<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-13082
KENNETH COLE PRODUCTIONS, INC.
(Exact name of registrant as specified in its charter)
New York 13-3131650
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
152 West 57th Street, New York, NY 10019
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 265-1500
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 of each of the issuer's classes of
common stock, as of the latest practicable date:
Class November 10, 1999
Class A Common Stock ( $.01 par value) 8,226,222
Class B Common Stock ( $.01 par value) 5,785,398
<PAGE>
Kenneth Cole Productions, Inc.
Index to Form 10-Q
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of September 30, 1999 and
December 31, 1998 .................................................... 3
Condensed Consolidated Statements of Income for the three and nine month
periods ended September 30, 1999 and 1998 ............................ 5
Condensed Consolidated Statement of Changes in Shareholders'Equity for the
nine month period ended September 30, 1999............................. 6
Condensed Consolidated Statements of Cash Flows for the nine month periods
ended September 30, 1999 and 1998...................................... 7
Notes to Condensed Consolidated Financial Statements................... 8
Item 2.Management's Discussion and Analysis of Financial Condition
and Results of Operations.............................................. 12
Item 3. Quantitative and Qualitative Disclosure about Market Risk........... 17
Part II. OTHER INFORMATION
Item 1.Legal Proceedings.................................................... 18
Item 2.Changes in Securities and Use of Proceeds........................... 18
Item 3.Defaults Upon Senior Securities..................................... 18
Item 4.Submission of Matters to a Vote of Security Holders................. 18
Item 5.Other Information................................................... 18
Item 6.Exhibits and Reports on Form 8-K.................................... 18
Signatures................................................................. 19
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
<TABLE>
Condensed Consolidated Balance Sheets
Part I. Financial Information
Item 1. Financial Statements
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash $ 36,616,000 $ 13,824,000
Due from factor 40,965,000 19,552,000
Accounts receivable, net 5,575,000 4,874,000
Inventories 39,160,000 32,957,000
Prepaid expenses and other current assets 782,000 1,735,000
Deferred income taxes 718,000 718,000
------------ ------------
Total current assets 123,816,000 73,660,000
Property and equipment - at cost, less 18,759,000 16,171,000
accumulated depreciation
Other assets:
Deposits and deferred income taxes 2,466,000 3,106,000
Deferred compensation plan assets 5,682,000 3,743,000
------------ ------------
Total other assets 8,148,000 6,849,000
------------ ------------
Total assets $150,723,000 $ 96,680,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (continued)
<CAPTION>
September 30, December 31,
1999 1998
(Unaudited)
<S> <C> <C>
Liabilities and shareholders' equity
Current liabilities:
Accounts payable $ 16,388,000 $ 10,644,000
Accrued expenses and other current liabilities 7,524,000 4,634,000
Income taxes payable 1,634,000 1,738,000
------------ ------------
Total current liabilities 25,546,000 17,016,000
Deferred compensation 5,682,000 3,743,000
Other 3,227,000 2,232,000
Commitments and contingencies
Shareholders' equity:
Preferred stock, par value $1.00, 1,000,000
shares authorized, none outstanding
Class A common stock, par value $.01,
20,000,000 shares authorized, 8,679,405
and 7,609,697 issued in 1999 and 1998 87,000 76,000
Class B common stock, par value $.01,
6,000,000 shares authorized, 5,785,398
outstanding in 1999 and 1998 58,000 58,000
Additional paid-in capital 52,530,000 22,284,000
Accumulated other comprehensive income 199,000 74,000
Retained earnings 72,533,000 56,165,000
------------ ------------
125,407,000 78,657,000
Class A Common Stock in treasury, at cost,
477,500 and 350,000 shares in 1999 and 1998 (9,139,000) (4,968,000)
------------ ------------
Total shareholders' equity 116,268,000 73,689,000
------------ ------------
Total liabilities and shareholders' equity $150,723,000 $ 96,680,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Condensed Consolidated Statements of Income
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net sales $ 81,327,000 $ 62,010,000 $207,129,000 $162,370,000
Licensing revenue 4,226,000 2,294,000 9,784,000 5,741,000
------------ ------------ ------------ ------------
Net revenue 85,553,000 64,304,000 216,913,000 168,111,000
Cost of goods sold 46,294,000 36,512,000 119,538,000 95,569,000
------------ ------------ ------------ ------------
Gross profit 39,259,000 27,792,000 97,375,000 72,542,000
Selling, general and
administrative expenses 26,026,000 18,415,000 70,445,000 52,498,000
------------ ------------ ------------ ------------
Operating income 13,233,000 9,377,000 26,930,000 20,044,000
Interest income, net (325,000) (96,000) (580,000) (328,000)
------------ ------------ ------------ ------------
Income before provision
for income taxes 13,558,000 9,473,000 27,510,000 20,372,000
Provision for
income taxes 5,491,000 3,742,000 11,142,000 8,047,000
------------ ------------ ------------ ------------
Net income $ 8,067,000 $ 5,731,000 $ 16,368,000 $ 12,325,000
============ ============ ============ ============
Earnings per share:
Basic $ .60 $ .43 $ 1.24 $ .93
Diluted $ .57 $ .42 $ 1.18 $ .90
Shares used to compute
earnings per share:
Basic 13,459,000 13,268,000 13,203,000 13,281,000
Diluted 14,140,000 13,633,000 13,848,000 13,742,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statement of Changes in Shareholders' Equity
(Unaudited)
<CAPTION>
Class A Class B
Common Stock Common Stock Additional
Number Number Paid-in
of shares Amount of shares Amount Capital
<S> <C> <C> <C> <C> <C>
Shareholders'equity
January 1, 1999 7,609,697 $ 76,000 5,785,398 $ 58,000 $22,284,000
Net income
Foreign currency
Translation
adjustments
Comprehensive income
Exercise of stock options,
including tax benefit 69,708 1,000 1,256,000
Purchase of 127,500 shares
of Class A Common Stock
Issuance of 1,000,000 shares
of Class A Common Stock 1,000,000 10,000 28,990,000
-----------------------------------------------------
Shareholders'equity
September 30, 1999 8,679,405 $ 87,000 5,785,398 $ 58,000 $52,530,000
=====================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Other Treasury Stock
Comprenhensive Retained Number
Income Earnings of shares Amount Total
<S> <C> <C> <C> <C> <C>
Shareholders' equity
January 1, 1999 $ 74,000 $56,165,000 (350,000) $(4,968,000) $ 73,689,000
Net income 16,368,000 16,368,000
Foreign currency
Translation
adjustments 125,000 125,000
------------
Comprehensive income 16,493,000
Exercise of stock options,
including tax benefit 1,257,000
Purchase of 127,500 shares
of Class A Common Stock (127,500) (4,171,000) (4,171,000)
Issuance of 1,000,000 shares
of Class A Common Stock 29,000,000
----------------------------------------------------------
Shareholders' equity
September 30,1999 $199,000 $72,533,000 (477,500) $(9,139,000) $116,268,000
==========================================================
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
Kenneth Cole Productions, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net income $ 16,368,000 $ 12,325,000
Adjustments to reconcile net income to net cash
Provided by (used in) operating activities:
Depreciation and amortization 2,548,000 2,171,000
Unrealized gain on deferred compensation (305,000) (27,000)
Provision for bad debts 905,000 100,000
Changes in assets and liabilities:
Increase in due from factors (21,413,000) (6,210,000)
Increase in accounts receivable (1,606,000) (1,211,000)
Increase in inventories (6,203,000) (13,034,000)
Decrease in prepaid expenses & other
current assets 953,000 421,000
Increase in other assets (868,000) (893,000)
Increase in accounts payable 5,744,000 2,346,000
Increase in income taxes payable 319,000 1,893,000
Increase in accrued expenses and other
current liabilities 2,880,000 30,000
Increase in other non-current liabilities 3,070,000 1,246,000
------------ ------------
Net cash provided by (used in) operating activities 2,392,000 (843,000)
Cash flows from investing activities:
Acquisition of property and equipment, net (5,262,000) (4,162,000)
------------ ------------
Net cash used in investing activities (5,262,000) (4,162,000)
Cash flows from financing activities:
Proceeds from revolving line of credit, net 998,000
Proceeds from exercise of stock options 834,000 1,500,000
Proceeds from issuance of stock 29,000,000
Purchase of treasury stock (4,171,000) (4,968,000)
Principal payments on capital lease obligations (126,000)
------------ ------------
Net cash provided by (used in) financing activities 25,537,000 (2,470,000)
Effect of exchange rate changes on cash 125,000 (14,000)
------------ ------------
Net increase (decrease) in cash 22,792,000 (7,489,000)
Cash, beginning of period 13,824,000 8,803,000
------------ ------------
Cash, end of period $ 36,616,000 $ 1,314,000
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 22,000 $ 23,000
Income taxes $ 10,821,000 $ 6,154,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
The accompanying unaudited consolidated financial statements
have been prepared by Kenneth Cole Productions, Inc. (the "Company")
in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all
of the information and footnotes required by generally accepted
accounting principles for complete financial statements. Certain
items contained in these financial statements are based on estimates.
In the opinion of management, the accompanying unaudited financial
statements reflect all adjustments, consisting of only normal and
recurring adjustments, necessary for a fair presentation of the
financial position and results of operations and cash flows for the
periods presented. All significant intercompany transactions have
been eliminated.
Operating results for the nine months ended September 30, 1999
are not necessarily indicative of the results that may be expected
for the year ended December 31, 1999. These unaudited financial
statements should be read in conjunction with the financial
statements and footnotes included in the Company's annual report on
Form 10-K for the year ended December 31, 1998.
The consolidated balance sheet at December 31, 1998, as
presented, was derived from the audited financial statements as of
December 31, 1998 included in the Company's Form 10-K.
2. Comprehensive Income
Comprehensive income amounted to $16,493,000 and $12,311,000 for
the nine month periods ended September 30, 1999 and 1998,
respectively. Comprehensive income for the three month periods ended
September 30, 1999 and 1998 amounted to $8,063,000 and $5,743,000,
respectively.
3. Derivative Instruments and Hedging Activities
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and for Hedging Activities" ("SFAS 133") which
the Company expects to adopt on January 1, 2001. This Statement
requires all derivatives to be recorded in the balance sheet at fair
value and establishes special accounting for three different types of
hedges. The Company, based on its current hedging activities, does
not expect the adoption of SFAS 133 to have a material effect on the
earnings and financial position of the Company.
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
4. Segment Information
The Company has three reportable segments: Wholesale, Consumer Direct
and Licensing. The Company's reportable segments are business units
that offer different products and services or similar products
through different channels of distribution. The wholesale segment is
comprised of design, sourcing and marketing a broad range of quality
footwear and handbags for wholesale distribution. The consumer direct
segment reflects the operations of all businesses doing business
directly with retail consumers, including the Company's full price
retail stores, outlet stores, catalog and e-commerce. The licensing
segment consists of the operations of licensing the Company's
trademarks for specific products in specified geographic regions.
The Company evaluates segment performance and allocates resources to
segments based on segment income before taxes. Intercompany profit
on intersegment sales between wholesale and Consumer Direct is
eliminated in consolidation.
<TABLE>
Financial information of the Company's reportable segments is as
follows (in thousands):
<CAPTION>
Three Months Ended
September 30, 1999
Consumer
Wholesale Direct Licensing Totals
<S> <C> <C> <C> <C>
Revenues from external customers 56,056 25,280 4,217 85,553
Intersegment revenues 7,361 7,361
Segment income before provision
for Income taxes 9,716 3,787 3,586 17,089
Segment assets 117,593 32,880 2,293 152,766
<CAPTION>
Nine Months Ended
September 30, 1999
Consumer
Wholesale Direct Licensing Totals
<S> <C> <C> <C> <C>
Revenues from external customers 137,809 69,344 9,760 216,913
Intersegment revenues 18,016 18,016
Segment income before provision
for Income taxes 18,351 10,102 8,168 36,621
Segment assets
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998
Consumer
Wholesale Direct Licensing Totals
<S> <C> <C> <C> <C>
Revenues from external customers 46,955 15,055 2,294 64,304
Intersegment revenues 5,143 5,143
Segment income before provision
for Income taxes 8,315 987 2,178 11,480
Segment assets 67,581 25,632 1,445 94,658
<CAPTION>
Nine Months Ended
September 30, 1999
Consumer
Wholesale Direct Licensing Totals
<S> <C> <C> <C> <C>
Revenues from external customers 119,105 43,265 5,741 168,111
Intersegment revenues 14,977 14,977
Segment income before provision
for Income taxes 19,105 2,383 4,846 26,334
Segment assets
</TABLE)
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
</TABLE>
<TABLE>
The reconciliation of the Company's reportable segment revenues,
profit and loss, and assets are as follows (in thousands):
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues
Revenues for external
customers $ 85,553 $ 64,304 $ 216,913 $ 168,111
Intersegment revenues 7,361 5,143 18,016 14,977
Elimination of intersegment
revenues (7,361) (5,143) (18,016) (14,977)
---------- ---------- ---------- ----------
Total consolidated
revenues $ 85,553 $ 64,304 $ 216,913 $ 168,111
========== ========== ========== ==========
Income
Total profit for
reportable segments $ 17,089 $ 11,480 $ 36,621 $ 26,334
Elimination of intersegment
profit and unallocated
corporate overhead (3,531) (2,007) (9,111) (5,962)
---------- ---------- ---------- ----------
Total income before
income taxes $ 13,558 $ 9,473 $ 27,510 $ 20,372
========== ========== ========== ==========
Assets
Total assets for
reportable segments 152,766 94,658
Elimination of inventory
profit in consolidation (2,043) (1,387)
---------- ----------
Total consolidated assets$ 150,723 $ 93,271
========== ==========
</TABLE>
<PAGE>
Kenneth Cole Productions, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
5. Shareholders' Equity
On July 20, 1999, the Company and Liz Claiborne entered into
a multi-brand initiative to launch Kenneth Cole Productions, Inc.
into the women's apparel market under an exclusive womenswear
license agreement. Simultaneously therewith, Liz Claiborne agreed
to purchase one million shares of Kenneth Cole Productions, Inc.
Class A Common Stock, par value $.01 per share, at a price of
$29.00 per share. The shares were issued on August 23, 1999.
In August 1999, the Board of Directors of the Company
authorized management to repurchase, from time to time, up to one
million shares of the Company's Class A Common Stock.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth the Company's condensed
consolidated statements of income in thousands of dollars and as
a percentage of net revenue for the three and nine months ended
September 30, 1999 and September 30, 1998.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $81,327 95.1% $62,010 96.4% $207,129 95.5% $162,370 96.6%
Licensing
revenue 4,226 4.9 2,294 3.6 9,784 4.5 5,741 3.4
Net revenue 85,553 100.0 64,304 100.0 216,913 100.0 168,111 100.0
Gross profit 39,259 45.9 27,792 43.2 97,375 44.9 72,542 43.1
Selling, general
& administrative
expenses 26,026 30.4 18,415 28.6 70,445 32.5 52,498 31.2
Operating
income 13,233 15.5 9,377 14.6 26,930 12.4 20,044 11.9
Interest
income, net (325) (.3) (96) (.1) (580) (.3) (328) (.2)
Income before
income taxes 13,558 15.8 9,473 14.7 27,510 12.7 20,372 12.1
Income tax
expense 5,491 6.4 3,742 5.8 11,142 5.1 8,047 4.8
Net income 8,067 9.4 5,731 8.9 16,368 7.6 12,325 7.3
</TABLE>
Three Months Ended September 30,1999 Compared to Three Months
Ended September 30,1998
Consolidated net revenues increased 33.1% to $85.6 million
for the three months ended September 30, 1999 compared to $64.3
million for the three months ended September 30, 1998.
Wholesale net sales (including sales to its Consumer Direct
business segment) increased $11.3 million or 21.7% for the three
months ended September 30, 1999 to $63.4 million from $52.1
million for the three months ended September 30, 1998. This
increase is primarily attributable to the further increase in
sales of men's footwear and renewed momentum in women's footwear
as evidenced by increased sales in all three women's footwear
brands, Kenneth Cole New York, Reaction Kenneth Cole and
Unlisted.com.
Net sales in the Company's Consumer Direct segment increased
$10.2 million or 67.9% to $25.3 million for the three months
ended September 30, 1999 compared to $15.1 million for the three
months ended September 30, 1998. The improvement in net sales is
due to the increase in number of stores as well as comparable
stores sales increases of 27.7%. Retail stores opened subsequent
to September 30, 1998 contributed $7.0 million of net sales
during the three-month period ended September 30, 1999. The
Company believes that its retail stores seamlessly showcase both
Company and licensee products and that this comprehensive
presentation reinforces the Kenneth Cole lifestyle brand, thereby
increasing consumer demand and awareness.
<PAGE>
Licensing revenue increased 84.2% to $4.2 million for the
three months ended September 30, 1999 from $2.3 million for the
three months ended September 30, 1998. This increase primarily
reflects the incremental revenues associated with increased sales
of existing licensed products. Licensing revenue increased as a
percentage of net revenues to 4.9% for the three months ended
September 30, 1999 compared to 3.6% for the three months ended
September 30, 1998.
Consolidated gross profit as a percentage of net revenue
increased to 45.9% for the three months ended September 30, 1999
from 43.2% for the comparable period last year. This increase is
primarily due to higher gross profit percentages in wholesale
resulting from better performing women's footwear, and the
increased proportion of revenue from the Consumer Direct and
Licensing segments, each of which produces substantially higher
margins than the Company's wholesale gross profit percentages.
Net revenues from the Consumer Direct segment were 29.5% of net
consolidated revenue for the three months ended Sept 30, 1999
compared to 23.4% for the three months ended September 30, 1998.
Selling, general and administrative expenses, including
shipping and warehousing, increased 41.3% to $26.0 million (or
30.4% of net revenue) for the three months ended September 30,
1999 from $18.4 million (or 28.6% of net revenue) for the three
months ended September 30, 1998. The increase as a percentage of
net revenue continues to be the result of the increase in retail
and outlet stores, which carry a higher expense level as a
percentage of sales than that of the wholesale segment. In
addition, the Company increased its expenditures on technology to
implement new financial and wholesale distribution systems as
well as to initiate significant enhancements to its e-commerce
site.
Interest income increased to $325,000 from $96,000 in the
comparable prior year period. The increase is the result of
higher average cash balances, primarily due to the proceeds
received from the Company selling 1,000,000 shares of its Class A
Common Stock to Liz Claiborne.
The Company's effective tax rate has increased to 40.5% for
the three month period ended September 30, 1999 from 39.5% in the
corresponding period last year. The increase is due to the
relative level of earnings in the various state and local taxing
jurisdictions to which the Company's earnings are subject.
As a result of the foregoing, operating income increased
41.1% for the three months ended September 30, 1999 to $13.2
million (15.5% of net revenue) from $9.4 million (14.6% of net
revenue) for the three months ended September 30, 1998.
Nine months Ended September 30, 1999 Compared to Nine Months
Ended September 30, 1998
Consolidated net revenue increased 29.0% to $216.9 million
for the nine months ended September 30, 1999 compared to $168.1
million for the nine months ended September 30, 1998. This
increase is primarily due to volume increases in each of the
Company's operating segments: Wholesale, Consumer Direct and
Licensing.
Wholesale net sales (including sales to its Consumer Direct
business segment) increased $21.7 million or 16.2% for the nine
months ended September 30, 1999 to $155.8 million from $134.1
million for the nine months ended September 30, 1998. This
increase is primarily attributable to an increase in sales of
men's footwear, including the recently introduced Unlisted mens
product lines, Kenneth Cole Reaction women's footwear and
handbags. The overall increase is due to increased sales by new
and existing customers due to a continued growing consumer
acceptance of Kenneth Cole New York as a premier lifestyle brand.
Net sales in the Company's Consumer Direct segment increased
$26.1 million or 60.2% to $69.3 million for the nine months ended
September 30, 1999 compared to $43.2 million for the nine months
ended September 30, 1998. The improvement in net sales is due to
the increase in the number of stores as well as comparable store
sales increases of 21.6%. Retail stores opened subsequent to
September 30, 1998 contributed $18.7 million of net sales during
the nine-month period ended September 30, 1999.
Licensing revenue increased 70.4% to $9.8 million for the
nine months ended September 30, 1999 from $5.7 million for the
nine months ended September 30, 1998. This increase primarily
reflects the incremental revenues in sales of existing licensees.
Licensing revenue increased as a percentage of the net revenues
to 4.5% of the nine months ended September 30, 1999 compared to
3.4% for the nine months ended September 30, 1998.
Consolidated gross profit as a percentage of net revenue
increased to 44.9% for the nine months ended September 30, 1999
from 43.1% for the comparable period last year. This increase is
due to the increased proportion of revenue from the Consumer
Direct and Licensing segments, each of which produces
substantially higher margins than the Company's wholesale gross
profit percentages. Net revenue from the Consumer Direct segment
were 32.0% of net consolidated revenue for the nine months ended
September 30, 1999 compared to 25.7% for the nine months ended
September 30, 1998.
Selling, general and administrative expenses, including
shipping and warehousing, increased 34.2% to $70.4 million (or
32.5% of net revenue) for the nine months ended September 30,
1999 from the $52.5 million (or 31.2% of net revenue) for the
nine months ended September 30, 1998. The increase was primarily
attributable to the Company's marketing and public relations
expenditures to build the Company's brands and promote the
Kenneth Cole lifestyle image, the expansion of the Company's
Consumer Direct segment, and the Company's ongoing efforts to
enhance its information systems and web-sites. The increase as a
percentage of net revenue is due to the growth in the number of
the Company's retail and outlet stores, which operate at a higher
cost structure than the wholesale segment.
The Company's effective tax rate increased to 40.5% for the
nine month period ended September 30, 1999 from 39.5% in the
corresponding period last year. The increase is due to the
relative level of earnings in the various state and local taxing
jurisdictions to which the Company's earnings are subject.
As a result of the foregoing, operating income increased
34.4% for the nine months ended September 30, 1999 to $26.9
million (12.4% of net revenue) from $20.0 million (11.9% of net
revenue) for the nine months ended September 30, 1998.
<PAGE>
Liquidity and Capital Resources
The Company uses cash from operations and borrowings under
its line of credit as the primary sources of financing for its
expansion and seasonal requirements. Cash requirements vary from
time to time as a result of the timing of the receipt of
merchandise from suppliers, the delivery by the Company of
merchandise to its customers, and the level of accounts
receivable and due from factors balances. Cash provided by
operating activities was $1.9 million for the nine months ended
September 30, 1999. Cash used in operating activities was $0.8
million for the nine months ended September 30, 1998. The
increase in cash flows provided by operating activities is
primarily attributable to the timing of payment of trade accounts
payable and the increase in net income offset by increases in
receivable balances. At September 30, 1999 and December 31, 1998
working capital was $98.3 million and $56.6 million,
respectively.
The Company currently has a line of credit, which allows for
borrowings and letters of credit up to a maximum of $25.0 million
to finance working capital requirements. Open letters of credit
in the amount of $1.2 million reduced the amount available under
the line of credit from $25.0 million to $23.8 million at
September 30, 1999.
Capital expenditures totaled approximately $5.3 million and
$4.2 million for the nine months ended September 30, 1999 and
1998, respectively. Expenditures on furniture, fixtures and
leasehold improvements for new retail store openings and
expansions were approximately $4.7 million and $3.2 million for
the nine months ended September 30, 1999 and September 30, 1998,
respectively. The remaining expenditures were primarily for
information systems and equipment for the Company's, distribution
facilities and warehouse.
The Company entered into a 15-year lease, which over the
next five year period, will provide the Company with
approximately 120,000 square feet of office space, enabling it to
relocate its corporate headquarters within New York City. The
Company is currently evaluating the capital expenditure
requirements associated with this move.
The Company believes that it will be able to satisfy its
cash requirements for the next year, including requirements for
its retail expansion, new corporate office space and information
systems improvements, primarily with cash flow from operations,
current cash levels and, if necessary, with borrowings under its
line of credit.
Year 2000
The Year 2000 problem is the result of computer
programs being written using two digits rather than four to
define the applicable year. Certain information technology
systems and their associated software may recognize a date using
"00" as the year 1900 rather than the year 2000, which could
result in miscalculations, system failures or other computer
errors. In addition, like every other business, the Company is
at risk from Year 2000 failures on the part of its major business
suppliers, distributors, licensees as well as potential failures
from public and private infrastructure service providers. System
failures resulting from the Year 2000 problem could adversely
effect operations and financial results in all of the Company's
business segments.
The Company has been undergoing a comprehensive program to
ensure that its systems will recognize and process transactions
for the year 2000 and beyond. The Company believes that it has
implemented successfully the systems and programming changes
necessary to address year 2000 issues with respect to its
internal systems. However, in implementing the new systems,
which went live in August, it resulted in certain disruptions in
the Company's normal distribution operations. Management
believes that it has adequately addressed the associated issues
with this implementation.
Based upon its efforts to date, the Company believes that
all of its critical information technology and non-information
technology will remain up and running beyond January 1, 2000.
Accordingly, the Company does not currently anticipate that
internal systems failures will result in any material adverse
effect to its operations or financial condition. The Company is
addressing contingency plans in order to minimize the potential
disruption of business operations that may result if the Company,
its vendors or customers fail to become year 2000 compliant.
In addition to addressing the Company's internal systems and
equipment, the Company is communicating with significant
suppliers, vendors and other third parties with whom the Company
has a significant business relationship with, to determine their
state of readiness with respect to Year 2000. To date, the
Company is not aware of any third party with a Year 2000 issue
that would materially impact the Company's results of operations.
However, failure of significant suppliers, vendors or other third
parties to timely address and remedy Year 2000 problems or to
develop and effect appropriate contingency plans could have a
material adverse effect on the Company's operations. Various
fallback plans are being considered, including the use of
electronic spreadsheets and manual work-arounds (e.g., written
purchase orders and bulk distributions). In addition, the
Company believes that the geographically disbursed nature of its
business and its large supplier and vendor base mitigates such
potential adverse effects.
The Company does not expect the costs associated with its
Year 2000 efforts to be material to the Company's financial
condition or results of operations. The total cost of purchasing
and implementing the new information systems, including
addressing the Year 2000 problem is estimated at $2.0 to $2.5
million, of which approximately $800,000 has been expensed to
date and $1.2 million capitalized on new software and hardware.
The Company's cost estimates do not include costs associated with
addressing and resolving issues as a result of the failure of
third parties to become Year 2000 compliant.
