UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A No. 1
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 27, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-10746
JONES APPAREL GROUP, INC.
(Exact name of registrant as specified in its charter)
Pennsylvania 06-0935166
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
250 Rittenhouse Circle
Bristol, Pennsylvania 19007
(Address of principal (Zip Code)
executive offices)
(215) 785-4000
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all 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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class of Common Stock Outstanding at November 6, 1998
$.01 par value 104,859,946
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Explanatory Note
The undersigned Registrant hereby amends, as and to the extent
set forth below, the following items, financial statements,
financial statement schedules, exhibits or other portions of its
Quarterly Report on Form 10-Q for the quarterly period ended
September 27, 1998, filed pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934:
Item 6. Exhibits and Reports on Form 8-K
The descriptions of Exhibits 10.53 and 10.54 are being amended
to state that portions have been deleted pursuant to application
for confidential treatment under Rule 24B-2 of the Securities
Exchange Act of 1934.
Exhibit 10.53, filed herewith, has been amended to include
certain previously redacted material, in response to the staff's
letter to the Registrant dated January 27, 1999.
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 10.53 License Agreement dated as of August 1, 1995 by and between
PRL USA, Inc., as assignee of Polo Ralph Lauren Corporation,
successor to Polo Ralph Lauren, L.P., and Sun Apparel, Inc.,
as amended to date#
Exhibit 10.54 Design Services Agreement dated as of August 1, 1995 by and
between Polo Ralph Lauren Corporation, successor to Polo Ralph
Lauren, L.P., and Sun Apparel, Inc., as amended to date#
Exhibit 11 Computation of earnings per share
Exhibit 27 Financial data schedule dated September 27, 1998
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# Portions deleted pursuant to application for confidential treatment under
Rule 24B-2 of the Securities Exchange Act of 1934.
(b) Reports on Form 8-K
During the quarter ended September 27, 1998, a Current Report on Form 8-K,
dated September 24, 1998, was filed with the Commission by the Company
announcing the acquisition of Sun Apparel, Inc.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment to Quarterly Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Date: August 26, 1999 By /s/ Wesley R. Card
----------------------------
WESLEY R. CARD
Chief Financial Officer
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Exhibit 10.53.
(Polo Jeans Company - License)
LICENSE AGREEMENT, dated as of August 1, 1995 by and between Polo Ralph
Lauren, L.P. ("Licensor") , a Delaware limited partnership with a place of
business at 650 Madison Avenue, New York, New York 10022, and Sun Apparel,
Inc. ("Licensee"), a Texas corporation with a place of business at 11201
Armour Drive, El Paso, Texas 79935.
WHEREAS, Licensor is engaged in the business of manufacturing, selling and
promoting, and licensing others the right to manufacture, sell and promote,
high quality apparel and related merchandise under certain Polo/Ralph Lauren
trademarks and trade names; and
WHEREAS, Licensee desires to obtain, and Licensor is willing to grant, a
license pursuant to which Licensee shall have the right to use certain Polo/
Ralph Lauren trademarks in the United States on the terms set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual promises
and covenants herein contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Definitions. As used herein, the term:
1.1. "License" shall mean the exclusive, non-assignable right to use the
Trademark in connection with the manufacture and/or importation and sale of
Licensed Products in the Territory.
1.2. "Licensed Products" shall mean those items set forth on Schedule A
attached hereto and made a part hereof, and all bearing the Trademark. From
time to time Licensor may authorize Licensee to manufacture and distribute
products bearing the Trademark not expressly listed in Schedule A hereto.
Absent an agreement with respect to such products signed by Licensor and
Licensee, all such products shall be deemed Licensed Products for all purposes
hereunder; provided, however, that Licensee's rights with respect to such
products (i) shall be non-exclusive and (ii) may be terminated by Licensor
upon 90 days written notice.
1.3. "Licensor" shall mean Polo Ralph Lauren, L.P., a limited partnership
organized under the laws of the State of Delaware.
1.4. "Licensee" shall mean Sun Apparel, Inc., a corporation organized under
the laws of Texas.
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1.5. "Net Sales Price" shall have the meaning set forth in paragraph 6.2
hereof.
1.6. "Territory" shall mean the United States of America, its territories
and possessions. From time to time Licensor may authorize Licensee to sell
certain Licensed Products to specific purchasers outside the Territory.
Absent an agreement with respect to such sales signed by Licensor and Licensee,
all such sales shall be made on all of the terms and conditions set forth in
this Agreement; provided, however, that Licensee's right to make such sales
shall be non-exclusive and may be terminated by Licensor immediately upon
written notice to Licensee. Any such termination shall not apply to orders
already taken by Licensee in accordance with Licensor's prior authorization.
1.7. "Trademark" shall mean the trademarks set forth on Schedule B hereto,
and no other trademarks, regardless of whether such trademark is or includes
"POLO" or "RALPH LAUREN", except as may be expressly authorized by Licensor in
writing. Licensor shall have the sole right to determine the manner and use of
the Trademark in connection with each particular Licensed Product. Each
particular form or logo selected by Licensor to be used as part of or in
connection with the Trademark shall be deemed within the definition of
"Trademark" hereunder, and such particular forms already approved are annexed
hereto as Schedule B.
2. Grant of License.
2.1. Subject to the terms and provisions hereof, Licensor hereby grants
Licensee and Licensee hereby accepts the License. Licensor shall neither use
nor authorize third parties to use the Trademark in connection with the
manufacture, sale and/or importation of Licensed Products in the Territory
during the term of this Agreement without Licensee's prior approval. To the
extent it is legally permissible to do so, no license is granted hereunder
for the manufacture, sale or distribution of Licensed Products to be used for
publicity purposes, other than publicity of Licensed Products, in combination
sales, as premiums or giveaways, or to be disposed of under or in connection
with similar methods of merchandising.
2.2. It is understood and agreed that the License applies solely to the use
of the Trademark on the Licensed Products, and that no rights are granted by
Licensor hereunder with respect to the use of: (i) any trademark of Licensor
or of any of Licensor's affiliates (including any trademark that uses "Polo"
or the name "Ralph Lauren") other than the Trademark, on or in connection with
any product (including, without limitation, jeanswear), or (ii) the use of the
Trademark on any products other than Licensed Products.
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Licensor reserves the right to use, and to grant to any other licensee the
right to use, the Trademark, whether within or outside the Territory, in
connection with any and all products and services, other than Licensed
Products within the Territory. Notwithstanding the foregoing, Licensor
shall not itself use or license the right to use any "Polo" or "Ralph Lauren"
trademark, other than its "CHAPS" trademarks and derivatives thereof, in
connection with men's denim jean pants or shorts or women's denim jean pants
or shorts ("Denim Bottoms"); provided, however, that (i) Licensor or its
affiliates (but not an unaffiliated, licensed third party) shall be entitled
to include Denim Bottoms within Licensor's various "Polo" and "Ralph Lauren"
lines so long as the wholesale prices of such Denim Bottoms are at least 40%
higher than the wholesale prices of the Denim Bottoms generally applied to the
most comparable Licensed Products and (ii) Licensor and its affiliates shall
also be entitled to continue to develop its "cutup" program of Denim Bottoms
for Polo/Ralph Lauren outlet stores. Licensor shall be entitled to continue
to include Denim Bottoms within Licensor's "RRL" line of products at the
suggested retail price structure (or higher) at which such Denim Bottoms are
currently offered. In the event that Licensor, during the term hereof, opens
directly or indirectly one or more "Vertical RRL Stores" (as hereinafter
defined) and desires to offer at such Vertical RRL Stores Denim Bottoms
bearing the RRL mark at suggested retail prices below the prices at which
such Denim Bottoms were generally offered prior to the effective date of this
Agreement ("RRL Denim Bottoms"), Licensee shall have the right to act, during
the term hereof, as the exclusive licensee of the RRL mark in connection with
RRL Denim Bottoms for the purpose of supplying RRL Denim Bottoms, at wholesale,
to such RRL Vertical Stores; provided, however, that (a) Licensee shall
manufacture such RRL Denim Bottoms in accordance with all of Licensor's design
and construction specifications and on commercially competitive wholesale
prices and terms, which prices shall be no less than the wholesale prices of,
and which terms shall be no less favorable than the terms for, any comparable
Licensed Products,(b) the suggested retail price of such RRL Denim Bottoms
shall be at least 15% above the suggested retail price of the most comparable
Licensed Products, (c) all sales of such RRL Denim Bottoms shall fall within
the definition of Net Sales Price for the purpose of calculating Licensor's
royalties on such sales pursuant to paragraph 6.2; provided, however, that the
royalty rate applicable to sales of RRL Denim Bottoms shall be 7% of the Net
Sales Price thereof, which amount shall be paid, in accordance with the terms
hereof, to Licensor or such other entity or entities as Licensor may designate
and (d) sales of RRL Denim Bottoms shall not be included within the definition
of Net Sales Price with respect to the calculations to be performed under
paragraph 4.6 hereof or paragraph 2 of Schedule C hereof. The term "Vertical
RRL Stores" shall mean any stores or shops doing business under a service mark
or tradename incorporating the RRL trademark,
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the principal focus of which is the sale of
products bearing the RRL trademark, and in which Licensor or any of its
affiliates owns, directly or indirectly, an equity interest in excess of 25%.
Licensee understands and agrees that Licensor may itself manufacture or
authorize third parties to manufacture in the Territory, Licensed Products
but solely for ultimate sale outside of the Territory. Subject to the terms of
paragraph 17.4 hereof, Licensee may manufacture or cause to be manufactured the
Licensed Products outside of the Territory, but solely for purposes of sale
within the Territory pursuant to the terms of this Agreement.
2.3. Licensee shall not have the right to use Licensee's name on or in
connection with the Licensed Products, except with the prior approval by
Licensor of the use and placement of Licensee's name. Licensee shall, at the
option of Licensor, include on its business materials and/or the Licensed
Products an indication of the relationship of the parties hereto in a form
approved by Licensor.
2.4. Licensee shall not use or permit or authorize another person or entity
in its control to use the words "Polo" or "Ralph Lauren" as part of a
corporate name or tradename without the express written consent of Licensor
and Licensee shall not permit or authorize use of the Trademark in such a way
so as to give the impression that the name "Ralph Lauren," or the Trademark,
or any modifications thereof, are the property of Licensee.
2.5. Licensee (and its affiliates) shall not, directly or indirectly, by
license or otherwise, sell, advertise or promote the sale of during the term
of this Agreement any items which are comparable and/or competitive with
Licensed Products and which bear the name of any fashion apparel designer
other than Todd Oldham or Robert Stock. The foregoing shall not restrict
Licensee's right to act solely as the manufacturer, contractor or supplier of
or for merchandise comparable and/or competitive with Licensed Products to or
for any third party; provided, however, that Licensee shall not during the
term hereof, directly or indirectly, act as a manufacturer, contractor or
supplier of or for merchandise comparable or competitive with Licensed
Products bearing or associated with the following names: Tommy Hilfiger,
Nautica, Calvin Klein, Donna Karan or Armani.
