(Polo Japan - Design)
DESIGN SERVICES AGREEMENT dated as of March 1, 1998 by and
between Polo Ralph Lauren Enterprises, L.P. (the 'Design Partnership'), with a
place of business at 650 Madison Avenue, New York, New York 10022 and Polo Ralph
Lauren Japan Co., Ltd. (the 'Company') with a place of business at Kihoh Bldg.
2-2, Koji-Machi, Chiyoda-ku, Tokyo, 102 Japan.
Ralph Lauren ('Lauren') is an internationally famous designer
who has been twice inducted into the Coty Hall of Fame for his design of men's
and women's fashions, is the recipient of the CFDA Lifetime Achievement Award,
and is a creator of original designs for cosmetics, jewelry, home furnishings
and other products.
The Polo/Lauren Company, L.P., a New York limited partnership
('PLC'), holds the right and interest in and to certain trademarks and trade
names, as same may be used in connection with the manufacture and sale of
Licensed Products, as hereinafter defined, and on even date herewith, the
Company has obtained the right to use the trademarks ('Trademarks') in
connection with the Licensed Products, pursuant to a license agreement ('License
Agreement') of even date herewith by and between the Company and PLC.
The value of the Trademarks are largely derived from the
reputation, skill and design talents of Lauren, and Lauren, directly and through
his designees, provides design services through the Design Partnership.
The Company desires to obtain the services of the Design
Partnership in connection with the creation and design of the Licensed Products.
The Company desires, in order to exploit the rights granted to
it under the License Agreement, to engage and retain the Design Partnership to
create and provide to the Company the designs for its line of Licensed Products.
The Design Partnership is willing to furnish such designs and render such
services on the basis hereinafter set forth. As used herein, the term 'Licensed
Products' shall have the meaning set forth in the License Agreement.
In consideration of the foregoing premises and of the mutual
promises and covenants herein contained, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. Designs: Assistance.
1.1 At any time or from time to time the Company may
provide the Design Partnership with a list or lists setting forth those Licensed
Products for which the Company shall require designing.
1.2 At any time or from time to time, or within a
reasonable period following receipt by the Design Partnership of the aforesaid
list or lists, the Design Partnership shall provide the Company with a program
of suggested, broad design themes and concepts with respect to the design of the
Licensed Products ('Design Concepts') which shall be embodied in verbal and/or
written descriptions of design themes and concepts and such other detailed
designs and sketches therefor, as the Design Partnership deems appropriate. The
Design Partnership shall have full discretion with respect to the manner in
which the Design Concepts shall be formulated and presented by the Design
Partnership to the Company. The Company and the Design Partnership shall confer
on Design Concepts and shall make such modifications as are required to meet the
Design Partnership's approval.
1.3 The Design Partnership may engage such employees,
agents, and consultants operating under the Design Partnership's creative
supervision and control as it may deem necessary and appropriate.
1.4 From time to time while this Agreement is in
effect, the Design Partnership, by notice to the Company, may (a) develop or
modify and implement designs from the Design Concepts or other designs furnished
by the Design Partnership or (b) develop and implement new designs.
1.5 If the Company wishes to prepare a design for any
or all of its lines of Licensed Products, it shall submit to the Design
Partnership for its approval the Company's proposed design therefor. By written
notice to the Company, the Design Partnership may approve any of the designs so
furnished, with such modifications as it shall deem appropriate, or the Design
Partnership, in its sole discretion, may disapprove any or all of the designs.
1.6 The Company understands that all or portions of
the Design Concepts may be furnished to the Company through or in cooperation
with other entities to which the Design Partnership has provided design
services. The Company upon its prior authorization and receipt of appropriate
documentation, shall pay all costs, including shipping and handling charges, for
fabric swatches or mill chips, sketches, specifications, paper sample patterns
and product samples furnished to the Company by the Design Partnership or such
other entities.
1.7 The Company shall submit to the Design
Partnership for its review and approval, the Company's proposed media
advertising (other than cooperative advertising) relating to each Licensed
Product or Licensed Product line.