The foregoing commentary should be considered to fall within
the coverage of the "Safe Harbor Statement" under the Private
Securities Litigation reform Act of 1995 included in this report.
Safe Harbor Statement under the Private Securities Litigation
Reform Act of 1995
Important Factors Relating to Forward Looking Statements
This report contains certain forward looking statements, as
defined in The Private Securities Litigation Reform Act of 1995,
with respect to cash flows from operation, market risks and Year
2000 issues. The forward-looking statements contained in this
Form 10-Q were prepared by management and are qualified by, and
subject to, significant business, economic, competitive,
regulatory and other uncertainties and contingencies, all of
which are difficult or impossible to predict and many of which
are beyond the control of the Company. Accordingly, there can
be no assurance that the forward-looking statements contained in
this Form 10-Q will be realized or that actual results will not
be significantly higher or lower.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
The Company does not believe it has a material exposure to
market risk. The Company is primarily exposed to currency
exchange-rate risks with respect to its inventory transactions
denominated in Italian Lira and Spanish Pesetas, both of which
have been converted to the Euro effective January 1, 1999.
Business activities in various currencies expose the Company to
the risk that the eventual net dollar cash flows from
transactions with foreign suppliers denominated in foreign
currencies may be adversely affected by changes in currency
rates. The Company manages these risks by utilizing foreign
exchange forward contracts to fix its costs on future purchases.
The Company does not enter into foreign currency transactions for
speculative purposes. The Company's earnings may also be
affected by changes in short-term interest rates as a result of
borrowings under its line of credit facility. At the Company's
borrowing levels, a two percent increase in interest rates
affecting the Company's credit facility would not have a material
effect on the Company's projected 1999 and 1998 net income.
Part II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
Pursuant to the Common Stock Purchase Agreement, dated July 20,
1999, between Liz Claiborne Inc. ("Liz Claiborne") and the
Company, on August 23, 1999, the Company issued 1,000,000 shares
of its Class A Common Stock, $.01 par value, at $29.00 per share.
The offer and sale of the Class A Common Stock was exempt from
registration under the Securities Act of 1933, as amended (the
"Securities Act") pursuant to Section 4(2) of the Securities Act.
With respect to the exemption under Section 4(2), the Company
relied on representations by Liz Claiborne as to its investment
intent, investment experience, and accredited investor status.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
10.01 Common Stock Purchase Agreement, dated July 20,
1999, between Liz Claiborne inc. and Kenneth Cole
Productions, Inc.
10.02 Registration Rights Agreement, dated July 20,
1999, between Liz Claiborne Inc. and Kenneth Cole
Productions, Inc.
10.03 License Agreement, dated July 20, 1999, by and
between L.C.K.L., LLC. and K.C.P.L., Inc.
(Portions of this exhibit
have been omitted pursuant to a request
for confidential treatment and been filed
separately with the Securities and
Exchange Commission. Such portions are
designated by a " * ".
27.01 Financial Data Schedule.
(b) Reports on Form 8-K: The Company filed a Form 8-K on
July 29, 1999 announcing that it had entered into an exclusive
women's wear license arrangement with Liz Claiborne. In
addition, Liz Claiborne agreed to purchase 1,000,000 shares of
Kenneth Cole Productions, inc. Class A Common Stock, $.01 par
value, at a price of $29.00 per share.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Kenneth Cole Productions, Inc.
Registrant
November 12, 1999 /s/ STANLEY A. MAYER
Stanley A. Mayer
Executive Vice President and
Chief Financial Officer
<PAGE>
INDEX OF EXHIBITS
Sequential
Exhibit Number Description Page No.
10.01 Common Stock Purchase Agreement, dated July 20, 1999,
between Liz Claiborne Inc. and Kenneth Cole
Productions, Inc. 21
10.02 Registration Rights Agreement, dated July 20, 1999,
between Liz Claiborne Inc. and Kenneth Cole Productions, Inc. 47
10.03 License Agreement, dated July 20, 1999, by and between
L.C.K.L., LLC and K.C.P.L., Inc. . (Portions of this
exhibit have been omitted pursuant to a request for
confidential treatment and been filed separately with
the Securities and Exchange Commission. Such portions
are designated by a " * ". 74
27.01 Financial Data Schedule 117
<PAGE>
EXHIBIT 10.01
COMMON STOCK PURCHASE AGREEMENT
between
KENNETH COLE PRODUCTIONS, INC.
and
LIZ CLAIBORNE, INC.
Dated as of July 20, 1999
TABLE OF CONTENTS
Page
ARTICLE I. AGREEMENT TO PURCHASE AND SELL COMMON STOCK
1.1. AGREEMENT TO PURCHASE AND SELL COMMON STOCK 1
ARTICLE II. CLOSING DATE; DELIVERY
2.1. CLOSING DATE 1
2.2. DELIVERY 1
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1. CORPORATE EXISTENCE AND POWER 2
3.2. AUTHORIZATION; CONTRAVENTION 2
3.3. SEC DOCUMENTS 3
3.4. APPROVALS 3
3.5. BINDING EFFECT 3
3.6. FINANCIAL INFORMATION 4
3.7. ABSENCE OF CERTAIN CHANGES OR EVENTS 4
3.8. LITIGATION 4
3.9. CAPITALIZATION 4
3.10. NO BROKER 5
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1. CORPORATE EXISTENCE AND POWER 5
4.2. AUTHORIZATION; CONTRAVENTION 5
4.3. APPROVALS 5
4.4. BINDING EFFECT 6
4.5. INVESTMENT 6
4.6. DISCLOSURE OF INFORMATION 6
4.7. INVESTMENT EXPERIENCE 6
4.8. ACCREDITED INVESTOR STATUS 6
4.9. RESTRICTED SECURITIES 6
4.10. INVESTIGATION 6
4.11. NO BROKER 6
ARTICLE V. CONDITIONS TO OBLIGATION OF THE PURCHASER
5.1. REPRESENTATIONS AND WARRANTIES 7
5.2. COVENANTS 7
5.3. HSR ACT 7
5.4. NO ORDER PENDING 7
5.5. NO LAW PROHIBITING OR RESTRICTING SALE OF THE SHARES 7
5.6. REGISTRATION RIGHTS AGREEMENT 7
5.7. LICENSE AGREEMENT 7
5.8. PRINCIPAL STOCKHOLDER AGREEMENT 7
ARTICLE VI. CONDITIONS TO OBLIGATION OF THE COMPANY
6.1. REPRESENTATIONS AND WARRANTIES 8
6.2. COVENANTS 8
6.3. HSR ACT 8
6.4. NO ORDER PENDING 8
6.5. NO LAW PROHIBITING OR RESTRICTING THE SALE OF THE SHARES8
6.6. REGISTRATION RIGHTS AGREEMENT 8
6.7. LICENSE AGREEMENT 8
ARTICLE VII. COVENANTS OF THE PURCHASER AND THE COMPANY
7.1. PURCHASE RESTRICTIONS 8
7.2. SALE RESTRICTIONS 8
7.3. OTHER RESTRICTIONS 10
7.4. RIGHT OF FIRST OFFER 10
7.5. TERMINATION OF CERTAIN RESTRICTIONS 12
ARTICLE VIII. MISCELLANEOUS
8.1. CERTAIN DEFINITIONS 12
8.2. FURTHER ASSURANCES 14
8.3. GOVERNING LAW 15
8.4. SURVIVAL; TERMINATION OF COVENANTS 15
8.5. INDEMNIFICATION 15
8.6. SUCCESSORS AND ASSIGNS 16
8.7. AMENDMENTS; ETC 16
8.8. ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES 16
8.9. NOTICES 16
8.10. FEES, COSTS AND EXPENSES 17
8.11. TERMINATION 17
8.12. SEVERABILITY OF PROVISIONS 18
8.13. PUBLICITY 18
8.14. HEADINGS AND REFERENCES 18
8.15. COUNTERPARTS; EFFECTIVENESS 18
8.16. EXCLUSIVE JURISDICTION 18
8.17. WAIVER OF JURY TRIAL 18
COMMON STOCK PURCHASE AGREEMENT
COMMON STOCK PURCHASE AGREEMENT, dated as of July 20,
1999 (this "Agreement"), between LIZ CLAIBORNE, INC., a Delaware
corporation (the "Purchaser"), and KENNETH COLE PRODUCTIONS,
INC., a New York corporation (the "Company").
W I T N E S S E T H:
WHEREAS, the Company desires to sell to the Purchaser,
and the Purchaser desires to purchase from the Company, 1,000,000
shares of the Company's Class A Common Stock, $0.01 par value per
share (the "Common Stock"), on the terms and subject to the
conditions set forth in this Agreement; and
WHEREAS, concurrently herewith, the Company and the
Purchaser are entering into (1) a Registration Rights Agreement,
dated as of the date hereof (the "Registration Rights
Agreement"), to provide for the registration under the Securities
Act of 1933, as amended (the "Securities Act"), of the
disposition of the shares of Common Stock purchased under this
Agreement pursuant to the terms thereof; and (2) a License
Agreement, dated as of the date hereof (the "License Agreement"),
to provide for the manufacture, advertising, merchandising,
marketing, distribution and sales of women's sportswear products
by the Purchaser and its Affiliates under marks of the Company
and its Affiliates in certain parts of the world;
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual covenants and agreements herein
contained, and intending to be legally bound hereby, the Company
and the Purchaser hereby agree as follows:
ARTICLE I.
AGREEMENT TO PURCHASE AND SELL COMMON STOCK
1.1. Agreement to Purchase and Sell Common Stock. Upon the
terms and subject to the conditions of this Agreement, the
Company hereby agrees to sell to the Purchaser at the Closing (as
defined in Section 2.1), and the Purchaser agrees to purchase
from the Company at the Closing, 1,000,000 newly issued shares
(each, a "Share" and collectively, the "Shares") of Common Stock
at $29 per Share in cash for an aggregate purchase price of
$29,000,000 (the "Purchase Price").
ARTICLE II.
CLOSING DATE; DELIVERY
2.1. Closing Date. The closing of the purchase and sale of the
Shares hereunder (the "Closing") shall be held at the offices of
Willkie Farr & Gallagher, 787 Seventh Avenue, New York, NY 10019,
at 10:00 a.m. on the third business day after the satisfaction or
waiver of the conditions set forth in Articles V and VI, or at
such other time and place as the Company and the Purchaser
mutually agree.
2.2. Delivery. At the Closing, the Company will deliver to the
Purchaser (or a wholly owned subsidiary of Purchaser designated
by Purchaser) a certificate or certificates representing the
Shares against payment of the aggregate Purchase Price by wire
transfer of immediately available funds to an account designated
by the Company. Purchaser shall cause any such subsidiary so
designated by the Purchaser to agree in writing to be bound to
the terms of this Agreement and, thereafter, such subsidiary
shall have the rights and obligations of the Purchaser hereunder;
provided, however, that any such designation shall in no way
relieve the Purchaser of its obligations under this Agreement.
The certificate or certificates representing the Shares shall be
subject to a legend restricting transfer under the Securities Act
and referring to restrictions on transfer herein, such legend to
be substantially as follows:
"The shares represented by this certificate
have been acquired for investment and have not
been registered under the Securities Act of 1933,
as amended. Such shares may not be sold or
transferred in the absence of such registration or
an opinion of counsel reasonably satisfactory to
the Company as to the availability of an exemption
from registration.
The shares represented by this certificate
are subject to restrictions on transfer, including
any sale, pledge or other hypothecation, set forth
in an agreement dated as of July 20, 1999, between
the Company and Liz Claiborne, Inc., a copy of
which agreement may be obtained at no cost by
written request made by the holder of record of
this certificate to the secretary of the Company
at the Company's principal executive offices."
The Company agrees to remove from the Shares (1) the
legend set forth in the second preceding paragraph in connection
with a transfer pursuant to an effective Registration Statement
(as defined in the Registration Rights Agreement) or upon receipt
of an opinion of counsel in form and substance reasonably
satisfactory to the Company that the Shares are eligible for
transfer without registration under the Securities Act, and (2)
the legend set forth in the immediately preceding paragraph at
such time as the Shares may be transferred in compliance with
Article VII.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the
Purchaser as follows:
3.1. Corporate Existence and Power. The Company (1) is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of New York, (2) has all
necessary corporate power and authority and all material
licenses, authorizations, consents and approvals required to own,
lease, license or use its properties now owned, leased, licensed
or used and proposed to be owned, leased, licensed or used and to
carry on its business as now conducted and proposed to be
conducted, (3) is duly qualified as a foreign corporation under
the laws of each jurisdiction in which qualification is required
either to own, lease, license or use its properties now owned,
leased, licensed or used or to carry on its business as now
conducted, except where the failure to effect or obtain such
qualification, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect (as
defined in Section 8.1) on the Company, and (4) has all necessary
corporate power and authority to execute and deliver this
Agreement, the Registration Rights Agreement and the License
Agreement (collectively, the "Transaction Documents") and to
perform its obligations hereunder and thereunder.
3.2. Authorization; Contravention. The execution and delivery
by the Company of the Transaction Documents and the performance
by the Company of its obligations under the Transaction
Documents, and the authorization, sale, issuance and delivery of
the Shares hereunder, have been duly authorized by all necessary
corporate action and do not and will not contravene, violate,
result in a breach of or constitute a default under, (1) its
certificate of incorporation or bylaws, (2) any regulation of any
Governmental Entity (as defined in Section 8.1) or any decision,
ruling, order or award of any arbitrator by which it or any of
its properties may be bound or affected, or (3) any agreement,
indenture or other instrument to which it is a party or by which
it or its properties may be bound or affected, except in each
case referred to in the preceding clauses for contraventions,
violations, breaches or defaults that, individually or in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on the Company, or materially impair or restrict
the Company's power to perform its obligations as contemplated
under said agreements. Upon their issuance and delivery pursuant
to this Agreement, the Shares will be validly issued, fully paid
and nonassessable and free and clear of any liens. The issuance
and sale of the Shares will not give rise to any preemptive
rights, rights of first refusal or other rights to acquire Common
Stock on behalf of any Person (as defined in Section 8.1).
3.3. SEC Documents. The Company has filed with the Securities
and Exchange Commission (the "SEC") all reports, schedules,
forms, statements and other documents required by the Securities
Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), to be filed by the Company since December 31,
1997 (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference
therein, the "Company SEC Documents"). As of their respective
dates, except to the extent revised or superseded by a subsequent
filing with the SEC on or before the date of this Agreement, the
Company SEC Documents filed by the Company complied in all
material respects with the requirements of the Securities Act or
the Exchange Act, as the case may be, as in effect at the time
when they were filed, and none of the Company SEC Documents
(including any and all financial statements included therein)
filed by the Company as of such dates contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. Except as set forth in the
Company SEC Documents, neither the Company nor any of its
subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) which
would reasonably be expected to have a Material Adverse Effect on
the Company. Since March 31, 1999, no event has occurred or
facts exist which would be required to be disclosed in Part II
of Form 10-Q (other than matters submitted to the vote of the
Company's stockholders at the Company's annual stockholders
meeting held on May 27, 1999).
3.4. Approvals. In reliance on the representations of the
Purchaser contained in this Agreement, no consent, approval or
authorization of or designation, declaration or filing with any
Governmental Entity on the part of the Company is required in
connection with the due execution and delivery of the Transaction
Documents, the performance by the Company of its obligations
under the Transaction Documents or the offer, sale or issuance of
the Shares, except for (a) those required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (b) such filings as may be required to be made with the
SEC and the New York Stock Exchange, Inc. (the "NYSE"), and (c)
such filings as may be required to be made with certain state
agencies.
3.5. Binding Effect. The Transaction Documents constitute the
legally valid and binding obligations of the Company enforceable
against it in accordance with their terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights
generally and general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith
and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law.
3.6. Financial Information. The consolidated balance sheets of
the Company and its subsidiaries as of December 31, 1998 and
March 31, 1999, and the related consolidated statements of
income, changes in shareholders' equity and cash flows for the
periods then ended, contained in the Company SEC Documents,
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance
with U.S. generally accepted accounting principles ("GAAP")
applied on a consistent basis and fairly present the consolidated
financial position of the Company and its subsidiaries as of that
date and their consolidated results of operations and cash flows
for the periods then ended.
3.7. Absence of Certain Changes or Events. Except as disclosed
in the Company SEC Documents filed, or as otherwise publicly
disclosed, since March 31, 1999, there has not been (1) any
declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) with respect to
any of the Company's capital stock, (2) any split, combination or
reclassification of any of its capital stock or any issuance or
the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its
capital stock, (3) any damage, destruction or loss of property,
whether or not covered by insurance, that has or would reasonably
be expected to have a Material Adverse Effect on the Company, (4)
any change in accounting methods, principles or practices by the
Company materially affecting its assets, liabilities, or
business, except insofar as may have been required by a change in
GAAP or (5) any event or state of facts that, individually or in
the aggregate, has had or would reasonably be expected to have a
Material Adverse Effect on the Company.
3.8. Litigation.
(a) There is no action, suit
or proceeding pending or, to the
Company's knowledge, threatened
against the Company or any of its
subsidiaries that (1) impairs in
any material respect the ability of
the Company to perform its
obligations under the Transaction
Documents, or (2) restricts in any
material respect or prohibits the
sale of the Shares to the
Purchaser.
(b) Except as disclosed in
the Company SEC Documents, there is
no action, suit or proceeding
pending or, to the Company's
knowledge, threatened against the
Company or any of its subsidiaries
that, individually or in the
aggregate, would reasonably be
expected to have a Material Adverse
Effect on the Company.
3.9. Capitalization.
(a) As of the date of this
Agreement, the authorized capital
stock of the Company consists of
20,000,000 shares of the Common
Stock, 6,000,000 shares of Class B
Convertible Common Stock, par value
$.01 per share (the "Class B Common
Stock," and together with the
Common Stock, the "Company Stock"),
and 1,000,000 shares of preferred
stock, par value $1.00 per share
(the "Preferred Stock").
(b) As of July 20, 1999,
there were (1) 7,318,002 shares of
the Common Stock issued and
outstanding, (2) 5,785,398 shares
of the Class B Common Stock issued
and outstanding, (3) no shares of
the Company Preferred Stock issued
and outstanding, (4) 1,299,933
shares of the Common Stock reserved
for issuance upon exercise of
outstanding stock options issued by
the Company to current or former
employees and directors of the
Company and its subsidiaries, and
(5) no shares of Common Stock were
reserved for issuance upon the
exercise of any warrants of the
Company or upon the conversion or
exchange of any security of the
Company other than with respect to
the Class B Common Stock. No
options, warrants or convertible of
exchangeable securities of the
Company are issued and outstanding
other than as described in this
Section 3.9(b).
(c) All outstanding shares of
the Common Stock and Class B Common
Stock are duly authorized, validly
issued, fully paid and
nonassessable with respect to the
issuance and delivery thereof and
not subject to preemptive rights.
3.10. No Broker. The Company has not engaged, consented to or
authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by
the Transaction Documents. The Company hereby agrees to
indemnify and hold harmless the Purchaser from and against all
fees, commissions or other payments owing to any party acting on
behalf of the Company hereunder.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser hereby represents and warrants to the Company
as follows:
4.1. Corporate Existence and Power. The Purchaser (1) is a
corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware, (2) has all
necessary corporate power and authority and all material
licenses, authorizations, consents and approvals required to own,
lease, license or use its properties now owned, leased, licensed
or used and proposed to be owned, leased, licensed or used and to
carry on its business as now conducted and proposed to be
conducted, (3) is duly qualified as a foreign corporation under
the laws of each jurisdiction in which qualification is required
either to own, lease, license or use its properties now owned,
leased, licensed or used or to carry on its business as now
conducted, except where the failure to effect or obtain such
qualification, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on the
Purchaser, and (4) has all necessary corporate power and
authority to execute and deliver the Transaction Documents and to
perform its obligations thereunder.
4.2. Authorization; Contravention. The execution and delivery
by the Purchaser of the Transaction Documents and the performance
by the Purchaser of its obligations under the Transaction
Documents, have been duly authorized by all necessary corporate
action and do not and will not contravene, violate, result in a
breach of or constitute a default under, (1) its certificate of
incorporation or bylaws, or (2) any regulation of any
Governmental Entity or any decision, ruling, order or award of
any arbitrator by which it or any of its properties may be bound
or affected, except in each case referred to in the preceding
clauses for contraventions, violations, breaches or defaults
that, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on the Purchaser.
4.3. Approvals. No consent, approval or authorization of or
designation, declaration or filing with any Governmental Entity
on the part of the Purchaser is required in connection with the
due execution and delivery of the Transaction Documents, the
performance by the Purchaser of its obligations under the
Transaction Documents or the acquisition of the Shares by
Purchaser, except for (a) those required under the HSR Act, and
(b) such filings as may be required to be made with the SEC.
4.4. Binding Effect. The Transaction Documents constitute the
legally valid and binding obligations of the Purchaser
enforceable against it in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting
creditors' rights generally and general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance or injunctive relief,
regardless of whether considered in a proceeding in equity or at
law.
4.5. Investment. The Purchaser is acquiring the Shares for
investment for its own account, not as a nominee or agent, and
not with a view to, or for resale in connection with, any
distribution thereof. The Purchaser understands that the Shares
have not been registered under the Securities Act by reason of a
specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona
fide nature of the investment intent and the accuracy of the
Purchaser's representations and warranties contained herein.
4.6. Disclosure of Information. The Purchaser has had full
access to all information it considers necessary or appropriate
to make an informed investment decision with respect to the
Shares to be purchased by the Company under this Agreement. The
Purchaser further has had an opportunity to ask questions and
receive answers from the Purchaser regarding the terms and
conditions of the offering of the Shares and to obtain additional
information necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.
4.7. Investment Experience. The Purchaser understands that the
purchase of the Shares involves substantial risk. The Purchaser
has experience as an investor in securities of companies and
acknowledges that it is able to fend for itself, can bear the
economic risk of its investment in the Shares and has such
knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of this investment
in the Shares and protecting its own interests in connection with
this investment.
4.8. Accredited Investor Status. The Purchaser is an
"accredited investor" within the meaning of Regulation D
promulgated under the Securities Act.
4.9. Restricted Securities. The Purchaser understands that the
Shares to be purchased by the Purchaser hereunder are
characterized as "restricted securities" under the Securities Act
inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under the
Securities Act and applicable regulations thereunder such
securities may be resold without registration under the
Securities Act only in certain limited circumstances. The
Purchaser is familiar with Rule 144 of the Securities Act, as
presently in effect, and understands the resale limitations
imposed thereby and by the Securities Act.
4.10. Investigation. The Purchaser has conducted its own
investigation of the Company and hereby acknowledges that the
only representations and warranties of the Company in connection
with the Purchaser's investment are those expressly made by the
Company in Article III of this Agreement and under the License
Agreement.
4.11. No Broker. The Purchaser has not engaged, consented to
or authorized any broker, finder or intermediary to act on its
behalf, directly or indirectly, as a broker, finder or
intermediary in connection with the transactions contemplated by
the Transaction Documents. The Purchaser hereby agrees to
indemnify and hold harmless the Company from and against all
fees, commissions or other payments owing to any party acting on
behalf of the Purchaser hereunder.
ARTICLE V.
CONDITIONS TO OBLIGATION OF THE PURCHASER
The Purchaser's obligation to purchase the Shares at the
Closing is subject to the fulfillment on or prior to the Closing
Date of the following conditions:
5.1. Representations and Warranties. Each of the
representations and warranties of the Company contained in
Article III will be true and correct in all material respects on
and as of the date hereof and (except to the extent such
representations and warranties speak as of a particular date)
true and correct in all material respects as of the Closing Date
with the same effect as though such representations and
warranties had been made on and as of the Closing Date.
5.2. Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or
prior to the Closing Date shall have been performed or complied
with in all material respects. The Purchaser shall have received
a certificate signed by an officer of the Company to such effect
on the Closing Date.
5.3. HSR Act. The waiting period (and any extensions thereof)
under the HSR Act applicable to the transactions contemplated
hereby shall have expired or been terminated.
5.4. No Order Pending. There shall not then be in effect any
order enjoining or restraining the sale and purchase of the
Shares or the other transactions contemplated by the Transaction
Documents.
5.5. No Law Prohibiting or Restricting Sale of the Shares.
There shall not be in effect any law, rule or regulation
prohibiting or restricting the sale and purchase of the Shares,
or the other transactions contemplated by the Transaction
Documents, or requiring any consent or approval of any Person
which shall not have been obtained to sell and purchase the
Shares, with full benefits afforded the Common Stock.
5.6. Registration Rights Agreement. The Registration Rights
Agreement shall not have been terminated.
5.7. License Agreement. The License Agreement shall be in full
force and effect and shall not have been terminated.
5.8. Principal Stockholder Agreement. The agreement, dated the
date hereof (the "Principal Stockholder Agreement"), between
Kenneth D. Cole (the "Principal Stockholder") and the Purchaser
shall be in full force and effect and shall not have been
terminated.
ARTICLE VI.
CONDITIONS TO OBLIGATION OF THE COMPANY
The Company's obligation to sell and issue the Shares at the
Closing is subject to the fulfillment on or prior to the Closing
Date of the following conditions:
6.1. Representations and Warranties. The representations and
warranties of the Purchaser contained in Article IV will be true
and correct in all material respects on and as of the date hereof
and (except to the extent such representations and warranties
speak as of a particular date) true and correct in all material
respects as of the Closing Date with the same effect as though
such representations and warranties had been made on and as of
the Closing Date.
6.2. Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Purchaser on
or prior to the Closing Date shall have been performed or
complied with in all material respects. The Company shall have
received a certificate signed on behalf of the Purchaser by an
officer of the Purchaser to such effect on the Closing Date.
6.3. HSR Act. The waiting period (and any extensions thereof)
under the HSR Act applicable to the transactions contemplated
hereby shall have expired or been terminated.
6.4. No Order Pending. There shall not then be in effect any
order enjoining or restraining the sale and purchase of the
Shares or the other transactions contemplated by the Transaction
Documents.
6.5. No Law Prohibiting or Restricting the Sale of the Shares.
There shall not be in effect any law, rule or regulation
prohibiting or restricting the sale and purchase of the Shares,
or the other transactions contemplated by the Transaction
Documents, or requiring any consent or approval of any Person
which shall not have been obtained to sell and purchase the
Shares.
6.6. Registration Rights Agreement. The Registration Rights
Agreement shall not have been terminated.
