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LICENSE AGREEMENT
BETWEEN
TOMMY HILFIGER LICENSING, INC.
AND
T.H.M.J. INCORPORATED
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PREMISES.................................................................. 1
ARTICLE 1. DEFINITIONS.................................................... 1
1.1 Affiliates of Licensee.............................................. 1
1.2 Annual Period....................................................... 1
1.4 Concessions......................................................... 1
1.5 Close-Outs.......................................................... 1
1.8 Gross Sales......................................................... 2
1.9 Guaranteed Minimum Royalty.......................................... 2
1.10 Inventory........................................................... 2
1.11 Inventory Schedule.................................................. 2
1.13 Labels.............................................................. 2
1.14 Licensed Products................................................... 2
1.16 Minimum Sales Level................................................. 2
1.17 Net Sales........................................................... 2
1.19 Percentage Royalty.................................................. 3
1.22 Retail Stores....................................................... 3
1.23 Seasonal Collections................................................ 3
1.24 Seconds............................................................. 3
1.26 Subcontractor....................................................... 3
1.27 Supplier............................................................ 3
1.28 Term................................................................ 4
1.29 Territory........................................................... 4
1.30 Third Party Manufacturer............................................ 4
1.31 Trade Secrets....................................................... 4
1.32 Trademarks.......................................................... 4
ARTICLE 2. GRANT.......................................................... 4
2.1 License............................................................. 4
2.2 Reservations........................................................ 4
ARTICLE 3. TERM OF THE AGREEMENT.......................................... 5
3.1 Term................................................................ 5
ARTICLE 4. ORGANIZATION.................................................. 6
4.1 Organization........................................................ 6
ARTICLE 5. APPROVALS...................................................... 6
5.1 Approvals........................................................... 6
ARTICLE 6. DESIGN AND MANUFACTURING....................................... 7
6.1 Design and Production Plan.......................................... 7
6.2 Overall Commitment to Quality....................................... 7
6.3 Samples of Extension Products....................................... 7
6.4 Non-Conforming Products............................................. 7
6.5 Withdrawal of Approval.............................................. 8
6.6 Assistance by Hilfiger.............................................. 8
6.7 Ownership of Designs................................................ 8
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6.8 Cost of Designs..................................................... 9
6.9 Code of Conduct..................................................... 9
6.10 Monitoring Program.................................................. 9
6.11 Third Party Manufacturing Agreement................................. 10
6.12 Information About Third Party Manufacturers, Etc.................... 10
6.13 Compliance with Applicable Laws - Generally......................... 11
6.14 Inspection of Facilities............................................ 11
6.15 Meetings............................................................ 11
ARTICLE 7. SALES AND MARKETING............................................ 11
7.1 Best Efforts........................................................ 11
7.2 INTENTIONALLY OMITTED............................................... 12
7.3 Certification....................................................... 12
7.4 Sales/Marketing Plans............................................... 12
7.5 Minimum Sales Levels................................................ 12
7.6 Certain Sales Excluded.............................................. 13
7.7 Approved Customers.................................................. 13
7.8 Prohibited Sales.................................................... 14
7.9 Showrooms and In-Store Shops........................................ 14
7.10 Disposal of Seconds and Close-Outs.................................. 15
ARTICLE 8. ADVERTISING.................................................... 16
8.1 Advertising and Advertising Plans. ................................ 16
8.2 Advertising Expeditures............................................. 16
8.3 Approval of Packaging, Labeling and Advertising..................... 18
8.4 Use of Trademark on Invoices, etc................................... 18
8.5 Launch.............................................................. 19
8.6 Trade Shows......................................................... 19
8.7 Public Announcements................................................ 19
ARTICLE 9. ROYALTIES AND RELATED FEES..................................... 19
9.1 Guaranteed Minimum Royalty.......................................... 19
9.2 Percentage Royalty.................................................. 20
9.3 Royalty Statements.................................................. 20
9.5 No Set-Off.......................................................... 21
ARTICLE 10. MANNER OF PAYMENT, INTEREST, BOOKS AND RECORDS,
INSPECTION.......................................................... 21
10.1 Manner of Payment................................................... 21
10.2 Interest on Late Payments........................................... 21
10.3 Taxes............................................................... 21
10.4 Books and Records................................................... 21
10.5 Underpayments....................................................... 22
10.6 Financial Statements................................................ 22
ARTICLE 11. REPRESENTATIONS AND WARRANTIES ............................... 23
11.1 Representations and Warranties of Licensee.......................... 23
ARTICLE 12. CONFIDENTIALITY AND HIRING OF EMPLOYEES....................... 23
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12.1 Confidentiality..................................................... 23
12.2 Hiring of Hilfiger's Employees...................................... 24
ARTICLE 13. TRADEMARKS AND COPYRIGHTS..................................... 24
13.1 Rights to the Trademark............................................. 24
13.2 Protecting the Trademarks........................................... 24
13.3 Compliance with Notice and Other Requirements....................... 24
13.4 Ownership of Copyrights............................................. 24
13.5 Infringement........................................................ 25
13.6 Counterfeit Protection.............................................. 25
13.7 Use of Other Trademarks............................................. 25
13.8 Use of Trademarks on Invoices, etc.................................. 26
13.9 Monitoring.......................................................... 26
ARTICLE 14. INSOLVENCY.................................................... 26
14.1 Effect of Proceeding in Bankruptcy, etc............................. 26
14.2 Rights Personal..................................................... 26
14.3 Trustee in Bankruptcy............................................... 26
ARTICLE 15. EXPIRATION AND TERMINATION.................................... 26
15.1 Other Rights Unaffected............................................. 27
15.2 Termination Without Right to Cure................................... 27
15.3 Termination with Right to Cure...................................... 27
15.4 Effect of Expiration or Termination................................. 28
15.6 Freedom to License.................................................. 30
15.7 Royalty Payments on Termination..................................... 30
ARTICLE 16. RELATIONSHIP BETWEEN THE PARTIES.............................. 30
16.1 No Agency........................................................... 31
ARTICLE 17. THE STORES.................................................... 32
17.1 Design of the Stores................................................ 32
17.2 Construction........................................................ 32
17.3 Costs............................................................... 32
17.4 Maintenance......................................................... 32
17.5 Alterations......................................................... 33
17.6 Future Renovations.................................................. 33
17.7 Store Appearance.................................................... 33
17.8 Quality............................................................. 32
17.9 Inventories......................................................... 32
17.10 Exclusivity......................................................... 32
17.11 Packaging........................................................... 32
17.12 Store Specifications................................................ 32
17.13 Visits By Licensor.................................................. 33
17.14 Image............................................................... 33
17.15 Permits............................................................. 33
17.16 Expenses............................................................ 33
17.17 Business Practices.................................................. 33
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17.18 Type of Sales....................................................... 33
17.19 Employee Attire..................................................... 34
17.20 Inspections......................................................... 34
ARTICLE 18. INDEMNIFICATION AND INSURANCE................................. 35
18.1 Indemnification by Licensee......................................... 35
18.2 Notice of Suit or Claim............................................. 35
18.3 Indemnification by Hilfiger......................................... 35
ARTICLE 19. NOTICES....................................................... 36
19.1 Manner of Notice.................................................... 36
ARTICLE 20. SUSPENSION OF OBLIGATIONS..................................... 37
20.1 Suspension of Obligations (Force Majeure)........................... 37
ARTICLE 21. MISCELLANEOUS................................................. 37
21.1 Benefit............................................................. 37
21.2 Entire Agreement; Amendment......................................... 37
21.3 Non-Waiver.......................................................... 37
21.4 No Assignment Without Consent....................................... 37
21.5 Sale of Assets...................................................... 38
21.6 Sale of Stock/Interest.............................................. 38
21.7 Assignment by Hilfiger.............................................. 38
21.8 Public Offering..................................................... 38
21.9 Severability........................................................ 38
21.10 Governing Law....................................................... 39
21.11 Jurisdiction........................................................ 39
21.12 Exhibits............................................................ 39
21.13 Headings............................................................ 39
21.14 Counterparts........................................................ 40
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EXHIBITS
EXHIBIT A TRADEMARKS
EXHIBIT B LICENSED PRODUCTS
EXHIBIT C ORGANIZATION CHART
EXHIBIT D DESIGN AND PRODUCTION PLAN
EXHIBIT E APPROVAL FORM
EXHIBIT F CODE OF CONDUCT
EXHIBIT G THIRD PARTY MFR CERTIFICATION
EXHIBIT H THIRD PARTY MFR AGREEMENT
EXHIBIT I SUPPLIER CERTIFICATION
EXHIBIT J ILLUSTRATIVE LIST OF COMPETITORS
EXHIBIT K ROYALTY STATEMENT
EXHIBIT L CERTIFICATION
EXHIBIT M ADVERTISING EXPENDITURE FORM
EXHIBIT N ADVERTISING APPROVAL FORM
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LICENSE AGREEMENT
-----------------
THIS AGREEMENT is entered into as of the 1/st/ day of January, 2001, by
and between TOMMY HILFIGER LICENSING, INC., a Delaware corporation, having an
address at 913 N. Market Street, Wilmington, Delaware 19801 ("Hilfiger") and
T.H.M.J. INCORPORATED, a Japan corporation, having its offices at 8-20
Nishigotanda 8-chome, Shinagawa-ku, Tokyo, Japan ("Licensee"), with reference to
the following premises.
PREMISES
A. Hilfiger's Trademarks (as defined below) are famous and valuable, and are
associated with substantial goodwill in connection with apparel and related
products.
B. Licensee recognizes the fame, value of, and goodwill associated with the
Trademarks and that all rights to the Trademarks, and the goodwill associated
therewith, belong exclusively to Hilfiger.
C. Licensee desires to have the license to use the Trademarks, on and in
connection with the manufacture and distribution of Licensed Products (as
defined below) and the operation of retail stores for the sale of Licensed
Products in Approved Locations (as defined below) in the Territory (as defined
below).
D. Hilfiger is willing to grant such License subject to the terms and
conditions set forth below.
E. In consideration of these premises and the mutual covenants herein
expressed, and for other good consideration, which the parties hereby
acknowledge, the parties hereby agree as follows.
ARTICLE 1. DEFINITIONS
1.1 Affiliates of Licensee means all persons and business entities that now
or hereafter control, or are owned or controlled, directly or indirectly, by
Licensee, or are under common control with Licensee.
1.2 Annual Period means each twelve-month period beginning on January 1 and
ending on December 31.
1.3 Approved Locations means the store locations in the Territory
specifically approved by Hilfiger in writing in accordance with Paragraph 5.2.
1.4 Concessions means independent retail stores located within department
stores, which are operated by Licensee. Concessions shall not include in-store
shops operated by retailers. Sales from concessions shall require the payment
of Wholesale Percentage Royalty.
1.5 Close-Outs means first quality Licensed Products that under applicable
industry standards cannot be or are not sold to regular customers.
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1.6 Exchange Rate means the spot rate of exchange prevailing at each
respective due date for all payments due to Hilfiger under this agreement. The
spot rate of exchange shall be determined by quotation from Chase Manhattan
Bank's Foreign Exchange Desk in New York or such other bank as selected by
Licensee and deemed acceptable to Hilfiger.
1.7 Extension Products means Licensed Products which by virtue of their style
or fit are not the same as products manufactured and sold by Hilfiger's U.S.
licensee, Tommy Hilfiger U.S.A., Inc.
1.8 Gross Sales means the invoiced amount of Licensed Products shipped by
Licensee, before any deductions for allowances, discounts and returns, insurance
and freight as are referred to in Paragraph 1.17.
1.9 Guaranteed Minimum Royalty means the minimum royalties that Licensee must
pay in each Annual Period, as set forth in Paragraph 9.1.
