SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 1994
Commission File Number 0-15238
VICTORIA CREATIONS, INC.
(Exact name of registrant as specified in its charter)
Rhode Island 05-0301429
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
30 Jefferson Park Rd.
Warwick, Rhode Island 02888
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code (401)467-7150
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.01 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all documents
and reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The aggregate market value of Common Stock held by non-affiliates (based
upon the average of bid and asked prices) on September 20, 1994 was
approximately $250,000.
As of September 20, 1994, there were 7,800,000 shares of the registrant's
Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the Annual Meeting of
Stockholders to be held on November 15, 1994 are incorporated by reference
into Part III.
<PAGE>
PART I
Item 1. Business.
General
Victoria Creations, Inc. ("Victoria" or the "Company") is one of the
leading designers, manufacturers and distributors of costume jewelry
throughout the United States and also exports such products, principally
to Japan and western Europe. Victoria produces a broad range and
assortment of costume jewelry, including relatively expensive, high
quality items sold under the Bijoux Givenchy(R), Richelieu(R) and Karl
Lagerfeld(R) trade names and private label jewelry for major department
and chain stores. The Company markets its costume jewelry primarily to
department and chain stores and to a lesser extent to direct marketing
distributors. In addition, Victoria has established a factory direct
business to design and manufacture unique and proprietary costume-jewelry
type items for certain customers.
The Company was incorporated in 1962 and, until March 1984, was privately
owned. Effective March 8, 1984, the Company was purchased by Jonathan
Logan, Inc. ("Logan") which in turn was acquired by United Merchants and
Manufacturers, Inc. ("UM&M") effective September 1, 1984. Effective
September 11, 1986, UM&M sold 17% of the outstanding shares of Common
Stock of the Company in a public offering, thus reducing UM&M's ownership
to 83% of the outstanding Common Stock of the Company. On December 30,
1992, the Company sold 300,000 shares of its authorized, but previously
unissued, Common Stock to certain key employees, which sale increased the
number of shares of Common Stock outstanding and, thereby, reduced UM&M's
ownership to 79% of the outstanding Common Stock of the Company. UM&M, a
company whose stock is traded on the New York Stock Exchange, is a
diversified company engaged primarily in the manufacture and distribution
of textiles and the design and distribution of apparel and accessories.
UM&M's operations are located primarily in the United States. See Item 12
below.
Selected Financial Data
The following information has been derived from audited financial
statements. The information below is qualified by reference to, and
should be read in conjunction with, the financial statements, related
notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained elsewhere herein.
(000 omitted)
-------------------------------------------
for the Year Ended June 30
-------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Income Statement Data:
Net sales................ $42,569 $42,179 $39,789 $40,992 $52,879
Operating income (loss).. 183 (981) (3,814) (5,477) (9,532)
Loss before income taxes. (2,027) (4,137) (7,388) (9,057) (12,986)
Net loss................. (2,054) (4,177) (7,428) (9,107) (9,862)
Net loss per share ...... (0.26) (0.55) (0.99) (1.21) (1.31)
1
<PAGE>
(000 omitted)
-------------------------------------------
At June 30
-------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
Balance Sheet Data:
Working capital.............. $23,897 $ 5,110 $12,273 $15,447 $18,686
Total assets................. 50,673 50,756 50,283 53,926 57,970
Notes payable/long-term debt. 13,391 18,915 10,951 9,654 9,115
Due to Parent Company........ 24,493 17,977 21,893 18,740 13,941
Stockholders' equity......... 9,345 11,399 15,538 22,966 32,073
- - -------------
The Company has paid no cash dividends since the date of its
incorporation. There were 7,500,000 shares of Common Stock outstanding
during the periods prior to December 30, 1992; thereafter there were
7,800,000 shares outstanding.
Seasonality
The Company believes that, to some extent, the seasonality of its business
is the result of retail clothing seasonal buying patterns and certain
traditional gift-giving holidays, such as Valentine's Day, Mother's Day
and the holidays which occur in December. See Note N of Notes to
Financial Statements for financial information by fiscal quarter.
Description of Principal Products
Bijoux Givenchy. Bijoux Givenchy, marketed under an exclusive licensing
arrangement, is a very prestigious, high quality and upscale jewelry line
and is sold principally to department stores. Retail selling prices for
items in the line generally range from $15 to $125 per item. The Bijoux
Givenchy line is geared to be highly fashionable and, as a result, is
continuously being changed and updated. However, certain items in the
line, including signature jewelry, have become basic items. The Company
has created a separate Bijoux Givenchy line, with more explicit designer
logo identification, for the Japanese and other international markets.
The Bijoux Givenchy line's direct worldwide competitors are lines marketed
under the Anne Klein, Yves St. Laurent and Christian Dior names.
Under the licensing agreement with Givenchy, the Company has exclusive
worldwide marketing rights for the Bijoux Givenchy trade name through
1999, while Givenchy retains final approval of design. Under the terms of
the agreement which commenced in 1975, the Company is obligated to pay a
royalty on all sales under the Bijoux Givenchy trade name with
minimum royalties for each fiscal year. Royalty payments historically
have far exceeded the minimum in every year.
2
<PAGE>
Richelieu. Richelieu, founded in 1882 and acquired by Victoria in 1979,
is believed by the Company to be the oldest company in the costume jewelry
business. Richelieu imports simulated pearls from independent suppliers
and markets them principally to major department and chain stores and,
beginning in fiscal 1993, through the Army and Air Force Exchange System
worldwide. Retail selling prices for items in the line are from $7.50 to
$110 per item.
Richelieu simulated pearls assume the appearance of natural pearls.
Alabaster glass pearls are hand-made of high quality lampen beads by
independent suppliers to the Company. These beads are covered with a
sealer and then coated with pearl essence. After the "pearl" is coated, a
dulling process is applied in order to achieve the look of a cultured
pearl. A sealer coat is the last application to the "pearl" ensuring its
lasting quality. The "pearls" are then hand knotted on silk thread.
Approximately one-half of Richelieu's business is in basic products:
strand "pearls" and basic earrings. The other half of the Richelieu
business is more fashion oriented with different colored, sized or shaped
"pearls" being introduced yearly. Richelieu is one of the two largest
distributors of simulated pearls in the United States.
R. J. Design. During the year ended June 30, 1993, the Company
established a design and marketing group, R. J. Design, to capitalize on
the design and manufacturing capabilities available at the Company's
Warren, Rhode Island, facility. The group produces unique, proprietary
items for sale to selected customers. The items include specialty lines
of costume jewelry, costume-jewelry type articles and specialty
recognition-award pieces of costume jewelry. The items are primarily made
of cast metal and brass and are generally decorated with high quality
components.
Private Label. Costume jewelry under the Citation name had been designed
and manufactured by Victoria exclusively for J. C. Penney Company, Inc.
("J. C. Penney") as a private label since 1972. While J. C. Penney sells
costume jewelry purchased from other manufacturers, Victoria had been the
sole manufacturer of costume jewelry products sold by J. C. Penney under
the Citation name. During the 1993 fiscal year, J. C. Penney and the
Company collaborated in developing a new costume jewelry line to support
J. C. Penney's brand of women's ready to wear apparel, "Worthington". In
the fourth quarter of the 1993 fiscal year, the Company made the initial
shipments of Worthington costume jewelry to J. C. Penney and the Citation
brand products were phased out. Worthington is a tailored line of
merchandise that has a variety of fashion themes and is distributed to
approximately 1,100 J. C. Penney stores nationwide. Retail selling prices
for items in the line are $5 to $50 per item. As a result of the success
of the Worthington line, the Company was selected J. C. Penney's "Jewelry
Supplier of the Year". The Company is currently instituting several
private label programs for other U. S. department store chains,
capitalizing on the opportunity to market value-driven and
styling-differentiated classic, tailored product marketed under store
brand labels.
3
<PAGE>
Karl Lagerfeld. During fiscal 1988, the Company acquired a license to
manufacture and distribute high quality, specially designed, luxury
costume jewelry under the Karl Lagerfeld trade name. Under the agreement,
the Company is obligated to pay a royalty of 10% on all of its sales under
the Lagerfeld trade name. The Karl Lagerfeld collection is sold in
boutiques and stores with discriminating clientele. Retail prices range
from $25 to $350 per item.
Design and Production
Victoria's designers identify, on an ongoing basis, fashion trends for the
coming seasons. Costume jewelry is developed and screened with product
merchandisers.
In the case of the Worthington line, the Company and J. C. Penney
conceive, sample and finalize the line. After approval, model stock
selections are created and presented to the jewelry department managers of
individual J. C. Penney stores by the Company's sales staff, who then
write orders.
The Company's two designer brands, Givenchy and Karl Lagerfeld, are
developed in conjunction with the Paris, France studio of each designer.
Initial design concepts are created in Paris and are related to the
designers' runway apparel collections presented throughout the year.
The manufacturing process is labor intensive. The Company currently
employs approximately 473 people solely in its design and production
department and believes that its manufacturing efficiency is attributable
in large part to the many years of experience and expertise of these
employees.
Victoria manufactures at a plant in Warren, Rhode Island. The Company
also makes use of local outside contractors to do preliminary
manufacturing such as linking, gluing and polishing. The Company believes
that its facilities are adequate for current and projected production
requirements.
In general, the raw materials and supplies that Victoria requires are
commodity goods that can be provided by many suppliers. The Company does
not generally enter into long-term commitments with its suppliers and
contractors.
Marketing and Distribution
Victoria's sales and marketing organization for department store and mass
merchandiser business is headquartered at the Company's showroom in New
York City, with a staff of approximately 55 people, including certain
regional sales representatives. In addition, the Company has a regional
sales office in Los Angeles with a sales staff totaling approximately 43
people. Costume jewelry lines are shown five times a year at jewelry
markets in New York. The major shows are in May, for fall season buying,
and in November, for spring season buying. After new lines are shown at
the seasonal marketing shows, it is the responsibility of sales executives
to contact buyers and merchandise managers to obtain orders and
projections of future seasons' needs. Regional sales managers and
associates manage various accounts and are responsible for handling
returns and customer inquiries, setting up advertising and promotions and
4
<PAGE>
reordering. The regional sales and marketing executives also generate new
business by visiting potential customers throughout the United States. In
addition to the Company's sales staff, a separate sales and service group
of approximately 16 independent representatives, working in conjunction
with the Company's personnel, services the J. C. Penney account.
In 1987, the Company opened a wholesale outlet store in New York City to
sell, for cash, small quantities of unbranded costume jewelry to
independent retail stores. Beginning in the 1992 fiscal year, the
Company's parent company retail outlet (primarily apparel) stores
division, in cooperation with the Company, has opened 13 outlet stores
featuring certain of the Company's merchandise.
Under Victoria's cooperative advertising policy, Victoria bears, to a
limited extent, a portion of department stores' local advertising costs
relative to the amount of advertising of the Company's products included
therein.
Victoria's products are exported to markets throughout the world,
primarily to Japan and western Europe and to a lesser extent to Australia,
Canada, Mexico and the Near East. In addition, the Company sells to
duty-free shops throughout the world. During the years ended June 30,
1994, 1993 and 1992, export sales were approximately 9%, 13% and 11% of
sales, net of returns, respectively.
Significant Customers
In 1994, the Company's products were sold to approximately 400 customers,
including most major department stores in the United States. During the
year ended June 30, 1994, sales to one of the Company's customers, J. C.
Penney, accounted for approximately 30% of the Company's total sales, net
of returns. The Company has no contractual relationships with its
principal customers. Goods are shipped against orders received from time
to time on customary payment terms.
Backlog
The Company does not believe that the dollar amount of unfilled orders is
significant to an understanding of the Company's business due to the
generally short time between receipt of a customer order and shipment of
the product.
Competition
The costume jewelry industry is highly fragmented and includes many small
firms. The Company believes it is one of the largest manufacturers of
costume jewelry in the United States. Within the industry, there are
manufacturers that focus on low-margin, basic items and those that
emphasize higher-margin (and higher risk) items geared to be highly
fashionable. The Company believes that only a few companies, of which
Victoria is one, combine manufacturing and marketing capabilities for both
basic and high fashion items.
5
<PAGE>
Victoria competes on the basis of design, quality, reliability as a
supplier, service to a customer and price. Its major direct competitors
are the Monet, Marvela and Trifari divisions of Crystal Brands, Inc., Anne
Klein division of Swank, Inc., Liz Claiborne, Inc. and Napier, Inc.
Employees
As of June 30, 1994, the Company employed full time approximately 624
people, none of whom is represented by a labor union. Of these employees,
approximately 38 are involved in management and administration, 13 in
design, 460 in manufacturing and shipping and 113 in marketing and
customer service. Of the Company's employees at June 30, 1994, 188 were
salaried and 436 were paid on an hourly basis. The Company believes that
its relationship with its employees is good.
Item 2. Properties.
The following table lists the location of the Company's facilities, all of
which are leased.
Lease
Square Expiration
Location Feet Dates
-------- -------- ---------
Warren, RI (Manufacturing facility)............ 40,000 June 1996
Warwick, RI (Offices, warehousing
and distribution)................ 35,000 June 1996
Providence, RI (warehouse)..................... 15,000 July 1995
New York, NY (Offices and showroom)............ 17,100 July 2013
(Showroom)........................ 2,800 March 2001
Los Angeles, CA (Showroom)..................... 1,100 Feb 1996
The Company leases its Warren, Rhode Island and Warwick, Rhode Island
facilities from UM&M under leases expiring in June 1996 at a total cost of
$317,000 a year (subject to annual cost-of-living adjustments). See Item
13 below.
The Company's manufacturing facility, based on a one shift a day
operation, operated at approximately 85% of capacity during the year ended
June 30, 1994.
The Company believes that each of its facilities is well maintained and
properly equipped for its purpose.
Item 3. Legal Proceedings.
The Company is a defendant in various lawsuits. It is not expected that
these suits will result in judgements which in the aggregate would have a
material adverse effect on the Company's financial position; accordingly,
no such lawsuit is described herein.
Item 4. Submission of Matters to a Vote of Security Holders.
None
6
<PAGE>
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock traded on The Nasdaq SmallCap Market through
June 15, 1993, at which time it began trading in the over-the-counter
market. The stock is currently quoted on the OTC Bulletin Board operated
by National Association of Securities Dealers, Inc. The approximate
number of holders of the Common Stock of the Company at August 31, 1994
was 500. The following table sets forth the high and low bid prices of
the Company's Common Stock. The market quotations may reflect
inter-dealer prices, without retail mark-up or mark-down or commission,
and may not necessarily represent actual transactions.
Market Quotations
------------------
Fiscal Year Fiscal Quarter Ended High Low
----------- -------------------- -------- --------
1994 June 30, 1994 $ 0.0626 $ 0.0625
March 31, 1994 0.1875 0.0625
December 31, 1993 0.25 0.0625
September 30, 1993 0.1875 0.0625
1993 June 30, 1993 $ 0.1875 $ 0.1875
March 31, 1993 0.1875 0.125
December 31, 1992 0.1875 0.125
September 30, 1992 0.1875 0.1875
The Company has never declared nor paid a cash dividend on its Common
Stock, and the Company's Board of Directors presently intends to retain
any earnings for use in the business.
Item 6. Selected Financial Data.
The information required by the Item is found in Part I, Item 1.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
The information required by this Item is found on page F-3.
Item 8. Financial Statements and Supplementary Data.
See index on page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None.
7
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
Information required under this item with respect to the Directors is
contained in the Registrant's 1994 Proxy Statement, pursuant to Regulation
14A, which is incorporated herein by reference.
Set forth below are the names, ages, present positions and business
experience during the last five years of all current Executive Officers of
the Company. Officers are appointed to serve until the meeting of the
Board of Directors following the next Annual Meeting of Stockholders and
until their successors have been elected and have qualified.
Name Age Present Position Business Experience
- - ---- --- ---------------- -------------------
Uzi Ruskin 49 Chairman of the President, Chief
Company and Executive and Chief
Director Operating Officer of
UM&M; Chairman of the
Company since October
1993
Patricia Stensrud 46 President and Chief Vice President of
Executive Officer Marketing of Hambrect
of the Company and Terrell International
Director from 1989 to April 1990;
Executive of the Company
since May 1990.
Executive Vice President
- Sales and Marketing of
the Company from June
1992 to July 1993;
President and Chief
Executive Officer of the
Company since July 1993
Richard M. Andreoli 38 Executive Vice Executive of the Company
President and since 1982. Senior Vice
Chief Operating President - Operations
Officer of the of the Company from
Company and September 1991 to May
Director 1992; Executive Vice
President - Operations
of the Company since
May 1992; Chief
Operating Officer of the
Company since July 1993
Norman R. Forson 65 Senior Vice President Senior Vice President and
and Treasurer of the Chief Financial Officer
Company of Jonathan Logan
Division of UM&M since
1985; Senior Vice
President and
Comptroller of UM&M
since 1987
8
<PAGE>
Edgar L. Brinkworth 51 Vice President and Vice President and
Controller of the Controller of the
Company Company since 1987
Item 11. Executive Compensation.