6.7. License Agreement. The License Agreement shall be in full
force and effect and shall not have been terminated.
ARTICLE VII.
COVENANTS OF THE PURCHASER AND THE COMPANY
7.1. Purchase Restrictions.
(a) Other than pursuant to
the transactions contemplated by
this Agreement, the Purchaser shall
not, and shall not cause or permit
its Affiliates or any Group (as
defined in Section 8.1) including
the Purchaser or any of its
Affiliates to, acquire shares of
the Common Stock, which when
combined with shares of the Common
Stock then owned by the Purchaser
and its subsidiaries would result
in the Purchaser Beneficially
Owning (as defined in Section 8.1)
more than 10% of the shares of the
Common Stock then issued and
outstanding (the "Standstill Cap"),
except pursuant to a transaction or
series of transactions at prices
and on terms approved by the Board
of Directors of the Company.
(b) Nothing in this Section
7.1 shall require the Purchaser or
its subsidiaries to transfer any
shares of Common Stock if the
aggregate percentage ownership of
the Purchaser and its subsidiaries
is increased as a result of any
action taken by the Company or its
subsidiaries including, without
limitation, by reason of any
reclassification, recapitalization,
stock split, reverse stock split,
combination or exchange of shares,
redemption, repurchase or
cancellation of shares or any other
similar transaction.
7.2. Sale Restrictions.
(a) The Purchaser shall not,
and shall not cause or permit its
Affiliates or any Group including
the Purchaser or any of its wholly-
owned subsidiaries to directly or
indirectly offer, sell, transfer,
assign, exchange, grant an option
to purchase, encumber, pledge,
hypothecate or otherwise dispose of
the Beneficial Ownership of shares
of Common Stock, whether in one or
more transactions (any such act or
series of acts, a "Transfer"),
except in compliance with all
applicable requirements of law and
upon the receipt of necessary
approvals of any Governmental
Entity.
(b) Until the second
anniversary of the Closing Date
(the "Initial Sale Restriction
Termination Date"), the Purchaser
shall not, and shall not cause or
permit its subsidiaries or any
Group including the Purchaser or
any of its subsidiaries to,
directly or indirectly Transfer any
shares of Company Stock, other than
in one or more of the following
transactions: (1) a Transfer
pursuant to a tender offer or
exchange offer subject to Section
14 of the Exchange Act (or any
successor provision) (an "Offer")
for outstanding shares of Common
Stock that (A) the Company has not,
within 10 days of the commencement
thereof (or such longer period as
may then be permitted under
applicable law for the Company's
initial recommendation with respect
to such Offer), publicly
recommended that such Offer not be
accepted, (B) pursuant to which the
Principal Stockholder has tendered
more than 50% of the shares of
Company Stock of which he is the
Beneficial Owner, or (C) pursuant
to which the Principal Stockholder
has tendered such number of shares
of Company Stock that, following
the acceptance of such shares for
payment, the Principal Stockholder
will be the Beneficial Owner of
shares representing less than a
majority of the then outstanding
aggregate voting power of the
Company Stock, taken together as a
single class; (2) any other
Transfer which has been approved by
the Board of Directors of the
Company; and (3) any Transfer in
accordance with the terms of the
Principal Stockholder Agreement.
(c) From and after the
Initial Sale Restriction
Termination Date until the later of
(i) December 31, 2004 and (ii) the
termination of the License
Agreement other than by reason of
the Purchaser's breach, but in no
event later than December 31, 2009
(such later date, the "Termination
Date"), the Purchaser shall not,
and shall not cause or permit its
subsidiaries or any Group including
the Purchaser or any of its
subsidiaries to directly or
indirectly Transfer any shares of
Common Stock to any Person without
first giving the Company the
opportunity to purchase such shares
in the manner set forth in Section
7.4; provided, however, that such
restriction shall not apply to: (1)
a Transfer pursuant to an Offer for
outstanding shares of Company Stock
(A) that the Company has not,
within 10 days of the commencement
thereof (or such longer period as
may then be permitted under
applicable law for the Company's
initial recommendation with respect
to such Offer), publicly
recommended that such Offer not be
accepted, (B) pursuant to which the
Principal Stockholder has tendered
more than 50% of the shares of
Company Stock of which he is the
Beneficial Owner, or (C) pursuant
to which the Principal Stockholder
has tendered such number of shares
of Company Stock that, following
the acceptance of such shares for
payment, the Principal Stockholder
will be the Beneficial Owner of
shares representing less than a
majority of the then outstanding
aggregate voting power of the
Company Stock, taken together as a
single class; (2) any other
Transfer which has been approved by
the Board of Directors of the
Company; (3) any Transfer in
accordance with the terms of the
Principal Stockholder Agreement;
and (4) any Transfer pursuant to an
underwritten public offering under
to the Registration Rights
Agreement (whether pursuant to a
demand or piggyback registration).
(d) Subject to Section
7.2(a), nothing in this Agreement
shall prevent or restrict the
Purchaser and its Affiliates from
Transferring any Shares (1) to and
among each other, provided that any
such transferee shall agree in
writing to be bound hereby, or (2)
to the Principal Stockholder or his
Affiliates.
7.3. Other Restrictions. From and after the date hereof until
the Termination Date, the Purchaser shall not, and shall not
cause or permit its subsidiaries to, without the prior approval
of the Board of Directors of the Company or unless required by
applicable law or rules of any exchange on which the Purchaser's
securities are listed: (1) make any public comment or proposal
with respect to any Acquisition Proposal involving the Company,
(2) become a member of a Group (other than a Group comprised
solely of the Purchaser and its subsidiaries) with respect to the
Common Stock or other equity securities of the Company, (3)
solicit proxies or initiate, propose or become a participant in a
solicitation (as such terms are defined in Regulation 14A under
the Exchange Act) with respect to the Company in opposition to
any matter which has been recommended by the Board of Directors
of the Company or in favor of any matter which has not been
approved by the Board of Directors of the Company, (4) enter into
any discussions, negotiations, arrangements or understandings
with any third party with respect to any of the foregoing
(provided that the Purchaser may consult with the Company, the
Principal Stockholder and the Purchaser's advisors as to any
pending Acquisition Proposal made by a third party), or (5)
disclose to any third party any intention, plan or arrangement
inconsistent with the foregoing. From and after the date hereof
until the Termination Date, the Purchaser shall not, and shall
not cause or permit its subsidiaries to, without prior approval
of the Board of Directors or unless required by applicable law or
rules of any exchange on which the Purchaser's securities are
listed, take any actions with respect to any Acquisition Proposal
(including any Acquisition Proposal made by the Purchaser or its
Affiliates) that would require the Company to make a public
announcement regarding such Acquisition Proposal (provided that
the Purchaser may consult with the Company, the Principal
Stockholder and the Purchaser's advisors as to any pending
Acquisition Proposal made by a third party).
7.4. Right of First Offer. Prior to making any Transfer of any
shares of Common Stock after the Initial Sale Restriction
Termination Date and until the Termination Date, the Purchaser,
any of its subsidiaries or any Group including the Purchaser or
any of its subsidiaries (a "Transferor") shall, except as set
forth in Section 7.2(c) or 7.2(d) hereof, give the Company the
opportunity to purchase such shares in the following manner:
(a) Any Transferor intending
to make such Transfer shall give
notice (the "Transfer Notice") to
the Company in writing of such
intention, specifying the number of
shares proposed to be disposed of
and the proposed minimum price
therefor, and setting forth all the
terms of such proposed Transfer.
(b) The Company shall have
the right, exercisable by written
notice given by the Company to the
party which gave the Transfer
Notice within 10 business days
after receipt of such Notice to
purchase all, but not a part of,
the shares specified in such Notice
for cash at the minimum price set
forth therein. If the minimum
purchase price specified in the
Transfer Notice includes any
property other than cash, such
purchase price shall be deemed to
be the amount of any cash included
in the purchase price plus the
value (as jointly determined by a
nationally recognized investment
banking firm selected by each party
or, in the event such firms are
unable to agree, a third nationally
recognized investment banking firm
to be selected by them) of such
other property included in such
price. For this purpose:
(i) The parties shall use their best
efforts to cause any determination of the
value of any securities included in the
purchase price to be made within three
business days after the date of delivery of
the Transfer Notice. If the firms selected
by the Purchaser and the Company are unable
to agree upon the value of any such
securities within such three-day period, the
parties shall promptly select a third firm
whose determination shall be conclusive.
(ii) The parties shall use their best
efforts to cause any determination of the
value of property other than securities to be
made within seven business days after the
date of delivery of the Transfer Notice. If
the firms selected by the Purchaser and the
Company are unable to agree upon a value
within such seven-day period, the parties
shall promptly select a third firm whose
determination shall be conclusive.
(iii) The date on which the Company
must exercise its right of first offer shall
be extended until three business days after
the determination of the value of property
included in the purchase price if such
property consists solely of securities or 10
business days after the determination of such
value if other property is included.
(c) If the Company exercises
its right of first offer hereunder,
the closing of the purchase of the
shares of Common Stock with respect
to which such right has been
exercised shall take place within
10 business days (or if approval of
such purchase by the Company's
shareholders is required by law or
pursuant to any stock exchange rule
or policy, within 90 calendar days)
after the Company gives notice of
such exercise. Upon exercise of
its right of first offer, the
Company shall be legally obligated
to consummate the purchase
contemplated thereby and shall use
its best effort to secure all
approvals required in connection
therewith.
(d) If the Company does not
exercise its right of first offer
hereunder within the time specified
for such exercise, Transferor shall
be free during the period of 120
calendar days following the
expiration of such time for
exercise to sell the shares
specified in such Notice to any
Person in accordance with the terms
specified therein or at any price
in excess of the price specified
therein; provided that (1) such
person is an investment company
registered under the Investment
Company Act of 1940, as amended, a
broker or dealer registered under
the Exchange Act, a bank, thrift,
savings and loan or an insurance
company and, in any such case, is
acquiring such shares in the
ordinary course of business without
the purpose or effect of
influencing control of the Company;
(2) such Transfer is effected in an
ordinary course brokers'
transaction on a national
securities exchange; (3) such
person (A) is not a competitor of
the Company engaged in the fashion,
textile or fabrics business, at
either the wholesale or retail
level (a "Competitor"), and (B)
will not, after giving effect to
such Transfer, be the Beneficial
Owner of 5% or more of the Common
Stock; or (4) such person (A) is
not a Competitor, (B) will, after
giving effect to such Transfer, be
the Beneficial Owner of 5% or more
of the Common Stock and (C) is not
an entity or individual whose
ownership of Common Stock has been
determined by the Company in good
faith to be detrimental to the
Company.
7.5. Termination of Certain Restrictions. The covenants
contained in Sections 7.2(b) and (c), 7.3 and 7.4 hereof shall
terminate upon the earlier of (i) the Principal Stockholder
ceasing to be the Beneficial Owner of shares of Company Stock
representing a majority of the outstanding aggregate voting power
of the Company Stock, taken together as a single class and (ii)
the Purchaser and its Affiliates ceasing to own in the aggregate
at least 30% of the Shares purchased by the Purchaser hereunder.
ARTICLE VIII.
MISCELLANEOUS
8.1. Certain Definitions. As used in this Agreement:
(a) "Acquisition Proposal"
shall mean a bona fide written
proposal received by the Company
from any Person or Group that
contemplates a transaction which,
if effected, would constitute a
Change of Control of the Company.
(b) "Affiliate" shall have
the meaning given such term in Rule
12b-2 under the Exchange Act.
(c) "Beneficial Ownership"
and "Beneficial Owner" shall have
the meanings given such terms in
Section 13(d)(3) of the Exchange
Act and the rules and regulations
promulgated thereunder.
(d) "Change of Control" shall
mean (1) an acquisition of, or the
entering into of a definitive
agreement with the Company to
acquire, Voting Stock by a Person
or Group (other than the Principal
Stockholder or his Affiliates) in a
purchase or transaction or series
of purchases or transactions if
immediately thereafter such Person
or Group has, or would have,
Beneficial Ownership of more than
50% of the combined voting power of
the Company's then outstanding
Voting Stock; (2) the execution of
an agreement providing for a tender
offer, merger, consolidation or
reorganization, or series of such
related transactions involving the
Company, unless both (x) the
stockholders of the Company,
immediately after such transaction
or transactions shall Beneficially
Own at least 50% of the Voting
Stock of the Company (or, if the
Company shall not be the surviving
company in such merger,
consolidation or reorganization,
such surviving company), and (y)
the Company is not subject to an
agreement that contemplates that
individuals who are then directors
of the Company (or individuals
designated by the Company at or
before the closing of such
transaction) shall constitute less
than a majority of the directors of
the Company (or such surviving
company, as the case may be) after
the closing of such transaction;
(3) a change or changes in the
membership of the Company's Board
of Directors which represent a
change of a majority or more of
such membership during any twelve
month period (unless such change or
changes in membership are the
result of an election approved by a
majority of (i) the members of the
Board of Directors holding office
on the date hereof or (ii) members
whose election was approved by such
members); or (4) a sale of all or
substantially all of the Company's
assets.
(e) "Governmental Entity"
shall mean any agency, bureau,
commission, court, department,
official, political subdivision,
tribunal or other instrumentality
of any government, whether federal,
state, county or local, domestic or
foreign.
(f) "Group" shall have the
meaning given such term in Section
13(d)(3) of the Exchange Act and
the rules and regulations
promulgated thereunder.
(g) "Material Adverse Effect"
shall mean, with respect to any
Person, a material adverse effect
on the business, properties,
operations, or condition (financial
or otherwise) of such Person (and
its subsidiaries), taken as a
whole.
(h) "Person" shall mean any
person, individual, corporation,
partnership, trust or other non-
governmental entity or any
governmental agency, court,
authority or other body (whether
foreign, federal, state, local or
otherwise).
(i) "Voting Stock" shall mean
(1) the Common Stock, the Class B
Common Stock and any other
securities issued by the Company
having the ordinary power to vote
in the election of directors of the
Company (other than securities
having such power only upon the
happening of a contingency), and
(2) the common stock and any other
securities issued by any successor
to the Company pursuant to a
merger, consolidation or
reorganization having the ordinary
power to vote in the election of
directors of such successor company
(other than securities having such
power only upon the happening of a
contingency).
(j) As used herein, any
references to specified numbers
(but not percentages) of Shares or
of Common Stock shall be deemed to
be references to such number of
Shares or of Common Stock as may be
adjusted in the event of any change
in the capital stock of the Company
by reason of stock dividends, split-
ups, reverse split-ups, mergers,
recapitalizations, subdivisions,
conversions, exchanges of shares or
the like occurring after the date
of this Agreement.
8.2. Further Assurances.
(a) Each of the Company and
the Purchaser shall use its
commercially reasonable efforts to
take all actions required under any
law, rule or regulation to ensure
that the conditions to the Closing
set forth herein are satisfied on
or before the Closing Date.
(b) In furtherance and not in
limitation of the foregoing, each
of the Company and the Purchaser
hereby agrees to make an
appropriate filing of a
Notification and Report Form
pursuant to the HSR Act with
respect to the transactions
contemplated hereby as promptly as
practicable after the date hereof
or (y) if later, five business days
after the receipt by the Purchaser
of all information from the Company
reasonably necessary for the
Purchaser's preparation of such
filing) and to supply as promptly
as practicable any additional
information and documentary
material that may be requested
pursuant to the HSR Act and to use
commercially reasonable efforts to
cause the expiration or early
termination of the applicable
waiting periods under the HSR Act
as soon as practicable. Nothing in
this Section 8.2 shall require any
of the Company and its Affiliates
or the Purchaser and its Affiliates
to sell or otherwise dispose of, or
permit the sale or other
disposition of, any assets, whether
as a condition to obtaining any
approval from a Governmental Entity
or any other Person for any other
reason.
(c) Each of the Company and
the Purchaser shall, in connection
with the efforts referenced in
Section 8.2(a), use commercially
reasonable efforts to obtain all
requisite approvals and
authorizations for the sale and
purchase of the Shares under the
HSR Act or any other law, rule,
regulation, order or decree
(collectively, the "Laws"). In
furtherance and not in limitation
of the foregoing, each of the
Company and the Purchaser shall (1)
cooperate in all respects with each
other in connection with any filing
or submission and in connection
with any investigation or other
inquiry, including any proceeding
initiated by a private party, (2)
promptly inform the other party of
any communication received by such
party from, or given by such party
to any Governmental Entity and of
any material communication received
or given in connection with any
proceeding by a private party, in
each case regarding any of the
transactions contemplated hereby,
and (3) permit the other party to
review any communication given by
it to, and consult with each other
in advance of any meeting or
conference with, any Governmental
Entity or, in connection with any
proceeding by a private party, with
any other Person, and to the extent
permitted by the Governmental
Entity or other Person, give the
other party the opportunity to
attend and participate in such
meetings and conferences.
(d) In furtherance and not in
limitation of the covenants of the
parties contained in Sections
8.2(a), (b) and (c), if any
administrative or judicial action
or proceeding, including any
proceeding by a private party, is
instituted (or threatened to be
instituted) challenging the
purchase of the Shares contemplated
by this Agreement as violative of
any Law, each of the Company and
the Purchaser shall cooperate in
all respects with each other and
use commercially reasonable efforts
to contest and resist any such
action or proceeding and to have
vacated, lifted, reversed or
overturned any decree, judgment,
injunction or other order, whether
temporary, preliminary or
permanent, that is in effect and
that prohibits, prevents or
restricts consummation of the
transactions contemplated by this
Agreement. Notwithstanding the
foregoing or any other provision of
this Agreement, nothing in this
Section 8.2 shall limit a party's
right to terminate this Agreement
pursuant to Section 8.10, so long
as such party has complied with
this Section 8.2.
(e) If any objections are
asserted with respect to the
transactions contemplated hereby
under any Law or if any suit is
instituted by any Governmental
Entity or any private party
challenging the purchase of the
Shares contemplated hereby as
violative of any Law, each of the
Company and the Purchaser shall use
commercially reasonable efforts to
resolve any such objections or
challenge as such Governmental
Entity or private party may have to
such transactions under such Law so
as to permit consummation of the
transactions contemplated by this
Agreement.
8.3. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York,
without regard to principles of conflicts of law.
8.4. Survival; Termination of Covenants. The representations
and warranties in Articles III and IV of this Agreement shall
survive until the first anniversary of the date hereof, except
for the representations and warranties in Sections 3.1, 3.2, 3.5
and 3.10, and in Sections 4.4 through 4.11 hereof, which shall
continue to survive. The covenants and agreements of the Company
and the Purchaser under this Agreement shall survive in
accordance with their terms.
8.5. Indemnification.
(a) The Company hereby agrees
to indemnify, defend and hold
harmless the Purchaser from and
against all actual demands, claims,
actions or causes of action,
assessments, losses, damages,
liabilities, costs and expenses
(collectively, "Claims"), including
without limitation reasonable
attorneys' fees and expenses,
asserted against, resulting to, or
imposed upon or incurred by the
Purchaser by reason of or resulting
from a breach of any covenant,
representation, warranty or
agreement of the Company contained
in this Agreement.
(b) The Purchaser hereby
agrees to indemnify, defend and
hold harmless the Company from and
against all Claims, including
without limitation reasonable
attorneys' fees and expenses,
asserted against, resulting to, or
imposed upon or incurred by the
Company by reason of or resulting
from a breach of any covenant,
representation, warranty or
agreement of the Purchaser
contained in this Agreement.
8.6. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and
their respective successors and permitted assigns. Neither party
may assign this Agreement or any of its rights or obligations
hereunder to any Person without the prior written consent of the
other party.
8.7. Amendments; Etc. No amendment, modification, termination,
or waiver of any provision of this Agreement, and no consent to
any departure by a party to this Agreement from any provision of
this Agreement, shall be effective unless it shall be in writing
and signed and delivered by the other party to this Agreement,
and then it shall be effective only in the specific instance and
for the specific purpose for which it is given.
8.8. Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Registration Rights Agreement and the License
Agreement embody the entire agreement and understanding of the
parties and supersede all prior agreements or understandings with
respect to the subject matter thereof. This Agreement is not
intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
8.9. Notices. All notices, requests and other communications
to any party under this Agreement shall be in writing.
Communications may be made by telecopy or similar writing. Each
communication shall be given to the party at its address set
forth below or at any other address as the party may specify for
this purpose by notice to the other party. Each communication
shall be effective (1) if given by telecopy, when the telecopy is
transmitted to the proper address and the receipt of the
transmission is confirmed, (2) if given by mail, 72 hours after
the communication is deposited in the mails properly addressed
with first class postage prepaid or (3) if given by any other
means, when delivered to the proper address and a written
acknowledgment of delivery is received.
(a) If to the Company, to:
Kenneth Cole Productions, Inc.
152 West 57th Street
New York, NY 10019
Attention: Mr. Stanley A. Mayer
Executive Vice President
and Chief Financial Officer
Telecopy: (201) 583-8577
and with additional copies to:
Kenneth Cole Productions, Inc.
152 West 57th Street
New York, NY 10019
Patrice F. Cohen, Esq.
General Counsel
Telecopy: (201) 583-8588
and
Daniel D. Rubino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Telecopy: (212) 728-8111
(b) If to the Purchaser, to:
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07045
Attention: Mr. Richard F. Zannino
Senior Vice President - Finance
and Administration and
Chief Financial Officer
Telecopy: (212) 626-1888
and with additional copies to:
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07045
Roberta S. Karp, Esq.
Vice President - Corporate Affairs
and General Counsel
Telecopy: (201) 295-7803
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Paul S. Pearlman, Esq.
Telecopy: (212) 715-8000
8.10. Fees, Costs and Expenses. All fees, costs and expenses
(including attorneys' fees and expenses) incurred by either party
hereto in connection with the preparation, negotiation and
execution of this Agreement and the consummation of the
transactions contemplated hereby, shall be the sole and exclusive
responsibility of such party; provided, however, that the
Purchaser shall pay the filing fee for the Notification and
Report Form pursuant to the HSR Act.
8.11. Termination.
(a) This Agreement may be
terminated at any time prior to the
Closing Date:
(1) by mutual written consent of the Company and the Purchaser;
(2) by either the Company or the Purchaser if the other
materially breaches this Agreement and such breach remains
uncured for 10 days after receipt by the breaching party of
written notice thereof;
(3) by either the Company or the Purchaser if the Closing Date
shall not have occurred on or before December 31, 1999. The
right to terminate this Agreement under this Section 8.10(a)(3)
shall be not available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of any condition to be satisfied.
(b) In the event of
termination of this Agreement by
either the Company or the Purchaser
as provided in this Section 8.10,
this Agreement shall forthwith
become null and void and there
shall be no liability or obligation
on the part of the Company or the
Purchaser except with respect to
Sections 3.10, 4.11 and 8.9 and
this Section 8.10(b); provided,
however, that nothing herein shall
relieve any party from liability
with respect to any breach of this
Agreement.
8.12. Severability of Provisions. Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of
the prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity
or enforceability of the provision in any other jurisdiction.
8.13. Publicity. The Company and the Purchaser shall agree on
the form and content of the initial public announcement which
shall be made concerning this Agreement and the transactions
contemplated hereby, and neither the Company nor the Purchaser
shall make such public announcement without the consent of the
other, except as required by law.
8.14. Headings and References. Section headings in this
Agreement are included for the convenience of reference only and
do not constitute a part of this Agreement for any other purpose.
References to parties, express beneficiaries and sections in this
Agreement are references to the parties to or the express
beneficiaries and sections of this Agreement, as the case may be,
unless the context shall require otherwise.
8.15. Counterparts; Effectiveness. This Agreement may be
signed in any number of counterparts, each of which shall be an
original, with the same effect as if all signatures were on the
same instrument.
8.16. Exclusive Jurisdiction. Each party (1) agrees that any
action, complaint, counterclaim, investigation, petition, suit or
other proceeding, whether civil or criminal, in law or in equity,
or before any arbitrator, court or Governmental Entity (each, an
"Action"), with respect to this Agreement or any transaction
contemplated by this Agreement shall be brought exclusively in
the courts of the State of New York or of the United States of
America for the Southern District of New York, in each case
sitting in the Borough of Manhattan, State of New York, (2)
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts and (3)
irrevocably waives any objection, including, without limitation,
any objection to the laying of venue or based on the grounds of
Forum Non Conveniens, which it may now or hereafter have to the
bringing of any legal action in those jurisdictions; provided,
however, that any party may assert in an Action in any other
jurisdiction or venue each mandatory defense, third-party claim
or similar claim that, if not so asserted in such Action, may
thereafter not be asserted by such party in an original Action in
the courts referred to in clause (1) above.
8.17. Waiver of Jury Trial. Each party waives any right to a
trial by jury in any Action to enforce or defend any right under
this Agreement or any amendment, instrument, document or
agreement delivered, or which in the future may be delivered, in
connection with this Agreement and agrees that any Action shall
be tried before a court and not before a jury.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first written above.
KENNETH COLE PRODUCTIONS, INC.
By: /s/
Stanley A. Mayer
Name: Stanley A. Mayer
Title: Executive Vice President
and Chief Financial Officer
LIZ CLAIBORNE, INC.
By: /s/
Paul R. Charron
Name: Paul R. Charron
Title: Chairman and
Chief Executive Officer
<PAGE>
EXHIBIT 10.02
REGISTRATION RIGHTS AGREEMENT
between
KENNETH COLE PRODUCTIONS, INC.
and
LIZ CLAIBORNE, INC.
Dated as of July 20, 1999
TABLE OF CONTENTS
PAGE
1. DEMAND REGISTRATION RIGHTS. 11
2. PIGGY-BACK REGISTRATION RIGHTS. 12
3. REGISTRATION PROVISIONS. 13
4. BLACKOUT PROVISIONS. 18
5. TERMINATION PROVISIONS. 18
6. EXPENSES. 19
7. INDEMNIFICATION. 20
8. TRANSFER RESTRICTIONS. 22
9. EXEMPT SALES. 22
10. MERGER, CONSOLIDATION, EXCHANGE, ETC. 23
11. NOTICES. 23
12. NO WAIVERS; REMEDIES. 24
13. AMENDMENTS, ETC. 24
14. SUCCESSORS AND ASSIGNS. 24
15. GOVERNING LAW. 25
16. COUNTERPARTS; EFFECTIVENESS. 25
17. SEVERABILITY OF PROVISIONS. 25
18. HEADINGS AND REFERENCES. 25
19. ENTIRE AGREEMENT. 25
20. SURVIVAL. 25
21. EXCLUSIVE JURISDICTION. 26
22. WAIVER OF JURY TRIAL. 26
23. AFFILIATE. 26
24. EFFECTIVENESS; TERMINATION. 26
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
July 20, 1999, between Kenneth Cole Productions, Inc., a New York
corporation (the "Company"), and Liz Claiborne, Inc., a Delaware
corporation (the "Stockholder").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of that certain Common Stock
Purchase Agreement dated as of the date hereof between the
Stockholder and the Company (the "Common Stock Purchase Agreement"),
the Company is selling to the Stockholder, and the Stockholder is
purchasing from the Company, an aggregate of 1,000,000 shares (the
"Shares") of the Company's Class A Common Stock, $.01 par value per
share; and
WHEREAS, the Company and the Stockholder desire to enter into
this Agreement to provide for, among other things, the registration
under the Securities Act of 1933, as amended (the "Securities Act"),
of the disposition of the Registrable Shares (as defined below).
