<PAGE>
EXHIBIT 10.37**
LICENSE AGREEMENT
BY AND BETWEEN
L. C. LICENSING, INC.
AND
MOVADO GROUP, INC.
AND
SWISSAM PRODUCTS LIMITED
**CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED FROM
PAGES 7, 13, 14,
34 AND SCHEDULES 1.1, 1.13, 3.1, 3.3(g), 4.1, 4.2, 6.2(a), 7.2,
7.3, 8.2, 9.1
AND 14.8 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION
("SEC") PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF
1934, AS
AMENDED ("1934 ACT").
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION
PAGE
-------
----
<S>
<C>
1. Definitions
.........................................................
1
2. Grant of License
.................................................... 4
3. Term; Events of
Default; Termination ................................ 8
4. Distribution
........................................................
12
5. Organization
........................................................
15
6. Standards and
Quality; Merchandise Approvals ........................
15
7. Advertising and
Marketing; Showroom and Trade Shows ................. 21
8. Guaranteed Minimum
Royalties ........................................ 25
9. Sales Royalty
.......................................................
26
10. Sign on Fee
.........................................................
26
11. Statements and Financial Information and Covenants
.................. 27
12. Effect of Expiration or Termination
................................. 30
13. Non-Compete
.........................................................
34
14. Intellectual Property Matters
....................................... 35
15. Confidentiality
..................................................... 38
16. Equitable Relief
.................................................... 39
17. Indemnity; Insurance
................................................ 39
18. Representations and Warranties
...................................... 41
19. Brokers
.............................................................
43
20. Notices
.............................................................
43
21. Miscellaneous
.......................................................
43
22. Licensor's Approval or Consent
...................................... 46
23. Taxes
...............................................................
46
24. Joint and Several Liability
......................................... 46
</TABLE>
i
<PAGE>
LICENSE AGREEMENT
LICENSE AGREEMENT ("Agreement"), dated as of the Effective Date, by
and
between L.C. LICENSING, INC., a Delaware corporation having an
office at c/o Liz
Claiborne, Inc., 1441 Broadway, New York, NY 10018 ("Licensor"),
and Movado
Group, Inc. a corporation organized and existing under the laws of
the State of
New York, having an office at 650 From Road, Paramus, NJ 07652
("Movado") and
Swissam Products Limited, a corporation organized and existing
under the laws of
Hong Kong, having an office at 1406 World Finance Centre, North
Tower, Harbour
City, Tsimshatsui, Kowloon, Hong Kong ("Swissam"). Movado and
Swissam are
jointly and severally referred to herein as "Licensee".
WHEREAS, Licensor holds exclusive rights to the use and
exploitation of the
Licensed Mark(s) in connection with the manufacture and sale of
Merchandise
within the Territory (as such terms are defined below).
WHEREAS, Licensee has experience and expertise in developing,
manufacturing, promoting, selling and distributing Merchandise, and
is desirous
of associating its products with the Licensed Mark(s) so as to
obtain the
benefit of the goodwill associated therewith.
WHEREAS, Licensee desires to have the exclusive right and license,
and
Licensor desires to grant such right and license, to use the
Licensed Mark(s) as
applied to the manufacture, promotion, sale and distribution of
Merchandise
within the Territory, all on the terms and subject to the
conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties and promises set forth below, and for
other good and
valuable consideration, the receipt and sufficiency of which is
hereby
acknowledged, Licensor and Licensee agree as follows:
1.
DEFINITIONS. The
following definitions shall be applicable throughout
this Agreement:
1.1 The term "Territory" means the countries set forth in
Schedule
1.1, excluding U.S. Military Bases but including duty-free
shops.
1.2 The term "Licensed Mark(s)" means the trademark(s) listed
on
Schedule 1.2, together with any other trademarks which at any time
during the
term of this Agreement are owned by Licensor and
<PAGE>
contain the word "JUICY".
1.3
The term "Merchandise" means and is limited to those items
listed
on Schedule 1.3, and does not include any other items
whatsoever.
1.4 The term "Licensed Merchandise" means Merchandise intended to
be
sold or promoted in connection with a Licensed Mark; the term
"Approved Licensed
Merchandise" means Licensed Merchandise approved by Licensor in
accordance with
the provisions hereof. The term "Category" means each of the
categories of
Approved License Merchandise set forth in Schedule 1.3.
1.5 The term "Line Opening Date" is the date of the initial
trade
introduction for each line of Licensed Merchandise for each major
market. The
number and timing of seasonal Line Opening Dates for Licensed
Merchandise are
listed on Schedule 1.5.
1.6 The term "Sample" means any and all models, or actual samples
or
prototypes, of Licensed Merchandise, except that the terms "Initial
Sample",
"Final Sample" and "Production Sample" have the meanings set forth
in Article 6
hereof.
1.7 An
"affiliate" of any Person means and includes any Person, who
controls, is controlled by or is under common control with such
Person. The term
"control" (including the correlative meanings of "controlled by"
and under
"common control with") means the power, directly or indirectly, to
effectively
direct or cause the direction of the management and policies of any
Person. The
term "Person" means any natural person, corporation, association,
business,
government, governmental agency, firm, partnership or other entity,
whether
acting in an individual, fiduciary or other capacity.
1.8 The term "Effective Date" has the meaning set forth in
Schedule
1.8; the term "First Contract Year" means the period commencing on
the Effective
Date and terminating on the date set forth in Schedule 1.8.
1.9 The term "Contract Year" means the First Contract Year, the
period
of twelve (12) months commencing on the day following the end of
the First
Contract Year, and the twelve (12) month period commencing on each
January 1
thereafter for the Initial Term and any Renewal Term.
1.10 The term "Business Plan" means such annual business
plan(s)
relating to Licensee's business hereunder, prepared by Licensee in
such format,
and containing such detailed data, information, sales and marketing
plans,
budgets and projections, as Licensor may from time to time
reasonably request,
2
<PAGE>
including the information set forth in Schedule 1.10.
