Exhibit 10(e)(iii)
NANTUCKET INDUSTRIES, INC.
LICENSE AGREEMENT
-----------------
This License Agreement (the "Agreement") is effective as of
the 1st day of January, 1997 (the "Effective Date"), by and between ▇▇▇▇▇▇▇▇▇
Sportswear Limited (A subsidiary of Levi ▇▇▇▇▇▇▇ & Co.), a California
corporation with its principal office at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇ (hereinafter called "Licensor") and Nantucket Industries, Inc., a Delaware
corporation with its principal office at ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇, ▇▇▇▇▇
(hereinafter called "Licensee").
R E C I T A L S:
----------------
WHEREAS, ▇▇▇▇▇▇▇▇▇ Sportswear Limited, and its predecessor
companies have manufactured garments, particularly blue jeans and other casual
clothing, for many years; and
WHEREAS, for many years the trademarks and distinctive
features of Licensor's products have come to be recognized by the consuming
public as constituting a desirable image of superior quality and thus possess
considerable value and goodwill; and
WHEREAS, Licensor is well-established in marketing apparel and
presently distributes garments to numerous retail outlets having a reputation
for quality, service and dependability; and
WHEREAS, Licensee has manufactured and sold underwear in the
USA for nearly 40 years, and has attained a reputation for quality and
dependability with respect to such articles; and
WHEREAS, Licensee possesses marketing experience for the
distribution of these products; and
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WHEREAS, the primary purpose of Licensor's ▇▇▇▇▇▇▇▇▇(R)
accessory licensing program is to provide a unique line of accessories bearing
the ▇▇▇▇▇▇▇▇▇(R) trademarks which complements Licensor's product lines.
NOW, THEREFORE, in consideration of the premises and of the
following promises, the parties hereto hereby agree as follows:
ARTICLE 1. DEFINITIONS
----------------------
A. "Net Sales" shall mean gross receipts generated from the
sale of the Products (as defined below), less customary discounts and allowances
allowed and less any credits for returns, transportation charges allowed on
returns, or other credits.
B. "Net Sales Price" shall mean the wholesale billing price to
customers or distributors, less customary discounts and allowances allowed and
less any credits for returns, transportation charges allowed on returns, or
other credits.
C. "Products" shall mean those products set forth on Schedule
B hereto.
D. "Trademarks" shall mean the trademark ▇▇▇▇▇▇▇▇▇(R) and the
various ▇▇▇▇▇▇▇▇▇(R) logos and distinctive marks as set forth on Schedule A
hereto. Should Licensor, during the term of this Agreement, develop additional
registered or unregistered marks which, in the judgment of Licensor, are
appropriate for use by Licensee, Licensor may extend this Agreement to
incorporate such marks.
E. "Territory" shall mean the United States of America,
including its territories, overseas possessions and military bases.
ARTICLE 2. LICENSE GRANT
------------------------
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A. Licensor grants to Licensee the exclusive right to use the
Trademarks on and in connection with the manufacture, sale, distribution and
advertising of the Products in the Territory to those stores pre-approved by
Licensor per Article 11 below for the period and upon the terms and conditions
hereinafter set forth.
ARTICLE 3. TERM OF AGREEMENT
----------------------------
A. This Agreement shall continue in full force and effect from
January 1, 1997 until December 31, 1999, unless sooner terminated by the mutual
agreement of both Licensor and Licensee; provided, however, that:
(1) If at any time Licensor or Licensee shall become
bankrupt, insolvent or make any assignment for the benefit of creditors, the
other party, as the case may be, shall have the right to immediately terminate
this Agreement.
(2) If either party shall cause or permit any
material breach of this Agreement, the other party shall have the right to
terminate this Agreement by written notice to the party causing or permitting
the material breach which notice shall specify the alleged breach, and said
termination shall be effective ninety (90) days after the receipt of such
notice, unless prior thereto such default or breach shall have been cured and
thereafter royalties shall be due and payable only on the basis of Net Sales
actually made.
(3) If at any time, any person who is not, at the
date hereof, an officer or a director of Licensee becomes, directly or
indirectly, the owner of 50% or more of the total outstanding common stock of
the company, and active control of the Licensee passes to any party other than
those persons currently in active control of the Licensee, then Licensor shall,
within 30 days of receiving written notice of such acquisition of stock, or of
Licensor becoming aware of such change in ownership or control, shall have the
right to terminate this Agreement.
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B. The rights and remedies set forth in this article shall not
be exhaustive and are in addition to any other rights and remedies provided by
law.
C. During the term of this Agreement, at the request of either
party holding a good faith belief that this Agreement should be replaced by an
arrangement or organization better providing for the mutual benefit of both, the
parties shall meet to discuss such possible replacement.
D. Unless earlier terminated in accordance with the provisions
of this Article 3, this Agreement may be renewed as set forth in Article 14
below.
E. Article 13 below shall survive the termination of this
Agreement.
ARTICLE 4. ROYALTIES
--------------------
A. For purposes of this Agreement, an item shall be considered
"sold" upon the date when such item is billed or invoiced, shipped, consigned or
paid for, whichever event occurs first.
B. The annual royalty percentage shall be four percent (4%) of
the Net Sales Price of Products sold by Licensee under the terms of this
Agreement.
C. The annual royalty percentages expressed as a percentage of
Net Sales of Products are set forth in Schedule E. Commencing January 1, 1997
Licensee shall remain current, on a quarterly basis, on the minimum royalty
amounts for the contract period as set forth in Schedule E. For example, in the
first period annual period (1997), at the end of the first quarter, royalty
payments made shall equal or exceed the stated annual minimum for that quarter
(1997, I), at the end of the second quarter total royalties paid under the
contract shall equal or exceed the accumulated minimum royalties for that annual
period through the second quarter (1997, II), at the end of the third quarter of
the first annual period total royalties paid shall equal or exceed the
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accumulated minimum royalties for that annual period through the third quarter
(1997, III), and so on through the contract period. Thus, if the total minimum
royalty due is achieved and paid prior to the end of the Initial term of this
Agreement, the only royalties due throughout the remainder of the term shall be
those calculated on the basis of a percentage of Net Sales.