Information required under this item is contained in the Registrant's 1994
Proxy Statement, pursuant to regulation 14A, which is incorporated herein
by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Information required under this item is contained in the Registrant's 1994
Proxy Statement, pursuant to regulation 14A, which is incorporated herein
by reference.
Item 13. Certain Relationships and Related Transactions.
Information required under this item is contained in the Registrant's 1994
Proxy Statement, pursuant to regulation 14A, which is incorporated herein
by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
Item 14(a) 1. and 2. Financial Statements and Schedules - See "Index to
Financial Statements, Schedules and Management's Discussion and
Analysis" on page F-1.
Item 14(a) 3. Exhibits
(3) Articles of Incorporation and Bylaws.
(3) 1. Composite Certificate of Incorporation. Incorporated by
reference to Exhibit 3 (a) to the Registration Statement of
the Registrant on Form S-1, File No. 33-7125. Amendment
dated May 24, 1993 incorporated by reference to Form 10-K
filed by the Registrant for the year ended June 30, 1003.
(3) 2. Bylaws. Incorporated by reference to Exhibit 3 (b) to the
Registration Statement of the Registrant on Form S-1, File
No. 33-7125.
(4) Instruments defining the rights of security holders,
including indentures.
(4) 1. 1986 Stock Option Plan. Incorporated by reference to Exhibit
10(m) to the Registration Statement of the Registrant on
Form S-1, File No. 33-7125.
(10) Material Contracts. (see Exhibit Index, Page E-1)
Item 14(b) Registrant filed a report on Form 8-K on July 14, 1994,
which reported that, on June 30, 1994, the registrant
repaid its indebtedness to its senior lender by borrowing
$13 million from another lender and approximately $5.6
million from its Parent Company. The report included as
exhibits the Secured Promissory Note and the Loan and
Security Agreement between the Registrant and the new
lender. See Note D of Notes to Financial Statements
included elsewhere herein for further information regarding
this matter.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Annual Report to be
signed on behalf by the undersigned, thereunto duly authorized.
Dated: September 20, 1994 VICTORIA CREATIONS, INC.
(Registrant)
By /s/ Norman R. Forson
Norman R. Forson
Senior Vice President,
Treasurer and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, which include the
Principal Executive Officer, the Principal Accounting Officer and a
majority of the Board of Directors, on behalf of the Registrant and in the
capacities and on the dates indicated:
/s/ Patricia Stensrud President and Chief September 20,1994
Patricia Stensrud Executive Officer and
Director (Principal
Executive Officer)
/s/ Edgar L. Brinkworth Vice President and September 20, 1994
Edgar L. Brinkworth Controller (Principal
Accounting Officer)
/s/ Richard M. Andreoli Executive Vice President September 20, 1994
Richard M. Andreoli and Chief Operating
Officer and Director
/s/ Paul B. Markovits Director September 20, 1994
Paul B. Markovits
/s/ Uzi Ruskin Chairman and September 20, 1994
Uzi Ruskin Director
/s/ Robert J. Swartz Director September 20, 1994
Robert J. Swartz
/s/ Thomas J. Tisch Director September 20, 1994
Thomas J. Tisch
10
<PAGE>
VICTORIA CREATIONS, INC.
FORM 10-K
INDEX TO FINANCIAL STATEMENTS, SCHEDULES
AND MANAGEMENT'S DISCUSSION AND ANALYSIS
Page
Statement of Operations for the three years ended June 30, 1994 ..... F-2
Management's Discussion and Analysis of Financial Condition
and Results of Operations ......................................... F-3
Balance Sheet as of June 30, 1994 and 1993 .......................... F-6
Statement of Cash Flows for the three years
ended June 30, 1994 ............................................... F-7
Notes to Financial Statements........................................ F-8
Independent Auditors' Report......................................... F-15
Schedules have been omitted because they are inapplicable or because the
required information is included in the financial statements and notes
thereto.
F-1
<PAGE>
VICTORIA CREATIONS, INC.
STATEMENT OF OPERATIONS
(000 omitted)
Year Ended June 30,
----------------------------
1994 1993 1992
-------- -------- --------
Net sales.................................. $ 42,569 $ 42,179 $ 39,789
Cost of goods sold......................... 23,744 24,165 24,110
-------- -------- --------
Gross Profit $ 18,825 $ 18,014 $ 15,679
Selling, general and administrative expenses 18,642 18,995 19,493
-------- -------- --------
Operating Income (Loss) $ 183 $ (981) $ (3,814)
Other income (expense):
Interest expense - Notes D and G......... (1,574) (2,546) (3,023)
Amortization of goodwill................. (720) (720) (720)
Royalty income........................... 84 110 169
-------- -------- --------
Loss before Income Taxes $ (2,027) $ (4,137) $ (7,388)
Provision for income taxes - Note F....... 27 40 40
-------- -------- --------
Net Loss $ (2,054) $ (4,177) $ (7,428)
======== ======== ========
Average common shares outstanding (Note A) 7,800 7,650 7,500
Net Loss Per Share - Note A............... $ (0.26) $ (0.55) $ (0.99)
See notes to financial statements.
F-2
<PAGE>
VICTORIA CREATIONS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(Not Covered by Report of
Independent Certified Public Accountants)
The Company is a 79%-owned subsidiary of United Merchants and
Manufacturers, Inc. ("UM&M" or "Parent Company").
Results of Operations
Net sales in the fiscal year ended June 30, 1994 increased by 1% to
$42.6 million from $42.2 million in fiscal 1993. The increase in the 1994
fiscal year resulted from increased net sales in the first and third
quarters of the current fiscal year. Sales in the fourth quarter were
approximately equal to those of the same quarter last year even though
last year's fourth quarter included shipments for an initial launch of a
new (for the Company) label for the Company's largest customer. Consumer
interest remained strong for the Company's branded label merchandise,
Givenchy, Richelieu and Lagerfeld. Sales of the Company's private label
merchandise increased over those of the prior fiscal year. R. J. Design,
the Company's factory-direct design and manufacturing business which is
focused on providing unique, proprietary products to certain customers,
also showed sales increases in the 1994 fiscal year over the 1993 year.
Overall, unit sales and average unit price increased slightly during the
current fiscal year versus the 1993 fiscal year.
Net sales in the fiscal year ended June 30, 1993 increased by 6%, to
$42.2 million from $39.8 million in fiscal 1992. The increase in the 1993
fiscal year resulted from improved sales in both the third and fourth
fiscal quarters over sales of the same quarters in the prior fiscal year.
Sales for the first six months of fiscal 1993 were lower than the those of
the comparable period in fiscal 1992 as a result of conservative buying by
the Company's largest customers, the major department stores. During the
second half of the fiscal 1993 year, sales of the Company's designer
merchandise, Givenchy, Lagerfeld and Richelieu, increased. The increased
sales in fiscal 1993 also reflect increased sales in the Company's R. J.
Design factory direct business. The conservative buying by the Company's
customers during the first six months of the 1993 fiscal year resulted in
lower unit sales during the year which were offset by increased average
unit prices.
While net sales increased in the 1994 fiscal year over the 1993 year, cost
of goods sold decreased 2%, reflecting the Company's continued emphasis on
manufacturing and purchasing efficiencies. The resulting gross profit for
the current year increased 5% over that of the year ended June 30, 1993.
The disposal of out-of-season merchandise, which is sold at lower than the
F-3
<PAGE>
Company's normal margin, was at a lower rate during the fiscal 1994 year
as management emphasized improved forecasting to reduce the amount of such
merchandise available to be sold through off-price channels.
Cost of goods sold for the year ended June 30, 1993 was approximately the
same as that of the 1992 fiscal year. While there was an increase in net
sales, the expected increase in cost of goods sold for fiscal 1993 was
offset by higher gross profit on the sales. During the 1993 fiscal year,
the Company continued to dispose of out-of-season inventory at
approximately the same dollar volume as in the prior year. As a result of
the increased net sales and improved gross profit percentage on sales,
gross profit for the year ended June 30, 1993 increased 15% over that of
fiscal 1992.
As a percentage of net sales, gross profit for the current year increased
by 2% over that of the 1993 fiscal year which in turn had increased by 3%
over that of fiscal 1992.
The Company continues to exercise strict budgeting controls and spending
restraints resulting in a decrease of 2% in selling, general and
administrative expenses during the fiscal 1994 year compared to those in
fiscal 1993. Selling, general and administrative expenses decreased 3% in
the year ending June 30, 1993 from those of the fiscal 1992 year. On an
absolute basis, selling, general and administrative expenses decreased by
$0.4 million in fiscal 1994 and by $0.5 million in fiscal 1993 compared
with the prior year.
Interest expense for the year ended June 30, 1994 was $972,000 lower than
that reported for fiscal 1993. The decrease was due to the waiving of
interest by the Parent Company on the amount due to it for the entire
fiscal year. If the Parent Company had not waived the interest due to it,
interest expense for the 1994 fiscal year would have been approximately
$1.5 million greater than the interest expense reflected in the statement
of operations. Interest expense for the year ended June 30, 1993 was
$477,000 lower than that reported for fiscal 1992. The decrease was
primarily due to the waiving of the interest by the Parent Company on the
amount due to it for the three months ended June 30, 1993. If that
interest had not been waived, interest expense for fiscal 1993 would have
been approximately $ 115,000 lower than that reported in fiscal 1992 as a
result of lower interest rates which more than offset higher average
borrowings.
See Note F of Notes to Financial Statements for information regarding
income taxes.
F-4
<PAGE>
Liquidity and Capital Resources
The Company has generally met its capital requirements from internally
generated funds and borrowings from its Parent Company and, until June 30,
1994, from its factor. See Notes D and G of Notes to Financial Statements
for more information regarding borrowings from the Parent Company and the
factor. On June 30, 1994, the Company repaid its indebtedness to its
factor by borrowing $13.0 million from another lender and approximately
$5.6 million from its Parent Company. The borrowing from the other lender
consisted of $2.0 million under a secured promissory note and the balance
under a revolving loan and security agreement. See Note D for further
information regarding these borrowings from the new lender.
Short-term needs for working capital will be borrowed under the revolving
loan mentioned above. The Company does not anticipate increased needs for
long-term borrowings.
On December 30, 1992, as an incentive to certain of its key employees, the
Company sold 300,000 shares of its Common Stock to those employees. See
Note E of Notes to Financial Statements.
Working capital at June 30, 1994 was $23.9 million compared with
$5.1 million at June 30, 1993, (1993 included the loan to factor as a
current liability) primarily reflecting the debt restructuring described
above. The Company's current ratio of 7.9 to 1 at June 30, 1994 is deemed
adequate for the Company's current financial position and needs.
F-5
<PAGE>
VICTORIA CREATIONS, INC.
BALANCE SHEET
(000 omitted)
June 30,
------------------
1994 1993
-------- --------
ASSETS
Current Assets:
Cash.............................................. $ 72 $
148
Receivables - Notes B and D....................... 8,359
7,439
Inventories - Notes C and D....................... 17,994
18,159
Other current assets.............................. 916
744
-------- --------
Total Current Assets $ 27,341 $ 26,490
Plant and Equipment:
Machinery and equipment........................... $ 2,877 $ 2,758
Leasehold improvements............................ 1,889 1,842
Capitalized equipment leases...................... 362 362
-------- --------
$ 5,128 $ 4,962
Less accumulated depreciation..................... 3,812 3,507
-------- --------
Net Plant and Equipment $ 1,316 $ 1,455
Other Assets:
Goodwill - Note A................................. $ 21,430 $ 22,150
Other............................................. 586 661
-------- --------
$ 22,016 $ 22,811
-------- --------
$ 50,673 $ 50,756
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable - Note D............................ $ 0 $ 18,915
Accounts payable.................................. 2,315 1,592
Accrued expenses and other liabilities............ 1,129 873
-------- --------
Total Current Liabilities $ 3,444 $ 21,380
Long-term debt - Note D............................. 13,391 0
Due to Parent Company - Note G...................... 24,493 17,977
Stockholders' Equity - Notes E and J:
Common stock, $0.01 par value; 10 million shares
authorized; 7.8 million shares outstanding...... $ 58 $ 58
Additional paid-in capital........................ 32,998 32,998
Retained earnings (deficit)....................... (23,711) (21,657)
-------- --------
Total Stockholders' Equity $ 9,345 $ 11,399
-------- --------
$ 50,673 $ 50,756
======== ========
See notes to financial statements.
F-6
<PAGE>
VICTORIA CREATIONS, INC.
STATEMENT OF CASH FLOWS
(000 omitted)
Year Ended June 30,
----------------------------
1994 1993 1992
-------- -------- --------
Cash Flows from Operating Activities:
Net loss.................................. $ (2,054) $ (4,177) $ (7,428)
Add back items not requiring cash in the
current period:
Depreciation and amortization........... 1,026 1,057 1,138
Decrease (Increase) in Current Assets:
Receivables.............................. (920) (3,449) 474
Inventories.............................. 165 2,055 1,858
Other current assets..................... (172) 107 206
Increase (Decrease) in Current Liabilities:
Accounts payable......................... 723 562 (450)
Accrued expenses and other liabilities... 256 2 (215)
Other - net............................... 75 6 12
-------- -------- --------
Net Cash Used by Operating Activities $ (901) $ (3,837) $ (4,405)
Cash flows from Investing Activities:
Additions to plant and equipment.......... $ (170) $ (171) $ (49)
Dispositions of plant and equipment....... 3 - -
-------- -------- ---------
Net Cash Used by Investing Activities $ (167) $ (171) $ (49)
Cash Flows from Financing Activities:
Notes payable............................. $(18,915) $ 7,964 $ 1,297
Increase in long-term debt................ 13,391
Due to Parent Company..................... 6,516 (3,916) 3,153
Proceeds from sale of Common Stock........ - 38 -
-------- -------- --------
Net Cash Provided by Financing Activities $ 992 $ 4,086 $ 4,450
-------- -------- --------
Net Increase (Decrease) in Cash $ (76) $ 78 $ (4)
Cash at beginning of year.................. 148 70 74
-------- -------- --------
Cash at End of Year $ 72 $ 148 $ 70
======== ======== ========
- - ----------
Supplemental disclosure:
Cash payments for:
Interest................................. $ 1,574 $ 1,259 $ 1,945
Income taxes............................. 27 40 40
See notes to financial statements.
F-7
<PAGE>
VICTORIA CREATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
The Company is a 79%-owned subsidiary of United Merchants and
Manufacturers, Inc. (the "Parent Company").
NOTE A - Summary of Significant Accounting Policies
Inventories are valued at the lower of cost (first-in, first-out method)
or market.
Plant and equipment are carried at cost. Depreciation and amortization
are computed using the straight-line method over the following range of
estimated useful lives:
Machinery and equipment............... 3 to 10 years
Leasehold improvements................ 5 to 10 years
Capitalized leases.................... 5 to 8 years
Goodwill is being amortized by the straight-line method over 40 years.
Accumulated amortization of goodwill amounted to $6,585,000 and $5,865,000
at June 30, 1994 and 1993, respectively.
Net loss per share is computed based on the weighted average number of
shares of Common Stock outstanding during the periods. See Note E.
NOTE B - Receivables
Substantially all of the Company's trade accounts receivable have been
sold to a factor. The amounts shown in the balance sheet are net of
allowances of $990,000 as of June 30, 1994 and $792,000 as of June 30,
1993.
NOTE C - Inventories
Inventories consist of:
(000 omitted)
------------------
June 30,
------------------
1994 1993
-------- --------
Raw materials................................... $ 5,551 $ 6,045
Work in process................................. 705 547
Finished goods.................................. 11,738 11,567
-------- --------
$ 17,994 $ 18,159
======== ========
F-8
<PAGE>
Note D - Notes Payable/Long-Term Debt
The amount borrowed as notes payable/long-term debt fluctuates based on
the Company's cash availability or requirements.
On June 30, 1994, the Company repaid its indebtedness to its senior
secured lender by borrowing $13 million from another lender and
approximately $5.6 million from its Parent Company. The borrowing from
the other lender consisted of $2 million under a secured promissory note
and the balance under a revolving loan and security agreement. These
borrowings are secured by substantially all of the Company's assets, are
due June 30, 1996, may be prepaid without premium or penalty and bear
interest at the rate of 2% a month.
Prior to June 30, 1994, notes payable amounts were borrowed from the
Company's factor. The amount outstanding was secured by the Company's
receivables and inventory and interest was charged at 2% a year over a
bank's reference rate.