1.11 The term "Packaging" means all packaging and packaging
materials
for Merchandise, including boxes, containers, wrappings, labels,
tags and any
and all other receptacles and materials, including any artwork
and/or graphics
embodied therein.
1.12 As used in this Agreement, the term "Gross Sales" for any
period
means the gross invoice price of all Licensed Merchandise sold or
shipped by or
on behalf of Licensee (including Licensed Merchandise sold to
distributors
provided that with respect to sales made to distributors who are
affiliates of
Licensee the invoice price of such Licensed Merchandise shall be
deemed to be no
less than that invoiced by Licensee to non-affiliated distributors)
during such
period, not including taxes or freight charged to customers. The
term "Net
Sales" for any period means Gross Sales for such period less (i)
actual trade
discounts taken and noted on the face of the invoice and allowances
with prior
written documentation given by Licensee to its customers, at the
time product is
shipped; (ii) the amount of any: (a) refunds; (b) credits for
returns of
Licensed Merchandise; (c) markdowns; and (d) chargebacks (other
than operational
chargebacks), actually granted and paid or taken by customers at
the time each
is authorized by Licensee; provided, however, that the amount of
aggregate
deductions from Gross Sales under clauses (i) and (ii) above for
any Contract
Year shall not exceed ten percent (10%) of Licensee's Gross Sales
for any
Contract Year. No other deductions may be taken. For royalty
computations Gross
Sales and Net Sales will be computed without regard to whether
payment therefore
has been received by Licensee. If any sale or transfer of Licensed
Merchandise
is made other than at "arms-length" (including but not limited to
sales by
Licensee to its own or its affiliates' stores), then, subject to
the first
sentence of this Section 1.12, the Net Sales of such Merchandise
will be deemed
to be the Net Sales of a corresponding sale at arm's-length at the
prevailing
U.S. list price or absent a list price, the highest price sold to a
regular
account in the licensee's normal channel of distribution.
1.13 The terms "Off-Price Sales" and "Off-Price Sales Cap" have
the
meanings set forth in Schedule 1.13.
1.14 The term "LCI Standards" means the standards, reputation
and
established prestige and goodwill connected with the Licensed
Mark(s) and the
names of Licensor, Juicy Couture, Inc. and their parent, Liz
Claiborne, Inc.
(LCI), including the design content, spirit, quality, style, price
point and
value which apparel products bearing the Licensed Marks(s)have come
to represent
in the minds of the trade and the
3
<PAGE>
public, and Licensee shall reflect throughout its operations
hereunder the
standards embodied in the businesses owned and operated by
Licensor, Juicy
Couture, Inc. and LCI and the Standards of Engagement, a copy of
the current
form of such standards is attached as Schedule 1.14 (such standards
as they may
from time to time be amended or modified, the "Standards of
Engagement").
1.15 The term "Approved Customers" means Approved Full Price
Customers
(as defined in Section 4.1) and Approved Off Price Customers (as
defined in
Section 4.2).
2.
GRANT OF
LICENSE.
2.1 (A) Subject to the terms and conditions of this Agreement,
Licensor hereby grants to Licensee, and Licensee hereby accepts, an
exclusive
license solely to use the Licensed Mark(s) in the Territory as a
trademark(s) in
connection with the manufacture, advertising, merchandising,
promotion, sale and
distribution of Approved Licensed Merchandise to Approved
Customers. Licensee
shall use the Licensed Mark(s) only in the form approved in advance
in writing
by Licensor for use by Licensee and only in connection with the
manufacture,
advertising, merchandising, promotion, sale and distribution to
Approved
Customers of Approved Licensed Merchandise subject to the terms of
this
Agreement; no Licensed Mark shall be accompanied by any word, mark
or symbol, or
include a trademark in any type style or typeface other than that
so set forth.
Licensor has the right to change the required typeface and type
style of a
Licensed Mark in its discretion from time to time. No license is
granted
hereunder for the use of the Licensed Mark(s) for any purpose other
than as
specifically set forth in this Section 2.1.
(B) Licensor retains and reserves any and all rights to use and
exploit, and to grant to any other Person the right to use and
exploit, the
Licensed Mark(s), and any designs, names or other items supplied by
Licensor
hereunder in connection with any and all products and services,
other than
Merchandise bearing the Licensed Mark(s), and to use and exploit
any other
trademarks in connection with Merchandise.
(C) Licensee acknowledges that, at the date hereof, Licensor
sells products bearing the Licensed Mark(s) and such products have
an
established reputation for high standards and quality. Licensee
acknowledges
that, in order to preserve the goodwill attached to the Licensed
Mark(s),
Approved Licensed Merchandise should be sold at prices and terms
reflecting the
prestigious nature of the Licensed Mark(s) consistent with other
products
bearing such Licensed Mark(s); it being understood, however,
that
4
<PAGE>
Licensor is not empowered to fix or regulate the prices at which
Licensed
Merchandise is to be sold, either at the wholesale or retail
level.
2.2 Licensee will not use the Licensed Mark(s) on or in
connection
with Merchandise or any other product manufactured from designs
neither provided
nor approved by Licensor or on Merchandise or any other product
distributed by
any person or entity, including Licensee, as premiums, promotions,
give-aways or
fund-raisers except with Licensor's express prior approval.
Licensee will not
manufacture, or cause the manufacture of, any products bearing
designs the same
as or substantially similar to the designs of any Licensed
Merchandise.
2.3 (A) The license granted herein is strictly personal to
Licensee.
Neither this Agreement nor any of the rights granted to or
obligations
undertaken by Licensee hereunder may be transferred, assigned,
pledged, sold,
mortgaged, sublicensed or otherwise hypothecated or disposed of,
either directly
or indirectly, in whole or in part, by operation of law or
otherwise
(collectively, "transfer"), to any Person without Licensor's prior
written
consent which may be withheld in its sole discretion; any attempted
transfer to
which Licensor has not consented shall be null, void, and of no
force or effect.