NOW, THEREFORE, in consideration of the foregoing premises and
the mutual covenants and agreements herein contained, and intending
to be legally bound hereby, the Company and the Stockholder hereby
agree as follows:
Demand Registration Rights.
If at any time after the Initial Sale Restriction Termination Date
(as defined in the Common Stock Purchase Agreement) and prior to the
Termination Date (as defined in the Common Stock Purchase Agreement),
the Company shall have received the written request (the "Demand
Registration Notice") of the Stockholder or holders of at least
400,000 Registrable Shares in the aggregate (as such number of shares
may be adjusted in the event of any change in the capital stock of
the Company by reason of stock dividends, split-ups, reverse split-
ups, mergers, recapitalizations, subdivisions, conversions, exchanges
of shares or the like) that have been acquired directly or indirectly
from the Stockholder and to which rights under this Section 1 shall
have been assigned pursuant to Section 14(a) (each such person, when
requesting registration under this Section 1 or under Section 2 and
thereafter in connection with any such registration, being
hereinafter referred to as a "Registering Stockholder"), the Company
shall promptly give written notice of the receipt of such request to
each potential Registering Stockholder and each other person known by
the Company to have rights with respect to the registration under the
Securities Act of the disposition of securities of the Company. The
Company shall use reasonable best efforts to file as promptly as
practicable but in any event within 45 days after the Company 's
receipt of such Demand Registration Notice a Registration Statement
which includes the Registrable Shares owned by the Registering
Stockholders (all such Registrable Shares collectively, the
"Transaction Registrable Shares") that in each case shall have been
duly specified by such Registering Stockholders by written notice
received by the Company not later than 20 days after the Company
shall have given written notice to the Registering Stockholders
pursuant to this Section 1(a).
If the Registering Stockholders initiating a request for registration
of Registrable Shares pursuant to Section 1(a) shall state in such
written notice that they intend to distribute the Transaction
Registrable Shares covered by their request by means of an
underwritten offering, the Company shall include such information in
the written notice delivered by the Company pursuant to Section 1(a).
The Company shall select the managing underwriter for the offering
and any additional investment bankers and managers to be used in
connection with the offering, in each case with the consent of the
Registering Stockholders holding a majority of the Transaction
Registrable Shares, which consent shall not be unreasonably withheld,
conditioned or delayed.
Notwithstanding anything herein to the contrary:
the Company shall not be required to prepare and file pursuant to
this Section 1, and the Company shall be entitled not to file and, if
filed, to withdraw a Registration Statement including less than
400,000 Transaction Registrable Shares in the aggregate (as such
number of shares may be adjusted in the event of any change in the
capital stock of the Company by reason of stock dividends, split-ups,
reverse split-ups, mergers, recapitalizations, subdivisions,
conversions, exchanges of shares or the like);
the Company shall not be required to prepare and file pursuant to
this Section 1 more than two Registration Statements prior to the
Termination Date;
the Company shall not be required to prepare and file a Registration
Statement pursuant to this Section 1 during the period from the date
of filing of a registration statement of the Company involving an
underwritten offering of any Equity Securities of the Company to the
date that is the earlier of (A) the date of the withdrawal of the
registration statement or the request to file the registration
statement by the security holder requesting the registration and (B)
the date that is 90 days following the effective date of the
registration statement;
if a requested registration pursuant to this Section 1 shall involve
an underwritten offering, and if the managing underwriter shall
advise the Company and the Registering Stockholders in writing that,
in its opinion, the number of Transaction Registrable Shares proposed
to be included in the registration is so great as to adversely affect
the offering, including the price at which the Transaction
Registrable Shares could be sold, the Company shall include in the
registration the maximum number of securities which it is so advised
can be sold without the adverse effect, allocated as follows:
First, all Transaction Registrable Shares duly requested to be
included in the registration, allocated pro rata among all
Registering Stockholders on the basis of the relative number of
Transaction Registrable Shares that each Registering Stockholder
shall have duly requested to be included in the registration or such
other basis as the Registering Stockholders shall agree; and
Second, any other securities proposed to be registered by the Company
other than for its own account, including, without limitation,
securities proposed to be registered by the Company pursuant to the
exercise by any person other than a Registering Stockholder of a
"piggy-back" right requesting the registration of shares of Common
Stock pursuant to an agreement with the Company in existence as of
the date of this Agreement that expressly provides, in effect, that
the Company is required to include such shares of Common Stock in the
Registration Statement; and
before the Registration Statement becomes effective, any Registering
Stockholder may withdraw from the registration any Transaction
Registrable Shares owned by the Registering Stockholder; provided
that, subject to Section 1(c)(1), withdrawal of Transaction
Registrable Shares shall not relieve the Company from its obligations
under this Agreement with respect to Transaction Registrable Shares
that are not withdrawn from the Registration Statement; and provided
further that, if Registering Stockholders withdraw all Transaction
Registrable Shares from a registration and pay all expenses incurred
by the Company in connection with such registration, the Registering
Stockholders shall not be deemed to have requested a registration
under Section 1 with respect to such registration.
Piggy-Back Registration Rights.
From and after the Sale Restriction Termination Date to and including
the Termination Date, if the Company shall determine to register or
qualify by a registration statement filed under the Securities Act
and under any applicable state securities laws, any Equity Securities
of the Company, whether for its own account or the account of a
holder of Equity Securities of the Company, other than an offering
with respect to which a Registering Stockholder shall have requested
a registration pursuant to Section 1, the Company shall give notice
of such determination to each potential Registering Stockholder and
each other person known by the Company to have rights with respect to
the registration under the Securities Act of the disposition of
securities of the Company. The Company shall use reasonable best
efforts as promptly as practicable to include in a Registration
Statement the Transaction Registrable Shares that in each case shall
have been duly specified by such Registering Stockholders by written
notice received by the Company not later than 20 days after the
Company shall have given written notice to the Registering
Stockholders pursuant to this Section 2(a).
Notwithstanding anything herein to the contrary:
the Company shall not be required by this Section 2 to include any
Registrable Shares in (A) a registration statement on Form S-4 or S-8
(or any successor form) or (B) a registration statement filed in
connection with an exchange offer or other offering of securities
solely to the then existing stockholders of the Company;
if a registration pursuant to this Section 2 involves an underwritten
offering, the Company shall select the managing underwriter for the
offering and any additional investment bankers and managers to be
used in connection with the offering, and if the managing underwriter
advises the Company in writing that, in its opinion, the number of
securities requested to be included in the registration is so great
as to adversely affect the offering, including the price at which the
securities could be sold, the Company shall include in the
registration the maximum number of securities which it is so advised
can be sold without the adverse effect, allocated as follows:
First, all securities proposed to be registered by the Company for
its own account;
Second, all securities proposed to be registered by the Company
pursuant to the exercise by any person other than a Registering
Stockholder of a "demand" right requesting the registration of shares
of Company Common Stock pursuant to an agreement with the Company in
existence as of the date of this Agreement; and
Third, any other securities proposed to be registered by the Company
other than for its own account, including, without limitation,
Transaction Registrable Shares duly requested to be included in the
registration and securities proposed to be registered by the Company
pursuant to the exercise by any person other than a Registering
Stockholder of a "piggy-back" right requesting the registration of
shares of Company Common Stock pursuant to an agreement with the
Company, allocated pro rata among all Registering Stockholders and
such other persons on the basis of the relative number of Transaction
Registrable Shares or other securities that each Registering
Stockholder or other person has duly requested to be included in such
registration;
before the Registration Statement becomes effective, any Registering
Stockholder may withdraw from the registration any Transaction
Registrable Shares owned by the Registering Stockholder; provided
that, subject to Section 2(b)(4), the withdrawal of Transaction
Registrable Shares shall not relieve the Company from its obligations
under this Agreement with respect to Transaction Registrable Shares
that are not withdrawn from the Registration Statement.
Registration Provisions.
With respect to each registration pursuant to this Agreement:
Notwithstanding anything herein to the contrary, the Company shall
not be required to include in any registration any of the Registrable
Shares owned by a Registering Stockholder if (1) the distribution of
such Registrable Shares proposed by the Registering Stockholder is
exempt from registration under the Securities Act and all applicable
state securities laws, (2) such Registering Stockholder or any
underwriter of such Registrable Shares shall fail to furnish to the
Company the information in respect of the distribution of such
Registrable Shares that may be required under this Agreement to be
furnished by the Registering Stockholder or the underwriter to the
Company or (3) if such registration involves an underwritten
offering, such Registrable Shares are not included in such
underwritten offering on the same terms and conditions as shall be
applicable to the other securities being sold through underwriters in
the registration or the Registering Stockholder fails to enter into
an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwritten offering.
The Company shall make available for inspection by each Registering
Stockholder participating in the registration, each underwriter of
Transaction Registrable Shares owned by the Registering Stockholder
and their respective accountants, counsel and other representatives
all financial and other records, pertinent corporate documents and
properties of the Company as shall be reasonably necessary to enable
them to exercise their due diligence responsibility in connection
with each registration of Transaction Registrable Shares owned by the
Registering Stockholder, and shall cause the Company's officers,
directors and employees to supply all information reasonably
requested by any such person in connection with such registration;
provided that records and documents which the Company determines, in
good faith, to be confidential and which it notifies such persons are
confidential shall not be disclosed to them, except in each case to
the extent that (1) the disclosure of such records or documents is
necessary to avoid or correct a misstatement or omission in the
Registration Statement or (2) the release of such records or
documents is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction. Each Registering Stockholder shall,
upon learning that disclosure of any such records or documents is
sought in a court of competent jurisdiction, give notice to the
Company, and allow the Company, at the Company's expense, to
undertake appropriate action and to prevent disclosure of any such
records or documents deemed confidential.
Each Registering Stockholder shall furnish, and shall cause each
underwriter of Transaction Registrable Shares owned by the
Registering Stockholder to be distributed pursuant to the
registration to furnish, to the Company in writing promptly upon the
request of the Company the information regarding the Registering
Stockholder or the underwriter, the contemplated distribution of the
Transaction Registrable Shares and the other information regarding
the proposed distribution by the Registering Stockholder and the
underwriter that shall be required in connection with the proposed
distribution by the applicable securities laws of the United States
of America and the states thereof in which the Transaction
Registrable Shares are contemplated to be distributed. The
information furnished by any Registering Stockholder or any
underwriter shall be certified by the Registering Stockholder or the
underwriter, as the case may be, and shall be stated to be
specifically for use in connection with the registration.
The Company shall use reasonable best efforts to prepare and file
with the Securities and Exchange Commission as promptly as
practicable the Registration Statement, including the Prospectus, and
each amendment thereof or supplement thereto, under the Securities
Act and as required under any applicable state securities laws, on
the form that is then required or available for use by the Company to
permit each Registering Stockholder, upon the effective date of the
Registration Statement, to use the Prospectus in connection with the
contemplated distribution by the Registering Stockholder of the
Transaction Registrable Shares requested to be so registered. The
Company shall furnish to each Registering Stockholder drafts of the
Registration Statement and the Prospectus and each amendment thereof
or supplement thereto for its timely review prior to the filing
thereof with the Securities and Exchange Commission, and shall use
its reasonable best efforts to reflect in each such document, when so
filed with the Securities and Exchange Commission, such comments as
the Registering Stockholder reasonably may propose. If any
Registration Statement refers to any Registering Stockholder by name
or otherwise as the holder of any securities of the Company but such
reference is not required by the Securities Act or any similar
federal statute then in force, then the Registering Stockholder shall
have the right to require, the deletion of such reference. The
Company shall deliver to each Registering Stockholder, without
charge, such number of copies of the Registration Statement and each
amendment or post-effective amendment thereof and such number of
copies of each document incorporated therein by reference, as the
Registering Stockholder may reasonably may request. If the
registration shall have been initiated solely by the Company or shall
not have been initiated by a Registering Stockholder, the Company
shall not be obligated to proceed with the registration, and may
withdraw the Registration Statement at any time prior to the
effectiveness thereof, if the Company shall determine not to proceed
with the offering of securities included in the Registration
Statement. In all other cases, the Company shall use reasonable best
efforts to cause the Registration Statement to become effective as
promptly as practicable and, as soon as practicable after the
effectiveness thereof, shall deliver to each Registering Stockholder
evidence of the effectiveness and such number of copies of the
Prospectus, including any preliminary prospectus, and each amendment
thereof or supplement thereto, as the Registering Stockholder may
reasonably request. The Company consents to the use by each
Registering Stockholder of each Prospectus and each amendment thereof
and supplement thereto in connection with the distribution, in
accordance with this Agreement, of the Transaction Registrable Shares
owned by the Registering Stockholder. In addition, the Company shall
qualify or register under the securities laws or blue sky laws of
such states as may be reasonably requested by each Registering
Stockholder with respect to the Transaction Registrable Shares of the
Registering Stockholder that shall have been included in the
Registration Statement, and to continue such registration or
qualification in effect for so long as such registration statement
remains in effect; provided that the Company shall not be obligated
to file any general consent to service of process or to qualify as a
foreign corporation in any state in which it is not subject to
process or qualified as of the date of the request. The Company
shall advise the Stockholder and each Registering Stockholder in
writing, promptly after the occurrence of any of the following, of
(1) the filing of the Registration Statement or any Prospectus, or
any amendment thereof or supplement thereto, with the Securities and
Exchange Commission, (2) the effectiveness of the Registration
Statement and any post-effective amendment thereto, (3) the receipt
by the Company of any communication from the Securities Exchange
Commission with respect to the Registration Statement or the
Prospectus, or any amendment thereof or supplement thereto,
including, without limitation, any stop order suspending the
effectiveness thereof, any comments with respect thereto and any
requests for amendments or supplements and (4) the receipt by the
Company of any notification with respect to the suspension of the
qualification of Transaction Registrable Shares owned by the
Registering Stockholders for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.
The Company shall use reasonable best efforts to cause the
Registration Statement to remain effective under the Securities Act
and the Prospectus to remain current, including the filing of
necessary amendments, post-effective amendments and supplements, and
shall furnish copies of such amendments, post-effective amendments
and supplements to the Registering Stockholders, so as to permit the
Registering Stockholders to distribute the Transaction Registrable
Shares owned by them in their respective manner of distribution
during their respective contemplated periods of distribution for a
period ending on the earlier of (A)(i) for a Registration Statement
pursuant to Rule 415 under the Securities Act, the date which is six
months after the effective date of such Registration Statement and
(ii) for all other Registration Statements, the date which is 120
days after the effective date of such Registration Statement, and (B)
the date on which all Registrable Securities covered by such
Registration Statement have been sold and the distribution
contemplated thereby has been completed; provided that the period
shall be increased by the number of days that any Registering
Stockholder shall have been required by Section 4 to refrain from
disposing under the registration any of the Transaction Registrable
Shares owned by the Registering Stockholder. During such respective
contemplated periods of distribution, the Company shall comply with
the provisions of the Securities Act applicable to it with respect to
the disposition of all Transaction Registrable Shares owned by the
Registering Stockholders that shall have been included in the
Registration Statement in accordance with their respective
contemplated manner of disposition by the Registering Stockholders
set forth in the Registration Statement, the Prospectus or the
supplement, as the case may be.
Any obligation of the Company under this Agreement, including any
obligation to use its reasonable best efforts or take such actions as
are reasonably required shall not preclude the Company from taking
any action or omitting to take any action (other than omitting to
file necessary amendments, post-effective amendments and supplements
if a Suspension Notice or Termination Notice is not then in effect
pursuant to Section 4 or Section 5, respectively) that would result
in the Company issuing a Suspension Notice or Termination Notice.
The Company shall notify each Registering Stockholder, at any time
when a prospectus with respect to the Transaction Registrable Shares
owned by the Registering Stockholders is required to be delivered
under the Securities Act, when the Company becomes aware of the
happening of any event as a result of which the Prospectus (as then
in effect) contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements therein (in
the case of the Prospectus or any preliminary prospectus, in light of
the circumstances under which they were made) not misleading; and, as
promptly as practicable thereafter, but subject to Sections 4 and 5,
the Company shall use reasonable best efforts to prepare and file
with the Securities and Exchange Commission an amendment or
supplement to the Registration Statement or the Prospectus so that,
as thereafter delivered to the purchasers of such Transaction
Registrable Shares, such Prospectus will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
Company also shall notify each Registering Stockholder, when the
Company becomes aware of the occurrence thereof, of the issuance by
the Securities and Exchange Commission of an order suspending the
effectiveness of the Registration Statement; as promptly as
practicable thereafter, but subject to Sections 4 and 5, the Company
shall use reasonable best efforts to obtain the withdrawal of such
order at the earliest possible moment.
If requested by any Registering Stockholder or an underwriter of
Transaction Registrable Shares owned by the Registering Stockholder,
the Company shall as promptly as practicable prepare and file with
the Securities and Exchange Commission an amendment or supplement to
the Registration Statement or the Prospectus containing such
information as the Registering Stockholder or the underwriter
requests to be included therein, including, without limitation,
information with respect to the Transaction Registrable Shares being
sold by the Registering Stockholder to the underwriter, the purchase
price being paid therefor by such underwriter and other terms of the
underwritten offering of the Transaction Registrable Shares to be
sold in such offering.
The Stockholder shall (1) offer to sell or otherwise distribute
Registrable Shares in reliance upon a registration contemplated
pursuant to Section 1 or 2 only (A) if the Stockholder is a
Registering Stockholder and the Registrable Shares are Transaction
Registrable Shares and (B) after the related Registration Statement
shall have been filed with the Securities and Exchange Commission,
(2) sell or otherwise distribute Registrable Shares in reliance upon
such registration only (A) if the Stockholder is a Registering
Stockholder and the Registrable Shares are Transaction Registrable
Shares and (B) the related Registration Statement is then effective
under the Securities Act, (3) not sell or otherwise distribute
Transaction Registrable Shares in reliance upon a registration
contemplated by Section 1 or 2 during any period specified in a
Suspension Notice delivered to the Registering Stockholder pursuant
to Section 4 or after receiving a Termination Notice pursuant to
Section 5 (until the Registering Stockholder shall have received
written notice from the Company pursuant to Section 3(d) that the
registration of such Transaction Registrable Shares is again
effective), (4) distribute Transaction Registrable Shares only in
accordance with the manner of distribution contemplated by the
Prospectus with respect to the Transaction Registrable Shares owned
by the Registering Stockholder and (5) report to the Company
distributions made by the Registering Stockholder of Transaction
Registrable Shares pursuant to the Prospectus. Each Registering
Stockholder, by participating in a registration pursuant to this
Agreement, acknowledges that the remedies of the Company at law for
failure by the Registering Stockholder to comply with the undertaking
contained in this paragraph (i) would be inadequate and that the
failure would not be adequately compensable in damages and would
cause irreparable harm to the Company, and therefore agrees that
undertakings made by the Registering Stockholder in this paragraph
(i) may be specifically enforced.
If the registration involves an underwritten offering, each
Registering Stockholder shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwritten offering.
If the registration involves an underwritten offering, the Company
shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting and shall
deliver to each Registering Stockholder, its counsel and each
underwriter of Transaction Registrable Shares owned by the
Registering Stockholders to be distributed pursuant to such
registration, the certificates, opinions of counsel and comfort
letters that are customarily delivered in connection with
underwritten offerings.
Before sales of Transaction Registrable Shares under a Registration
Statement, the Company shall cooperate with each Registering
Stockholder and each underwriter of Transaction Registrable Shares
owned by the Registering Stockholder to facilitate the timely
preparation and delivery of certificates (not bearing any restrictive
legends) representing the Transaction Registrable Shares to be sold
under the Registration Statement and to enable such Transaction
Registrable Shares to be in such denominations and registered in such
names as the Registering Stockholder or the underwriter may request.
The Company shall use reasonable best efforts to (1) comply with all
applicable rules and regulations of the Securities and Exchange
Commission, and (2) make available to its securityholders, as soon as
reasonably practicable, an earning statement covering the period of
at least twelve months, but not more than eighteen months, beginning
with the first calendar month after the effective date of the
Registration Statement, which earning statement shall satisfy the
provisions of Section 11(a) of the Securities Act.
The Company shall use reasonable best efforts to cause the
Transaction Registrable Shares to be listed on each national
securities exchange on which Company Common Stock shall then be
listed, if any, and to be qualified for inclusion in the
NASDAQ/National Market, as the case may be, if Company Common Stock
is then so qualified, and in each case if the listing or inclusion of
the Transaction Registrable Shares is then permitted under the rules
of such national securities exchange or the NASD, as the case may be.
For the purposes of this Agreement, the following terms shall have
the following meanings:
"Beneficial Owner" has the meaning given to it in Section 13(d)(3) of
the Exchange Act and the rules and regulations promulgated
thereunder;
"Business Day" means any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Colorado or
is a day on which banking institutions located in such state are
authorized or required by law or other governmental action to close;
"Equity Securities" of a person means the capital stock of the person
and all other securities convertible into or exchangeable or
exercisable for any shares of its capital stock, all rights or
warrants to subscribe for or to purchase, all options for the
purchase of, and all calls, commitments or claims of any character
relating to, any shares of its capital stock and any securities
convertible into or exchangeable or exercisable for any of the
foregoing;
"Exchange Act" means the Securities Exchange Act of 1934, as amended;
"Prospectus" means (A) the prospectus relating to the Transaction
Registrable Shares owned by the Registering Stockholders included in
a Registration Statement, (B) if a prospectus relating to the
Transaction Registrable Shares shall be filed with the Securities and
Exchange Commission pursuant to Rule 424 (or any similar provision
then in force) under the Securities Act, such prospectus, and (C) in
the event of any amendment or supplement to the prospectus after the
effective date of the Registration Statement, then from and after the
effectiveness of the amendment or the filing with the Securities and
Exchange Commission of the supplement, the prospectus as so amended
or supplemented;
"Registrable Shares" means the Shares and any stock of the Company
issued as a result of or in connection with a dividend, stock split,
reverse stock split, share combination, recapitalization,
reclassification or other distribution with respect to, or in
exchange for or in replacement of, the Shares.
"Registration Statement" means (A) a registration statement filed by
the Company in accordance with Section 3(d), including exhibits and
financial statements thereto, in the form in which it shall become
effective, the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 (or any similar provision or forms then in
force) under the Securities Act and information deemed to be a part
of such registration statement pursuant to paragraph (B) of Rule 430A
(or any similar provision then in force) and (B) in the event of any
amendment thereto after the effective date of the registration
statement, then from and after the effectiveness of the amendment,
the registration statement as so amended; and
information "contained", "included" or "stated" in a Registration
Statement or a Prospectus (or other references of like import)
includes information incorporated by reference.
Blackout Provisions.
Notwithstanding anything in this Agreement to the contrary, by
delivery of written notice to any of the Registering Stockholders and
the other holders of Registrable Shares (a "Suspension Notice"),
stating which one or more of the following limitations described in
Section 4(b) shall apply to the addressee of such Suspension Notice,
the Company may (1) postpone effecting a registration under this
Agreement, or (2) require such addressee to refrain from disposing of
Transaction Registrable Shares under the registration, in either case
for a no more than 60 consecutive days from the delivery of such
Suspension Notice (which period may not be extended or renewed).
The Company may postpone effecting a registration or apply to any
person specified in clause (2) of Section 4(a) any of the limitations
on dispositions specified in such clause if (1) the Company in good
faith determines that such registration or disposition would
materially impede, delay or interfere with any material financing,
offer or sale of Equity Securities or debt securities of the Company,
acquisition, disposition or other material transaction by the Company
or any of its material subsidiaries, (2) an investment banking firm
of recognized national standing shall advise the Company in writing
that effecting the registration or the disposition by such person of
Registrable Shares or other Equity Securities of the Company, as the
case may be, would materially and adversely affect an offering of
Equity Securities of the Company, by the Company for its own account
the preparation of which had then been commenced, or (3) the Company
in good faith determines that the Company is in possession of
material non-public information the disclosure of which during the
period specified in such notice the Company reasonably believes would
not be in the best interests of the Company; provided that the
Company may not take any action pursuant to this Section 4 for a
period of time in excess of 90 days in any one year period.
If the Company shall take any action pursuant to clause 2 of Section
4(a) with respect to any Registering Stockholder or other holder of
Registrable Shares in a period during which the Company shall be
required under Section 3(e) to cause the Registration Statement to
remain effective under the Securities Act and the Prospectus to
remain current, such period shall be extended for such person by one
day beyond the end of such period for each day that, pursuant to
Section 4(a), the Company shall require such person to refrain from
disposing of Transaction Registrable Shares owned by such person.
If the Company shall take any action pursuant to clause 1 of Section
4(a) with respect to a Registering Stockholder or other holder of
Registrable Shares, then the period during which the Registering
Stockholder may exercise its rights under Sections 1 and 2 shall be
extended by one day beyond the Termination Date for each day that,
pursuant to Section 4(a), the Company shall postpone effecting a
registration under this Agreement.
Termination Provisions.
Notwithstanding anything in this Agreement to the contrary, if, in
the opinion of counsel for the Company, there shall have arisen any
legal impediment to the offering of Transaction Registrable Shares
pursuant to this Agreement or if any legal action or administrative
proceeding shall have been instituted or any other claim shall have
been made relating to the registration or the offer made by the
related prospectus or against any of the parties involved in the
offering, the Company may at any time upon written notice (a
"Termination Notice") to each Registering Stockholder participating
in the registration (1) terminate the effectiveness of the related
Registration Statement or (2) withdraw from the Registration
Statement the Transaction Registrable Shares owned by the Registering
Stockholder; provided that, promptly after those matters shall be
resolved to the satisfaction of counsel for the Company, then the
Company shall notify each affected Registering Stockholder in writing
that such matters have been resolved and, pursuant to Section 1 or 2,
as the case may be, shall, upon the written direction of such
affected Registering Stockholder and subject to the limitations in
Section 1(c) or elsewhere herein, cause the registration of
Transaction Registrable Shares formerly covered by the Registration
Statement that were removed from registration by the action of the
Company.