2.6. Licensor represents and warrants that it has full right, power and
authority to enter into this Agreement, to perform all of its obligations
hereunder, and to consummate all of the transactions contemplated herein and
further that it is not aware of any claim or proceedings which would prevent
it from performing its obligations hereunder. In the event that Licensee or
Licensor is charged with infringement on account of Licensee's use of the
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Trademark and, as a result, Licensor determines that the use by Licensee of
the Trademark should be discontinued upon reasonable written notice to
Licensee, this license under the Trademark shall be converted to a license
under another "Ralph Lauren" trademark or label; in such event Licensee shall
have the right to (i) accept the exclusive license to use such "Ralph Lauren"
trademark in connection with the manufacture and sale of Licensed Products in
the Territory subject to all other terms of this Agreement or (ii) terminate
this Agreement. In either such event, Licensee shall immediately advise
Licensor of its inventory of Licensed Products labelled with the Trademark
and of its stock of business materials bearing the Trademark and Licensor
shall, in its sole discretion and judgment, determine whether and to what
extent such inventory and materials of Licensee may continue to be used by
Licensee.
2.7. Licensee shall not purport to grant any right, permission or license
hereunder to any third party, whether at common law or otherwise. Licensee
shall not without Licensor's prior written approval sell any Licensed Products
bearing the Trademark to any third party which Licensee knows or should have
reason to know, directly or indirectly, sells or proposes to sell such
Licensed Products outside the Territory. Licensee shall use its commercially
reasonable efforts to prevent any such resale outside the Territory and shall,
immediately upon learning or receiving notice from Licensor that a customer is
selling Licensed Products outside the Territory, cease all sales and
deliveries to such customer.
2.8. Each of Licensee and Licensor recognizes that there are many
uncertainties in the business contemplated by this Agreement. Each of
Licensee and Licensor agrees and acknowledges that other than those
representations, warranties and guaranties explicitly contained in this
Agreement, if any, no representations, warranties or guarantees of any kind
have been made to either party by the other party, or by such other party's
affiliates, or by anyone acting on their behalf. Without limitation, no
representations concerning the value of the Licensed Products or the
prospects for the level of their sales or prof its have been made and each of
Licensee and Licensor has made its own independent business evaluation in
deciding to enter into this License Agreement and conduct the business
contemplated herein.
2.9. Licensee represents and warrants that it has full right, power and
authority to enter this Agreement, to perform all of its obligations
hereunder, and to consummate all of the transactions contemplated herein and
further that it is not aware of any claim or proceeding which would prevent
it from performing its obligations hereunder.
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2.10. In the event during the term hereof Licensor acquires the right and
desires to license a third party to use the Trademark in the Territory in
connection with the manufacture or sale of women's denim pants (and such
related products as Licensor, in its sole discretion, may designate),
Licensor shall, provided that Licensee is not in default of any of its
obligations hereunder and this Agreement is in full force and effect, give
Licensee notice of the terms upon which it proposes to grant a license with
respect to the Trademark for such products. Upon receipt of such notice,
Licensee shall have thirty (30) days during which it may propose modified
terms to Licensor, and the terms initially proposed by Licensor, together
with such modifications proposed by Licensee as Licensor may, in its sole
discretion, agree to during such thirty-day period, shall, upon the expiration
of such thirty-day period, be deemed the "Final Offer Terms". Licensee shall
have a period of fifteen (15) days after the expiration such thirty-day period
to accept or reject the Final Offer Terms in writing. If Licensee rejects the
Final Offer Terms or if Licensee initially accepts the Final offer Terms but
thereafter is unable to satisfy the Final offer Terms, then Licensor shall be
free to make a substantially similar offer to any third party and, if such
offer is accepted within twelve (12) months after the fifteen (15) day period
set forth above ("Timely Third Party Acceptance"), Licensee shall have no
further rights pursuant to this paragraph 2.10. If, prior to any Timely Third
Party Acceptance, Licensor shall substantially change the Final Offer Terms,
or if Licensor does not receive a Timely Third Party Acceptance, then, during
the term hereof, Licensee's rights as provided hereinabove shall apply to such
changed terms or any subsequent proposed grant of rights by Licensor pursuant
to this paragraph 2.10.
3. Design Standards and Prestige of Licensed Products.
3.1. Licensee acknowledges that it has entered into a design services
agreement ("Design Agreement"), of even date herewith, with Polo Ralph
Lauren Enterprises, L.P. (the "Design Partnership"), which provides for the
furnishing to Licensee by the Design Partnership of design concepts and other
professional services so as to enable Licensee to manufacture or cause to be
manufactured the Licensed Products in conformity with the established prestige
and goodwill of the Trademark. Licensee shall manufacture, or cause to be
manufactured, and sell only such Licensed Products as are made in accordance
with the design and other information approved under, and in all other
respects in strict conformity with the terms of, the Design Agreement.
3.2. Licensee acknowledges that the Ralph Lauren trademarks have
established prestige and goodwill and are well recognized in the minds
of the public, and that it is of great importance to each
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party that in the manufacture and sale of various lines of Licensor's products,
including the Licensed Products, the high standards and reputation that
Licensor and Ralph Lauren have established be maintained. Accordingly, all
items of Licensed Products manufactured or caused to be manufactured by
Licensee hereunder shall be of high quality workmanship with strict adherence
to all details and characteristics embodied in the designs furnished pursuant
to the Design Agreement. Licensee shall supply Licensor with samples of the
Licensed Products (including, if Licensor so requests, samples of labeling and
packaging used in connection therewith) prior to production and from time to
time during production, and shall, at all times during the term hereof, upon
Licensor's request, make its manufacturing facilities available to Licensor,
and shall use its commercially reasonable efforts to make available each
subcontractor's manufacturing facilities for inspection by Licensor's
representatives during usual working hours, which efforts shall include,
without limitation, not placing future orders for Licensed Products with
any subcontractor who fails to make such facilities available for inspection
by Licensor's representatives.
3.3. In the event that any Licensed Product is, in the reasonable judgment
of Licensor, not being manufactured, distributed or sold with first quality
workmanship or in strict adherence to all details and characteristics
furnished pursuant to the Design Agreement, Licensor shall notify Licensee
thereof in writing and Licensee shall promptly repair or change such Licensed
Product to conform thereto. If a Licensed Product as repaired or changed does
not strictly conform after Licensor's request and such strict conformity
cannot be obtained after at least one (1) resubmission, or if Licensee
determines that a Licensed Product does not strictly conform, the Trademark
shall be promptly removed from the item, at the option of Licensor, in which
event the item may be sold by Licensee, provided (a) such miscut or damaged
item does not contain any labels or other identification bearing the Trademark
without Licensor's prior approval and (b) further provided that Licensor agrees
Licensee will be permitted to sell Licensed Products as irregulars and seconds
bearing the Trademark, so long as such products are clearly labelled as such
in a manner reasonably approved by Licensor, are distributed in channels and
to outlets approved by Licensor, and are produced only as by-products of the
manufacture of first quality goods and only in reasonable quantities.
Notwithstanding anything in this paragraph 3.3 to the contrary, Licensee's
sales of all products of Licensor's or the Design Partnership's design,
whether or not bearing the Trademark, shall nonetheless be subject to
royalty payments pursuant to paragraph 6 hereof.
3.4. At the request of Licensor, Licensee shall cause to be
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placed on all Licensed Products appropriate notice in accordance with
applicable law designating Licensor or the Design Partnership as the copyright
or design patent owner thereof, as the case may be. The manner of
presentation of said notices shall be determined by Licensor.
3.5. Licensee agrees to maintain sound and ethical business practices and
to promptly pay in accordance with the purchase terms therefor all amounts
due for any Licensed Products or materials, trim, fabrics, packaging or
services relating to Licensed Products purchased by Licensee from Licensor
or any agent or licensee of Licensor or any other supplier of such items,
all subject to good faith errors or disputes.
4. Marketing.
4.1. Except as set forth in paragraph 4.11 hereof, the distribution of
the Licensed Products in the Territory shall be performed by Licensee
exclusively. The Licensed Products shall be sold by Licensee only to
those specialty shops, department stores and other retail outlets which
deal in products similar in quality and prestige to products bearing Ralph
Lauren trademarks other than the Trademark, whose operations are consistent
with the quality and prestige of such trademarks and only to those customers
expressly approved by Licensor. Whenever Licensee wishes to sell Licensed
Products to a customer not previously approved by Licensor, Licensee shall
submit a written list of its proposed customers to Licensor for Licensor's
approval, which shall be given or withheld in Licensor's discretion based on
whether the proposed customer shall enhance or not be inconsistent with the
quality and prestige of the Trademark and the distribution channels therefor.
Licensor shall have the right to withdraw its approval of a customer based on
its evaluation of the criteria set forth in the preceding sentence, subject
to orders for Licensed Products already accepted by Licensee. Licensee shall
take such steps as may be reasonably necessary, including the implementation
of an inventory marking system, to avoid any negative impact on the
reputation and desirability of Licensor's products as a result of the
unauthorized resale of Licensed Products through unauthorized distribution
channels. Licensee shall not market or promote or seek customers for the
Licensed Products outside of the Territory and Licensee shall not establish
a branch, wholly owned subsidiary, distribution or warehouse with inventories
of Licensed Products outside of the Territory; provided that upon prior
written notice to Licensor, Licensee may directly or through a controlled
affiliate own and operate a warehouse in Mexico for the purpose of storing
and/or shipping Licensed Products to be distributed in the Territory.
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4.2. Licensee acknowledges that in order to preserve the good will attached
to the Trademark, the Licensed Products are to be sold at prices and terms
reflecting the prestigious nature of the Trademark, it being understood,
however, that Licensor is not empowered to fix or regulate the prices at
which the Licensed Products are to be sold, either at the wholesale or
retail level.
4.3. Licensee shall maintain the high standards of the Trademark and the
Licensed Products, in all advertising, packaging and promotion of the
Licensed Products. Licensee shall not employ or otherwise release any of
such advertising or packaging or other business materials relating to any
Licensed Products or bearing the Trademark, unless and until Licensee shall
have made a request, in writing, for approval by Licensor. As promptly as
practicable, Licensor may, with respect to any advertising, packaging or
business materials submitted by Licensee, make such suggestions as Licensor
deems necessary or appropriate, or disapprove, in either event by notice to
Licensee. Any approval granted hereunder shall be limited to use during the
seasonal collection of Licensed Products to which such advertising relates
and shall be further limited to the use (e.g. TV or print) for which approval
by Licensor was granted. Licensee shall, at the option of Licensor, include
on its business materials an indication of the relationship of the parties
hereto in a form approved by Licensor.