Notwithstanding the foregoing, Licensor will not unreasonably
withhold its
consent to (i) a transfer of all of Swissam's rights and
obligations hereunder
to any wholly owned subsidiary of Movado or (ii) the sale of all
the outstanding
shares of or substantially all the assets of Movado or the merger
or
consolidation of Movado where the acquirer or surviving entity has,
or
immediately following such transaction will have, a financial
condition which is
no worse than that of Movado prior to such acquisition, merger or
consolidation
and provided that the acquirer or surviving entity is (A) neither a
Person which
owns or is licensed to use a Competing Brand, nor an affiliate of
such a Person
and (B) a Person, or an affiliate of such a Person, whose primary
business
involves the sale of consumer goods sold under its owned or
licensed brands
(other than primarily through Off Price Sales). If at any time
Swissam ceases to
be a wholly owned subsidiary of Movado or, subsequent to a
transaction, of a
permitted surviving entity or acquirer, then Swissam's rights and
obligations
hereunder shall immediately terminate.
(B) Notwithstanding the foregoing, Licensee may engage
subcontractors and suppliers to produce Approved Licensed
Merchandise hereunder,
only with the express prior written consent of Licensor (which
shall not be
unreasonably withheld or delayed); provided, however, that (i)
prior to any
5
<PAGE>
subcontractor or supplier undertaking any work under this
Agreement, Licensee
must notify such subcontractor or supplier in writing of the
requirements and
standards set forth herein including the products, quality and
trademark
protection standards, as well as the LCI Standards; and (ii)
compliance with the
terms and conditions of this Agreement will remain the sole and
exclusive
responsibility of Licensee, and Licensee will be responsible for
the acts and
omissions of all subcontractors and suppliers, and such acts and
omissions will
for purposes of this Agreement be deemed to be acts and omissions
of Licensee,
such that the supervision of production of Approved Licensed
Merchandise will
remain under the control and the responsibility of Licensee in
accordance with
the terms of this Agreement. Licensee will supply Licensor within
thirty (30)
days of the date this Agreement is executed, and at any time during
the Term
upon the request of the Licensor, with a list of subcontractors and
suppliers
employed by Licensee in connection with its operations hereunder,
and Licensee
will complete the "Licensee/Factory Profile" attached as Schedule
2.3(b) for
each subcontractor and supplier. Licensee will promptly cease its
relationship
with any subcontractor or supplier in connection with its
operations hereunder
upon Licensor's reasonable request or if any such subcontractor or
supplier
fails to comply with the terms and conditions contained herein to
be complied
with by Licensee. Licensee will, within thirty (30) days after
Licensor's
request, require subcontractors and suppliers to execute an
agreement in form
acceptable to Licensor regarding quality control and any other
matters as
Licensor reasonably deems appropriate.
(C) Licensee will use commercially reasonable efforts to make
the
personnel and facilities of its suppliers and contractors available
to Licensor
for inspection and consultation during normal business hours.
2.4 Licensee will devote sufficient financial resources to its
business and operations hereunder and will use its best efforts to
develop and
maintain a substantial, permanent and expanding business under this
Agreement,
and to sell a maximum quantity of Approved Licensed Merchandise
consistent with
the high standards and prestige associated with the Licensed
Mark(s) and the
terms of this Agreement.
2.5 In the event of any dispute between Licensee and any other
licensee of Licensor in the Territory with respect to the products
covered by
their respective licenses, such dispute will be resolved in good
faith by
Licensor in its sole discretion.
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2.6 (A) Notwithstanding anything to the contrary contained herein,
the
Line Opening Date set forth on Schedule 1.5 shall apply only to the
Category of
Women's Timepieces. Licensor shall have the right, upon notice to
Licensee at
any time after such date, to require Licensee to submit to Licensor
a proposed
Business Plan with respect to the Category of Men's Timepieces.
Within thirty
(30) days after its receipt of any such notice ("Men's Category
Notice"),
Licensee shall submit to Licensor such a Business Plan which shall
include
proposed Net Sales minimums with respect to such Category for the
duration of
the Term and the Renewal Term. Provided that such proposed annual
Net Sales
minimums are at least the same percentage of the Net Sales minimums
set forth on
Schedule 3.3(g) as *
, then Licensor will
approve the proposed Business Plan
and Schedule 3.3(g) shall be amended to increase the Minimum Net
Sales amounts
by the proposed Net Sales amounts for the Men's Timepieces
Category. In
addition, Schedule 8.2 shall automatically be amended so that the
base amounts
set forth thereon shall equal * of the amended Minimum Net Sales
amounts.
(B) Provided that no event of default (as defined in Section
3.3)
on Licensee's part hereunder has occurred and is continuing, no
default (as
defined in Section 3.3) hereunder then exists, and this Agreement
is then in
full force and effect, Licensor agrees to give a first right of
negotiation to
Licensee with respect to the proposed exclusive license for the
Category of
Children's Watches bearing the Licensed Marks (the "New
Opportunity") as set
forth in Schedule 1.3. Licensor shall notify Licensee of the
potential New
Opportunity ("New Opportunity Notice"). In the event that Licensee
desires to be
considered for the New Opportunity proposed by Licensor, it shall
advise
Licensor within ten (10) days of receipt of Licensor's New
Opportunity Notice.
Within thirty (30) days thereafter, Licensee shall submit to
Licensor the
proposed Business Plan with respect to such New Opportunity, which
Business Plan
shall include proposed sales minimums, guaranteed minimum royalties
and
advertising obligations with respect to the New Opportunity and
shall be subject
to the express written approval of Licensor, which shall not be
unreasonably
withheld. Similarly, Licensee shall have the right to advise
Licensor that
Licensee is interested in the New Opportunity ("Licensee's New
Opportunity
Notice"). Within thirty (30) days after Licensor's receipt of
Licensee's New
Opportunity Notice, Licensee shall submit to Licensor the proposed
Business Plan
with respect to such New
* CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY
WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
7
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Opportunity which Business Plan shall include proposed Minimums Net
Sales,
Guaranteed Minimum Royalties and advertising obligations with
respect to the New
Opportunity and shall be subject to the express written consent of
Licensor,
which shall not be unreasonably withheld. If (a) Licensee notifies
Licensor at
any time that it is not interested in such New Opportunity; or (b)
Licensee
fails to submit a Business Plan within the time period set forth in
this section
2.6(b); or (c) Licensor does not approve Licensee's Business Plan,
even after
Licensee has resubmitted such business plan to Licensor after
Licensor's initial
rejection of same; then (1) Licensee shall not have any right,
obligation,
license or privilege with respect to the proposed New Opportunity;
and (2)
Licensor shall have the right to contract with any other entity for
such New
Opportunity, except that Licensor shall not have the right to
contract with such
other entity upon the substantially same business terms as proposed
by the
Licensee and rejected by the Licensor.