D. Within thirty (30) days after the end of each month, a
report shall be made by Licensee to Licensor setting forth the number and type
of Products which have been sold during the preceding month and also showing the
Net Sales Price of such Products and other information on an appropriate form,
such as the monthly sales report attached hereto as Schedule C.1.
E. Licensee shall make royalty payments to Licensor for sold
Products within thirty (30) days after the end of each calendar quarter and
shall submit an appropriate form, such as the quarterly royalty remittance
report attached hereto as Schedule D, for all Products sold. Interest shall
accrue and be payable by Licensee on royalties earned by Licensor, beginning on
the thirty-first (31st) day after the completion of each quarter in which the
Products were invoiced and for which royalties are due. Interest shall be
calculated on a floating basis of one percent (1%) over the commercial reference
rate in effect at the end of each month at Citibank, New York.
F. The annual minimum royalty to be paid during the term of
the Agreement is shown in Schedule E.
ARTICLE 5. WARRANTY AND INDEMNITY
---------------------------------
A. Licensee warrants that the Products shall be of good
quality in design, material, and workmanship, and that they shall be suitable
for their intended purposes; that no injurious, poisonous, deleterious or toxic
substances or materials will be used in or on the Products; that the Products in
normal and proper use will not harm the user thereof; and that the
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Products will be manufactured, sold and distributed in strict compliance with
all applicable laws and regulations. Licensee agrees to defend, indemnify and
hold Licensor harmless against any liabilities and expenses arising out of use
by any person of Products sold by Licensee. Similarly, Licensor will defend,
indemnify and hold Licensee harmless from all product liability on any other
products bearing the Trademarks not manufactured, sold, distributed or
advertised by the Licensee, and Licensee shall give Licensor prompt notice in
writing of all such suits, claims or other actions or proceedings brought
against it.
B. Licensee agrees to defend, indemnify and hold Licensor
harmless against any liabilities and expenses arising from the infringement of a
patent or copyright caused by the manufacture, advertisement or sale of the
Products.
C. Licensor will promptly notify Licensee in writing of all
suits, claims or other actions or proceedings brought against Licensor and
against which Licensee has agreed to defend, indemnify and hold Licensor
harmless. Licensee at its sole expense agrees to defend the same; provided,
however, that Licensor shall have given Licensee prompt notice in writing and
shall have given Licensee all pertinent information in Licensor's possession to
enable and permit Licensee to defend.
D. Licensee shall procure and maintain at its own expense in
full force and effect at all times during which the Products are being sold and
for three (3) years after the sales are complete, a Commercial General Liability
Insurance with limits and conditions set as follows: throughout the term of the
Agreement, Licensee will carry a Commercial General Liability Insurance on an
Occurrence Basis with a Combined Single Limit for Bodily Injury and Property
Damage of not less than $1,500,000 for each Occurrence and to include Blanket
Contractual Liability, Product/ Completed Operations, Advertising Injury and
Personal Injury Liability. It is agreed that such insurance limits may be
provided by both a primary and excess policy totaling
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not less than $1,500,000 per occurrence/ $3,000,000 annual aggregate. This is
not a limit of Licensee's liability.
It is agreed that the Licensee will provide the Licensor with
a certificate of insurance evidencing such coverage within ten (10) days of
executing this Agreement, naming ▇▇▇▇▇▇▇▇▇ Sportswear Limited, Levi ▇▇▇▇▇▇▇ &
Co., and their respective directors, officers, employees, agents and assigns as
additional insureds for liabilities related to this Agreement. This policy shall
not be cancelable or subject to reduction of coverage or limits or to any other
modification without providing thirty (30) days written notice of cancellation
or reduction of coverage to the Licensor.
It is further agreed that the Licensee during the term of the
Agreement will procure this Commercial General Liability insurance contract with
an insurance company which has an A.M. Best Rating of A or better, unless
otherwise approved in writing by Licensor.
ARTICLE 6. INFRINGEMENT, INDEMNITY, AND DEFENSE
-----------------------------------------------
A. Licensor represents and warrants that it is the owner of
the Trademarks set forth in Paragraph 1.D. above.
B. Licensor represents and warrants that it will not take any
action with regard to the Trademarks so as to interfere with the manufacture,
sale, distribution and advertising of Products as contemplated by this
Agreement.
C. Licensor represents and warrants that on its own initiative
and at its own expense it will take all appropriate actions necessary to protect
Licensee's exclusive right to use the Trademarks and will in good faith
prosecute against all such infringements; provided, however, that Licensee will
not be precluded from initiating at its own expense actions pursuant
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to any rights and remedies Licensee may have under any law arising outside the
scope of this Agreement.
D. Licensor agrees to defend, indemnify and hold Licensee
harmless from and against any liabilities and expense resulting from any suit,
claim or other action or proceeding brought against Licensee for trademark
infringement arising out of the use of the licensed Trademarks.
E. Licensee will promptly notify Licensor in writing of all
suits, claims or other actions or proceedings brought against Licensee and
against which Licensor has agreed to defend, indemnify and hold harmless.
Licensor at its sole expense agrees to defend the same; provided, however, that
Licensee shall have given Licensor prompt notice in writing and shall have given
Licensor all pertinent information in Licensee's possession to enable and permit
Licensor to defend.