4.4. Licensee shall use its commercially reasonable efforts to assure
that all cooperative advertising, whereby Licensee provides a customer with
a contribution toward the cost of an advertisement for Licensed Products,
whether Licensee's contribution be in the form of an actual monetary
contribution, a credit or otherwise, shall be subject to prior approval of
Licensor under the same terms and conditions as apply to advertising and
promotional materials prepared by or to be used by Licensee pursuant to
paragraph 4.3 hereof; provided, however, that in the event that Licensee is
not as a matter of practice given an opportunity to review the cooperative
advertising due to time constraints, then Licensee shall notify Licensor,
in advance, of those customers with whom it does cooperative Licensed Product
advertising and/or promotion, and Licensee at Licensor's request shall notify
the named customer of the terms of this Agreement which pertain to the said
advertising or promotional materials.
4.5. Licensee, in connection with the conduct of its business hereunder,
shall exercise its best efforts to safeguard the established prestige and
goodwill of the names "Polo" and "Ralph Lauren," and the Ralph Lauren image,
at the same level of prestige and goodwill as heretofore maintained.
"Image" as used herein refers primarily to quality and style of packaging,
advertising and promotion, creation and introduction of new products, type of
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outlets with reference to quality of service provided by retail outlets and
quality of presentation of Licensed Products in retail outlets. Licensee
shall take all necessary steps, and all steps reasonably requested by
Licensor, to prevent or avoid any misuse of the Trademark by any of its
customers, contractors or other resources.
4.6. During each year of this Agreement, Licensee shall expend for the
production and placement of national institutional and media advertising of
Licensed Products ("Institutional Advertising"), an amount that is not less
than the "Annual Advertising obligation", as hereinafter defined, for such
year. Licensor shall consult in advance with Licensee regarding the creation,
production and placement of Institutional Advertising, but all final decisions
with respect thereto shall be made by Licensor in its sole discretion. The
"Annual Advertising obligation" for each year during the term hereof shall be
[OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION]
of the aggregate Net Sales Price of Licensed Products sold during such year,
but the Annual Advertising Obligation for the period from the date hereof to
December 31, 1997 shall be not less than [OMITTED; MATERIAL FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION], of which approximately [OMITTED;
MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION] is
intended to be spent during calendar year 1996. Licensee shall deliver to
Licensor within sixty (60) days after the end of each year hereof an
accounting statement in respect of amounts expended by Licensee on
Institutional Advertising for the prior year. Each such accounting statement
shall be signed, and certified as correct, by a duly authorized officer of
Licensee. Prior to each year hereof, Licensee shall submit Licensee's
advertising budget for the upcoming year, based on the aggregate Net Sales
Price of Licensed Products during the year then ending and on sales projected
for the upcoming year. Only actual advertising costs and expenses charged to
Licensee or Licensor in connection with the advertising of Licensed Products
under the Trademark shall be charged to Licensee's advertising budget
hereunder, and Licensor shall make available to Licensee or credit to
Licensee's budget any volume discounts for the advertising of Licensed
Products Licensor is able to achieve as a result of the advertising of
Licensed Products and other advertising placed by or for Licensor and/or
its other licensees. The Annual Advertising Obligation for such upcoming
year will initially be calculated and expended based upon such budget. If in
any year during the term hereof an amount less than the Annual Advertising
Obligation is expended on Institutional Advertising for any reason whatsoever
(including an underestimate of the actual Net Sales Price for such year or
because the actual cost of Institutional Advertising, if any, produced and
placed during such year is less than the Annual Advertising Obligation), the
entire amount not expended shall be added to the Annual Advertising
obligation for the following year.
4.7. During the term of this Agreement, Licensee shall, in
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consultation with Licensor, provide a budget for the design, construction,
re-fits and seasonal changeovers of in-store shops and fixtures to be used
exclusively for the presentation of Licensed Products, the design of which
shall be subject to Licensor's prior approval. Licensee's budget for such
purposes shall be adequate to present Licensed Products in a manner consistent
with the high quality and prestige associated with Licensor's trademarks and
the price structure of the Licensed Products.
4.8. To the extent permitted by applicable law Licensor may from time to
time, and in writing, promulgate reasonable and nondiscriminatory rules and
regulations to Licensee relating to the manner of use of the Trademark.
Licensee shall comply with such rules and regulations. Any such rules or
regulations shall not be inconsistent with or derogate from Licensee's
rights under this Agreement.
4.9. Licensee agrees to make available for purchase and to sell on its
customary price, credit and payment terms (subject to paragraph 4.11 hereof)
all lines and styles of Licensed Products to retail stores in the Territory
bearing a trademark of Licensor or its affiliates which are authorized to sell
the Licensed Products within such retail stores. Notwithstanding anything to
the contrary contained herein, to the extent that any such Licensed Products
are not so made available by Licensee to such stores, such Licensed Products
may be made available to such stores by Licensor (or its affiliates or other
licensees).
4.10. In consideration of the License granted herein, in the event Licensor
elects to offer Licensed Products for sale in mailorder catalogs or "vertical
retail stores of Licensor or its affiliates" (as hereinafter defined),
Licensee shall sell and timely ship Licensed Products to Licensor or its
affiliate for such purposes at a price equal to [OMITTED; MATERIAL FILED
SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION] less than the regular
wholesale price therefor. All such sales shall be separately reported by
Licensee in its accounting statements pursuant to paragraph 6.2 hereof, and
such sales shall not be subject to the royalty or advertising obligations set
forth herein, or to the compensation obligations set forth in the Design
Agreement, but such sales shall be included within the definition of Net
Sales Price for all purposes under paragraph 2 of Schedule C to this Agreement.
The term "vertical retail stores of Licensor or its affiliates" shall mean a
store or shop doing business under a service mark or tradename substantially
similar to the Trademark, the principal focus of which is the sale of products
bearing the Trademark, and in which Licensor or any of its affiliates owns,
directly or indirectly, an equity interest in excess of 25%.
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4.11. Licensor shall respond to any requests for approvals or consents from
Licensee hereunder as promptly as reasonably practicable consistent with the
level of review required.
5. Trademark Protection.
5.1. All uses of the Trademark by Licensee, including, without limitation,
use in any business documents, invoices, stationery, advertising, promotions,
labels, packaging and otherwise shall require Licensor's prior written consent
in accordance with paragraph 4 hereof.
5.2. All uses of the Trademark by Licensee in advertising, promotions,
labels and packaging shall include, at Licensor's option, a notice to the
effect that the Trademark is used by Licensee for the account and benefit
of Licensor or that Licensee is a registered user thereof or both such
statements. The use of the Trademark pursuant to this Agreement shall be for
the benefit of Licensor and shall not vest in Licensee any title to or right
or presumptive right to continue such use. For the purposes of trademark
registration, sales by Licensee shall be deemed to have been made by Licensor.
5.3. Licensee shall cooperate fully and in good faith with Licensor for the
purpose of securing and preserving Licensor's rights in and to the Trademark.
Nothing contained in this Agreement shall be construed as an assignment or
grant to Licensee of any right, title or interest in or to the Trademark, or
any of Licensor's other trademarks, it being understood that all rights
relating thereto are reserved by Licensor, except for the License hereunder
to Licensee of the right to use the Trademark only as specifically and
expressly provided herein. Licensee shall not file or prosecute a trademark
or service mark application or applications to register the Trademark, for
Licensed Products or otherwise.
5.4. Licensee shall not, during the term of this Agreement or thereafter,
(a) attack Licensor's title or rights in or to any Ralph Lauren trademarks
in any jurisdiction or attack the validity of this License or the Ralph Lauren
trademarks or (b) contest the fact that Licensee's rights under this Agreement
(i) are solely those of a licensee, manufacturer and distributor and (ii)
subject to the provisions of paragraph 10 hereof, cease upon termination
of this Agreement. The provisions of this paragraph 5.4 shall survive the
termination of this Agreement.
5.5. Subject to the provisions of paragraph 2.7 of the Design
Agreement, all right, title and interest in and to all samples,
patterns, sketches, designs, artwork, logos and other materials
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furnished by or to Licensor or the Design Partnership, whether
created by Licensor, the Design Partnership or Licensee, are hereby
assigned in perpetuity to, and shall be the sole property of, Licensor and/or
the Design Partnership, as the case may be. Licensee shall assist Licensor to
the extent necessary in the protection of or the procurement of any protection
of Licensor's rights to the Trademark, designs, design patents and copyrights
furnished hereunder and Licensor, if Licensor so desires, may commence or
prosecute any claims or suits in Licensor's own name or in the name of
Licensee or join Licensee as a party thereto. Licensee shall promptly notify
Licensor in writing of any uses which may be infringements or imitations by
others of the Trademark on articles similar to those covered by this Agreement
which may come to Licensee's attention. Licensor shall have the sole right to
determine whether or not any action shall be taken on account of any such
infringements or imitations. Licensor shall bear one hundred percent (100%)
of the costs of all actions or proceedings it undertakes, and shall be
entitled to all recoveries in such actions. If Licensor declines to take
action with respect to a particular infringer Licensee is not obligated to but
may, with Licensor's prior written consent, undertake such action at
Licensee's expense, and all recoveries in such actions shall first be applied
to reimbursement of Licensee's actual legal and investigative fees, and then
divided equally between Licensor and Licensee.
6. Royalties.
6.1. Commencing with the First Renewal Term (as hereinafter defined in
Schedule C), if the term hereof is extended beyond the Initial Term (as
hereinafter defined in paragraph 8), Licensee shall thereafter pay to
Licensor minimum royalties for each year during the term of this Agreement
as compensation for the License granted hereunder for the use of the Trademark
in the manufacture and sale, and/or importation and sale, of Licensed Products
in the Territory. The minimum royalty for each year commencing with the First
Renewal Term shall be an amount equal to [OMITTED; MATERIAL FILED SEPARATELY
WITH SECURITIES AND EXCHANGE COMMISSION] of the actual earned royalties due
for the immediately preceding year; provided, however, that the minimum
royalty obligation for each year of the First Renewal Term shall in no event
be less than [OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE
COMMISSION]; for each year of the Second Renewal Term no less than [OMITTED;
MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION]; for each
year of the Third -Renewal Term no less than [OMITTED; MATERIAL FILED
SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION]; for each year of the
Forth Renewal Term no less than [OMITTED; MATERIAL FILED SEPARATELY WITH
SECURITIES AND EXCHANGE COMMISSION]; for each year of the Fifth Renewal Term
no less than [OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE
COMMISSION]; and for each year of the Sixth Renewal Term no less than
[OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION]
(each such Term as defined in Schedule C). Minimum royalties for each year
shall be paid on a quarterly basis, within thirty (30) days after the end
of each quarter during the term hereof, commencing with the first quarter
of the First Renewal Term. No
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credit shall be permitted against minimum royalties payable for any year on
account of actual or minimum royalties paid for any other year, and minimum
royalties shall not be returnable. For the purposes of this Agreement, the
term "year" shall mean a period of twelve (12) months commencing on each
January 1 during the term of this Agreement; provided, however, that the
term "first year" shall mean the 17-month period commencing
on August 1, 1995 and ending on December 31, 1996.