1.10 Inventory means Licensee's inventory of Licensed Products and of related
work in progress.
1.11 Inventory Schedule means a complete and accurate schedule of Inventory.
1.12 Lease means any lease or other document granting Licensee the right to
occupy the facility for any of its Stores.
1.13 Labels means all labels, tags, packaging material, tickets, advertising
and promotional materials and all other forms of identification affixed to or
connected with the Licensed Products that bear the Trademarks.
1.14 Licensed Products means only those products listed in Exhibit B attached
hereto, that bear the Trademarks under authorization from Hilfiger. Licensee
acknowledges that the definition of Licensed Products may change and may not be
amenable to precise delineation. Licensee agrees that if there is a dispute
over the definition of Licensed Products, Hilfiger's written determination shall
be conclusive and binding on Licensee, without legal recourse.
1.15 Manufactured Products means Extension Products and other Licensed
Products which, with the prior written consent of Hilfiger, are manufactured by
or for Licensee through sources approved by Hilfiger other than Tommy Hilfiger
(Eastern Hemisphere) Limited ("THEH") and Tommy Hilfiger U.S.A., Inc. ("THUSA").
1.16 Minimum Sales Level means the minimum Net Sales (as defined below) of
Licensed Products that Licensee must achieve during each Annual Period, as set
forth in Paragraph 7.5.
1.17 Net Sales means the Gross Sales of Licensed Products, including but not
limited to, Seconds and Close-Outs, to retailers who are not Affiliates of
Licensee, less only: (a) returns that Licensee actually authorizes and receives,
(b) allowances (defined as credits to a customer after delivery,
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including credits for returns) that Licensee actually grants in writing, and (c)
trade discounts (defined as reductions in the list wholesale selling price that
are customary in the trade) that Licensee actually grants in writing prior to
delivery. For the purpose of computing Net Sales, the deductions from the Gross
Sales for returns, allowances and trade discounts may not exceed * percent of
the Gross Sales of Licensed Products shipped in any Annual Period.
1.18 Outlet Stores means free-standing retail locations from which Licensee
shall be permitted to sell Licensed Products to retail customers at
predominantly discount prices.
1.19 Percentage Royalty means the amount of money that Licensee will pay to
Hilfiger in consideration for the grant of this license, including Wholesale
Percentage Royalty and Retail Percentage Royalty.
1.20 Retail Percentage Royalty means Percentage Royalty arising from Retail
Sales of Licensed Products, which amount is * percent of the Gross Revenues
derived from such Retail Sales without deduction.
1.21 Retail Sales means the sales price of Licensed Products charged to retail
customers as permitted hereunder, less only returns that Licensee actually
authorizes and receives.
1.22 Retail Stores means free-standing retail locations from which Licensee
shall be permitted to sell Licensed Products to retail customers at
predominately full retail prices.
1.23 Seasonal Collections means the collection of Licensed Products that
Licensee will present to the market at least four (4) times per year in
accordance with Paragraph 6.1.
1.24 Seconds means damaged, imperfect, defective or otherwise non-first
quality Licensed Products.
1.25 Stores means Retail Stores and Outlet Stores. Stores shall specifically
not include in-store shops operated by the retailers or Concessions.
1.26 Subcontractor means an entity or an individual hired by a Third Party
Manufacturer (as defined below) to perform manufacturing in relation to this
Agreement.
1.27 Supplier means an individual or entity that produces components for the
Licensed Products, and provides such components to the manufacturer in order to
assemble the finished Licensed Products, provided that such individual or entity
does not contribute further to the manufacture of the Licensed Products.
Examples of a supplier include, but are not limited to, those who manufacture
________________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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fabric/trim, yarn, buttons, or zippers.
1.28 Term means the duration of this Agreement, as set forth in Paragraph 3.1,
including, if not expressly excluded, all Extensions (as defined below), if any.
1.29 Territory means Japan.
1.30 Third Party Manufacturer means an entity or an individual which or whom
Licensee either hires or pays to manufacture the License Products.
1.31 Trade Secrets means any and all information that derives to its owner
independent economic value, actual or potential, from not being generally known
to the public or to other persons who can obtain economic value from its
disclosure or use, and that is the subject of efforts that are reasonable under
the circumstances to maintain its secrecy.
1.32 Trademarks means only the trademarks set forth in Exhibit A attached
hereto.
1.33 Wholesale Percentage Royalty means Percentage Royalty arising from the
sale of Licensed Products to wholesale customers, other than Stores, which
amount is * percent of wholesale Net Sales. The Wholesale Percentage Royalty
will be based on the bona fide wholesale prices that Licensee charges for
Licensed Products to independent retailers in arms' length transactions. If
Licensee sells Licensed Products to Affiliates of Licensee, the Wholesale
Percentage Royalty will be on such bona fide wholesale price, irrespective of
Licensee's internal accounting treatment of such sales.
ARTICLE 2. GRANT
2.1 License. Hilfiger hereby grants to Licensee an exclusive non-assignable
license during the Term, subject to all of the obligations and conditions
contained in this Agreement, to use the Trademarks in connection with (a) the
manufacture of Licensed Products anywhere in the world, subject to approval by
Hilfiger in each case, (b) the distribution at wholesale of Licensed Products in
the Territory, and (c) the operation of Stores in Approved Locations in the
Territory and the distribution at retail of Licensed Products from such Stores.
2.2 Reservations. This Agreement does not constitute a grant of any rights
other than those set forth in Paragraph 2.1 above. In particular, Hilfiger does
not grant to Licensee:
a. the right to use the name "TOMMY" or "HILFIGER" individually;
____________________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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b. the right to use any derivative of, modification to, the Trademarks;
c. the right to form a business entity whose name includes the terms
"Tommy Hilfiger" or "Hilfiger", except that Licensee shall be
permitted to use the corporate name "Tommy Hilfiger Japan
Corporation" during the Term and for the purposes of this Agreement
only. Upon termination or expiration of this Agreement for any
reason, Licensee must immediately change its corporate name to
delete any reference to the Trademarks, or
d. an assignment of any right, title or interest in or to the
Trademarks.
Hilfiger, and its other licensees and sublicensees, have the right to
manufacture or authorize third parties to manufacture Licensed Products in the
Territory for sale outside of the Territory, or to manufacture and sell or
authorize third parties to manufacture and sell products of any and all types
and descriptions other than the Licensed Products in or outside the Territory,
or to operate Stores outside the Territory.
Except as otherwise required by applicable law, no license is granted hereunder
for the manufacture, sale or distribution of Licensed Products to be used for
publicity purposes, other than to promote the sale of Licensed Products, in
combination sales, premiums or giveaways, or to be disposed of under or in
connection with similar methods of merchandising, such license being
specifically reserved for Hilfiger.
ARTICLE 3. TERM OF THE AGREEMENT
3.1 Term. The initial term of this Agreement shall commence on the date of
this Agreement shall end on December 31, 2005 (the "Term").
3.2 Extension. This Agreement may be extended for one additional five (5)
year period through December 31, 2010 ("Extension"), if Licensee:
1. requests the Extension in writing at least twelve (12) months, but
nor more than fifteen (15) months, before the expiration of the
Term;
2. at the time it requests the Extension, is in compliance with all
material terms and conditions of any and all agreements between
Licensee and Hilfiger; and
3. up to the time it requests the Extension, has met the Total Minimum
Net Sales Levels for at least * of the five (5) Annual Periods
during the Term.
________________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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Licensee acknowledges that the twelve (12) month advance notice is necessary to
maintain the continuity of Hilfiger's licensing and marketing programs and the
good will associated with the Trademarks. Licensee agrees that timing is
critically important in this regard and that Licensee's failure to make its
request in time will be construed as a decision by Licensee that it has elected
not to seek an Extension. Upon such failure, Hilfiger has the right, with
fifteen (15) days notice to Licensee, to immediately replace Licensee as of the
end of the Term or thereafter, unless Licensee shall request the Extension in
writing within such fifteen (15) days.
ARTICLE 4. ORGANIZATION
4.1 Organization. Licensee will, at its sole cost and expense, employ
individuals to fill the positions set forth on Exhibit C, or persons with
similar titles and responsibility, who will all work exclusively with Hilfiger's
representatives on Licensee's business arising under this Agreement and will
report directly to the President of Licensee or his or her designee. Hilfiger
will employ a designer, who shall be located in New York, to work on the design
of Extension Products and to assist in product development. Licensee shall
reimburse Hilfiger for the portion of such designer's salary and benefits which
is equal to the portion of such designer's time expended for the purposes of
this Agreement. In addition, Licensee shall reimburse Hilfiger for such
designer's travel expenses and out-of-pocket design costs. The individuals
holding the positions of CEO/President, CSO, CMO and Designer will be hired with
the prior approval of Hilfiger. In addition, Licensee will maintain a sales
force dedicated exclusively to the sale of Licensed Products, however, the exact
structure of the sales force may reasonably vary over time from that which is
set forth on Exhibit C.
ARTICLE 5. APPROVALS
5.1 Approvals. Licensee must present to Hilfiger in writing all approvals
required or permitted by this Agreement. Except as otherwise stated in this
Agreement, all approvals of Hilfiger will be at its sole and subjective
discretion. A submission for approval will be deemed disapproved unless
-----------
Hilfiger delivers a notice of approval within twenty (20) days after receipt of
the request from Licensee. Hilfiger will endeavor to provide an explanation for
its disapprovals, but its failure to do so will not affect the finality of its
determination. Without limitation to the foregoing, Hilfiger has no obligation
to approve, review or consider any item that does not strictly comply with
submission procedures announced by Hilfiger. Approval by Hilfiger will not be
deemed to be a determination that the approved matter complies with all
applicable regulations and laws. Licensee may not exhibit, display,
manufacture, sell, use, distribute or advertise any disapproved item. In the
event that it is reasonably necessary for Hilfiger to do on-site approvals,
Licensee will pay any and all expenses and airfare incurred by Hilfiger with
respect to such on-site approvals.
5.2 Approved Locations. Before Licensee shall establish any Store, Licensee
shall submit the location of each such proposed Store to Hilfiger for its prior
written approval, which approval may be withheld by Hilfiger in its sole and
absolute discretion. A submission for approval shall be
6
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deemed disapproved unless Hilfiger delivers a notice of approval within twenty
(20) days from confirmed receipt thereof by Hilfiger. No Store may be
established by Licensee pursuant to this Agreement unless approved by Licensor
in accordance with this Paragraph. A Concession shall be subject to approval as
to the store location and the specific location within such store. Licensee
shall reimburse Hilfiger for Hilfiger's costs (including business class airfare,
hotel accommodations and expenses) incurred in connection with all "on-site"
visits made by Hilfiger in connection with Store approval.
ARTICLE 6. DESIGN AND MANUFACTURING
6.1 Design and Production Plan. Merchandising budgets and plans detailing
projected buys and assortments, portion of USA tag-on and special product
development requirements for each approved product division must be submitted to
Hilfiger for review and approval prior to seasonal buying trips. For detailed
time-line information, product development procedures and approval criteria,
please refer to the International Product Development calendar in place for each
division (Exhibit "D").
6.2 Overall Commitment to Quality. Licensee will maintain the distinctiveness
of the Trademarks and the image and high quality of the goods bearing Trademarks
presently manufactured and sold by Hilfiger and its other licensees. Licensee
agrees that Extension Products and Manufactured Products will be of high quality
as to workmanship, fit, design and materials used therein, and will be at least
equal in quality, workmanship, appearance, fit, design and material
(collectively "Quality") to the samples of Extension Products and Manufactured
Products submitted by Licensee and approved by Hilfiger pursuant to Paragraph
6.3 hereof.