Selected information with regard to the notes payable to the factor is as
follows:
(000 omitted)
------------------
Year Ended June 30
------------------
1994 1993
-------- --------
Maximum amount outstanding (at any month end)........ $ 17,963 $ 18,915
Average amount outstanding during period............. 16,403 14,241
Interest paid to factor.............................. 1,565 1,287
Weighted average interest rate during period -
(based on average amount outstanding)............... 9.5% 9.0%
NOTE E - Stockholders' Equity
On December 30, 1992, as an incentive to certain of its key employees, the
Company sold 300,000 shares of authorized, but previously unissued, Common
Stock to those employees. The sale of these shares increased the number
of outstanding shares of Common Stock from 7.5 million to 7.8 million.
The shares are not registered under the Securities Act of 1933, as
amended. These unregistered shares were sold for cash at a value, based
on market quotations of the Company's publicly-traded Common Stock, of
$0.125 a share.
The only other changes in stockholders' equity during the three years
ended June 30, 1994 have been the addition of net losses to retained
earnings (deficit).
F-9
<PAGE>
NOTE F - Income Taxes
Through December 30, 1992, the results of operations of the Company were
included in the consolidated Federal and certain state income tax returns
of the Parent Company. The provision for income taxes was computed based
on the earnings (loss) as reflected in the financial statements, using
applicable Federal and state income tax law and rates, as if the Company
were filing separate income tax returns. The amount which would have been
payable to the applicable taxing authorities was paid to the Parent
Company.
Effective December 30, 1992, as a result of the sale of Common Stock (see
Note E above), the Parent Company's ownership of the Company dropped below
the percentage required for consolidation for income tax purposes and,
therefore, the results of operations of the Company will not be included
in consolidated Federal and certain state income tax returns of the Parent
Company.
The provision for income taxes consists of:
(000 omitted)
----------------------------
Year Ended June 30,
----------------------------
1994 1993 1992
-------- -------- --------
Current income taxes:
State and local........................ $ 27 $ 40 $ 40
======== ======== ========
A reconciliation of the United States statutory Federal corporate income
tax rate to the effective rate of the provision for income taxes is as
follows:
Year Ended June 30,
----------------------------
1994 1993 1992
-------- -------- --------
Statutory rate............................. (34.0)% (34.0)% (34.0)%
Increase (decrease) in taxes arising from
effect of:
State and local income taxes, net of
Federal tax benefit..................... 0.9 0.6 0.4
Amortization of goodwill................. 12.1 5.9 3.3
Losses not resulting in tax benefit...... 22.3 28.5 30.8
-------- -------- --------
Effective rate............................. 1.3 % 1.0 % 0.5 %
======== ======== ========
At June 30, 1994, the Company had unused net operating loss carryforwards
of approximately $38.1 million, of which $3.6 million expire in 2003,
$11.3 million in 2005, $10.0 million in 2006, $7.4 million in 2007, $3.8
million in 2008 and $1.1 million in 2009.
F-10
<PAGE>
NOTE G - Related Party Transactions
Prior to 1991, the Parent Company acted as a banker for the Company. The
Company would borrow from the Parent Company funds necessary to meet
operational and capital needs, and lend funds to the Parent Company when
the Company had excess funds available. During the 1991 fiscal year, the
Company established banking facilities with a factor and no longer relies
on the Parent Company to be its banker. The Company currently owes the
Parent Company for borrowings, for interest expense on amounts due, for
rent and for amounts paid by the Parent Company on behalf of the Company
which were not reimbursed by the Company. The Company is charged interest
on its net outstanding balance with the Parent Company at the annual rate
paid by the Parent Company on its borrowings; however the Parent Company
has waived the interest due to it for the fourth quarter of fiscal 1993
and for the 1994 fiscal year. There is no repayment schedule for this
debt and the Parent Company has indicated that it has no intention of
making demands for payment during the 1995 fiscal year.
Selected information with regard to the amount due to Parent Company is as
follows:
(000 omitted)
------------------
Year Ended June 30
------------------
1994 1993
-------- --------
Maximum amount outstanding (at any month end)........ $24,493 $21,545
Average amount outstanding during period............. 18,846 20,076
Interest paid to Parent Company ..................... 0 1,259
Weighted average interest rate during period (interest
paid divided by average amount outstanding)......... 0% 6.3%
- - ----------
Note - The Parent Company waived interest on the amount due to it for the
three months ended June 30, 1993 and for the year ended June 30, 1994.
The Company leases two buildings from the Parent Company at a total cost
of $317,000 a year (subject to annual cost-of-living adjustments). The
Company pays all expenses of the buildings on a triple net lease basis.
During the years ended June 30, 1994 and 1993, sales to the Parent
Company's retail outlet stores were approximately $702,000 and $670,000,
respectively.
Under a service agreement, the Parent Company performs certain limited
administrative functions, including data processing services, for the
Company. These functions were performed by the Company prior to its
acquisition. The Company believes that if it were to resume
responsibility for these services, the additional cost to the Company
would be minimal. Accordingly, the Parent Company has not charged the
Company for these services.
F-11
<PAGE>
NOTE H - Commitments and Contingencies
Rental expense for real property, machinery and equipment was $1,006,000,
$1,068,000, and $1,370,000 for the years ended June 30, 1994, 1993 and
1992, respectively. These amounts include rent paid to the Parent Company
for the lease of two buildings (see Note G above).
At June 30, 1994, minimum rental commitments under non-cancellable
operating leases (including leases with the Parent Company), primarily for
real property, machinery and equipment, are as follows:
Year ending (000
June 30, omitted)
----------- --------
1995................................................... $ 1,110
1996................................................... 1,061
1997................................................... 764
1998................................................... 761
1999................................................... 805
Thereafter............................................. 10,347
Under the present terms of certain agreements, the Company is obligated to
pay royalties based on sales of certain product lines with minimum royalty
payments of $730,000 in the year ending June 30, 1995, $767,500 in 1996,
$802,500 in 1997, $837,500 in 1998, $641,250 in 1999 and $213,750 for the
first six months of fiscal 2000.
NOTE I - Supplemental Information
(000 omitted)
----------------------------
Year ended June 30
----------------------------
1994 1993 1992
-------- -------- --------
Advertising expense....................... $ 2,215 $ 2,221 $ 2,574
Royalty expense........................... 1,304 1,401 1,576
NOTE J - Stock Options
1986 Stock Option Plan:
The 1986 Stock Option Plan provides for the granting of options to
officers and other key employees to purchase an aggregate of 200,000
shares of Common Stock of the Company. Such options are required to have
an exercise price of not less than fair market value of the shares on the
date the option is granted. Some or all of the options may be granted as
"incentive stock options" within the meaning of the Internal Revenue Code
of 1954, as amended.
F-12
<PAGE>
Transactions under this Plan for the three years ended June 30, 1994 are
as follows:
(000 omitted)
-------------
Number of Total
Shares Price per Share Price
-------- ------------------ --------
Outstanding at June 30, 1991 35,500 $ 1.25 to $10.75 $ 282
Granted.......................... 110,000 0.34 to 1.00 44
Cancelled........................ (45,500) 1.00 to 10.75 (292)
-------- --------
Outstanding at June 30, 1992,
1993 and 1994.................. 100,000 $ 0.34375 $ 34
======== ========
Exercisable at:
June 30, 1993................... 25,000
June 30, 1994................... 50,000
Available for future grant:
June 30, 1993 and 1994.......... 100,000
Other Options:
On July 7, 1986 the Company granted to the Parent Company an option to
purchase 800,000 shares of Common Stock of the Company at $10.80 a share.
The option is exercisable in whole or part until August 31, 1996.
As of June 30, 1992 and 1993, an executive of the Company held options to
purchase 250,000 shares of Common Stock of the Company at prices ranging
from $5.25 to $1.125 a share. During fiscal 1994, the executive ceased to
be an employee of the Company and the options were canceled.
NOTE K - Retirement Savings Plan
The Company has a Retirement Savings Plan which includes the salary
deferral feature afforded by Section 401(k) of the Internal Revenue Code.
The Plan covers substantially all employees of the Company. Under the
Plan, covered employees may make pre-tax contributions of up to 10% of
salary (but not to exceed the Internal Revenue Service limits in any one
year) to their Plan account. For those employees whose annual salary is
less than $40,000, the Company contributes a matching amount equal to 20%
of the employee's contribution at the time of the employee's
contribution. For those employees whose annual salary is $40,000 or
greater, the Company makes no contribution. During the years ended
June 30, 1994, 1993 and 1992, the Company's contributions to, and expenses
of, the Plan were $40,000; $70,000 and $94,000, respectively.
NOTE L - Business Segment
The Company consists of one business segment, the design, manufacture and
distribution of costume jewelry.
F-13
<PAGE>
NOTE M - Major Customers
During the years ended June 30, 1994, 1993 and 1992, one customer's
purchases amounted to approximately 30%, 29% and 26%, respectively, of the
Company's sales, net of returns.
NOTE N - Quarterly Results (Unaudited)
The following summarizes the quarterly operating results of the Company
for the years ended June 30, 1994 and 1993.
(000 omitted)
------------------------------------------------
Quarter Ended
------------------------------------------------
Sep 30 Dec 31 Mar 31 June 30 Total
-------- -------- -------- -------- --------
Year ended June 30, 1994:
Net sales........... $ 11,108 $ 9,616 $ 10,593 $ 11,252 $ 42,569
Gross profit........ 5,390 3,305 4,925 5,205 18,825
Net earnings (loss). 165 (2,066) (100) (53) (2,054)
Net earnings (loss)
per share.......... 0.02 (0.26) (0.01) (0.01) (0.26)
Year ended June 30, 1993:
Net sales........... $ 11,042 $ 10,487 $ 9,018 $ 11,632 $ 42,179
Gross profit........ 5,393 4,567 3,509 4,545 18,014
Net loss............ (455) (1,013) (1,810) (899) (4,177)
Net loss per share.. (0.06) (0.14) (0.23) (0.12) (0.55)
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors,
Victoria Creations, Inc.:
We have audited the balance sheets of Victoria Creations, Inc. as of June
30, 1994 and 1993 and the related statements of operations and cash flows
for each of the years in the three-year period ended June 30, 1994. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Victoria Creations,
Inc. as of June 30, 1994 and 1993, and the results of its operations and
its cash flows for each of the years in the three-year period ended June
30, 1994, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
September 20, 1994
F-15
<PAGE>
VICTORIA CREATIONS, INC.
FORM 10-K
INDEX TO EXHIBITS
Certain exhibits to this Annual Report on Form 10-K have been incorporated
by reference. For a list of these exhibits see Item 14 hereof.
The following exhibits are being filed herewith:
Exhibit No.
(10) Material Contracts
(10) a. Givenchy License Agreement dated as of January 1, 1994
between the Company and Givenchy Corporation is filed
herewith as Exhibit E-1
(10) b. Karl Lagerfeld License Agreement dated as of September
1987 among the Company and Karl Lagerfeld is
incorporated herein by reference to Registrant's Annual
Report on Form 10-K for the year ended June 30, 1989.
Amendment No. 2 dated April 27, 1994 is filed herewith
as Exhibit E-2.
(10) c. Edgar L. Brinkworth - Employment agreement dated February
27, 1990 is incorporated herein by reference to
Registrant's Annual Report on Form 10-K for the year
ended June 30, 1990.
(10) d. Richard M. Andreoli - Employment agreement dated June 30,
1993 is incorporated herein by reference to Registrant's
Annual Report on Form 10-k for the year ended June 30,
1993.
(10) e. Patricia J. Stensrud - Employment agreement dated June
30, 1993 is incorporated herein by reference to
Registrant's Annual Report on Form 10-k for the year
ended June 30, 1993.
(27) Financial Data Schedule as of and for the year ended June 30,
1994 is filed herewith as Exhibit E-3.
E-1
<PAGE>
E-1
GIVENCHY CORPORATION
LICENSE AGREEMENT
(Version No. 2)<PAGE>
GIVENCHY CORPORATION
LICENSE AGREEMENT
AGREEMENT, dated as of the 1st day of January, 1994 between
GIVENCHY CORPORATION, a Delaware corporation (the "LICENSOR"),
having an office at 21 East 75th Street, New York, New York 10021,
U.S.A., and VICTORIA CREATIONS, INC., a Rhode Island corporation
(the "LICENSEE"), having an office at 30 Jefferson Park Road,
Warwick, Rhode Island 02888.
WITNESSETH
----------
WHEREAS, GIVENCHY S.A., a corporation organized and existing
under the laws of France ("Givenchy Paris") , the owner of the
rights in the Territory defined in the Summary Sheet (the
"Territory") to the trademarks (the "Trademarks") set forth on the
Summary Sheet, has granted LICENSOR, the right to use and grant
licenses in the Territory under the Trademarks; and
WHEREAS, Givenchy Paris has established a worldwide
reputation for manufacturing, selling and licensing for sale luxury
and fashion items to be sold in stores selling high fashion and high
quality products. In order to maintain such standards, Givenchy
Paris directly and through LICENSOR participates in the design of
products which it licenses to others and has established and
maintains quality standards and controls for licensed products and
services bearing the Trademarks; and
WHEREAS, LICENSEE desires to obtain a license to use the
Trademarks in connection with the manufacture, distribution and sale
in the Territory of the Products (the "Products") set forth on the
Summary Sheet;
NOW THEREFORE, in consideration of the mutual agreements set
forth in this Agreement, the parties hereby agree as follows:
1. GRANT OF LICENSE. LICENSOR hereby grants to LICENSEE an
exclusive and nonassignable right and license within the Territory,
for the term of this Agreement:
(a) To use the Trademarks in connection with the
manufacture, distribution and sale of the Products for which
LICENSEE has obtained LICENSOR's approval, under the terms and
conditions hereinafter set forth and subject to LICENSOR's reserved
rights under this Agreement. The license hereby granted extends
only to the specified Products. Notwithstanding anything contained
in this Agreement to the contrary, LICENSOR shall have the right to
manufacture and cause to be manufactured similar goods in the
Territory exclusively for sale outside the Territory.
(b) To use and display the Trademarks, but solely in
advertising and promoting the Products in the Territory, within the
limits hereinafter set forth, to the specific exclusion of any use in
any combination or form in connection with any other products or
with LICENSEE's overall business operation or in LICENSEE's trade
or corporate names.
(c) LICENSEE, recognizes and acknowledges that LICENSOR
is a party to license agreements with other licensees to manufacture
and distribute men's and women's apparel, accessories and other
articles and that evolving changes make it difficult for the parties
to this Agreement and such other agreements to define with
precision such apparel, accessories and other articles. Accordingly,
(i) LICENSOR and LICENSEE agree to use their best
efforts to avoid any conflicts between or among the definitions of
any apparel, accessories or other articles licensed under agreements
with other licensees, or reserved to LICENSOR hereunder, and the
Products licensed under this Agreement, provided, however, that
LICENSOR shall incur no liability to LICENSEE in this regard. In
case of a conflict between or among the definitions of any apparel,
accessories or other articles licensed under agreements with other
licensees or reserved to LICENSOR hereunder, and the Products
licensed under this Agreement, LICENSOR reserves the right to
resolve any such conflict, taking into account the natural channels
of distribution of the Products and such other apparel, accessories
or other articles and the protection of the Trademarks. LICENSOR'
s decision in resolving such conflicts shall be final and binding.
(ii) LICENSEE agrees that it will not directly or
indirectly engage in any conduct which infringes or contributes to
infringement of the legal rights of third party licensees who have
Givenchy trademark licenses for other products in the Territory or
other jurisdictions, and for Products in other jurisdictions.
(d) If LICENSEE fails to manufacture, distribute or sell a
reasonable number as determined by LICENSOR of each Product
licensed hereunder within ____________ months from the effective
date of this Agreement, LICENSOR has the right to terminate
LICENSEE's right to use the Trademarks in connection with the
manufacture, distribution and sale of any such under-commercialized
Products upon 90 days' written notice to LICENSEE.
2. TERM AND TERRITORY.
(a) Term. This Agreement shall begin on the Commencement
Date (the "Commencement Date") and end on the Termination Date
(the "Termination Date") set forth on the Summary Sheet, unless
sooner terminated as provided in this Agreement.
(b) Territory. The license herein granted shall extend only
to the Territory as set forth in the Summary Sheet.
(i) The license herein granted shall not extend to (A)
free ports and duty-free stores, (B) armed forces installations inside
and outside the Territory, (C) any airlines for sale on board their
aircraft on international flights, (D) duty-paid shops serving
airports or operated in connection with duty-free shops, and (E) any
boutique owned, licensed or franchised by LICENSOR.
