EXHIBIT 10.3
LICENSING AGREEMENT
BETWEEN THE UNDERSIGNED:
KENZO,
A French company, the registered office of which is located at 3 Place des
Victoires, 75001 PARIS, FRANCE, represented by MR. RICHARD SIMONIN and MR. YVES
ALEMANY,
Hereinafter referred to as "KENZO",
ON THE ONE HAND
AND:
CYGNE DESIGNS INC.,
A US company, the registered office of which is located at 1372 Broadway, NEW
YORK, NY 10018, USA, represented by MR. BERNARD MANUEL, and MR. IRVING BENSON
Hereinafter referred to as the "LICENSEE"
ON THE OTHER HAND
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TABLE OF CONTENTS
Pages
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ARTICLE 1: PURPOSE 4
ARTICLE 2: TERRITORY 4
ARTICLE 3: TERM 5
ARTICLE 4: CREATION 6
ARTICLE 5: MANUFACTURE 7
ARTICLE 6: KENZO VISUAL IDENTITY STANDARDS 8
ARTICLE 7: COLLECTIONS TIMETABLE 10
ARTICLE 8: DISTRIBUTION 10
ARTICLE 9: INFORMATION TO BE PROVIDED TO KENZO 13
ARTICLE 10: KENZO INSPECTIONS 14
ARTICLE 11: ROYALTIES 15
ARTICLE 12: ADVERTISING INVESTMENT 15
ARTICLE 13: MINIMUM ROYALTIES 16
ARTICLE 14: FINANCIAL PAYMENTS 17
ARTICLE 15: SUB-LICENSES - NON-ASSIGNABILITY 17
ARTICLE 16: PROTECTION OF KENZO TRADEMARKS 18
ARTICLE 17: PROTECTION OF MODELS 19
ARTICLE 18: TERMINATION 19
ARTICLE 19: END OF THE AGREEMENT 20
ARTICLE 20: MISCELLANEOUS 22
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PREAMBLE
1) KENZO has exclusive rights to the title to the KENZO trademark and the
derivatives thereof. The status of the registrations and filings of said
trademark in the Territory for the products which are governed by the
present agreement are set forth in Annex.
The international reputation of the KENZO trademark, the quality of the
products and techniques developed by KENZO, the qualities of the articles
sold, the careful selection of points of sale and the timely delivery of
orders have, in particular, led to KENZO's commercial success.
2) In light of:
- the general obligation of the LICENSEE:
o to maintain the reputation of the KENZO trademark and to act
consistently therewith;
o to ensure particularly careful manufacture and distribution
consistent with the renown and reputation of the KENZO trademark;
o to adopt the same standard and level of quality as the other
ready to wear KENZO lines;
o to only use articles bearing the KENZO JEANS label for sale
purposes;
o to adopt a selective sales point marketing policy;
o to accept that the KENZO Homme line will be distributed in the
Territory (see article 2);
o not to interfere with the KENZO's partner who will eventually
distribute this KENZO Homme line in the Territory;
- and the sales objectives and business plan to be provided to KENZO by
the LICENSEE by the end of September 1996,
KENZO hereby concludes the present agreement with the LICENSEE. It is
hereby specified that the general obligation set forth above, the
objectives and the LICENSEE's business plan constitute for KENZO the
rationale and the determinative basis for its consent to conclude the
present agreement and shall determine the spirit in which the present
agreement shall be interpreted in the event of any difficulty in the
performance hereof.
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IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1: PURPOSE
1-1) KENZO hereby grants to the LICENSEE, which accepts, an exclusive license
for the manufacture and distribution of THE MEN'S AND WOMEN'S READY TO WEAR
GARMENTS LINE BEARING THE KENZO JEANS LABEL. The products will have to be
completed and manufactured based on KENZO's designs and/or those approved
in advance by KENZO.
1-2) This KENZO JEANS line will have to be an interpretation of the original
KENZO JEANS line for the US market and shall be developed with appropriate
specifications for this market, without interfering with the original KENZO
Homme line.
The concept of this US KENZO JEANS line, the number of models to be
included in the collection, the variety of fabrics, the number of models
per references of items (slacks, trousers, blousons, jackets etc....) shall
be mutually agreed by the parties.
In case of an eventual misunderstanding of the interpretation of the
concept of the KENZO JEANS line, both parties agreed to discuss amicably
with a view to find a mutual arrangement.
The Products price policy will have to be competitive but to remain in
harmony with other KENZO lines however.
1-3) The Products will have to be identified very clearly in order to avoid any
confusion with other men's or women's ready to wear KENZO lines: in
particular all the "jacquard" or print designs if they use a KENZO logo, it
will be strictly compulsory to use KENZO JEANS logo and not KENZO alone.
1-4) The LICENSEE may manufacture and/or distribute, directly or otherwise,
other men's or women's ready to wear lines only after having so informed
KENZO prior to making any such commitment, and consulted with KENZO to
discuss any issue of compatibility of such lines with KENZO JEANS.
In the event KENZO grants its consent, the LICENSEE hereby warrants that
the manufacture and/or distribution of said new trademarks shall not change
the attention which it devotes to the Products and that it shall continue
to devote the same care thereto.
ARTICLE 2: TERRITORY
2-1) The present agreement grants to the LICENSEE the exclusive right to
manufacture and sell the Products in THE AREA GOVERNED BY THE NORTH
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AMERICAN FREE TRADE AGREEMENT (I.E. USA, CANADA AND MEXICO)
hereinafter referred to as the "Territory".
It is hereby specified that this exclusive manufacturing and marketing
right is granted to the LICENSEE only for local markets in the
above-indicated countries and not for the duty free places within the
Territory.
2-2) KENZO agrees the LICENSEE manufacture some Products in Asia. The LICENSEE
shall notify KENZO at the beginning of each season of any other manufacture
outside the Territory.