6.3 Samples of Extension Products. Before Licensee may exhibit, display or
distribute any Extension Products in any Seasonal Collection, Licensee must
submit samples of each of such Extension Products to Hilfiger for its prior
written approval. Any such request for approval must be submitted to Hilfiger on
the form attached hereto as Exhibit E. Any approval given hereunder will apply
only to that Seasonal Collection for which it is submitted to Hilfiger. Licensee
will submit to Hilfiger additional samples of Extension Products upon Hilfiger's
reasonable request. Licensee will provide all samples to Hilfiger free of
charge. Once samples have been approved, Licensee may manufacture only in
accordance with such approved samples and will not make any changes for
manufacture without Hilfiger's prior written approval. No Extension Products
(including samples) may be exhibited, displayed, distributed and/or sold by
Licensee pursuant to this Agreement unless such Extension Products are in
substantial conformity with, and at least equal in, Quality to the samples
previously approved by Hilfiger in accordance with this Paragraph 6.3.
6.4 Non-Conforming Products. In the event that any Extension Product or
Manufactured Product is, in the judgment of Hilfiger, not being manufactured and
distributed with the previously approved Quality, Hilfiger will notify Licensee,
and Licensee must promptly repair or change such Extension Product or
Manufactured Product to conform thereto. If after Hilfiger's request a Licensed
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Product as repaired or changed does not strictly conform and conformity cannot
be obtained after one (1) resubmission, if permitted by Hilfiger, Licensee may
sell the item but not in Stores and only after removing from the item the
Trademarks and Labels. Notwithstanding anything in this Paragraph 6.4 to the
contrary, sales of all products of Hilfiger's design, whether or not bearing
Labels or the Trademarks, will nonetheless be subject to Royalty Payments
pursuant to Article 9. Hilfiger may, at Licensee's expense, purchase any
Extension Products or Manufactured Products found in the marketplace that, in
Hilfiger's judgment, are inconsistent with approved Quality and bill such costs
to Licensee. Licensee must pay all royalties due on sales of nonconforming
goods. Hilfiger may require Licensee to recall any Extension Products or
Manufactured Products not consistent with approved Quality.
6.5 Withdrawal of Approval. If at any time any Extension Product ceases to be
acceptable to Hilfiger, Hilfiger will have the right in the exercise of its sole
discretion to withdraw approval of such Extension Product upon reasonable
advance notice to Licensee. Upon withdrawal of approval, Licensee will cease the
use of the Trademarks in connection with the manufacture, distribution,
promotion, advertising, and use of such Extension Product(s). Notice of such
election by Hilfiger to withdraw approval will not relieve Licensee from its
obligation to pay royalties on sales of such product(s) made by Licensee prior
to the date of disapproval or thereafter as permitted. Licensee may, however,
complete work in progress and utilize materials on hand provided that it submits
proof of such work in progress and inventory of materials to Hilfiger.
6.6 Assistance by Hilfiger. At least four (4) times during each Annual Period
for each product category, Licensee must, at its expense, visit Hilfiger's
offices, factories, showroom, and other places of business, and attend
Hilfiger's international adoption meetings to obtain additional know-how and
assistance with respect to Licensed Products. Licensee shall reimburse Hilfiger
for the cost of (a) one Hilfiger employee to make two (2) trips per Annual
Period to review the Stores; and (b) one Hilfiger employee to make two (2) trips
per Annual Period to the Territory for the training of Store staff and
specialists. The scheduling of such visits will be at times mutually convenient
to the parties hereto. If Licensee requests Mr. Tommy Hilfiger or any other
member(s) of Hilfiger's staff to make a personal appearance, to attend any
function, to visit Licensee's manufacturing plants or facilities or to attend
any design meetings, Licensee will pay all reasonable expenses connection
therewith, including air travel and hotel accommodations (which for Tommy
Hilfiger will be first class) and other reasonable services of Hilfiger's
choosing. Hilfiger will, at least four (4) times during each Annual Period, make
available to Licensee certain samples, designs, colors, samples of materials,
Labels and artwork, and the cost of which will be borne by Licensee at the cost
incurred by Hilfiger to provide the same. In addition to the foregoing, for
marketing purposes, Hilfiger will, upon reasonable request, make available to
Licensee such of the following which are available to Hilfiger: (a) reports on
marketing policy of Hilfiger; (b) reports on color, style and fabric trends; (c)
samples of advertising materials; (d) display ideas; and (e) Labels.
6.7 Ownership of Designs. All right, title and interest in and to all
samples, sketches, designs, and other materials, whether created by Hilfiger, by
Licensee, or by third parties, including any
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modifications or improvements thereto, are the exclusive property of Hilfiger;
and this Agreement constitutes an assignment by Licensee to Hilfiger of such
rights, to the extent they are not already the property of Hilfiger, and are
licensed hereunder solely and exclusively for use in connection with the
manufacture and distribution of Licensed Products in the Territory. Hilfiger may
use and permit others to use said designs and other materials in any manner it
desires, provided that such use does not conflict with any rights that Hilfiger
is granting to Licensee hereunder. Licensee specifically acknowledges that such
designs and other materials may be used by Hilfiger and other licensees on
Licensed Products in jurisdictions outside the Territory and on products other
than Licensed Products anywhere in the world. Licensee will place appropriate
notices, reflecting ownership of design rights by Hilfiger, on all Licensed
Products, Labels and advertising and promotional materials. Licensee will not do
or allow to be done anything that may adversely affect any of Hilfiger's design
rights. Licensee must disclose and freely make available to Hilfiger any and all
developments or improvements it may make relating to Licensed Products and to
their manufacture, promotion and sales, including, without limitation,
developments and improvements in any machine, process or product design, that
may be disclosed or suggested by Hilfiger or regarding any patent or trademark
that Licensee is entitled to utilize.
6.8 Cost of Designs. Licensee will pay for all pre and post-adoption design
costs for Hilfiger's designs and all design costs for Licensee's designs
relative to Extension Products, as well as all extraordinary costs such as
expedited shipping charges associated with the delivery of the designs.
6.9 Code of Conduct. Attached hereto as Exhibit F is Hilfiger's Supplier Code
of Conduct ("Code") which applies to any entity manufacturing Extension Products
or Manufactured Products (including the components thereof). Licensee must
ensure that Licensee and all Third Party Manufacturers, Subcontractors and
Suppliers comply with the terms of the Code and will evidence such compliance
by:
a. prior to the commencement of the manufacturing of Extension Products
or Manufactured Products, Licensee executing, and having all Third Party
Manufacturers, Subcontractors and Suppliers execute, the Code in the form
attached hereto, and returning such document to Hilfiger, and
b. displaying and having all Third Party Manufacturers, Subcontractors
and Suppliers display the Code, in a clearly visible location in Licensee's
manufacturing facilities (if applicable) and in the manufacturing facilities of
Licensee's Third Party Manufacturers, Subcontractors and Suppliers, in local
languages, at all times during the Term of this Agreement.
6.10 Monitoring Program. Licensee acknowledges that prior to the commencement
of the manufacturing of Extension Products or Manufactured Products, it will
have in effect, to the satisfaction of Hilfiger, a program of monitoring
manufacturing facilities, whether operated by Licensee, by Third Party
Manufacturers, Subcontractors or Suppliers, that is sufficient to ensure their
compliance with the Code and all applicable laws and regulations pertaining to
wages, overtime
9
<PAGE>
compensation, benefits, hours, hiring and employment, workplace conditions and
safety, the environment, collective bargaining, freedom of association, and that
their products and the components thereof are made without the use of child
(persons under the age of 15 or younger than the age for completing compulsory
education, if that age is higher than 15), prison, indentured, exploited,
bonded, forced or slave labor. Such compliance will be evidenced by Licensee,
upon execution of this Agreement, executing and abiding by the Certification in
the form as attached hereto as Exhibit G, and executing and abiding by any such
other form as may be provided by Hilfiger from time to time.
6.11 Third Party Manufacturing Agreement. Within thirty (30) days after
establishing a new arrangement with a Third Party Manufacturer or Subcontractor,
Licensee must inspect each Third Party Manufacturer or Subcontractor and provide
approval, signed by an authorized employee or agent of Licensee that such Third
Party Manufacturer or Subcontractor is in compliance with Paragraph 6.9 above,
and will obtain and provide to Hilfiger the signature of an authorized
representative from each of such parties on a Third Party Manufacturing
Agreement in the form of Exhibit H attached hereto, or such other form as may be
provided by Hilfiger from time to time. Within thirty (30) days after
establishing a new arrangement with a Supplier, Licensee must obtain and provide
to Hilfiger the signature of an authorized representative from each Supplier on
a Certification in the form of Exhibit I attached hereto, or such other form as
may be provided by Hilfiger from time to time. In the event Licensee has
knowledge of, has reason to believe, or should have reason to know that any
Third Party Manufacturer, Subcontractor or Supplier is in breach of the Third
Party Manufacturing Agreement or Certification, as the case may be, Licensee
must immediately notify Hilfiger and Licensee shall, at its sole expense, take
immediate action to rectify such breach, including, where Hilfiger deems it
necessary, immediate termination of its relationship with such Third Party
Manufacturer, Subcontractor or Supplier. If Licensee fails to take immediate
action or such action is not successful, Licensee will assign its rights to
proceed against such Third Party Manufacturer, Subcontractor or Supplier to
Hilfiger and Hilfiger will, at Licensee's expense, have the right to pursue all
available remedies to protect its rights. Notwithstanding the foregoing,
Licensee acknowledges that it will remain primarily liable and completely
obligated under all of the provisions of this Agreement in respect of the
production of Extension Products hereunder.
6.12 Information About Third Party Manufacturers, Etc. In order to maintain
Hilfiger's high standard of quality control and to ensure that appropriate
measures are taken against counterfeiting, Licensee will provide notice to
Hilfiger, on a quarterly basis, including all of the following information:
a. the name and address of each Third Party Manufacturer,
Subcontractor and Supplier;
b. the type of Licensed Products manufactured by such Third Party
Manufacturer and Subcontractor;
c. quantity of Licensed Products to be manufactured by each such
entity;
10
<PAGE>
d. the type of components provided by each Supplier; and
e. any other relevant information regarding all such entities.
6.13 Compliance with Applicable Laws - Generally. All Licensed Products
manufactured and distributed by, or on behalf of, Licensee must be marked,
labeled, packaged, advertised, and distributed in accordance with this
Agreement, in accordance with all applicable laws, rules and regulations in the
Territory, and in such a manner as will not tend to mislead or deceive the
public or damage the reputation of the Trademarks.
6.14 Inspection of Facilities. Licensee will regularly, and not less than
two (2) times per year, inspect the facilities it utilizes and those facilities
utilized by Third Party Manufacturers, Subcontractors, and Suppliers for
compliance with this provision and will take all action necessary to cure any
deficiencies. Licensee further agrees that it will terminate any agreement with
any such third party found to be in default on three (3) separate inspections.
Hilfiger and its duly authorized representatives will have the right, during
normal business hours and upon reasonable notice, to inspect all facilities
utilized by Licensee, its Third Party Manufacturers, Subcontractors and
Suppliers in connection with the manufacture, storage or distribution of
Extension Products and Manufactured Products, and to examine: (a) Licensee's
manufacturing facilities, residential facilities (if any) and any manufacturing
and/or residential facility operated by any of Licensee's Third Party
Manufacturers or Subcontractors; and (b) Licensee's and any of Licensee's Third
Party Manufacturers or Subcontractors books, records and documents necessary to
evidence such entities' compliance with the Code and all applicable laws, rules
and regulations. For purposes of this Paragraph, all such books, records and
documents shall be maintained by Licensee in a secure and readily accessible
location for a period of three (3) years from their creation.