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All layouts proposed by the Company for cooperative advertising shall similarly
be subject to the Design Partnership's review and approval, which shall not be
unreasonably withheld or delayed. The Design Partnership may, with respect to
such advertising make such suggestions as it may deem necessary or appropriate,
or disapprove, in either event by notice to the Company.
1.8 All patents and copyrights on designs of the
Licensed Products shall be owned exclusively, and applied for, by the Design
Partnership or its designee, at the Design Partnership's discretion and expense
and shall designate the Design Partnership or its designee as the patent or
copyright owner, as the case may be, therefor.
1.9 The Company acknowledges that the Licensed
Products contain elements which in concept, execution and/or presentation are
unique. The Company agrees that it will not, during the term of the Agreement,
use any designs used in the Licensed Products or any designs submitted or
modified by the Design Partnership or any designs which are comparable and/or
competitive with Licensed Products and which may be identified as the Design
Partnership designs for purposes other than those permitted by this Agreement or
the License Agreement.
2. Design Legends; Copyright Notice and License.
2.1 All designs, patterns, sketches, artwork, logos
and other materials of Licensed Products and the use of such designs, artwork,
sketches, logos and other materials created by the Design Partnership, or
created by or for the Company and reviewed and approved by the Design
Partnership, or developed by or for the Company from Design Concepts or
subsequent design concepts furnished or approved by the Design Partnership (all
of which shall hereinafter constitute Design Concepts), shall be the property of
the Design Partnership and shall be subject to the provisions of this paragraph
2.
2.2 All right, title and interest in and to the
samples, sketches, design, artwork, logos and other materials furnished by or to
the Company or submitted to the Design Partnership, whether created by the
Design Partnership or the Company, are hereby assigned to and shall be the sole
property of the Design Partnership. The Company shall cause to be placed on all
Licensed Products appropriate notice designating the Design Partnership as the
copyright or design patent owner thereof, as the case may be. The manner of
presentation of said notices shall be reviewed and approved by the Design
Partnership prior to use thereof by the Company.
2.3 The Design Partnership hereby grants to the
Company the exclusive right, license and privilege ('License') to use the
designs furnished hereunder and all copyrights, if any, and patents, if any
therein; provided, however, that the License is limited to use in connection
with Licensed Products manufactured and sold, or imported and sold, pursuant to
the License Agreement and only for the
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seasonal collection for which such Design Concepts are approved. All other
rights in and to the designs furnished hereunder, including without limitation
all rights to use such designs in connection with products other than Licensed
Products (as defined in the License Agreement) and in territories other than the
Territory (as defined in the License Agreement) are expressly reserved by the
Design Partnership. The License shall continue only for such period as this
Agreement shall be effective. The Design Partnership shall execute and deliver
to the Company all documents and instruments necessary to perfect or evidence
the License. Upon termination of this Agreement, for any reason whatsoever, any
and all of the Company's right, title and interest in and to the License shall
forthwith and without further act or instrument be assigned to, revert to and be
the sole and exclusive property of the Design Partnership, and the Company shall
have no further or continuing right or interest therein, except the limited
right to complete the manufacture of and sell Licensed Products during the
disposal period, as set forth in paragraph 6.3 hereof. In addition, the Company
shall thereupon (i) execute and deliver to the Design Partnership all documents
and instruments necessary to perfect or evidence such reversion, (ii) refrain
from further use of any of the Design Concepts and (iii) refrain from
manufacturing, selling or distributing any products (whether or not they bear
the Trademarks) which are confusingly similar to or derived from the Licensed
Products or Design Concepts.
2.4 The Company may sublicense its rights hereunder
only in connection with a sublicense of its rights under the License Agreement
which has been approved pursuant to the License Agreement. The Design
Partnership acknowledges and agrees that the Company's parent Company, The Seibu
Department Stores, Ltd., will be involved, as the Company's sublicensee, service
provider or otherwise, in the Polo/Ralph Lauren business in the Territory (as
defined in the License Agreement) using the Design Concepts in accordance with
the terms and conditions of this Agreement.