If the Company shall take any action pursuant to Section 5(a) with
respect to a Registering Stockholder or other holder of Registrable
Shares, then the period during which the Registering Stockholder may
exercise its rights under Sections 1 and 2 shall be extended by one
day beyond the Termination Date for a number of days equal to (1) the
number of days during which the Company shall be required under
Section 3(e) to cause the Registration Statement to remain effective
under the Securities Act and the Prospectus to remain current minus
(2) the number of days during which the Registration Statement was
effective before the date of the action taken pursuant to Section
5(a).
Expenses.
Each of the Company on the one hand and the Registering Stockholders
on the other hand shall pay one-half of all Company Registration
Expenses (as defined below) incurred in connection with the
performance of the Company's obligations under Section 1 hereof with
respect to the preparation and filing of the first demand
Registration Statement, whether or not such Registration Statement
shall become effective. The Registering Stockholders shall pay all
Company Registration Expenses incurred in connection with the
performance of the Company's obligations under Section 1 hereof with
respect to the preparation and filing of a second demand Registration
Statement, whether or not such Registration Statement shall become
effective.
With respect to any registration pursuant to Section 2 hereof, the
Company shall pay all Company Registration Expenses incurred in
connection with the performance of the Company's obligations under
such Section less the Incremental Amount (as defined below) related
thereto. The Registering Stockholders shall pay the Incremental
Amount with respect to such registration.
The Registering Stockholders shall bear all other expenses incident
to the distribution by the respective Registering Stockholders of the
Transaction Registrable Shares owned by them in connection with a
registration pursuant to this Agreement, including, without
limitation, the selling expenses of the Registering Stockholders,
commissions, underwriting discounts, insurance and fees of counsel
for the Registering Stockholders.
"Company Registration Expenses" means, with respect to any
registration hereunder, all expenses (other than underwriting
discounts and commissions) incurred in connection with the
performance of the Company's obligations hereunder with respect to
such registration, whether or not any related Registration Statement
shall become effective, including, without limitation:
preparing, printing and filing each Registration Statement and
Prospectus and each qualification or notice required to be filed
under federal and state securities laws or the rules and regulations
of the National Association of Securities Dealers, Inc. (the "NASD")
in connection with a registration pursuant to Section 1 or 2;
all fees and expenses of complying with federal and state securities
laws and the rules and regulations of the NASD;
furnishing to each Registering Stockholder such number of copies of
the related Registration Statement and the number of copies of the
related Prospectus that may be required by Sections 3(d) and 3(e) to
be so furnished, together with a like number of copies of each
amendment, post-effective amendment or supplement;
performing its obligations under Sections 3(d), 3(e) and 3(k);
printing and issuing share certificates, including the transfer
agent's and registrar's fees, in connection with each distribution so
registered;
preparing audited financial statements required by the Securities Act
and the rules and regulations thereunder to be included in the
Registration Statement and preparing audited financial statements for
use in connection with the registration other than audited financial
statements required by the Securities Act and the rules and
regulations thereunder, including fees and expenses of the Company's
outside independent accountants (including any fees and expenses in
connection with any comfort letters and any special audits incident
to or required by any registration or qualification);
internal expenses of the Company (including, without limitation, all
salaries and expenses of its officers and employees performing legal
or accounting duties);
listing of the Registrable Shares on national securities exchanges
and inclusion of the Registrable Shares on the NASDAQ/National
Market; and
fees and expenses of any special experts retained by the Company in
connection with the registration, including fees and disbursements of
the Company's outside counsel.
"Incremental Amount" means, with respect to any registration pursuant
to Section 2 hereof, the incremental amount by which the Company
Registration Expenses increase by reason of including Transaction
Registrable Shares in such registration.
Indemnification.
The Company shall indemnify and hold harmless each Registering
Stockholder participating in a registration pursuant to this
Agreement, each underwriter of Transaction Registrable Shares owned
by the Registering Stockholder to be distributed pursuant to the
registration, each partner in the Registering Stockholder, the
officers and directors of the Registering Stockholder and the
underwriter and each person, if any, who controls the Registering
Stockholder, any partner in the Registering Stockholder or the
underwriter within the meaning of Section 15 (or any successor
provision) of the Securities Act, and their respective successors,
against all claims, losses, damages and liabilities to third parties
(or actions in respect thereof) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained
in the Registration Statement or the Prospectus or other document
incident thereto or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, and shall reimburse each
such Registering Stockholder and each other person indemnified
pursuant to this Section 7(a) for any legal and any other expenses
reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action; provided that the
Company shall not be liable in any case to the extent that any such
claim, loss, damage or liability arises out of or is based on any
untrue statement or omission based upon written information furnished
to the Company by the Registering Stockholder or the underwriter of
such Transaction Registrable Shares specifically for use in the
Registration Statement or the Prospectus.
Each Registering Stockholder, by participating in a registration
pursuant to this Agreement, thereby agrees to indemnify and to hold
harmless the Company and its officers and directors and each person,
if any, who controls any of them within the meaning of Section 15 (or
any successor provision) of the Securities Act, and their respective
successors, against all claims, losses, damages and liabilities to
third parties (or actions in respect thereof) arising out of or based
upon any untrue statement (or alleged untrue statement) of a material
fact contained in the Registration Statement or the Prospectus or
other document incident thereto or any omission (or alleged omission)
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and shall
reimburse the Company and each other person indemnified pursuant to
this Section 7(b) for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided that (x) this
Section 7(b) shall apply only if (and only to the extent that) the
statement or omission was made in reliance upon and in conformity
with information furnished to the Company in writing by the
Registering Stockholder specifically for use in the Registration
Statement or the Prospectus and (y) in no event shall the liability
of a Registering Stockholder under this Section 7 exceed the amount
of the gross proceeds paid to the Registering Stockholder in
consideration of the sale of Transaction Registrable Shares pursuant
to such registration.
If any action or proceeding (including any governmental investigation
or inquiry) shall be brought, asserted or threatened against any
person indemnified under this Section 7, the indemnified person shall
promptly notify the indemnifying party in writing, and the
indemnifying party shall assume the defense of the action or
proceeding, including the employment of counsel satisfactory to the
indemnified person and the payment of all expenses. The indemnified
person shall have the right to employ separate counsel in any action
or proceeding and to participate in the defense of the action or
proceeding, but the fees and expenses of that counsel shall be at the
expense of the indemnified person unless:
the indemnifying party shall have agreed to pay those fees and
expenses; or
the indemnifying party shall have failed to assume the defense of the
action or proceeding or shall have failed to employ counsel
reasonably satisfactory to the indemnified person in the action or
proceeding; or
the named parties to the action or proceeding (including any
impleaded parties) include both the indemnified person and the
indemnifying party, and the indemnified person shall have been
advised by counsel that there may be one or more legal defenses
available to the indemnified person that are different from or
additional to those available to the indemnifying party (in which
case, if the indemnified person notifies the indemnifying party in
writing that it elects to employ separate counsel at the expense of
the indemnifying party, the indemnifying party shall not have the
right to assume the defense of such action or proceeding on behalf of
the indemnified person; it being understood, however, that the
indemnifying party shall not, in connection with any one action or
proceeding or separate but substantially similar or related actions
or proceedings in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys at any
time for the indemnified person, which firm shall be designated in
writing by the indemnified person).
The indemnifying party shall not be liable for any settlement of any
action or proceeding effected without its written consent, but if
settled with its written consent, or if there be a final judgment for
the plaintiff in any such action or proceeding, the indemnifying
party shall indemnify and hold harmless the indemnified person from
and against any loss or liability by reason of the settlement or
judgment.
If the indemnification provided for in this Section 7 is unavailable
to an indemnified person (other than by reason of exceptions provided
in this Section 7) in respect of losses, claims, damages, liabilities
or expenses referred to in this Section 7, then each applicable
indemnifying party, in lieu of indemnifying the indemnified person,
shall contribute to the amount paid or payable by the indemnified
person as a result of the losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party on the one hand and of the
indemnified person on the other in connection with the statements or
omissions which resulted in the losses, claims, damages, liabilities
or expenses as well as any other relevant equitable considerations.
The relative fault of the indemnifying party on the one hand and of
the indemnified person on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to
state a material fact relates to information supplied by the
indemnifying party or by the indemnified person and by these persons'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties agree
that it would not be just and equitable if contribution pursuant to
this Section 7(d) were determined by pro rata allocation or by any
other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding
sentence. The amount paid or payable by a person as a result of the
losses, claims, damages, liabilities and expenses shall be deemed to
include any legal or other fees or expenses reasonably incurred by
the person in connection with investigating or defending any action
or claim. Notwithstanding in the foregoing to the contrary, no
Registering Stockholder or underwriter of Transaction Registrable
Shares owned by the Registering Stockholder shall be required to
contribute any amount in excess of the amount by which (1) in the
case of the Registering Stockholder, the gross proceeds paid to the
Registering Stockholder in consideration of the sale pursuant to the
registration of Transaction Registrable Shares owned by it or (2) in
the case of the underwriter, the total price at which such
Transaction Registrable Shares purchased by it and distributed to the
public were offered to the public exceeds, in any such case, the
amount of any damages that the Registering Stockholder or
underwriter, as the case may be, has otherwise been required to pay
by reason of any untrue or alleged untrue statement or omission. No
person guilty of fraudulent representation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
Each Registering Stockholder participating in a registration pursuant
to Section 1 shall cause each underwriter of any Transaction
Registrable Shares owned by the Registering Stockholder to be
distributed pursuant to the registration to agree in writing on terms
reasonably satisfactory to the Company to indemnify and to hold
harmless the Company and its officers and directors and each person,
if any, who controls any of them within the meaning of Section 15 (or
any similar provision then in force) of the Securities Act, and their
respective successors, against all claims, losses, damages and
liabilities to third parties (or actions in respect thereof) arising
out of or based upon any untrue statement (or alleged untrue
statement) of a material fact contained in the Registration Statement
or the Prospectus or other document incident thereto or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and to reimburse the Company and each other person
indemnified pursuant to the agreement for any legal or any other
expense reasonably incurred in connection with investigating or
defending any claim, loss, damage, liability or action; provided that
the agreement shall apply only if (and only to the extent that) the
statement or omission was made in reliance upon and in conformity
with information furnished to the Company in writing by the
underwriter specifically for use in the Registration Statement or the
Prospectus.
Transfer Restrictions.
The Stockholder agrees that before any sale or other disposition
of any Registrable Shares other than in a sale registered under the
Securities Act or pursuant to Rule 144 (or any similar provisions
then in force) under the Securities Act (unless the Company shall
have been advised by counsel that the sale does not meet the
requirements of Rule 144, as the case may be, for such sale), it will
deliver to the Company an opinion of counsel, in form and substance
reasonably satisfactory to the Company, to the effect that
registration of such sale or other distribution is unnecessary.
Exempt Sales.
The Company shall make all filings with the Securities and Exchange
Commission required by Rule 144(c) (or any similar provision then in
force) under the Securities Act to permit the sale of Registrable
Shares by any holder thereof (other than an Affiliate of the Company)
to satisfy the conditions of Rule 144 (or any similar provision then
in force). The Company shall, promptly upon the written request of
the holder of Registrable Shares, deliver to such holder a written
statement as to whether the Company has complied with all such filing
requirements.
Before sales of Registrable Shares proposed to be sold pursuant to an
exemption from the registration requirements of the Securities Act,
the Company shall, subject to Section 8(c), cooperate with the holder
of such Registrable Shares, to facilitate the timely preparation and
delivery of certificates (not bearing any restrictive legends)
representing such Registrable Shares, in connection with the closing
of the sales and to enable such Registrable Shares, to be in such
denominations and registered in such names as the holder may request.
Merger, Consolidation, Exchange, Etc.
In the event, directly or indirectly, (1) the Company shall
merge with and into, or consolidate with, any other person or (2) any
person shall merge with and into, or consolidate with, the Company
and the Company shall be the surviving corporation of such merger or
consolidation and, in connection with such merger or consolidation,
all or part of the Registrable Shares shall be changed into or
exchanged for stock or other securities of any other person, then, in
each such case, proper provision shall be made so that the surviving
corporation shall be bound by the provisions of this Agreement and
the term the "Company" shall thereafter be deemed to refer to such
surviving corporation.
Notices.
All notices, requests and other communications to any party
under this Agreement shall be in writing. Communications may be made
by telecopy or similar writing. Each communication shall be given to
the party at its address set forth below or at any other address as
the party may specify for this purpose by notice to the other party.
Each communication shall be effective (1) if given by telecopy, when
the telecopy is transmitted to the proper address and the receipt of
the transmission is confirmed, (2) if given by mail, 72 hours after
the communication is deposited in the mails properly addressed with
first class postage prepaid or (3) if given by any other means, when
delivered to the proper address and a written acknowledgment of
delivery is received.
If to the Company, to:
Kenneth Cole Productions, Inc.
152 West 57th Street
New York, NY 10019
Attention: Mr. Stanley A. Mayer
Executive Vice President
and Chief Financial Officer
Telecopy: (201) 583-8577
and with additional copies to:
Patrice F. Cohen, Esq.
General Counsel
152 West 57th Street
New York, NY 10019
Telecopy: (201) 583-8588
and
Daniel D. Rubino, Esq.
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Telecopy: (212) 728-8111
If to the Purchaser, to:
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07045
Attention: Mr. Richard F. Zannino
Senior Vice President - Finance
and Administration and
Chief Financial Officer
Telecopy: (212) 626-1888
and with additional copies to:
Roberta S. Karp, Esq.
Vice President - Corporate Affairs
and General Counsel
Liz Claiborne, Inc.
One Claiborne Avenue
North Bergen, NJ 07045
Telecopy: (201) 295-7803
and
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022
Attention: Paul S. Pearlman, Esq.
Telecopy: (212) 715-8000
No Waivers; Remedies.
No failure or delay by any party in exercising any right, power
or privilege under this Agreement shall operate as a waiver of the
right, power or privilege. A single or partial exercise of any
right, power or privilege shall not preclude any other or further
exercise of the right, power or privilege or the exercise of any
other right, power or privilege. The rights and remedies provided in
this Agreement shall be cumulative and not exclusive of any rights or
remedies provided by law.
Amendments, Etc.
No amendment, modification, termination or waiver of any
provision of this Agreement, and no consent to any departure by a
party to this Agreement from any provision of this Agreement, shall
be effective unless it shall be in writing and signed and delivered
by the other party to this Agreement, and then it shall be effective
only in the specific instance and for the specific purpose for which
it is given.
Successors and Assigns.
Each holder of Registrable Shares may assign to any permitted
transferee of Registrable Shares under the Common Stock Purchase
Agreement, its rights and delegate to the transferee its obligations
under this Agreement including, without limitation, the rights of
assignment pursuant to this Section 14; provided that (1) any
assignment of rights under Section 1 of one or more demand
registration right must indicate in writing the number of demand
rights so assigned and the Company must receive notice of such
assignment and (2) such transferee shall accept such rights and
assume such obligations for the benefit of the Company by written
instrument, in form and substance reasonably satisfactory to the
Company. Thereafter, without any further action by any person, all
references in this Agreement to the holder of such Registrable
Shares, and all comparable references, shall be deemed to be
references to the transferee, and the transferor shall be released
from each obligation or liability under this Agreement, with respect
to the Registrable Shares so transferred.
The provisions of this Agreement shall be binding upon and inure to
the benefit of the parties to this Agreement, the express
beneficiaries thereof and their respective permitted heirs,
executors, legal representatives, successors and assigns, and no
other person.
Governing Law.
This Agreement shall be governed by and construed in accordance
with the internal laws of the State of New York, without regard to
principles of conflicts of law.
Counterparts; Effectiveness.
This Agreement may be signed in any number of counterparts, each
of which shall be an original, with the same effect as if all
signatures were on the same instrument.
Severability of Provisions.
Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of the prohibition or unenforceability
without invalidating the remaining provisions of this Agreement or
affecting the validity or enforceability of the provision in any
other jurisdiction.
Headings and References.
Section headings in this Agreement are included for the
convenience of reference only and do not constitute a part of this
Agreement for any other purpose. References to parties, express
beneficiaries and sections in this Agreement are references to the
parties to or the express beneficiaries and sections of this
Agreement, as the case may be, unless the context shall require
otherwise.
Entire Agreement.
This Agreement and the Common Stock Purchase Agreement embody
the entire agreement and understanding of the parties and supersedes
all prior agreements or understandings with respect to the subject
matters thereof.
Survival.
Except as otherwise specifically provided in this Agreement,
each representation, warranty or covenant of each party contained in
to this Agreement shall remain in full force and effect,
notwithstanding any investigation or notice to the contrary or any
waiver by the other party of a related condition precedent to the
performance by such other party of an obligation under this
Agreement.
Exclusive Jurisdiction.
Each party (1) agrees that any action, complaint, counterclaim,
investigation, petition, suit or other proceeding, whether civil or
criminal, in law or in equity, or before any arbitrator, court or
governmental authority (each, an "Action"), with respect to this
Agreement or any transaction contemplated by this Agreement shall be
brought exclusively in the courts of the State of New York or of the
United States of America for the Southern District of New York, in
each case sitting in the Borough of Manhattan, State of New York, (2)
accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of those courts and (3) irrevocably
waives any objection, including, without limitation, any objection to
the laying of venue or based on the grounds of forum non conveniens,
which it may now or hereafter have to the bringing of any legal
action in those jurisdictions; provided, however, that any party may
assert in an Action in any other jurisdiction or venue each mandatory
defense, third-party claim or similar claim that, if not so asserted
in such Action, may thereafter not be asserted by such party in an
original Action in the courts referred to in clause (1) above.
Waiver of Jury Trial.
Each party waives any right to a trial by jury in any Action to
enforce or defend any right under this Agreement or any amendment,
instrument, document or agreement delivered, or which in the future
may be delivered, in connection with this Agreement and agrees that
any Action shall be tried before a court and not before a jury.
Affiliate.
Nothing contained in this Agreement shall constitute Stockholder
or any Registering Stockholder an "affiliate" of any of the Company
and its Subsidiaries within the meanings of the Securities Act or the
Exchange Act, respectively, including, without limitation, Rule 501
under the Securities Act and Rule 13e-3 under the Exchange Act.
Effectiveness; Termination.
This Agreement shall only become effective upon the closing of
the transactions contemplated by the Common Stock Purchase Agreement
and shall automatically terminate and be of no force or effect upon
the termination of the Common Stock Purchase Agreement in accordance
with its terms.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective authorized officers as of the date first
written above.
KENNETH COLE PRODUCTIONS, INC.
By: /s/
Stanley A. Mayer
Name: Stanley A. Mayer
Title: Executive Vice President
and Chief Financial Officer
LIZ CLAIBORNE, INC.
By: /s/
Paul R. Charron
Name: Paul R. Charron
Title: Chairman and
Chief Executive Officer
<PAGE>
EXHIBIT 10.03
License Agreement
By and Between
K.C.P.L., INC.
and
L.C.K.C., LLC
Women's Sportswear
Dated as of the 20TH day of July, 1999
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment and have been file separately with the
Securities and Exchange Commission.
Such portions are designated by "*".
TABLE OF CONTENTS
1. GRANT OF LICENSE . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .Page 2
2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . .. . . . Page 6
3. DESIGN PROCESS . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . Page 7
4. MANUFACTURE OF ARTICLES: QUALITY CONTROL . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . Page 9
5. APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . Page 12
6. ADVERTISING; SHOWROOM . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . Page 12
7. GUARANTEED MINIMUM ROYALTY AND
GUARANTEED MINIMUM NET SALES . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . Page 15
8. SALES ROYALTY . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . Page 17
9. SALES STATEMENT. . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . Page 18
10. BOOKS AND RECORDS; AUDITS. . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . Page 19
11. THE LICENSED MARK; COPYRIGHT; PATENT. . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19
12. INDEMNITY; INSURANCE . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . Page 22
13. DEFAULTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . Page 23
14. RIGHTS ON EXPIRATION OR TERMINATION. . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 25
15. NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .. . Page 26
16. ASSIGNABILITY; BINDING EFFECT. . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. Page 26
17. ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . Page 27
18. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . Page 28
19. EXHIBIT "1" . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . Page 32
20. EXHIBIT "2" . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . Page 33
21. SCHEDULE A . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .Page 34
22. SCHEDULE B . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .Page 35
23. SCHEDULE C . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . Page 36
24. SCHEDULE D . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . Page 37
25. SCHEDULE E . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . Page 38
26. SCHEDULE F . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .Page 39
27. SCHEDULE G . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . .
. . . . . . . . . . . . . . . . .Page 40
28. SCHEDULE H . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . Page 41
29. SCHEDULE I . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . Page 42
THIS LICENSE AGREEMENT (the "Agreement") made as of the 1st day
of July, 1999, by and between K.C.P.L., INC., a Delaware corporation
with offices at 152 West 57th Street, New York, New York 10019
("Licensor"), and L.C.K.C., LLC, a Delaware limited liability
corporation with offices at One Claiborne Avenue, North Bergen, New
Jersey 07047 ("Licensee").
WHEREAS, Licensor is exclusive owner of all right, title and
interest in and to the tradenames, trademarks and service marks as
are now or as may be hereinafter designated by Licensor as the
Licensed Marks (as such term is hereinafter defined); and
WHEREAS, it is the desire and intention of the parties that
Licensee be permitted to use the Licensed Marks throughout the
Territory (as such term is hereinafter defined); and
WHEREAS, Licensee has submitted to Licensor a financial model
relative to this Agreement (the "Financial Plan") which Financial
Plan contained a proposed customer list and an aggregate door plan
for the distribution of Articles, as such term is hereinafter defined
(the "Customer/Door Plan"). Licensor has accepted said Customer/Door
Plan, subject to all the terms, covenants and provisions of this
Agreement. Said Financial Plan is the economic basis on which
Licensee has agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth, Licensor and Licensee do hereby respectively
grant, covenant and agree as follows:
1. GRANT OF LICENSE
1.1(a) Licensor hereby grants to Licensee, during the
term of this Agreement, an exclusive license only throughout the
United States, its territories and possessions, Canada and other
jurisdictions in North America, Central America, South America and
the Caribbean as specifically provided in Schedule "A" attached
hereto and made part hereof (collectively the "Territory") to use the
marks "KENNETH COLE", "KENNETH COLE NEW YORK", "REACTION KENNETH
COLE", and "UNLISTED.COM" (each individually a "Licensed Mark" and
collectively the "Licensed Marks") and any other component,
variation, simulation, derivation or abbreviation of the Licensed
Marks in connection with the manufacture, advertising,
merchandising, marketing, distribution and sale solely of women's
sportswear in all knit and woven fabrications, as specifically
provided in Schedule "B" attached hereto and made part hereof
("Products") in misses, petite, large and junior sizes; provided,
however, with respect to large sizes only, the introduction of
Products in large sizes shall be subject to the parties hereto
mutually agreeing on a Business Plan. Said Business Plan shall
include projections for minimum annual Net Sales, as such term is
hereinafter defined, attributable to such large sizes, and
accordingly, the Guaranteed Minimum Net Sales, as such term is
hereinafter defined, and the Net Sales thresholds for the renewal
options as provided in Paragraphs 2.2(a), 2.3(a) and 2.4(a) hereafter
shall be adjusted correspondingly. The items within the definition
of Products, which are manufactured, distributed and sold by Licensee
pursuant to this Agreement, shall be referred to collectively herein
as "Articles".
(b) In order to retain the right to distribute and sell Articles
under each of the Licensed Marks (each a "Brand") Licensee shall
attain Net Sales, as such term is defined hereinafter, equal to: (i)
the guaranteed minimum brand net sales for such Brand in each Annual
Period in the initial term hereof, as set forth in Schedule "C"
attached hereto and made part hereof; and (ii) for each renewal term
hereunder, the guaranteed minimum brand net sales for each Brand
applicable to each Annual Period of such renewal term shall be agreed
to in good faith by the parties hereto prior to each such renewal
term at the time the notice of renewal is given in accordance with
Section 2 hereinafter. In the event such guaranteed minimum brand
net sales are not attained for any such Brand in any two consecutive
Annual Periods, Licensor shall have the right, but not the
obligation, to delete such Licensed Mark from the definition of
Licensed Marks as granted hereunder. In the event any Licensed Mark
shall be so deleted, the Guaranteed Minimum Net Sales and Guaranteed
Minimum Royalty as set forth in Paragraph 7.1 hereinafter shall be
reduced by the amount of guaranteed minimum brand net sales and
guaranteed minimum royalty for such Brand.
(c) (i) Licensee shall not be obligated to commence marketing
Articles under any Brand in any jurisdiction in Schedule "A" in the
two (2) years after the initial shipment of Articles under such Brand
in the United States. On or before the end of such two (2) year
period, Licensee shall submit to Licensor a Business Plan, as such
term is defined hereinafter, including, but not limited to, setting
forth specific guaranteed minimum net sales amounts and the minimum
marketing amounts, attributable to each specific jurisdiction. Once
the parties hereto have agreed on such Business Plan, Licensee shall
commence, within twelve (12) months of the approval of such Business
Plan, to commence shipment of Articles under such Brand to such
jurisdiction and the provisions, terms and covenants of this
Agreement shall apply to such jurisdiction; provided, however, in the
event such guaranteed minimum net sales amounts for a specific
jurisdiction are not attained in any two consecutive Annual Periods,
or ninety percent (90%) of the minimum marketing amounts are not
spent in any Annual Period, Licensor shall have the right, but not
the obligation, to delete such jurisdiction from the definition of
the Territory as granted hereinabove.
(ii) Licensee shall have the right to engage distributors for
the sale of Articles in those jurisdictions provided in Schedule "A".
Licensee may provide that the proposed distributor be granted a
license by Licensor to establish and operate retail stores and shop-
in-shops under Licensed Marks in such jurisdiction. Licensee shall
provide Licensor with such information as may be reasonably requested
by Licensor to enable Licensor to determine whether such proposed
distributor is acceptable to Licensor, both as a distributor of
Articles and, if applicable as the operator of stores or shops. No
such proposed distributor may be engaged as a distributor for
Articles hereunder unless and until it and a distribution agreement
("Distribution Agreement') has been approved by Licensor and, if
applicable, a retail license agreement satisfactory to Licensor
between Licensor and the proposed distributor has been executed.