6.15 Meetings. Hilfiger may from time to time, but no more than twice a
year, hold a meeting of Hilfiger's licensees/distributors. Licensee agrees upon
receipt of reasonable notice to attend any such meeting(s) at its own expense.
ARTICLE 7. SALES AND MARKETING
7.1 Best Efforts. Licensee will use its best efforts to exploit this
license throughout the Territory. Without limitation, Licensee will: (a) sell a
sufficiently representative quantity of all styles, fabrications and colors of
Licensed Products; (b) offer for sale Licensed Products so that they may be sold
to consumers on a timely basis; and (c) cooperate with Hilfiger's merchandising,
sales and anti-counterfeiting programs. Licensee acknowledges that to preserve
the goodwill associated with the Trademarks, Licensed Products should be sold at
prices and terms reflecting the prestigious nature of the Trademarks, and the
reputation of the Trademarks as appearing on goods of high quality and
reasonable price, it being understood, however, that Hilfiger is not empowered
and has no desire to fix or regulate the prices for which the Licensed Products
are to be sold, either at the
11
<PAGE>
wholesale or retail level. Licensee shall at all times maintain a sales force
for the sale of Licensed Products that will be sufficient to provide effective
distribution of the Licensed Products throughout the entire Territory.
7.2 INTENTIONALLY OMITTED
7.3 Certification. Within sixty (60) days after the end of each Annual
Period, Licensee will present to Hilfiger a certification by an authorized
officer of Licensee of the Net Sales and Retail Sales of Licensed Products
during each Annual Period (the "Certification"). Such Certification shall be in
the form annexed hereto as Exhibit L. Within one hundred twenty (120) days after
the end of each Annual Period, Licensee will present to Hilfiger the
Certification further certified by Licensee's external auditors. On or before
the thirtieth (30/th/) day of each month, Licensee shall provide to Hilfiger
monthly net shipment reports and retail selling reports for the prior month.
7.4 Sales/Marketing Plans. On each January 1, April 1, July 1 and October
1, Licensee will submit to Hilfiger, for Hilfiger's approval, a schedule showing
in detail the projected sales marketing plans for the Licensed Products as
follows:
SUBMISSION DATE PERIOD TO BE COVERED
--------------- --------------------
January 1 April 1 - September 30
April 1 July 1 - December 31
July 1 October 1 - March 31
October 1 January 1 - June 30
7.5 Minimum Sales Levels. During each Annual Period, Licensee must achieve
all of the following Minimum Sales Levels:
MINIMUM SALES LEVELS
--------------------
------------------------------------------------------------------
Annual Period Wholesale (Yen) Retail (Yen) Total (Yen)
------------- --------------- ------------ -----------
------------------------------------------------------------------
* * *
1/1/01 - 12/31/01
------------------------------------------------------------------
* * *
1/1/02 - 12/31/02
------------------------------------------------------------------
* * *
1/1/03 - 12/31/03
------------------------------------------------------------------
1/1/04 - 12/31/04 * * *
------------------------------------------------------------------
___________________________
/*/ This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
12
<PAGE>
------------------------------------------------------------------
* * *
1/1/05 - 12/31/05
------------------------------------------------------------------
Each Total Minimum Sales Level for each Annual Period must be the greater of (a)
the amounts set forth above for such Annual Period, and (b) * percent of the
actual Net Sales for the immediately preceding Annual Period. Each Wholesale and
Retail Minimum Sales Level for each Annual Period must be the greater of (a) the
amounts set forth above for such Annual Period, and (b) * percent of the actual
applicable Net Sales for the immediately preceding Annual Period. In no event
may the Minimum Sales Level for any Annual Period be less than the Minimum Sales
Level for the immediately preceding Annual Period.
For example, assuming that Wholesale Net Sales in the first Annual Period are
JPY*, Retail Net Sales in the first Annual Period JPY*, and Total Net sales are
JPY*, then for the second Annual Period the Minimum Sales Level would be JPY*
(JPY* x *% = JPY* which is greater than JPY*), the Wholesale Minimum Sales Level
would remain at JPY* (JPY* x *% = JPY* which is less than the stated minimum)
and the Retail Minimum Sales Level would be JPY* (JPY* x *% = JPY* which is
greater than JPY*).
Licensee will not be in default of this Agreement the first * times in
any consecutive * Annual Periods that it fails to meet the total Wholesale
Minimum Sales Level, provided that Licensee pays the Guaranteed Minimum Royalty
for such Annual Period. Similarly, Licensee will not be in default of this
Agreement the first * times in any consecutive * Annual Periods that it fails to
meet the total Retail Minimum Sales Level, provided that Licensee pays the
Guaranteed Minimum Royalty for such Annual Period. As to either total Minimum
Sales Level, a * failure shall, at Hilfiger's option, be grounds for termination
of this Agreement as to Wholesale Sales or Retail Sales, whichever shall be
applicable.
7.6 Certain Sales Excluded. Licensee may satisfy its obligation to reach
the Minimum Sales Levels set forth with full price sales of Licensed Products in
the Territory only. Licensee will not receive credit against Minimum Sales
Levels for (a) sales outside the Territory; (b) sales under Paragraphs 7.10; or
(c) sales of Seconds and Close-Outs anywhere.
7.7 Approved Customers. Licensee may sell Licensed Products only to those
specialty shops, department stores and retail outlets that carry high quality
and prestige merchandise and whose operations are consistent with Hilfiger's
reputation and sales policies. Upon execution of this Agreement, and prior to
the opening of each selling season (and whenever Licensee wishes to sell
Licensed Products to customers not previously approved by Hilfiger), Licensee
must submit a list of its proposed customers for Hilfiger's written approval.
Hilfiger has the right to withdraw any such approval on written notice to
Licensee. After such notice, Licensee may not accept additional orders for
Licensed Products from such customer, but may fill any existing order.
_________________________
/*/ This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
13
<PAGE>
7.8 Prohibited Sales. Except as expressly permitted by Hilfiger in
writing, Licensee may not (a) market or promote or seek customers for Licensed
Products outside of the Territory; (b) establish a branch, wholly owned
subsidiary, distribution center or warehouse with inventories of Licensed
Products outside the Territory; (c) sell or distribute any Licensed Products to
wholesalers, jobbers, diverters, catalog vendors or any other entity that does
not operate retail stores exclusively; (d) sell or distribute any Licensed
Products over the Internet or any other global or regional computer access
network; (e) use Licensed Products as giveaways, prizes or premiums, except for
promotional programs which have received the prior written approval of Hilfiger;
or (f) sell Licensed Products to any third party or Affiliate of Licensee or any
of its directors, officers, employees or any person having an equity
participation in or any other affiliation to Licensee, without the prior written
approval of Hilfiger. Hilfiger may, at Licensee's expense, purchase any Licensed
Products found in the marketplace that Licensee has sold to unapproved
customers. Licensee shall include and shall enforce the following on all
invoices to its 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 only. 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.
The merchandise purchased hereunder may not be
sold by Buyer from any store locations which
Seller has been advised Buyer do not qualify as an
acceptable location.
7.9 Showrooms and In-Store Shops.
a. Showroom. Licensee may display Licensed Products for sale only in
--------
a separate showroom, designed and displayed in accordance with Hilfiger's
specifications, apart from any showroom(s) in which Licensee or another business
may sell goods other than Licensed Products. The style and manner in which
Licensed Products will be displayed in said showroom are subject to Hilfiger's
approval. Hilfiger reserves the right to approve the location of Licensee's
primary showroom required above.
b. Fixtures. Licensee will, at Hilfiger's option, participate in any
--------
in-store shop or main floor fixturing program with any of Licensee's customers.
Licensee will fixture or cause to be
14
<PAGE>
refixtured each in-store shop and area dedicated to the sale of Licensed
Products within sixty (60) days after notice from Hilfiger or, without notice
from Hilfiger, no less often than every four (4) years during the Term. Hilfiger
and Licensee shall, each six months during the Term, consult in good faith
regarding standards and specifications for such fixturing, however, such
standards and specifications ultimately shall be subject to Hilfiger's approval;
and Licensee shall be responsible for causing all fixturing to be undertaken in
a manner consistent with such plans and specifications, as modified from time to
time, during each six month review. To the extent that the same is not paid for
by Licensee's customers, Licensee shall pay for such fixturing. Licensee
acknowledges that Hilfiger has the right to disapprove of Licensee supplying
Licensed Products to customers who do not have fixtured or visually enhanced
shops or areas.
7.10 Disposal of Seconds and Close-Outs.
a. Seconds. Licensee may not sell any Licensed Products which are
-------
Seconds without the express prior written consent of Hilfiger. All Seconds
approved for sale by Hilfiger must be clearly marked "Seconds" or "Irregular".
The percentage of Seconds that may be disposed of pursuant to this Paragraph may
not, in any event, exceed * percent of the total Net Sales of Licensed
Products distributed by Licensee in any Annual Period.
b. Close-Outs. All Close-Outs shall be sold only with Hilfiger's
----------
prior written approval, which Hilfiger may withhold in its sole discretion,
through retail outlets and traditional and accepted dealers in such merchandise
and upon such terms and conditions as Licensee, in its reasonable discretion,
determines appropriate and shall not be sold to any person which Licensee knows,
or has reason to know, will export such Close-Outs from the Territory.
c. Other Plans. Any plan of Licensee for the disposition of Seconds
-----------
or Close-Outs which varies from the foregoing requirements of Article 7 shall
require the prior written approval of Hilfiger.
7.11 Purchase of Licensed Products
a. Licensee hereby agrees that all Licensed Products shall be
exclusively purchased by Licensee or its designees approved by Hilfiger through
Hilfiger or its designees, or any other sources approved by Hilfiger, and shall
be purchased from no other source.
b. Licensee, or its designees approved by Hilfiger, shall enter into
an exclusive buying
________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
15
<PAGE>
office agreement with THEH and THUSA (in a standard form used by those
entities), for the purchases of Licensed Products which shall cover the entire
Term of this Agreement.
c. In connection with the purchase by Licensee or its designees
approved by Hilfiger of Manufactured Products from sources other than Hilfiger
or its designee, which shall in all events be sources approved by Hilfiger,
Licensee or its designee shall pay to Hilfiger a technical assistance fee in the
amount equal to * percent of the invoice price (in U.S. Dollars) of all such
Purchased Products.
ARTICLE 8. ADVERTISING
8.1 Advertising and Advertising Plans. All advertising and promotion in
connection with Licensed Products, including operative advertising whereby
Licensee provides their customers with a contribution be it in the form of
actual monetary contribution, credit or otherwise, shall be placed with an
agency approved by Hilfiger. Licensee will pay all advertising invoices directly
as they become due. Licensee agrees to use its best efforts to advertise and
promote the Licensed Products during each Annual Period in order to make and
keep the Trademark a well known name within the Territory and to maintain the
high standards of the Trademark. On each September 1 during the Term, Licensee
will submit to Hilfiger, for Hilfiger's approval, a schedule showing in detail,
the projected advertising plan for the following Annual Period. Such plan should
include the name and placement of the advertisements.