6.2. Licensee shall pay to Licensor earned royalties based on the Net Sales
Price of all Licensed Products manufactured or imported and sold by Licensee
hereunder. Earned royalties shall [OMITTED; MATERIAL FILED SEPARATELY WITH
SECURITIES AND EXCHANGE COMMISSION] of the Net Sales Price of all Licensed
Products sold under this Agreement, including, without limitation, any sales
made pursuant to the terms of paragraphs 3.2, 3.3 and 10.2 hereof. Licensee
shall prepare or cause to be prepared statements containing the information
set forth in paragraph 7.1 hereof for the period commencing on the date
hereof and ending on March 31, 1996 and for each quarter ending the last day
of March, June, September and December in each year hereof, which shall be
furnished to Licensor together with the earned royalties due for each such
quarter (less minimum royalties, when applicable, paid for such quarter)
within thirty (30) days after the end of each such quarter. The term "Net
Sales Price" shall mean the gross sales price to retailers of all Licensed
Products sold under this Agreement or, with respect to Licensed Products that
are not sold directly or indirectly to retailers, other ultimate consumers (as
in the case of accommodation sales by Licensee to its employees or sales by
Licensee in its own shops), less trade discounts, merchandise returns, sales
tax (if separately identified and charged) and markdowns and/or chargebacks
which, in accordance with generally accepted accounting principles, would
normally be treated as deductions from gross sales, and which, in any event,
do not include any chargebacks or the like for advertising, fixture or retail
shop costs or contributions. Notwithstanding the foregoing, Licensor hereby
waives its right to (i) receive royalties hereunder for, or (ii) include
within the calculation of Net Sales Price for the purpose of calculating the
Annual Advertising Obligation as set forth in paragraph 4.6 hereof, sales of
units of Licensed Products sold at a discount of [OMITTED; MATERIAL FILED
SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION] or more off the regular
wholesale price ("Discounted Units"), provided that such waiver shall only
apply to the extent that the aggregate Net Sales Price of Discounted Units
for any year does not exceed [OMITTED; MATERIAL FILED SEPARATELY WITH
SECURITIES AND EXCHANGE COMMISSION] of the Net Sales Price of all units of
Licensed Products other than Discounted Units sold in such year. No other
deductions shall be taken. Any merchandise returns shall be credited in
the quarter in which the returns are actually made. For purposes of this
Agreement, affiliates of Licensee shall mean all persons and business
entities, whether corporations, partnerships, joint ventures or otherwise,
which now or hereafter
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control, or are owned or controlled, directly or indirectly by Licensee, or
are under common control with Licensee. It is the intention of the parties
that royalties will be based on the bona fide wholesale prices at which
Licensee sells Licensed Products to independent retailers in arms' length
transactions. In the event Licensee shall sell Licensed Products to its
affiliates, royalties shall be calculated on the basis of such a bona fide
wholesale price irrespective of Licensee's internal accounting treatment of
such sale unless such products are sold by its affiliates directly to the
end-user consumer, in which case royalties shall be calculated on the basis
of the price paid by the end-user consumer, less applicable taxes. Licensee
shall identify separately in the statements provided to Licensor pursuant to
paragraph 7 hereof, all sales to affiliates. At least once annually and no
later than 90 days after the close of Licensee's fiscal year, Licensee shall
furnish to Licensor a statement of the Net Sales Price of all Licensed
Products sold during the year just ended, which shall be certified by the
independent auditor for Licensee as correct and in accordance with the terms
of this Agreement.
6.3. If the payment of any installment of royalties is delayed for any
reason, interest shall accrue on the unpaid principal amount of such
installment from and after the date which is 10 days after the date the
same became due pursuant to paragraphs 6.1 or 6.2 hereof at the lower of
the highest rate permitted by law in New York and 2% per annum above the
prime rate of interest in effect from time to time at Chemical Bank, New
York, New York or any successor bank.
6.4. The obligation of Licensee to pay royalties hereunder shall be
absolute notwithstanding any claim which Licensee may assert against
Licensor or the Design Partnership. Licensee shall not have the right
to set-off, compensate itself or any third party, or make any deduction
from such royalty payments for any reason whatsoever.
7. Accounting.
7.1. Licensee shall at all times keep an accurate account of all
operations within the scope of this Agreement. Licensee shall render a
full statement in writing to Licensor in accordance with paragraph 6.2
hereof, which shall account separately for each different product category
and shall include all aggregate gross sales, trade discounts, merchandise
returns, sales tax, markdowns, chargebacks, unit sales, sales of Discounted
Units, sales of miscuts and damaged merchandise and net sales price of all
sales for the previous quarter. Such statements shall be in sufficient
detail to be audited from the books of Licensee. Once annually, which may
be in connection with the regular annual audit of
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Licensee's books, Licensee shall furnish an annual statement of the aggregate
gross sales, trade discounts, merchandise returns and Net Sales Price of all
Licensed Products made or sold by Licensee certified by Licensee's independent
accountant. Each quarterly statement furnished by Licensee shall be certified
by the chief financial officer of Licensee.
7.2. Licensor and its duly authorized representatives, on reasonable notice,
shall have the right, no more than once in each year during regular business
hours, for the duration of the term of this Agreement and for three (3) years
thereafter, to examine the books of account and records and all other
documents, materials and inventory in the possession or under the control of
Licensee and its successors with respect to the statements required, and
Licensee's obligations, hereunder. All such books of account, records and
documents shall be maintained and kept available by Licensee for at least the
duration of this Agreement and for three (3) years thereafter. Licensor shall
have free and full access thereto in the manner set forth above and shall
have the right to make copies and/or extracts therefrom. If as a result of
any examination of Licensee's books and records it is shown that Licensee's
payments to Licensor hereunder with respect to any twelve (12) month period
were less than or greater than the amount which should have been paid to
Licensor by an amount equal to two percent (2%) of the amount which should
have been paid during such twelve (12) month period, Licensee will, in
addition to reimbursement of any underpayment, with interest from the date
on which each payment was due at the rate set forth in paragraph 6.3 hereof,
promptly reimburse Licensor for the cost of such examination. Licensor shall
reimburse Licensee for any overpayment of royalties it discovers during such
examination, after deducting from the amount of such overpayment all costs and
expenses incurred in connection with such examination.
7.3. With respect to each notice Licensee may give to Licensor that it is
exercising an option for a Renewal Term pursuant to paragraph 2 of Schedule
C to this Agreement, Licensee shall provide to Licensor, simultaneously with
such notice, a profit and loss statement, statement of cash flows and
balance sheet covering Licensee's most recent fiscal year ("Financial
Statement"), each of which shall be certified by the independent auditor
for Licensee. In addition, if the term hereof remains in effect on April 1,
2010, Licensee shall provide Licensor on such date with Financial Statements
covering Licensee's last three fiscal years, and thereafter with such updated
and additional information and documentation as Licensor may reasonably
request in considering whether to exercise the Buyout Option set forth in
paragraph 4 of Schedule C to this Agreement. All Financial Statements
required to be furnished herein shall be prepared in
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accordance with generally accepted accounting principles and any officer's
certificate relative thereto shall state that such statements are true,
complete and correct in all material respects and present fairly the financial
position of Licensee as of the respective date of the balance sheets and the
results of operations for the respective periods covered.
8. Term.
The initial term of this Agreement shall commence as of the date hereof and
shall terminate on December 31, 2000 (the "Initial Term"). In addition,
Licensee and Licensor shall have the respective option rights relating to the
term set forth in Schedule C to this Agreement. It is expressly understood
that only the company (which may be Licensee) whose licensed term covers the
period subsequent to the expiration of this Agreement shall be entitled to
receive designs for Licensed Products intended to be sold after the expiration
of this Agreement, and to make presentations of such Licensed Products during
the market presentation weeks that relate to such subsequent period, even if
such market presentation occurs prior to the termination of this Agreement.
Without limiting the generality of the foregoing, in the event the term
hereof is not renewed or extended, the last season for which Licensee shall
be entitled to receive designs and, during the term hereof, to manufacture
and sell Licensed Products shall be the Cruise/Holiday season of the final
year of either the Initial Term or the relevant Renewal Term (the "Final
Season"), and Licensor shall be entitled to undertake, directly or through
a successor licensee, all activities associated with the design, manufacture
and sale Licensed Products commencing with the season immediately following
the Final Season.
9. Default; Change of Control.
9.1. Each of the following shall constitute an event of default ("Event of
Default") hereunder:
(i) Any installment of royalty payments is not paid when due and such
default continues for more than fifteen (15) days after written notice
thereof to Licensee;
(ii) Licensee shall fail to timely present for sale to the trade a
broadly representative and fair collection of each seasonal collection of
Licensed Products designed by the Design Partnership under the Design
Agreement or Licensee shall fail to timely ship to its customers a material
portion of the orders of Licensed Products it has accepted, and in either
case such failure results in material injury to Licensee's or Licensor's
reputation or causes reasonable
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uncertainty regarding Licensee's ability to timely fulfill its obligations
in the future;
(iii) Licensee defaults in performing any of the other terms of this
Agreement and continues in such default for a period of thirty (30) days
after written notice thereof (unless the default cannot be cured within
such thirty (30) day period and Licensee shall have in good faith advised
Licensor that it has commenced to cure the default and thereafter diligently
cures such default within an additional forty-five (45) day period);
(iv) If Licensee shall knowingly use the Trademark in an unauthorized or
improper manner and/or if Licensee shall knowingly make an unauthorized
disclosure of confidential information or materials given or loaned to
Licensee by Licensor and/or the Design Partnership;
(v) Licensee institutes proceedings seeking relief under a bankruptcy
act or any similar law, or consents to entry of any order for relief against
it in any bankruptcy or insolvency proceeding or similar proceeding, or
files a petition for or consent or answer consenting to reorganization or
other relief under any bankruptcy act or other similar law, or consents to
the filing against it of any petition for the appointment of a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other similar
official) of it or of any substantial part of its property, or a proceeding
seeking such an appointment shall have been commenced without Licensee's
consent and shall continue undismissed for sixty (60) days or an order
providing for such an appointment shall have been entered, or makes an
assignment for the benefit of creditors, or admits in writing its inability
to pay its debts as they become due or fails to pay its debts as they become
due, or takes any action in furtherance of the foregoing;
(vi) Licensee transfers or agrees to transfer substantially all of its
property (other than as permitted in paragraph 17.4 hereof);
(vii) The voluntary calling of a meeting of creditors, or the voluntary
or involuntary appointment of a committee of creditors or liquidating agents,
or offering a composition or extension to creditors by, for or of Licensee;
(viii) There shall be a change in control of Licensee other than as
permitted in paragraph 17.4 hereof or Licensee shall dissolve liquidate or
wind-up its business;
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(ix) An event of default occurs under the Design, or any other license
agreement entered into between Licensor and Licensee or design agreement
between Licensee and the Design Partnership;
(x) Licensee shall fail to timely comply with the terms of paragraph 4
of Schedule C to this Agreement.