ARTICLE 7. COMPETING BRANDS
---------------------------
Licensee agrees that during the term of this Agreement it will
not enter into new license arrangements with other producers of men's branded
casual apparel that are marketed and sold in national and regional discount
channels and that in Licensor's reasonable judgment compete in the marketplace
with Licensor's line of ▇▇▇▇▇▇▇▇▇(R) products. This provision does not apply to
store or private branded programs.
ARTICLE 8. QUALITY AND PRODUCT CONTROL
--------------------------------------
A. Licensee agrees to submit to Licensor for product and
quality approval two (2) prototype samples ("Samples"), made under normal
production conditions, of each Product proposed to be advertised, sold,
manufactured, or distributed by Licensee. Promptly after receipt
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of said Samples, Licensor shall give the Licensee its written approval or
disapproval of the Samples. "Promptly" is intended to mean within ten (10)
working days under ordinary circumstances. If Licensee does not receive notice
of disapproval within ten (10) working days of delivery of Samples, Licensor
shall be deemed to have approved such Samples. Licensor shall specifically set
forth in writing its reasons for disapproval of any Sample and in no case will
Licensor unreasonably withhold its approval. Licensee will not manufacture,
advertise, sell, or distribute any such Products without prior approval.
B. Licensor shall have the right to refuse to approve any
Sample which in good faith is considered to impair the value or reputation of
any of the Trademarks by reason of poor or substandard quality, inadequate or
improper resemblance to the quality standard represented, or otherwise. Licensee
agrees to maintain the quality of all Products made or sold by or through it
under this Agreement up to the quality and finish of the Samples approved by
Licensor and agrees not to change the Products in any substantial respect
without the prior written consent of Licensor. However, Licensor understands and
agrees that Licensee, from time to time and in its sole discretion, may change
the materials and components used in and on an approved Product without the
prior written approval of Licensor provided that the quality of the Product, its
construction, or its appearance are not substantially affected thereby. From
time to time after the Licensee has commenced selling the Products, Licensee
shall, at the request of Licensor, furnish to Licensor without cost, a
reasonable number of random samples not to exceed three (3) of each different
style being manufactured and sold by or through Licensee hereunder, together
with any labels, cartons, containers, and packing and wrapping materials used in
connection therewith.
C. Licensee agrees to promptly furnish Licensor with the
addresses of Licensee's production and warehouse facilities for the Products and
the names and addresses of
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the persons, firms or corporations, if any, which are manufacturing each of the
Products for Licensee. Licensor shall have the right upon reasonable notice (ten
(10) working days or more) to Licensee, during regular business hours and at its
own expense, to inspect any production and warehouse facilities where any of the
Products are being manufactured or stored for the purpose of enabling Licensor
to determine whether Licensee is adhering to the requirements of this Agreement
relating to the nature and quality of the Products and the use of the Trademarks
in connection therewith.
It is understood that all manufacturing processes, including
but not limited to equipment used, technical data, systems, methods and
procedures, and all other information involved in the manufacturing and
execution of Licensee's business shall be considered "Proprietary Information"
as defined in Article 13 of this Agreement and shall not be disclosed by
Licensor.
D. Licensee agrees to develop and submit to Licensor an annual
Marketing Plan for all products manufactured pursuant to this Agreement.
"Marketing Plan" is defined as a plan which projects sales estimates and sets
forth retail distribution, product, advertising, and promotional plans for the
coming year.
E. Licensor shall not require Licensee to pay royalties on
off-quality Products, commonly referred to as "seconds" or "irregulars,"
provided that the Trademarks are removed from such Products. If Licensee is
unable to remove the Trademarks from off-quality Products without unreasonable
effort or expense, as determined by Licensee in its sole discretion, Licensee
shall dispose of such branded off-quality Products through selected retailers
approved by Licensor or to employees of Licensee or Licensor and only after
clearly marking and packaging the Products as "irregular." The royalty
percentage shall be reduced to one-half (1/2) of the royalty rate then in effect
for branded, first-quality Products. The amount of such branded off-quality
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products allowed shall not exceed two percent (2%) of annual Net Sales. Branded,
off-quality Products in excess of two percent (2%) of the annual Net Sales shall
be subject to the regularly applicable royalty rate. Licensee shall report
amounts of such branded off-quality Products on a report such as the Monthly
Sales of Irregulars report attached hereto as Schedule C.2.
ARTICLE 9. ETHICS CODE AND GLOBAL SOURCING AND OPERATING GUIDELINES
-------------------------------------------------------------------
A. Licensor has and is determined to maintain a world-wide
reputation for ethical business conduct. To further this aim, Licensor has
adopted a Code of Ethics and has also adopted Global Sourcing and Operating
Guidelines setting forth standards of conduct it requires from, among others,
its licensees, including Licensee. Licensee acknowledges that its conduct, and
the conduct of any permitted sub-contractor, must reflect positively on
Licensor's reputation and agrees to the provisions of this Article 9
accordingly.
B. Licensee represents and warrants that Licensee and its key
officers and managers have read and understand Licensor's Code of Ethics, a copy
of which is attached to this Agreement as Exhibit 1, and agrees that Licensee
will, and will cause its permitted sub-contractors to, abide by the principles
set forth therein (as amended from time to time by Licensor) in conducting all
aspects of its operations under this Agreement.
C. Licensee further represents and warrants that its key
officers and managers have read and understand the Global Sourcing and Operating
Guidelines attached to this Agreement as Exhibit 2, and agrees that Licensee
will, and will cause its permitted sub-contractors to, comply with the
requirements of the Terms of Engagement at all times.