8.2 Advertising Expenditure. Licensee agrees that, during each Annual
Period, it shall spend at least the total amounts set forth below for direct
media advertising of the Licensed Products, including model usage fees, but not
including any cooperative advertising, trade shows, sampling, or any other
promotional or sales material normally produced for the sale of the Licensed
Products (the "Total Advertising Expenditure"). If in any Annual Period the
Total Advertising Expenditure has not been made, then Licensee shall spend such
amount for advertising within the first ninety (90) days of the subsequent
Annual Period. If the Total Advertising Expenditure has not been expended by the
end of said ninety (90) day period, then, unless Hilfiger shall agree in writing
otherwise, the amount which should have been expended and which was not expended
shall be paid over to Hilfiger to be used by Hilfiger for advertising the
Trademark provided, however, that if Total Advertising Expenditure has not been
made prior to the termination of this Agreement, the unexpended Total
Advertising Expenditure shall, within twenty(20) days, be paid over to Hilfiger
absolutely. Proof of expenditure shall be submitted each quarter using the
Advertising Expenditure
___________________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
16
<PAGE>
form (Exhibit M).
Annual Period Advertising Expenditures (Yen)
------------- ------------------------------
-------------------------------------------------------------------------------
Wholesale Retail Total
-------------------------------------------------------------------------------
* * *
First 1/1/01 - 12/31/01
-------------------------------------------------------------------------------
* * *
Second 1/1/02 - 12/31/02
-------------------------------------------------------------------------------
* * *
Third 1/1/03 - 12/31/03
-------------------------------------------------------------------------------
* * *
Fourth 1/1/04 - 12/31/04
-------------------------------------------------------------------------------
* * *
Fifth 1/1/05 - 12/31/05
-------------------------------------------------------------------------------
In no event shall the Total Advertising Expenditures for any Annual Period be
less than * percent of the Wholesale and Retail Minimum Sales Levels for such
Annual Period as the same may be adjusted pursuant to Paragraph 7.5 above.
_____________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
17
<PAGE>
8.3 Approval of Packaging, Labeling and Advertising. No packaging,
labeling or advertising, including cooperative advertising may be used without
the prior written approval of Hilfiger. Before publication of any advertisement
or promotion, Licensee shall submit every element of the advertisement or
promotion, including the design, placement and medium, to Hilfiger for approval
using an "Advertising Approval Form" (Exhibit N). Any approval granted hereunder
shall be limited to use during the Seasonal Collection of the Licensed Products
to which such advertising relates and shall be further limited to use (e.g.
television or print) for which approval by Hilfiger was granted. Samples of
initial packaging, labeling and advertising, and samples of any revisions,
changes, modifications or substitutions thereof, shall be submitted to Hilfiger
sufficiently far in advance to permit Licensee time to make such changes as
Hilfiger shall deem necessary. Licensee acknowledges the importance of global
consistency in advertising using the Trademarks. Therefore, Hilfiger shall have
the right to require Licensee to: (a) use images in Licensee's advertisements
which have been used in other parts of the world; and (b) pay for or reimburse
Hilfiger, its Affiliates, or any third party for the model usage fees required
to be paid in connection with such images. Hilfiger may not require Licensee to
pay model usage in either the first or second Annual Periods in excess of $*
or model usage fees in any of the third, fourth or fifth Annual Periods in
excess of $*. Additionally, under no circumstances will Licensee be permitted to
advertise Licensed Products over any medium not previously approved by Hilfiger
in writing. To such end, unless otherwise approved in writing by Hilfiger, the
Internet or any other global or regional computer access network is deemed an
unapproved medium for advertising. All requests for the approval of packaging,
labeling or advertising pursuant to this Paragraph 8.3 shall be accompanied by
at least two (2) samples of the object for which approval is sought. Licensee
shall use its best efforts to ensure that all advertising and promotional plans
used by Licensee in connection with the Trademark, in any form and in any
medium, shall be consistent with the prestige of the Trademark and the quality
of the Licensed Products. All packaging, labeling and advertising of Licensed
Products shall use the Trademark, but no other trademark or trade name shall be
used except as may be required by applicable law or permitted to Hilfiger.
Licensee shall not be permitted to use its name on the Licensed Products,
packaging and other materials displaying the Trademark other than as
specifically approved by Hilfiger. Any advertising materials provided by
Hilfiger to Licensee shall be so provided at Licensee's cost and the price
therefor shall be Hilfiger's cost of producing of providing the same.
8.4 Use of Trademark on Invoices, etc. The use of the Trademark by
Licensee on invoices, order forms, stationery and related matter and in
advertising in telephone or other directory listings is permitted only upon
Hilfiger's prior written approval of the format in which the Trademark is to be
so used, the juxtaposition of the Trademark with other words and phrases, and
the content of the copy prior to the initial such use of the Trademark and prior
to any material change therein; provided, however, that each such use of the
Trademark is only in conjunction with the manufacture, sale, distribution or
advertisement of Licensed Products pursuant to this Agreement.
_________________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
18
<PAGE>
8.5 Launch. In addition to the advertising requirements set forth above,
Licensee will host a launch event and distribute a gift package to the fashion
and financial press and to major retail accounts during the initial selling
season for the first Seasonal Collection to be sold under this Agreement. Such
event shall be comparable to similar launch events hosted by Hilfiger's other
licensees of the Trademarks and shall reasonably reflect the prestige of the
Trademarks and the relative significance of Licensed Products to Hilfiger.
8.6 Trade Shows. Licensees may not participate in trade shows without the
prior written consent of Hilfiger. To the extent that Hilfiger does consent to
such participation, the booth or showroom must be approved by Hilfiger in each
instance.
8.7 Public Announcements. Licensee's press releases and other public
announcements related to Licensee's operations hereunder, are subject to
approval by Hilfiger.
ARTICLE 9. ROYALTIES AND RELATED FEES
9.1 Guaranteed Minimum Royalty. Licensee shall, during each Annual Period
or portion thereof (calculated on a pro rata basis), pay to Hilfiger the Total
Guaranteed Minimum Royalties listed below. Total Guaranteed Minimum Royalties
will be payable in quarterly installments in advance on the first day of each
quarter during each year during the Term.
Annual Period Guaranteed Minimum Royalty (Yen)
------------- --------------------------------
------------------------------------------------------------------------------
Wholesale Retail Total
------------------------------------------------------------------------------
* * *
First 1/1/01 - 12/31/01
------------------------------------------------------------------------------
* * *
Second 1/1/02 - 12/31/02
------------------------------------------------------------------------------
* * *
Third 1/1/03 - 12/31/03
------------------------------------------------------------------------------
* * *
Fourth 1/1/04 - 12/31/04
------------------------------------------------------------------------------
* * *
Fifth 1/1/05 - 12/31/05
------------------------------------------------------------------------------
In the event that during any Annual Period, the actual payments under Paragraph
9.2 below exceed the entire Total Guaranteed Minimum Royalty with respect to
that Annual Period, no further Total Guaranteed Minimum Royalty payments need be
made for such Annual Period.
_______________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
19
<PAGE>
In no event shall the Wholesale Guaranteed Minimum Royalty for any Annual Period
be less than * percent of the Wholesale Minimum Sales Level for such Annual
Period as the same may be adjusted pursuant to Paragraph 7.5 above. Similarly,
in no event shall the Retail Guaranteed Minimum Royalty for any Annual Period be
less than * percent of the Retail Minimum Sales Level for such Annual Period as
the same may be adjusted pursuant to Paragraph 7.5 above.
9.2 Percentage Royalty. Except as specifically exempted, all Licensed
Products sold by Licensee, or Affiliates of Licensee or subsidiaries, require
the payment of the Percentage Royalty. Percentage Royalties shall be payable in
quarterly installments on January 30, April 30, July 30 and October 30 for the
immediately preceding quarter in which the Licensed products are sold, less
Guaranteed Minimum Royalty payments for such period, and each payment must be
submitted with the royalty statement described below. All royalties shall accrue
upon the sale of Licensed Products, regardless of the time of collection by
Licensee. For purposes of this paragraph, a Licensed Product shall be considered
"sold" upon the date of billing, invoicing, shipping, or payment, whichever
occurs first.
9.3 Royalty Statements. Licensee will submit to Hilfiger complete and
accurate royalty statements in the form attached hereto as Exhibit K, signed by
an authorized officer of Licensee and certified by him/her as accurate
indicating all of the following information by month: (a) the total invoice
price of all Licensed Products sold during the period covered by such Percentage
Royalty payment; (b) the amount of discounts and credits from Gross Sales that
may be deducted therefrom, during said period; and (c) computation of the amount
of Percentage Royalty for said period. Licensee will identify separately all
sales to Affiliates of Licensee. At least once annually, or more often at
Hilfiger's request, Licensee will also submit to Hilfiger a certification from
its external auditors that the statements are in accordance with the
requirements of this Paragraph 9.3. Receipt or acceptance by Hilfiger of any
statement furnished, or of any sums paid by Licensee, will not preclude Hilfiger
from questioning their correctness at any time. On the other hand, reports
submitted by Licensee will be binding and conclusive on Licensee in the event of
any termination based on a breach by Licensee arising out of any payment or
report. Licensee will list Net Sales made in Yen.
9.4 Merchandise Coordinator Program. Licensee shall establish and maintain
a Merchandise Coordinator Program modeled after, and to the level of, the
program that operates in the United States under the Tommy Hilfiger U.S.A., Inc.
corporate structure. The manager of Licensee's program shall comply with
Hilfiger's direction from time to time as to the operation of the program,
including, but not limited to, employing sufficient coordinators to adequately
maintain and provide
__________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
20
<PAGE>
training for the individual free-standing stores and department store customers.
At no time during the Term may Licensee employ less than three (3) merchandise
coordinators.
9.5 No Set-Off. The obligation of Licensee to pay royalties hereunder is
absolute notwithstanding any claim that Licensee may assert against Hilfiger.
Licensee will not have the right to set-off, compensate or make any deduction
from such royalty payments for any reason whatsoever.
ARTICLE 10. MANNER OF PAYMENT, INTEREST, BOOKS
AND RECORDS, INSPECTION
10.1 Manner of Payment. All royalty payments required by Licensee hereunder
will be made to Hilfiger in Delaware in Yen. It is understood that Licensee
shall be responsible for any US Dollar loss to Hilfiger arising from changes in
the Exchange Rate of (Yen to US Dollar) exchange between the due date and actual
receipt date of any payments made under this Agreement.
10.2 Interest on Late Payments. In addition to any other remedy available
to Hilfiger, if any payment due under this Agreement is delayed for any reason,
interest will accrue and be payable, to the extent legally enforceable, on such
unpaid principal amounts from and after the date on which the same became due,
at a per annum rate equal to the lesser of (i) * points above the prime rate
of interest in effect on the due date of the late payment as quoted by Chase
Manhattan Bank in New York, New York, U.S.A. and (ii) the highest rate permitted
by law in New York.
10.3 Taxes. Licensee will bear all taxes, duties and other governmental
charges in the Territory relating to or arising under this Agreement, including
without limitation, any state or federal income taxes (except withholding taxes
on royalties), any stamp or documentary taxes or duties, turnover, sales or use
taxes, value added taxes, excise taxes, customs or exchange control duties and
any other charges relating to or on any royalty payable by licensee to Hilfiger.
Licensee will obtain, at its own cost and expense, all licenses, reserve bank,
commercial bank or other bank approvals, and any other documentation necessary
for the importation of materials and the transmission of royalties and all other
payments relevant to Licensee's performance under this Agreement. If any tax or
withholding is imposed on royalties, Licensee shall obtain certified proof of
the tax payment or withholding and immediately transmit it to Hilfiger.
