supplier such
information related to sales, sales forecasts, warranty claims and
inventories of Products as may be reasonably requested from time to
time by Supplier.
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Distributor
shall establish and maintain, at its expense, such number of
authorized service facilities for the service and repair of the
Products in the Territory (the “Service Center(s)”) as
Supplier may reasonably request, it being understood that initially
there shall be one (1) such Service Center. Distributor
shall accept all Products for service, returned by any consumer or
retailer in the Territory for service whether covered by the
applicable consumer warranty (“warranty repairs”) or
not covered by said warranty (“out-of-warranty
repairs”). All costs related to out-of-warranty
service, including, without limitation, costs of all Products and
Product parts used in the performance thereof, shall be borne by
Distributor. Distributor shall purchase such Products
and parts from Supplier or from one or more parts distributors
designated in writing by Supplier and maintain an adequate stock of
Products, parts and materials as necessary to perform such service
in a timely manner.
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Within thirty
(30) days after the Effective Date, Distributor will furnish
Supplier with Distributor’s initial price list for all out of
warranty repairs. Distributor will give Supplier no less
than ninety (90) days prior written notice of any change to any
such prices. Distributor shall submit to Supplier each month, a
statement summarizing all out of warranty repairs performed in the
immediately preceding month indicating for each watch repaired the
corresponding style number and the work
performed. Distributor will use only those parts
(excluding batteries) for out of warranty service on the Products
which are supplied directly by or otherwise approved in writing by
Supplier as original equipment for the Products.
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7.3 On
or before the fifteenth day of each month, Distributor shall send
to the Supplier (Attn.: Service Department) a cumulative
statement for all warranty repairs completed by Distributor in the
immediately preceding calendar month. This statement
must be accompanied by a copy of each repair receipt complete
with:
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Dates repair
received, completed and returned to customer. and
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Complete
description of work performed
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Supplier shall
offer a range of parts that it determines appropriate in its sole
discretion. Supplier shall also establish the cost of
such parts in its sole discretion. In no event shall
Distributor use any parts for warranty repairs except parts
furnished by Supplier. Supplier shall supply Distributor
at no charge with an initial inventory of such parts to be used
solely for performing warranty repairs as Supplier determines
reasonable and necessary and thereafter with replenishment parts
equivalent to up to one percent (1%) of the Net Invoiced Cost of
the Products purchased by Distributor in the prior contract
year. This allotment of such parts to be used for
warranty repairs must be used in the year provided. No
portion of any such allotment may be carried forward into a
subsequent contract year. All shipping charges,
including any duty, or Customs brokerage fees, for parts shall be
paid by Supplier. Supplier shall have the right to
furnish such parts to Distributor in the form of finished watches
in its sole discretion.
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7.5 Distributor
will issue estimates for repair work within five (5) working days
after receipt of a Product for repair on ninety percent (90%) of
the Products submitted to Distributor for
repair. Working days are defined as all days of the year
except Saturdays and Sundays and legal
holidays. Warranty repairs will be completed within
fifteen (15) working days after receipt of a Product for repair on
ninety percent (90%) of the in-warranty work performed by
Distributor, unless detained because of delays in receiving
necessary parts from the Supplier. Out of warranty
repairs will be completed within twenty (20) working days after
receipt of the customer's written authorization to proceed with
repair of a Product on ninety percent (90%) of the out of warranty
work performed by Distributor. On the same day any
repairs are completed, the Product repaired or serviced will be
returned to the customer via express mail or such other method as
Supplier may reasonably request. Increases in the postage or other
ground delivery rates may require requisite increases in charges to
the customer by the Distributor for shipping.
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Distributor
shall sell the Products at competitive levels, at wholesale in
accordance with generally accepted customs in the trade and shall
refrain from using selling methods or practices which shall be
harmful to the reputation of the Products, Supplier or the
Trademarks. Distributor’s right to determine the
prices of reselling and to employ conditions of trade at its
exclusive discretion remains unaffected, provided however that
Distributor shall sell the Products to JC Stores at a price which
is not greater than eighty percent (80%) of the prevailing
wholesale price for the same Products in the Territory.