2-3) The LICENSEE may sell the Products in countries which are not part of the
Territory with the prior written consent of KENZO. Said consent shall be
provided season-by-season and country-by-country pursuant to a business
plan. However, said consent shall not constitute a grant of any rights to
an indemnity for the LICENSEE if KENZO does not extend its consent for the
following season or grants a license to a third party for one or more of
said countries.
KENZO may subject its consent for sales outside of the Territory to the
establishment thereby of specific financial conditions.
In all cases, the LICENSEE must pay to KENZO the royalties for said sales
outside the Territory over and above the royalties based on the sales
within the Territory (therefore, over and above the minimum requirements,
as applicable).
Accordingly, in no event shall the royalties outside of the Territory be
added to those used for the Territory with respect to said minimum
requirements.
ARTICLE 3: TERM
THE PRESENT AGREEMENT SHALL GOVERN FIVE YEARS BEGINNING WITH THE SPRING/SUMMER
1997 SEASON AND, CONSEQUENTLY, SHALL TERMINATE UPON COMPLETION OF THE
AUTUMN/WINTER 2001 SEASON.
It shall be automatically renewed for the same term if the parties have met
during the month of June 2000 to assess the operation of the license during its
initial period and to define new minimum royalties. In no event shall said
minimum royalties during any license renewal period be less than the higher of
the following amounts:
o the royalty levels reached during the last year of the present
license, or
o the minimum royalties set for the last year of the present license
(i.e. US $450,000.00).
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ARTICLE 4: CREATION
4-1) In order to develop the US KENZO JEANS line in accordance with the
specifications of the US market, the specific "designer/merchandiser" in
charge of the KENZO STUDIO line shall be also responsible for the
interpretation of the original KENZO JEANS line for the US market.
The parties agree that all expenses relating to this
"designer/merchandiser" in charge of the KENZO STUDIO line as well as the
US KENZO JEANS line (fees, all monthly financial compensations, travel
costs specially between Paris and the USA, daily expenses, hotels,
restaurants, phone and fax costs, shopping, equipments, administrative
assistance services, French language instruction, discount on KENZO
merchandise, etc.... this list being not limitative) shall be shared
equally between KENZO and the LICENSEE. Therefore, the LICENSEE shall
reimburse the half amount of these KENZO's expenses.
4-2) KENZO shall supply to the LICENSEE:
- sketches,
- patterns,
- assortment of color ideas, suggested combinations of colors,
- swatches of fabrics and materials.
In the event the LICENSEE requires an original KENZO JEANS collection (or
any other original KENZO collection), this collection will be sold to the
LICENSEE at the KENZO's export price.
4-3) From the original KENZO JEANS collection, the LICENSEE will have the
possibility to propose to KENZO any modification of design or style or
material in order to meet the request and specifications of the US market.
However, these LICENSEE's proposals shall fully conform with the plan of
collection and with the KENZO trademark fame.
Any LICENSEE's proposals shall be discussed with KENZO and will have to
receive the KENZO's approval prior inclusion within the collection.
IN THE EVENT OF APPROVAL BY KENZO AND THE INCLUSION THEREOF IN THE
COLLECTION, SAID LICENSEE'S PROPOSALS SHALL BECOME THE EXCLUSIVE PROPERTY
OF KENZO AND THE LICENSEE HEREBY WARRANTS KENZO AGAINST ANY CLAIMS BY THIRD
PARTIES REGARDING TITLE TO SAID ITEMS. IN ADDITION, THE LICENSEE HEREBY
WARRANTS WITH RESPECT TO KENZO THAT ITS EMPLOYEES SHALL WAIVE ANY PROPERTY
RIGHTS IN SAID ITEMS.
4-4) IN ANY EVENT, KENZO SHALL BE DEEMED TO BE THE SOLE CREATOR AND TITLE HOLDER
TO THE ORIGINAL DESIGNS AND MODELS CREATED OR APPROVED THEREBY. THEREFORE,
KENZO MAY FREELY USE SAID DESIGNS AND MODELS OUTSIDE OF THE TERRITORY.
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The LICENSEE shall only be authorized to use said designs and models
pursuant to the present agreement for the manufacture and distributions of
the Products within the Territory. As a result, the LICENSEE shall be
prohibited from using said items, which are the property of KENZO, for its
personal requirements and/or for labels other than KENZO JEANS.
ARTICLE 5: MANUFACTURE
5-1) All models or items manufactured by the LICENSEE based on designs developed
or approved by KENZO must be so manufactured using very high quality and
durable materials and colors approved in advance by KENZO.
All said models or items must be marketed exclusively under the KENZO JEANS
label (and not KENZO alone).
5-2) The LICENSEE shall submit to KENZO for approval the final prototype of all
items. It is hereby specified that any modifications to the model must also
be approved in advance by KENZO and that said submission to KENZO must take
place in accordance with a timetable which allows KENZO to request and
obtain any modifications necessary prior to production and/or marketing.
Except in the event it is submitted to and approved by KENZO during a
collection meeting, any item (prototype, model, etc.) submitted to KENZO
for approval shall be deemed approved thereby if it is not refused in
writing ten (10) days following effective receipt thereof by KENZO.
The LICENSEE shall not manufacture, distribute, advertise or sell any item
before the sample (or the prototype) has been approved by KENZO. All goods
manufactured, distributed or sold by the LICENSEE shall fully conform with
the approved samples (or prototypes) and no modification thereof shall be
permitted without the prior written approval by KENZO.
5-3) The designs and models selected shall in all events be kept confidential
until the first presentation to customers and/or the press, which events
shall be determined with KENZO's consent. In addition, the LICENSEE shall
be obligated to preserve the confidentiality of any of KENZO's designs and
models which are not manufactured and/or marketed.