D. Licensee remains fully responsible for compliance with all
local laws and regulations applicable to Licensee's operations. If the
requirements of the Code of Ethics or of the Global Sourcing and Operating
Guidelines are stricter than the requirements of applicable law,
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the requirements of the Code of Ethics and the Global Sourcing and Operating
Guidelines shall control.
E. This Article is of the essence of this Agreement. Any
material failure by Licensee or any of its sub-contractors to comply with the
Code of Ethics or any failure by Licensee or any of its sub-contractors to
comply with the Global Sourcing and Operating Guidelines will be grounds for
termination of this Agreement by Licensor.
ARTICLE 10. TRADEMARK CONTROL
-----------------------------
A. Licensor shall provide standards, specifications and
instructions for the use of the Trademarks and Licensee agrees to strictly abide
by them. The Trademarks shall be reproduced precisely as set forth on Schedule A
hereto.
B. Licensee agrees that no advertising or display materials
shall be unethical, immoral or offensive to good taste, and no display or
advertising material shall be used without the prior written approval of
Licensor, which approval may be granted or withheld in Licensor's reasonable
discretion; provided, however, that Licensor's approval shall be communicated
not more than ten (10) working days after Licensee's submission of such material
to Licensor, and such communication shall specifically describe the Licensor's
basis for disapproval and suggest corrective action which may be taken to secure
approval of such material. If Licensee does not receive notice of Licensor's
disapproval within ten (10) working days, Licensor shall be deemed to have
approved the material. The proposed uses and estimated duration of the displays
and advertising material shall be stated by Licensee when submitting the same to
Licensor for approval, and said approval shall extend only to the said proposed
uses and duration thereof, except that once an advertisement has been approved
by Licensor, it need not be resubmitted for subsequent repeats, changes in size
of the advertisement or cropping. Samples of each
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advertisement shall be retained by Licensee together with records of media and
frequency of appearance of the advertisement.
C. Licensee further agrees to cooperate with Licensor in
maintaining advertising standards. This provision in no way shall operate to
restrain resales, but only to avoid purchaser confusion and protect the valuable
image represented by the Trademarks in all advertising and promotion.
D. Licensee shall cooperate with Licensor, if necessary and
upon request, in protecting and proving use of the Trademarks.
E. Licensee agrees to place upon all hangtags, identification
tags, price lists, catalogs, and similar trade advertising materials other than
radio and television advertising, the phrase "Manufactured under license from
▇▇▇▇▇▇▇▇▇ Sportswear Ltd., ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇."
F. Licensee agrees to keep records of sales volume and
advertising expenditures on an annual basis.
G. Licensee agrees to cooperate with Licensor in obtaining any
further registrations and agrees not to use or register any trademarks
confusingly similar to the Trademarks.
ARTICLE 11. MARKETING OF THE PRODUCTS
-------------------------------------
A. Licensee shall use its best efforts to exploit the rights
granted herein consistent with Licensor's marketing policies and the maintenance
of Licensor's goodwill.
B. Licensee shall not sell Products to any account until it
has obtained Licensor's prior written approval to sell to the specified account.
Such approval or rejection shall be made by Licensor within ten (10) working
days of receipt of Licensee's request for approval. If Licensee does not receive
notice of Licensor's rejection within ten (10) working days, Licensor
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shall be deemed to have approved the account. Licensee is not required to obtain
approval for an account if Licensor, as of the effective date of the Agreement,
already offers first quality ▇▇▇▇▇▇▇▇▇(R) brand merchandise to the account.
ARTICLE 12. ASSISTANCE BY LICENSOR
----------------------------------
A. Licensor shall, from time to time, furnish Licensee with
such assistance and information in the following categories as Licensor and
Licensee mutually deem necessary to aid Licensee in the production and marketing
of Products under this Agreement.
(1) Advertising and promotional materials for use by
Licensee in the marketing, advertising or production of Products under this
Agreement; and
(2) Information concerning sales and trend data,
promotions, credit information, marketing, and customers of Licensor for its
garments, provided that Licensor shall have the right to withhold proprietary
information in its sole discretion.
B. Licensee shall reimburse Licensor for the out-of-pocket
cost of furnishing Licensee with the material described in subparagraph A(1) of
this article (which may include development and production cost for materials
developed especially for use by Licensee at Licensee's request and otherwise
will be limited to actual reproduction and shipping cost), and the salaries,
traveling, and living expenses of Licensor's employees rendering assistance away
from their normal employment location whose work activities do not normally
involve licensing or sales, but only when such materials or assistance have been
approved in advance in each instance by the Licensee in writing.
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C. Licensor agrees to provide expertise in the development of
markets for licensed Products, and the marketing of items of wearing apparel
with the Products and Licensee agrees to coordinate all marketing activities
with Licensor.
ARTICLE 13. PROPRIETARY INFORMATION
-----------------------------------
A. Except as otherwise provided in this Agreement, all
proprietary information disclosed by one of the parties (the "Discloser") to the
other party (the "Recipient") is Confidential Information and (1) shall remain
the exclusive property of the Discloser, (2) shall be used by the Recipient only
in connection with its performance under this Agreement and (3) shall be
protected by the Recipient. Confidential Information includes, without
limitation, any formula, pattern, program, method, technique, process, design,
business plan, business opportunity, customer or personnel list, or financial
statement that: (1) derives independent economic value, actual or potential, for
not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use; and (2) is the subject of efforts
that are reasonable under the circumstances to maintain its secrecy.
Confidential Information includes, but is not limited to, information disclosed
in connection with this Agreement, and shall not include information that: (1)
is now or subsequently becomes generally available to the public through no
wrongful act or omission of Recipient; (2) Recipient has legally obtained from
sources other than the Discloser and is in its possession prior to disclosure to
Recipient by Discloser; (3) is independently developed by Recipient without use,
directly or indirectly, of any Confidential Information; or (4) Recipient
obtains from a third party who has the right to transfer or disclose it.