2.5 The Design Partnership represents and warrants to
the Company that it has full right, power and authority to enter into this
Agreement, to perform all of its obligations hereunder and to consummate all of
the transactions contemplated herein.
2.6 The Company represents and warrants to the Design
Partnership that the Company has full right, power and authority to enter into
this Agreement, to perform all of its obligations hereunder and to consummate
all the transactions contemplated herein.
3. Licensed Products.
3.1 The Company shall obtain the written approval of
the Design Partnership, of all Licensed Products to be manufactured or caused to
be manufactured by the Company, by submitting a Prototype, as hereinafter
defined, of each different design or model of a Licensed Product, including, but
not limited to,
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the type and quality of materials, colors and workmanship to be used in
connection therewith, prior to any commercial production thereof. In the event
that the Design Partnership rejects a particular Prototype or Prototypes, the
Design Partnership shall so notify the Company and shall in certain cases where
the Design Partnership desires to include the prototype in the collection,
provide the Company with suggestions for modifying the particular Prototype or
Prototypes which the Design Partnership is rejecting. The Company shall promptly
correct said Prototype or Prototypes, resubmit said Prototype or Prototypes to
the Design Partnership and seek the Design Partnership's approval under the same
terms and conditions as set forth herein with respect to the first submission of
Prototypes. As used herein, the term 'Prototype' shall mean any and all models,
or actual samples, of Licensed Products; and the term 'Final Prototype' shall
mean the actual final sample of a Licensed Product from which the first
commercial production thereof will be made and which has been approved by the
Design Partnership prior to the first commercial production thereof pursuant to
this paragraph 3.
3.2 The written approval of the Design Partnership of
the Prototypes for each seasonal collection shall be evidenced by a written
list, signed on behalf of the Design Partnership, setting forth those Prototypes
which have been approved for inclusion in such collection. Prototypes so
approved shall be deemed Final Prototypes in respect of such collection.
Approval of any and all Prototypes as Final Prototypes shall be in the sole
discretion of the Design Partnership, individually, or a designee of the Design
Partnership. The Company shall present for sale, through the showing of each
seasonal collection to the trade, all Final Prototypes so approved in respect of
such collection.
3.3 The Licensed Products thereafter manufactured and
sold by the Company shall strictly adhere, in all respects, including, without
limitation, with respect to materials, color, workmanship, designs, dimensions,
styling, detail and quality, to the Final Prototypes approved by the Design
Partnership.
3.4 In the event that any Licensed Product is, in the
judgment of the Design Partnership, not being manufactured or sold in strict
adherence to the materials, color, workmanship, designs, dimensions, styling
detail and quality, embodied in the Final Prototypes, or is otherwise not in
accordance with the Final Prototypes, the Design Partnership shall notify the
Company thereof in writing and the Company shall promptly repair or change such
Licensed Product to conform strictly thereto. If an item of Licensed Product as
repaired or changed does not strictly conform to the Final Prototypes and such
strict conformity cannot be obtained after at least one (1) resubmission, the
Trademarks shall be promptly removed from the item, at the option of the Design
Partnership, in which event the item may be sold by the Company, provided it is
in no way identified as a Licensed Product. Notwithstanding anything in this
paragraph 3.4 to the contrary, sales of all products using the Design Concepts,
whether or not bearing the Trademarks, shall be subject to compensation payments
pursuant to paragraph 4 hereof.
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3.5 The Design Partnership and its duly authorized
representative shall have the right, upon reasonable notice during normal
business hours, to inspect all facilities utilized by the Company (and, upon
prior consultation with the Company, its contractors and suppliers) in
connection with the preparation of Prototypes and the manufacture, sale, storage
or distribution of Licensed Products pursuant hereto and to examine Licensed
Products in process of manufacture and when offered for sale within the
Company's operations. The Company shall take all necessary steps, and all steps
reasonably requested by the Design Partnership, to prevent or avoid any misuse
of the licensed designs by any of its customers, contractors or other resources.