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Distributor may
sell Products only to those specialty shops, department stores and
retail outlets (including those that sell directly to the consumer)
that satisfy Supplier’s objective criteria for approved
retailer status as set forth in Schedule B annexed. The
satisfaction of such requirements shall be evidenced by written
approval to Distributor from Supplier as provided in this Section
8.2. Upon execution of this Agreement, and prior to the opening of
each selling season (and whenever Distributor wishes to sell
Products to retail customers not previously approved by Supplier),
Distributor must submit a list of such proposed retail customers
(not including previously approved retail customers) for
Supplier’s written approval. Supplier has the
right to withdraw any such approval on written notice to
Distributor, provided, however, that Supplier will not withdraw
approval of a retail customer that is then authorized to carry and
is carrying JC products, unless Supplier is reasonably dissatisfied
with the display, delivery or inventory model of Products of such
retail customer. After such notice, Distributor may not
accept additional orders for Products from such retail customer,
but may fill any existing order. Once each quarter,
Distributor shall provide Supplier with a list of
the retailers in the Territory that purchased Products
in the immediately preceding quarter containing the addresses of
their sales outlets, it being understood that such list is of a
confidential nature and shall be for the sole use of Supplier and,
if requested, Licensor, and shall be kept confidential by Supplier
and shall not be disclosed by Supplier to any person whatsoever,
other than employees of Supplier and Licensor whose performance of
their duties require the disclosure of such list to
them.
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Except as
expressly permitted by Supplier in writing, Distributor may not (a)
sell Products directly to the public in retail stores; (b) use
Products as giveaways, prizes or premiums, except for promotional
programs which have received the prior written approval of
Supplier; or (c) sell Products to any Affiliate of Distributor or
any of its directors, officers, employees or any person having an
equity participation in or any other affiliation to Distributor,
other than to Distributor’s employees or other
representatives for their personal use, without the prior written
approval of Supplier. Supplier may, at Distributor’s expense,
purchase any Products found in the marketplace that Distributor has
sold to unapproved customers in violation of this Section 8.3 or
Section 2.3. Distributor shall include and enforce the following on
all invoices to its retail customers: “Limitations on Sale by
Buyer: Seller expressly reserves the right to limit the amount of
merchandise delivered to only such quantities as are necessary to
meet the reasonably expected demand at Buyer’s store
locations. This Merchandise is sold to Buyer for resale to the
ultimate consumer and/or within the JC selective distribution
network and only and only from such store locations as have been
approved in writing by Seller. Buyer shall be expressly prohibited
from selling the merchandise purchased hereunder to a retailer or
other dealer in like merchandise, or to any party who Buyer knows,
or has reason to know, intends to resell the merchandise and is not
a member of the JC selective distribution network. The merchandise
purchased hereunder may not be sold by Buyer from any store
locations which Seller has advised Buyer do not qualify as an
acceptable location”.
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PROTECTION OF
INTERESTS; TRADEMARKS
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Distributor
shall protect and at all times seek to promote Supplier’s
best interests in the Territory and shall immediately notify
Supplier of any fact or situation which may be or may be reasonably
presumed to become detrimental to Supplier or to its good will,
copyrights, patents, or to the Trademarks or other intellectual
property rights of Supplier or Licensor. Distributor
shall have the exclusive right to use the Trademarks in connection
with distribution of the Products in the Territory for the term
hereof and solely for the limited purpose of and only to the extent
necessary for performing its obligations hereunder and for no other
purpose. Distributor agrees that it shall have no rights
with respect to the Trademarks in connection with the Products
except only as expressly and specifically set forth herein and that
its every use shall inure exclusively to the benefit of Licensor
and that Distributor shall not, at any time, acquire any rights
therein or challenge the validity thereof. Distributor
further agrees at no time to use any of the Trademarks or other
intellectual property rights owned by or licensed to Supplier in a
manner not authorized by Supplier. Distributor shall not apply to
register, nor shall Distributor use or permit the use of, any name,
logo, mark or tradedress which is confusingly similar to any of the
Trademarks or do any act or thing, or permit any act or thing to be
done, which may in any way impair, dilute, reduce the value of the
Trademarks or damage the goodwill relating to the
Trademarks
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If requested by
Supplier, in writing, the Distributor shall assist and cooperate
with Supplier, its counsel and agents as so requested, in
connection with any matters involving any of Supplier’s
intellectual property rights in the Territory including without
limitation, in any legal proceedings and any out-of-pocket expenses
incurred by the Distributor in connection with litigation in which
the Distributor participates at the request of Supplier shall be
reimbursable to the Distributor and any recoveries form any such
litigation or the settlement thereof shall belong exclusively to
Supplier; provided, however, that Supplier shall have the exclusive
right (but not the obligation) to take such action against third
parties in the respect of the Trademarks and all other intellectual
property rights of Supplier.
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In the event
that Distributor sells any Products outside the Territory in
violation of Section 2.3 hereof, then Supplier may, in addition to
all other rights and remedies available to it, repurchase all or
any portion of such Products. Within ten (10) days after
receipt of a statement from the Supplier listing all such Products
purchased, together with a list of the model numbers, and setting
forth Supplier’s out-of-pocket costs incurred in connection
with such purchase, Distributor shall reimburse Supplier such
out-of-pocket costs. Distributor acknowledges that
such payment is not a penalty but fair compensation to
Supplier’s for breach of this Agreement and damage to
Supplier goodwill and tradename.