5-4) The KENZO JEANS label may only be affixed on Products which conform fully
with the quality and manufacture of the models, designs and prototypes
created or accepted by KENZO.
KENZO shall have the right, which the LICENSEE hereby acknowledges, to
inspect the quality, conformity and finish of the articles which are to
bear the KENZO JEANS label and to prohibit the sale of those articles which
do not meet the quality requirements and/or those articles which have not
been submitted to
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KENZO, after having forwarded notice to this effect to the LICENSEE by
registered letter, return receipt requested, or by telex.
Each season, it will be therefore the responsibility of the LICENSEE, prior
to his sale start, to inform KENZO of the time when collection will be
fully ready for an eventual final inspection.
5-5) Each season, for the requirements of the KENZO Press and Licenses
Departments, the LICENSEE shall provide at no cost to KENZO and outside of
the advertising investment one complete collection of Products.
Over and above this collection, the cost of any additional pieces shall be
invoiced to KENZO at the cost thereof to the LICENSEE.
5-6) The LICENSEE agrees to refrain directly or indirectly manufacturing
Products in quantities which are not consistent with the orders received.
With respect thereto the percentage of manufacture shall not exceed 110% of
the anticipated orders.
5-7) The LICENSEE may subcontract the manufacture of some Products, provided
that KENZO shall have been notified in writing as to the subcontractors
being used prior to beginning of production for each season.
IN ALL CASES, THE LICENSEE SHALL REMAIN LIABLE TO KENZO FOR THE SERVICES
PROVIDED BY SAID SUBCONTRACTORS.
The LICENSEE hereby agrees also to regularly inform KENZO of any difficulty
arising between it and its subcontractors.
In addition, KENZO's right to inspect (see Article 10) shall also apply to
any subcontractors. Accordingly, the LICENSEE hereby agrees to so provide
in its agreements with its subcontractors.
ARTICLE 6: KENZO VISUAL IDENTITY STANDARDS
6-1) A Visual Identity Standards Booklet containing the shapes, colors,
trademark, labeling and/or brand indicators and any logo to be placed on
the Products, their packaging, sales material and/or the LICENSEE's
administrative documents (letterhead, orders, invoices, etc.) shall be
provided to the LICENSEE by KENZO.
AS A GENERAL MATTER, THE LICENSEE HEREBY AGREES TO COMPLY STRICTLY WITH THE
CONTENTS OF THE BOOKLET AND TO ENSURE THAT ITS OWN CUSTOMERS COMPLY
THEREWITH.
Except if KENZO has otherwise agreed in writing, the LICENSEE shall be
prohibited from affixing any logos, trademarks or indications whatsoever
other
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than those listed above and provided by KENZO on the Products and/or their
packaging, those which indicate the composition of the fabric or the type
of fibers used, those which indicate how to care for the product and those
which are mandatory pursuant to imperative local law and regulations.
In addition, the LICENSEE must submit all packaging, wrapping, documents
and materials such as boxes, bags, catalogues, posters, etc....which are
used for the sale and promotion of the Products for KENZO's prior approval.
Said submission must take place in accordance with a timetable which allows
KENZO to request and obtain any modifications necessary prior to production
and/or marketing.
If the LICENSEE so desires, KENZO may undertake a graphic and advertising
study at the LICENSEE's expense.
Any proposal from the LICENSEE submitted to KENZO for approval shall be
deemed approved if it has not been refused in writing by KENZO within
twenty (20) days of the actual receipt thereof by KENZO.
In accordance with the hereabove paragraphs, upon reasonable request made
by KENZO, the LICENSEE shall furnish samples of the advertising material,
labeling, packaging and boxing thereof, to allow KENZO to verify that the
specifications regarding the quality of marketing and advertising are fully
complied with by the LICENSEE.
6-2) IN ADDITION, THE LICENSEE SHALL ENSURE THAT ALL DISTINCTIVE KENZO LABELS
(STICKERS, LOGOS, TRADEMARK INDICATORS, WRAPPING, ETC.) USED BY ITS
CUSTOMERS AT THEIR POINTS OF SALE OR USED THEREBY TO INDICATE THE SALE OF
KENZO JEANS LINE FULLY COMPLY WITH THE STANDARDS SET BY KENZO (SEE THE
VISUAL IDENTITY STANDARDS BOOKLET).
SIMILARLY, THE LICENSEE MUST PROHIBIT ITS CUSTOMERS FROM USING A STORE SIGN
OR OTHER INDICATION WHICH MIGHT LEAD THE PUBLIC TO BELIEVE THAT THE STORE
ONLY SELLS KENZO TRADEMARK GOODS OR IS A KENZO SINGLE-BRAND BOUTIQUE WHEN
THIS IS NOT THE CASE.
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ARTICLE 7: COLLECTIONS TIMETABLE
The collections timetable shall be as follows:
===============================================================================
SPRING/SUMMER AUTUMN/WINTER
COLLECTIONS COLLECTIONS
- -------------------------------------------------------------------------------
Supply of informations by KENZO February September
- -------------------------------------------------------------------------------
Cooperation in PARIS between
KENZO and the LICENSEE for the
selection of prints fabrics,
materials . . . March/April October/November
- -------------------------------------------------------------------------------
Prototypes ready for approval by
KENZO May December
- -------------------------------------------------------------------------------
Show to the LICENSEE's
distributors and customers September March
- -------------------------------------------------------------------------------
Distribution starts February August
===============================================================================
The LICENSEE's product manager in charge of the Products shall come to Paris
once or twice every season to discuss plan of collection, selection of suitable
fabrics as well as any other technical matters related to the preparation of the
Products collection.
ARTICLE 8: DISTRIBUTION
8-1) The LICENSEE shall distribute the Products throughout all the Territory.