3.6 The Company shall upon request make its
personnel, and shall use its best efforts to make the personnel of any of its
contractors, suppliers and other resources, available by appointment during
normal business hours for consultation with the Design Partnership. The Company
shall make available to the Design Partnership, upon reasonable notice,
marketing plans, reports and information which the Company may have with respect
to Licensed Products in the Territory (as defined in the License Agreement).
3.7 The Company may employ subcontractors for the
manufacture of Licensed Products, solely on the terms set forth in paragraph
16.4 of the License Agreement.
3.8 The Company shall include within each seasonal
collection of Licensed Products a fully representative assortment of designs
therefor designated by the Design Partnership for inclusion therein.
Notwithstanding anything to the contrary contained herein or in the License
Agreement, in the event the Company chooses not to or is unable to include
within a seasonal collection of Licensed Products a particular Licensed Product
which the Design Partnership has designed or designated for inclusion in such
collection, the Design Partnership shall be entitled to authorize third parties
to manufacture such Licensed Product(s) on behalf of the Company and the Company
shall, at the Design Partnership's option, display, present and sell such
Licensed Product(s) in its showroom for Licensed Products.
4. Compensation; Accounting.
4.1 (a) As compensation for the designs and services
rendered hereunder, the Company shall pay minimum compensation to the Design
Partnership each year during the term of this Agreement.
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(b) the Initial Term hereof (as defined in
paragraph 8 of the License Agreement) shall be the following amounts, fixed in
U.S. dollars:
Year 1 [***]
Year 2 [***]
Year 3 [***]
Year 4 [***]
Year 5 [***]
(c) The minimum compensation for each year
during the 'First Renewal Period' (as defined in paragraph 8 of the License
Agreement) shall be as follows, in [***] yen:
Year 6 [***]
Year 7 [***]
Year 8 [***]
Year 9 [***]
Year 10 [***]
(d) The minimum compensation for each year
during the 'Second Renewal Period' (as defined in paragraph 8 of the License
Agreement) shall be as follows, in [***] yen:
Year 11 [***]
Year 12 [***]
Year 13 [***]
Year 14 [***]
Year 15 [***]
(e) The exchange rates fixed by Licensor and
Licensee with respect to minimum royalty payments during each of the First
Renewal Period and the Second Renewal Period, in accordance with the terms of
paragraph 6.1(e) of the License Agreement, shall apply to the minimum
compensation payments to be made by the Company hereunder during each of the
First Renewal Period and the Second Renewal Period.
(f) Minimum compensation for each year shall
be paid in twelve (12) equal monthly installments on the last day of each month
during the term hereof, commencing with the first payment in the amount of
[***] on March 31, 1998. No credit shall be permitted against minimum
compensation payable in any year on account of earned or minimum compensation
paid in any other year, and minimum compensation shall not be returnable. For
the purposes of this
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Agreement, the term 'year' shall mean a period of twelve (12) months commencing
on each March 1 during the term of this Agreement.
4.2 The Company shall pay to the Design Partnership
earned compensation based on the net sales price of Licensed Products
manufactured or imported and sold by the Company hereunder. Earned compensation
shall be an amount equal to the 'Earned Compensation Percentage Rate' (as
defined in Schedule A hereto) applied to the net sales price of all Licensed
Products sold under this Agreement, including, without limitation, sales made
pursuant to paragraphs 3.4 and 6.3 hereof. The Company shall prepare or cause to
be prepared statements of operations for the period commencing on the date
hereof and ending on August 31, 1998 and for each six-month period ending the
last day of August and February in each year hereof, which shall be furnished to
the Design Partnership together with payment of the earned compensation due, if
any, for each such six-month period (less minimum compensation due for such
year) no later than October 31 (for each period ending on the last day of
August) and April 30 (for each period ending on the last day of February). The
term 'net sales price' shall mean the gross sales price of all Licensed Products
sold under this Agreement to retailers or, with respect to Licensed Products
that are not sold directly or indirectly to retailers, other ultimate consumers
(as in the case of accommodation sales by Company to its employees or sales by
Company in its own stores), less trade discounts, merchandise returns and sales
tax. No other deductions shall be taken. Any merchandise returns shall be
credited in the three (3) month period in which the returns are actually made.