3.
TERM; EVENTS OF
DEFAULT AND TERMINATION.
3.1 (A) The term of this Agreement will commence as of the
Effective
Date and will continue through the date set forth on Schedule
3.1(a) (the
"Initial Term"), unless renewed or sooner terminated as provided
herein.
(B) Subject to the provisions of this Article 3, provided that;
(1) no event of default (as defined below) under this Agreement has
occurred and
is continuing; (2) no default (as defined below) under this
Agreement then
exists; (3) the amount of aggregate Net Sales of Approved Licensed
Merchandise
in the Contract Year immediately preceding the final Contract Year
of the
Initial Term shall equal or exceed the amount listed on Schedule
3.1(b) as the
"Renewal Threshold", the term of this Agreement may be renewed by
Licensee, at
its option, for an additional renewal term as set forth in Schedule
3.1(c) (the
"Renewal Term"); provided that Licensee must notify Licensor in
writing of its
intention to renew by the date set forth in Schedule 3.1(d)
3.2 The parties agree that any announcement to the public or trade
of
the termination of this Agreement will be made only by a joint
statement
mutually agreed upon by the parties.
3.3 Each of the following constitutes, an event of default under
this
Agreement:
(A) If Licensee fails to pay any funds owing to Licensor
pursuant
to this Agreement as and when due and such failure is not remedied
within five
(5) business days after Licensee's receipt of notice from
Licensor;
8
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(B) If Licensee or Licensor institutes proceedings to be
adjudicated a voluntary bankrupt or insolvent, or consents to the
filing of a
bankruptcy proceeding against it, or files a petition or answer
seeking
reorganization or arrangement under any bankruptcy act or any other
similar
applicable law of any country, or consents to the appointment of a
receiver or
liquidator or trustee or assignee in bankruptcy or insolvency for
itself, or any
of its property, or makes an assignment for the benefit of
creditors, or is
unable to pay its debts generally as they become due, or shall
cease doing
business as a going concern, or corporate action is taken by it in
furtherance
of any of the foregoing purposes; or
(C) If an order, judgment or decree of a court having
jurisdiction is entered adjudicating Licensee or Licensor, a
bankrupt or
insolvent, or approving, as properly filed, a petition seeking
reorganization of
Licensee or Licensor, or of all or a substantial part of its
properties or
assets under any bankruptcy act or other similar applicable law, as
from time to
time amended, or appointing a receiver, trustee or liquidator of
Licensee or
Licensor, and such order, judgment or decree remains in force,
undischarged and
unstayed for a period of thirty (30) days, or a judgment or lien
for the payment
of money in excess of $250,000 is rendered or entered against it
and the same
remains undischarged or unbonded for a period of thirty (30) days,
or any writ
or warrant or attachment shall be issued or levied against a
substantial part of
its property and the same is not released, vacated or bonded within
thirty (30)
days after issue or levy; or
(D) If Licensee defaults, subject to applicable cure or waiver
provisions, on any obligation in excess of $250,000 which is
secured by a
security interest in Licensed Merchandise; or
(E) If Licensee for any reason discontinues the sale of
Approved
Licensed Merchandise or any substantial portion of its business
operations
resulting in Licensed Merchandise representing more than twenty
percent (20%) of
Licensee's total business, or shall liquidate or dissolve; or
(F) If Licensee, except as otherwise permitted under Section
2.3(a) hereof, sells, without the prior written approval of
Licensor (which
approval shall not be unreasonably withheld or delayed),
(regardless of how
designated) all or substantially all of its assets, or merges or
consolidates
with or into another corporation or entity, or if there is a change
in control
of Licensee, in each case whether in a single transaction or as the
aggregate
result of a series of transactions; or
(G) If Licensee's Net Sales of Approved Licensed Merchandise
fail
to equal or exceed in any two consecutive Contract Years the amount
set forth in
Schedule 3.3(g) as the minimum sales
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<PAGE>
amount for such Contract Year; or
(H) If Licensee fails, in any Contract Year and within three
(3)
months thereafter to pay or expend the amounts required to be paid
or expended
under any provision of Article 7; or
(I) If Off-Price Sales in any Contract Year during the Initial
Term or during any Renewal Term is equal to or greater than the
Off-Price Sales
Cap set forth in Schedule 1.13; or
(J) If Licensee fails in any Contract Year commencing with
Contract Year 4 to ship at least ninety percent (90%) of the orders
received by
it for Licensed Merchandise; or
(K) If Licensee fails to cure a failure to comply with any of
the
quality requirements set forth herein within thirty (30) days after
it has been
notified by Licensor in writing of such failure to comply; or
(L)
If Licensee conducts its business hereunder in a manner which
causes Licensor to send Licensee two or more notices of a default
under this
Section 3.3 in any consecutive 12 month period; or
(M) If Licensee has not begun the bona fide sale of Approved
Licensed Merchandise by the time indicated in the Initial Business
Plan approved
by Licensor, unless a delay in such sales has been approved in
advance in
writing by Licensor; or
(N) If Licensee breaches section11.10 hereof; or
(O) Intentionally omitted
(P) If any representation or warranty of any party contained
herein is or becomes false or misleading in any material respect,
or if any
party fails to perform or observe any term, condition, agreement or
covenant in
this Agreement on its part to be performed or observed, other than
as provided
in Paragraphs (a) through (o) of this Section 3.3, and such default
is not
remedied within thirty (30) days after written notice thereof from
the
non-defaulting party, unless such default is curable but is not
capable of being
cured through the defaulting party's diligent and continuous effort
within such
thirty (30) day period, and such party immediately commences to
cure such
default, and thereafter applies its diligent and continuous best
efforts to cure
such default, and does in fact cure such default within sixty (60)
days of the
initial notice of default.