Licensor shall approve or disapprove any proposed distributor within
thirty (30) days after Licensee has provided Licensor with all
requested information and a copy of the proposed Distribution
Agreement. Licensor may not condition its approval of any proposed
distributor on the payment to Licensor of any financial remuneration
on account thereof. Any approval under this Paragraph 1.5.(c) (ii)
by Licensor may not be unreasonably withheld or delayed.
(iii) Notwithstanding the provisions of Paragraph 1.7 and
subject to Paragraph 18.1(b), Licensee shall have the first right to
supply Products for sale under each of the Licensed Marks outside of
the Territory and any other component, variation, simulation,
derivation or abbreviation of the Licensed Marks. Licensor shall
notify Licensee of any opportunity to supply such Products outside of
the Territory. If Licensee fails to indicate its desire to supply
such Products within a reasonable time after receipt of such notice,
Licensor may arrange for supply of such Product from a source other
than Licensor.
(d) Notwithstanding the foregoing, Licensor hereby acknowledges
Licensee's right to manufacture Articles within and without the
Territory, both directly and through subcontractors.
(e) * Within thirty (30) days of receipt of
such notification, Licensee shall present Licensor with a Business
Plan with respect to such category or classification setting forth,
inter alia, proposed minimum sales, royalty rates, advertising
contribution and marketing commitments. The parties shall negotiate
in good faith with respect to the terms of such agreement. If the
parties can not reach an agreement with sixty (60) days, Licensor may
then negotiate with and enter into an agreement with regard to such
category or classification; provided, however, in no event may
Licensor enter into any such agreement on economic terms less
favorable in the aggregate to the terms proposed by Licensee.
1.2 All Articles shall bear a Licensed Mark and no
Articles shall be sold or otherwise distributed by Licensee under any
mark other than a Licensed Mark. Licensor reserves all rights to the
Licensed Marks except as specifically granted herein to Licensee and
Licensor may exercise such rights at any time.
1.3 Licensee acknowledges that the rights granted
hereunder do not include the right to operate a retail or outlet
store under any Licensed Mark or any variation or simulation thereof;
nor may Licensee or any of its affiliates sell Articles at retail.
1.4 Licensee shall use commercially reasonable efforts to
exploit the rights herein granted throughout the Territory and to
sell the maximum quantity of Articles therein consistent with the
high standards and prestige represented by each of the Licensed
Marks.
1.5 (a) Articles shall not be sold: (i) to customers
located outside the Territory; (ii) outside the distribution channels
within the Territory subject to Paragraph 4.5 hereinafter; or (iii)
to a customer if Licensee has reason to believe that such customer
may sell Articles to customers located outside the Territory or that
such customer may divert Articles, including by reason of a previous
history of diversion of Products. (To "divert" means to resell or
otherwise transfer Articles other than to consumers from approved
doors.)
(b) In order to monitor and trace the source of any diversion
activities, Licensee shall use commercially reasonable efforts to
mark or otherwise code product to enable Licensee to track the
manufacturer or supplier of merchandise. Licensee shall use all
commercially reasonable efforts to determine whether any item of
merchandise Licensee knows to have been sold outside the Territory is
counterfeit or not, and if not, to determine the source of such item,
including by use of investigative agencies. Licensee shall
cooperate with Licensor and its affiliates in the implementation of
their anti-diversion and anti-counterfeiting measures.
1.6 Licensee acknowledges that Licensor and/or its affiliates
through its Consumer Direct Entities, as such term is defined
hereinafter, sell Products bearing the respective Licensed Marks: (a)
to consumers in the Territory in and through mail order catalogs and
at and through Websites, as such term is defined hereinafter, on the
Internet; and (b) in and from retail stores and outlet stores
operating under one or another of the Licensed Marks located within
and without the Territory. Further, Licensee acknowledges that
Licensor may purchase no more than a de minimis amount of Products in
any Annual Period, as well as T-shirts and sweatshirts used or sold
exclusively as promotional items, each bearing the respective
Licensed Marks from third party contractors, but only for sale
through such catalogs and Websites and in Licensor's retail and
outlet stores; provided, however, Licensor shall promptly notify
Licensee of any such purchases. For purposes of this Paragraph 1.6
only, the term "de minimis" shall be deemed to be * of
Licensor's aggregate sales in such Annual Period attributable to all
Consumer Direct Entities.
1.7 (a) Nothing herein shall be deemed to prevent Licensor or
any of its affiliates or third parties from manufacturing Products
bearing the Licensed Mark in the Territory, provided that such
Products are not sold by them to customers located in the Territory.
(b) Subject to the provisions of 1.1(c) (iii)
hereinabove, Licensee acknowledges that Licensor hereafter may enter
into agreements with its affiliates and third parties granting them
the right to use a Licensed Mark in connection with the manufacture,
distribution and sale of Products outside the Territory. Upon
request by Licensor, Licensee shall cooperate with such affiliate or
third party in connection therewith and, specifically, shall provide
such affiliate or third party, without charge, with such design and
styling information, including technical manufacturing
specifications, if available, as may be necessary or appropriate to
enable such affiliate or third party to produce Articles consistent
with Articles produced by Licensee. In connection therewith or
when otherwise requested by Licensor, Licensee shall provide such
affiliates and third parties with disk copies of the graded patterns
and markers for the Articles, if available, which any such affiliate
or third party desires to include in its collections and copies of
such other materials as may be necessary for the production of those
Products, if available. With respect solely to these items,
Licensee's cost thereof shall be reimbursed to Licensee by such
affiliate or third party.
1.8 (a) Subject to the provisions of 1.1(c) (iii)
hereinabove, the term Territory shall not include the Internet. In
that regard, the sale of Products bearing a Licensed Mark by, or
purchased from, Licensor or any of its affiliates and third party
licensees, to customers in the Territory ordered on the Internet
shall not be deemed a breach of Licensee's Product exclusivity
rights hereunder.
(b) Licensee shall not, nor shall it authorize any of its
wholesale customers, without Licensor's approval which shall not be
unreasonably withheld, to offer Articles for sale on the Internet or
through other electronic sales vehicles, such as television. Also,
Licensee shall not, nor shall it authorize any of its retail
customers without Licensor's approval which shall not be
unreasonably withheld, to advertise, market, promote, publicize or
otherwise exploit Articles or the Licensed Mark or otherwise use any
of the Licensed Marks on the Internet or together with any other
trademarks or name or any other products.
(c) Notwithstanding anything to the contrary contained
in this Paragraph 1.8, Licensee may establish a so-called "Virtual
Showroom" website on the Internet for the display and offering for
sale of Articles to the wholesale trade; provided, however, it is
expressly understood and agreed that the consuming public shall not
have access to such website.
2. TERM
2.1 The term of this Agreement shall be five (5) years
and six (6) months commencing as of the date hereof and
continuing through December 31, 2004. The eighteen (18) month period
commencing on the date hereof and each twelve (12) month period
commencing on each January 1st thereafter during the term of this
Agreement shall constitute and shall be referred to herein as an
"Annual Period."
2.2 (a) Provided that: (i) Net Sales in the fourth Annual
Period are at least * and (ii)
subject to Paragraph 13.1, Licensee shall not be in default beyond
the expiration of any applicable grace or cure period of the terms,
covenants and conditions of this Agreement at the end of the fourth
Annual Period or at the end of the initial term of this Agreement,
Licensee shall have the option (the "First Option") to extend the
term of this Agreement for an additional period of five (5) years
commencing January 1, 2005 and terminating December 31, 2009 (the
"First Option Period"). Licensee may exercise this First Option by
giving written notice that shall be received by Licensor no later
than June 30, 2003. Time is of the essence with regard to the
provisions of this Paragraph 2.2. All of the terms, covenants and
provisions of this Agreement shall remain in full force and effect
during such First Option Period.
(b) Notwithstanding the foregoing, in the event Licensee shall
not achieve the threshold in accordance with Subparagraph 2.2(a)
hereinabove, then Licensor shall notify Licensee in writing no later
than January 31, 2004 of Licensor's election either to permit or not
permit Licensee to exercise the First Option, which election shall be
at Licensor's sole and absolute discretion. In the event Licensor
shall elect not to permit Licensee to exercise the First Option, then
the First Option shall be deemed null and void.
2.3 (a) Provided that: (i) Net Sales, in the ninth Annual
Period are at least * and (ii) subject to Paragraph
13.1, Licensee shall not be in default beyond the expiration of any
applicable grace or cure period of the terms, covenants and
conditions of this Agreement at the end of the ninth Annual Period or
at the end of the First Option Period, Licensee shall have the option
(the "Second Option") to extend the term of this Agreement for an
additional period of five (5) years commencing January 1, 2010 and
terminating December 31, 2014 (the "Second Option Period"). Licensee
may exercise this Second Option by giving written notice that shall
be received by Licensor no later than June 30, 2008. Time is of the
essence with regard to the provisions of this Paragraph 2.3. All of
the terms, covenants and provisions of this Agreement shall remain in
full force and effect during such Second Option Period.
(b) Notwithstanding the foregoing, in the event Licensee shall
not achieve the threshold in accordance with Subparagraph 2.3(a)
hereinabove, then Licensor shall notify Licensee in writing no later
than January 31, 2009 of Licensor's election either to permit or not
permit Licensee to exercise the Second Option, which election shall
be at Licensor's sole and absolute discretion. In the event Licensor
shall elect not to permit Licensee to exercise the Second Option,
then the Second Option Period shall be deemed null and void.
2.4 (a) Provided that: (i) Net Sales in the fourteenth Annual
Period are at least * and (ii) subject to Paragraph
13.1, Licensee shall not be in default beyond the expiration of any
applicable grace or cure period of the terms, covenants and
conditions of this Agreement at the end of the fourteenth Annual
Period or at the end of the Second Option Period of this Agreement,
Licensee shall have the option (the "Third Option") to extend the
term of this Agreement for an additional period of five (5) years
commencing January 1, 2015 and terminating December 31, 2019 (the
"Third Option Period"). Licensee may exercise this Third Option by
giving written notice that shall be received by Licensor no later
than June 30, 2013. Time is of the essence with regard to the
provisions of this Paragraph 2.4. All of the terms, covenants and
provisions of this Agreement shall remain in full force and effect
during such Third Option Period.
(b) Notwithstanding the foregoing, in the event Licensee shall
not achieve the threshold in accordance with Subparagraph 2.4(a)
hereinabove, then Licensor shall notify Licensee in writing no later
than January 31, 2014 of Licensor's election either to permit or not
permit Licensee to exercise the Third Option, which election shall be
at Licensor's sole and absolute discretion. In the event Licensor
shall elect not to permit Licensee to exercise the Third Option, then
the Third Option shall be deemed null and void.
2.5 Licensee shall have no right to renew this Agreement
beyond the Third Option Period . However, if Licensee desires to
continue this Agreement beyond the end of the third renewal term,
Licensee shall so notify Licensor no earlier than January 1, 2017 and
no later than June 30, 2018. Thereupon, Licensor and Licensee shall
negotiate in good faith the terms and conditions upon which they
would be willing to continue this Agreement, which terms and
conditions shall be consistent with then current industry standards
for manufacturing licenses covering Products of other high-end
fashion designers (or their licensees). If agreement is reached,
Licensor and Licensee shall enter into a new agreement. If,
however, having negotiated in good faith as aforesaid, Licensor and
Licensee shall have failed to execute such a new agreement by
December 31, 2018, Licensee and Licensor shall have no further
obligation to negotiate with each other with respect to a
continuation of this Agreement, and neither Licensee nor Licensor
shall have any liability or responsibility to the other on account
thereof.
3. DESIGN PROCESS
3.1 (a) During each Annual Period, Licensee shall
manufacture, advertise, merchandise, market, distribute and sell at
least four (4) collections of Articles: Spring, Fall, Summer and
Holiday/Resort. The first collection shall be no later than the Fall
2000 collection of the Kenneth Cole New York Brand.
(b) Licensee shall submit to Licensor each six (6) months
during the term hereof beginning January 1, 2000 for Licensor's prior
approval, an annual marketing, advertising and promotion plan (the
"Marketing Plan") and a two-year business plan (the "Business Plan"),
the form of each of which is attached hereto and made a part hereof
as Exhibit "2" and which may be amended by Licensor from time to
time. Each Marketing Plan shall cover the upcoming Annual Period,
and shall include any other information which Licensor may reasonably
request, all by Brand. Each Business Plan shall cover, the upcoming
two Annual Periods (including, as applicable, "potential" Annual
Periods after the end of the then current term of this Agreement,
even if this Agreement has not yet been renewed) and shall include
any other information which Licensor may reasonably request. No
Business Plan or Marketing Plan shall be implemented until such
proposed Business Plan or Marketing Plan is approved by Licensor,
including the proposed Marketing Plan and Business Plan for the first
Annual Period. In connection with any proposed Business Plan
submitted by Licensee to Licensor after the first Annual Period,
Licensor's approval shall not be unreasonably withheld to the extent
that any such Business Plan is consistent with the original Business
Plan submitted by Licensee to Licensor prior to the launch of each
Brand hereunder.
(c) Licensee shall appoint and maintain the following staff:
(i) a Division President, to be appointed no later than
October 1, 1999;
(ii) a Vice President of Manufacturing, to be appointed no later
than December 1, 1999;
(iii) a Vice President of Product Development, to be appointed no
later than November 1, 1999.
(iv) a Vice President of Sales, to be appointed no later than
December 1, 1999;
(v) A Manager of Marketing and Public Relations, to be appointed no
later than December 1, 1999;
(vi) a Kenneth Cole New York Brand Director of Product
Development, to be appointed no later than November 1,
1999.
(vii) a Kenneth Cole New York Sales Manager, to be
appointed no later than December 1, 1999;
(viii) an Unlisted Brand Director of Product Development,
to be appointed no later than April 1, 2000;
(ix) an Unlisted Sales Manager, to be appointed no later
than June 1, 2000;
(x) a Kenneth Cole Reaction Brand Director of Product
Development, to be appointed no later than October 1,
2000; and
(xi) a Kenneth Cole Reaction Sales Manager, to be
appointed no later than December 1, 2000.
These individuals shall be dedicated exclusively to the Articles
and to Licensee's operations pursuant to this Agreement. Further,
they shall be employees of Licensee but shall be subject to
Licensor's approval prior to their appointment and with respect to
the individuals designated as (i), (iii), (iv), (v), (vi), (viii),
(x) at all times thereafter during the term of this Agreement. The
individuals designated as (ii), (vii), (ix), (xi) shall be subject to
the continuing approval of Licensor, but with regard to said
individuals only, such approval shall not be unreasonably withheld.
Said individuals shall operate as liaisons with Licensor in order to
facilitate the design, production, advertising and distribution of
Articles.
3.2 Prior to each collection, Licensee shall submit to
Licensor materials, designs, sketches, swatches, colors and hardware,
if applicable, for use in connection with Articles. Any and all such
items requiring Licensor's approval shall be approved in writing
using the approval form attached hereto as Exhibit "1", which form
may be amended by Licensor from time to time (the "Approval Form").
Licensee shall receive any such approval by Licensor prior to the use
of any of such items. All approvals requested by Licensee for
Licensor hereunder shall be provided on a timely basis by Licensor in
line with the then applicable seasonal production/line calendar
provided to Licensor by Licensee. Licensor and Licensee shall at
all times cooperate with each other in good faith and use
commercially reasonable efforts to effectuate the design, development
and production of Articles and to adhere to the applicable
production/line calendar.
3.3 From time to time, Licensor may, in its sole
discretion, prepare and deliver to Licensee sketches and ideas for
Articles. Licensee shall use commercially reasonable efforts to use
such sketches and ideas provided by Licensor to the extent
practicable in light of the then applicable production/line calendar.
All designs created or approved by Licensor (other than any generic
or basic designs) shall be and remain Licensor's sole and exclusive
property and shall, in no event, be used by Licensee or its parent,
affiliates, or related entities except on Articles pursuant to this
Agreement. Notwithstanding the foregoing, however, Licensor hereby
acknowledges that its exclusivity rights hereunder shall not apply
at the end of the season in which the Articles were first offered to
the consuming public. Licensee shall use all sketches and other
materials provided by or approved by Licensor solely in connection
with the manufacture, distribution and sale of Articles pursuant to
this Agreement Licensor may use and permit Licensor's other licensees
to use any such sketches and other material, provided that such use
does not conflict with any rights granted to Licensee hereunder.
3.4 Licensee shall be responsible for the production of all
samples as well as for the production of Articles and Licensee shall
bear all costs in connection therewith.
3.5 Licensor hereby acknowledges that Licensee is a party to
other licensing arrangements with other parties for the manufacture
and distribution of products with labels and trademarks other than
the Licensed Marks. Consequently:
(a) As of the date hereof, Licensee has provided Licensor with
a complete list of all such trademarks and existing businesses, which
list shall include, but not be limited to, the names of all such
parties and a complete description of the product lines thereunder;
(b) During the term of this Agreement, Licensee shall be
prohibited from entering into any licensing arrangement if such
licensing arrangement is with those designers or entities designated
on Schedule "F" attached hereto and made part hereof. Such Schedule
"F" shall be revised by mutual agreement by the parties hereto prior
to the commencement of the third Annual Period and thereafter prior
to every second Annual Period during the term hereof.
3.6 Licensee hereby acknowledges that Licensor is a party to
other licensing arrangements with other parties for the manufacture
and distribution of merchandise other than the Products under one or
more of the Licensed Marks. Consequently:
(a) Licensee shall use commercially reasonable efforts to
avoid any conflicts between or among the definitions of any apparel,
accessories or other articles licensed by Licensor under other
agreements. In the event of a conflict between or among the
definitions of outerwear, intimate apparel, lingerie or accessories
licensed by Licensor under other agreements, and the Products
hereunder, Licensor reserves the right to resolve any such conflict
on a commercially reasonable basis, taking into account the natural
channels of distribution of the Articles and other apparel, and the
protection of any of the Licensed Marks. Licensor's decision in
resolving such conflicts shall be final and binding; and
(b) Licensee shall not, directly or indirectly, engage in
any conduct that Licensee knows or has reason to know infringes on
the legal rights of parties licensed under arrangements with Licensor
for products manufactured or sold under one or more of the Licensed
Marks, whether in the Territory or other jurisdictions.
4. MANUFACTURE OF ARTICLES: QUALITY CONTROL
4.1 Licensee acknowledges that Licensor has established a
reputation for excellence with the public as a leading fashion firm
manufacturing and selling merchandise (directly and through
licensees) of the highest quality. Consequently, the preservation of
the reputation and prestige of Licensor and each of the Licensed
Marks is of paramount importance. Accordingly, Articles shall be of
the highest quality for the similar class of merchandise and shall be
distributed and sold with packaging and sales promotion materials
appropriate for highest quality Products for the similar class of
merchandise.
4.2 The styles, designs, packaging, contents, workmanship and
quality of all Articles shall be approved by Licensor in writing,
using the Approval Form, prior to the distribution or sale thereof.
4.3 Prior to the offer for sale or distribution of any
Article, Licensee shall deliver to Licensor for its approval, free of
charge, one sample of each pattern and certain colors of such pattern
as Licensor shall designate on a timely basis together with the tags,
labels and packaging to be used in connection therewith. From time
to time, Licensee shall submit to Licensor then current production
samples of a sampling of Articles as reasonably requested by
Licensor so that Licensor may be assured of the maintenance of the
required quality standards. Licensee shall also submit to Licensor
samples of each Article for any reasonable business purpose including
public relations and advertising upon Licensor's request therefor
free of charge, Licensor shall use commercially reasonable efforts to
return such samples to Licensee, if practicable under the
circumstances. Articles sold hereunder shall be equal in all material
respects in quality to the approved samples. Licensee shall use
commercially reasonable efforts to cause its contractors to permit
Licensor and its representatives, upon reasonable advance notice, to
examine Articles in the process of being manufactured and inspect all
facilities utilized in connection therewith.
4.4 Articles shall be manufactured, sold, labeled,
packaged, distributed and advertised in accordance with all
applicable laws and regulations. Licensee shall use and display each
Licensed Mark only in such form and manner as are approved by
Licensor. After any sample, copy, artwork or other material is
approved, Licensee shall not deviate therefrom without the prior
written approval of Licensor. Licensee shall cause to appear on all
Articles and related materials, all advertising, promotional and
publicity material used in connection therewith, and any printed
matter on which any of the Licensed Marks appears, such legends,
markings and notices as Licensor may request. No such printed
matter shall include any other name, mark or designation other than
the Licensed Marks. Before using or releasing any such material,
Licensee shall submit to Licensor, for its written approval, proposed
advertising, promotional and publicity copy, finished artwork for
tags, labels, packaging and the like and all printed matter on which
any of the Licensed Marks appear. If Licensor shall disapprove of any
sample Article, any sample tag, label, packaging or the like,
Licensee shall immediately cease and desist from any use thereof in
any manner whatsoever. Licensor shall notify Licensee if it elects
to change any form or version of the
Licensed Mark and, after its receipt of the new version of the
Licensed Mark, Licensee shall effect the change for the applicable
Licensed Mark and the applicable materials, as promptly as reasonably
practicable and, in any event, no later than the start of the next
season after the season then in production; provided that, if
Licensee has an inventory of Articles bearing the previous version of
such Licensed Mark, Licensee may during the next six (6) months, sell
off those Articles in the ordinary course and, if Licensee has an
inventory of business documents bearing the previous version of such
Licensed Mark, Licensee may use up such materials in the ordinary
course so long as Licensee shall cease and desist from using any
previous version of such Licensed Mark within six (6) months from the
date of receipt of such new version of the Licensed Mark. No
printed matter of any kind shall be used or released prior to
Licensee's receipt of such approval.
4.5 (a) In order to maintain the reputation, image and
prestige of Licensor and the Licensed Marks, Licensee's distribution
patterns shall consist solely of such retailers whose location,
merchandising and overall operations are consistent with the highest
quality of Articles for the similar class of merchandise and the
reputation, image and prestige of each of the Licensed Marks.
Notwithstanding the foregoing, all such retailers, as well as those
to which close-outs are sold, shall be subject to the prior written
approval by Licensor. Once such approval is given, Licensor
subsequently may withdraw its approval of a retailer, an individual
door (i.e., a single branch of a multiple-unit retailer) of an
otherwise approved retailer, if it is dissatisfied with its
performance or the manner in which it presents Articles for sale.
Licensee acknowledges that retailers approved for a particular Brand
may not necessarily be approved for another Brand.
(b) In addition, Licensee undertakes to monitor and supervise
the merchandising and display of the Articles to be sold at retail so
that the Licensed Marks wherever used are properly and correctly
displayed and the Articles are in fact shown and sold as quality and
prestige merchandise consistent with the worldwide reputation and
prestige of the Licensed Marks. In the event Licensor should find
any fact inconsistent with the foregoing, then Licensor shall notify
Licensee thereof and Licensee shall supervise the retail location
concerned in rectifying such inconsistency. Should such retail
location fail to rectify the same within a reasonable time period,
then Licensee shall cease to supply the Articles to said retail
location.
(c) Licensee shall provide Licensor, within five (5) days
after the end of each month during the term of this Agreement, with a
complete and itemized list of all open orders, by season to date, by
Brand and by customer. Licensee shall also provide any and all
other information relating to bookings, if and when available.
(d) With respect to the initial term hereunder only, in the
event: *
4.6 In an endeavor to ensure the highest level of customer
service to all consumers, and only in the event Licensor shall so
request, Licensee shall place the number "1-800-KEN-COLE"
(collectively the "Consumer Phone") or any other phone designation
specified by Licensor as well as and any domain name that Licensor
shall designate for the Brand (e.g. www.kencole.com) (collectively
the "Websites") on all packaging, hang tags and other printed matter
that are used in conjunction with the Articles at retail; provided,
however, in the event a wholesale customer provided in Schedule "H"
attached hereto and
made part hereof shall object to such use, Licensee shall promptly
notify Licensor and may thereafter cease using such designation on
any such printed matter on Articles to be sold. Licensor shall
administrate, coordinate and pay for all expenses related to said
Consumer Phone and Websites; provided, however, Licensor reserves the
right to charge Licensee for its pro rata share of costs associated
with said Consumer Phone and Websites. Such pro rata share shall
not exceed * in any Annual Period. At any time during the
term hereof, Licensor or Licensee may request that Licensee handle
all consumer service relating exclusively to the Articles.
Licensee shall cooperate with Licensor to satisfy, at Licensee's
expense, all reasonable consumer demands as may be deemed appropriate
by Licensor for: (a) replacement goods or merchandise credits; and
(b) inquiries related to the availability of Articles or other
information reasonably required to service the consumers. At any
time after Licensee has paid any amounts due under this Paragraph
4.6, upon Licensee's request, Licensor shall submit to Licensee
documentary evidence in a form reasonably satisfactory to Licensee
that substantiates all such expenditures. The provisions of this
Paragraph 4.6 shall survive the termination or expiration of this
Agreement for a period of one (1) year subsequent to said termination
or expiration.
4.7 Any concept shops or shop-in-shops constructed by Licensee
shall be built in accordance with a prototype plan, including design,
architectural planning, construction materials, layout, decor and
other aspects of decoration, which prototype plan shall be subject to
Licensor's prior written approval. All expenses in connection with
the design, development or construction of any such shops shall be
borne by Licensee at its sole cost and expense, subject to the
budgetary guidelines set forth in Schedule "G" attached hereto and
made part hereof. Such prototype plan may be modified by Licensor
from time to time; provided, however, Licensor shall not request that
any shop-in-shop be materially modified earlier than three (3) years
after the installation of such shop.
5. APPROVALS
5.1 Licensor's approvals pursuant to this Agreement,
except as otherwise expressly provided, may be based solely on
Licensor's subjective standards and may be withheld in Licensor's
sole and absolute discretion.
5.2 Licensor's approval of any designs, materials, printed
matter, samples or any and all things related thereto or contemplated
under this Agreement, for use in connection with any particular
collection of Articles shall constitute approval for such use only in
connection with such collection and shall not constitute approval of
the use of any such materials in connection with any other collection
of Articles. In the event Licensor disapproves, withholds approval
or otherwise rejects, or raises an objection to, any item or matter
presented to it for action under this Agreement, Licensor shall use
commercially reasonable efforts to promptly notify Licensee of its
reasons for disapproval, rejection, objection, etc., and shall
provide Licensee, to the extent applicable or practicable under the
circumstances, with suggestions for modifying, correcting or
rectifying such item or matter.