For purposes of this Agreement, affiliates of the Company shall mean all persons
and business entities, whether corporations, partnerships, joint ventures or
otherwise, which now or hereafter control, or are owned or controlled, directly
or indirectly by the Company, or are under common control with the Company. It
is the intention of the parties that compensation payments will be based on bona
fide wholesale prices at which the Company sells Licensed Products to
independent retailers in arms' length transactions. In the event the Company
shall sell Licensed Products to its affiliates, compensation payments shall be
calculated on the basis of such a bona fide wholesale price irrespective of the
Company's internal accounting treatment of such sale. The Company shall identify
separately in the statements of operations provided to the Design Partnership
pursuant to paragraph 4.5 hereof, all sales to its affiliates. Notwithstanding
anything to the contrary contained herein, and except as Licensor and Licensee
may otherwise agree with respect to particular items of Licensed Products, no
earned compensation shall be due hereunder with respect to sales of Licensed
Products which Licensee has acquired from other licensees of Licensor, unless
Licensee acquires such products at a price which is equal to or less than
[***] percent [***] off the regular wholesale price therefor, or the factory
cost thereof plus [***] percent [***].
4.3 The Company shall reimburse PLC and the Design
Partnership for all of their travel expenses incurred in the performance of
their respective duties under this Agreement, such amounts to include first
class travel and
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hotel accommodations, up to a maximum amount of $70,000 per year in the
aggregate. Such amounts payable to the Design Partnership pursuant to this
paragraph shall become due and payable monthly within thirty (30) days of the
date of mailing of the invoices, accompanied by corresponding receipts, for such
costs incurred during the preceding month.
4.4 If the payment of any installment of compensation
is delayed for any reason, interest shall accrue on the unpaid principal amount
of such installment from and after the date on which the same became due
pursuant to paragraphs 4.1 or 4.2 hereof at the prime rate of interest in effect
from time to time at Chase Manhattan Bank, New York, New York or its successor
bank.
4.5 The Company shall at all times keep an accurate
account of all operations within the scope of this Agreement and shall render a
full statement of such operations in writing to the Design Partnership in
accordance with paragraph 4.2 hereof. Such statements shall account separately
for each different product category and shall include all aggregate gross sales,
trade discounts, merchandise returns, sales of miscuts and damaged merchandise
and net sales price of all sales for the preceding six (6) month period. Such
statements shall be in sufficient detail to be audited from the books of the
Company. Once annually, which may be in connection with the regular annual audit
of the Company's books, the Company shall furnish an annual statement of the
aggregate gross sales, trade and prompt payment discounts, merchandise returns
and net sales price of all Licensed Products made or sold by the Company,
certified by Company's chief financial officer or, if the Company's records are
examined by an independent accountant, by such independent accountant. Each
six-month financial statement furnished by Company shall be certified by the
chief financial officer of the Company. The Design Partnership and its duly
authorized representatives, on reasonable notice, shall have the right, no more
than once in each year during regular business hours, for the duration of the
term of this Agreement and for one (1) year after the expiration of the disposal
period set forth in paragraph 10.2 of the License Agreement, to examine the
books of account and records and all other documents, materials and inventory in
the possession or under the control of the Company and its successors with
respect to the information required to be provided under paragraph 4.2 hereof
and this paragraph 4.5. All such books of account, records and documents shall
be maintained and kept available by the Company for at least the duration of
this Agreement and for three (3) years thereafter. The Design Partnership shall
have free and full access thereto in the manner set above and shall have the
right to make copies and/or extracts therefrom. If as a result of any
examination of the Company's books and records it is shown that the Company's
payments to the Design Partnership hereunder with respect to any twelve (12)
month period were less than or greater than the amount which should have been
paid to the Design Partnership by an amount equal to two percent (2%) of the
amount which should have been paid during such twelve (12) month period, the
Company will, in addition to reimbursement of any underpayment, with interest
from the date on which
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each payment was due at the rate set forth in paragraph 4.4 hereof, promptly
reimburse the Design Partnership for the cost of such examination.