(ii) LICENSEE shall promptly refer to LICENSOR all
orders or inquiries relating to the Products from outside the
Territory, as well as any inquiries relating to those outlets excluded
in Section 2(b)(i) above. LICENSOR reserves the right to supply any
such boutique, airline or duty-free or duty-paid shop, from any
source whatsoever. At LICENSOR's request, LICENSEE shall use its
best efforts to supply any such boutiques with a special line of
Products compatible with the special merchandising requirements of
such boutiques. Any and all sales of Products by LICENSEE to any
such boutique, airline or shop shall be subject to the terms of this
Agreement and LICENSEE shall be obligated to pay to LICENSOR all
royalties as provided herein on account of such sales.
(iii)Licensee shall not sell to any accounts within the
Territory which ship Products outside the Territory. In addition,
LICENSEE shall not knowingly sell to anyone who intends to
transship Products and shall otherwise use its best efforts to
prevent the export of the Products outside the Territory.
3. GIVENCHY LABEL AND TRADEMARKS. During the term of this
Agreement, LICENSEE will only use the labels as indicated on the
Summary Sheet or as later approved by the LICENSOR in writing in
its sole and absolute discretion. The license herein granted shall
not transfer to LICENSEE any legal or beneficial property rights
whatsoever to the name "Givenchy" or the Trademarks or the
goodwill now associated or to become associated therewith.
LICENSEE shall only use the Trademarks on the terms and conditions
set forth in this Agreement. Each Trademark shall be used in its
entirety and as part of an approved label.
(a) For purposes of this Agreement, "Trademarks" shall be
limited to the exact wording of the trademarks set forth on the
Summary Sheet and shall not include variations thereof. LICENSOR
expressly reserves the right to use or license the use of the name
GIVENCHY, either alone or in combination with any other words or
phrases other than MONSIEUR, including without limitation GIVENCHY
GENTLEMAN, on Products in the Territory.
4. DESIGN AND CREATION OF LINE. LICENSEE and LICENSOR shall
work together to design and create an appropriate number of
Products for each season. LICENSOR may provide LICENSEE with
product sketches, samples and color tendencies and LICENSEE shall
give these due consideration in design of Products for each season.
LICENSOR shall make available to LICENSEE, at all reasonable times,
the assistance and design consultation of the Givenchy Paris Design
Studio. All costs incurred in the manufacture of any patterns,
models, samples or prototypes shall be for the account of LICENSEE.
(a) At least _____ days prior to the commencement of each
season, LICENSEE shall, and at any other time during the term of
this Agreement, LICENSEE may submit to LICENSOR for its express
written approval a reasonable number of new, hitherto unpublished
Product designs created by or for LICENSEE which LICENSEE
proposes to sell under this Agreement. Such designs shall be
accompanied by all necessary design specifications relating thereto,
including, but not limited to workmanship, fabric, and any other
materials and colors and such samples as LICENSOR may request.
However, no designs, including without limitation those submitted by
LICENSEE and those created by the joint efforts of LICENSEE and
LICENSOR (or the Givenchy Paris Design Studio), shall be
manufactured (except for samples manufactured solely for LICENSOR's
inspection), distributed, or sold until such designs have received
LICENSOR's express written approval.
(b) LICENSEE shall strictly adhere to all designs approved
by LICENSOR. Any departure or variance from such designs,
including but not limited to any change of workmanship, fabric or
other materials or colors, must receive the prior written approval of
LICENSOR, failing which such departure or variance shall be deemed
to constitute a breach of this Agreement.
(c) All right, title and interest in and to samples, sketches,
ideas, designs, and suggestions, and other materials furnished by or
approved by LICENSOR or Givenchy Paris, in connection with the
Products, including any modifications or improvements thereof, shall
be the sole property of LICENSOR.
5. EXCLUSIVITY. LICENSEE shall not use or incorporate for use
any ideas, designs or suggestions furnished by or approved by
LICENSOR, including, but not limited to styling features and
patterns, in articles manufactured or sold by LICENSEE, directly or
indirectly, other than the Products offered for sale under this
Agreement, nor sell to any third party or disclose the same except
through the promotion and sale of Products under this Agreement.
6. ROYALTIES; CERTIFIED STATEMENTS; CLOSE-OUT SALES.
(a) Percentage Royalty. LICENSEE shall pay LICENSOR an
amount equal to a percentage ("Percentage Royalty") of all Net Sales
(as hereinafter defined) effected by LICENSEE during each calendar
year during the term of this Agreement, at the rate designated on
the Summary Sheet opposite the heading "Percentage Royalty". Net
Sales shall mean gross sales invoiced during the period of reference
minus actual customary trade discounts actually granted (except
discounts for cash and early payment; all such customary trade
discounts shall be identified on the invoice) not to exceed ________
percent, returns, sales taxes, if any, and special freight and
insurance charges where identified and billed separately on the
invoice. Sales to affiliates, LICENSEE owned outlet stores,
distributors and wholesalers shall be included in the computation of
Net Sales at no less than LICENSEE's highest actual selling price
charged to independent retail outlets for the Products in question
during the season in question, for the purpose of computing the
Percentage Royalty. Percentage Royalty shall be calculated and
payable on Close-Out Sales (as hereinafter defined) in accordance
with Section 6(i)(iv) and (v) hereof. Percentage Royalty shall be
calculated on a quarterly basis for the periods ending on the last
day of March, June, September and December of each year during
the Term.
(b) Minimum Royalty. LICENSEE agrees to pay to LICENSOR
during the term of this Agreement for and as a guaranteed minimum
annual royalty ("Minimum Royalty") the amount set forth opposite the
heading "Minimum Royalty" on the Summary Sheet. LICENSEE shall
pay the Minimum Royalty in equal quarterly installments, each such
installment to be paid not later than the 1st day of each calendar
quarter. If such 1st day is not a Business Day (as hereinafter
defined), then the Minimum Royalty shall be paid not later than the
next succeeding Business Day. The first installment of the Minimum
Royalty shall be paid upon the execution of this Agreement. If such
first installment payment is for a period of less than three months,
such installment payment shall be prorated. The obligation to pay
the Minimum Royalty is an independent obligation under this
Agreement and is not subject to set-off. In no event shall Minimum
Royalty payments be repayable or refundable to LICENSEE or carried
forward to the following year. Once the Percentage and Minimum
Royalty payments received by LICENSOR in any year equal the full
Minimum Royalty for that year, no further payments of Minimum
Royalty shall be due for that year; Percentage Royalties shall
continue to be payable on a quarterly basis.
(c) Over-Royalty. "Over-royalty" shall mean the excess of
Percentage Royalties due quarterly over Minimum Royalty payments
made quarterly. If calculation indicates that the Percentage Royalty
due for the quarter in question exceeds the Minimum Royalty
installment paid for such quarter pursuant to Section 6(b) hereof,
the Over-royalty, if any, shall be paid by LICENSEE to LICENSOR on
or before the last Business Day of the month following the end of
the quarter in question (the "Quarterly Payment Date"). "Business
Day" shall mean any day other than a Saturday, Sunday or legal
holiday under the laws of the State of New York.
(d) Payment.
(i) The foregoing Percentage and Minimum Royalties
shall be payable in U.S. dollars on all Products, even though such
Products are sold or distributed (x) in violation of this Agreement
or (y) without bearing a label authorized pursuant to Paragraph 3
of this Agreement, without prejudice to LICENSOR's right to
terminate this Agreement as a result of such violations.
(ii) LICENSEE shall effect no deduction from any
payments to be made under this Agreement for any reason.
(iii)Without limiting LICENSOR's right to terminate
under Paragraph 14, in the event that LICENSEE fails to make timely
payments to LICENSOR under subparagraphs 6(a), 6(b) or 6(c) of
this Agreement, LICENSEE shall pay to LICENSOR on demand the
amounts due together with interest at the rate publicly designated
from time to time as the prime, reference or base rate by Citibank,
N.A. plus 2%, on any overdue amount, such interest to commence
accruing on the ________ day such payment is late. For sales made
outside the United States (if permitted by the Summary Sheet),
Percentage Royalties shall be computed initially in the local currency
and converted into U.S. dollars at the exchange rate quoted by
Citibank, N.A. in New York City on the date of payment. Minimum
Royalties shall be paid in the full amount of U.S. dollars listed on
the Summary Sheet.
(e) Certified Quarterly Statements. LICENSEE agrees that on
or before the last Business Day of January, April, July and October
of each year during the term of this Agreement, it will furnish
LICENSOR with a complete and accurate statement of its sales of the
Products for the preceding three month period ending on the last
day of March, June, September and December, respectively, which
statement shall be on LICENSOR's standard Quarterly Sales Report
form, as the same may be amended from time to time. Such
statements of LICENSEE's sales shall be certified as complete and
accurate by LICENSEE's chief financial officer and shall show for
each three month period, quantities shipped, by country, Product
and sub-category of Product, if applicable, less any deductions
authorized in accordance with subparagraph 6(a) of this Agreement.
(f) Certified Yearly Statement. LICENSEE agrees that on or
before the last Business Day of January of each year during the
term of this Agreement, it will furnish LICENSOR with a complete and
accurate statement (a "Yearly Statement") of its sales of the
Products for the immediately preceding year. Each Yearly Statement
also shall contain a reconciliation of any differences reflected in the
quarterly statements submitted to LICENSOR pursuant to
subparagraph 6(e) of this Agreement. Each Yearly Statement shall
be certified as complete and accurate by LICENSEE's chief financial
officer and shall show for the year reported, quantities shipped, by
country, Product and sub-category of Product, if applicable, less
any deductions authorized in accordance with sub-paragraph 6(a) of
this Agreement.
(g) Format for Certified Statements. Each statement
provided pursuant to subparagraph 6(f) of this Agreement shall, as
nearly as possible, conform to the following format for the Products
covered:
Value (US$) Quantity
----------- --------
Total invoiced gross sales
of ________________________
___________ in the Territory $ -----------
Less:Returns, special freight
and insurance charges
billed separately and
sales taxes $ ---------- --------
Less:Actual customary trade
discounts (listed on invoices)$ ----------
- - --------
Net Sales $ ----------
(Gross) Percentage Royalty $ __________
Less Minimum Royalty $ ----------
(Net) Percentage Royal Payable $ ----------
(h) Net Sales Shortfall. In the event the Net Sales achieved
by LICENSEE during the third or any subsequent year during the
term of this Agreement do not result in Percentage Royalties which
equal or exceed the Minimum Royalty as set forth in the Summary
Sheet for the corresponding year, LICENSEE, nonetheless, shall pay
the Minimum Royalty for such year, but in such event, LICENSOR
may, at its option, effective upon notice to LICENSEE no later than
90 days following the end of such year, terminate this Agreement.
In the event of such termination, LICENSEE shall dispose of its
remaining inventory as provided in Paragraph 16 of this Agreement.
As of the effective date of the termination of this Agreement
pursuant to this subparagraph 6(h), LICENSEE shall cease to be
liable for prospective Minimum Royalty payments as provided in
subparagraph 6(b) of this Agreement, but LICENSEE shall render
certified statements of sale to LICENSOR and make any Percentage
Royalty payments as indicated by such statements within 15 days of
rendering such certified statements to LICENSOR.
(i) Close-Out Sales. LICENSOR acknowledges that LICENSEE'S
operations necessarily entail the need to dispose of certain
quantities of unsold Products through Close-Out Sales, while
LICENSEE acknowledges that the excessive or indiscriminate disposal
of Products through Close-Out Sales may adversely affect the
prestige associated with the Trademarks. "Close-Out Sales" shall
mean and be limited to sales of discontinued styles or leftover
inventory of high-quality Products at the end of a product run or
the end of a season.
(i) LICENSEE agrees to use its best efforts to plan
and conduct its manufacturing and sales operations so as to limit,
insofar as possible, the quantity of Close-Out Sales and to dispose
of unsold Products, preferably through normal channels of
distribution, and otherwise only through stores specializing in high
quality Close-Out Sales and approved in writing by LICENSOR.
(ii) It is LICENSOR's policy to approve for Close-Out
Sales those stores that offer for sale in significant quantities and at
comparable prices, at least five other Couture House or
designer-labeled product lines bearing names of French, Italian or
American Couture Houses or designers of status comparable to that
of Givenchy, provided such stores do not identify such Couture
Houses or designers in advertising.
(iii)LICENSEE agrees that Close-Out Sales in any year
shall not exceed 33% of the aggregate Net Sales of Products
(measured in dollars, not units, but excluding all Close-Out Sales)
sold in such year during the term of this Agreement. LICENSEE
agrees that it will not ship any Products for Close-Out Sales until
at least 90 days have elapsed from the date of the first showing of
the season's collection of which the Products to be so sold are a
part.
(iv) To the extent that Close-Out Sales in any year do
not exceed 33% of the aggregate Net Sales of Products (measured in
dollars, not units, but excluding Close-Out Sales) in such year, the
Percentage Royalty calculated as provided in subparagraph 6(a) shall
be payable thereon.
(v) To the extent Close-Out Sales in any year exceed
33% of the aggregate Net Sales of Products (measured in dollars, not
units, but excluding Close-Out Sales) in such year, (1) LICENSEE
shall cause all Products sold in such Close-Out Sales to be
thoroughly and permanently de-branded (if possible) and sold
without any reference to or mention of the Trademarks, and (2) the
Percentage Royalty calculated as provided in subparagraph 6(a) shall
be applied to LICENSEE'S highest actual selling price charged to
independent retail outlets for the Products in question during the
season in question. Debranding for the purposes of this
subparagraph 6(i)(v) shall include, without limitation, the removal of
any and all tags, labels, cartons, wrapping, packaging, buttons,
crests and any other elements that identify the Products with the
Trademarks. LICENSEE acknowledges that Close-Out Sales described
in this subparagraph 6(i)(v) shall constitute a breach of this
Agreement and the acceptance by LICENSOR of the royalties provided
herein in respect of such sales shall not constitute a waiver of any
other rights LICENSOR may have under this Agreement by reason of
such breach, including, without limitation, the right to terminate this
Agreement pursuant to Paragraph 14.
(vi) Not later than the last Business Day of January of each
year during the term of this Agreement, LICENSEE shall furnish
LICENSOR with a statement conforming to the following format:
Value (US$) Quantity
-------------------
Total Net Sales
(excluding Close-Out Sales) $ ----------- --------
Total Close-Out Sales $ ----------- --------
Close-Out Sales as a
percentage of Net Sales
(excluding Close-Out Sales) -------------------
(j) Audit Provisions. During the term of this Agreement
and (i) for three years thereafter, or (ii) until the resolution of any
dispute arising out of or otherwise relating to the transactions
contemplated by this Agreement, whichever is later, LICENSOR and
its duly authorized representatives on 15 days' notice shall have the
right, at all business hours, at any time during the year, to an
examination or audit of LICENSEE's books of account and records
required by or relating to this Agreement, and of all other
documents, materials and inventories in the possession or under the
control of LICENSEE with respect to the subject matter and terms of
this Agreement, pertaining to any period within the immediately
preceding six years, and shall have free and full access thereto for
said purposes and for the purpose of making copies and/or extracts
therefrom. Upon demand of LICENSOR and upon reasonable notice,
LICENSEE shall at LICENSOR's expense furnish to LICENSOR, in
addition to the information described herein, a detailed statement by
an independent public accountant, selected by LICENSOR, showing
the number of Products and aggregate Net Sales by categories in
reasonable detail of the Products manufactured, distributed and/or
sold by LICENSEE, as well as all amounts spent by LICENSEE for
Advertising (as hereinafter defined), to the date of LICENSOR's
demand. If any examination or audit procedures are delayed because
(i) the LICENSEE is not prepared with requested data on the
appointed date, or (ii) the documents required to be maintained are
found to be unavailable, the LICENSEE will pay the additional
examination or audit costs incurred for such circumstances and the
period during which LICENSOR may examine or audit shall be
extended to allow LICENSOR to complete such examination or audit.
In the event that an examination or audit of LICENSEE's books and
records shall reveal that LICENSEE's royalties were understated by
an amount equal to 3% or more in any year, or that LICENSEE's
expenditures for Advertising reported pursuant to paragraph 9 were
overstated by 5% or more in any year, then LICENSEE shall bear the
full cost of such examination or audit. The exercise by LICENSOR of
any right to examination or audit from time to time or the acceptance
by LICENSOR of any statement or payment shall be without prejudice
to any of LICENSOR's rights or remedies and shall not affect (i)
LICENSOR's right to thereafter dispute any payment or the accuracy
of any statement or (ii) LICENSEE's liability for any sums due under
this Agreement.
7. PRODUCT PRODUCTION. LICENSEE agrees that during the term
of this Agreement it will give and devote its best efforts to the
diligent manufacture, distribution and sale of the Products, including
the advertising effort called for by Paragraph 9 of this Agreement.