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B. Except as specifically authorized by Discloser in writing,
Recipient shall not reproduce, use, distribute, disclose or otherwise
disseminate the Confidential Information and shall not take any action causing,
or fail to take any action necessary to prevent, any Confidential Information
disclosed to Recipient pursuant to this Agreement to lose its character as
Confidential Information. Upon termination of this Agreement or upon request by
Discloser, Recipient shall promptly deliver to Discloser all Confidential
Information and all embodiments thereof then in its custody, control or
possession and shall deliver within five (5) days after such termination or
request a written statement to Discloser certifying to such action.
C. Recipient agrees that access to Confidential Information
will be limited to those employees or other authorized representatives of
Recipient who: (1) need to know such Confidential Information in connection with
their work related to this Agreement and (2) have signed agreements with
Recipient obligating them to maintain the confidentiality of Confidential
Information disclosed to them. Recipient further agrees to inform such employees
or authorized representatives of the confidential nature of Confidential
Information and agrees to take all necessary steps to ensure that the terms of
this Agreement are not violated by them.
D. Recipient's duty to protect Discloser's Confidential
Information pursuant to this Agreement extends both during the term of this
Agreement (including any extension or renewal thereof) and after its
termination.
ARTICLE 14. RENEWAL
-------------------
If during the second year of the Agreement (1998), Licensee's Net
Sales meet or exceed a Net Sales volume of nine million dollars ($9,000,000),
then Licensee shall have the option to renew the Agreement for an additional
two-year period at the royalty rate and minimum royalties shown in Schedule E.
Should Licensee exercise its option to renew, the parties agree,
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during the first year of such renewal term, to meet and discuss terms on which a
further renewal might be negotiated; provided, however, that Licensor shall be
under no obligation to enter into an additional renewal if acceptable terms
cannot be agreed to by the parties.
During each annual renewal year Licensee shall remain current, on
a quarterly basis, on the minimum royalty amounts for each annual renewal period
as set forth above in Article 4.C. hereof.
Should the Licensee not meet the terms required to automatically
renew this Agreement, the Licensee and Licensor agree to meet at least six (6)
months prior to the expiration of this Agreement to discuss the progress of the
program and to negotiate possible terms for renewal.
ARTICLE 15. BOOKS OF ACCOUNT
----------------------------
A. Licensee shall keep full and accurate books of account and
all documents and other material relating to this Agreement and the subject
matter thereof in accordance with generally-accepted accounting principles at
Licensee's principal office at all times during the continuation of this
Agreement and for two (2) years thereafter. Licensee agrees to keep complete and
correct account of the number and Net Sales Price of Products sold according to
this Agreement.
B. Licensee shall submit to Licensor the monthly sales report
and such other reports as will enable Licensor to evaluate the success of
Licensee's marketing activities related to this Agreement.
C. Licensor or its duly authorized agent or representative
shall have the right upon ten (10) days' advance notice, during regular business
hours, and at its own expense, to examine such books, documents, and other
material relating to the Products and shall be at liberty
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to make copies of all or any part of such books, documents and other related
materials. Licensor agrees that all information, data, books, documents, and
other materials acquired by it pursuant to this paragraph will be treated by it
as proprietary information of Licensee in the same manner and upon the same
terms as are set forth in Article 13 above.
ARTICLE 16. USE OF TRADEMARKS
-----------------------------
A. Licensee recognizes that (1) there is great value to
Licensor in the Trademarks and the goodwill associated therewith, (2) that
Licensor may license third parties to use such Trademarks and goodwill in
connection with other goods and services in various countries, including the
United States, (3) that nothing contained in this Agreement gives Licensee any
interest or property rights in the Trademarks except the right to use the same
as specifically granted herein, and (4) that all uses by Licensee of the
Trademarks shall inure to the benefit of Licensor.
B. Licensee agrees that it will not during the existence of
this Agreement or thereafter, directly or indirectly, assert any interest or
property rights in or to any of the Trademarks which are now or hereafter owned
or controlled by Licensor and which have not been abandoned by Licensor.
C. Upon termination of this Agreement, Licensee shall cease
using the Trademarks, but shall have the right to dispose of stocks of Products
in inventory and to complete and dispose of those Products in the process of
manufacture; provided, however, that the same is completed within the period
specified in Article 21 herein.
ARTICLE 17. SPECIAL PURCHASE
----------------------------
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Licensor, from time to time, may purchase Products covered by this
Agreement from Licensee for use in special retail promotions in connection with
its apparel products and for resale to employees of Licensor as part of its
established Employee Purchase Program (EPP). Such purchases as described in this
Article shall be at a price to be agreed upon between the parties.
ARTICLE 18. FORCE MAJEURE
-------------------------
Neither party shall be deemed to be in breach of this Agreement,
shall be subject to having this Agreement terminated, or shall in any way be
liable to the other party for damages of any type or for any relief of any type
on account of any act, omission, failure of performance, event, occurrence, or
cause which is unavoidable or beyond its reasonable control, including, but not
by way of limitation, accident, fire, flood, natural disaster, strike or labor
disturbances, vandalism, riot or insurrection, war, embargo, any order, decree,
law or regulation of any court, government or governmental agency.