10.4 Books and Records. Licensee will, at its sole cost and expense,
maintain complete and accurate books and records (specifically including,
without limitation, the originals or copies of
_______________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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documents supporting entries in the books of account) covering all transactions
arising out of or relating to this Agreement. Hilfiger will have the right,
during normal business hours, for the duration of this Agreement and for seven
(7) years thereafter, to examine and copy said books and records and all other
documents and materials in the possession of and under the control of Licensee
with respect to the subject matter and terms of this Agreement, including
Licensee's internal control report. The exercise by Hilfiger of any right to
audit at any time or times or the acceptance by Hilfiger of any statement or
payment shall be without prejudice to any of Hilfiger's rights or remedies and
shall not bar Hilfiger from thereafter disputing the accuracy of any payment or
statement and Licensee will remain fully liable for any balance due under this
Agreement. Licensee will assign style numbers to Licensed Products that are
unique from numbers for any products other than the Licensed Products that
Licensee may manufacture and/or sell. The style number assigned to each Licensed
Product shall be identical to the style number utilized to identify that
Licensed Product in all Licensee's books and records. All documents evidencing
the sale of Licensed Products shall state the style and number of each of such
products. Licensee may not use terms such as "assorted" or "irregular"
without a style specification. All sales of the Licensed Products will be made
on sequentially numbered invoices that (a) contain sales only of the Licensed
Products, (b) contain a statement that the invoice shall be paid only to an
account owned by Licensee or its assignee, and (c) are recorded in a separate
ledger account.
10.5 Underpayments. If, upon any examination of Licensee's books and
records, Hilfiger discovers any royalty underpayment by Licensee, Licensee will
make all payments required to be made to correct and eliminate such underpayment
within ten (10) days after Hilfiger's demand. In addition, if said examination
reveals a royalty underpayment of * percent or more, for any royalty period,
Licensee will reimburse Hilfiger the cost of said examination within ten (10)
days after Hilfiger's demand.
10.6 Financial Statements. Licensee will provide to Hilfiger a certified,
audited financial statement within one hundred twenty (120) days after the end
of each fiscal year of Licensee, prepared by a chartered accountant having no
interest in Licensee's business and approved by Hilfiger. Licensee will also
provide to Hilfiger quarterly officer's certificates within thirty (30) days
after the end of each quarter.
__________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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ARTICLE 11. REPRESENTATIONS AND WARRANTIES
11.1 Representations and Warranties of Licensee. Licensee hereby
represents, warrants and covenants that:
a. it has the full right, power and authority to enter into this
Agreement, and to perform all of its obligations hereunder;
b. it is financially capable of undertaking the business operations
which it conducts and of performing its obligations hereunder;
c. it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation;
d. all necessary corporate acts have been effected by it to render
this Agreement valid and binding upon it; and
e. in its negotiations relative to this Agreement, it has not
utilized the services of any finder, broker or agent, and it owes no commission
or fees to any such person in relation hereto. Licensee agrees to indemnify
Hilfiger against, and hold it harmless from, any and all liabilities (including,
without limitation, reasonable legal fees) to any person, firm or corporation
claiming commissions or fees in connection with this Agreement or the
transactions contemplated hereby as a result of an agreement with or services
rendered to Licensee.
ARTICLE 12. CONFIDENTIALITY AND HIRING OF EMPLOYEES
12.1 Confidentiality. Any and all information of any kind in any form
acquired, devised or developed from Hilfiger, Hilfiger's files or Hilfiger's
personnel, including but not limited to this Agreement, prints, designs, ideas,
sketches and other materials or Trade Secrets, shall be deemed Confidential
Information and shall be maintained by Licensee, Affiliates of Licensee,
employees, attorneys, accountants and bankers, in strict confidentiality.
Licensee agrees not to disclose, in whole or in part, any Confidential
Information to any third party, except upon consent of Hilfiger or pursuant to,
or as may be required by law, or in connection with regulatory or administrative
proceedings and only then with reasonable advance notice of such disclosure to
the other, and provided (a) that each such person shall agree to be bound by the
terms of this Agreement; (b) that Confidential Information shall be used by
Licensee, and such persons solely as provided hereunder; and that Confidential
Information shall be revealed only to those officers, directors and employees of
Licensee, respectively, on a need to know basis. Licensee shall take all
reasonable precautions to protect the secrecy of the materials, samples, and
designs described in this article prior to their commercial distribution or the
showing of samples for sale, and shall not sell any merchandise employing or
adapted from any of said designs except under the Trademarks. Hilfiger shall
take all reasonable precautions to protect the secrecy of the original designs
created by Licensee for
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Licensed Products prior to their advertisement, commercial distribution or the
showing of samples for sale. Neither Hilfiger nor Licensee may, at any time
during the term of this Agreement, disclose or use for any purpose, other than
as contemplated by this Agreement, any revealed or otherwise acquired
confidential information and data relating to the business of the other.
12.2 Hiring of Hilfigers Employees. During the Term and for a period of two
(2) years thereafter, Licensee will not directly or indirectly employ on a full
or part-time basis any employee of Hilfiger or its affiliates.
ARTICLE 13. TRADEMARKS AND COPYRIGHTS
13.1 Rights to the Trademark. Licensee acknowledges the great value of the
goodwill associated with the Trademarks, and acknowledges that the Trademarks
and all the rights therein, and goodwill attached thereto, belong exclusively to
Hilfiger. Licensee will not, during the Term or thereafter: (a) do, or otherwise
suffer to be done, any act or thing that might, in any way, adversely affect the
rights of Hilfiger in and to the Trademarks or that, directly or indirectly, may
reduce the value of the Trademarks or detract from their reputation; (b)
prosecute an application to register the Trademarks; (c) attack Hilfiger's title
or right in and to the Trademarks; (d) attack the validity of this license or
the Trademarks; or (e) contest the fact that Licensee's rights under this
Agreement (i) are solely those of a manufacturer and distributor, and (ii)
subject to the provisions of Articles 14 and 15 hereof, cease upon expiration or
termination of this Agreement. The provisions of this Paragraph 13.1 will
survive the expiration and termination of this Agreement.
13.2 Protecting the Trademarks. Licensee will cooperate fully and in good
faith with Hilfiger for the purpose of securing, preserving and protecting
Hilfiger's rights in and to the Trademarks. At the request of Hilfiger, Licensee
will execute and deliver to Hilfiger any and all documents and do all other acts
and things that Hilfiger deems necessary or appropriate to make fully effective
or to implement the provisions of this Agreement relating to the ownership, use
or registration of the Trademarks.
13.3 Compliance with Notice and Other Requirements. Licensee will use the
Trademark strictly in compliance with all applicable legal requirements.
Whenever the Trademarks are used on any item of packaging or labeling or in any
advertisement, they must be followed, in the case of a registered trademark by
the registration symbol, i.e.,(R) and in the case of all other trademarks by the
symbol (TM), or other appropriate symbols of similar import acceptable to
Hilfiger or required by applicable law. Upon expiration or termination of this
Agreement for any reason whatsoever, Licensee will execute and deliver to
Hilfiger any and all documents required by Hilfiger for terminating any and all
registered user agreements and other documents regarding Licensee's use of the
Trademarks.
13.4 Ownership of Copyrights. Any copyrights created by or for Licensee in
any sketch, design, print, package, label, tag or the like, designed and
approved for use in connection with
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Licensed Products, are hereby assigned by Licensee to Hilfiger. Licensee will
not, at any time, do, or otherwise suffer to be done, any act or thing that may
adversely affect any rights of Hilfiger in such copyrights and will, at
Hilfiger's request, do all things reasonably required by Hilfiger to preserve
and protect said rights, including the placement of appropriate notices of
copyright ownership.
13.5 Infringement. Licensee must promptly notify Hilfiger of any
infringement or other misuse of the Trademarks or the use by any person of any
trademarks or trade names confusingly similar to the Trademarks that comes to
its attention. Hilfiger will take such action as it deems advisable, and
Licensee will assist in such action, as Hilfiger may reasonably request, at
Hilfiger's expense. In no event, however, will Hilfiger be required to take any
action if it deems it inadvisable to do so, and Licensee will have no right to
take any action without the prior written consent of Hilfiger. However, in the
event of any infringement or other misuse of the Trademarks on items identical
or similar to Licensed Products, Hilfiger will take the measures it deems
appropriate to protect the Trademarks, and Licensee, at Hilfiger's request, will
pay the costs in excess of * Yen incurred therefor in any Annual Period,
including judicial expenses and legal fees.
13.6 Counterfeit Protection. Licensee will cooperate with Hilfiger in all
efforts to prevent counterfeiting. All Licensed Products shall bear and use any
counterfeit preventive system, devices or labels designated by Hilfiger. At its
option, Hilfiger may supply the system, devices or labels (provided that they
are supplied on a timely basis), that Licensee must use. Licensee will pay all
reasonable costs for such system, devices or labels, in advance.
13.7 Use of Other Trademarks. During the Term, neither Licensee, nor any
persons and business entities which are now and hereafter controlled and managed
directly or indirectly by Licensee, or company in which Licensee is a partner,
may act as a licensee or distributor in the Territory of any products within the
definition of Licensed Products, under any name which is currently, or in the
future becomes, directly competitive with Hilfiger, unless expressly consented
to by Hilfiger. By way of illustration, attached hereto as Exhibit J is a non-
exhaustive list of names that Hilfiger considers to be directly competitive with
Hilfiger. If such consent is given, unless prohibited by other agreements,
Licensee will provide Hilfiger with samples of any such competitive products it
manufactures and distributes that do not bear the Trademarks. (Licensee may act
as a manufacturer only of such products, provided that Licensee is not the
licensee or distributor thereof.) In all cases, the design and style of any such
products or any of Licensee's private label products, must be clearly
distinguished from Licensed Products. A breach of this clause will constitute a
violation of Licensee's obligation to use its best efforts to exploit this
license. Licensee must maintain the design, merchandising, packaging, sales and
display of all of Licensee's other products separate and distinct from Licensed
Products.
__________________
* This information, which has been filed separately with the Securities and
Exchange Commission, has been omitted and is the subject of a request made to
the Commission for confidential treatment.
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13.8 Use of Trademarks on Invoices, etc. Licensee must submit to Hilfiger
for prior approval, the proposed use of the Trademarks on invoices, business
cards, order forms, stationery and related materials and in advertising in
telephone and other directory listings.
13.9 Monitoring. Licensee will actively monitor use of the Trademarks by
third parties, including by its customers, and will use its best efforts to see
that such use does not impair the image or reputation of the Trademarks;
provided, however, that Licensee will have no obligation to place any unlawful
restrictions on third parties.
ARTICLE 14. INSOLVENCY
14.1 Effect of Proceeding in Bankruptcy, etc. If either party institutes
for its protection or is made a defendant in any proceeding under bankruptcy,
insolvency, reorganization or receivership law, or if either party is placed in
receivership or makes an assignment for benefit of creditors or is unable to
meet its debts in the regular course of business, the other party may elect to
terminate this Agreement immediately by written notice to the other party
without prejudice to any right or remedy the terminating party may have,
including, but not limited to, damages for breach.
14.2 Rights Personal. The license and rights granted hereunder are personal
to Licensee. No assignee for the benefit of creditors, receiver, trustee in
bankruptcy, sheriff or any other officer or court charged with taking over
custody of Licensee's assets or business, shall have any right to continue
performance of this Agreement or to exploit or in any way use the Trademarks if
this Agreement is terminated pursuant to Paragraphs 14.1 and 14.2, except as may
be required by law.