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This Agreement
shall take effect upon the Effective Date and shall, unless
otherwise earlier terminated as provided herein continue for the
duration of the JV Agreement. It shall be
automatically terminated upon the termination or expiration of the
JV Agreement.
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In the event
(a) this Agreement is assigned to Swico, MGI or to an Affiliate of
Swico or MGI in accordance with Section 2.6 hereof, or (b) either
Swico or MGI purchases all of the other’s interest in
Distributor under Section 15.2.2 of the JV Agreement or (c) Swico,
its Affiliates or Permitted Transferees (as such term is defined in
the JV Agreement) otherwise acquire control of Distributor, then
this Agreement shall continue from the date of such assignment,
purchase and/or acquisition, as the case may be, until the third
anniversary of such date at which time this Agreement shall expire
and neither party shall have any further obligation to the other
hereunder except as to those obligations which by their express
terms survive beyond the expiration or termination of this
Agreement. Following any assignment, purchase or acquisition
referred to in Section 10.1, this Agreement may be terminated by
either party hereto upon prior written notice to the other
party:
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in the event
such other party shall have breached any of the terms and
conditions hereof and, if remediable shall have failed to remedy
such breach within sixty (60 ) days after the
notification of the breach by the non-breaching party;
or
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(ii) in the
event that such other party
becomes insolvent, has an insolvency
proceeding of any
kind filed by or against it, including bankruptcy or reorganization, liquidates its business
or is liquidated, has a receiver appointed for its assets, or makes
an assignment for the benefit of its
creditors.
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In addition to
any other rights of termination provided hereunder, Supplier may
terminate this Agreement immediately by notice to Distributor if
Distributor (i) fails to satisfy the Minimum Turnover Requirement
for any contract year; or (ii) fails to satisfy the minimum
advertising expenditures in Section 5.2 in any contract year or
(iii) fails to comply with the payment terms in Section 3.3 or (iv)
breaches any of the covenants contained in Article 8 or Article 9
hereof; or (v) transfers or attempts to transfer a substantial part
of its business to a third party or attempts to assign this
Agreement to a third party (or relinquishes control of any
previously approved assignee under Section 13.5) or has its
business merged or consolidated with a third party without the
prior written consent of Supplier.
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10.4 Notwithstanding
anything to the contrary contained herein, this Agreement will
automatically expire and be of no further effect in the event the
JC License expires or is terminated for any reason. Upon such
expiration or termination, neither party will have any further
obligation hereunder to the other except any obligation or
liability which accrued prior to the date of such expiration or
termination.
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Upon the
expiration of this Agreement or its termination by Supplier,
Supplier may, at its sole discretion, reject all or part of any
outstanding orders received or accepted by Supplier.
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Upon expiration
or termination of this Agreement for any reason:
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Any sums due
and owing by either party to the other shall become immediately due
and payable, and such sums shall be paid forthwith.
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Supplier may
immediately appoint a successor to Distributor in the Territory and
announce the change of its distributorship to the
public.
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Distributor
shall take a physical inventory of all Products in stock and submit
a report of such inventory to Supplier. Supplier shall
have the right to have a representative present to verify such
inventory. Supplier shall be entitled but not obliged to
take over any portion of the Products remaining in stock from
Distributor at the price in currency originally paid by Distributor
to Supplier, plus the cost of shipping and
insurance. Upon notice to Distributor of
Supplier’s election to buy back any or all such inventory,
Distributor shall cooperate as requested by Supplier for the
packing and shipping of such inventory. Distributor may
sell any Products not taken over by Supplier for six (6) months
after the termination of this Agreement or such shorter period as
notified by Supplier subject to all the provisions hereof,
including, without limitation, Article 8.
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Distributor
shall immediately cease all use of the Trademarks; provided,
however, that Distributor may continue to use the Trademarks solely
in connection with the sale of the Products pursuant to Section
11.2 (iii) above and in such a way as not to impair, dilute, reduce
the value of or damage the goodwill relating to the
Trademarks.
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Any advertising
must be at the discretion of Supplier and must be approved by
Supplier.
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Distributor, at
its expense, will return to Supplier all materials belonging to
Supplier and all proprietary data or confidential information
furnished to Distributor by Supplier during the term
hereof.
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11.3 The rights of
termination granted herein are absolute and each party acknowledges
that it has considered and assumed as its own exclusive risk the
possibility of making expenditures of money and time in preparing
for the performance of this Agreement and possible loss or damage
on account of the loss of prospective profits or anticipated sales
or on account of expenditures, investments, leases, property
improvements or commitments in connection with the good will or
business of the parties or otherwise resulting from the proper
termination hereof and that it is the express intent and agreement
of the parties that neither party properly terminating this
Agreement in accordance with the terms hereof (the
“Terminating Party”) shall be liable to the other for
any claim, cost or damages solely by reason of such
termination. In the event of such termination or
expiration of this Agreement in accordance with the terms hereof,
the Terminating Party shall have no obligation or liability to pay
to the other, and such other party hereby expressly waives, any
statutory termination fee, any other right to compensation provided
by law arising solely as a consequence of such termination, and
consequential damages and lost profits arising solely on account of
such termination or expiration.