If during 2 successive seasons, the LICENSEE does not market the Products
in a significant manner within certain countries within the Territory,
KENZO shall have the right to immediately exclude said countries from the
Territory, provided, however, that Canada and Mexico shall not be excluded
even if sales in these countries do not begin before 1998.
8-2) The LICENSEE shall provide KENZO with the name of its representative who is
authorized to handle all problems with KENZO which may arise in connection
with the daily management of the present license.
8-3) The general policy and coordination of the distribution of the Products
shall be determined by mutual agreement between KENZO and the LICENSEE.
In particular, in order to protect the KENZO trademark and to ensure that
the distribution of the Products within the Territory is consistent, the
LICENSEE hereby agrees to take into consideration KENZO's recommendations
and general policy, subject to local regulations regarding marketing and
prices.
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8-4) The Products distribution shall always be organized by the LICENSEE clearly
in accordance with the US concept.
The LICENSEE agrees that Product sales display sites shall be located on
commercial premises which correspond to the quality and high reputation of
the KENZO trademark.
If there is any problem concerning the quality and the choice of the points
of sales, a discussion should be held immediately between KENZO and the
LICENSEE to settle the matter according to the best interest of KENZO brand
image policy.
The LICENSEE shall be prohibited from using display or sales sites which
operate under a name of a direct competitor of KENZO or the name of a large
distributor which is affiliated with the discount sector.
8-5) The LICENSEE shall inform KENZO in advance of its future distributors
and/or agents in each part of the Territory in order to maximize the
synergies between the KENZO distributors. KENZO reserves the right to
refuse any such entities on an exceptional basis, in good faith and with
justification therefor.
8-6) The LICENSEE hereby acknowledges the importance of KENZO-single brand
stores for the development of the image and reputation of the KENZO
trademark.
As a result, the LICENSEE hereby agrees to directly fill itself the orders
from said KENZO-single brand stores in the event that its local distributor
defaults or in the event that there are difficulties between said
distributor and the KENZO-single brand store(s) in question.
In addition, KENZO-single brand stores shall receive an 8% discount on the
local wholesale price regardless of whether they are supplied with Products
directly from the LICENSEE or through distributor thereof.
8-7) The location, space and design of any specific KENZO JEANS boutiques or
other specific retail outlet to be established by the LICENSEE for the sale
of the Products in the Territory shall be previously approved in writing by
KENZO. Plans, designs and concept of such boutique or retail outlet shall
be submitted for approval prior to execution in order to maintain KENZO
identity. Such materials once approved by KENZO can be used thereafter
unless they are changed in full or on a large scale. Any material
alteration to the approved design shall also be approved in writing by
KENZO.
The outfitting of stands and/or corners at which the Products will be sold
or displayed (department stores, salons, etc.), as well as "point of sale
materials" must also conform with the quality image of the KENZO trademark.
They must be approved in advance by KENZO.
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The expenses for creating these specific KENZO JEANS boutiques, stands,
corners and sales material shall be borne by the LICENSEE.
8-8) The LICENSEE shall reserve a specific place within its show room in NEW
YORK for the display of only the Products. The design and outfittings of
this place shall be approved by KENZO to reflect the KENZO identity.
8-9) If a distributor does not possess or no longer possesses all of the
characteristics which are reasonably required thereof with respect to
display window presentation, the general maintenance and appearance of the
KENZO stand or sales point, the LICENSEE hereby agrees to refuse any orders
for the following seasons.
8-10) The LICENSEE shall be solely liable for the successful filling of
orders received thereby from its customers.
The LICENSEE shall be obligated to comply with the local usual delivery
deadlines in the profession.
The LICENSEE hereby also agrees to ensure that the Products shall be
shipped in appropriate packaging and via appropriate means.
8-11) Without KENZO's prior written consent, the LICENSEE shall be prohibited
from:
- directly or indirectly discounting the Products outside of its usual and
regular customer network; and
- using the KENZO trademark and/or the KENZO JEANS label in any manner
whatsoever (other than those set forth below) in any advertising or
promotional discount or inventory liquidation activity.
If a residual inventory of Products exists at the end of any season, said
residual inventory must only represent a very small percentage of the total
production for said season.
The LICENSEE shall attempt to liquidate said residual inventory by
successively taking the usual steps in this area: sales to its employees at
sacrifice prices, sales of the Products with labels clearly defaced and cut
in those stores or countries agreed upon with KENZO. The opening of outlet
stores in the Territory will be permissible, provided that no in - season
merchandise be sold in these stores.
Any other activity to liquidate inventory must be approved in advance by
KENZO. KENZO may not unreasonably withhold its approval provided that the
LICENSEE suggests its own steps to reduce and/or eliminate residual
inventory which do not harm the image of the KENZO trademark.
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ARTICLE 9: INFORMATION TO BE PROVIDED TO KENZO
9-1) The LICENSEE shall provide the following information to KENZO:
a) Regarding the Spring/Summer season in year "x":
o in July of year x-1: the provisional sales and turnover objectives
for that season;
b) Regarding the Fall/Winter season in year "x":
o in January of year x: the provisional sales and turnover objectives
for that season;
c) Regarding each season:
o prior to the 15th and 30th of each month, the orders received
during the preceding fifteen days;
o prior to the 15th of each month, the sales invoiced by season (see
the definition in paragraph 11-2) during the preceding month; and
o at the beginning of each season, the full "sales book" including,
inter alia, references and wholesale prices for all Products in
the collection.
It is hereby specified that, first, the sales, order and effective sales
objectives shall be expressed by country, number of customers and total
number of pieces and, second, THAT THE FINAL ANNUAL SALES INVOICED MUST BE
CERTIFIED BY THE LICENSEE'S STATUTORY AUDITOR(S).
9-2) In addition, at the end of the sales for each season, the LICENSEE shall
inform KENZO of:
- the sales for said season by product reference;
- a list of Products sales points by country;
- the deliveries compared to pre-season orders; and
- the residual inventory in number of pieces and value (using the
LICENSEE's production value).