14.3 Trustee in Bankruptcy. Notwithstanding the provisions of Paragraph
14.2 above, in the event that, pursuant to applicable bankruptcy law (the
"Code"), a trustee in bankruptcy, receiver or other comparable person, of
Licensee, or Licensee, as debtor, is permitted to assume this Agreement and does
so and, thereafter, desires to assign this Agreement to a third party, which
assignment satisfies the requirements of the Code, the trustee or Licensee, as
the case may be, must notify Hilfiger. Said notice shall set forth the name and
address of the proposed assignee, the proposed consideration for the assignment
and all other relevant details thereof. The giving of such notice will be deemed
to constitute an offer to Hilfiger to have this license assigned to it or its
designee for such consideration, or its equivalent in money, and upon such terms
as are specified in the notice. Hilfiger may accept the aforesaid offer only by
written notice given to the trustee or Licensee, as the case may be, within
fifteen (15) days after Hilfiger's receipt of the notice to such party. If
Hilfiger fails to deliver such notice within the said fifteen (15) days, such
party may complete the assignment referred to in its notice, but only if such
assignment is to the entity named in said notice and for the consideration and
upon the terms specified therein. Nothing contained herein will be deemed to
preclude or impair any rights that Hilfiger may have as a creditor in any
bankruptcy proceeding.
ARTICLE 15. EXPIRATION AND TERMINATION
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15.1 Other Rights Unaffected. Expiration or termination of this Agreement
will not affect any obligation of Licensee to make payments to Hilfiger
hereunder accruing prior to such expiration or termination or in respect to an
antecedent breach of this Agreement, and will not prejudice any other right of
Hilfiger hereunder including, without limitation damages for breach, and
Licensee agrees to reimburse Hilfiger for any costs and expenses (including
attorneys' fees) incurred by Hilfiger in enforcing its rights hereunder. Except
as required by law, no assignee for the benefit of creditors, receiver,
liquidator, sequestrator, trustee in bankruptcy, sheriff or any other officer of
the court or official charged with taking over custody of Licensee's assets
shall have the right to continue the performance of this Agreement.
15.2 Termination Without Right to Cure. Hilfiger will have the right to
immediately terminate this Agreement by giving Licensee a notice of termination,
without giving Licensee any right to cure, if Licensee:
a. makes an unauthorized disclosure of confidential information,
Trade Secrets, or materials given or loaned to Licensee by Hilfiger;
b. institutes proceedings seeking relief under a bankruptcy act or
any similar law, or otherwise violates the provisions of Paragraph 14.1 thereof;
c. transfers or agrees to transfer substantially all of its
property, its shares of stock or, this Agreement in violation of Paragraphs 21.5
or 21.6 hereof;
d. exhibits, displays, or distributes unapproved products;
e. without the prior written consent of Hilfiger, uses the
Trademarks in an unauthorized or improper manner;
f. uses the Trademarks in connection with another trademark or name;
g. intentionally misrepresents any financial data regarding its
business under this license; or
h. places, or participates in, any unapproved or prohibited
advertising.
15.3 Termination with Right to Cure. If Licensee breaches any of its other
obligations under this Agreement, Hilfiger will have the right to terminate this
Agreement by giving Licensee a notice of intention to terminate to Licensee.
Termination will become effective automatically and without further notice
unless Licensee completely cures the breach within fifteen (15) days after the
giving of such notice. Termination based upon Licensee's failure to comply with
the Minimum Sales Levels will become effective thirty (30) days after the giving
of the notice. If the notice relates to
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royalties or to product quality, pending cure, Licensee may ship no Licensed
Products; if Licensee does ship, it will automatically forfeit its right to cure
and the license shall terminate immediately. To fully cure its breach, Licensee
must also reimburse Hilfiger for its attorneys' fees incurred in investigating
and analyzing the breach and issuing the notice of breach and for any other
communication in connection therewith. Upon the giving of a notice of intention
to terminate for the second time, for any reason, Licensee will no longer have
the right to cure any violation, and termination will be effective upon the
giving of a notice of termination.
15.4 Effect of Expiration or Termination. Upon expiration or termination of
this Agreement for any reason whatsoever:
a. Reversion of Rights. All of the rights of Licensee under this
-------------------
Agreement will terminate and immediately revert to Hilfiger. Licensee, except as
specified below, will immediately discontinue use of the Trademarks, whether in
connection with the sale, advertisement or manufacture of Licensed Products or
otherwise, and will not resume the use thereof or adopt any colorable imitation
of the Trademarks or any of their components or designs incorporated therein or
material parts thereof.
b. Royalties. All royalties on sales theretofore made will become
---------
immediately due and payable.
c. Return of Labels and Other Materials. At Hilfiger's option,
------------------------------------
Licensee will (i) promptly destroy, or (ii) convey to Hilfiger (at a price equal
to Licensee's book value thereof) and free of all liens and encumbrances, all
plates, engravings, silkscreens, computer tapes, molds, stitching patterns or
the like used to make or reproduce the Trademarks in Licensee's possession or
control, and all items affixed with likenesses or reproductions of the
Trademarks in Licensee's possession or control whether Labels, bags, boxes, tags
or otherwise. Licensee will deliver to Hilfiger, free of charge, all sketches,
designs and the like in its possession or control. Hilfiger will have the
option, exercisable upon notice to Licensee within thirty (30) days after
termination, to negotiate the purchase of the Labels that were not supplied by
Hilfiger. If such negotiations do not result in the purchase of those Labels,
Licensee will destroy those Labels under the supervision of Hilfiger, and
Licensee will deliver to Hilfiger a certificate of destruction signed by an
authorized officer of Licensee.
d. Pending Orders. Except as otherwise provided below, Licensee will
--------------
be entitled for a period of one hundred eighty (180) days after expiration or
termination of this Agreement, to consummate all sales of Licensed Products that
were firm upon the delivery of the Inventory Schedule specified in Paragraph
15.4(e) below.
e. Inventory/Right to Purchase. Licensee shall immediately deliver
---------------------------
to Hilfiger an Inventory Schedule. The Inventory schedule will be prepared as of
the close of business on the date
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of such termination and will reflect the direct cost of each Licensed Product
(actual manufacturing cost, not including overhead or any general or
administrative expenses). Hilfiger will have the right to conduct a physical
inventory of Licensed Products in Licensee's possession or control. Hilfiger
will have the option, exercisable by notice to Licensee, within thirty (30) days
after its receipt of the complete Inventory Schedule, to purchase any or all of
the Inventory for an amount equal to Licensee's cost. In the event Hilfiger
sends such notice, Hilfiger may collect the Inventory it elects to purchase
within ninety (90) days after Hilfiger's notice.
f. Inventory/Right to Sell Off. Except as otherwise provided below,
---------------------------
if Hilfiger does not elect to purchase the Inventory, Licensee may sell off
Licensed Products up to a period of one hundred eighty (180) days after the date
of expiration or termination.
g. Non-Conforming Products. Under no circumstances will Licensee be
-----------------------
permitted to (i) sell Licensed Products that have not been approved in
accordance with Paragraph 6.3 above or are in any non-conforming as to style or
quality; or (ii) advertise or promote the Trademarks during the sell-off period
without Hilfiger's prior approval. The sell off of Licensed Products will be
subject to all of Licensee's obligations hereunder, including, but not limited
to, royalty payment obligations.
h. Remaining Products. At the end of such one hundred eighty (180)
------------------
day period, any Licensed Products remaining in Licensee's possession will, at
the request of and under the supervision of Hilfiger, be destroyed.
i. Licensee shall discontinue the use of any decor, interior or
exterior decoration, signs, displays, furniture, fixtures, advertising and/or
promotional material, and the like, that are unique or distinctive to Stores,
and either destroy the same or turn over same to Hilfiger or its designee at a
cost mutually agreed upon.
j. Licensee shall return to Hilfiger any materials obtained by
Licensee, from or through Hilfiger, including, but not limited to, all
Proprietary Materials and all promotional and point-of-sale materials without
compensation.
k. Licensee shall execute and deliver to Hilfiger any and all
documents required by Licensor terminating any and all trademark registrations,
Registered User agreements and other documents regarding this Trademark.
l. Licensee shall cease and desist from using any business name or
symbol that may associate Licensee with Hilfiger or the Merchandise, and cancel
any and all registrations or listings that may have been obtained prior to the
execution of this Agreement which associated Licensee with Licensor, including
telephone listings.
m. Licensee shall notify all suppliers, utilities, landlords,
creditors, and concerned others that Licensee is no longer affiliated with
Hilfiger.
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n. Licensee shall discontinue use of any of the Trademarks, Trade
Secrets or other Proprietary Materials, or anything similar to, or which may be
confused with the Trademarks or Proprietary Materials. Licensee shall not
identify itself or any present or future store or entity, as having been in any
way associated with Hilfiger or the Merchandise.
o. Licensee shall notify all owners or lessors of the Stores not
directly owned or leased by Licensee that Licensee's rights to the Trademark
have ceased and that all the Stores must be stripped of the Trademark and other
indicia of Hilfiger within one hundred eighty (180) days of the date of
expiration or termination of this Agreement.
15.5 Store Operations and Leases. Upon the termination of this Agreement
for any reason, Licensee agrees that Hilfiger has the option, but not the
obligation, to have Licensee assign its Leases or other documents of occupancy
to Hilfiger to the extent legally possible and/or permissible under the relevant
Leases or documents of occupancy. Before any such assignment, Licensee shall
bring all of its Store premises into full compliance with the requirements of
the Leases or other documents of possession and bring all accounts with the
lessors or other grantors current as of the date that Hilfiger assumes
possession of the premises, as well as indemnify Licensor against all loss and
costs arising by virtue of or attributable to the Leases prior to the
assignment. Hilfiger shall also have the option to cause Licensee to immediately
obtain a new telephone listing and telephone number and to assign its previous
telephone listing and number to Licensor. In addition, Licensee agrees that upon
termination Licensor shall be authorized to enter and, at Licensee's expense,
strip the Stores of any indicia of the Trademark if such indicia have not been
removed within one hundred eighty (180) days of termination. Licensee hereby
acknowledges that if Licensee does not actually own or directly lease the
Stores, Licensee shall be solely liable to such owners and/or licensees for any
damages caused by the removal of the Hilfiger's names and materials from the
stores and for any investment losses, and shall indemnify and hold Hilfiger
harmless for any claims from third parties arising out of the closure of such
Stores.
15.6 Freedom to License. In the event of expiration or termination of this
Agreement or the receipt by Hilfiger of a notice or termination from Licensee,
Hilfiger will be free to license to others the use of the Trademarks in
connection with the manufacture and sale of Licensed Products in the Territory.
15.7 Royalty Payments on Termination. Upon termination of this Agreement as
a result of a breach by Licensee, the total amount of the Guaranteed Minimum
Royalties for the balance of the Term, although not yet due, shall, without
notice of demand, forthwith become and be immediately due and payable.
ARTICLE 16. RELATIONSHIP BETWEEN THE PARTIES
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16.1 No Agency. Licensee shall not represent itself as the agent or legal
representative of Hilfiger, Hilfiger's affiliates or Tommy Hilfiger for any
purpose whatsoever and shall have no right to create or assume any obligation of
any kind, expressed or implied, for or on behalf of them in any way whatsoever.
Hilfiger shall similarly not represent itself as the agent or legal
representative of Licensee.
ARTICLE 17. THE STORES
17.1 Design of the Stores. Hilfiger retains sole discretion and approval
over the design of all Stores in order to maintain a uniform worldwide image.
17.2 Construction. The Stores must be constructed and equipped in all
respects in accordance with any plans, standards and specifications furnished by
or approved by Hilfiger. In particular, all fittings, fixtures, furnishings,
signs, equipment and methods of exterior and interior design must conform with
Hilfiger's specifications and the quality of the same shall be subject to
Hilfiger's approval. The fixtures may be purchased by Licensee only from vendors
and sources approved by Hilfiger. If Hilfiger requires an "on site" visit in
order to grant approval of plans or grant final approval of a Store, the cost of
such "on site" approval, including business class airfare, hotel accommodations
and expenses, shall be paid by Licensee. Hilfiger's requirement of compliance to
construction specifications shall not be construed as a determination by
Hilfiger that the specified requirements comply with all applicable regulations
and laws nor shall the same create a liability on Hilfiger's part in connection
with the specifications or the construction in accordance therewith.