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Distributor
hereby agrees to indemnify and hold the Supplier, and its
Affiliates and/or agents and each of their officers, directors and
employees harmless from and against any and all liabilities,
damages, costs and expenses (including reasonable attorneys’
fees) which arise out of or in connection with any act or omission
related to this Agreement by Distributor, its successors, assigns,
parents, subsidiaries, Affiliates, agents, and contractors, or the
officers, directors or employees of any of them. Supplier reserves
the right, without being required to do so, at its own expense and
without waiver of any indemnity hereunder, to defend any claim,
action or lawsuit coming within the purview of this Section
12. This section shall survive the termination or
expiration of this Agreement.
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GENERAL TERMS
AND CONDITIONS
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Supplier
reserves the right to designate in writing from time to time any
other Affiliate of Supplier to exercise any of the
rights or perform any of the obligations of Supplier
hereunder
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Neither party
shall have the power to represent the other party. For
purposes of this Agreement, Distributor is an independent
contractor and neither the agent nor the representative of Supplier
or any of its affiliated companies. Distributor, its
employees, contractors and Affiliates shall not act or represent
themselves as agents or representatives of, or as having the right,
power or authority, express or implied to assume or create any
obligation or liability on behalf of Supplier or any of its
affiliated companies.
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Neither party
hereto shall be liable for any delay or failure in fulfilling the
obligations hereunder (except for the payment of money) when such
delay or failure is caused by riots, war (declared or not), or
hostilities between any nations; acts of God, fire, storm, flood or
earthquake; strikes, labor disputes, shortage or delay of carriers,
or shortage of raw materials, labor power or other utility
services; any governmental restrictions; or any other unforeseeable
contingencies beyond the control of the party.
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Any notice to
be given pursuant to this Agreement shall be written in English and
shall be deemed duly given when sent by reputable overnight
international courier including FedEx, UPS or DHL to the respective
address first set forth above or by facsimile to the respective
facsimile number set forth below confirmed by letter as aforesaid,
or to such other address and/or facsimile number as a party hereto
may designate by like notice.
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Supplier’s designated Affiliate under
Section 13.1 shall be designated by notice to Distributor, which
notice shall include the address and facsimile number of such
Affiliate for purposes of giving notice
hereunder. Notice to Supplier’s designated
Affiliate shall be made and deemed duly given in the same manner as
for notice to Supplier.
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In view of the
fact that this Agreement has been entered into because of the
confidence that Supplier has in Distributor, it is understood that
the terms and conditions hereof shall be performed by Distributor
only and that, except as expressly permitted in Section 2.6 hereof,
this Agreement may not be assigned, whether by operation of law or
otherwise, without the prior written approval of Supplier which
Supplier may withhold or grant in its sole and absolute discretion
and any such purported assignment by Distributor without such
approval by Supplier shall be void and of no effect. Following any
such assignment, Distributor shall remain obligated as a guarantor
for all the payment obligations of the approved assignee hereunder
and any change in control of the approved assignee without the
approval of Supplier shall constitute a breach of this Section 13.5
and shall entitle Supplier to terminate this Agreement as provided
under Section 10.3
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The captions of
this Agreement are inserted solely for ease of reference and are
not deemed to form a part of or to modify the terms and conditions
of this Agreement.
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This Agreement
shall be governed exclusively by the law of Hong Kong without
reference to its conflict of laws rules. Any dispute,
controversy or difference which may arise out of, in relation to,
or in connection with this Agreement shall be finally settled by
arbitration in Hong Kong in accordance with the under the Rules of
Arbitration of the International Chamber of Commerce by three (3)
Arbitrators appointed in accordance with said
rules. Each party hereto shall be bound by any
arbitration award so rendered and any judgment upon such award may
be entered as a non-appealable final, foreign judgment in any court
having jurisdiction thereon. The language of the
proceedings shall be English.
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When
interpreting the terms and conditions of this Agreement, the
English language shall be applied exclusively.
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This Agreement,
including the terms and conditions incorporated by reference in
Section 3.3 hereof, constitutes the entire agreement of the parties
with respect to the subject matter hereof and prevails over and
supersedes all prior agreements, whether written or oral, relating
to the subject matter hereof and may not be altered, waived,
modified, or discharged except by an express writing referring to
this Agreement signed on behalf of the parties hereto by their duly
authorized representatives. In the event of any conflict or
inconsistency between this Agreement and the JV Agreement, the
latter shall control.