3.4 As used in this Agreement, the term "default" shall mean
any
condition, event or state
10
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of facts which, after notice or lapse of time, or both, would be an
event of
default. A default by either Movado or Swissam shall be considered
a default by
Licensee.
3.5 If any event of default occurs and is continuing, the
non-defaulting party may, by written notice to the defaulting
party, immediately
terminate this Agreement; provided that in the event of default
under Sections
3.3(b), (c), (d), (e) or (f), this Agreement will terminate
automatically.
3.6 (A) Notwithstanding anything to the contrary herein, if
Licensee
defaults, subject to applicable cure or waiver provisions, on any
obligation
which is secured by a security interest in any Licensed
Merchandise,
automatically and simultaneously therewith Licensee no longer shall
have the
right to sell or otherwise transfer Licensed Merchandise or
otherwise use the
Licensed Mark(s) until (i) it notifies Licensor of the occurrence
of such
default on any such obligation; and (ii) Licensor notifies it that
Licensor has
elected to waive its right under Section 3.3(d) to terminate this
Agreement by
reason thereof.
(B) No assignee for the benefit of creditors, custodian,
receiver, trustee in bankruptcy, sheriff or any other officer of
the court or
official charged with taking over custody of Licensee's assets or
business may
continue this Agreement or exploit or in any way use the Licensed
Mark(s) if
this Agreement terminates as a result of as default under Sections
3.3(b) or
(c).
(C) In the event that, pursuant to the Bankruptcy Code or any
amendment or successor thereto (the "Code"), a trustee in
bankruptcy of Licensee
or Licensee, as debtor, is permitted to assume this Agreement and
does so and,
thereafter, desires to assign this Agreement to a third party,
which assignment
satisfies the requirements of the Code, then the trustee or
Licensee, as the
case may be, must notify Licensor of same in writing. Said notice
must set forth
the name and address of the proposed assignee, the proposed
consideration for
the assignment and all other relevant details thereof. The giving
of such notice
will be deemed to constitute the grant to Licensor of an option to
have this
Agreement assigned to it or to its designee for such consideration,
or its
equivalent in money, and upon such terms as are specified in the
notice. The
aforesaid option may be exercised only by written notice given to
the trustee or
Licensee, as the case may be, by Licensor within fifteen (15) days
after
Licensor's receipt of the notice from such party, or within such
shorter period
as may be deemed appropriate by the court in the bankruptcy
proceeding. If
Licensor fails to give its notice to such party within the said
exercise period,
such party may complete the assignment referred to in its notice,
but only if
such assignment is to the entity named in such notice and for
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<PAGE>
the consideration and upon the terms specified therein. Nothing
contained herein
shall be deemed to preclude or impose any rights which Licensor may
have as a
creditor in any bankruptcy proceeding.
4.
DISTRIBUTION.
4.1 The parties acknowledge and agree it is the intention that
Approved Licensed Merchandise be sold by Licensee and distributors
approved in
writing in advance by Licensor in its sole discretion ("Approved
Distributors")
(i) for resale to consumers only by retailers whose location,
merchandising and
overall operations are consistent with the high quality of products
sold under
the Licensed Mark(s) and the reputation, image and prestige of the
Licensor,
Juicy Couture, Inc. and LCI's name and of the Licensed Mark(s) and
(ii) to
corporate accounts for use as premium and incentive awards upon the
prior
written approval of Licensor, which may be withheld in its sole
discretion. All
affiliates of Licensee shall be deemed Approved Distributors.
Licensee and
Approved Distributors may sell first quality, in-season items of
Approved
Licensed Merchandise only to such retailers and corporate accounts
operating in
the Territory approved in advance by Licensor (which approval shall
not be
unreasonably withheld or delayed) or retailers to which Licensor or
any of its
affiliates or licensees sells first quality, in-season product
bearing the
Licensed Marks ("Approved Full Price Customers"). Licensor agrees
that the
customers listed on Schedule 4.1 are deemed to be Approved Full
Price Customers
as of the date hereof. Such Schedule may be modified or
supplemented by Licensor
in its reasonable determination from time to time on no less than
thirty (30)
days prior written notice to Licensee. Licensee must submit to
Licensor a "new
account" application to obtain approval for new accounts. Except as
explicitly
set forth above in this Section 4.1, Licensee shall not accept
orders for first
quality, in-season Licensed Merchandise from any other customers
without
Licensor's prior express written consent (which shall not be
unreasonably
withheld or delayed), and Licensee shall consistently monitor its
customers to
assure compliance with the terms of this Agreement.
4.2 Licensee may sell seconds or end-of-season closeouts of
Licensed
Merchandise through off-price customers operating in the Territory
approved in
advance in writing by Licensor (which approval shall not be
unreasonably
withheld or delayed) ("Approved Off-Price Customers"). Licensor
agrees that the
off-price customers listed on Schedule 4.2 are Approved Off-Price
Customers as
of the date hereof for sales of seconds and end-of-season
close-outs of Approved
Licensed Merchandise; such Schedule may be modified or supplemented
by Licensor
in its reasonable determination from time to time on no less than
thirty
12
<PAGE>
(30) days prior written notice to Licensee. All affiliates of
Licensee operating
outlet stores shall be deemed Approved Off-Price Customers,
provided that
Licensed Merchandise shall not represent * . Except as explicitly set
forth
above in this Section 4.2, Licensee will not accept orders for
seconds or
close-outs of Licensed Merchandise from any other customers without
Licensor's
prior express written consent (which shall not be unreasonably
withheld or
delayed), and Licensee shall consistently monitor the customers to
assure
compliance with the terms of this Agreement. Licensor, Juicy
Couture, Inc., and
their parent LCI and their respective affiliates and licensees have
a right of
first refusal to purchase any or all of such seconds or
end-of-season Licensed
Merchandise prior to it being offered for sale to Approved
Off-Price Customers.