LICENSEE agrees that the Products covered by this Agreement and
their packaging shall be of the highest standard and of such style,
appearance, distinctiveness and quality as to protect and enhance
the prestige of LICENSOR, Givenchy Paris and of the Trademarks and
the goodwill associated therewith, and that such Products will be
manufactured, packaged, sold and distributed in accordance with all
applicable Federal, State and local laws.
(a) Product Approvals. At least ______ days prior to the
commencement of each season, LICENSEE shall submit to LICENSOR
for approval samples of all Products which LICENSEE proposes to
offer for sale under the Trademarks during such season, including
Products approved for sale in a prior season. LICENSEE shall not
sell any Products until the corresponding samples have been
approved by LICENSOR in writing. LICENSOR reserves the right to
withdraw approval of any Product whose quality or workmanship
undergoes deterioration and which deterioration of quality or
workmanship is not corrected to LICENSOR's satisfaction within 60
days of notice of such deterioration from LICENSOR. LICENSEE shall
not distribute or sell any disapproved or otherwise defective items.
(b) Control of Inventory. LICENSEE shall cause its
manufacturers to produce only the quantity of the specific Products
ordered by LICENSEE. LICENSEE further agrees to assume all
responsibility for the control and safekeeping by it or any
manufacturer or subcontractor of all inventory of Products, whether
finished or work in process, as well as labels and promotional
materials using the Trademarks. LICENSEE hereby indemnifies and
holds LICENSOR harmless against any loss, damage or expense
arising from any breach of LICENSEE's duties under this
subparagraph 7(b), including, without limitation, any legal expenses
incurred in pursuing infringers or counterfeiters, the provisions of
subparagraph 10(a)(ii) notwithstanding.
(c) Packaging Approval. LICENSEE shall submit to
LICENSOR for prior approval samples of all tags, labels, packaging
(including cartons, containers and wrapping or packing materials)
and all advertising, promotional or display materials and stationery,
sales documents and other items bearing or using the Trademarks.
LICENSEE shall not use any of the foregoing items until the
corresponding samples have been approved by LICENSOR in writing.
(d) Samples. Upon LICENSOR's written request, LICENSEE
shall furnish without cost to LICENSOR a reasonable number of
random production samples per year of each Product being
manufactured and sold by LICENSEE hereunder, together with any
tags, labels, cartons, containers and packing or wrapping material
used in connection therewith. LICENSEE shall immediately cease
manufacturing any Product which, in the judgment of LICENSOR, is
defective and, upon request of LICENSOR, shall immediately remove
from all channels of distribution and destroy such defective
Products.
(e) Changes. After LICENSOR's approval has been obtained
for samples of Products, tags, labels, cartons, containers, packing or
wrapping material, advertising, promotional and display material,
stationery, sales documents and other items, LICENSEE shall not
depart therefrom in any respect without again obtaining LICENSOR's
prior written approval.
(f) Facilities Inspection. LICENSOR and its duly authorized
representatives shall have the right, during normal business hours
and upon reasonable notice, to inspect all facilities used by
LICENSEE (and its contractors and suppliers to the extent LICENSEE
may do so) in connection with its manufacture, assembly, sale,
storage, or distribution of the Products, and to examine the Products
in process of manufacture and when offered for sale within
LICENSEE's operation.
(g) Notices. LICENSEE agrees that it shall cause to appear
on or within each Product offered for sale under this Agreement,
and on or within all advertising, promotional or display material and
on stationery and sales documents bearing or using the Trademarks
and on any and all labels, tags, cartons, containers, packing and/or
wrapping materials bearing any Trademarks, appropriate notices
pursuant to any law or statute of the United States and any other
applicable jurisdiction, and any patent, trademark, copyright or
other notices required to protect LICENSOR's rights in the
Trademarks or otherwise deemed appropriate or necessary by
LICENSOR.
(h) Country of Origin. Prior to the manufacture of any
Products, LICENSEE shall advise LICENSOR of the proposed country
of origin thereof and the name of the manufacturer. LICENSEE shall
not manufacture or have manufactured any Products until LICENSOR
has approved in writing (in LICENSOR's sole discretion) the country
of origin and the manufacturer, nor shall LICENSEE thereafter
change the country of origin or the manufacturer thereof without
LICENSOR's prior written approval (given in LICENSOR's sole
discretion).
8. SALES AND PROMOTION. LICENSEE's policy of sale and
distribution of the Products and exploitation of the Trademarks shall
be of the highest standard through prestigious channels so that the
same shall in no manner reflect adversely upon the good name of the
LICENSOR, Givenchy Paris, Hubert deGivenchy or the Trademarks and
shall in fact enhance the prestige of LICENSOR, Givenchy Paris and
the Trademarks.
(a) Sales Personnel. LICENSEE shall use its best efforts to
advertise and sell the Products in the Territory and to develop and
maintain a strong and growing business in the Products during the
term of this Agreement. To that end, LICENSEE shall designate and
maintain sales personnel adequately trained to sell the Products and
LICENSEE shall maintain a showroom area for the sale of the
Products distinct from that of all LICENSEE's other operations.
(b) Showroom. In order to maintain a uniform international
image for articles licensed by LICENSOR and its affiliates throughout
the world, LICENSEE shall maintain a permanent and separate area
for the sale of the Products distinct from that of all LICENSEE's
other operations.
(c) Sales to Fine Department and Better Specialty Stores.
LICENSEE shall distribute the Products or cause the Products to be
distributed only to prestige department and better specialty stores
of the highest quality for resale to the ultimate consumer of such
Products, such as the ones listed on Schedule A. LICENSEE shall on
the last Business Day of January of each year during the term of
this Agreement furnish LICENSOR with a current list with the names
and addresses of its customers and/or distributors for Products in
the Territory, showing the annual sales volume for each customer for
the preceding year. LICENSEE shall keep LICENSOR fully and
promptly informed of any changes in price lists and sales policies
relating to the Products. LICENSEE shall cooperate with LICENSOR
to ensure coordination wherever advisable among the advertising and
promotional and sales efforts of LICENSEE and those of LICENSOR
and the other licensees of LICENSOR. LICENSEE shall cooperate fully
with LICENSOR'S duly authorized public relations representative.
(d) Sales to Mail Order; Premiums. LICENSEE agrees not to
sell the Products through any mail-order channel of distribution
(including, without limitation, credit card, home shopping or mail
order catalogues) without the prior written consent of LICENSOR.
LICENSOR and LICENSEE agree that if LICENSOR has approved a
mail-order vendor, such approval may be withdrawn at a later date
by written notice to LICENSEE. In such event LICENSEE may
complete commitments entered into prior to receipt of such notice
from LICENSOR. Without the prior written consent of LICENSOR,
LICENSEE shall not distribute, market or sell any Product as a
premium, at no charge to the recipient or at less than the usual
selling price for the purpose of increasing the sale of, or publicizing
any product or service, or for any other giveaway or promotional
purpose.
9. ADVERTISING AND PUBLIC RELATIONS. The parties agree that
a consistent and uniformly applied advertising and promotional policy
plays a vital role in the merchandising and sales development of
Products, and that LICENSEE stands to benefit from the enhancement
of the Trademarks and their prestige and goodwill and from the
coordination of advertising under this Agreement with advertising
undertaken by LICENSOR jointly with its other United States
licensees.
(a) Annual Advertising Amount. LICENSEE agrees that
during the term of this Agreement, LICENSEE shall comply with the
following:
(i) Marketing Plan. On or before November 15 of each
year, LICENSEE shall deliver to LICENSOR a Marketing Plan and
Budget for the following year including trade advertising, consumer
advertising, coordinated advertising, press relations and other
promotional activities. LICENSEE and LICENSOR shall promptly meet
to discuss, refine the final Marketing Plan and Budget, which shall
be subject to approval by LICENSOR, and determine, within the
parameters set forth below, how the Annual Advertising Amount
(hereafter defined) shall be spent.
(ii) Required Advertising. LICENSEE shall expend at
least the following amounts (collectively the "Annual Advertising
Amount") in each year during the term of this Agreement for the
purpose of advertising, promoting and publicizing the Products
(such advertising, promotion and publicizing shall be referred to as
"Advertising"):
(A) Trade Advertising. During the first
Contract Year, LICENSEE shall expend for advertising in trade
publications and its share of cooperative advertising (in which a
third party contributes to advertising expenses incurred) ("Trade
Advertising") an amount not less than the amount listed on the
Summary Sheet. For later Contract Years, LICENSEE shall expend
for Trade Advertising an amount not less than 1% of the greater of
projected Net Sales of Products for the Contract Year in question or
actual Net Sales for the prior Contract Year. "Contract Year" shall
mean each calendar year during the term of this Agreement.
(B) Consumer Advertising. During the first
Contract Year, LICENSEE shall spend not less than the amount set
forth on the Summary Sheet for general consumer advertising of
Products ("Consumer Advertising"). For each additional Contract
Year during the term of this Agreement, LICENSEE shall expend for
Consumer Advertising an amount not less than 1% of the greater of
projected Net Sales of Products for the Contract Year in question or
actual Net Sales for the prior Contract Year.
(iii)Coordinated Advertising. If requested, LICENSEE
shall contribute to LICENSOR an amount to be used by LICENSOR in
its sole discretion for coordinated advertising of Products with other
Givenchy products and/or advertising promoting the Givenchy name
generally ("Coordinated Advertising").
(iv) Exclusions. The following items shall NOT constitute
expenditures by LICENSEE for the purpose of computing the Annual
Advertising Amount: (1) any third party expenditures for cooperative
advertising and (2) expenses incurred, directly or indirectly, by
LICENSEE (x) in connection with its participation in trade shows, (y)
in connection with the appearance of any of the Products in a sales
catalog and (z) for tags, labels and packaging. All of LICENSEE's
expenditures for Advertising shall be subject to audit by LICENSOR
in accordance with Paragraph 6 of this Agreement.
(v) Advertising Shortfall. If LICENSEE fails to expend
at least the minimum amounts required for Consumer or Trade
Advertising, or fails to pay to LICENSOR at least any requested
amount for Coordinated Advertising, during any one year, the
amount of the shortfall shall be added to the corresponding minimum
amounts required to be expended during the following year.
Notwithstanding the foregoing, failure by LICENSEE to expend at
least the minimum amount required for Consumer or Trade
Advertising, or failure by LICENSEE to pay to LICENSOR at least the
minimum amount required for Coordinated Advertising, for any
Contract Year prior to the end of such Contract Year shall give
LICENSOR the absolute right to terminate this Agreement upon _____
days written notice to LICENSEE, such right of termination to be in
addition to any other remedies (including without limitation recovery
of money damages) otherwise available to LICENSOR. LICENSEE's
right to cure under Paragraph 14 shall not apply to this
subparagraph 9(a)(v).
(b) Advertising Format. The format of all advertising
conducted by LICENSEE shall be LICENSOR's standard format for
licensee advertising as provided by LICENSOR. Said material will be
provided by LICENSOR at LICENSEE's expense within thirty days
after written request by LICENSEE.
(i) All Advertising materials shall be submitted to
LICENSOR for its approval in sufficient time to allow LICENSOR to
comment and review the same prior to the placement of such
materials with the media. To the extent reasonably practicable,
where other products are used they shall be selected from other
licensees of LICENSOR. LICENSOR shall assist LICENSEE in
coordinating requests for such products manufactured by other
licensees.
(ii) Only the Trademarks shall be used in Advertising.
No other trademark or trade name, including LICENSEE's own
trademark or trade name, may be associated with the Trademarks.
Notwithstanding anything to the contrary contained in this
subparagraph 9(b)(ii), another trademark or trade name may, in
LICENSOR's sole and absolute discretion, be associated with the
Trademarks in the following cases: (x) in cooperative advertising in
which the Trademarks are associated with the names of one or more
retailers who sell the goods to consumers; (y) in trade papers or
trade magazines in which LICENSEE's name is associated with the
Trademarks; (z) in Advertising in which a tradename is used to
designate materials used in manufacturing the Products. LICENSEE
agrees to submit to LICENSOR any and all news releases, advertising,
publicity or promotional material from any and all media and in any
and all forms in which such items appear as soon as such items are
available to LICENSEE. Any and all Advertising relating to the
Trademarks, the Products, the LICENSOR, Givenchy Paris, and Hubert
de Givenchy must be of the highest standard and of such style,
appearance, distinctiveness and quality as to protect and enhance
the prestige associated with the Trademarks, the Products,
LICENSOR, Givenchy Paris, and Hubert de Givenchy. LICENSEE shall
not use any Advertising that has not been approved in advance by
LICENSOR in writing. LICENSEE agrees that it shall not, in any
Advertising or otherwise, use any (x) information regarding the
personal life or (y) photograph or photographs, of Hubert de
Givenchy without his prior written consent.
10. TRADEMARK, COPYRIGHT AND PATENT PROTECTION.
(a) Trademark Protection. LICENSEE recognizes the great
value of the goodwill associated with the Trademarks, and the
identification of the Products with the Trademarks, and acknowledges
that the Trademarks and trademark registrations therefor are valid
and subsisting and all rights therein and the goodwill pertaining
thereto belong exclusively to Givenchy Paris, and have acquired a
secondary meaning in the minds of the trade and purchasing public.
(i) LICENSEE shall promptly upon learning of same
notify LICENSOR of the facts and circumstances surrounding any
alleged infringement or counterfeiting of the Trademarks or
misappropriation of any right of LICENSOR known to LICENSEE.
LICENSOR shall have the exclusive right (but shall not be obligated)
to take action with respect to any such infringement or
counterfeiting, at LICENSOR's sole expense, including, without
limitation, the right, in its own name and that of LICENSEE, to
commence and prosecute any suit or other proceeding against any
such infringer or counterfeiter or join LICENSEE as a party thereto.
Any recovery obtained in such proceeding shall belong to LICENSOR.
LICENSEE shall cooperate with LICENSOR in any such proceeding,
and in connection therewith (and without limitation), LICENSEE shall
provide such evidence and give such testimony as may reasonably
be requested by LICENSOR. LICENSEE shall not commence any suit
or other proceeding against any such infringer or counterfeiter
without the prior written consent of LICENSOR and only then on
such terms as LICENSOR shall dictate.
(ii) LICENSOR shall use reasonable efforts to register
where appropriate, and maintain or cause to be maintained, the
Trademarks in the Territory so long as the same shall be used in
commerce to enable the Products to be distributed and sold in the
Territory under the Trademarks as provided in this Agreement.
(iii)LICENSEE agrees not to use any of the
Trademarks, any name confusingly similar thereto or any initials of
the Trademarks as all or part of its corporate name or as all or part
of the name of any corporation, partnership, association, trust or
other entity which LICENSEE controls. Without the prior written
consent of LICENSOR, LICENSEE shall not do business under any
Trademark or use any Trademark as its own tradename, trademark
or slogan.
(iv) LICENSEE agrees not to use in or on the Products,
on the labels, tags, packaging or wrapping materials, any trademark
or tradename, other than the Trademarks. This restriction includes
LICENSEE's own trademark or tradename, any trademark or
tradename used to designate the materials used in manufacturing the
Products, or the tradename or trademark of any retailer selling the
Products, unless LICENSEE has received LICENSOR's prior written
approval with respect thereto.
(b) Copyright Protection. To the extent that any Product
includes in whole or in part, any work which is protectible under
___________________________________:
(i) LICENSEE shall assist LICENSOR in procuring at
LICENSOR's request any copyright registrations. The cost of
obtaining and maintaining such copyright registrations shall be
borne solely by LICENSOR. Any Products for which copyright
registrations have been obtained shall have permanently affixed
thereto an appropriate copyright notice as specified by LICENSOR
such as, without limitation and by way of example,
c Givenchy S.A. 19----.
LICENSEE recognizes the importance of having such copyright notice
permanently affixed to each and every such Product from the very
first public offering or sale thereof, for example, by sewing into any
such Product or Products a permanent label bearing such copyright
notice or imprinting the notice on the Product or Products.
(ii) LICENSOR shall own the entire right, title and
interest in and to any such copyright and registration thereof,
subject only to the exclusive license to LICENSEE to use such
copyright during the term of this Agreement. During the term of
this Agreement, LICENSOR shall have the sole and exclusive right,
but not the obligation, to preclude infringements of such copyrights,
including the commencement of actions against infringers. LICENSEE
agrees to fully cooperate with LICENSOR in the enforcement of any
such copyrights, including, without limitation and by way of example,
executing any and all necessary documents to obtain, maintain and
enforce such copyrights and joining as a party plaintiff in any
litigation commenced by LICENSOR.
(iii)In the event that there comes to the attention of
the LICENSEE any infringement of any copyright relating to any of
the Products or of any other Givenchy article, LICENSEE shall
promptly give LICENSOR written notice of the facts of such
infringement known to LICENSEE.