9-3) Generally, the LICENSEE shall regularly inform KENZO of the market, its
distribution policy and the activities of competitors.
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ARTICLE 10: KENZO INSPECTIONS
10-1) The LICENSEE hereby acknowledges that KENZO has the right to monitor
compliance with the present agreement with respect to the Products
manufactured, subcontracting, the quality of materials used,
advertising and the use of the KENZO trademark by the LICENSEE and its
customers, deliveries and distribution of the Products, financial
obligations, etc.
10-2) During the term of the present agreement and until completion of the
last sales, the LICENSEE must maintain complete, detailed and accurate
accounting records which show the quantity of Products manufactured
and/or sold. In addition, it must preserve all supporting documentation
used in the calculation of the royalties owed to KENZO, as well as all
supporting documents regarding sales of Products without labels and
inventory liquidation.
During the term of the present agreement and for a period of 12 months
following the expiration hereof, KENZO and/or its authorized
representatives shall have access to said accounting records and/or
supporting documentation, provided that the LICENSEE is notified thereof
at least one month in advance. KENZO and/or its representatives must keep
any information which is not related to the Products of which they may
become aware during said visits confidential.
In addition, in light of the management requirements of LVMH, a company
listed on the Paris Stock Exchange which consolidates KENZO's activities,
every two years an audit of the LICENSEE's accounting records with respect
to this licensing agreement and, generally, of the KENZO-related
activities of the LICENSEE, shall be conducted by KENZO (or by auditors
designed by KENZO).
If an inspection of the LICENSEE's books by KENZO and/or the audit
described above shows errors or differences to KENZO's detriment during
any whatsoever of the years inspected, the LICENSEE must immediately
correct said error and pay KENZO the balance which is due thereto.
In addition, if for a given year, said errors or differences equal more
than 5% of the total of the royalties paid by the LICENSEE during said
year, the total cost of said accounting inspection or audit shall be borne
by the LICENSEE and reimbursed to KENZO.
Such inspections and audits at KENZO's initiative may begin with the
effective date of the present license.
10-3) KENZO shall also have access to the LICENSEE's facilities (commercial and
administrative offices, show rooms, manufacturing sites, warehouses, etc.)
and to those of its sub-contractors and/or sub-LICENSEEs upon providing 10
days notice.
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ARTICLE 11: ROYALTIES
11-1) IN RETURN FOR THE KNOW-HOW AND THE CREATION AND IN RETURN FOR THE RIGHT
TO USE THE KENZO TRADEMARK AND THE KENZO JEANS LABEL, THE LICENSEE
SHALL PAY A ROYALTY TO KENZO FIXED AT 8% OF THE INVOICED SALES AS
DEFINED IN PARAGRAPH 11-2.
11-2) The sales used as the basis for calculating the royalties owed by the
LICENSEE shall cover THE NET CONSOLIDATED WHOLESALE TURNOVER INVOICED
BY THE LICENSEE, ITS SUBSIDIARIES AND ITS SUB-LICENSEES TO THIRD
PARTIES (EXCLUDING ANY AFFILIATES OF THE LICENSEE).
ARTICLE 12: ADVERTISING INVESTMENT
The LICENSEE hereby acknowledges that the reputation and distribution of the
KENZO trademark depends, inter alia, on direct and indirect media advertising,
contacts maintained with the media, fashion shows and presentations, organizing
exceptional events, etc.
AS A RESULT, THE LICENSEE HEREBY AGREES TO INVEST EACH YEAR A MINIMUM BUDGET FOR
LOCAL PUBLICITY AND PROMOTION FOR THE PRODUCTS AND TO PROVE IT TO KENZO BY
SENDING DOCUMENTARY REPORTS AND RELATIVE JUSTIFICATIONS.
THIS MINIMUM BUDGET WILL BE:
- - DURING THE TWO FIRST YEARS (I.E. 1997 AND 1998): 6% OF THE ANNUAL TURNOVER
DEFINED IN PARAGRAPH 11-2,
- - AS FROM THE THIRD YEAR: 3% OF THIS ANNUAL TURNOVER.
ANY ADVERTISING, ANY PUBLICITY, ANY PUBLICITY OR PROMOTIONAL CAMPAIGN, WHICH IS
PLANNED BY THE LICENSEE MUST BE SUBMITTED TO KENZO FOR APPROVAL BEFORE THE
REALIZATION THEREOF. IN THIS RESPECT, THE LICENSEE SHALL INITIATE ONLY PUBLICITY
OR ADVERTISING WHICH HAS BEEN APPROVED BY KENZO.
In the event that, at the end of the year, and after the application of the last
amounts which are coming to be posted to its credit, the budget would show any
available balance, such available amount will be carried forward to the
following year in order to increase the budget thereof.
AT THE TIME OF EXPIRY OF THIS AGREEMENT, THE LICENSEE SHALL PAY KENZO THE
BALANCE OF THE ADVERTISING BUDGET NOT SPENT DURING THE LAST YEAR OF THIS
AGREEMENT.
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ARTICLE 13: MINIMUM ROYALTIES
13-1) DURING THE ENTIRE TERM OF THE PRESENT AGREEMENT, THE LICENSEE HEREBY
WARRANTS TO KENZO THAT DURING A GIVEN YEAR (S/S + A/W SEASONS), THE
ROYALTIES PAID BY THE LICENSEE TO KENZO FOR SAID YEAR SHALL NOT BE LESS
THAN THE FOLLOWING MINIMUM AMOUNTS:
=============================================
Minimum Guaranteed
Year Royalties
---------------------------------------------
1997 US $ 200,000.00
1998 US $ 300,000.00
1999 US $ 350,000.00
2000 US $ 400,000.00
2001 US $ 450,000.00
=============================================
13-2) Including in the event of destructive accident (fire, flood, explosion,
etc.) which makes sales impossible or prevents the timely delivery of
the Products which have been ordered but not yet delivered, the
LICENSEE shall pay KENZO the minimum royalties for the year in
question.