4.6 The obligation of the Company to pay compensation
hereunder shall be absolute notwithstanding any claim which the Company may
assert against PLC or the Design Partnership. The Company shall not have the
right to set-off, compensate or make any deduction from such compensation
payments for any reason whatsoever.
4.7 All references to dollars in this Agreement
shall, except as otherwise expressly provided herein, mean U.S. dollars. All
compensation due hereunder shall be paid in U.S. dollars. The currency
conversion to U.S. dollars for each six-month accounting period shall be made:
(i) with respect to earned compensation on net sales of Licensed Products up to
the 'Trigger Point' (as defined in Schedule A hereto), at the 'Fixed Exchange
Rate' (as hereinafter defined), and (ii) with respect to earned compensation on
net sales of Licensed Products in excess of the Trigger Point, at the spot
conversion rate published by The Bank of Tokyo-Mitsubishi for the day on which
the accounting statement and payment is due pursuant to paragraph 4.2 hereof.
The term 'Fixed Exchange Rate' shall have the meaning set forth in paragraph 6.5
of the License Agreement. The amount of compensation to be paid to the Design
Partnership by the Company hereunder has been determined on the understanding
that the Company will be entitled to deduct any required withholding taxes and
the Design Partnership will be entitled to a tax credit for United States
federal income tax purposes equal to the amount of any tax imposed in Japan upon
the Design Partnership's compensation, whether imposed by withholding or
otherwise. The Company shall provide the Design Partnership with all information
and documentation necessary in order for the Design Partnership to secure such
tax credits. In the event that any such Japan tax is not so available as a
credit for United States federal income tax purposes for the period when paid,
the compensation to be paid hereunder shall be renegotiated to reflect the
actual loss of revenue to Licensor.
5. Death or Incapacity of Lauren.
The Design Partnership shall perform its obligations hereunder
notwithstanding any death or incapacity of Lauren, and the Company shall accept
the services of the Design Partnership.
6. Term and Termination.
6.1 Unless sooner terminated in accordance with the
terms and provisions hereof, this Agreement shall continue in effect for so long
as the License Agreement is in effect and shall terminate upon the termination
of the License Agreement.
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6.2 Each of the following shall constitute an event
of default ('Event of Default') hereunder: (i) any compensation is not paid when
due and such default continues for more than fifteen (15) days after notice
thereof; (ii) the Company shall, after thirty (30) days' written notice from the
Design Partnership, continue to use the designs in an unauthorized or improper
manner and/or Company shall make an unauthorized disclosure of confidential
information or materials given or loaned to Company by the Design Partnership or
PLC which, unless it relates to designs or business plans for upcoming seasons,
is expressly designated by the Design Partnership or PLC as confidential when so
given or loaned; or (iii) the Company defaults in performing any of the other
terms of this Agreement and continues in such default for a period of thirty
(30) days after notice thereof (unless the default cannot be cured within such
thirty (30) day period and the Company shall have commenced to cure the default
and proceeds diligently thereafter to cure within an additional fifteen (15) day
period); (iv) an event of default shall occur under the License Agreement or any
other design agreement entered into between the Company and the Design
Partnership or license agreement between the Company and PLC; or (v) the License
Agreement shall be terminated for any reason whatsoever. If any Event of Default
other than that described in paragraph 6.2(v) shall occur, the Design
Partnership shall have the right, exercisable in its sole discretion, to
terminate this Agreement upon ten (10) days' written notice to the Company of
its intention to do so. Upon the expiration of such ten (10) day period, this
Agreement shall terminate and come to an end and, subject to paragraph 6.3
hereof, all rights of the Company in and to the designs furnished or used
hereunder and all copyrights and designs patents therein and their contemplated
use shall terminate. If the Event of Default described in paragraph 6.2(v) shall
occur, this Agreement and the License shall thereupon forthwith terminate and
come to an end without any need for notice to the Company. Termination of this
Agreement shall be without prejudice to any remedy of the Design Partnership for
the recovery of any monies then due to it under this Agreement or in respect to
any antecedent breach of this Agreement, and without prejudice to any other
right of the Design Partnership, including without limitation, damages for
breach to the extent that the same may be recoverable.