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The failure of
either party hereto to enforce at any time any of the provisions or
terms of this Agreement, or any rights in respect thereof, or the
exercise of or failure to exercise by either party any rights or
any of its elections herein provided, shall in no way be considered
to be a waiver of such provisions, terms, rights or elections or in
any way to affect the validity of this Agreement.
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In connection
with this Agreement, the parties may from time to time exchange
proprietary data or confidential information. The
parties agree to keep in confidence all such proprietary data or
confidential information received in accordance with this Agreement
and to use the same only in connection with the performance of this
Agreement. This provision shall survive the termination
or expiration of this Agreement.
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Should any
provision of this contract held invalid, incomplete or
unenforceable, this will not affect the validity of the remaining
provisions. Supplier and Distributor undertake to
replace the invalid incomplete or unenforceable provision by
provision which comes closest to the commercial goal that the
parties intended to achieve on the conclusion of this agreement by
the invalid, uncompleted and unenforceable provision.
Notwithstanding anything to the contrary contained herein, in the
event of any conflict or inconsistency between any term or
provision of this Agreement and the JC License, the latter shall
control.
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Supplier shall
have the right to injunctive relief to enforce the covenants,
agreements and obligations of Distributor hereunder in addition to
any other relief to which Supplier may be entitled at law or in
equity.
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Each order
deliverable under this Agreement shall be deemed sold under a
separate contract. Non-delivery or default by Supplier
as to any order shall not be deemed a breach of the
entire
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Agreement and
shall not relieve Distributor of its obligation to accept and pay
for any prior or subsequent delivery, even though such non-delivery
or default substantially impairs the value of this Agreement to
Distributor.
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Distributor
shall comply with all applicable laws, rules and regulations in the
Territory, including, without limitation, the provisions of
Directive 2002/96/EC , which governs waste electrical and
electronic equipment, including all related amendments and all
laws, rules and regulations in the Territory related
thereto Distributor shall provide Supplier with evidence
of any such compliance upon request.
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IN WITNESS
WHEREOF, the parties hereto have caused this Agreement to be
executed in multiple duplicates by their authorized representatives
as of the day and year first above written.
MGS
DISTRIBUTION
LIMITED SWISSAM
PRODUCTS LIMTED
By: ________________________ By: ____________________________
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Title: _______________________ Title: ___________________________
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Name:
_______________________ Name: ___________________________
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DISTRIBUTOR DISCOUNT
SCHEDULE
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Distributor
pricing shall be * of Supplier’s recommended Euro retail
price (inclusive of VAT); provided, however, that if this Agreement
is assigned as provided under Section 2.6, then the pricing to the
assignee shall be based on the same discount off of
Supplier’s recommended Euro retail price as generally offered
by Supplier to its other independent distributors of the Products
in the European Union.
*CONFIDENTIAL
PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
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OBJECTIVE
CRITERIA FOR APPROVED RETAILER STATUS
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(i) Animated
and attractive environment
(ii) Centrally
located neighborhood
(iii) Shopping
district with fashion and prestige branded shops
(i) Attractive,
well-maintained, high-quality façade
(ii) Clean,
visible and prominent shop sign
(iii) Visible
and easily accessed entrance
(i) Well
lit, clean and made from good quality materials
(ii) Suitable
number and size show windows
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Windows provide
sufficient space to display a representative selection of JC brand
products
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Professionally
maintained and attractive window decoration
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(i) Clean
and well-maintained walls, floors, ceilings and
furnishings
(ii) Sufficient
and sophisticated lighting
(iii) Equipped
with adequate security devices
(i) Made
of high-quality materials with adequate lighting
(ii) JC
products displayed on official brand POS materials
(iii) Clearly
visible and strong brand identification
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JC products are
grouped together and displayed separately from other
brands
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Premises used
solely for the retail sale of quality watches, jewelry, fashion
accessories and/or fashion apparel.
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products
displayed to prevent confusion with any other brands
products.