Licensee will provide Licensor with prompt written notice of the
proposed terms
of any offer to sell to third parties such Approved Merchandise,
and Licensor,
Juicy Couture, Inc. and LCI and their respective affiliates and
licensees will
have ten (10) business days from its receipt of such notice to
exercise its
right of first refusal by providing written notice to Licensee of
its desire to
purchase such Approved Licensed Merchandise. Such right shall apply
to each
price point at which Licensee offers such Licensed Merchandise. All
seconds and
irregulars of Licensed Merchandise offered for sale shall be marked
as such.
4.3 Licensee will not make sales of Licensed Merchandise to any
Person
(i) which it knows, or reasonably should have known, intends to
sell such
Licensed Merchandise outside of the channels of distribution
described in
Section 4.1 or 4.2 above or to a Person other than the ultimate
customer, or
(ii) which is not an Approved Distributor, Approved Full-Price
Customer or an
Approved Off-Price Customer. Licensee will take all reasonable
efforts to
prevent any Licensed Merchandise from being distributed, either
directly or
indirectly, to any Person located outside of, or who Licensee
knows, or
reasonably should have known, intends to resell such Licensed
Merchandise
outside of, the countries where Licensee is then authorized to
distribute
Licensed Merchandise. Licensee will cease selling Licensed
Merchandise to any
store, distributor or other customer, including previously approved
customers,
upon the reasonable request of Licensor or in the event that any
such store,
distributor or other customer is not selling Licensed Merchandise
in accordance
with the terms of this Agreement; provided that Licensee shall not
be required
to cease selling to any store, distributor or other Approved
Customer if (i) it
is the first time such customer has failed to sell Licensed
Merchandise in
accordance with the terms of this Agreement and (ii) such customer
cures such
* CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY
WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
13
<PAGE>
failure within thirty (30) days of notice thereof.
4.4 (A) Licensee will sell to Licensor and its affiliates such
items
of Licensed Merchandise as may be ordered by Licensor and its
affiliates from
time to time solely for resale direct to consumers, including on
the internet,
through catalogs and in retail and outlet stores wholly or
partially owned and
operated by Licensor, Juicy Couture, Inc. or LCI or any of their
affiliates, as
evidenced by timely placed, non cancelable purchase orders. All
such purchases
shall be on terms no less favorable than those made available to
Licensee's
comparable customers, including a high priority delivery schedule.
The price to
be paid by Licensor and its affiliates for such orders of Licensed
Merchandise
will be at an arm's length price to be agreed upon in good faith by
the parties,
* There will be no minimum purchase
or order requirements with respect to any
such orders, and orders submitted by Licensor's international
retail licensees
are subject to Licensee's reasonable credit requirements and terms
of sale to be
agreed upon in good faith at arms length by the parties. All
products shipped to
such stores will be "floor ready" and include all hang tags (with
UPC and
suggested retail price).
(B) Licensee or its Approved Distributors, at Licensee's
option,
shall sell Licensed Merchandise to international retail and
distribution
partners of Licensor, Juicy Couture, Inc. and LCI solely for sale
in retail
stores operating under the Licensed Marks at a price and upon terms
to be agreed
upon in good faith at arm's length by the parties.
4.5 Licensee will only offer for sale or sell Approved Licensed
Merchandise at wholesale to Approved Full Price Customers, Approved
Off Price
Customers, and Approved Distributors as permitted under Sections
4.1 and 4.2,
and will not offer for sale or sell any Licensed Merchandise to or
through any
other customers, channels or outlets, including the internet,
television,
catalogs or specialty retail or outlet stores other than those
operated by
Licensor, Juicy Couture, Inc. or LCI or their affiliates or
international retail
licensees.
4.6 Licensee is permitted to enter into arm's length agreements
with
Juicy Couture, Inc.'s sales representatives to solicit orders of
Licensed
Merchandise on behalf of Licensee.
4.7 No Licensed Merchandise may be consigned to any retailer
without
the prior written approval of Licensor.
* CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY
WITH THE SEC
PURSUANT TO RULE 24b-2 OF THE 1934 ACT
14
<PAGE>
5.
ORGANIZATION. Licensee will at all times employ such competent
and
qualified personnel as are necessary to fulfill its obligations
under this
Agreement. Without limiting the foregoing, Licensee will employ
individual(s) in
the position(s) set forth in Schedule 5, each with an appropriate
staff and each
of whom will work exclusively for the business licensed hereunder.
The hiring of
the Brand President and the Director of Product Development is
subject to the
prior approval of Licensor, which approval will not be unreasonably
withheld or
delayed, and such persons will at all times be acceptable to
Licensor in its
reasonable commercial judgment and will be located in the United
States.
Licensee will make all of its personnel available by appointment
during normal
business hours for consultation with representatives of
Licensor.
6.
STANDARDS AND QUALITY; MERCHANDISE APPROVALS.
6.1 (A) Licensee acknowledges that the Licensed Mark(s) and names
of
Juicy Couture, Inc., Licensor and LCI have established prestige and
goodwill,
are well recognized in the mind of the trade and the public, and
have a
reputation for high standards and quality. Licensee will maintain
the LCI
Standards in all of its operations under this Agreement. Licensee
and its
affiliates, subcontractors, suppliers and distributors will comply
with the
Standards of Engagement.
(B) All items of Licensed Merchandise will reflect the LCI
Standards and the general lifestyle themes and concepts as
expressed by Licensor
to Licensee from time to time. Included within each collection will
be, at
minimum and as directed by Licensor (i) a number of items of
Licensed
Merchandise which specifically coordinate and are capable of
being
cross-merchandised with specific products bearing the Licensed
Mark(s), and (ii)
an appropriate mix of fashion and basic items which will include a
reasonable
number of styles, which styles will reflect diverse fabrications
and styling,
all as mutually agreed upon by the parties in advance for the
collection to be
competitive and complete.