(c) Patent Protection. To the extent that any Products
licensed hereunder shall be protectible under
_________________________________________:
(i) LICENSEE shall, at the request of LICENSOR take
such steps as deemed appropriate and reasonably necessary by
LICENSOR to enable LICENSOR to file for and obtain such foreign
and/or domestic patents on such Products with the cost of obtaining
and maintaining any such patents being borne solely by LICENSOR.
(ii) LICENSOR shall own the entire right, title and
interest in and to any such patents, subject to an exclusive license
to LICENSEE hereunder during the term of this Agreement. During
the term of this Agreement, LICENSOR shall have the sole and
exclusive right, but not the obligation, to enforce any such patents
and to preclude infringement thereof. LICENSEE agrees to fully
cooperate with LICENSOR in the enforcement of any such patents
including, without limitation and by way of example, executing any
and all necessary documents to obtain, maintain and enforce such
patents and joining as a party plaintiff in any litigation commenced
by LICENSOR relating to such patents.
(iii)In the event that there comes to the attention of
the LICENSEE any infringement of any patent relating to any of the
Products or of any other Givenchy article, LICENSEE shall promptly
give LICENSOR written notice of the facts of such infringement
known to LICENSEE.
11. SUBLICENSES. No sublicensing of LICENSEE's rights
hereunder, even partial, shall occur, without the prior written
consent of LICENSOR, which consent may be granted or withheld in
LICENSOR'S sole and absolute discretion.
12. BOOKS AND RECORDS. LICENSEE shall keep accurate books of
account and records covering all transactions arising out of or
otherwise relating to this Agreement. All such books of account and
records shall be kept available (x) for at least three years after the
expiration or termination of this Agreement, or (y) until the
resolution of any dispute arising out of or otherwise relating to the
transactions contemplated by this Agreement, whichever is later.
LICENSOR shall have access and audit rights with respect to
LICENSEE's books and records in accordance with Section 6(j)
hereof.
(a) LICENSEE agrees that its books and records shall
include, without limitation, the following documents: general ledger
and sales, sales returns and any allowances recorded separately for
the Products; sales unit totals for each month; copies of the cutting
"lay plans" setting forth the quantities cut of all manufactured
goods by LICENSEE (these reports shall be maintained under numeric
control) ; copies of physical inventory observation count summaries,
reconciliations and other workpapers showing the quantity physically
on hand and the adjustment and/or reconciling items to the
accounting records on the observation date(s), and records
separately stating LICENSEE's expenditures for Advertising
(including without limitation all advertising invoices). All such
documents will be retained for all annual and interim physical
inventory verification procedures.
(b) LICENSEE agrees that (i) the Products shall be
separately invoiced such that sales of other products shall not be
recorded on invoices with the Products, and (ii) invoices for the
Products shall be sequentially numbered in a unique batch for sales.
(c) Upon request, LICENSEE shall promptly provide such
additional information as LICENSOR shall reasonably request for
promotion and merchandising purposes, including but not limited to
the volume of sales of Products by styles and categories, by
geographical area and the volume of sales to major department and
specialty stores.
13. INSURANCE; PRODUCT LIABILITY INDEMNIFICATION. LICENSEE
does hereby indemnify and agree to save and hold harmless
LICENSOR and any parent, subsidiary or affiliate of LICENSOR
(including, without limitation, Givenchy Paris and Hubert de
Givenchy), their officers, employees and agents (collectively
hereinafter referred to as "LICENSOR" for purposes of this
Paragraph 13), of and from any and all liability, claims, causes of
action, suits, damages and expenses (including reasonable attorneys'
fees and costs whether or not such fees were incurred in an action
in which LICENSOR was named as a party), for which they or any of
them may become liable or may incur or be compelled to pay in any
action or claim 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 or on behalf of LICENSEE or any of its servants,
contractors, agents or employees in connection with LICENSEE's
performance of this Agreement, including, but not limited to any acts
relating to the manufacture, distribution, sale or promotion of the
Products licensed under this Agreement. In the event LICENSOR
intends to enforce the indemnities herein set forth, prompt notice
shall be given to LICENSEE of the claim. LICENSOR will cooperate
in the defense thereof at LICENSEE's expense. LICENSEE agrees to
carry throughout the term hereof insurance covering all risks of
loss arising from alleged product and contractual liability (including,
without limitation, claims relating to the design, manufacture,
distribution, and/or intended use of any Product), with a limit of
liability of not less than $5,000,000 per occurrence,and LICENSOR,
Givenchy Paris and Hubert de Givenchy shall be named therein as
additional insureds and a certificate evidencing such coverage shall
be issued to LICENSOR. Said certificate shall provide for at least 30
days' prior written notice to LICENSOR in the event of cancellation
of the insurance, and any certificate evidencing the renewal of
insurance coverage shall be furnished to LICENSOR on or before the
15th day prior to the expiration or cancellation of the then existing
insurance coverage.
14. TERMINATION FOR BREACH. If LICENSEE shall violate any of
its obligations under this Agreement, LICENSOR shall have the right
to terminate this Agreement and the license herein granted, without
incurring any liability to LICENSEE, by giving to LICENSEE written
notice of such breach and of the termination, or (in the case of a
non-monetary default) intent to terminate, this Agreement. Unless
LICENSEE shall have cured (i) a breach of any payment obligation
within 5 days after the applicable due dates, or (ii) any other
breach within 15 days after receipt of written notice of breach and
termination from LICENSOR, this Agreement and the license granted
herein shall automatically terminate on said 5th or 15th day as
applicable. Termination of this Agreement and the license herein
granted shall be without prejudice to any rights or remedies which
LICENSOR may otherwise have against LICENSEE. The exercise or
failure to exercise the aforementioned right of termination shall in
no way be considered a waiver by LICENSOR of any right to
arbitration as referred to elsewhere herein or of any other legal
rights and remedies. Furthermore, the failure by LICENSOR to claim
or enforce performance of any obligation set forth in this Agreement
by LICENSEE for any length of time and however frequently
repeated, shall not be deemed to be a continuing waiver or
modification by LICENSOR of its contractual rights to the
performance of such obligation by LICENSEE.
15. TERMINATION FOR CHANGE OF CONTROL, INSOLVENCY OR
BANKRUPTCY.
(a) Change in Control. This Agreement may be terminated by
LICENSOR in the event of any Change in Control, as defined below,
of LICENSEE, upon 30 day's prior written notice given by LICENSOR
to LICENSEE no later than 60 days after receipt by LICENSOR of
written notice from LICENSEE of the occurrence of such a
transaction, or, if LICENSEE fails to give such written notice of the
occurrence of such a transaction to LICENSOR within five days after
its occurrence, on prior written notice given by LICENSOR to
LICENSEE at any time after the fifth day after the occurrence of
such a transaction. "Change in Control" shall mean (i) any change
(whether by operation of law or otherwise, and whether in a single
transaction or multiple transactions) in the direct or indirect
ownership of or right to vote voting securities of LICENSEE, as a
result of which the direct and indirect owners of the voting
securities of LICENSEE as of the date hereof, cease to own or cease
to have the right to vote, directly or indirectly, voting securities of
LICENSEE the voting power of which constitutes at least 36 percent
of all voting securities of LICENSEE; (ii) any change in the
membership of the Board of Directors of LICENSEE such that more
than one-third of the directors are persons whose election has not
been previously recommended or approved by the Board of Directors
of LICENSEE or such that Uzi Ruskin ceases to be a director of
LICENSEE; (iii) any change in the identity(ies) of the person(s) or
entity(ies) exercising a controlling influence over the management or
policies of LICENSEE; (iv) any sale of all or substantially all of the
assets of LICENSEE; or (v) the grant of any option, warrant, or
other agreement the exercise or performance of which, alone or
together with the exercise and performance of other such options,
warrants and agreements then in effect, would result in any change
described in clause (i), (ii), (iii) or (iv) above.
(b) Insolvency or Bankruptcy. If LICENSEE files a petition
in bankruptcy or is adjudicated a bankrupt or if a petition in
bankruptcy is filed against LICENSEE or LICENSEE becomes insolvent
or makes an assignment for the benefit of creditors or an
arrangement pursuant to any bankruptcy law, or if LICENSEE
discontinues its business, or suspends its business for whatever
cause for more than 60 consecutive days or 60 days within a 90-day
period, or if a receiver is appointed for LICENSEE, or LICENSEE
admits in writing its inability, or is unable, to pay its debts as they
mature, this Agreement and the license herein granted shall
automatically terminate forthwith without any notice whatsoever
being necessary, and all Minimum Royalties and all Percentage
Royalties on sales theretofore made shall become immediately due and
payable and no Minimum Royalties paid in advance shall be
repayable. Notwithstanding Paragraph 16, in the event this
Agreement and the license granted herein are so terminated,
LICENSEE, its receivers, representatives, trustees, agents,
administrators, successors and/or assigns (collectively hereinafter
referred to as the "Receivers" for the purposes of this
subparagraph 15(b)), shall have no right to sell, exploit or in any
way deal with or in any of the Products covered by this Agreement
or use any tags, labels, cartons, containers, packing or wrapping
materials, advertising, promotional or display materials pertaining
thereto except with and under the special consent and instructions
of LICENSOR in writing, which the Receivers shall be obliged to
follow.
16. CONSEQUENCES OF EXPIRATION OR TERMINATION OF THIS
AGREEMENT. Upon the expiration or termination of this Agreement
for any reason whatsoever (and in addition to any and all rights
and remedies LICENSOR may otherwise have in the event of
termination for LICENSEE's breach), (i) all rights granted to
LICENSEE hereunder shall immediately terminate and revert to
LICENSOR, which shall be free to license others immediately to use
the Trademarks and LICENSOR's services in connection with the
manufacture, sale and distribution of the Products, (ii) except as
otherwise provided in subsection 16(c), LICENSEE shall refrain from,
and shall have absolutely no right to, any further use of the
Trademarks, directly or indirectly, or of anything deemed by
LICENSOR to be a simulation of such trademarks or deceptively
similar thereto or likely to be confused therewith, in connection with
the manufacture, sale or distribution of LICENSEE's products, (iii)
LICENSEE shall not sell, exploit or in any way deal with or in any
of the Products or use any tags, labels, cartons, containers, packing
or wrapping materials or advertising, promotional or display
materials pertaining thereto, (iv) LICENSEE shall have absolutely no
right to a renewal or extension of this Agreement, and (v) all
Minimum Royalties, all Coordinated Advertising amounts and all
Percentage Royalties shall become immediately due and payable.
(a) Right to Purchase. In the event of the termination or
expiration of this Agreement for any reason whatsoever, LICENSOR,
on notice to LICENSEE, shall have the prior right (but not the
obligation) to purchase:
(i) any or all of the Products at the lower of (a) the
cost thereof to LICENSEE, as carried on its books of account (after
eliminating any bookkeeping write-ups of such cost) or (b) the fair
market value thereof, in the case of Products intended for sale
during the then current season and at 50% of the amount specified
above in the case of Products intended for sale during a preceding
season; and
(ii) any and all tags, cartons, labels, containers,
packing or wrapping materials, advertising, promotional or display
materials used in connection therewith, at the lower of (a) the cost
thereof to LICENSEE, as carried on its books of account (after
eliminating any bookkeeping write-ups of such cost) or (b) the fair
market price thereof.
(b) Inventories. Promptly after the date of notice of
termination of this Agreement or not less than three months before
the expiration of this Agreement and again promptly after such
termination or expiration, the parties hereto shall jointly cause
physical inventories to be taken of (i) all completed Products on
hand; (ii) such Products as are in the process of manufacture and
uncut piece goods unique to Products, which such Products in the
process of manufacture shall not include any uncut piece goods or
items referred to in subsection (iii) hereof on hand or on order as
of the date of such termination or expiration; and (iii) all tags,
labels or other identification bearing the Trademarks used on or in
connection with said goods. During the interim period from
notification of termination to actual date of termination or expiration,
LICENSEE shall not complete any Products except as allowed under
a production schedule prepared by LICENSOR after consultation with
LICENSEE, in order to prevent LICENSEE from having a large
inventory of Products at the expiration date of this Agreement. All
costs and expenses of such physical inventories shall be borne by
LICENSEE. During the three-month period immediately preceding the
expiration of the term of this Agreement (hereinafter the "Final
Quarter"), LICENSEE shall not have (a) an inventory of Products in
excess of the inventory of such Products which it possessed during
the three-month period immediately preceding such Final Quarter; or
(b) an inventory of uncut piece goods or unfinished Products
greater than LICENSEE shall be able to manufacture into finished
Products and sell in accordance with the terms of this Agreement
during such Final Quarter.
(c) Subsequent Sales. LICENSEE recognizes that any sale
of the Products upon any such termination or expiration of this
Agreement through other than prestige department stores and better
specialty stores would cause irreparable damage to the prestige of
LICENSOR and the Products and to the goodwill associated therewith.
Accordingly, LICENSEE shall offer for sale or sell all of the Products
not purchased by LICENSOR, pursuant to subsection 16(a), only in
accordance with the following terms and conditions:
(i) Upon such expiration or termination of this
Agreement, LICENSEE shall cease manufacturing Products but, except
in the event of termination pursuant to Section 15, may continue to
sell or offer for sale only through prestige department stores and
better specialty stores at such prices, subject to payment of the
Percentage Royalties specified in Section 6 and on such other terms
as the Products were offered for sale by LICENSEE immediately prior
to such expiration or termination of this Agreement, for a period of
three months after such expiration or termination, all completed
Products set forth on the inventories referred to in subsection 16(b)
which are not purchased by LICENSOR pursuant to subsection 16(a);
and
(ii) Upon the termination of this Agreement pursuant
to Section 15, or three months after its expiration or termination for
any reason other than pursuant to Section 15, LICENSEE will not
thereafter sell or offer for sale any merchandise (whether Products
or otherwise) bearing any of the Trademarks or any trademarks
similar hereto or likely to be confused therewith; LICENSEE shall
remove all tags and labels bearing any such Trademarks from all
such merchandise and shall destroy all remaining tags, labels,
packaging and wrapping materials and promotional material,
stationery and sales documents bearing any such Trademarks; and
any inventory remaining after such termination or such three-month
period, respectively, shall be disposed of (or destroyed) by, and at
the expense of, LICENSEE strictly in accordance with LICENSOR's
instructions.
(d) Rights of Licensor. Nothing contained in this Agreement
shall prevent LICENSOR from negotiating or entering into an
agreement with any other person, granting a license to such person
with respect to all or any portion of Products or from designing,
manufacturing, introducing to the trade, promoting or taking orders
for Products, or permitting such person under such license to do so,
on or before the date of expiration of termination of this Agreement;
provided that no deliveries of such Products are made until after
the applicable date specified in subsection 16(c).
17. BOUTIQUE SALES. Nothing contained in this Agreement shall
restrict or prevent the sale in Givenchy boutiques, corners or leased
departments in the Territory of products supplied from sources
which products are similar to Products licensed hereunder, free of
any obligation to LICENSEE, provided that the average price range
of such products is higher than the average price of any
corresponding licensed Products. For the purposes of this
Paragraph 17, "Givenchy boutiques and corners" shall include
boutiques and corners regardless of (i) whether or not LICENSOR
owns or operates such boutiques and corners, and (ii) whether such
boutiques and corners are now existing or are hereafter established.
18. DESIGNER EXCLUSIVITY. LICENSEE will not, except with
LICENSOR's prior written consent, directly or indirectly manufacture,
distribute, sell or otherwise deal in products of the same kind as
the Products, similar or related thereto, under the name, label,
trademark or trademarks of or with any other reference to any
Couture House or designer. LICENSEE shall give LICENSOR prompt
written notice of its intent or agreement to manufacture, distribute,
sell or otherwise deal in products under the name, label, trademark
of or with any other reference to any United States designer.
19. GIVENCHY GENTLEMAN. LICENSEE acknowledges and agrees that
LICENSOR intends to develop products (including Products covered
by this Agreement) with unrestricted distribution in the Territory
at a retail price substantially higher than Givenchy Monsieur, under
the Trademark GIVENCHY GENTLEMAN.
20. WARRANTIES OF THE PARTIES.
(a) LICENSEE's Warranties. LICENSEE represents and
warrants to LICENSOR that LICENSEE is authorized to enter into this
Agreement; that this Agreement has been duly executed by an
authorized signatory of LICENSEE and constitutes the valid and
binding obligation of LICENSEE enforceable against LICENSEE in
accordance with its terms; that at all times during the term of this
Agreement, LICENSEE shall have the power and authority to perform
all of its obligations under this Agreement; and that the execution,
delivery and performance of this Agreement will not violate any
agreement or instrument to which LICENSEE is a party.