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Retailer also
sells at least two (2) Swiss watch brands or any three (3) of the
following fashion/designer/prestige watch
brands: Emporio Armani, Diesel, DKNY, Kenneth Cole,
Versace, Puma, D&G, CK, Sector, Briel, Guess,
Lacoste
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Brand visuals
properly presented and changed out seasonally or whenever requested
by brand
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Dealer’s
advertising is consistent with the quality requirements of the
brand
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Dealer agrees
to conduct co-op advertising on the basis of an agreed and shared
budget and media plan
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Personnel/Customer Service
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Sales staff
with good knowledge of JC brand and products
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Available for
regular training on brand and new products
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Well dressed,
groomed and polite
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Capacity to
advise customer on how to operate products correctly
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Able to carry
out simple adjustments (e.g. sizing metal bracelets)
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Provides clear
and comprehensive information
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Provides
information on sales and stock situation
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Provides
monthly sales reports by SKU
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Provides
immediate information on problems with products
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TOMMY
HILFIGER
DISTRIBUTORSHIP
AGREEMENT
THIS AGREEMENT
is made and entered into as of May 11, 2007 (the
“Effective Date”) by and between MOVADO WATCH COMPANY,
S.A. a corporation duly incorporated under the laws of Switzerland
having its principal office at Bettlachstrasse 8, CH-2540,
Grenchen, Switzerland (hereinafter referred to as
“Supplier”) and MGS DISTRIBUTION LIMITED a corporation
incorporated under the laws of England having its principle office
at c/o Swico, Meadway, Haslemere, Surrey GU27 1NN,
England (hereinafter referred to as the
“Distributor”).
RECITALS
WHEREAS, Swico Limited (“Swico”),
Movado Group, Inc. (“MGI”) and
Distributor have entered into a Joint Venture Agreement,
dated May 11, 2007 (the “JV Agreement”), pursuant to
which Swico and MGI have established a joint venture relationship
relating to the sale, marketing and distribution of certain watch
brands in the United Kingdom.
WHEREAS, this Agreement is one of the
Distribution Agreements as defined in the JV Agreement.
WHEREAS
Supplier is an Affiliate (as defined in the JV Agreement) of MGI
and is engaged in the development, design, manufacture,
distribution and sale of the Products (as hereinafter defined) and
Supplier desires to appoint Distributor and Distributor desires to
be appointed, as the exclusive distributor of the Products in the
Territory (as hereinafter defined), in accordance with the terms
and conditions set forth hereinafter;
NOW, THEREFORE,
in consideration of the premises and the mutual covenants herein
contained, the parties hereto agree as follows:
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In this
Agreement, except where the context otherwise requires, the
capitalized terms listed below shall have the respective meanings
assigned to them as follows:
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means as to
either party, a person or entity which controls, is under common
control with, or is controlled by such party.
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means premium
and incentive accounts and other corporate accounts which have been
approved in writing by THLI under the THLI License for the purchase
of Products solely for the use of the employees of such
accounts.
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means watches
manufactured by or for Supplier and bearing one
or more of the Trademarks
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means the
United Kingdom.
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means Tommy
Hilfiger Licensing, Inc., a Delaware corporation, including any
successors and assigns.
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means the
license agreement between Supplier and THLI, as the same may be
amended from time to time, pursuant to which Supplier has the right
to use the Trademarks in connection with the manufacture,
marketing, advertising, sale and distribution of the
Products.
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means retail
and outlet stores, including flagship stores, owned by or
affiliated with THLI that bear the name “Tommy
Hilfiger” or “Hilfiger”.
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means all
trademarks licensed to Supplier by THLI under the THLI License and
used on or in connection with the Products, including, without
limitation, TOMMY, HILFIGER, TOMMY HILFIGER, Flag Design and Crest
Design.
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“Travel
Retail
Accounts” means
any account whose retail business consists of in-flight
duty free retail sales operations.
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Unless
otherwise defined herein, each capitalized term used herein shall
have the meaning as set
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forth
in the THLI License.
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Subject to the
terms and conditions contained herein, for the term of this
Agreement, Supplier hereby appoints Distributor as the exclusive
wholesale distributor for marketing, distribution and sales of the
Products in the Territory (with the exception of sales to Tommy
Hilfiger Stores, Corporate Accounts and Travel Retail Accounts),
and Distributor hereby accepts such
appointment. Notwithstanding anything to the contrary
contained herein, Supplier may permit Distributor to sell to
certain Tommy Hilfiger Stores and Corporate Accounts on a case by
case basis as Supplier may, in its sole and absolute discretion,
designate in writing from time to time.
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Distributor
shall purchase all Products directly from Supplier, or from one or
more other sources nominated in writing by Supplier, subject to
Distributor’s right to purchase Products (a) from other
distributors with which Supplier has contracted for the
distribution of the Products (“Approved Distributors”)
that are located in Switzerland, the European Union, the European
Economic Area or any other country with which the European Union
has concluded a free trade agreement (in the aggregate, the
“European Area”) and (b) from approved retailers that
satisfy the conditions set forth in Section 8.2 hereof
(“Approved Retailers”) located in the European Area
(provided that prior to exercising such right Distributor receives
written confirmation from Supplier that each such other distributor
is an Approved Distributor and that each such retailer is an
Approved Retailer). Such Approved Distributors and Approved
Retailers, only, are included within and comprise the Tommy
Hilfiger selective distribution network.