ARTICLE 19. NOTICE
------------------
All demands and requests required or permitted by this Agreement
shall be by notice given hereunder. Notices for routine business matters, such
as under Articles 8 and 10 above, shall be as agreed upon by the parties. If no
form of notice is agreed upon, notice shall be given by a mailing in writing,
postage prepaid, addressed to the parties as follows or to such other addresses
as one party may specify in notice to the other party:
19
▇▇▇▇▇▇▇▇▇ Sportswear Ltd.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇. ▇.▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Director of Marketing
(206) 227 - 7800
(206) 227 - 8616 (FAX)
Nantucket Industries, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: Chairman
(212) 889 - 5656
(212) 532 - 3217 (FAX)
Levi ▇▇▇▇▇▇▇ & Co.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Director of Licensing, LSNA
(▇▇▇) ▇▇▇-▇▇▇▇
(▇▇▇) ▇▇▇-▇▇▇▇ (FAX)
Such notice shall be effective upon receipt by the party to whom it is
addressed.
ARTICLE 20. ASSIGNMENT
----------------------
Licensee shall not assign, sublicense or otherwise transfer its
right under this Agreement, to any subsidiary, parent company, affiliated
entity, or any other third party without the prior written approval of Licensor
which approval shall not be unreasonably withheld. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their successors
and permitted assigns.
ARTICLE 21. DISPOSAL OF STOCKS/TERMINATION
------------------------------------------
In the event this Agreement is terminated for any reason, Licensee
shall discontinue the manufacture of Products under this Agreement on or before
the effective date of such termination; provided, however, Licensee shall have
the right to dispose of existing stocks of
20
Products on hand, in process, or in transit, produced in the ordinary course of
business, in accordance with the terms of this Agreement (including, without
limitation, the provisions of Article 11.B. regarding approved accounts). The
right to dispose of stocks shall be non-exclusive with regard to use of the
trademarks and shall not extend beyond one hundred and eighty (180) days from
the date of termination of this Agreement, and may be shortened or eliminated at
the discretion of Licensor if this Agreement is terminated by default by
Licensee. Upon termination, Licensor shall continue to be paid on a quarterly
basis during any permitted disposal period.
ARTICLE 22. GOVERNING LAW; VENUE
--------------------------------
A. The validity, construction, and performance and effect of
this Agreement shall be governed by and construed under and in accordance with
the laws of the State of California without regard to its choice of law
principles.
B. The parties hereto consent to the jurisdiction of the
federal and state courts of the State of California. The parties agree that any
action or proceeding arising out of this Agreement shall be brought in a federal
or state court of competent jurisdiction in the State of California, and in no
other jurisdiction.
ARTICLE 23. AGREEMENT EMBODIES ALL UNDERSTANDINGS
-------------------------------------------------
This Agreement embodies all understandings between the parties
hereto. Any promises, agreements, representations, or obligations which may have
been previously made or undertaken by either of the parties and not set out
herein are canceled and shall be of no further force or effect. This Agreement
shall not be changed, modified, abrogated, or superseded unless by a writing
signed the party to be bound.
21
ARTICLE 24. WAIVER
------------------
The waiver by either party of any specific provision of the
Agreement or either party's failure to exercise any right which accrues to it
under this Agreement shall not affect the enforceability of any other provision
or rights accruing hereunder.
ARTICLE 25. SEVERABILITY
------------------------
Should any part or provision of this Agreement be held
unenforceable or in conflict with the laws of any jurisdiction, the validity of
the remaining parts or provisions shall not be affected by such holding.
ARTICLE 26. ATTORNEYS' FEES
---------------------------
In any litigation, arbitration or court proceeding between the
parties, the prevailing party shall be entitled to recover, in addition to any
other amounts rewarded, reasonable attorneys' fees and all costs of proceedings
incurred in enforcing this Agreement.
ARTICLE 27. HEADINGS
--------------------
The section headings provided herein are provided for convenience
only and are not to serve as a basis for interpretation or construction of this
Agreement.
ARTICLE 28. COUNTERPARTS
------------------------
This Agreement may be executed in counterparts, each of which
shall be deemed an original and which together shall constitute one and the same
agreement.
22
IN WITNESS WHEREOF, the parties have executed this License
Agreement as of the Effective Date.
▇▇▇▇▇▇▇▇▇ SPORTSWEAR LTD. NANTUCKET INDUSTRIES, INC.
LICENSOR LICENSEE
By: By:
------------------------------- --------------------------------
Printed Name: Printed Name:
-------------------- ---------------------
Title: Title:
---------------------------- -----------------------------
23
SCHEDULE A
----------
▇▇▇▇▇▇▇▇▇(R) LOGOS AND DISTINCTIVE TRADEMARKS
* Trademark usage is divided into 3 categories:
o on Product
o on Packaging
o Advertising
Attached hereto are the specific trademarks and exact approved uses thereof.
SCHEDULE B
----------
PRODUCTS
UNDERWEAR
---------
Men's knit colored/patterned underwear
Men's knit boxer shorts
LOUNGEWEAR
----------
Top Silhouettes:
----------------
Athletic Shirts
Muscle Shirts
Tee Back Athletic Shirts
Tee Shirts
▇▇▇▇▇▇ Neck Shirts
Unconstructed CPO Shirt, V-Neck
Fabrications:
-------------
Knits: Jersey, Rib, Thermal and Mesh
Woven: Flannel, Sheeting
Fabric Weight:
--------------
Between 130 and 180 grams per square meter
Bottom Silhouettes:
-------------------
Boxer Shorts
Jams
Pull-On Pants Elastic Waist
Pull-On Pants Draw String Waist
Fabrications:
-------------
Knits: Jersey, Rib, Thermal and Mesh
Woven: Flannel, Sheeting
Fabric Weight:
--------------
Between 130 and 180 grams per square meter
Unionsuits:
-----------
One Piece
Fabrication:
------------
Knit: Jersey
Fabric Weight:
--------------
Between 130 and 180 grams per square meter
SCHEDULE C.1.
-------------
LEVI ▇▇▇▇▇▇▇ & CO.