6. ADVERTISING; SHOWROOM
6.1 (a) Licensor shall promote, market and advertise the
Licensed Marks and shall administer the budget for such advertising,
marketing and promotion. As a contribution to said advertising,
marketing and promotion, Licensee shall pay to Licensor a fee (the
"Advertising Fee") for each Annual Period in an amount equal to:
1st Annual Period: *
2nd Annual Period: *
3rd Annual Period and *
thereafter:
* During each Annual Period, Licensee shall pay the
minimum Advertising Fee to Licensor in four (4) equal installments at
the same time as installments of Guaranteed Minimum Royalty, as such
term is defined hereinafter, for such Annual Period are payable
hereunder. Any additional Advertising Fee payable for an Annual
Period shall be based upon actual Net Sales and shall be accounted
for and paid in the same manner and at the same time that Sales
Royalty, as such term is defined hereinafter, is to be accounted for
and paid hereunder.
(b) Licensor shall utilize the Advertising Fee for
institutional advertising of the Licensed Marks, as it so determines,
which may include the cost of catalog advertising, Licensor's
Websites and other electronic media. Upon Licensee's request,
Licensor shall submit to Licensee documentary evidence in a form
reasonably satisfactory to Licensee that substantiates all such
expenditures. Licensee shall cooperate with Licensor in connection
with such advertising and, if requested by Licensor, shall produce
and deliver samples of Articles to Licensor for use in connection
therewith at no cost to Licensor.
6.2 (a) During the term of this Agreement, Licensee shall
maintain separate showroom spaces exclusively for the display of
Articles under each Brand. Said showroom spaces shall be located in
the borough of Manhattan and shall be located, designed, decorated,
staffed, and maintained in a manner commensurate with the reputation
and prestige of the Licensed Marks and shall be subject to the prior
written approval of Licensor, subject to the budget therefor set
forth in the initial Business Plan. From time to time Licensee
shall refurbish or remodel the showrooms as reasonably requested by
Licensor so that the showrooms continue to reflect the reputation and
prestige of the Licensed Marks; provided, however, no significant
remodeling shall be required more than once every three (3) years.
In connection therewith, Licensee shall also maintain separate
telephone numbers and listings under the names "KENNETH COLE WOMEN'S
WEAR", "REACTION WOMEN'S WEAR" and "UNLISTED.COM WOMEN'S WEAR".
Licensee shall also maintain a showroom space in Licensor's
corporate showroom for the display and design of Articles. Such
spaces shall be built by Licensor; provided, however, all costs
associated with the building of such space shall be at Licensee's
sole cost and expense, in an amount not to exceed Licensor's actual
out-of-pocket costs (including so-called "soft" costs for
professional fees attributable to architects and engineers). In
addition, Licensee shall pay its pro rata share of rent and operating
expenses ("Rent").
Said Rent shall be based upon the number of square feet of Licensee's
showroom space, and office space if any, divided by the total number
of square feet utilized by all Licensor's licensing partners in such
corporate headquarters. Such Rent (for both showroom and office
space if any) shall include, but not be limited to: building
operating expense and taxes, heat, light, air conditioning, rubbish
disposal, elevator service, kitchen availability, electricity,
reception service and cleaning service, to the extent the same are
supplied to Licensor. Rent shall not commence on any such showroom
or office space prior to the third Annual Period. Licensee and
Licensor shall enter into a separate agreement setting forth the
particulars of said Rent prior to any such possession by Licensee.
(b) Under no circumstances shall any of the Licensed Marks be
used in combination with any other marks or products used by Licensee
in conjunction with said telephone listing or showroom. Licensor
must approve in writing all printed matter used by Licensee in the
course of its business that contains any of the Licensed Marks,
including but not limited to, stationery and business cards.
(c) When Licensee participates in trade shows, separate areas
shall be maintained exclusively for the display of Articles under
each Brand, subject to Licensor's prior approval. At Licensor's
request, Licensee shall also cooperate in trade shows in which
Licensor participates, and pay its pro rata share of any expenses
incurred by Licensor in connection therewith.
(d) In the event Licensor shall request Licensee to participate
in fashion or "runway" shows, Licensee shall pay its pro rata share
of any expenses incurred by Licensor in connection therewith.
(e) Notwithstanding the foregoing, Licensee's pro rata share
of all the expenses contemplated under Paragraphs 6.2(a), 6.2(c) and
6.2(d) hereunder shall not exceed, in the aggregate: * All such
amounts shall be paid within thirty (30) days from the presentment
of an invoice therefor.
6.3 Upon request from Licensee, Licensor may furnish the
services of its marketing personnel to assist Licensee's marketing
efforts relating to the Articles. In such event, Licensee shall
reimburse Licensor for all of Licensor's direct costs and expenses in
furnishing such services. In advance of performing services under
this Paragraph 6.3, Licensor shall submit an estimate of the
anticipated services and related reimbursable costs and expenses for
Licensee's approval, which estimates shall include a *
contingency surcharge. Any costs or estimates in excess of such
approved estimate shall be subject to Licensee's prior approval. All
amounts due to Licensor under this Paragraph 6.3 shall be payable by
Licensee within thirty (30) days from the presentment of an invoice
therefor.
6.4 (a) In addition to the Advertising Fee, in order to advertise,
promote and market the Articles, Licensee shall spend (inclusive of
production costs) the following amounts:
1st Annual Period: *
2nd Annual Period: *
3rd Annual Period *
and thereafter:
("Minimum Marketing Amount"). Such Minimum Marketing Amount shall
include, but not be limited to, consumer advertising. For purposes
hereof, "consumer" advertising and promotion shall be deemed to
exclude cooperative and trade advertising and to include magazines
and newspapers directed to the consuming public, broadcast media,
mailers and outdoor advertising, and shall include all launch
advertising. Upon Licensor's request therefore, Licensee shall submit
to Licensor documentary evidence in a form reasonably satisfactory to
Licensor that substantiates all such expenditures. During the third
Annual Period and during all Annual Periods thereafter: (i) in the
event Licensee's actual Net Sales are in excess of the Guaranteed
Minimum Net Sales hereunder in any Annual Period, *
(b) All advertising and marketing efforts in any jurisdiction
entered into by Licensee in accordance with Paragraph 1.1(c)
hereinabove shall be coordinated through Licensor's designated brand
manager in such jurisdiction, if applicable. Accordingly, all
Minimum Marketing Amounts in each such jurisdiction shall be paid
through such designated brand manager, if applicable.
6.5 In the event Licensee wishes to generate its own press
releases or publicity of any kind including, but not limited to,
interviews, exclusively relating to any or all of the Licensed Marks
or the Articles, such releases or publicity shall be submitted to
Licensor for Licensor's prior written approval. Licensee shall
promptly submit to Licensor any and all news releases, advertising,
publicity or promotional materials from any and all media and in any
and all forms in which any or all of the Licensed Marks or the
Articles appear as soon as such items are made available to Licensee.
In all instances, Licensee shall fully cooperate with Licensor's duly
authorized public relations representative. Notwithstanding the
foregoing, the prohibitions of this Paragraph 6.5 shall be waived
with respect to any or all of Licensee's publications or materials
which are required by any law, statute, regulation or rule required
of any publicly-held company; provided, however, that before either
party makes any filing with the SEC of this Agreement or any portion
thereof, it shall notify the other at least five (5) days in advance
to discuss the items to keep confidential. It also is acknowledged
that each party may have disclosure obligations, whether by reason of
being a public company or by reason of being listed on the New York
Stock Exchange (the "Exchange"), which may require it to make other
public disclosures of information (whether in the form of press
releases or otherwise) arising out of or relating to this Agreement,
the licensed business and/or the performance of the parties
hereunder. If either party makes a determination that it shall make
or consider making such a disclosure, it shall use reasonable efforts
to notify the other thereof at least five (5) days prior to the date
by which such disclosure would have to be made. The foregoing and
the confidentiality obligations of Paragraph 18.2 hereinafter shall
not apply to general descriptions of this Agreement or information
regarding the licensed business as may be appropriate in SEC filings,
annual reports, earnings releases, analyst conference calls and other
similar such documents and situations, nor shall any other provisions
of this Agreement be construed otherwise. Also and notwithstanding
the foregoing, both parties may respond to inquiries from the
Exchange, from the financial press or from financial analysts for
information arising out of or relating to this Agreement, the
licensed business and/or the performance of the parties hereunder in
the ordinary course.
.
7. GUARANTEED MINIMUM ROYALTY AND GUARANTEED MINIMUM NET SALES
7.1 (a) Licensee shall pay to Licensor a Guaranteed
Minimum Royalty, and shall attain Guaranteed Minimum Net Sales in
each Annual Period set forth below. After the first Annual Period,
the Guaranteed Minimum Net Sales for each Annual Period shall *
the Guaranteed Minimum Net Sales and the Guaranteed Minimum Royalty
for such Annual Period, as set forth below, shall be increased to
reflect such amount.
Guaranteed Minimum Guaranteed Minimum
Annual Period Net Sales Royalty
1 * *
2 * *
3 * *
4 * *
5 * *
(b) In the event Licensee should exercise its First Option in
accordance with Sec. 2.2 hereinabove, the Guaranteed Minimum Net
Sales shall be * In the event subsection (ii) is
applicable in any Annual Period, the Guaranteed Minimum Net Sales and
the Guaranteed Minimum Royalty for such Annual Period shall be
increased to reflect such amount.
Guaranteed Minimum Guaranteed Minimum
Annual Period Net Sales Royalty
6 * *
7 * *
8 * *
9 * *
10 * *
(c) In the event Licensee should exercise its Second Option in
accordance with Sec. 2.3 hereinabove, the Guaranteed Minimum Net
Sales shall be * In the event subsection (ii) is applicable
in any Annual Period, the Guaranteed Minimum Net Sales and the
Guaranteed Minimum Royalty for such Annual Period shall be increased
to reflect such amount.
Guaranteed Minimum Guaranteed Minimum
Annual Period Net Sales Royalty
11 * *
12 * *
13 * *
14 * *
15 * *
(d) In the event Licensee should exercise its Third Option to
extend the term of this Agreement in accordance with Sec. 2.4
hereinabove, the Guaranteed Minimum Net Sales shall be * In
the event subsection (ii) is applicable in any Annual Period, the
Guaranteed Minimum Net Sales and the Guaranteed Minimum Royalty for
such Annual Period shall be increased to reflect such amount.
Guaranteed Minimum Guaranteed Minimum
Annual Period Net Sales Royalty
16 * *
17 * *
18 * *
19 * *
20 * *
7.2 The Guaranteed Minimum Royalty for each Annual Period
shall be paid to Licensor in four (4) equal quarterly installments
payable on the first day of January, April, July, and October during
each such Annual Period, except that for the third Annual Period, the
Guaranteed Minimum Royalty shall be paid in accordance with Section
7.2(b) hereinafter. *
7.3 The Guaranteed Minimum Royalty for each Annual Period may
be credited only against the Sales Royalty for the same Annual
Period. Further, no payment of Guaranteed Minimum Royalty shall
be refundable.
7.4 Notwithstanding anything to the contrary contained herein,
at such times as payments of Guaranteed Minimum Royalty for an Annual
Period and Sales Royalties in excess of Guaranteed Minimum Royalty
for any such Annual Period reach the Guaranteed Minimum Royalty
payable for such entire Annual Period, no further installments of
Guaranteed Minimum Royalty for such Annual Period are required to be
paid.
8. SALES ROYALTY
8.1 (a) Licensee shall pay to Licensor a Sales Royalty as
set forth below on "Net Sales" in each Annual Period. "Net Sales"
shall be determined in accordance with generally accepted accounting
principles; provided, however, any aggregate deductions relative to
freight chargebacks or handling shall not exceed * of the
aggregate gross shipments by Licensee, less any and all amounts
invoiced to Licensor's Consumer Direct Entities, as such term is
defined hereinafter.
1st Annual Period: *
2nd Annual Period: *
3rd Annual Period and *
thereafter
(b) Licensee shall pay to Licensor a Sales Royalty as set forth
below on Net Sales made to so-called "off-price" retailers where the
discount granted is * or greater from Licensee's published line
price ("Off-Price Net Sales"). In the event Off-Price Net Sales
shall exceed * of Net Sales in either the first or second
Annual Period and * of Net Sales in each Annual Period
thereafter, such excess shall be subject to the Sales Royalty rate
set forth in subparagraph 8.1(a) hereinabove. Further, Off-Price
Net Sales shall not be included for purposes of determining whether
Guaranteed Minimum Net Sales have been attained in any Annual Period.
1st Annual Period: *
2nd Annual Period: *
3rd Annual Period and *
thereafter
8.2 (a) The Sales Royalty hereunder shall be accounted for
based upon Licensee's fiscal quarters and shall be paid quarterly
within thirty (30) days from March 31, June 30, September 30 and
December 31 during the term of this Agreement, except that, in the
first Annual Period, the initial accounting shall be from the date
hereof to the period ending with Licensee's second fiscal quarter
in the year 2000 and then for the following two (2) fiscal quarters.
The Sales Royalty payable for each accounting and payment period (the
"Payment Period") during each Annual Period shall be computed on the
basis of Net Sales during such Payment Period, with a credit for any
Guaranteed Minimum Royalty payments theretofore made to Licensor.
(b) *
(c) *
8.3 No payment of Sales Royalty for any Annual Period in
excess of payments of Guaranteed Minimum Royalty for the same Annual
Period shall be credited against the Guaranteed Minimum Royalty due
to Licensor for any other Annual Period.
8.4 Licensee and Licensor shall not be entitled to nor shall
either of them take deductions or set-offs from any payments required
to be made under this Agreement for any reason.
8.5 Net Sales with respect to the sales of Articles in any
foreign currency, for purposes of calculating the Sales Royalty
payable hereunder, shall be computed on the basis of the conversion
rates into United States Dollars quoted in the Wall Street Journal as
of the close of business on the day before any payments hereunder are
due and payable.
9. SALES STATEMENT
9.1 (a) Licensee shall deliver to Licensor, at the time each
Sales Royalty payment is due, a statement (the "Quarterly Statement")
signed and certified as accurate by Licensee's Chief Accounting
Officer or its Chief Financial Officer, setting forth for the just
completed Payment Period and the Annual Period-to-date: (i) the
number of units and invoice price of all Articles invoiced or shipped
to Licensee's customers, any and all deductions which properly may be
deducted in calculating Net Sales in accordance with generally
accepted accounting principles, all by Brand, by month and, by
jurisdiction and in the aggregate; (ii) the amount of Sales Royalty
then due and payable; and (iii) the amounts spent by Licensee for
advertising, marketing and another promotional activities, by Brand
and by type of activities and in the aggregate.
(b) (i) Licensee shall deliver to Licensor monthly, within ten
(10) days after the end of each month commencing with the first month
during which Articles are shipped, detailed sell-in reports, in both
units and dollar amounts, covering the preceding month and the Annual
Period-to-date, by Brand and by customer, with a comparison to the
corresponding period during the preceding Annual Period, if and when
applicable; (ii) Licensee shall deliver to Licensor detailed weekly
sell-through reports (including sales and stock information for "this
year," "last year" and "planned"), by Brand, by customer, with
information presented for the week, the month-to-date and the season-
to-date. Each weekly sales report shall cover the proceeding Sunday
through Saturday and shall be delivered by telefax no later than the
following Friday.
(c) Each of the Quarterly Statements and Licensee's other
statements, reports and other items to be delivered under this
Paragraph 9 shall be prepared in a format reasonably acceptable to
Licensor which may be amended from time to time.
(d) In addition to the information required above, Licensee
shall provide Licensor, upon request therefor, copies of any reports
relating to the business contemplated under this Agreement, which
Licensee regularly prepares in the normal course.
9.2 Licensee shall deliver to Licensor, not later than
forty-five (45) days after the end of each Annual Period, a statement
signed and certified by its Chief Accounting Officer or its Chief
Financial Officer, relating to the entire Annual Period and setting
forth the same information required of Licensee in accordance with
Paragraph 9.1 above. If such statement should indicate that there
had been an overpayment of Sales Royalty in any Annual Period, then
Licensor shall refund such overpayment within thirty (30) days of the
receipt by Licensor of such statement.
10. BOOKS AND RECORDS; AUDITS
10.1 Licensee shall maintain complete and accurate books
of account and records relating to all transactions under this
Agreement. At any reasonable time during the term of this Agreement
and for three (3) years thereafter, Licensor may, upon ten (10)
business days prior written notice to Licensee, cause an audit to be
made of Licensee's records and documents relating to this Agreement
to be conducted during regular business hours. Any such audit may be
performed by Licensor or Licensor's certified public accountant or
other auditing professional and shall be binding upon the parties.
All such records and documents shall be kept available for at least
three (3) years after the end of the Annual Period to which they
relate. No audit shall cover a period of less than a full Annual
Period; provided, however, if as a result of any audit of Licensee's
books and records, such audit discloses a deficiency in excess of
* of the amount actually paid for the subject period, Licensor's
subsequent audits may cover any period, in Licensor's sole
discretion.
10.2 If, as a result of any audit of Licensee's books and
records, such audit discloses a deficiency in the payment of any
amount due hereunder, such deficiency shall become immediately due
and payable with interest at the rate provided in Paragraph 13.1
below from the date when such payment should have been made. If any
audit shall reveal an overpayment of any amount due hereunder,
Licensor shall promptly refund the amount thereof to Licensee. In
the event the deficiency shall be in excess of * of the
amount actually paid for the subject period, Licensee shall pay to
Licensor upon demand the cost of such audit as well as all costs
associated with two (2) subsequent audits. In the event a
deficiency should occur that is in excess of * , and if during
any five (5) consecutive Annual Periods thereafter another such
deficiency shall be disclosed, and such deficiency is in excess of
* , then Licensor, in addition to all other remedies provided
herein, shall have the option to terminate this Agreement upon ten
(10) days notice.
11. THE LICENSED MARK; COPYRIGHT; PATENT
11.1 Licensee shall not use any of the Licensed Marks, in
whole or in part, as a corporate name or trade name. Licensee shall
not use any name in connection with any of the Licensed Marks in
connection with Articles or any related materials, without the prior
consent of Licensor.
11.2 (a) Licensor hereby represents and warrants that
Licensor and Licensor's parent company are the sole owners of all
right, title and interest in and to the Licensed Marks as
specifically provided in Schedules "D" and "E" attached hereto and
made part hereof. Licensee hereby acknowledges that Licensor is also
the owner of the goodwill attached or which shall become attached to
the Licensed Marks in connection with the business and goods in
relation to which the same has been, is or shall be used. Sales by
Licensee shall be deemed to have been made by Licensor for purposes
of trademark registration and all uses of the Licensed Marks by
Licensee shall inure to the benefit of Licensor. Licensee shall not
do or suffer to be done by its parent, affiliates or related entities
any act or thing which may adversely affect any rights of Licensor in
and to any of the Licensed Marks or any registrations thereof or
which, directly or indirectly, may reduce the value of any of the
Licensed Marks or detract from its reputation.
(b) Licensor represents and warrants that no claim is
currently being asserted or threatened by any governmental body or
third party and, to Licensors' knowledge, there exists no valid basis
for any claim: (a) that the use of any of the Licensed Marks in
connection with Products violates the rights of a third party in
those jurisdictions provided in Schedules "D" and "E"; (b) currently
challenging the enforceability or validity of any registrations for
any of the Licensed Marks or by a third party currently challenging
the validity of any applications for the registration of any of the
Licensed Marks; or (c) currently challenging the use of any of the
Licensed Marks on the grounds that such use violates the legitimate
rights of a third party in those jurisdictions provided in Schedules
"D" and "E" . No such registration or application as provided in
Schedule "D" or Schedule "E" has lapsed, expired or been abandoned
or canceled or is the subject of any pending or threatened
opposition or cancellation proceeding before the respective trademark
office.
Licensor shall use commercially reasonable efforts to maintain and
ensure the continued validity of all registrations obtained for any
of the Licensed Marks existing as of the date hereof or obtained from
time to time, including taking steps required to maintain
registration and to prosecute to completion pending applications.
Upon reasonable request of Licensee, Licensor shall file and
prosecute new applications to register the Licensed Marks for
Products in other jurisdictions in which Licensee notifies Licensor
that Product shall be sold.
11.3 Licensee shall use the Licensed Marks in the
Territory strictly in compliance with all applicable legal
requirements and shall use such markings in connection therewith as
may be required by applicable law, statute or regulation in order to
give appropriate notice of any trademark, trade name or other rights
therein or pertaining thereto.
11.4 Licensee shall never challenge Licensor's ownership of or
the validity of any of the Licensed Marks or any application for
registration thereof, or any trademark registration thereof, or any
rights of Licensor therein, nor shall Licensee seek to register any
of the Licensed Marks or any variation or simulation thereof within
or without the Territory. Further, Licensee shall cooperate fully
with any reasonable request by Licensor in connection with any
application, registration or filing in connection with any of the
Licensed Marks. All costs incurred in connection therewith,
including the costs of prosecuting or defending opposition and
cancellation proceedings and obtaining clearances and the costs of
the maintenance and renewal of any registrations which hereafter may
issue, as well as attorney's fees, search costs and filing fees,
shall be defrayed by Licensor. The provisions of this Paragraph 11.4
and Licensee's obligations hereunder shall survive the expiration or
termination of this Agreement.
11.5 (a) Licensor shall take such action as it deems advisable
for the protection of its rights in and to the Licensed Marks and
Licensee shall fully cooperate with Licensor in connection therewith,
at Licensor's sole expense. However, Licensor shall not be required
to take any action if it deems it inadvisable to do so and Licensee
may not take any action with respect to any of the Licensed Marks
without Licensor's prior written approval which approval shall not be
unreasonably withheld or delayed. Each party shall notify the other
promptly after becoming aware of: (a) an infringement or threatened
infringement of any of the Licensed Marks; or (b) any actionable
imitation of any of the Licensed Marks or Articles or of their
packaging or advertising. In such notice, the notifying party shall
identify the alleged infringer or imitator and shall specify in
reasonable detail the nature of the acts constituting such
infringement or actionable imitation. Within a reasonable time
thereafter in light of the circumstances, Licensor shall determine on
a reasonable basis what action, if any, is deemed advisable for the
protection of its rights in and to the Licensed Marks and the
Articles. If requested to do so by Licensor, Licensee shall
cooperate with and follow the directions of Licensor in all respects
in connection therewith. Any actions contemplated by this Paragraph
11.5(a) shall be controlled by Licensor. The costs, fees and
expenses incurred by Licensor and those incurred by Licensee in
connection with any action proposed to be taken under this Paragraph
11.5(a) shall be defrayed exclusively by Licensor.
(b) Licensor shall not be required to take action in any
particular circumstance involving infringement or counterfeiting if
it deems it inadvisable to do so; provided, however, Licensor shall
not unreasonably withhold its approval if Licensee desires to take
action in any such circumstance if Licensor elects not to do so.
Licensee acknowledges that Licensor shall not approve of Licensee
taking any such action if Licensor is advised by its outside
trademark counsel that pursuing such action could have a material
adverse effect on any of the Licensed Marks. If Licensor approves
of the taking of any such action by Licensee, Licensor shall
cooperate with Licensee in all respects in connection therewith.
Licensee shall consult with Licensor concerning developments in
respect of any such action and no settlement thereof may be made
without the approval of Licensor. The costs, fees and expenses
incurred by Licensee and those incurred by Licensor in connection
with any action taken under this Paragraph 11.5(b) shall be defrayed
exclusively by Licensee.
(c) Any recovery in any action taken under 11.5(a) or
(b) first shall be applied toward the reimbursement of the parties'
costs and then shall be split based upon the relative amount of
damage specifically allocated to each of the parties.
11.6 Licensee shall assist Licensor in procuring, at Licensor's
request, any copyright able registrations relating to any of the
packaging or any advertising of any Articles or any of the Licensed
Marks. The cost of obtaining and maintaining such copyright
registrations shall be borne solely by Licensor. Any copyright which
may be created in any Article or related material designed or
approved by Licensor shall be the sole property of Licensor. Any
Articles for which copyright registrations have been obtained shall
have such appropriate copyright notice affixed thereto.
11.7 Licensee shall assist Licensor in procuring, at Licensor's
request, any patent applications and subsequent letters patent
relating to any design or device used in connection with the Articles
including, without limitation, assigning any rights in and to such
patents on behalf of Licensee's employees to Licensor. The cost of
obtaining and maintaining such letters patent shall be borne solely
by Licensor. Any patent which may be created in any Article or
related material designed or approved by Licensor shall be the sole
property of Licensor. Any design or device used in connection with
the Articles for which letters patent have been issued shall have
such appropriate patent notice affixed thereto.
12. INDEMNITY; INSURANCE
12.1(a) Licensee shall hold Licensor, Mr. Kenneth Cole,
individually, and Kenneth Cole Productions, Inc. (the "Parent") and
their respective affiliates, as well as the directors, officers,
employees and agents, and the respective successors and assigns of
Licensor and its Parent, harmless from and shall indemnify each of
them against any losses, liabilities, damages and expenses (including
interest, penalties and reasonable attorneys' fees and expenses)
which any of them may incur or become obligated to pay, or for which
any of them may become liable to pay in any action, claim or
proceeding against any of them, by reason of any representation or
warranty on the part of Licensee being untrue in any material respect
or by reason of any acts, whether of omission or commission, by
Licensee, any of its affiliates, contractors, suppliers or any of
their respective affiliates, agents or employees arising out of or
related to this Agreement. Licensee's indemnification obligation
also shall apply to any action, claim or proceeding against any of
the indemnities brought by or on behalf of any of Licensee's
affiliates, customers, contractors or suppliers arising out of or
relating to their relationships or dealings with Licensee, the
termination thereof or otherwise. The provisions of and Licensee's
obligations under this Paragraph 12.1(a) shall survive the expiration
or termination of this Agreement.