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2.3 Distributor
shall sell the Products only to Approved Retailers in the Territory
and, within the European Area, only within the Tommy Hilfiger
selective distribution network. Distributor shall
refrain, outside the Territory and in relation to the Products,
from actively soliciting orders, establishing any branch or
maintaining any distribution depots. In no event will Distributor
sell or continue selling Products to any retailer that does not
satisfy the conditions in Section 8.2 of this Agreement.
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Distributor
shall use its best efforts to advertise, promote, market,
distribute and sell the Products in the
Territory. Without limiting the generality of the
foregoing, Distributor shall at all times maintain adequate stocks
of Products to meet demand for the Products in the Territory by
those retailers, if any, not being direct shipped by Supplier and
Distributor will use reasonable efforts to avoid accumulating
excess inventory not in line with its
forecasts. Distributor shall maintain an adequate sales
force for the effective distribution and sale of the Products in
the Territory, including at least one (1) full time, dedicated
brand manager for the Products, experienced in managing a watch
distribution business.
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During the term
of this Agreement, Distributor shall not directly or indirectly
manufacture or distribute any goods, including other watch brands,
which, in the determination of Supplier, compete with the Products
in the Territory. No other brand licensed to MGI or any
Affiliate of MGI shall be deemed to compete with the
Products.
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The parties
acknowledge that under the Joint Venture Agreement each of Swico
and MGI, as the only shareholders of Distributor, has the right
under section 15.2 of the JV Agreement, to dissolve, or to purchase
the other’s interest in, Distributor. Accordingly, if either
Swico or MGI (the “Non-breaching Party”) elects under
the foregoing provision of the JV Agreement to purchase
the other party’s interest in, Distributor and (a) written
notice from Swico and MGI confirming such election has been
provided to Supplier and Distributor and (b) the Non-breaching
Party also notifies Supplier that it wishes this Agreement to be
assigned, then effective upon the date specified in such notice
from the Non-breaching Party (or, absent the specification of any
date, then as soon as reasonably practicable) Supplier shall assign
all of Distributor’s right, title and interest in and under
this Agreement to such Non-breaching Party or to any Affiliate of
such Non-Breaching Party as specified in such notice. Distributor
hereby grants Supplier a power of attorney for purposes of Supplier
executing and delivering on behalf of Distributor any and all
documents or other instruments necessary to effect such
assignment.
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ORDERING,
SHIPMENT AND PRICES
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From time to
time Distributor shall submit purchase orders for the Products to
Supplier. All purchase orders shall be subject to
acceptance by Supplier, which acceptance may, at Supplier’s
option, be evidenced by the issuance of written confirmations or
acknowledgments. Supplier hereby reserves the absolute
right to reject the whole or any part of any purchase order for any
commercially valid reason, including, without limitation,
Distributor’s credit condition or its accumulation of excess
or non-current inventory or its failure otherwise to adhere to the
terms and conditions of this Agreement, notwithstanding that any
such rejection may prevent Distributor from achieving its Minimum
Purchase Requirements. Subject to Sections 3.2
and 11.1, all purchase orders shall be irrevocable after
acceptance by Supplier; provided, however, that Distributor may
reschedule or cancel that portion of any purchase order pertaining
to Products which Supplier fails to deliver as confirmed within
thirty (30) days after the later of the advised delivery date or
shipping date.. Distributor will provide Supplier with a
four (4) month rolling forecast of its anticipated order volume
monthly by SKU, for the four (4) month period. Supplier
will use reasonable efforts to deliver the Products ordered in
accordance with the forecast within three (3) months after
acceptance of the purchase order by Supplier and to deliver all
other Product orders within three (3) to five (5) months after
acceptance of the purchase order. As soon as is
reasonably practicable after acceptance of each purchase order,
Supplier shall advise Distributor of the shipping dates applicable
to such order. All shipping dates so advised are
estimates only and Supplier shall not have any liability for
failure to actually ship by such dates or to deliver by
Distributor’s requested delivery dates. Supplier
shall notify Distributor in the event of any anticipated delay in
shipping dates of thirty (30) days or more. Each order submitted by
Distributor will specify a “ship to” address which
shall be the address of Distributor’s warehouseman or the
address for one of Distributor’s customers
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The prices for
all Products purchased by Distributor shall be in Euros and based
on Supplier’s recommended Euro retail price in effect in the
European Union as of the date of shipment. Such prices are ex-works
and shall be calculated based on the discount structure as set
forth on Schedule A annexed hereto. Supplier will provide current
price lists for the Products to Distributor from time to time and
shall have the right to modify such prices at any time; provided,
however, that no price increase shall become effective sooner than
sixty (60) days after written notice thereof to
Distributor. Supplier will give Distributor prior notice
of all such price changes. For all orders shipped before
the effective date of any price increase, the applicable price
shall be the price in effect on the date of
shipment. With respect to orders for the Products that
have been accepted by Supplier but which have not been shipped as
of the effective date of a price increase, the applicable price
shall be the price in effect on the date of shipment; provided that
if the price increase is more than ten percent (10%) of the last
applicable price, Distributor shall have the right within ten (10)
days from the effective date of the price increase to cancel all or
any part of the order for the Products subject to such price
increase upon notice to Supplier. All prices are ex-works
Supplier’s distribution facility in Hong Kong.