(b) Valid Agreement. This Agreement has been duly
executed and delivered by LICENSEE and constitutes the legal, valid
and binding obligation of LICENSEE enforceable against it in
accordance with its terms.
(c) Consents. Neither the execution and delivery by
LICENSEE of this agreement or any of the instruments or agreements
herein referred to nor the consummation by it of any of the
transactions contemplated hereby or thereby nor the performance by
LICENSEE of this agreement or any of the instruments or agreements
herein referred to in accordance with their respective terms
requires the consent, approval, order or authorization of, or
registration with, or the giving of notice to, any governmental or
public body or authority or any third party.
(d) No Conflict. Neither the execution and delivery by
LICENSEE of this agreement or any of the instruments or agreements
herein referred to nor the consummation by it of any of the
transactions contemplated hereby or thereby nor compliance by
LICENSEE with any of their respective terms and provisions will
contravene any existing federal, state or local law, rule or regulation
or any judgment, decree or order applicable to or binding upon
LICENSEE or will contravene or result in any breach of, or
constitute any default under, or result in the creation of any lien
upon property of LICENSEE, its certificate of incorporation or by-
laws or any agreement or instrument to which it is a party or by
which it or any of its properties may be bound.
(e) Dispositions. LICENSEE has no present intention to
dispose of any of its assets or properties other than sales of
inventory in the ordinary course of business. LICENSEE shall give
LICENSOR prompt written notice of any disposition of any of its
assets or properties other than in the ordinary course of business.
21. CONFIDENTIALITY. Neither LICENSOR nor LICENSEE shall, at
any time during or after 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.
22. ASSIGNMENT. This Agreement is personal to LICENSEE and
neither it nor any of the rights or duties hereunder may be
assigned, sublicensed, subcontracted or otherwise encumbered or
disposed of by LICENSEE or by operation of law, nor may LICENSEE
give up any control over the subject matter of this Agreement.
LICENSOR and LICENSEE agree that LICENSOR has the right to
assign and give up control of the subject matter of this Agreement
to a company which possesses the rights in the Territory to the
Trademarks licensed hereunder.
23. FORCE MAJEURE. In the event that manufacturing and/or
sales operations of LICENSEE should be suspended or disrupted
because of a recognized force majeure (including strikes), and
should such suspension or disruption last for a consecutive period
of 60 days or for an aggregate period of 70 days within a six-month
period, LICENSOR shall have the right to terminate this Agreement
as to all or any portion of the Territory, unless LICENSEE shall
forthwith take affirmative steps to rectify the situation, except that
if it is apparent at the time of such suspension or disruption that
it cannot be rectified within the above stated 60-day period,
LICENSOR may terminate this Agreement forthwith. In the event
payment to LICENSOR of any royalties or other sums due it under
this Agreement are prohibited or otherwise made impossible for more
than 30 days by any applicable law and regulations, LICENSOR shall
have the right to terminate this Agreement as to all or any portion
of the Territory.
24. NOTICES. Any notification permitted or required under this
Agreement shall be sent by certified or registered mail with return
receipt requested, by reputable courier service providing next
business day delivery within the continental U.S. (such as Federal
Express, Network or Purolator), or by telecopy to each party, at the
address for such party designated on the Summary Sheet or to such
other address as the party in question may from time to time
designate by notice. Mailed notices shall be deemed to be given 72
hours after mailing, notices delivered by courier shall be deemed to
be given on the next business day, and notices sent by telecopy
shall be effective when sent in accordance with the provisions
hereof.
25. GOVERNING LAW. This Agreement shall be construed under
and interpreted in accordance with and governed by the laws of the
State of New York without regard to the conflicts of law provisions
thereof. In the event that one or more provisions of this Agreement
shall at any time be found to be invalid or otherwise rendered
unenforceable, such provision or provisions shall be severable from
this Agreement, so that the validity or enforceability of the
remaining provisions of this Agreement shall not be affected thereby.
26. NO AGENCY RELATION. Nothing contained in this Agreement
shall create or be deemed to create any agency, fiduciary,
partnership or joint venture relation between or among the
LICENSEE, LICENSOR, Givenchy Paris or Hubert de Givenchy. No
party hereto shall have the power to obligate or bind the other
party in any manner whatsoever.
27. COMPLETE AGREEMENT. As of the effective date hereof, this
Agreement contains the full and complete understanding of the
parties and replaces any prior agreement or arrangement between
the parties, whether oral or written. The provisions of this
Agreement may only be amended by a subsequent instrument in
writing clearly purporting to effect such amendment and signed by
both parties.
28. MISCELLANEOUS.
(a) The failure of a party hereto to enforce, or the delay by
a party hereto to enforce, any of its rights under this Agreement
shall not be deemed a continuing waiver or a modification by such
party of any of its rights under this Agreement and any party may,
within the time provided by the applicable law, commence appropriate
proceedings to enforce any or all of its rights under this Agreement
and any prior failure to enforce or delay in enforcement shall not
constitute a defense.
(b) The headings herein are for convenience of reference
only, do not constitute a part of this Agreement, and shall not be
deemed to limit or affect any of the provisions hereof.
(c) The word year, when used in this Agreement, shall mean
the calendar year.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above written.
GIVENCHY CORPORATION VICTORIA CREATIONS, INC.
By: /s/ Jean-LucNegre By: /s/ Pat Stensrud
Its President Its: President & CEO
<PAGE>
SCHEDULE A
Fine Department Stores such as:
1.
2.
3.
4.
Better Specialty Stores such as:
1.
2.
3.
4.
The facty
y that certain stores are not listed on this Schedule A is not
necessarily intended to exclude such stores from this partial list.
However, any store in which LICENSEE distributes Products must be
of the same caliber, quality, prestige and reputation of the stores
listed above.
<PAGE>
TABLE OF CONTENTS
1. GRANT OF LICENSE. . . . . . . . . . . . . . . . 1
2. TERM AND TERRITORY. . . . . . . . . . . . . . . 2
(a) Term . . . . . . . . . . . . . . . . . . . 2
(b) Territory. . . . . . . . . . . . . . . . . 2
3. GIVENCHY LABEL AND TRADEMARKS . . . . . . . . . 3
4. DESIGN AND CREATION OF LINE . . . . . . . . . . 3
5. EXCLUSIVITY . . . . . . . . . . . . . . . . . . 4
6. ROYALTIES; CERTIFIED STATEMENTS; CLOSE-OUT
SALES . . . . . . . . . . . . . . . . . . . . . 4
(a) Percentage Royalty . . . . . . . . . . . . 4
(b) Minimum Royalty. . . . . . . . . . . . . . 5
(c) Over-Royalty . . . . . . . . . . . . . . . 5
(d) Payment. . . . . . . . . . . . . . . . . . 5
(e) Certified Quarterly Statements . . . . . . 6
(f) Certified Yearly Statement . . . . . . . . 6
(g) Format for Certified Statements . . . . . 6
(h) Net Sales Shortfall. . . . . . . . . . . . 7
(i) Close-Out Sales. . . . . . . . . . . . . . 7
(j) Audit Provisions . . . . . . . . . . . . . 8
7. PRODUCT PRODUCTION . . . . . . . . . . . . . . 9
(a) Product Approvals. . . . . . . . . . . . . 9
(b) Control of Inventory . . . . . . . . . . . 9
(c) Packaging Approval. . . . . . . . . . . . 10
(d) Samples . . . . . . . . . . . . . . . . . 10
(e) Changes. . . . . . . . . . . . . . . . . . 10
(f) Facilities Inspection . . . . . . . . . . 10
(g) Notices. . . . . . . . . . . . . . . . . . 10
(h) Country of Origin. . . . . . . . . . . . . 10
8. SALES AND PROMOTION . . . . . . . . . . . . . . 10
(a) Sales Personnel. . . . . . . . . . . . . . 11
(b) Showroom . . . . . . . . . . . . . . . . . 11
(c) Sales to Fine Department and Better Specialty
Stores . . . . . . . . . . . . . . . . . . 11
(d) Sales to Mail Order; Premiums. . . . . . . 11
9. ADVERTISING AND PUBLIC RELATIONS. . . . . . . . 11
(a) Annual Advertising Amount. . . . . . . . . 12
(i) Marketing Plan. . . . . . . . . . . . 12
(ii) Required Advertising . . . . . . . . 12
(A) Trade Advertising. . . . . . . . 12
(B) Consumer Advertising . . . . . . 12
(iii)Coordinated Advertising . . . . . . . 12
(iv) Exclusions. . . . . . . . . . . . . . 12
(v) Advertising Shortfall . . . . . . . . 13
(b) Advertising Format . . . . . . . . . . . . 13
10. TRADEMARK, COPYRIGHT AND PATENT PROTECTION. . . 14
(a) Trademark Protection . . . . . . . . . . . 14
(b) Copyright Protection . . . . . . . . . . . 14
(c) Patent Protection. . . . . . . . . . . . . 15
11. SUBLICENSES . . . . . . . . . . . . . . . . . . 16
12. BOOKS AND RECORDS. . . . . . . . . . . . . . . 16
13. INSURANCE; PRODUCT LIABILITY INDEMNIFICATION. . 16
14. TERMINATION FOR BREACH. . . . . . . . . . . . . 17
15. TERMINATION FOR CHANGE OF CONTROL, INSOLVENCY OR
BANKRUPTCY. . . . . . . . . . . . . . . . . . . 17
(a) Change in Control. . . . . . . . . . . . . 17
(b) Insolvency or Bankruptcy . . . . . . . . . 18
16. CONSEQUENCES OF EXPIRATION OR TERMINATION OF
THIS AGREEMENT. . . . . . . . . . . . . . . . . 18
(a) Right to Purchase. . . . . . . . . . . . . 19
(b) Inventories. . . . . . . . . . . . . . . . 19
(c) Subsequent Sales . . . . . . . . . . . . . 19
(d) Rights of Licensor . . . . . . . . . . . . 20
17. BOUTIQUE SALES. . . . . . . . . . . . . . . . . 20
18. DESIGNER EXCLUSIVITY. . . . . . . . . . . . . . 20
19. GIVENCHY GENTLEMAN. . . . . . . . . . . . . . . 21
20. WARRANTIES OF THE PARTIES . . . . . . . . . . . 21
(a) LICENSEE's Warranties. . . . . . . . . . . 21
(b) Valid Agreement. . . . . . . . . . . . . . 21
(c) Consents . . . . . . . . . . . . . . . . . 21
(d) No Conflict. . . . . . . . . . . . . . . . 21
(e) Dispositions . . . . . . . . . . . . . . . 22
21. CONFIDENTIALITY. . . . . . . . . . . . . . . . 22
22. ASSIGNMENT. . . . . . . . . . . . . . . . . . . 22
23. FORCE MAJEURE. . . . . . . . . . . . . . . . . 22
24. NOTICES. . . . . . . . . . . . . . . . . . . . 22
25. GOVERNING LAW . . . . . . . . . . . . . . . . . 22
26. NO AGENCY RELATION. . . . . . . . . . . . . . . 23
27. COMPLETE AGREEMENT. . . . . . . . . . . . . . . 23
28. MISCELLANEOUS . . . . . . . . . . . . . . . . . 23
SCHEDULE A . . . . . . . . . . . . . . . . . . . . . 24
SUMMARY SHEET
This page is an integral part of the License Agreement dated
January 1, 1994 between Victoria Creations, Inc., LICENSEE, and
Givenchy Corporation, LICENSOR.
LICENSOR: GIVENCHY CORPORATION
21 East 75th Street
New York, NY 10021
Phone: (212) 772-1322
Fax: (212) 772-2405
LICENSEE: VICTORIA CREATIONS, INC.
385 Fifth Avenue
New York, New York 10016
Phone: 212-725-0600
Fax: 212-684-2390
Territory: Worldwide (subject to exclusion of Europe per
Addendum)
Products: All ladies' costume jewelry excluding wedding bands
worldwide. Men's jewelry only for sales through the
duty-free industry.
Labels: Bijoux Givenchy
Trademarks: Bijoux Givenchy and 4G. Monsieur Givenchy only
for men's jewelry for sales through the duty-free
industry
Percentage Royalty: Confidential Treatment Requested
Minimum Guaranteed Royalty: Confidential Treatment Requested
Duration of Contract:
Commencement date: July 1, 1994 (subject to fulfillment of
the conditions set forth in Section A of the Addendum, and
subject to acceleration upon earlier fulfillment thereof)
Termination date:December 31, 1999
National Advertising:
2% of Net Sales per contract year for national advertising
IN WITNESS WHEREOF, the parties have executed this Summary
Sheet as of the date first above written.
GIVENCHY CORPORATION VICTORIA CREATIONS, INC.
By: /s/ Jean-Luc Negre By: /s/ Patricia Stensrud
Its: President Its: President & CEO
GIVE-SUM.D11 ADDENDUM TO LICENSE AGREEMENT DATED JANUARY 1, 1994
BETWEEN VICTORIA CREATIONS, INC., LICENSEE, AND
GIVENCHY CORPORATION, LICENSOR
This Addendum constitutes an integral part of the captioned License
Agreement. Notwithstanding anything to the contrary contained in
the License Agreement or the accompanying Summary Sheet,
LICENSOR and LICENSEE agree as follows:
A. REPLACEMENT OF ORIGINAL LICENSE; RENEWAL FEE. Reference
is made to that certain License Agreement dated December 31, 1982
among Hubert deGivenchy, Givenchy S.A., Givenchy, Inc. (collectively,
"Original Licensor") and LICENSEE, as amended (the "Original
License"). LICENSOR has succeeded to all the rights and obligations
of Original Licensor under the Original License by assignment, and
Original Licensor no longer has any rights or obligations thereunder.
The Original License will expire by its terms on December 31, 1995.
LICENSEE has requested an extension or renewal of certain of its
rights under the Original License. LICENSOR is willing to grant
LICENSEE'S request only on the condition that the Original License
is replaced in its entirety by this License Agreement. LICENSOR and
LICENSEE have agreed as follows in connection with the replacement
of the Original License by this License Agreement:
1. On the Commencement Date specified in the Summary
Sheet: (a) the Original License shall automatically terminate, without
further action or documentation by the parties, and no party thereto
shall have any further liability or obligation thereunder; provided,
however, that each of LICENSOR and LICENSEE shall remain liable
and obligated for all liabilities and obligations accrued, due or
payable under the Original License prior to the Commencement Date;
and provided further than any breach or default existing under the
Original License prior to the Commencement Date shall be deemed a
breach or Default under this License Agreement; and (b) this License
Agreement shall govern the rights and obligations of the parties
from and after the Commencement Date.
2. Prior to the Commencement Date, LICENSEE shall pay to
LICENSOR a renewal fee in the amount of Four Hundred Twenty-
Seven Thousand Five Hundred and No/100 Dollars ($427,500.00), in
consideration of LICENSOR's entering into this License Agreement.
Said renewal fee shall be deemed fully earned as of the
Commencement Date specified in the Summary Sheet, and shall not be
refundable.
B. WAIVER. LICENSEE hereby irrevocably waives and relinquishes
any right to assert against LICENSOR in connection with the License
Agreement the bar of the so-called automatic stay or any similar
doctrine, whether under Section 362 of the U.S. Bankruptcy Code or
otherwise, but not any other rights or defenses, said waiver and
relinquishment to be limited to non-monetary remedies sought by
LICENSOR against LICENSEE and agrees to join LICENSOR, at
LICENSOR's request, in a joint motion before any judicial authority
to have such stay as to non-monetary remedies lifted as to
LICENSOR in connection with the License Agreement.
C. SECTION 1(c): LICENSEE DISPUTES. The second and third
sentences of Section 1(c)(i) of the License Agreement are deleted and
the following inserted in their place and stead:
"In case of conflict between or among the definitions of any
apparel, accessories or other articles licensed under
agreements with other licensees or reserved to LICENSOR
hereunder, and the Products licensed under this Agreement,
such conflict shall be resolved by arbitration in New York,
New York by a single arbitrator who shall be knowledgeable
in marketing and trademark matters. The arbitrator shall be
appointed on an annual basis by LICENSOR and LICENSEE, and
shall not be bound by the rules of the American Arbitration
Association, but shall adopt such procedures as shall appear
appropriate to decision making, in order that disputes may be
resolved within commercially viable time periods. Each party
shall bear its own costs in any such proceeding."
D. SECTION 1(d): PRODUCT ELIMINATION. Section 1(d) of the
License Agreement is hereby deleted.
E. SECTION 2(b): TERRITORY CHANGE. In the event that
LICENSEE fails to achieve Net Sales in Europe for calendar year 1995
of at least U.S. $2.5 million or for calendar year 1996 of at least U.S.