17.3 Costs. Licensee shall be solely responsible for all costs associated
with Stores. This includes but is not limited to all real estate purchasing
costs or lease expenses; all costs of construction of the store(s) in accordance
with Hilfiger's architectural and design requirements; all architect fees and
costs; the cost of design manuals, if any; the expenses of equipping the Stores
with approved fixtures; and so forth.
17.4 Maintenance. The maintenance and repair of the Stores is the sole
responsibility of Licensee. Licensee shall keep and maintain the Stores,
including the interior, exterior, immediately surrounding areas, signs, trade
fixtures, equipment, decor, furnishings, and all other tangible property used in
connection with the Stores in first class condition of repair and appearance,
and to replace any item or property that is not capable of being maintained in
the such condition of repair and appearance. All replacement and/or redecoration
of the Stores or any material part thereof or thing therein or thereon other
than mechanical equipment and items which are replaced with items of the same
style and quality, shall be made only with the prior written consent of
Hilfiger. Licensee shall repair, refinish, repaint, replace, and/or otherwise
redo the Stores, the furnishings, fixtures, decor, and any other tangible part
or property of the Stores at Licensee's expense at such time as Hilfiger may
reasonably direct so as to maintain the Stores in the condition described above.
17.5 Alterations. Licensee shall not alter or modify the premises in any
material respect without
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the prior written consent of Hilfiger.
17.6 Future Renovations. The parties recognize that from time to time
Hilfiger may revise or alter the design and appearance of its retail throughout
the world, and that all Licensee's Stores will, after four (4) years from the
opening of any particular Store, also be required to be renovated to maintain
such a consistent worldwide image, should there indeed be a planned revision on
a global basis. All costs associated with such future renovations will be borne
by Licensee. In the event that, within a reasonable period of time, Licensee
cannot or does not undertake the renovation of its Stores in accordance with
such design changes, Licensee shall be in breach of this Agreement and Hilfiger
will have the right upon six (6) months notice to Licensee, to remove those
particular Stores which Licensee has not renovated from the list of Approved
Locations, terminating this Agreement as to those particular stores.
17.7 Store Appearance. Licensee shall maintain the highest standards of
cleanliness, appearance, service, methods of operation and management techniques
to protect and enhance the business, reputation and goodwill of the Stores and
of the Trademark.
17.8 Quality. Licensee recognizes that it is essential for Hilfiger's
reputation that first class standards of quality and service be maintained at
the Stores. Licensee therefore agrees, as part of the consideration for the
granting of this license, that Licensee shall at all times exercise direct and
personal supervision and control of all Stores and shall conduct the operation
of the Stores in a first class manner as determined by Hilfiger in its sole
discretion. Licensee understands and acknowledges that all aspects of the
operation of the Stores and Licensee's compliance with all provisions or
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requirements of this Agreement is essential to Hilfiger.
17.9 Inventories. In all Stores, Licensee shall carry a product mix
reasonably specified by Hilfiger. Licensee shall, to the greatest extent
practicable, order and carry, at Licensee's expense, a reasonable quantity and
representative styles and sizes of all product categories of Licensed Products.
17.10 Exclusivity. The Stores may only carry products which bear the
Trademark, or such other mark, name, and/or symbols as may be used by Hilfiger
from time to time.
17.11 Packaging. Licensee shall use only items of wrapping and packaging as
may be supplied or approved in writing, by Hilfiger. If the wrapping and
packaging is changed, Licensee will be permitted to use up its stock of the
previous wrapping and packaging.
17.12 Store Specifications. Licensee, agrees that no items other than those
approved in writing by Hilfiger or heretofore used in the Stores, will be used,
sold, displayed, exhibited, shown, or otherwise employed in the Stores. Should
Hilfiger change its specifications, Licensee shall, at Hilfiger's expense,
comply with the revised specifications. Licensee shall be given a reasonable
time to exhaust Licensee's inventory of the previously specified items which are
subject to use in the
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course of business, and to amortize the cost of items not normally consumed in
the operation of the Stores.
17.13 Visits By Licensor. Licensee shall have its retail operations manager
or other qualified representative reasonably available by telephone to discuss
with Hilfiger matters concerning the operation of the Stores. Hilfiger may, at
its own expense, send a representative or representatives to visit any of the
Licensee's stores, at such times as Hilfiger may determine. Licensee shall be
present during such visits, upon adequate prior notice of such visits, and to
cooperate with Hilfiger's personnel during such visits.
17.14 Image. Licensee shall maintain an image and reputation of the Stores
consistent with Hilfiger's standards and the standards set forth in this
Agreement. In order to maintain such image and reputation, should Hilfiger
notify Licensee at any time of material defects or deficiencies in the
appearance or conduct of any of the Stores, Licensee agrees to promptly correct
any such item or items at Licensee's expense.
17.15 Permits. Licensee shall obtain and maintain at Licensee's expense all
licenses and permits necessary for the operation of the Stores. Licensee shall
timely comply with the orders, regulations, rules, and directives of government
officials in the conduct of their official rules as they pertain to the
construction, appearance, operation, and conduct of the Stores and the Stores
premises. Licensee shall promptly notify Hilfiger of any such order,
regulations, rules or directives, which may effect the due compliance with
Licensee's obligations hereunder.
17.16 Expenses. Licensee agrees that it is solely responsible for all taxes
and operating expenses, and any and all other outlays or responsibilities,
involving money or performance of any other nature, incurred or resulting on any
way from the construction, opening, operation or otherwise related to the
conduct of the Stores, unless the same were specifically incurred by Hilfiger
and except as otherwise provided herein.
17.17 Business Practices. Licensee shall maintain moral and ethical business
practices consistent with Hilfiger's image in the operation and conduct of the
Stores so as to maintain the goodwill in the eyes of the public for the
Trademark, and for the Merchandise, and supervise and evaluate the performance
of Licensee's staff to ensure that each renders service as previously provided
to the general public. Licensee's staff must strictly adhere to the customer
service guidelines from time to time adopted by Hilfiger and notified to
Licensee. Licensee's staff shall be trained by Hilfiger in the practices and
procedures appropriate in the operation of the Stores to aid in the opening of
the first Store and Licensee shall reimburse Licensor for Licensor's expenses
reasonably incurred in connection with such training, including "on-site" visits
if such visits are requested by Licensee to aid in Store openings.
17.18 Type of Sales. Licensee may not conduct any special promotions,
liquidation sales, going-out-of-business sales, auctions, or other sales not in
the ordinary course of business without the
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prior written consent of Hilfiger. It is understood that Licensor is not
empowered to fix or regulate the prices for which the Licensed Products are to
be sold, either at the wholesale or retail level, but in order to assist
Licensee, a suggested retail markdown schedule will be supplied by Hilfiger
which will assist Licensee in preserving the goodwill and prestigious nature of
the Trademark. To the extent commercially practicable, Licensee shall give due
consideration to Hilfiger's recommended pricing and markdown guidelines.
17.19 Employee Attire. Licensee shall be responsible for having all
personnel employed at the Stores wear such standard Tommy Hilfiger(R) attire or
uniforms during business hours as may be designed by Hilfiger from time to time.
The cost of supply of such standard attire or uniforms shall be borne solely by
the Licensee.
17.20 Inspections. Licensee shall permit Hilfiger, or its authorized agents
and representatives, to enter and inspect the Stores in order to evaluate the
operations and to examine the products being displayed and sold, for the
purposes of ascertaining that Licensee is operating the Stores in accordance
with the terms of this Agreement. Inspections may be conducted at any time
during the regular business hours of the Stores. Hilfiger shall notify Licensee
of any deficiencies detected during such inspection and Licensee shall promptly
correct any such deficiencies. Upon notification by Hilfiger that Licensee is
selling substitutions for the Merchandise, Licensee shall immediately cease and
desist from the further sale thereof, and make all of the necessary corrections
and remove those designated items from the Approved Location. Any items not
permitted hereunder shall, at Hilfiger's request, be delivered to Hilfiger,
without cost to Hilfiger, for Hilfiger's use and disposal. Hilfiger may remove
and dispose of any products not permitted hereunder which are found at an
Approved Location. Licensee shall reimburse Hilfiger for the cost of removal,
shipping, storage, testing and disposal of such products. Hilfiger shall not be
liable under any circumstances for consequential damages, even if the products
removed are ultimately determined by Hilfiger not to be from an unapproved
source, but shall only be liable to Licensee for the actual profits lost from
the sale of the confiscated goods.
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ARTICLE 18. INDEMNIFICATION AND INSURANCE
18.1 Indemnification by Licensee. Licensee will indemnify, defend, and hold
harmless Hilfiger, Tommy Hilfiger individually, and their directors, officers,
employees, agents, officials and related companies from and against any and all
losses, liability, claims, causes of action, damages and expenses (including
reasonable attorneys' fees and expenses in actions involving third parties or
between the parties hereto) that they or any of them may incur or be obligated
to pay in any action, claim or proceeding against them or any of them, for or by
reason of any acts, whether of omission or commission, that may be committed or
suffered by Licensee or any of its servants, agents or employees in connection
with or in any way related to Licensee's performance of this Agreement,
including Licensee's use of Licensee's own designs, in connection with Licensed
Products manufactured by or on behalf of Licensee or patent, trademark,
copyright or other proprietary rights; provided, however, that Hilfiger gives
Licensee prompt notice of, and full cooperation in the defense against, such
claim. If any action or proceeding is brought or asserted against Hilfiger in
respect of which indemnity may be sought from Licensee under this Paragraph
18.1, Hilfiger will promptly notify Licensee thereof in writing, and Licensee
will assume and direct the defense thereof. Hilfiger may thereafter, at its own
expense, be represented by its own counsel in such action or proceeding.
Hilfiger and Licensee will keep each other fully advised of all developments and
shall cooperate fully with each other and in all respects in connection with any
such defense. The provisions of this paragraph and Licensee's obligations
hereunder will survive any termination or rescission of this Agreement.
18.2 Notice of Suit or Claim. Licensee shall promptly inform Hilfiger by
written notice of any suit or claim against Licensee in connection with or in
any way related to Licensee's performance under this Agreement, whether such
suit or claim is for personal injury, involves alleged defects in the Licensed
Products manufactured, sold or distributed hereunder, or otherwise.
18.3 Indemnification by Hilfiger. Hilfiger will indemnify, defend, and hold
harmless Licensee against any and all liabilities, damages and expense
(including reasonable attorneys' fees, costs and expenses) which Licensee may
incur or be obligated to pay in any action or claim against Licensee for
infringement of any other person's claimed right to use a trademark in the
Territory, but only where such action or claim results from Licensee's use of
the Trademarks in the Territory in accordance with the terms of this Agreement.
Licensee will give Hilfiger prompt written notice of any such claim or action,
and thereupon Hilfiger will undertake and conduct the defense of any suit so
brought. It is understood, however, that if there is a dispute between Hilfiger
and Licensee as to whether the suit was brought as a result of Licensee's
failure to use the Trademarks in accordance with this Agreement, Licensee may be
required to conduct such defense unless and until it is determined that no such
misuse of the Trademarks occurred. In the event appropriate action is not taken
by Hilfiger within thirty (30) days after its receipt of notice from Licensee,
Licensee will have the right to defend such claim or action in its own name, but
no settlement or compromise of any such claim or action may be made without the
prior written approval of Hilfiger. In either case, Hilfiger and Licensee will
keep each other fully advised of all developments and shall cooperate
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fully with each other and in all respects in connection with any such defense.
Such indemnification will be deemed to apply solely to the amount of the
judgment, if any, against Licensee, and sums paid by Lic