(C) Licensee will use all technology and techniques available
to
Licensee for embodiment within Licensed Merchandise to the extent
such use is
commercially reasonable. Licensee will provide Licensor with a
description of
Licensee's research and development capacities, processes, new
product
constructions, designs and materials and the most up-to-date
information
(whether or not proprietary). Such description must be of
sufficient detail to
allow Licensor to make an informed decision about viability for use
in
connection with Licensed Merchandise and must be provided to
Licensor as soon as
reasonably practical in the course of development, but in any
event, in
sufficient time for Licensor and Licensee to be able
15
<PAGE>
to incorporate at least simultaneously with any commercial use in
the Territory
by Licensee or any affiliate for itself or any third party, such
research and
development into Approved Licensed Merchandise in a manner
consistent with high
quality products, so that Licensor is assured of having the option
of having any
new or improved product, technology or technique available to
Licensee embodied
in Licensed Merchandise. Such information will be deemed to be
confidential
information under Section 14. Upon termination of this Agreement,
Licensee will
provide Licensor access to, and the right to use, any technical
information
necessary for Licensor to continue the manufacture of any item of
Licensed
Merchandise.
6.2 (A) By written notice to Licensor (a "Product Proposal
Notice"),
Licensee will propose to Licensor a line of Merchandise for each
selling season
to be manufactured and sold as Approved Licensed Merchandise
hereunder. Each
Product Proposal Notice will set forth a proposed Line Opening Date
which will
not be less than twelve (12) months after the date of the
applicable Product
Proposal Notice. Licensee will provide Licensor with such
additional information
with respect to the matters referred to in any Product Proposal
Notice
(including marketing studies and the like) promptly upon Licensor's
request. Not
less than twelve (12) months prior to the Line Opening Date
proposed in a
Product Proposal Notice, Licensee will provide Licensor with the
following: (i)
a program of suggested, broad design themes and concepts
("Merchandise
Concepts"), which will include such items as coloration, materials,
sketches,
hardware, trim and other Specifications (as defined below), for
items of
Merchandise proposed for inclusion within the relevant seasonal
collection which
Licensee believes may be appropriate for manufacture and sale as
Licensed
Merchandise hereunder; (ii) a program of suggested design themes
and concepts
with respect to Packaging (as defined below) for items of
Merchandise for which
Merchandise Concepts are being supplied ("Design Concepts"); and
(iii) a
production calendar setting forth the timing for approval of
Merchandise
Concepts, Design Concepts, Initial Samples and Final Samples,
assuming completed
production by the Line Opening Date, and providing Licensor
sufficient time to
provide comments thereon and which shall be consistent with the
product calendar
attached hereto as Schedule 6.2(a). Each such presentation of
Merchandise
Concepts will include concepts and related materials for a complete
lifestyle
range of Merchandise reflecting the Licensor's brand lifestyles and
shall
include concepts and related materials sufficient in number to
enable Licensee
to produce sufficient styles and SKUs of Approved Licensed
Merchandise to meet
the sales volume projections contained in its then current Business
Plan, and
the applicable Sales Minimum (as hereinafter
16
<PAGE>
defined). The Merchandise Concepts and Design Concepts will be
embodied in
verbal, written and pictorial descriptions and presentation
materials, including
storyboards, together with any other sketches and materials as
Licensee deems
appropriate and shall be subject to Licensor's approval.
(B) At any time or from time to time, Licensor may, in its sole
discretion by notice to Licensee, advise Licensee that Licensor
desires a
particular item or items of Merchandise to be manufactured and sold
as Approved
Licensed Merchandise hereunder, and Licensee will use all
commercially
reasonable efforts to incorporate any such item into the line of
Licensed
Merchandise.
(C) Promptly after Licensor's receipt of Merchandise Concepts
and
Design Concepts, appropriate representatives of Licensor and
Licensee shall meet
at such place in the Los Angeles metropolitan area as the parties
designate, to
confer thereon and on any of Licensor's proposed designs. The
parties will make
such modifications thereon as may be required to meet Licensor's
initial
approval with respect thereto.
(D) Licensee will, as soon as is practicable but in no event
less
than one (1) month prior to the appropriate Line Opening Date,
prepare and
present to Licensor, or its designee, at such place as Licensor may
in its
discretion designate, at Licensee's sole cost and expense, an
initial sample
("Initial Sample") in respect of each Design Concept and
Merchandise Concept
approved by Licensor under Section 6.2(a). All Initial Samples are
subject to
Licensor's approval. Licensor and Licensee will make their
appropriate
representatives available to meet, at such place in the Los Angeles
metropolitan
area as the parties designate, promptly after Licensor's receipt of
Initial
Samples, to confer with respect to Licensee's presentation of
Initial Samples,
and Licensee will make such modifications therein as may be
required to meet
Licensor's initial approval with respect thereto. Revised Samples
will be
submitted for Licensor's approval at least one (1) week prior to
the Line
Opening Date.
(E) As used herein "Final Sample" means and includes a Sample
of
an item of Licensed Merchandise for which an Initial Sample or
Revised Sample
has been approved by Licensor (or a Sample provided by Licensor to
Licensee
under the provisions of Section 6.3 hereof), which shall embody all
of the
specifications (the "Specifications"), including the workmanship,
quality,
design, dimensions, styling, detail, material, colors and the like,
as are to be
used in the actual commercial production of each item of Approved
Licensed
Merchandise to be based on said Final Sample.
17
<PAGE>
(F) Licensor's approval of the Final Samples for all items of
Licensed Merchandise will be evidenced by a written list, duly
signed by a
representative of Licensor, setting forth those Samples which have
been approved
for production. Samples so approved will be deemed "Final Samples"
in respect of
such collection. Approval of any and all Samples as Final Samples
is in the sole
discretion of Licensor. Licensor will respond as promptly as
reasonably
practicable (and in any case within twenty (20) days from
submission) to any
written request from Licensee for approval of a Sample; any such
request must be
addressed to the attention of such person and at such address as
Licensor may,
from time to time, designate (any change thereon to be effective
only in
accordance with Section 20 hereof). Any such approval will continue
in effect
indefinitely thereafter, provided that any such approval may be
withdrawn by
Licensor upon not less than six (6) months prior written notice to
Licensee, and
any inventory of Licensed Merchandise manufactured prior to the
effective date
of the withdrawal of approval may be sold as closeouts as set forth
in Section
4.2 hereof.