13-3) At the end of each year covered by the present agreement and in light of
the guarantee provided above by the LICENSEE, KENZO shall have the
absolute right, which is hereby expressly acknowledged by the LICENSEE, to
terminate the present agreement by registered letter, return receipt
requested, if, during said year, the effective net wholesale turnover
reached by the LICENSEE is below to the equivalent minimum turnover
related to the minimum royalties of said year, provided, that for the
first two seasons, the LICENSEE shall have the right to preserve its
rights under this licensing agreement by paying the minimum royalties
required, regardless of underlying sales. The present article is a
termination clause.
The mechanism and the time period for said termination to take effect are
set forth in Article 19 below.
-16-
ARTICLE 14: FINANCIAL PAYMENTS
14-1) Regardless of the sales actually generated by the LICENSEE (See the
definition set forth in paragraph 11-2), the minimum royalties specified
in section 13-1 hereabove shall be paid to KENZO in accordance with the
following timetable:
- within two weeks following the execution of
this licensing agreement:.............$200,000.00,
- on the first anniversary of the execution of
this licensing agreement:.............$300,000.00,
- on the second anniversary of the execution of
this licensing agreement:.............$350,000.00,
- on the third anniversary of the execution of
this licensing agreement:.............$400,000.00,
- on the fourth anniversary of the execution of
this licensing agreement:............$450,000.000,
14-2) The payment of the running over royalties in excess of the minimum
royalties related to each year shall be made within the first 10 days of
April of the following year.
In the event the present agreement is renewed, said system shall be
continued based on the same principle.
14-3) In the event of late payment, the amounts owed to KENZO by the LICENSEE
shall bear interest as a matter of law at one and one-half times the
French legal interest rate per month or fraction thereof while said
payment is late effective from the due date thereof, without any formal
notice requirement.
ARTICLE 15: SUB-LICENSES - NON-ASSIGNABILITY
15-1) THE LICENSEE SHALL BE PROHIBITED FROM GRANTING ANY SUB-LICENSES WITHOUT
THE PRIOR WRITTEN CONSENT OF KENZO. In the event of acceptance by KENZO,
the LICENSEE shall remain the joint guarantee with any such sub-licensees
with respect to the services performed thereby.
In addition, KENZO's inspection right as set forth in Article 10 shall also
apply to said sub-licensees and, therefore, the LICENSEE hereby agrees to
so provide in its agreements with such sub-licensees.
15-2) The present agreement may not be assigned by the LICENSEE, in whole or in
part, in any form whatsoever, directly or indirectly, for consideration or
otherwise, without KENZO's prior written consent.
-17-
ARTICLE 16: PROTECTION OF KENZO TRADEMARKS
16-1) The LICENSEE hereby acknowledges KENZO's exclusive title to the "KENZO"
trademark and the derivatives thereof such as KENZO JEANS.
Consequently,
- all registrations of the KENZO trademark (and/or the derivatives
thereof) in any country whatsoever, regardless of the user thereof, may
only be completed for the exclusive benefit of KENZO and shall be
KENZO's property.
- KENZO shall have exclusive title to any rights to the KENZO and KENZO
JEANS trademark or label which may be acquired as a result of the use
of said trademark or label by the LICENSEE or its sub-licensees; and
- the rights granted to the LICENSEE shall be limited to those expressly
set forth in the present agreement.
16-2) The LICENSEE hereby agrees to not use the KENZO trademark (and/or the
derivatives thereof) in any manner whatsoever other than as a LICENSEE
pursuant to the present agreement.
In no event may the LICENSEE use the KENZO trademark or KENZO JEANS in its
name, as a trade name or on its store signs.
In addition, during the entire term of the present agreement and/or after
the termination hereof for any reason whatsoever, the LICENSEE hereby
agrees to not use any trademarks or labels which may be confused with
KENZO or with KENZO JEANS in any of its activities.
16-3) KENZO hereby warrants the existence of the filings and registrations of
the KENZO trademark set forth in Annex to the LICENSEE.
KENZO hereby also warrants to the LICENSEE that it has not granted any
other license for the Products within the Territory.
In no event shall KENZO be held liable by the LICENSEE if the LICENSEE
determines that counterfeiting has been committed.
16-4) ANY PROCEDURE CONCERNING THE PROTECTION OF THE KENZO TRADEMARK (AND THE
DERIVATIVES THEREOF) AGAINST THIRD PARTIES SHALL BE UNDERTAKEN BY KENZO AT
KENZO'S EXPENSE, RISK AND ADVANTAGE. THEREFORE, THE LICENSEE MAY IN NO WAY
UNDERTAKE ANY ACTION WITH RESPECT TO COUNTERFEITING, OBJECT TO THE FILING
OF A TRADEMARK, HAVE COUNTERFEIT PRODUCTS SEIZED AND/OR REQUEST THAT SUCH
PRODUCTS BE HELD BY CUSTOMS AUTHORITIES.
-18-
However, in the event that KENZO does not take action, the LICENSEE may
only take action, if it deems fit, if it has obtained KENZO's prior written
consent. In such event, the LICENSEE shall act at its own risk and peril.
If it has suffered or may suffer damages in its own right, the LICENSEE may
also participate in any proceedings undertaken by KENZO.
16-5) The LICENSEE hereby agrees to assist KENZO in the protection and/or
defense of the KENZO trademark (and the derivatives thereof), in
particular by providing KENZO with any information necessary therefor and
by informing KENZO of any counterfeiting, unfair competition, etc. of
which it becomes aware.
ARTICLE 17: PROTECTION OF MODELS
KENZO hereby grants to the LICENSEE the right to reproduce the models which
KENZO has created or approved.