6.3 In the event PLC chooses not to exercise the
option referred to in paragraph 10.1 of the License Agreement with respect to
all or any portion of the Licensed Products (as therein defined), the Company
may dispose of Licensed Products to the extent permitted by and in the manner
set forth in paragraph 10.2 of the License Agreement. Such sales shall be
subject to the payment of earned compensation pursuant to paragraph 4.2 hereof.
Upon the conclusion of the disposal period all rights and interests in and to
the designs furnished or used hereunder and design patents therein and all
copyrights licensed hereby shall belong to and be the property of the Design
Partnership, and the Company shall have no further or continuing right or
interest therein.
6.4 The Company acknowledges and admits that there
would be no adequate remedy at law for its failure to cease the manufacture or
sale of
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Licensed Products at the termination of this Agreement, by expiration or
otherwise, and the Company agrees that, notwithstanding anything to the contrary
contained in paragraph 9.8 hereof, in the event of such failure, the Design
Partnership shall be entitled to relief by way of temporary or permanent
injunction and such other and further relief as any court with jurisdiction may
deem proper.
6.5 It is expressly understood that under no
circumstances shall the Company be entitled, directly or indirectly, to any form
of compensation or indemnity from the Design Partnership, PLC or their
affiliates as a consequence to the termination of this Agreement, whether as a
result of the passage of time, or as the result of any other cause of
termination referred to in this Agreement. Without limiting the generality of
the foregoing, by its execution of the present Agreement, the Company hereby
waives any claim which it has or which it may have in the future against the
Design Partnership, PLC, Lauren, Polo Ralph Lauren Corporation or their
affiliates, arising from any alleged goodwill created by the Company for the
benefit of any or all of the said parties or from the alleged creation or
increase of a market for Licensed Products. The Company does not hereby waive
any claim which might arise against the Design Partnership for damages as a
result of any breach of this Agreement by the Design Partnership.
6.6 The Company shall have the right to terminate
this Agreement upon one hundred and twenty (120) days' written notice in the
event that pursuant to paragraph 9.8 hereof and paragraph 16.7 of the License
Agreement it is determined that the Design Partnership has defaulted in
performing any of the terms of this Agreement which default has had a material
adverse effect on the Company's ability to exploit its rights hereunder, and
that the Design Partnership has continued in default for a period of thirty (30)
days after notice thereof (unless the default cannot be cured within such thirty
(30) day period and the Design Partnership shall have commenced to cure the
default and proceeds diligently to cure within an additional fifteen (15) day
period).
7. Indemnity.
7.1 The Company shall indemnify and save and hold the
Design Partnership, PLC, Polo Ralph Lauren Corporation and Lauren, individually,
and their directors, officers, servants, agents and employees harmless from and
against any and all liability, claims, causes of action, suits, damages and
expenses (including reasonable attorney's fees and expenses in actions involving
third parties or between the parties hereto), which they, or any of them, are or
become liable for, or may incur, or be compelled to pay by reason of any acts,
whether of omission or commission, that may be committed or suffered by the
Company or any of its directors, officers, servants, agents or employees in
connection with the Company's performance of this Agreement, in connection with
Licensed Products manufactured by or on behalf of the Company or otherwise in
connection with the Company's business; provided, however, that the Company
shall not be responsible for any
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liability, claims, causes of action, suits, damages or expenses incurred or
suffered by the Design Partnership, PLC, Polo Ralph Lauren Corporation or
Lauren, individually, or their directors, officers, servants, agents and
employees in connection with any suit or proceeding for infringement of
another's design patent, trademark, copyright or other proprietary rights
brought against them as a result of the Company's use of the Trademarks, or the
Design Concepts furnished by the Design Partnership hereunder, in strict
accordance with the terms and conditions of this Agreement and the License
Agreement.