MONTHLY SALES REPORT FOR REGULAR PRODUCT
Nantucket Industries
Licensee
Country: United States
Month of , 19 Preparation Date:
---------------------------------- --- ---------
--------------------------------------------------------------------------------
PRODUCT GROUP NET UNITS NET SALES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTALS:
--------------------------------------------------------------------------------
(1) Total Sales for Month
---------------
(2) Royalty at _____ percent
---------------
(3) Royalties Accrued Quarter-to-Date
---------------
SCHEDULE C.2.
-------------
▇▇▇▇▇▇▇▇▇ SPORTSWEAR LTD.
MONTHLY SALES REPORT FOR IRREGULAR PRODUCT
Nantucket Industries
Licensee
Country: United States
Month of , 19 Preparation Date:
---------------------------------- --- ---------
--------------------------------------------------------------------------------
PRODUCT GROUP NET UNITS NET SALES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TOTALS:
--------------------------------------------------------------------------------
(1) Total Sales for Month
(2) Royalty at _____ percent
(3) Royalties Accrued Quarter-to-Date
SCHEDULE D
----------
▇▇▇▇▇▇▇▇▇ SPORTSWEAR LTD.
QUARTERLY ROYALTY REMITTANCE REPORT
REPORT FOR THE QUARTER ENDING
---------------------------- --------------------
Date Prepared Licensee
------------------------- -----------------
Month Net Sales - Firsts Net Sales - Seconds
--------- ------------------ -------------------
-------------------- ---------------------
-------------------- ---------------------
-------------------- ---------------------
1. Total Sales Current Quarter _____________________ ____________________
2. Sales- Prior Qtr(s)
[Line 3 from prior report] _____________________ ____________________
3. Total Sales - through current
Qtr. [Line 1 + Line 2] _____________________ ____________________
4. Royalty Earned [1sts + 2nds]
Thru Cur Qtr [R.R.* X Line 3] _____________________ ____________________
5. Total Royalty Earned
[Total of 1sts + 2nds] _____________________
6. Minimum Royalty Due
End of Quarter** _____________________
7. Enter Line 5 or Line 6
whichever is greater _____________________
8. Royalties Paid in Prior Qtr.(s)
of Current Agreement _____________________
9. Royalty Due BSL - Current
Qtr. [Line 7 less Line 8] _____________________
* Royalty Rate for 1sts is 4%. Royalty Rate for 2nds up to a maximum of 2% of Total Net Sales is 2% [see article
4.B. and 9.F.]
** Minimum Royalty Figure: See Schedule E.
SCHEDULE E
----------
ANNUAL/ ACCUMULATED
PERIOD MINIMUM MINIMUM MINIMUM
QUARTER NET SALES ROYALTY ROYALTY ROYALTY
($000) (% NET SALES) ($000) ($000)
1997 I 1,500.00 4.0% 60.00 60.00
II 1,500.00 4.0% 60.00 120.00
III 1,500.00 4.0% 60.00 180.00
IV 1,500.00 4.0% 60.00 240.00
TOTAL $ 6,000.00 $ 240.00
1998 I 1,531.25 4.0% 61.25 301.25
II 1,531.25 4.0% 61.25 362.50
III 1,531.25 4.0% 61.25 423.75
IV 1,531.25 4.0% 61.25 485.00
TOTAL $ 6,125.00 $ 245.00
1999 I 1,562.50 4.0% 62.50 547.50
II 1,562.50 4.0% 62.50 610.00
III 1,562.50 4.0% 62.50 672.50
IV 1,562.50 4.0% 62.50 735.00
TOTAL $ 6,250.00 $ 250.00
SCHEDULE E (continued)
RENEWAL/ ACCUMULATED
PERIOD MINIMUM MINIMUM MINIMUM
QUARTER NET SALES ROYALTY ROYALTY ROYALTY
($000) (% NET SALES) ($000) ($000)
2000 I 1,750.00 4.0% 70.00 70.00
II 1,750.00 4.0% 70.00 140.00
III 1,750.00 4.0% 70.00 210.00
IV 1,750.00 4.0% 70.00 280.00
TOTAL $ 7,000.00 $ 280.00
2001 I 1,950.00 4.0% 78.00 358.00
II 1,950.00 4.0% 78.00 436.00
III 1,950.00 4.0% 78.00 514.00
IV 1,950.00 4.0% 78.00 592.00
TOTAL $ 7,800.00 $ 312.00
EXHIBIT 1
LICENSOR'S CODE OF ETHICS
Levi ▇▇▇▇▇▇▇ & Co. has a long and distinguished history of ethical conduct and
community involvement. Essentially, these are a reflection of the mutually
shared values of the founding families and of our employees.
Our ethical values are based on the following elements:
A commitment to commercial success in terms broader than merely financial
measures.
A respect of our employees, suppliers, customers, consumers and stockholders.
A commitment to conduct which is not only legal but fair and morally correct in
a fundamental sense.
Avoidance of not only real, but the appearance of conflict of interest.
From time to time the Company will publish specific guidelines, policies and
procedures. However, the best test whether something is ethically correct is
whether you would be prepared to present it to our senior management and board
of directors as being consistent with our ethical traditions. If you have any
uneasiness about an action you are about to take or which you see, you should
discuss the action with your supervisor or management.
EXHIBIT 2
LEVI ▇▇▇▇▇▇▇ & CO.'S
GLOBAL SOURCING & OPERATING GUIDELINES
Levi ▇▇▇▇▇▇▇ & Co. seeks to conduct its business in a responsible manner. We
believe this is an important element of our corporate reputation which
contributes to the strength of our commercial success. As we expand our
marketing activities abroad, and work with contractors and suppliers throughout
the world to help meet our customers' needs, it is important to protect our
Company's reputation in selecting where and with whom to do business.