$2.75 million, LICENSOR may eliminate Europe from the Territory by
giving notice of such elimination to LICENSEE within ninety (90)
days after LICENSOR receives actual notice of LICENSEE's Net Sales
in Europe for the applicable year. If LICENSOR timely gives such
notice, then, from and after the expiration of one hundred twenty
(120) days following the date of such notice, (a) LICENSEE shall have
no further rights under the License Agreement with respect to
Europe to the same extent as if Europe had never been included in
the Territory and (b) LICENSOR agrees that any licensee replacing
LICENSEE with respect to the sale of Products in Europe shall be
required to manufacture or cause the manufacture of such Products
outside of the United States of America.
F. SECTION 2(b): SALES OUTLETS INCLUDED IN TERRITORY.
1. Section 2(b)(i): Sales Outlets. Notwithstanding anything
to the contrary contained in Section 2(b) of the License Agreement,
the license granted pursuant to the License Agreement shall extend
to (i) free ports and duty-free shops, (ii) armed forces installations
inside and outside the Territory, (iii) any airlines for sale on board
their aircraft on all flights, (iv) duty-paid shops serving airports or
operated in connection with duty-free shops and (v) perfumeries.
2. Section 2(b)(ii): Supply to Sales Outlets. Section
2(b)(ii) of the License Agreement is hereby amended by deleting
"airline or duty-free or duty-paid shop" from the second sentence
thereof and by deleting "airline or shop" from the last sentence
thereof.
G. EARLY TERMINATION. In the event of any termination of this
License prior to the Expiration Date in accordance with the terms
hereof, LICENSOR shall pay to LICENSEE, within thirty (30) days
after the effective date of such termination (or, in connection with
any situation described in Section 15(b), thirty (30) days after the
effective date of rejection of this License Agreement pursuant to
Section 365 of the U.S. Bankruptcy Code), the excess of: (a) (i) if
such effective date is on or prior to December 31, 1998, $427,500.00,
and (ii) if such termination date is after December 31, 1998, an
amount equal to the product of $427,500.00 multiplied by a fraction,
the denominator of which is 365 and the numerator of which is the
number of days remaining in 1999 as of such effective date; over (b)
any amounts due from LICENSEE to LICENSOR under or in connection
with this License (including, without limitation, any cost, expense,
loss or damage paid, suffered or incurred by LICENSOR in
connection with any breach or default by LICENSEE hereunder).
H. SECTION 6(i)(i): CLOSE-OUT SALES. Notwithstanding anything
to the contrary contained in the License Agreement, LICENSEE may
dispose of unsold Products through the types of stores or outlets
through which LICENSEE has conducted Close-Out Sales prior to the
date hereof, as listed on Exhibit B hereto, and otherwise as provided
in the License Agreement.
I. SECTION 6(j): AUDIT. Section 6(j) of the License Agreement
is hereby amended by inserting the word "written" before the word
"notice" in the fourth line thereof.
J. SECTION 7: PRODUCT PRODUCTION. Section 7 of the License
Agreement is hereby amended by inserting the phrase "for the price
brackets in question" after the words "highest standard" in the
fourth line thereof.
K. SECTION 7(b): CONTROL OF INVENTORY. Notwithstanding
anything to the contrary contained in the License Agreement,
LICENSEE shall be responsible for and shall indemnify LICENSOR
against only those acts or omissions by any manufacturer or
subcontractor of the Products directed or authorized by, acquiesced
in or taken with the knowledge of LICENSEE, which are within the
control of LICENSEE, or which result from any failure by LICENSEE
to exercise due care in the selection or supervision of such
manufacturer or subcontractor.
L. SECTION 7(d): SAMPLES. Notwithstanding anything to the
contrary contained in the License Agreement, LICENSEE shall, at its
own expense, furnish to LICENSOR production samples of Products
pursuant to the License Agreement, provided, however, that the total
wholesale price of samples required to be so furnished shall not
exceed $1,000.00 in any one calendar year. If LICENSOR requests
additional samples, LICENSEE shall furnish them, but LICENSOR shall
reimburse LICENSEE for LICENSEE's documented wholesale price
thereof. In addition, all prototypes of Products furnished to
LICENSOR for its approval or information shall be returned to
LICENSEE.
M. SECTION 7(e): MATERIAL CHANGES. Section 7(e) of the
License Agreement is hereby amended by inserting the words
"material or substantial" before the word "respect" in the fourth
line thereof.
N. SECTION 7(h): COUNTRY OF ORIGIN. Notwithstanding anything
to the contrary contained in the License Agreement, the production
and manufacture of the Products shall be completed at LICENSEE's
main manufacturing facility or facilities located in the United States
of America; provided, however, that so long as the principal
production and manufacturing of the Products continues to be done
at LICENSEE's facilities in the United States of America, LICENSEE
may use other third party manufacturers and/or subcontractors for
production of components, non-substantial production or finishing of
the Products without LICENSOR's prior written approval, regardless
of the country of origin or location of operations of such
manufacturers and/or subcontractors.
O. SECTIONS 8(a) and (b): SALES PERSONNEL/SHOWROOM.
Notwithstanding the provisions of Sections 8(a) and (b), LICENSOR
acknowledges that the location and size of LICENSEE'S present
showroom and sales facilities conform to the standards established
in such sections.
P. SECTION 8(d): MAIL-ORDER SALES. Notwithstanding anything
to the contrary contained in the License Agreement, LICENSEE may
sell the Products through any mail-order channel of distribution
(but in no event through any credit card or home shopping
catalogue or network) of the same or higher quality and prestige as
those mail-order channels of distribution through which LICENSEE
has sold Products prior to the date hereof as listed on Exhibit C
attached hereto, or otherwise through any mail-order channel of
distribution (including, without limitation, any credit card or home
shopping catalogue or network) to which LICENSOR has given its
prior written consent.
Q. SECTION 9(a)(i): MARKETING PLAN. Section 9(a)(i) is hereby
amended by inserting the word "reasonable" before the word
"approval" in the fifth line thereof, and by inserting the following
at the end thereof:
"Together with the Marketing Plan and Budget, LICENSEE shall
deliver to LICENSOR a report identifying the ten (10) best
selling styles in each of the fashion, classic and duty-free
collections for each classification of earrings, necklaces, pins
and bracelets of the Products for the preceding twelve (12)
month period, setting forth the quantity of each such style
sold during such period, and stating LICENSEE's product plan
specifications for design needs for the following year."
R. SECTION 9(a)(v): ADVERTISING SHORT FALL. Notwithstanding
anything to the contrary contained in the License Agreement,
LICENSEE shall not be deemed to be in breach or default under this
License Agreement on account of the amount of any shortfall
referred to in Section 9(a)(v) of the License Agreement which is 33
percent or less of the amount required to have been expended
during the period in question (exclusive of any shortfall amount
required to be expended during such period) unless LICENSEE fails
to expend the amount of such shortfall in accordance with Section
9 of the License Agreement prior to the earlier of (a) the expiration
of two years following the end of the period during which such
amount should originally have been expended, and (b) the
termination or expiration of this Agreement.
S. SECTION 13: INSURANCE. Section 13 of the License Agreement
is hereby amended by deleting the amount "$5,000,000" and inserting
the amount "$1,000,000" in its place and stead.
T. SECTION 14: TERMINATION FOR BREACH. Section 14 of the
License Agreement is hereby amended by deleting the phrase "after
the applicable due dates" from clause (i) thereof and inserting the
phrase "after receipt of written notice of breach and termination
from LICENSOR" in its place and stead.
U. SECTION 15(a): CHANGE OF CONTROL. Section 15(a) of the
License Agreement is hereby amended by deleting clause (iv) thereof
and inserting the following in its place and stead:
"(iv) any sale of all or substantially all of the assets of
LICENSEE other than a sale to a majority-owned subsidiary
company of LICENSEE or to LICENSEE's parent or to a
majority-owned subsidiary thereof; provided that LICENSOR
has consented in writing to the assignment of this Agreement
to such affiliate, which consent shall not be unreasonably
withheld, and that any such affiliate of LICENSEE assumes all
of the obligations of LICENSEE under the License Agreement
in a writing satisfactory to LICENSOR; and provided further
that, by way of example and without limitation, any
withholding of consent to such assignment shall be deemed
reasonable if based on LICENSOR's adverse determination as to
the assignee's financial strength and creditworthiness or as to
the assignee's experience and expertise in the business of
manufacturing and marketing upgrade costume jewelry, or if
based on the fact that Mr. Uzi Ruskin is not a director and
chief executive officer (or a director and a comparable senior
management leadership position, however denominated) of the
assignee or is not involved in the operations of the assignee
to substantially the same extent that he is involved in the
operations of LICENSEE on the date hereof."
V. SECTION 15(b): INSOLVENCY OR BANKRUPTCY. Section 15(b)
of the License Agreement is hereby amended by adding the following
sentence to the end thereof:
"If LICENSOR files a petition in bankruptcy or is adjudicated
a bankrupt or if a petition in bankruptcy is filed against
LICENSOR or LICENSOR becomes insolvent or makes an
assignment for the benefit of creditors or an arrangement
pursuant to any bankruptcy law, or if LICENSOR discontinues
its business, or suspends its business for whatever cause for
more than sixty (60) consecutive days or for sixty (60) days
within a ninety (90) day period, or if a receiver is appointed
for LICENSOR, or LICENSOR admits in writing its inability, or
is unable, to pay its debts as they mature, this Agreement and
the license herein granted shall automatically terminate
forthwith without any notice whatsoever being necessary.
W. SECTION 16: POST-TERMINATION.
1. Section 16(a): Right to Purchase. Sections 16(a)(i) and
(ii) are deleted in their entireties and the following is inserted in
their place and stead:
"(i) any or all of the Products bearing the
Labels or Trademarks at LICENSEE'S
wholesale price; and
(ii) any and all tags, cartons, labels,
containers, packaging or wrapping
materials, advertising, promotional or
display materials used in connection
therewith at the cost thereof to LICENSEE."
2. Section 16(b): Completion of Goods in Process.
Notwithstanding anything to the contrary contained in the License
Agreement, upon the expiration or termination of the License
Agreement, LICENSEE may complete any Products in the process of
manufacture, which such Products in the process of manufacture
shall not include any unassembled raw materials or items referred to
in Section 16(b)(iii) of the License Agreement on hand or on order
as of the date of such termination or expiration.
3. Section 16(c): Sale of Products After Breach. Section
16(c)(i) of the License Agreement is hereby amended by deleting the
phrase "except in the event of termination pursuant to Section 15"
from the second line thereof. Section 16(c)(ii) of the License
Agreement is hereby amended by deleting the first two lines thereof
and inserting in their place and stead the phrase "three months
after the expiration or termination of the License Agreement,".
X. SECTION 18: DESIGNER EXCLUSIVITY. Section 18 of the
License Agreement is hereby amended by inserting the phrase
"Western European" before the words "Couture House" and
"designer" in the fourth line thereof. Notwithstanding anything to
the contrary in the License Agreement, LICENSEE may, without
LICENSOR's prior written consent, directly or indirectly manufacture,
distribute, sell or otherwise deal in products of the same kind as
the Products under the name, label, trademark or trademarks of Karl
Lagerfeld.
Y. SECTION 19: GIVENCHY GENTLEMEN. Section 19 of the License
Agreement is hereby amended by inserting the words "manufactured
in Europe and sold" after the parenthetical in the second line
thereof.
Z. SECTION 23: FORCE MAJEURE. Notwithstanding anything to
the contrary in the License Agreement, in the event manufacture or
production operations of LICENSEE are suspended or disrupted due
to causes not the fault and beyond the reasonable control of
LICENSEE as provided in Section 23 of the License Agreement, the
60-day period referred to throughout Section 23 shall become a six-
month period and the aggregate period of 70 days within a six-
month period shall not apply.
AA. SECTION 24: NOTICES. Section 24 of the License Agreement
is hereby amended by deleting the words "or by telecopy to each
party," from the first sentence thereof. Notwithstanding anything
to the contrary contained in the License Agreement, notice sent
pursuant to Section 24 shall be deemed to be given upon the first
of receipt or refusal to accept delivery thereof.
BB. REASONABLENESS; TIMING OF APPROVAL. Notwithstanding
anything to the contrary in the License Agreement, whenever the
approval of LICENSOR is required with respect to the design of
Products, samples of Products or advertising materials referred to
in Section 9(b)(ii): (a) such approval shall not be unreasonably
withheld by LICENSOR and (b) if written non-approval is not given
by LICENSOR within two weeks of receipt by LICENSOR of the item
to be approved, said item shall be deemed approved.
LICENSOR: LICENSEE:
GIVENCHY CORPORATION VICTORIA CREATIONS, INC.
By: /s/ Jean-Luc Negre By: /s/ Patricia Stensrud
its: President Its: President & CEO
E-2
AMENDMENT NO.2
1) KARL LAGERFELD S.A of 14 Boulevard de la Madeleine, 75008
Paris, France ("KARL LAGERFELD")
2) VICTORIA CREATIONS, INC. of 385 Fifth Avenue, New York,
New York 10016, USA ("LICENSEE")
The parties hereby agree that the technical assistance agreement
(the "Technical Assistance Agreement") dated September 1987, and
as amended as of 23rd November 1987 under which KARL LAGERFELD
provides the LICENSEE with all artistic and technical assistance
necessary for its manufacture, sale and distribution of luxury
costume jewelry for men and women under the Karl Lagerfeld
trademarks, be amended as follows:
1. ARTICLE III - TERM
The term of this agreement shall be extended to expire on
30th June 1995.
2. ARTICLE IV - FEE
4.2 The Minimum Fee as defined under the Technical Assistance
Agreement shall for the period from 1st January 1993 to
30th June 1995 be nil.
It is agreed that all other terms and conditions for the
Technical Assistance Agreement as amended as of 23rd November
1987 shall remain unchanged.
Signed for and on behalf of Signed for and on behalf of
KARL LAGERFELD SA VICTORIA CREATIONS, INC.
By:/s/ R. Toledano By: /s/ Patricia Stensrud
Title: President Title: President & CEO
Date: April 27, 1994 Date: April 27, 1994
<PAGE>
AMENDMENT NO.2
1) ASIAN & WESTERN CLASSIC B.V. of Johannes Vermeerstraat
25, 1071 DJ Amsterdam, The Netherlands ("ASIAN")
AND
2) VICTORIA CREATIONS, INC. of 385 Fifth Avenue, New York,
New York 10016, USA ("LICENSEE")
The parties hereby agree that the trademark license contract
(the "Trademark License Contract") dated September 1987, and as
amended as of 23rd November 1987 under which the LICENSEE
manufacturers, sells and distributes luxury costume jewelry for
men and women under the Karl Lagerfeld trademarks, be amended as
follows:
1. ARTICLE I - DEFINITIONS
With effect from 1st July 1993 Article 1.2 of the
Trademark Licence Contract as amended as of 23rd
November 1987 is further amended as follows:
1.2 TERRITORY
This term means North America only excluding all duty
free outlets".
2.3. ARTICLE IV - TERM
The term of this contract shall be extended to expire on
30th June 1995.
3. ARTICLE XII - LICENSE FEE
12.2 The Minimum Fee as defined under the Trademark License
Contract shall for the period from 1st January 1993 to
30th June 1995 be nil.
It is agreed that all other terms and conditions of the
Trademark Licence Contract as amended as of 23rd November 1987
shall remain unchanged.
Signed for and on behalf of Signed for and on behalf of
AISIAN & WESTERN CLASSICS B.V. VICTORIA CREATIONS, INC.
By: /s/ B. M. Cornelisseu By: /s/ Patricia Stensrud
Title: Managing Director Title: President & CEO
Date: May 18, 1994 Date: April 27, 1994
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
E-3
VICTORIA CREATIONS, INC.
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's consolidated financial statements as of and for the year ended
June 30, 1994 and is qualified in its entirety by reference to the
registrant's financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1994
<PERIOD-END> JUN-30-1994
<CASH> 72
<SECURITIES> 0
<RECEIVABLES> 9,349
<ALLOWANCES> 990
<INVENTORY> 17,994
<CURRENT-ASSETS> 27,341
<PP&E> 5,128
<DEPRECIATION> 3,812
<TOTAL-ASSETS> 50,673
<CURRENT-LIABILITIES> 3,444
<BONDS> 0
<COMMON> 58
0
0
<OTHER-SE> 9,287
<TOTAL-LIABILITY-AND-EQUITY> 50,673
<SALES> 42,569
<TOTAL-REVENUES> 42,569
<CGS> 23,744
<TOTAL-COSTS> 23,744
<OTHER-EXPENSES> 19,278
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,574
<INCOME-PRETAX> (2,027)
<INCOME-TAX> 27
<INCOME-CONTINUING> (2,054)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> (2,054)
<EPS-PRIMARY> (0.26)
<EPS-DILUTED> (0.26)
</TABLE>