(G) In the event that Licensor rejects a particular Sample or
Samples, Licensor will notify Licensee of its reasons for rejection
and provide
Licensee with suggestions for modifying the rejected Sample(s).
Licensee will,
as promptly as practicable, correct said Sample(s), resubmit said
Sample(s) to
Licensor and seek Licensor's approval under the same terms and
conditions as set
forth with respect to the first submission of such Samples.
6.3 Licensor may provide Licensee with a Sample in respect of any
item
or items of Licensed Merchandise. Such Sample will, for all
purposes, be deemed
a Final Sample hereunder unless Licensee and Licensor mutually
agree to the
contrary within twenty (20) days after the date of Licensee's
receipt thereof.
6.4 Licensee will use its best efforts, through the submission of
a
sufficient number of Merchandise Concepts, Design Concepts and
Initial Samples,
and otherwise, to assure that the offering of Licensed Merchandise
is at all
times substantially competitive with the Merchandise offerings of
other fashion
brands.
6.5 Licensee will present for sale, through showings of each
collection to the trade and otherwise, all items of Licensed
Merchandise in
respect of which Final Samples have been approved by Licensor, in
accordance
with the terms hereof. Licensee will use all commercially
reasonable efforts to
18
<PAGE>
promote the sale and distribution of all items of Licensed
Merchandise in
respect of which Final Samples have been approved by Licensor, in
accordance
with the terms hereof.
6.6 The Approved Licensed Merchandise manufactured and sold by
Licensee will strictly adhere, in all respects, including with
respect to the
Specifications therefore, to the Final Samples therefore approved
by Licensor.
6.7 All Licensed Merchandise manufactured by or on behalf of
Licensee
will be suitable for its intended use and will not be designed or
produced so as
to be inherently dangerous. Without limiting the foregoing, (i) no
Licensed
Merchandise shall contain or be packaged in any injurious,
poisonous,
deleterious or toxic substance or material, (ii) no Licensed
Merchandise will be
adulterated or mislabeled, and (iii) all Licensed Merchandise and
all
manufacturing methods used to produce the same will meet or exceed
all
applicable industry and governmental standards established in
respect of safety.
Licensee will assure that all laws, statutes, rules, regulations,
and industrial
or governmental standards and requirements, now in force or
hereafter adopted,
which may be applicable to the manufacture, advertising,
merchandising,
promotion, importation, sale and distribution of Licensed
Merchandise, will be
strictly observed and complied with, notwithstanding the fact that
Licensor may
have expressly or implicitly approved any item or conduct with
respect thereto.
Licensee will at its own cost do such testing of Licensed
Merchandise as may be
required under applicable law or as is customary and standard in
the industry,
including quality testing. Licensee will supply Licensor, promptly
after request
from time to time, with (i) results of any testing of Licensed
Merchandise
performed by Licensee, (ii) copies of all certifications, if any,
provided by
all manufacturers and importers of Merchandise, and (iii) a copy of
Licensee's
warranty with respect to the Licensed Merchandise. Costs and
expenses relating
to any testing expressly required by Licensor will be shared
equally by Licensor
and Licensee; provided, however, that if any such test results or
if the results
of any other testing performed by Licensee indicates that any
tested Merchandise
does not comply with the provisions of this paragraph, Licensee
will (A)
forthwith pay all costs and expenses incurred in connection with
such testing,
and (B) pay all expenses of any additional testing which Licensor
reasonably
requests during the two (2) year period following the date on which
Licensor
received the results of the test indicating said sub-standard
performance.
Without limiting the foregoing, all Licensed Merchandise produced
hereunder must
comply with all reasonable standard of quality guidelines
formulated by Licensor
from time to time and with all applicable statutes, rules and
19
<PAGE>
regulations. Without limiting the foregoing, Licensee must complete
and submit
to Licensor the Licensee Procedures Checklist attached as Schedule
6.7 within
thirty (30) days of the end of each Contract Year.
6.8 Licensee will furnish Licensor, free of charge, with the
following
for each of the five (5) lines developed each year hereunder: (i)
two (2)
complete sets of production samples (which may be without moving
parts) for
Licensor's London and New York showrooms; (ii) five (5) timepieces
of their
choice for each of the co-presidents of Juicy Couture, Inc. (ten
(10) timepieces
total); and (iii) a reasonable number of timepieces for celebrity
placement.
6.9 Licensor has, subject to the notice provision set forth in
Section
6.2(f), the continuing right of approval of all items of Licensed
Merchandise,
including the Specifications therefor, to ensure that all Licensed
Merchandise
manufactured, sold or distributed is (i) in compliance with the
Final Samples
therefore; (ii) of the highest quality at its price points; (iii)
consistent
with the LCI Standards, and (iv) otherwise in accordance with the
terms of this
Agreement. In connection with the production of Licensed
Merchandise, Licensee
will use only such materials as Licensor will have previously
approved. Licensed
Merchandise manufactured and sold by Licensee shall strictly adhere
in all
respects to the Specifications, the LCI Standards and the
production standards
approved by Licensor.
6.10 In the event that any Licensed Merchandise is not being
manufactured or sold in accordance with the provisions hereof,
Licensor may
notify Licensee thereof in writing, and Licensee will, as promptly
as
practicable, take such action with respect thereto as Licensor
deems appropriate
including, if reasonably requested, the immediate recall of such
items of
Merchandise from Licensee's customers and ultimate consumers for
inspection
and/or destruction.
6.11 Licensor and its representatives have the right, upon
reasonable
advance notice to Licensee and during normal business hours, to
inspect at
Licensor's expense all facilities utilized by Licensee, its d