9.2. If any Event of Default described in paragraphs 9.1(i),(ii),(iii),(iv),
(viii),(ix), or (x) shall occur, Licensor shall have the right, exercisable
in its sole discretion, to terminate this Agreement and the License upon ten
(10) days' written notice to Licensee of its intention to do so, and upon the
expiration of such ten (10) day period, this Agreement and the License shall
terminate and come to an end. If the Event of Default described in paragraphs
9.1 (v),(vi) or (vii) shall occur, this Agreement and the License shall
thereupon forthwith terminate and come to an end without any need for notice
to Licensee. This Agreement will terminate automatically upon the expiration
or termination for any reason whatsoever of the Design Agreement. Any
termination of this Agreement shall be without prejudice to any remedy of
Licensor for the recovery of any monies then due it under this Agreement or in
respect to any antecedent breach of this Agreement, and without prejudice to
any other right of Licensor including, without limitation, damages for breach
to the extent that the same may be recoverable and Licensee agrees to
reimburse Licensor for any reasonable costs and expenses (including attorneys'
fees) incurred by Licensor in enforcing its rights hereunder. No assignee
for the benefit of creditors, receiver, liquidator, sequestrator, trustee in
bankruptcy, sheriff or any other officer of the court or official charged
with taking over custody of Licensee's assets or business shall have any
right to continue the performance of this Agreement.
10. Disposal of Stock Upon Termination or Expiration.
10.1. Within ten (10) days following the termination of this Agreement for
any reason whatsoever including the expiration of the term hereof, and on the
last day of each month during the disposal period set forth in paragraph 10.2
hereof, Licensee shall furnish to Licensor a certificate of Licensee listing
its inventories of Licensed Products (which defined term for purposes of this
paragraph 10.1 shall include finished Licensed Products and all fabrics, trim,
and packaging used in the manufacture and marketing of Licensed Products and
bearing the Trademark) on hand or in process wherever situated. Licensor shall
have the right to conduct a physical inventory of Licensed Products in
Licensee's possession or under Licensee's control. Licensor or Licensor's
designee shall have the option to purchase from Licensee all or any part of
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Licensee's then existing inventory of Licensed Products; provided, however,
that if (i) Licensee has exercised its option for a Third Renewal Term but
has not exercised its Extension Option (all as set forth in Schedule C
hereto) I and (ii) upon the expiration of the Third Renewal Term Licensor
does not offer Licensee the right to extend the term of this Agreement, then
Licensor shall have the obligation to purchase all of Licensee's then existing
inventories of Licensed Products upon the expiration of the Third Renewal Term.
Any purchase by Licensor of Licensee's inventory of Licensed Products
pursuant to this paragraph 10 shall be upon the following terms and
conditions:
(i) If the purchase is taking place at Licensor's option, Licensor shall
notify Licensee of its or its designee's intention to exercise the foregoing
option within thirty (30) days of delivery of the certificate referred to
above and shall specify the items of Licensed Products to be purchased.
Prior to and during such period of thirty (30) days Licensee shall be entitled
to continue distribution in the ordinary course subject to paragraph 10.2
hereof;
(ii) The price for Licensed Products manufactured by or on behalf of
Licensee on hand or in process shall be the lower of: (a) the fair market
value of the inventory to be purchased or (b) Licensee's standard cost
(the actual manufacturing cost) for each such Licensed Product. The "cost"
for all Licensed Products which are not manufactured by Licensee shall be
Licensee's landed costs therefor. Landed costs for the purposes hereof
means the F.O.B. price of the Licensed Products together with customs,
duties, brokerage charges, freight and insurance.
(iii) Licensee shall ship the Licensed Products to be purchased by
Licensor in "as is" condition within fifteen (15) days of receipt of the
notice referred to in clause (i) above (other than those products sold and
shipped between the date Licensee delivered the certificate of its
inventories and the date it received such notice from Licensor). Payment
of the purchase price for the Licensed Products so purchased by and shipped
to Licensor or its designee shall be payable upon shipment thereof; provided,
that Licensor shall be entitled to deduct from such purchase price any amounts
owed by Licensee to Licensor, the Design Partnership or their respective
affiliates (and/or to direct payment of any part of such merchandise to any
supplier of Licensed Products in order to reduce an outstanding balance due
to such supplier from Licensee). Licensor shall be responsible for the cost
of freight for shipment of the products to Licensor from Licensee's warehouse
facility in the United States of America.
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10.2. In the event that Licensee, pursuant to paragraph 10.1 hereof,
Licensee timely provides the certificate of inventory and Licensor chooses
not to exercise its option with respect to all or any portion of Licensed
Products, for a period of ninety (90) days after termination of this
Agreement for any reason whatsoever, except on account of breach of the
provisions of paragraph 3, 4 or 6 hereof, Licensee may dispose of Licensed
Products which are on hand or in the process of being manufactured at the
time of termination of this Agreement, provided that (i) Licensee fully
complies with the provisions of this Agreement, including specifically those
contained in paragraphs 3, 4 and 6 hereof in connection with such disposal,
and (ii) said disposal with respect to each shipment of Licensed Products
received by Licensee takes place within sixty (60) days after such shipment
is received; provided, however, that Licensee shall have no disposal rights
with respect to any Licensed Products it may receive more than 120 days
after the expiration or termination of this Agreement.
10.3. Notwithstanding anything to the contrary contained herein, in the
event that upon the expiration or termination of the term hereof for any
reason Licensee has not rendered to Licensor all accounting statements
then due, and paid (i) all royalties and other amounts then due to Licensor,
(ii) all compensation then due to the Design Partnership under the Design
Agreement and (iii) all amounts then due to any affiliate of or supplier to
Licensor or its affiliates (collectively, "Payments"), Licensee shall have
no right whatsoever to dispose of any inventory of Licensed Products in any
manner. In addition, if during any disposal period Licensee fails timely to
render any accounting statements, or certificates of inventory required
pursuant to paragraph 10.1 hereof, or to make all Payments when due,
Licensee's disposal rights hereunder shall immediately terminate without
notice.
11. Effect of Termination.
11.1. It is understood and agreed that except for the License to use the
Trademark only as specifically provided for in this Agreement, Licensee
shall have no right, title or interest in or to the Trademark. Upon and
after the termination of this License, all rights granted to Licensee
hereunder, together with any interest in and to the Trademark which
Licensee may acquire, shall forthwith and without further act or instrument
be assigned to and revert to Licensor. In addition, Licensee will execute
any instruments requested by Licensor which are necessary to accomplish or
confirm the foregoing. Any such assignment, transfer or conveyance shall
be without consideration other than the mutual agreements contained herein.
Licensor shall thereafter be free to license to others the right to use the
Trademark in connection with the manufacture and sale of the Licensed
Products covered hereby, and Licensee will
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refrain from further use of the Trademark or any further reference to them,
direct or indirect, or any other trademark, trade name or logo that is
confusingly similar to the Trademark, or associated with the Trademark in
any way, in connection with the manufacture, sale or distribution of
Licensee's products, except as specifically provided in paragraph 10 hereof.
It is expressly understood that under no circumstances shall Licensee be
entitled, directly or indirectly, to any form of compensation or indemnity
from Licensor, the Design Partnership or their affiliates, as a consequence
to the termination of this Agreement, whether as a result of the passage of
time, or as the result of any other cause of termination referred to in this
Agreement. Without limiting the generality of the foregoing, by its
execution of the present Agreement, Licensee hereby waives any claim which
it has or which it may have in the future against Licensor, the Design
Partnership or their affiliates, arising from any alleged goodwill created by
Licensee for the benefit of any or all of the said parties or from the alleged
creation or increase of a market for Licensed Products.
11.2. Licensee acknowledges and admits that there would be no adequate
remedy at law for its failure (except as otherwise provided in paragraph 10
hereof) to cease the manufacture or sale of the Licensed Products covered by
this Agreement at the termination of the License, and Licensee agrees that in
the event of such failure Licensor shall be entitled to equitable relief by
the way of temporary and permanent injunction and such other and further
relief as any court with jurisdiction may deem just and proper.
12. Showroom.
Licensee agrees to establish a separate showroom for the presentation and
sale of the Licensed Products and to maintain, operate, decorate and staff
the showroom in a manner consistent with that of the showrooms established
for the presentation and sale of Licensor's other products and with the price
structure of the Licensed Products. Licensor shall have a right of approval
with respect to the location, design, layout and decoration of the showroom
and all expenses incurred with respect to the design, construction, operation
and maintenance of such showroom shall be borne by Licensee. Licensor and
Licensee shall mutually agree to a budget for the construction of such
showroom. Licensee shall admit Licensor's employees to its showroom and
shall sell to such employees for their personal use (and not for resale)
such Licensed Products as any such employee may reasonably request, at
prices equal to the regular wholesale price less a discount equal to not
less than thirty percent (30%) of such regular wholesale price.
13. Indemnity.
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13.1. Licensor shall indemnify and hold harmless Licensee and its
affiliates, permitted assignees, directors, officers, agents and employees,
from and against any and all liability, claims, causes of action, suits,
damages and expenses (including reasonable attorneys' fees and expenses in
actions involving third parties or between the parties hereto) ("Claims")
which Licensee is or becomes liable for, or may incur solely by reason of
its use within the Territory, in strict accordance with the terms and
conditions of this Agreement and the Design Agreement, of the Trademark or
the designs furnished to Licensee by Licensor or the Design Partnership, to
the extent that any such Claims arise through infringement of another's
design patent, trademark, copyright or other proprietary rights; provided,
however, that Licensee gives Licensor prompt notice of, and full cooperation
in the defense against, all such Claims. If any action or proceeding shall be
brought or asserted against Licensee in respect of which indemnity may be
sought from Licensor under this paragraph 13.1, Licensee shall promptly
notify Licensor thereof in writing, and Licensor shall assume and direct
the defense thereof. Licensee may thereafter, at its own expense, be
represented by its own counsel in such action or proceeding.