SAID REPRODUCTION RIGHT ONLY GOVERNS THOSE MODELS MUTUALLY AGREED UPON FOR
COMMERCIALIZATION.
SAID MODELS MAY BE PROTECTED BY REGISTRATIONS IF KENZO DEEMS APPROPRIATE. SAID
REGISTRATIONS MAY ALSO BE UNDERTAKEN ON BEHALF OF KENZO AND AT KENZO' EXPENSE IF
THE TWO PARTIES AGREE THIS IS NECESSARY.
The existence or absence of registered models shall not have any impact on the
present agreement.
In the event that the models are copied by third parties or in the event of
legal action undertaken by third parties, the provisions of Article 16-4 and
16-5 above shall apply.
ARTICLE 18: TERMINATION
18-1) In the event any whatsoever of the clauses of the present agreement are
not performed, said agreement shall be terminated, if the non-defaulting
party so elects, one month after notice to perform provided by registered
letter, return receipt requested, which expressly lists said clause and
which does not result in a cure. The present article is a termination
clause.
However, in the event of a serious default by either of the parties (in
particular if the LICENSEE compromises the image of the KENZO trademark or
uses of any deceptive, misleading or unethical practices, or does not pay
any whatsoever of the royalties hereabove mentioned) and in the event that
a party goes bankrupt or into liquidation or has a receiver appointed to
any of its assets, the other party may immediately terminate the present
agreement by registered letter, return receipt requested. The present
article is also a termination clause.
In either case, said termination shall take effect as set forth in Article
20 below.
-19-
18-2) KENZO may also terminate the present agreement effective immediately by
registered letter, return receipt requested:
- if Mr. Bernard MANUEL ceases to actually manage the LICENSEE,
except in the event of agreement between the new LICENSEE's Chief
Executive Officer (and/or Chairman of the Board) and KENZO;
- and/or in the event of a change in the majority or the actual control
of the LICENSEE, except in the event of agreement subsequent to said
transfer between the LICENSEE and KENZO.
The present article is a termination clause.
As a result, the LICENSEE hereby agrees to immediately inform KENZO in the
event any of the conditions above are met.
ARTICLE 19: END OF THE AGREEMENT
19-1) In the event of the termination of the present agreement during any
whatsoever retail season "S", immediately upon receipt of the termination
notice from KENZO, the LICENSEE must:
- immediately return to KENZO all original documents thereof (designs,
sketches, patterns, etc...), relating to the last Products collection
prepared (i.e., collection S + 2); and
- only manufacture and deliver those Products for season S + 1 to its
usual and regular customers in quantities consistent with those of
previous seasons.
The LICENSEE hereby agrees that said manufacture and said delivery for the
season S + 1 shall be completed in good faith and under conditions which
do not compromise the image of the KENZO trademark. Royalties set forth
above will be due to KENZO on said sales.
THE TERMINATION OF THE PRESENT AGREEMENT SHALL TAKE EFFECT AT THE END OF
THE S + 1 SEASON (I.E., JANUARY 31 FOLLOWING TERMINATION NOTICE IF SAID
S + 1 SEASON IS A FALL/WINTER SEASON AND JULY 31 FOLLOWING SAID NOTICE IF
SAID S + 1 SEASON IS A SPRING/SUMMER SEASON). BEGINNING WITH SAID
EFFECTIVE DATE, THEREFORE, THE LICENSEE MUST CEASE ALL USE WHATSOEVER OF
THE KENZO TRADEMARK AND/OR THE KENZO JEANS LABEL (MANUFACTURE, SALES,
ADVERTISING, LETTERHEAD, ORDERS, INVOICES, ETC.), AS WELL AS THE USE OF
ANY KENZO CREATIONS OR ITEMS PREVIOUSLY APPROVED BY KENZO AND MUST RETURN
ALL DOCUMENTS TO KENZO RELATING TO THE PRODUCTS.
19-2) IN THE EVENT THE EXPIRATION OF THE PRESENT AGREEMENT IS NOT FOLLOWED BY
RENEWAL, AT THE END OF THE AUTUMN/WINTER 2001 SEASON, I.E., NO LATER THAN
JANUARY 31,
-20-
2002, THE LICENSEE MUST CEASE ALL USE WHATSOEVER (MANUFACTURE, SALES,
ADVERTISING, LETTERHEAD, ORDERS, INVOICES, ETC.) OF THE KENZO TRADEMARK
AND/OR THE KENZO JEANS LABEL, AS WELL AS THE USE OF ANY KENZO CREATIONS
OR ITEMS APPROVED BY KENZO AND ALSO RETURN ALL DOCUMENTS TO KENZO
RELATING TO THE PRODUCTS.
19-3) If KENZO so requests, within 10 days following the effective date of the
termination of the present agreement or no later than February 10, 2002 in
the event of non-renewal, the LICENSEE shall destroy all of its inventory
of finished and semi-finished Products, whether labeled or not, which are
more than two seasons old, before outside witness approved by KENZO.
As an example of the above, if the termination takes effect at the end of
retail season S + 1, all inventory (whether labeled or not) from season
S - 1 and previous seasons must be so destroyed if KENZO so requests.
Within the above 10-days period, the LICENSEE must also return at no cost
to KENZO all original documents (designs, models, sketches, etc.) relating
to the Products, as well as all labels, sew-on labels, KENZO promotional
materials, Products wrapping and packaging and administrative documents
marked "KENZO" (letterhead, orders, invoices, etc.) which remain in its
possession. Beyond said period, therefore, the LICENSEE must not directly
or indirectly retain any of said items.