Levi ▇▇▇▇▇▇▇ & Co.'s GLOBAL SOURCING & OPERATING GUIDELINES includes two parts:
the BUSINESS PARTNER TERMS OF ENGAGEMENT, which address work place issues that
are substantially controllable by individual business partners; and the COUNTRY
ASSESSMENT GUIDELINES, which address larger, external issues beyond the control
of the individual business partners.
BUSINESS PARTNER TERMS OF ENGAGEMENT:
The TERMS OF ENGAGEMENT are tool that help protect Levi ▇▇▇▇▇▇▇ & Co.'s
CORPORATE REPUTATION and, therefore, its COMMERCIAL SUCCESS. They assist us in
selecting business partners* that follow work place standards and business
practices consistent with our Company's policies. As a set of guiding
principles, they also help to identify potential problems so that we can work
with our business partners to address issues of concern as they arise.
Specially, we expect our business partners to operate work places where the
following standards and practices are followed:
1. EMPLOYMENT STANDARDS:
We will only do business with partners whose workers are in all cases
present voluntarily, not put at risk of physical harm, fairly
compensated, allowed the right of free association and not exploited in
any way. In addition, the following specific guidelines will be
followed.
WAGES AND BENEFITS
We will only do business with partners who provide wages and benefits
that comply with any applicable law or match the prevailing local
manufacturing or finishing industry practices.
WORKING HOURS
While permitting flexibility in scheduling, we will identify prevailing
local work hours and seek business partners who do not exceed them
accept for appropriately compensated overtime. While we favor partners
who utilize less than sixty-hour work weeks, we will not use
contractors who, on a regularly scheduled basis, require excess of a
sixty-hour week. Employees should be allowed at least one day off in
seven days.
CHILD LABOR
Use of child labor is not permissible. Workers can be no less than 14
years of age and not younger than the compulsory age to be in school.
We will not utilize partners who use child labor in any of their
facilities. We support the development of legitimate workplace
apprenticeship programs for the educational benefit of younger people.
PRISON LABOR/FORCED LABOR
We will not knowingly utilize prison or forced labor in contracting
relationships in the manufacture and finishing of our products. We will
not utilize or purchase materials from a business partner utilizing
prison or forced labor.
DISCRIMINATION
While we recognize and respect cultural differences, we believe that
workers should be employed on the basis of their ability to do the job,
rather than on the basis of personal characteristics or beliefs. We
will favor business partners who share this value.
DISCIPLINARY PRACTICES
We will not utilize business partners who use corporal punishment or
other forms of mental or physical coercion.
HEALTH & SAFETY
We will only utilize business partners who provide workers with a safe
and healthy work environment. Business partners who provide residential
facilities for their workers must provide safe and healthy facilities.
2. ENVIRONMENTAL STANDARDS:
We will only do business with partners who share our commitment to the
environment and who conduct their business in a way that is consistent
with Levi ▇▇▇▇▇▇▇ & Co.'s Environmental Philosophy and Guiding
Principles.
3. ETHICAL STANDARDS:
We will only seek to identify and utilize business partners who aspire
as individuals and in the conduct of their business to a set of ethical
standards not incompatible with our own.
4. LEGAL STANDARDS:
We expect our business partners to be law abiding as individuals and to
comply with legal requirements relevant to the conduct of their
business.
5. COMMUNITY INVOLVEMENT:
We will favor business partners who share our commitment to contribute
to improving community conditions.
* Business partners are contractors and subcontractors who manufacture or finish
our products and suppliers who provide raw materials used in the production of
our products. We have begun applying the Terms of Engagement to business
partners involved in manufacturing and finishing, and plan to extend their
application to suppliers.
Exhibit 2 continued
COUNTRY ASSESSMENT GUIDELINES:
The diverse cultural, social, political, and economic circumstances of the
various countries where Levi ▇▇▇▇▇▇▇ & CO. has existing or future business
interests raise issues that could subject our CORPORATE REPUTATION and
therefore, our BUSINESS SUCCESS, to potential harm. The COUNTRY ASSESSMENT
GUIDELINES are intended to help us assess these issues. The GUIDELINES are tools
that assist us in making practical and principled decisions as we balance the
potential risks and opportunities associated with conducting business in a
particular country.
In making these decisions, we consider the degree to which our global CORPORATE
REPUTATION and COMMERCIAL SUCCESS may be exposed to UNREASONABLE RISK.
Specially, we assess whether the:
BRAND IMAGE would be adversely affected by a country's perception or image among
our customers and/or consumers;
HEALTH AND SAFETY of our employees and their families, or our Company
representatives would be exposed to unreasonable risk;
HUMAN RIGHTS ENVIRONMENT would prevent us from conducting business activities in
a manner that is consistent with the Global Sourcing Guidelines and other
Company policies;
LEGAL SYSTEM would prevent us from adequately protecting our trademarks,
investments or other commercial interests, or from implementing the Global
Sourcing Guidelines and other Company policies; and
POLITICAL, ECONOMIC AND SOCIAL ENVIRONMENT would threaten the Company's
reputation and/or commercial interest.
In making these assessments, we take into account the various types of business
activities and objectives proposed (e.g., procurement of fabric and sundries,
sourcing, licensing, direct investments in subsidiaries) and, thus, the
accompanying level of risk involved.
Levi ▇▇▇▇▇▇▇ & Co. is committed to continuous improvement in the implementation
of its Global Sourcing & Operating Guidelines. As we apply these tools
throughout the world, we will acquire greater experience and gain new insight
from a variety of sources. The knowledge will enable us to continue our efforts
to update our Guidelines, better address issues of concern, and meet new
challenges.