13.2. To the extent not inconsistent with paragraph 13.1 hereof, Licensee
shall indemnify and save and hold Licensor, the Design Partnership, Polo
Ralph Lauren Corporation and Ralph Lauren, individually, and their assignees,
directors, officers, agents and employees, harmless from and against any and
all liability, claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees and expenses in actions involving
third parties or between the parties hereto), which they, or any of them,
are or become liable for, or may incur, or be compelled to pay by reason of
any acts, whether of omission or commission, that may be committed or suffered
by Licensee or any of its servants, agents or employees in connection with
Licensee's performance of this Agreement, including Licensee's use of
Licensee's own designs, in connection with Licensed Products manufactured
by or on behalf of Licensee or otherwise in connection with Licensee's
business. If any action or proceeding shall be brought or asserted against
Licensor in respect of which indemnity may be sought from Licensee under this
paragraph 13.2, Licensor shall promptly notify Licensee thereof in writing,
and Licensee shall assume and direct the defense thereof. Licensor may
thereafter, at its own expense, be represented by its own counsel in such
action or proceeding.
14. Insurance.
Licensee shall carry product liability insurance with limits of
liability in the minimum amount, in addition to defense costs, of
$3,000,000 per occurrence and $3,000,000 per person and
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Licensor, the Design Partnership, Polo Ralph Lauren Corporation and Ralph
Lauren, individually, shall be named therein as insureds, as their interests
may appear. The maximum deductible with respect to such insurance shall be
$100,000. Licensee shall, promptly after the signing of this Agreement,
deliver to Licensor a certificate of such insurance from the insurance
carrier, setting forth the scope of coverage and the limits of liability
and providing that the policy may not be canceled or amended without at
least thirty (30) days prior written notice to Licensor, the Design
Partnership, Polo Ralph Lauren Corporation and Ralph Lauren, individually.
15. Disclosure.
15.1. Licensor and Licensee, and their affiliates, employees, attorneys,
accountants and bankers shall hold in confidence and not use or disclose,
except as permitted by this Agreement, (i) confidential information of the
other or (ii) the terms of this Agreement, except upon consent of the other
or pursuant to, or as may be required by law, or in connection with regulatory
or administrative proceedings and only then with reasonable advance notice of
such disclosure to the other. Each of Licensee and Licensor shall take all
reasonable precautions to protect the secrecy of the material used pursuant
to this Agreement prior to the commercial distribution or the showing of
samples for sale, and Licensee shall not sell any merchandise employing or
adapted from any of said designs sketches, artwork, logos, and other
materials or their use except under the Trademark.
15.2. Licensee agrees that all press releases and other public announcements
related to Licensee's operations hereunder, shall be subject to approval by
Licensor, and that each request for a statement, release or other inquiry
shall be sent in writing to the advertising/publicity director of Licensor
for response.
16. Key Personnel.
16.1. At all times during the term hereof, Licensee shall employ a
divisional President, approved in advance by Licensor, whose sole
responsibility shall be to manage all of Licensee's operations pursuant
to this Agreement. Such individual shall report to the President of Licensee.
16.2. At all times during the term hereof, Licensee shall employ a Design
Director, approved in advance by Licensor, those sole responsibility shall be
to work with Licensor and the Design Partnership on the creation and
implementation of designs for the Licensed Products and related activities
under this Agreement.
17. Miscellaneous.
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17.1. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been properly given or sent
(i) on the date when such notice, request, consent or communication is
personally delivered or (ii) five (5) days after the same was sent, if sent
by certified or registered mail, return receipt requested, or (iii) two (2)
days after the same was sent, if sent by overnight courier delivery or
confirmed telecopier, as follows:
(a) if to Licensee, addressed as follows:
Sun Apparel, Inc.
11201 Armour Drive
El Paso, Texas 79935
Attention: Mr. Miles Rubin
Telecopier: 915.592.1343
with a copy to:
Sun Apparel, Inc.
111 West 40th Street
New York, New York 10018
Attention: Mr. Eric Rothfeld
Telecopier: 212.391.2780
(b) if to Licensor, addressed as follows:
Polo Ralph Lauren, L.P.
650 Madison Avenue
New York, New York 10022
Attention: Vice Chairman
Telecopier: 212.318.7186
with a copy to:
Victor Cohen, Esq.
Eighth Floor
650 Madison Avenue
New York, New York 10022
Telecopier: 212.318.7183
Anyone entitled to notice hereunder may change the address to which notices
or other communications are to be sent to it by notice given in the manner
contemplated hereby.
17.2. Nothing herein contained shall be construed to place the parties
in the relationship of partners or joint venturers, and no party hereto
shall have any power to obligate or bind any other party hereto in any
manner whatsoever, except as otherwise provided
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for herein.
17.3. None of the terms hereof can be waived or modified except by an
express agreement in writing signed by the party to be charged or, in the
case of the Licensee, its chairman or president. The failure of any party
hereto to enforce, or the delay by any party in enforcing, any of its rights
hereunder shall not be deemed a continuing waiver or a modification thereof
and any party may, within the time provided by applicable law, commence
appropriate legal proceedings to enforce any and all of such rights. All
rights and remedies provided for herein shall be cumulative and in addition
to any other rights or remedies such parties may have at law or in equity.
Any party hereto may employ any of the remedies available to it with respect
to any of its rights hereunder without prejudice to the use by it in the
future of any other remedy with respect to any of such rights. No person,
firm or corporation, other than the parties hereto and the Design Partnership
(and, to the extent set forth in paragraphs 13.1 and 13.2 hereof, Polo Ralph
Lauren Corporation and Ralph Lauren, individually), shall be deemed to have
acquired any rights by reason of anything contained in this Agreement.
17.4. (a) This Agreement shall be binding upon and inure to the benefit of
the successors and permitted assigns of the parties hereto. Licensor may
assign all or any portion of the royalties payable to Licensor hereunder, as
designated by Licensor, and in addition, Licensor may assign all of its
rights, duties and obligations hereunder to any entity to which the
Trademark, or the right to use the Trademark, has been transferred, or to an
affiliate of any such entity. The rights granted to Licensee hereunder are
unique and personal in nature, and neither this Agreement nor the License
may be assigned by Licensee without Licensor's prior written consent, which
may be withheld in Licensor's sole discretion. Notwithstanding anything to
the contrary contained in the prior sentence, Licensee may assign all of its
rights, duties, and obligations hereunder to any affiliated entity, provided
(i) such entity shall agree to be bound by the terms and provisions hereof,
including, without limitation, the right of Licensor to approve or reject
any successor to the individuals appointed by Licensee and approved by
Licensor pursuant to paragraphs 16.1 and 16.2 hereof; (ii)[intentionally
left blank](iii) such entity shall have the financial capacity to perform
the obligations of Licensee hereunder and the assignment shall not be
effectuated to avoid any provision of this Agreement; and (iv) such
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assignment shall not relieve Licensee of its duties and obligations
hereunder. Licensee shall reimburse Licensor for all reasonable costs and
expenses (including attorney's fees) incurred by Licensor in connection with
such assignment and Licensee shall give reasonable prior written notice to
Licensor of its intent to make such an assignment, setting forth in its
notice the name and address of such assignee, a description of its
capitalization, and the names and addresses of its stockholders, directors,
and officers, partners, and/or managers, as the case may be. Any event or
change of control of Licensee such that clause (ii) of this paragraph 17.4(a)
is no longer true with respect to Licensee (or any entity to which this
Agreement is assigned) shall be considered an assignment in violation of this
Agreement; provided, however, that a "change in control of the Licensee"
shall be deemed not to have occurred as aforesaid if an applicable change in
ownership is the result of (x) public offerings or sales to underwriters of
capital stock in anticipation thereof by Licensee or any successor thereto
or (y) any acquisition of Licensee through merger, purchase of assets or
otherwise effected in whole or in part by issuance or reissuance of shares
of capital stock, if clause (ii) of this paragraph 17.4(a) is true with
respect to the surviving or controlling entity. Licensee agrees that it
will not effectuate an initial public offering of its securities without
Licensor's prior consent if Licensee's primary business (i.e., more than
fifty (50%) percent of Licensee's sales or more than sixty-five (65%) percent
of Licensee's net profits before taxes, in each case determined by Licensee's
independent auditors for the latest fiscal year of Licensee preceding such
offering) relates to Licensee's operations pursuant to this Agreement. Except
as expressly permitted pursuant to this paragraph 17.4(a), any attempt by
Licensee to transfer any of its rights or obligations under this Agreement,
whether by assignment, sublicense or otherwise, without having received the
prior written consent of Licensor, shall constitute an Event of Default, but
shall otherwise be null and void.
(b) Licensee may employ subcontractors with the prior approval of
Licensor for the manufacture of the Licensed Products. Prior to each
season Licensee shall advise Licensor of the names and addresses of the
subcontractors it intends to use and the products each such subcontractor
will be manufacturing. Licensor shall promptly advise Licensee if it
withholds its approval to the use of any such subcontractor by Licensee
but, irrespective of the grant of approval by Licensor, (i) the supervision
of production of Licensed Products shall remain under the control of
Licensee, (ii) Licensee shall maintain appropriate quality controls, (iii)
such subcontractors shall comply with the quality and other requirements of
Licensor consistent with the terms of this Agreement, including, but not
limited to, the execution by subcontractor of the Trademark and Design
Protection Agreement attached hereto as Schedule D and
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<PAGE>
made a part hereof.
17.5. Licensee shall comply with all laws, rules, regulations and
requirements of any governmental body which may be applicable to the
operations of Licensee contemplated hereby, including, without limitation,
as they relate to the manufacture, distribution, sale or promotion of Licensed
Products, notwithstanding the fact that Licensor may have approved such item
or conduct. Licensee shall advise Licensor in the event any Final Prototype
(as defined in the Design Agreement) does not comply with any such law, rule,
regulation or requirement.
17.6. This Agreement shall be construed in accordance with and governed by
the laws of the State of New York, applicable to contracts made and to be
wholly performed therein without regard to its conflicts of law rules.
17.7. The parties hereby consent to the jurisdiction of the United States
District Court for the Southern District of New York and of any of the courts
of the Southern District of New York and of any of the courts of the State of
New York located within the Southern District in any dispute arising under
this Agreement and agree further that service of process or notice in any such
action, suit or proceeding shall be effective if in writing and delivered as
provided in paragraph 17.1 hereof. Notwithstanding anything to the contrary
set forth herein, neither Polo Ralph Lauren Corporation nor any other general
or limited partner of Licensor shall be liable for any claim based on, arising
out of, or otherwise in respect of, this Agreement, and Licensee shall not
have nor claim to have any recourse for any such claim against any general
or limited partner of Licensor.