19-4) An inventory in the presence of both parties shall be prepared within 10
days of the above destruction if it takes place. If no such destruction
takes place, said inventory must be prepared within 20 days following the
effective date of the termination of the present agreement or the
expiration hereof which is not followed by renewal, in order to assess the
LICENSEE's inventory (regardless of the age thereof) of both:
- finished or semi-finished Products; and
- raw materials exclusive to KENZO.
KENZO shall have the right, if it so elects, to purchase all or part of
said inventory, provided that it is in good condition. Any such purchase
shall be made at the LICENSEE's cost price based on documentation presented
thereof.
KENZO shall inform the LICENSEE of whether or not it intends to exercise
its purchase right by registered letter, return receipt requested, within
10 days of the above inventory.
If KENZO does not exercise said right or only exercises it partially, the
LICENSEE shall have 5 months from the date of receipt of KENZO's response
to market its residual inventory of finished Products AFTER HAVING REMOVED
THE LABELS in packaging which does not bear any reference to KENZO.
-21-
KENZO hereby agrees that an exception to the label removal requirement
(and, therefore, also to the provisions of Articles 19-1 and 19-2) shall
be made for any of the Products which cannot have the labels removed
without damaging them. Said labeled Products may be sold only to customers
accepted by KENZO and shall, therefore, constitute the last authorized use
of the KENZO trademark by the LICENSEE.
IN THE EVENT OF THE TERMINATION OF THE PRESENT AGREEMENT FOR SERIOUS
DEFAULT BY THE LICENSEE, SAID 5 MONTH PERIOD SHALL BE REDUCED TO 1 MONTH.
Upon conclusion of said 5-month (or 1-month) period, the LICENSEE must
destroy all of its remaining Product inventory, whether labeled or not,
before outside witness approved by KENZO.
19-5) At the end of the present agreement (i.e., upon its termination or
expiration without renewal), the LICENSEE may not claim any right with
respect to the KENZO trademark and the derivatives thereof such as KENZO
JEANS and/or the use thereof, or any indemnity with respect thereto.
ARTICLE 20: MISCELLANEOUS
20-1) The fact that at any time one party does not request the other party to
comply with the totality of the present agreement and/or does not exercise
any right whatsoever arising hereunder shall not constitute a waiver
thereof.
20-2) The parties hereby agree to cooperate to modify any clauses which may be
declared null and void so that similar economic results are obtained. If
this is not possible, said clauses shall be reduced to their maximum
authorized scope.
20-3) The LICENSEE shall indemnify and save and hold KENZO harmless for and
against any and all liabilities, claims, causes or actions, suits, damages
and expenses (including attorney's fees and expenses) which either becomes
liable for, or may incur or to be compelled to pay by reason of any acts,
whether of omission or commission, that may be committed or suffered by
the LICENSEE or any of its servants, agents, contractors or employees in
connection with the LICENSEE's performance of this agreement or in
connection with the goods manufactured by the LICENSEE or as a result of
any liabilities with which KENZO's designee may be charged because of
damages or injuries suffered by any servants, agents, contractors,
employees or customers of the LICENSEE or by the general public, resulting
from the use or sale of the goods sold or presented by the LICENSEE.
20-4) FRENCH LAW SHALL EXCLUSIVELY GOVERN THE INTERPRETATION AND PERFORMANCE OF
THE PRESENT AGREEMENT.
-22-
IN ADDITION, THE PARTIES HEREBY EXPRESSLY AGREE THAT ALL DISPUTES ARISING
FROM THE INTERPRETATION OR PERFORMANCE OF THE PRESENT AGREEMENT SHALL BE
RESOLVED BY THE COURTS WITHIN THE JURISDICTION OF THE PARIS COURT OF
APPEALS.
20-5) All notices to be provided pursuant hereto must be delivered to the
registered offices of the parties indicated above where they hereby elect
their domicile.
Done in Paris on July 26, 1996, in two originals.
FOR KENZO FOR THE LICENSEE
- --------- ----------------
Richard SIMONIN Bernard MANUEL
Yves ALEMANY Irving BENSON
-23-
EXTRAIT DE MARQUES APPARTENANT A LA SOCIETE KENZO
AU 23 JUILLET 1996 ANNEXE
MARQUES KENZO POUR DESIGNER LES VETEMENTS
(Classe internationale 25)
PAYS MARQUE Date de DEPOT No d'ENREGISTREMENT
CANADA KENZO PARIS 20 MAR 86 328 495
KENZO 27 SEP 72 255 373
KENZO 29 NOV 72 200 177
ETATS UNIS KENZO JEANS (FIG) 31 DEC 86 1 544 447
KENZO 3 AVR 79 1 214 902
MEXIQUE KENZO 5 DEC 90 338 251
KENZO 5 DEC 90 337 916
-24-
KENZO
Paris, July, 26 1996
O/REF.: YA/JG/DB/496/96
MR BERNARD MANUEL
CYGNE DESIGNS INC.
1372 Broadway
NEW YORK, NY
10018 USA
Re: The KENZO JEANS Licensing Agreement
Dear Mr MANUEL,
In conjunction with our execution of the KENZO JEANS Licensing Agreement, we
hereby confirm the following:
1. The first season to which this Agreement shall apply shall be the
Autumn/Winter 1997.
Consequently:
- - this Agreement will cover 5 years as from the Autumn/Winter 1997 season to
the Spring/Summer 2002 season,
- - the meeting to examine this 5 years initial period (see article 3) shall be
held during December 2000.
However the first payment of the minimum royalties shall be made by your company
within the two following weeks (i.e. before August 9, 1996).
2. Further to your today's request, KENZO accepts this Licensing Agreement
shall only become effective upon its approval by the Board of Directors of
CYGNE DESIGNS Inc.
If such approval is not obtained on or before August 9, 1996, this Licensing
Agreement shall be terminated with no obligation on the part of either party.
Please confirm your agreement with these terms and conditions by signing this
letter in the space provided below.
KENZO CYGNE DESIGNS Inc.
by by
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