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3.3 Unless
otherwise agreed in writing by Distributor and Supplier, all
Products shall be deemed delivered to Distributor when delivered by
Supplier or Supplier’s freight forwarder or distribution
center into the possession of a carrier designated by
Supplier. Distributor shall bear all risk of loss,
damage or shortage pertaining to the Products after delivery to
carrier for shipment to the designated “ship to”
address on the corresponding purchase order. All costs
of delivery, including, without limitation, all costs for freight,
import licenses, customs duties or other duties or imposts,
insurance and special handling shall be paid by
Distributor. All payments are to be made in Euros in
accordance with Supplier’s standard terms of sale, which are
incorporated herein by reference (except to the extent inconsistent
with the terms contained herein) net ninety (90) days after the
invoice date. A discount of two percent (2%) is granted for cash
payment in advance. .
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No provisions
contained in Distributor’s orders which are different from or
additional to the terms and conditions of this Agreement shall be
binding on the parties hereto or applicable to the sale of the
Products unless signed by a duly authorized representative of each
of the parties as provided by Section 13.9
hereof. Distributor shall have sole responsibility for
invoicing its customers and for the collection of all amounts due
from them for Product shipped to them either by Distributor or by
Supplier in accordance with the “ship to” designation
made on the applicable purchase orders. In no event shall
non-payment by any such customer or any claim or allegation any
customer may have against Distributor constitute grounds for any
off set, deduction, claim or defense on the part of Distributor
against Supplier or in respect of any obligation due to Supplier
and Distributor shall pay Supplier all amounts due to Supplier in
accordance with the terms of this Agreement without off set or
deduction for any amounts claimed to be due to Distributor by
Supplier.
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MINIMUM
TURNOVER REQUIREMENTS
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Each contract
year for the duration of this Agreement, Distributor will make
minimum sales of Products in the Territory (“Minimum Turnover
Requirement”) equal to at least sixty percent (60%) of the
amount of Product sales as budgeted in the Business Plan annexed to
the JV Agreement. Sales in excess of the Minimum Turnover
Requirement in any contract year shall be neither carried over nor
credited toward the Minimum Turnover Requirement of a subsequent
contract year. Notwithstanding the foregoing there shall be no
Minimum Turnover Requirement for the first contract
year.
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ADVERTISING AND
PROMOTION
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As used herein
“advertising” means only the publication in print or
broadcast media of advertisements approved by Supplier and
“promotion” means all other forms of Product promotion,
other than advertising, approved by Supplier including, without
limitation, point of sale material, co-op advertising, marketing,
public relations, special events and the like. All
promotions (including, without limitation, the methods, media
selection, layouts and timing thereof) shall be subject to the
prior written approval of Supplier. Distributor shall
submit all proposed promotion materials for approval at least four
(4) weeks prior to the first anticipated use thereof and shall not
engage in any promotion or use any such materials without
Supplier’s prior written approval. Unless otherwise expressly
approved in writing by Supplier, Distributor will use only such
materials including, without limitation, point of sale material,
packaging, advertising and ancillary material furnished by
Supplier.
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Distributor
shall conduct all advertising and promotion of the Products in the
Territory at its own expense, subject to matching of a portion of
such expenditures by Supplier as hereinafter
provided. At a minimum, Distributor shall expend each
contract year for approved advertising and promotion an amount
equal to * of Distributor’s budgeted sales of Products for
such contract year. Distributor’s budgeted sales
of Products for the first through the fifth contract years are set
forth in Annex D to the JV Agreement and Distributor’s
budgeted sales each contract year thereafter shall be as contained
in the annual business plan and budget as adopted in accordance
with the provisions of the JV Agreement at or before the beginning
of each contract year, or, at such time, if any, that the JV
Agreement is no longer in effect, then as approved by Distributor
in good faith consultation with Supplier, and may be adjusted in
the same manner quarterly. So long as Distributor satisfies its
advertising and promotion commitment as set forth in this Section
5.2, then Supplier will match such expenditures each contract year
by an amount equal to * of the Net Invoiced Cost of
Distributor’s Product purchases in such year.
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*CONFIDENTIAL
PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
(“Supplier’s Advertising
Amount”). For purposes of this Agreement, “Net Invoiced
Cost” means the invoiced price actually paid by Distributor
to Supplier net of all discounts, all costs referred
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