17.8. In the event either party hereto is delayed or hindered in or
prevented from the performance of any act required hereunder by reason of war,
revolution, insurrection, civil disorder, fire, flood, accident, explosion,
strikes, embargo, prohibition or substantial limitation on import or export
of (or unavailability from any source of) product or raw materials,
governmental orders or regulations or any other similar cause which is beyond
the control of such party hereto, the performance of such act shall be excused
for the period during which the cause of failure of performance exists
provided (i) such period shall in any event not extend beyond six (6) months
and shall not affect the running of the term of this Agreement; (ii) that no
such event shall excuse performance of a payment or other financial obligation
hereunder; and (iii) the excused party shall promptly notify the other in
writing advising of the cause for delay.
17.9. The provisions hereof are severable, and if any
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<PAGE>
provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall affect only such
provision, or part thereof in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction, or any other provision in
this Agreement in any jurisdiction. To the extent legally permissible, an
arrangement which reflects the original intent of the parties shall be
substituted for such invalid or unenforceable provision.
17.10. The paragraph headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Each party acknowledges and represents to the other that this
Agreement has been reviewed by its counsel and the provisions hereof shall be
construed without regard to which party prepared this Agreement.
17.11. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused the same to be executed by a duly authorized officer as of the day and
year first above written.
POLO RALPH LAUREN, L.P.
By: Polo Ralph Lauren Corporation,
General Partner
By: /s/ Michael Newman
SUN APPAREL, INC.
By: /s/ Eric Rothfeld
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Schedule A
LICENSED PRODUCTS
The term "Licensed Products" shall mean a men's jeans collection comprised of
the following products: (i) jean pants, jean jackets, jean shorts and jean
vests, (ii) coordinated outerwear, casual pants and shorts, t-shirts, woven
and knit shirts, sweaters, and hats and caps and (iii) such additional men's
products as may be designated by written agreement of Licensor and Licensee,
in all cases bearing the Trademark.
A women's jeans collection comprised of the following products: (i) jean pants,
jean jackets, jean shorts and jean vests, (ii) coordinated outerwear, casual
pants and shorts, t-shirts, woven and knit shirts, sweaters, hats and caps,
denim dresses and skirts, and solid chanbray dresses and skirts, and (iii)
such additional women's products as may be designated by written agreement of
Licensor and Licensee, in all cases (a) bearing the Trademark and (b) offered
as part of a women's jeans collection and not as individual or groups of items
of "better" or "bridge" apparel. Without limiting the generality of the
foregoing, not less than fifty percent (50%) of the SKUs of Licensed Products
offered each season shall be made substantially of denim, and Licensee shall
strive to achieve a retail presentation which is focused predominantly on the
denim portion of the line.
Schedule B
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TRADEMARK
POLO JEANS COMPANY BY RALPH LAUREN
POLO JEANS CO. BY RALPH LAUREN
POLO JEANS COMPANY RALPH LAUREN
POLO JEANS CO. RALPH LAUREN
Logos associated with the Trademark shall be added to this Schedule B as
approved by Licensor.
Licensor will apply to register the Trademark in at least one of the forms
in which it is finally adopted.
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Schedule C
LICENSOR AND LICENSEE OPTIONS
RELATING TO THE TERM OF THIS LICENSE AGREEMENT
As set forth in paragraph 8 of this Agreement, this Schedule C to this
Agreement sets forth the respective rights and obligations of Licensor and
Licensee with respect to the extension of the term of this Agreement beyond
the Initial Term.
1. Additional Definitions. The following words and phrases, unless the
context otherwise requires shall have the following meanings:
"Business" shall mean the entire business and assets which shall be owned
and operated by Licensee with respect to the design, manufacture, advertising,
promotion and sale of Licensed Products pursuant to the terms of this
Agreement, including but not limited to the following:
(a) All of the rights which Licensee has under this Agreement, including
but not limited to the License;
(b) Accounts receivable;
(c) Inventory;
(d) Furniture, fixtures, tools and equipment;
(e) Expendables, including but not limited to office supplies, sales
slips and other sales materials, bags and packaging materials,
brochures, fliers and other advertising and promotional materials
and copy;
(f) Prepaid fees, dues or subscriptions and prepaid compensation;
(g) All other assets relating to the design, manufacture, advertising,
promotion and sale of Licensed Products pursuant to the terms of this
Agreement, including without limitation all customer, mailing,
telephone and marketing lists, vendor warranties and other business
records;
(h) Goodwill and other intangible rights, whether acquired from
Licensor or from others (but excluding any value for the License
in excess of the present value of the projected sales, earnings
and cash flow relevant to the Going Concern value of the Business
assuming the continuation of the License through December
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31, 2030).
The Business shall also include all of the debts, liabilities, obligations or
claims owed by or due from Licensee incurred in the ordinary course and which
are necessary in connection with the Business, existing on the Closing Date
(as hereinafter defined) or arising thereafter with respect to events
occurring prior to the Closing Date, including but not limited to the
following:
(a) Trade and other accounts payable;
(b) Accrued expenses, including but not limited to accrued rent., accrued
compensation, pension plan liability, bonuses, retirement pay and
other fees and costs;
Liabilities included in the Business shall not include indebtedness to
individuals, banks or financial institutions (whether long- or short-term)
incurred other than in the ordinary course of Licensee's business hereunder,
guarantees of third-party obligations incurred other than in the ordinary
course of Licensee's business hereunder, any taxes owing or accrued prior to
the Closing Date incurred other than in the ordinary course of Licensee's
business hereunder or litigation claims. All of the liabilities included in
the Business and disclosed in writing to Licensor (but not those not so
included and disclosed) are hereinafter referred to as the "Liabilities."
Licensee will be required to supply Licensor with a schedule of Liabilities
within ten (10) days of receipt of a notice from Licensor that it is
exercising the Buyout Option.
"Purchase Price" shall mean an amount equal to eighty percent (80%) of the
fair value of the Business as a going concern as it exists on the Closing
Date ("Going Concern"), determined as set forth below.
The fair value of the Business as a Going Concern shall be determined in
the following manner:
(a) Each of Licensor and Licensee shall, within ten (10) days after
Licensor gives notice that it intends to exercise the Buyout Option,
select a reputable investment banker having a national reputation and
experienced in evaluating businesses as going concerns in connection
with public and private financings, mergers and acquisitions and in
representing companies engaged in national apparel manufacturing and
sales businesses in such transactions;
(b) Each such investment banker shall evaluate the Business as a going
concern, assuming the License is to continue
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("Going Concern") taking into account all factors which it considers
relevant to such an evaluation, including but not limited to the
following:
(i) Historical and projected sales and earnings;
(ii) Historical and projected cash flow;
(iii) The book value of the assets of the Business;
(iv) The value of the assets of the Business on a Going Concern basis;
(v) Multiples of sales and/or earnings used in evaluating companies
engaged in similar businesses for purposes of public or private
financings or for sale, acquisition or merger;
(vi) Relevant financial ratios, including but not limited to debt-
equity ratios, current ratios and return on investment;
(vii) Known business and economic risks and contingencies.
(viii) Liabilities to be assumed or not to be assumed.
In evaluating the Business the investment bankers shall not ascribe any
value over and above the Going Concern value of the Business to the License
assuming the continuation of the License through December 31, 2030. No
evaluation by an investment banker shall occur until Licensor shall have
received from Licensee a schedule of Liabilities and shall have confirmed
its undertaking to proceed with the purchase of the Business.
(c) Such investment bankers shall, within sixty (60) days after their
selection, attempt to agree as to the fair value of the Business as a Going
Concern on the Closing Date. Licensee shall make its books, records,
facilities and such other materials as may be necessary or desirable in
connection with such evaluation available to such investment bankers for
such purposes. In conducting their evaluation, such investment bankers shall
exercise such reasonable judgment and apply such standards as are customary
in the investment banking profession, recognizing that it is the desire of the
parties hereto to reach an accommodation with the least cost, effort and time
necessary.
(d) If such investment bankers are unable to so agree
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within such sixty (60) day period, then they shall, within fifteen (15) days
after the expiration of such sixty (60) day period, mutually appoint a third
investment banker of comparable stature and experience and each shall submit
to such third investment banker their respective analysis and conclusions as
to the fair value of the Business as a Going Concern. Within 30 days after
such third investment banker is provided with such material, such third
investment banker shall, based upon its own evaluation (following the
standards set forth herein) as well as the analysis and conclusions of the
other investment bankers, select one or the other of their evaluations, which
evaluation shall thereafter be deemed to be the fair value of the Business as
a Going Concern. Each of Licensor and Licensee shall be responsible for the
costs associated with the evaluation by the investment banker it selects, and
Licensor and Licensee shall share equally the costs associated with the
evaluation of a third investment banker, if necessary.
Eighty Percent (80%) of the fair value of the Business as a Going Concern
as determined pursuant to clauses (c) or (d) of this definition on the Closing
Date shall constitute the Purchase Price and shall be final and binding on the
parties hereto for the purposes of this Agreement.
2. Licensee Renewal Options.
a. Provided no Event of Default shall have occurred which is not timely
cured or waived, and Licensee has achieved the First Minimum Renewal Volume
(hereinafter defined) for the period January 1, 1999 to December 31, 1999,
Licensee shall have the option, upon providing notice to Licensor on or before
March 31, 2000, to renew this Agreement for an additional five (5) year period
(the "First Renewal Term") so as to expire on December 31, 2005, on the terms
and conditions set forth herein. The minimum aggregate Net Sales Price which
Licensee must achieve in connection with sales of Licensed Products during the
period from January 1, 1999 to December 31, 1999 (the "First Minimum Renewal
Volume") in order to be entitled to renew this Agreement for the First Renewal
Term as hereinabove provided shall be [OMITTED; MATERIAL FILED SEPARATELY WITH
SECURITIES AND EXCHANGE COMMISSION].
b. Provided no Event of Default shall have occurred which is not timely
cured or waived, and Licensee has achieved the Second Minimum Renewal Volume
(hereinafter defined) for the period January 1, 2004 to December 31, 2004,
Licensee shall have the option, upon providing notice to Licensor on or
before March 31, 2005, to renew this Agreement for an additional five (5)
year period (the "Second Renewal Term") so as to expire on December 31, 2010,
on the terms and conditions set forth herein. The minimum aggregate Net
Sales Price which Licensee must achieve in connection with sales of
Licensed Products during the period from January 1, 2004 to
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December 31, 2004 (the "Second Minimum Renewal Volume") in order to be
entitled to renew this Agreement for the Second Renewal Term as hereinabove
provided shall be [OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND
EXCHANGE COMMISSION].