(b) Licensor shall hold Licensee and its directors, officers,
employees and agents, and their respective successors and assigns,
harmless from and shall indemnify each of them against any losses,
liabilities, damages and expenses (including interest, penalties and
reasonable attorneys' fees and expenses) which any of them may incur
or become obligated or liable to pay in any action, claim or
proceeding against any of them in the event the use of any of the
Licensed Marks or any designs supplied to Licensee by Licensor and
used by Licensee without notification, in accordance with the
requirements hereof, infringes upon the trademark, tradename or other
intellectual property rights of a third party. The provisions of and
Licensor's obligations under this Paragraph 12.1(b) shall survive the
expiration or termination of this Agreement.
(c) Each indemnitee shall give the indemnifying party prompt
notice of any such action, claim or proceeding and the indemnifying
party, in its sole discretion, then may take such action as it deems
advisable to defend the action, claim or proceeding on behalf of the
indemnitee. If appropriate action is not taken by the indemnifying
party timely after its receipt of notice from the indemnitee, the
indemnitee may defend the action, claim or proceeding, but with only
one counsel reasonably acceptable to the indemnifying party and at
standard rates, and no compromise or settlement may be made without
the approval of Licensor, which shall not be withheld or delayed
unreasonably. In either case, the indemnitee and the indemnifying
party shall keep each other fully advised of all developments and
shall cooperate fully with each other in connection with the defense
of the action, claim or proceeding. Also, no compromise or
settlement of any such action, claim or proceeding may be made unless
full releases as to the subject matter are obtained for the
indemnifying party and for the indemnitee. The indemnification
provided herein applies solely to: (a) the amount of the judgement,
if any, against the indemnitee; (b) any sums paid by the indemnitee
in settlement; and (c) any expenses incurred by the indemnitee in
connection with its defense.
12.2 Licensee shall procure and maintain at its own
expense in full force and effect at all times during which Articles
are being sold a public liability insurance policy which shall
include products liability coverage with respect to Articles, with a
limit of liability of not less than * . Such insurance policy
shall be written for the benefit of Licensee, with Licensor, Mr.
Cole, individually, and Licensor's Parent as additional insureds and
shall provide for at least thirty (30) days prior notice to Licensor
of the cancellation or substantial modification thereof. Licensee
shall deliver certificates of such insurance to Licensor within
thirty (30) days of the date hereof and thirty (30) days prior to any
renewal thereof. Nothing in this paragraph 12.2 shall be deemed to
limit the indemnification provisions of paragraph 12.1 (a) above.
Licensee may maintain the required liability insurance in the form of
a blanket policy of Licensee; provided, however, Licensee shall
provide Licensor with certificates of insurance at the times, in the
amounts and for the benefit of the parties as provided hereinabove.
13. DEFAULTS
13.1 (a) In the event Licensee fails to make any payment
due to Licensor hereunder and such default shall continue uncured for
a period of ten (10) business days after receipt of notice from
Licensor that such payment was due and payable, Licensor may
terminate this Agreement forthwith by notice thereof to Licensee.
Interest shall be payable with respect to late payments and shall
accrue at a rate equal to two (2) full percentage points over the
prime rate being charged in New York, New York by the Bank of New
York as of the close of business on the date the payment first
becomes due.
(b) In the event that:
(i) Licensee discontinues the distribution of Articles for a period
of sixty (60) or more consecutive days after the initial launch
hereunder;
(ii) Licensee knowingly or intentionally violates the provisions of
Paragraph 1.5(a) hereinabove;
(iii) after the second Annual Period and thereafter during
the term hereof, Net Sales in any two (2) consecutive
Annual Periods are less than the Guaranteed Minimum Net
Sales for such Annual Periods as such Guaranteed Minimum
Net Sales are expressly provided in Sections 7.1(a) (b) (c)
and (d) hereinabove and not as such Guaranteed Minimum Net
Sales may be adjusted from time to time; provided, however,
in the event Licensee does not achieve Guaranteed Minimum
Net Sales in any Annual Period and such shortfall is a
direct consequence of Licensor's withdrawing approval of
customers previously approved by Licensor, such failure to
achieve Guaranteed Minimum Net Sales shall not be deemed a
default hereunder;
(iv) Off-Price Sales in any Annual Periods are more than
* of Net Sales twice during any five (5) Annual Periods;
or
(v) Licensee fails to spend any shortfall of the Minimum
Marketing Amount in the next succeeding Annual Period;
then in any such event, Licensor may terminate this Agreement
forthwith by notice thereof to Licensee.
(c) In the event Licensee fails to perform any of its
obligations under this Agreement other than those specifically set
forth in Paragraphs 13.1(a) and 13.1(b) hereunder, and such default
is not curable or, if curable, shall continue uncured for a period of
twenty-five (25) days after notice thereof from the non-defaulting
party, then the non-defaulting party, at its sole election, may
terminate this Agreement forthwith by notice thereof to the
defaulting party; provided, however, in the event such defaulting
party has commenced to cure any such breach during said twenty-five
(25) day period and is thereafter diligently prosecuting the cure of
such breach, such default shall be deemed to have been cured unless
and until the defaulting party has not, in fact, cured such default
within ninety (90) days of the initial notice of such default.
13.2 (a) In the event Licensor fails to make any payment due to
Licensee hereunder and such default shall continue uncured for a
period of ten (10) business days after receipt of notice from
Licensee that such payment was due and payable, Licensee may
terminate this Agreement forthwith by notice thereof to Licensor.
Interest shall be payable with respect to late payments and shall
accrue at a rate equal to two (2) full percentage points over the
prime rate being charged in New York, New York by the Bank of New
York as of the close of business on the date the payment first
becomes due.
(b) If Licensor fails to perform any of its other obligations
under this Agreement and such default is not curable or, if curable,
shall continue uncured for a period of twenty-five (25) days after
notice thereof from the non-defaulting party, then the non-defaulting
party, at its sole election, may terminate this Agreement forthwith
by notice thereof to the defaulting party; provided, however, in the
event such defaulting party has commenced to cure any such breach
during said twenty-five (25) day period and is thereafter diligently
prosecuting the cure of such breach, such default shall be deemed to
have been cured unless and until the defaulting party has not, in
fact, cured such default within ninety (90) days of the initial
notice of such default.
13.3 (a) In the event that Licensee or Licensor files
a petition in bankruptcy, is adjudicated a bankrupt or files a
petition or otherwise seeks relief under or pursuant to any
bankruptcy, insolvency or reorganization statute or proceeding, or if
a petition in bankruptcy is filed against it or it becomes insolvent
or makes an assignment for the benefit of creditors or a custodian,
receiver or trustee is appointed for it or a substantial portion of
its business or assets, this Agreement shall terminate automatically
without notice.
(b) No assignee for the benefit of creditors,
custodian, receiver, trustee in bankruptcy, sheriff or any other
officer of the court or official charged with taking over custody of
Licensee's assets or business may continue this Agreement or exploit
any of the Licensed Marks if this Agreement terminates pursuant to
paragraph 13.2(a) above.
13.4 Licensee shall not knowingly, nor shall Licensee
knowingly suffer or permit any person or entity engaged in the
manufacture or distribution of Articles, to violate any applicable
labor laws. In the event either of the parties hereto become aware
of any such violation, Licensee shall take commercially reasonable
steps necessary to rectify said violation, including but not limited
to, suspending shipments of Articles from said person or entity. Any
shipment of Articles knowingly produced or accepted in violation of
applicable labor law shall be deemed to be a breach of this
Agreement. Uncured, serious or repeated violations shall result in
termination, subject to the rights and remedies of Licensor.
14. RIGHTS ON EXPIRATION OR TERMINATION
14.1 Upon termination of this Agreement pursuant to Paragraph
13.1(a) or 13.1(b)(i), Licensee shall pay to Licensor, within twenty
(20) days of the date of termination as liquidated damages solely
with respect to Licensee's financial obligations hereunder, and not
as a penalty, a sum equal to *
14.2 (a) Notwithstanding the expiration or termination
of this Agreement, Licensor shall have and hereby reserves all rights
and remedies which it has, or which are granted to it by operation of
law or equity: (i) to enjoin the unlawful or unauthorized use of the
Licensed Marks; (ii) to collect any amounts payable to Licensor
pursuant to this Agreement, including but not limited to the
liquidated damages referred to in Paragraph 14.1 hereinabove; and
(iii) to recover any other damages resulting from Licensee's breach
hereof.
(b) Notwithstanding the expiration or termination of this
Agreement, Licensee shall have and hereby reserves all rights and
remedies which it has, or which are granted to it by operation of law
or equity: (i) to enjoin any violation of Licensor's confidentially
obligations under Paragraph 18.2 hereinafter; (ii) to collect any
amounts payable to Licensee and (iii) to recover damages for breach
of this Agreement.
(c) Each party shall use all commercially reasonable
efforts to mitigate any damages arising out of any breach or default
by the other party hereunder.
14.3 Licensee may, for an additional period of * only
from the date of any termination or expiration, on a non-exclusive
basis, sell and dispose of its inventory on hand of Articles (the
"Sell-Off Articles".) The sales of such Sell-Off Articles are
subject to all of the provisions hereof, including an accounting for
and the payment of Sales Royalty; provided, however, Sell-Off
Articles may not be advertised or promoted during such period.
Licensor reserves the right of first refusal with respect to any sale
of Sell-Off Articles. The accounting and payment shall be due within
thirty (30) days after the close of such * . No payments of
Guaranteed Minimum Royalty made during the Annual Period in which
this Agreement shall terminate or expire shall be credited against
any Sales Royalty payable on the sales of Sell-Off Articles. The
provisions of this Paragraph 14.3 shall in no event be applicable if
this Agreement should terminate pursuant to Paragraphs; 13.2(a); .
14.4 Except as provided in Paragraph 14.3 above, on the
expiration or termination hereof: (a) all rights of Licensee shall
terminate forthwith and shall revert immediately to Licensor, and all
payments of Sales Royalties and the Advertising Fee based upon Net
Sales theretofore made, shall become immediately due and payable; (b)
Licensee may no longer use any of the Licensed Marks and shall
promptly transfer to Licensor, free of charge, all registrations,
filings and rights with regard to any of the Licensed Marks which it
may have possessed at any time; and (c) Licensee thereupon shall
deliver to Licensor, free of charge, all samples, sketches and other
material in its possession which were designed by or approved by
Licensor or used in connection with the business conducted by
Licensee hereunder and all other material in its possession with any
of the Licensed Marks thereon. After the expiration or termination
hereof, Licensee shall not use or permit others to use any of said
sketches or other material in connection with Products or any other
merchandise, other than samples or sketches relating to basic
Articles and except as expressly permitted by Paragraph 3.3
hereinabove.
15. NOTICE
15.1 All reports, approvals, requests, demands and notices
required or permitted hereby shall be in writing and shall be deemed
to be duly given if personally delivered, if delivered by nationally-
recognized overnight courier or mail service, such as Federal Express
or Express Mail, if sent and acknowledged via facsimile transmission
or if mailed (by certified or registered mail, return receipt
requested) to the party concerned at its address set forth below:
.
To Licensor: c/o Kenneth Cole Productions, Inc.
at the address set forth on page 1:
Attention: PETER SIMMONDS,
Senior
Vice President, Licensing
Fax: (212) 713-6666
with a copy to: STANLEY A. MAYER,
Executive Vice President and Chief
Financial Officer
Fax: (201) 583-8577
and a copy to: PATRICE F. COHEN, Esq., Vice President
and
General Counsel
Fax: (201) 583-8588
To Licensee: at the address set forth on page 1:
Attention: RICHARD F. ZANNINO,
Senior Vice President - Finance and
Administration and
Chief Financial Officer
Fax: (212) 626-1888
with a copy to: ROBERTA S. KARP, Esq. Vice President -
Corporate Affairs and General Counsel
Fax: (201) 295-7803
Either party may, from time to time, designate a different address by
giving written notice to the other designating such address.
16. ASSIGNABILITY; BINDING EFFECT
16.1 (a) The performance of Licensee hereunder is of a
personal nature and, therefore, neither this Agreement nor the
license or other rights granted hereunder may be assigned,
sublicensed or transferred by Licensee and any such attempted
assignment, sublicense or transfer, whether voluntary or by operation
of law, directly or indirectly, shall be void and of no force or
effect, except as expressly permitted by Paragraphs 1.1(c)(ii),
1.1(d) or this Paragraph 16.1(a).
(b) Notwithstanding anything to the contrary contained in
Paragraph 16.1(a), Licensee may assign this Agreement to one of its
or its parent Company's wholly-owned direct or indirect subsidiaries,
provided that said subsidiary executes and delivers to Licensor a
duplicate original hereof, thereby binding it, as "Licensee," to the
terms of this Agreement.
(c) Notwithstanding anything to the contrary set forth
in this Paragraph 16.1, nothing herein shall be deemed to prohibit
Licensee's parent company from merging or consolidating with or being
taken over by or selling all substantially all of its assets to any
entity, whether public or private, or any of its affiliates or of
Licensee or any of its affiliates.
(d) Any assignment or transfer pursuant to this
Paragraph 16.1 shall not relieve the Licensee named herein from any
of its obligations hereunder and Licensee shall remain fully and
primarily liable therefor.
16.2 This Agreement shall inure to the benefit of and
shall be binding upon the parties, their respective successors,
Licensor's transferees and assigns and Licensee's permitted
transferees and assigns.
17. ARBITRATION; COURT ACTIONS
17.1 Except as specifically set forth in this Agreement,
any and all disputes, controversies and claims arising out of or
relating to this Agreement or concerning the respective rights of
obligations hereunder of the parties hereto [except disputes,
controversies and claims relating to or affecting in any way
Licensor's ownership of or the validity of the Licensed Marks or any
registration thereof, or any application for registration thereof
(hereinafter referred to as ["Licensed Mark Disputes"]) or disputes
regarding breaches of confidentiality shall be settled and determined
by arbitration in New York, New York before the Commercial Panel of
the American Arbitration Association in accordance with and pursuant
to the then existing Commercial Arbitration Rules. The arbitrators
shall have the power to award specific performance or injunctive
relief and reasonable attorneys' fees and expenses to any party in
any such arbitration and the courts shall have similar power with
regard to that injunctive relief sought by Licensor pursuant to
Paragraph 14.2 above and with regard to Licensed Mark Disputes or
disputes regarding confidentiality (collectively "Court Actions").
However, in any arbitration proceeding arising under this Agreement,
the arbitrators shall not have the power to change, modify or alter
any express condition, term or provision hereof, and to that extent
the scope of their authority is limited. The arbitration award shall
be final and binding upon the parties and judgement thereon may be
entered in any court having jurisdiction thereof. The service of any
notice, process, motion or other document in connection with an
arbitration under this Agreement or for the enforcement of any
arbitration award hereunder may be effectuated in the manner in which
notices are to be given to a party pursuant to Section 15 above.
17.2 Court Actions shall be brought in New York, New York in
any court having competent jurisdiction, except that Licensor also
may bring an injunctive proceeding in any jurisdiction where deemed
appropriate by reason of its subject matter. Licensor and Licensee
irrevocably submit to the jurisdiction of the State and Federal
courts in New York, New York and the courts in such other
jurisdictions in Court Actions and waive any claim or defense of
inconvenient forum or lack of personal jurisdiction in such forum
under any applicable law or decision or otherwise. Service of any
notice, process, motion or other document in connection with a Court
Action may be made in the same manner that notices may be given under
Section 15 hereinabove. However, Licensor and Licensee may serve
process in any manner permitted by the laws of the State of New York,
or by the State or Federal courts located therein, or by the laws or
courts of any such appropriate jurisdiction or any subdivision
thereof.
18. MISCELLANEOUS
18.1 (a) Licensee shall sell Articles to Licensor, its
Parent, affiliates and related entities in the Territory within the
Territory (collectively "Consumer Direct Entities") in such
quantities as may be reasonably required by such entities in
accordance with the applicable production calendar. All purchases of
Articles shall be billed and paid on terms of sale no less favorable
to Licensor than the same terms offered to any other retail customer
of Articles of Licensee, less a * discount to such Consumer
Direct Entities, including retail stores, catalogs and Websites.
Said discounts shall be taken off the gross wholesale selling price
at the time such orders are placed, before markdowns and irrespective
of close-outs. Delivery of Articles shall not be later than the
dates of delivery of the same Articles to any other customer.
Further, the outlet stores owned and operated by such Consumer
Direct Entities shall have a first option to purchase all Articles
sold as close-outs ("Closeouts"). Accordingly, before offering any
Closeouts to any third party, Licensee shall deliver to any such
Consumer Direct Entities a schedule of available Closeouts and such
Consumer Direct Entities shall notify Licensee, within ten (10)
business days after the receipt of any such schedule, which, if any,
of the available Closeouts such Consumer Direct Entities shall
purchase. The terms of any such purchase of Closeouts shall be
agreed to by such Consumer Direct Entities and Licensee. *
(b) At the request of Licensor, Licensee may sell Articles on a
non-exclusive basis, in such quantities as may be ordered from time
to time, to Licensor's authorized international distributors outside
the Territory (the "Foreign Distributors.") The prices to be paid
for Articles sold to such Foreign Distributors shall be *
"First Cost" shall be deemed to mean the costs of the components of
the Articles, and any other raw materials plus assembly costs, FOB
freight forwarder in the country of origin plus the cost of the
certificate of origin and the export declaration and the cost of
quota. All other terms of sale shall be no less favorable to said
Foreign Distributors then to any other customer of the Articles. In
the event Licensee shall sell Articles to any Foreign Distributor,
Licensee shall deal directly with such Foreign Distributor and shall
look solely to it in such dealings. No Sales Royalty or Advertising
Fee shall be due and payable on any sales under this Paragraph
18.1(b); neither shall Licensee include such sales in the calculation
of its Guaranteed Minimum Net Sales hereunder.
18.2 Neither Licensor nor Licensee shall, at any time during the
term of this Agreement, disclose or use for any purpose, other than
as specifically required under this Agreement or by any law, statute,
regulation or rule required of any publicly-held company or as
permitted by Paragraph 6.5 hereinabove, any acquired confidential
information or data relating to the business operations of the
other party or the terms and conditions of this Agreement.
18.3 Subject to the terms, provisions and covenants of this
Agreement, Licensor may, at any time after Licensee has notified
Licensor that it intends not to exercise any renewal right hereunder,
or after Licensor notifies Licensee that Licensor shall not renew
this Agreement, negotiate and enter into agreements with third
parties pursuant to which it may grant licenses to use any or all of
the Licensed Marks in connection with the manufacture, distribution
and/or sale of Products in the Territory, but only if, pursuant to
such third party agreements, the collections of such Products are not
shipped prior to the termination of this Agreement. Nothing herein
shall be construed to prevent any such new licensee from showing such
Products and accepting orders therefor prior to the termination
hereof.
18.4 This Agreement shall be construed and interpreted in
accordance with the laws of the State of New York applicable to
agreements made and to be performed in said State, contains the
entire understanding and agreement between the parties hereto with
respect to the subject matter hereof, supersedes all prior oral and
written understandings and agreements relating thereto and may not be
modified, discharged or terminated, nor may any of the provisions
hereof be waived orally. With respect to any matters in connection
with any of the Licensed Marks, the laws of the applicable
jurisdiction shall apply.
18.5 Nothing herein shall be construed to constitute the
parties hereto as partners or as joint venturers, or either as agent
of the other. Under no circumstances shall Licensee hold itself out
as an affiliate or subsidiary of Licensor or as being associated with
Licensor other than as a duly authorized Licensee of the Licensed
Marks. Licensee shall have no power to obligate or bind Licensor in
any manner.
18.6 No waiver by a party, whether express or implied, of
any provision hereof, or of any breach or default thereof, shall
constitute a continuing waiver of such provision or of any other
provision of this Agreement. Acceptance of payments by Licensor
shall not be deemed a waiver of any violation of or default under any
of the provisions hereof by Licensee.
18.7 Licensor and Licensee represent and warrant to each other
that it has not dealt with any broker, finder or other person in
connection with the negotiation and execution of this Agreement.
Each party agrees to and shall indemnify and hold harmless the other
from any and all losses, costs, damages, and expenses arising out of
or in connection with claims of any kind which assert the inaccuracy
or breach by the indemnitor of the above representation and warranty,
including, without limitation, attorneys' fees and court costs.
18.8 Notwithstanding any other provision of this Agreement and
except for any monetary obligations due under this Agreement, any
performance by Licensee or Licensor under this Agreement shall be
extended for the period of any delay caused by an act of God or the
public enemy, civil war, insurrection or riot, fires, explosions,
major accidents, governmental priorities, restrictions or allocations
or strikes or labor disputes, but in no event shall such extension be
longer than one hundred eighty (180) days. In any such event, the
party affected thereby shall promptly notify the other in writing of
such affected party's inability to perform.
18.9 (a) Licensor hereby represents and warrants to Licensee
that: (i) it is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware; (ii) it has
all requisite power and authority to execute and deliver this
Agreement and to carry out the transactions contemplated hereby; and
(iii) the execution by Licensor of this Agreement and the execution
of the transactions contemplated hereby do not and shall not conflict
with, result in a breach of the terms and conditions of, or
constitute a default under Licensor's articles of incorporation or
bylaws, or to the best of Licensor's knowledge violate any law,
regulation or court order applicable to Licensor, or any license,
agreement, contract, indenture or other instrument to which Licensor
is now a party or by which Licensor or its assets may be bound or
affected.
(b) Licensee hereby represents and warrants to Licensor that:
(i) it is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware; (ii) it has all
requisite power and authority to execute and deliver this Agreement
and to carry out the transactions contemplated hereby; and (iii) the
execution by Licensee of this Agreement and the execution of the
transactions contemplated hereby do not and shall not conflict with,
result in a breach of the terms and conditions of, or constitute a
default under, Licensee's articles of incorporation or bylaws, or to
the best of Licensee's knowledge violate any law, regulation or court
order applicable to Licensee or any license, agreement, contract,
indenture or other instrument to which Licensee is now a party or by
which Licensee or its assets may be bound or affected.
18.10 Promptly after the execution hereof, Licensor and
Licensee shall each prepare and file such applications as are
necessary to obtain notification from the U.S. Federal Trade
Commission or the U.S. Department of Justice that all applicable
waiting periods under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended. have expired or terminated with respect to
the transactions contemplated hereby. Each of Licensor and Licensee
shall prosecute all such applications in a diligent manner; provided,
however, neither Licensor nor Licensee shall be obligated to divest
itself of any assets or reorganize its existing business structures
or those of its affiliates. Licensor and Licensee shall cooperate
with each other in connection with, and shall take all steps
reasonably necessary, proper or desirable to expedite, the
prosecution of such applications. Licensor and Licensee shall bear
its own costs in connection with such filings.
18.11 In consideration of the grant of the license hereunder,
Licensee shall pay to Licensor the sum of *
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement the day and year first above written.
K.C.P.L., INC.
By:
________________________________
Its:
_______________________________
L.C.K.C., LLC
By:__________________________________
Its:__________________________________
EXHIBIT "1"
Kenneth Cole Product Approval Form
Licensee :
Product Category :
Style/ Reference No: Date:
Line: Kenneth Cole New York Season:
Reaction Kenneth Cole
Unlisted
Unlisted.com
Concept Approval Sketch/ Description:
Materials:
Approval Signature:
Date:
Final Sample Approval:
Date:
Production Approval:
Date:
EXHIBIT "2"
BUSINESS PLAN AND MARKETING PLAN SAMPLE
BUSINESS PLAN AND MARKETING PLAN SAMPLE
I. BUSINESS PLAN
A. SALES OBJECTIVES-All BY BRAND
1. PROJECTED VOLUMES
2. PROJECTED DOORS
3. DISTIRIBUTION STRATEGIES
4. ANALYSIS OF PAST SEASON VOLUMES
B. ADVERTISING, MARKETING, PROMOTION AND PUBLIC RELATIONS
OBJECTIVES BY BRAND
C. SHOP-IN-SHOPS BY BRAND
1. STRATEGIES
2. PROJECTED EXPENDITURES , CUSTOMER, DOOR
D. ORGANIZATIONAL STRUCTURE
E. LAUNCHES OF BRANDS, NEW CATEGORIES
F. ANALYSIS OF COMPETITION INCLUDING PRICING
G. QUALITY, SOURCING AND OPERATIONAL ISSUES
II. MARKETING PLAN
A. STRATEGY, INCLUDING EXPENDITURES, BY BRAND AND TYPE OF
ADVERTSING VEHICLES, MARKETING AND PUBLIC RELATIONS
B. LAUNCH ACTIVITIES BY BRAND
C. COLLATERAL SUPPORT BY BRAND
D. MEDIA PLAN
1. ADVERTISING SCHEDULE BY BRAND FOR ALL PRINT MEDIA
2. RADIO AND TELEVISION, IF APPLICABLE, BY BRAND
SCHEDULE "A"
TERRITORY
*
SCHEDULE "B"
PRODUCTS
Suits
Dresses
Trousers
Sport Jackets
Blouses
Jeanswear
Activewear
Skirts
Pants
Shorts
Jeans
Overalls
Shirts
T-shirts
Vests
Sweaters
Tops
Bottoms
Bodywear/exercisewear
Cardigans
Rompers
Culottes
Jumpsuit
Blazers
Tunics
Jerseys
Sweatshirts
Sweatpants
Tank Tops
SCHEDULE "C"
GUARANTEED MINIMUM BRAND NET SALES
*
SCHEDULE "D"
*
SCHEDULE "E"
*
SCHEDULE "F"
PROHIBITED COMPETITORS
*
SCHEDULE "G"
GROSS COSTS FOR SHOP-IN-SHOPS (expressed per square foot)
*
SCHEDULE "H"
CUSTOMER LISTING
*
SCHEDULE "I"
DOOR ASSUMPTIONS
*
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 36,616
<SECURITIES> 0
<RECEIVABLES> 47,309
<ALLOWANCES> (769)
<INVENTORY> 39,160
<CURRENT-ASSETS> 123,816
<PP&E> 29,135
<DEPRECIATION> 10,376
<TOTAL-ASSETS> 150,723
<CURRENT-LIABILITIES> 25,546
<BONDS> 0
0
0
<COMMON> 145
<OTHER-SE> 116,123
<TOTAL-LIABILITY-AND-EQUITY> 150,723
<SALES> 207,129
<TOTAL-REVENUES> 216,913
<CGS> 119,538
<TOTAL-COSTS> 119,538
<OTHER-EXPENSES> 70,445
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (580)
<INCOME-PRETAX> 27,510
<INCOME-TAX> 11,142
<INCOME-CONTINUING> 16,368
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,368
<EPS-BASIC> 1.24
<EPS-DILUTED> 1.18
</TABLE>