c. Subject to Licensor's Buyout Option as set forth in paragraph 4 of this
Schedule C, provided (i) no Event of Default shall have occurred which is not
timely cured or waived and (ii) Licensee has achieved the Third Minimum Renewal
Volume (hereinafter defined) for the period January 1, 2009 to December 31,
2009, Licensee shall have the option (in addition to the Extension option set
forth in paragraph 3 of this Schedule C), upon providing notice to Licensor on
or before March 31, 2010, to renew this Agreement for an additional five (5)
year period (the "Third Renewal Term") so as to expire on December 31, 2015,
on the terms and conditions set forth herein; provided, however, that if
Licensee does not exercise the Extension Option, Licensee shall have no right
to renew the term of this Agreement beyond the Third Renewal Term. The minimum
aggregate Net Sales Price which Licensee must achieve in connection with sales
of Licensed Products during the period from January 1, 2009 to December 31,
2009 (the "Third Minimum Renewal Volume") in order to be entitled to renew
this Agreement for the Third Renewal Term as hereinabove provided shall be
[OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION].
d. Provided (i) no Event of Default shall have occurred which is not
timely cured or waived, (ii) Licensee timely exercised its Extension Option
as set forth in paragraph 3 of this Schedule C, and (iii) Licensee has
achieved the Fourth Minimum Renewal Volume (hereinafter defined) for the
period January 1, 2014 to December 31, 2014, Licensee shall have the option,
upon providing notice to Licensor on or before March 31, 2015, to renew this
Agreement for an additional five (5) year period (the "Fourth Renewal Term")
so as to expire on December 31, 2020, on the terms and conditions set forth
herein. The minimum aggregate Net Sales Price which Licensee must achieve in
connection with sales of Licensed Products during the period from January 1,
2014 to December 31, 2014 (the "Fourth Minimum Renewal Volume") in order to
be entitled to renew this Agreement for the Fourth Renewal Term as hereinabove
provided shall be [OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND
EXCHANGE COMMISSION].
e. Provided (i) no Event of Default shall have occurred which is not
timely cured or waived, (ii) Licensee timely exercised its Extension Option
and (iii) Licensee -has achieved the Fifth Minimum Renewal Volume (hereinafter
defined) for the period January 1, 2019 to December 31, 2019, Licensee shall
have the option, upon providing notice to Licensor on or before March 31,
2020, to renew this Agreement for an additional five (5) year period (the
"Fifth Renewal Term") so as to expire on December 31, 2025, on the terms
and conditions set forth herein. The minimum aggregate Net Sales
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Price which Licensee must achieve in connection with sales of Licensed
Products during the period from January 1, 2019 to December 31, 2019 (the
"Fifth Minimum Renewal Volume") in order to be entitled to renew this
Agreement for the Fifth Renewal Term as hereinabove provided shall be
[OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND EXCHANGE COMMISSION].
f. Provided (i) no Event of Default shall have occurred which is not
timely cured or waived, (ii) Licensee timely exercised its Extension Option
and (iii) Licensee has achieved the Sixth Minimum Renewal Volume (hereinafter
defined) for the period January 1, 2024 to December 31, 2024, Licensee shall
have the option, upon providing notice to Licensor on or before March 31, 2025,
to renew this Agreement for an additional five (5) year period (the "Sixth
Renewal Term") so as to expire on December 31, 2030, on the terms and
conditions set forth herein, except that Licensee shall have no further right
of renewal. The minimum aggregate Net Sales Price which Licensee must achieve
in connection with sales of Licensed Products during the period from January 1,
2024 to December 31, 2024 (the "Fifth Minimum Renewal Volume") in order to be
entitled to renew this Agreement for the Sixth Renewal Term as hereinabove
provided shall be [OMITTED; MATERIAL FILED SEPARATELY WITH SECURITIES AND
EXCHANGE COMMISSION].
g. As a condition to Licensee"s right to exercise each renewal option
under this paragraph 2, Licensee must, in each notice to Licensor that any
renewal option is being exercised, certify to Licensor that Licensee is not
in material default under its loan agreements with its principal lender(s).
3. Licensee's Extension Option. Subject to Licensor's Buyout Option as set
forth in paragraph 4 of this Schedule C, if (i) no Event of Default shall have
occurred and not been cured or waived and (ii) Licensee has achieved the Third
Minimum Renewal Volume, Licensee shall have the option to acquire the options
set forth in paragraphs 2(d) through 2(f) of this Schedule C (the "Extension
Option"). Licensee must give Licensor notice that it is exercising the
Extension Option in the same notice by which it gives Licensor notice that
Licensee is exercising its option to extend this Agreement f or the Third
Renewal Term, which notice must be given on or before March 31, 2010. If
Licensee does not, on or before March 31, 2010, give Licensor notice that is
exercising its option to extend this Agreement for the Third Renewal Term,
with or without exercising the Extension Option, the term of this Agreement
and the Design Agreement shall expire on December 31, 2010, and the provisions
of paragraphs 10 and 11 of this Agreement shall apply. If Licensee does
exercise the Extension Option, in consideration of the additional rights it
acquires thereby Licensee shall pay Licensor the Extension Option Price, as
hereinafter defined, on December 31, 2010 (the "Closing Date"). At Licensee's
option subject to the last sentence of clause (b) below, the "Extension
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Option Price" shall be either:
a. Twenty-Five Million Dollars ($25,000,000), payable by wire transfer,
certified or bank check on the Closing Date; or
b. A twenty percent (20%) equity interest in the Business. The term
"twenty percent (20%) equity interest in the Business" shall mean, if at
the time the Extension Option is exercised the Business is conducted in the
form of a corporation engaged solely in the conduct of the Business, twenty
percent (20%) of the issued and outstanding equity and voting shares of such
corporation, on a fully-diluted basis. In such event, Licensee shall deliver
to Licensor on the Closing Date stock certificates representing such shares,
free and clear of all liens and encumbrances, with all necessary stock
transfer tax stamps attached, accompanied by stock powers duly executed in
blank, and otherwise in form acceptable for transfer on the books of such
corporation. If at the time the Extension Option is exercised the Business
is conducted in any form other than as a corporation engaged solely in the
conduct of the Business, the term "twenty percent (20%) equity interest in
the Business" shall mean, and Licensee shall deliver in a form reasonably
acceptable to Licensor on the Closing Date, such other consideration (by way
of example, shares of a parent corporation, shares of a limited partnership,
etc.) ("Alternate Equity Interest") as the parties may mutually agree, within
thirty (30) days after Licensee gives notice that it is exercising the
Extension Option and intends to convey a twenty percent (20%) equity interest
in the Business, as represents the equivalent of twenty percent (20%) of the
issued and outstanding voting shares of a corporation engaged solely in the
conduct of the Business. If the parties do not timely agree on an Alternate
Equity Interest, the Extension Option Price shall be the amount set forth in
clause (a) of this paragraph 3.
4. Licensor's Buyout Option. Notwithstanding anything to the contrary
contained herein, Licensor shall have the option, by giving written notice
to Licensee on or before June 1, 2010 and regardless of whether Licensee has
given notice that it intends to exercise the Extension Option or the option
to renew for the Third Renewal Term, to purchase the Business from Licensee
(the "Buyout Option"). If Licensor exercises the Buyout Option, Licensee
shall have no further rights or obligations with respect to the Extension
Option. The Buyout Option shall be in addition to and shall not alter or
affect Licensor's rights to terminate this Agreement as a result of any Event
of Default, as otherwise provided in this Agreement. If Licensor gives notice
that it will exercise the Buyout Option, Licensor (or its designee) shall
purchase and Licensee shall sell the Business for the Purchase Price including
assumption of the Liabilities. The closing date for the purchase
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and sale of the Business shall be December 31, 2010 (or the last business
day of the year 2010 if prior thereto) (the "Closing Date"), it being mutually
agreed by Licensor and Licensee that time shall be of the essence. On the
Closing Date, Licensor shall deliver the Purchase Price to Licensee by wire
transfer or a certified or bank cashier's check, together with such
instruments of assumption of the Liabilities as counsel to the parties shall
mutually agree are appropriate to cause the Liabilities to be assumed by
Licensor (or its designee), and Licensee shall deliver to Licensor such
instruments of transfer as counsel to the parties shall mutually agree are
appropriate to effect the purchase and sale of the Business and to give
Licensor (or its designee) good title to all of the assets of the Business,
free and clear of all liens and encumbrances.
5. Good Faith Obligation; Dispute Resolution; Indemnification. Licensor and
Licensee shall act in good faith to consummate the transactions contemplated
by either the Extension Option or the Buyout Option, if either such option is
exercised, while minimizing any negative tax implications to either party. Any
dispute arising out of either party's exercise of such option shall be
submitted to binding arbitration pursuant to the rules of the American
Arbitration Association. If the Buyout Option is exercised, Licensee shall
indemnify and save and hold Licensor, the Design Partnership, Polo Ralph
Lauren Corporation and Ralph Lauren, individually, and their assignees,
directors, officers, servants, agents and employees, harmless from and against
any and all liability, claims, causes of action, suits, damages and expenses
(including reasonable attorneys' fees and expenses) arising out of or relating
to the conduct of the Business up to and including the Closing Date (other
than with respect to the disclosed Liabilities assumed), and Licensor shall
indemnify and save and hold Licensee and its assignees, directors, officers,
servants, agents and employees, harmless from and against any and all
liability, claims, causes of action, suits, damages and expenses (including
reasonable attorneys' fees) arising out of the conduct of the Business after
the Closing Date.
6. Closing Procedures. In the event Licensee exercises the Extension Option
and is conveying a twenty percent (20%) equity interest in the Business
pursuant to paragraph 3(b) of this Schedule C, or in the event Licensor
exercises the Buyout Option, at the closing on the Closing Date Licensee
shall deliver to Licensor an absolute assignment of the relevant instruments
of transfer and shall represent and warrant that as of the closing Date:
(a) that the shares of Licensee or the Alternate Equity
Interest is owned by the Licensee free and clear
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of all pledges, security interests, liens, charges, encumbrances and
claims of any nature whatsoever, except any encumbrances otherwise
agreed to in writing by Licensor;
(b) that Licensee has the full and complete right, power and authority
to make the assignment and that such assignment does not violate any
agreement or government order;
(c) that no litigation exists or threat of litigation has been made with
respect to the Business that has not been disclosed in writing to
Licensor; and
(d) that all financial information and materials delivered by Licensee
in connection with any calculation of the Purchase Price or the
Alternate Equity Interest were true and correct as of the date made.
Licensee shall further deliver a letter from seller's counsel reasonably
satisfactory to Licensor which contains such legal opinions as are customarily
given in connection with the sale of a business such as the Business and
subject to standard limitations and qualifications thereto.
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