8. Disclosure.
The Design Partnership and the Company, and their affiliates,
employees, attorneys, bankers and accountants, shall hold in confidence and not
use or disclose, except as permitted by this Agreement, (i) confidential
information of the other or (ii) the terms of this Agreement, except upon
consent of the other or pursuant to, or as may be required by law, or in
connection with regulatory or administrative proceedings and only then with
reasonable advance notice of such disclosure to the other. The Company shall
take all reasonable precautions to protect the secrecy of the materials,
samples, sketches designs artwork logos and other materials used pursuant to
this Agreement prior to the commercial distribution or the showing of samples
for sale and shall not sell any merchandise employing or adapted from any of
said designs, sketches, artwork, logos, and other materials or their use except
under the Trademarks.
9. Miscellaneous.
9.1 All notices, requests, consents and other
communications hereunder shall be in writing and shall be deemed to have been
properly given or sent (i) on the date when such notice, request, consent or
communication is personally delivered, or (ii) five (5) days after the same was
sent, if sent by certified or registered mail or (iii) two (2) days after the
same was sent, if sent by overnight courier delivery or confirmed telecopier, as
follows:
(a) if to the Company, addressed as follows:
Polo Ralph Lauren Japan Co., Ltd.
Kihoh Bldg. 2-2, Koji-Machi
Chiyoda-ku
Tokyo, 102 Japan
Attention: President
Telecopier: 81.3.3222.0266
13
With a copy to:
The Seibu Department Stores, Ltd.
16-15 Minaini-ikebukuro 1-chome
Toshima-ku, Tokyo 171 Japan
Attention: Manager of International Division
Telecopier: 81.3.5396.5285
(b) if to the Design Partnership, addressed as
follows:
Polo Ralph Lauren Enterprises, L.P.
650 Madison Avenue
New York, New York 10022
Attention: President
Telecopier: 212-318-7186
with a copy to:
Victor Cohen, Esq.
Eighth Floor
650 Madison Avenue
New York, New York 10022
Telecopier: 212-318-7183
Anyone entitled to notice hereunder may change the address to which notices or
other communications are to be sent to it by notice given in the manner
contemplated hereby.
9.2 Nothing herein contained shall be construed to
place the parties in the relationship of partners or joint venturers, and
neither the Design Partnership nor the Company shall have any power to obligate
or bind the other in any manner whatsoever, except as otherwise provided for
herein.
9.3 None of the terms hereof can be waived or
modified except by an express agreement in writing signed by the party to be
charged. The failure of any party hereto to enforce, or the delay by any party
in enforcing, any of its rights hereunder shall not be deemed a continuing
waiver or a modification thereof and any party may, within the time provided by
applicable law, commence appropriate legal proceedings as set forth in
paragraphs 6.4 and 9.8 hereof to enforce any and all of such rights. All rights
and, except as provided in paragraph 9.8 hereof, remedies, provided for herein
shall be cumulative and in addition to any other rights or remedies such parties
may have at law or in equity. Any party hereto may employ any of the remedies
available to it with respect to any of its rights hereunder without prejudice to
the use by it in the future of any other remedy with respect to any of such
rights. No person, firm or corporation, other than the parties hereto and
14
PLC, shall be deemed to have acquired any rights by reason of anything contained
in this Agreement.
9.4 The Design Partnership may, upon thirty (30)
days' written notice to the Company, assign its right to receive all or any
portion of its compensation under this Agreement and, in addition, this
Agreement and all of the Design Partnership's rights, duties and obligations
hereunder may, upon thirty (30) days' written notice to the Company, be assigned
by the Design Partnership to any entity to which the right to own or use the
Trademarks has been assigned, or to an affiliate of any such entity. The Company
may not assign its rights and obligations under this Agreement without the prior
written consent of the Design Partnership, which may be withheld in the Design
Partnership's sole discretion.
9.5 The Company will comply with all laws, rules,
regulations and requirements of any governmental body which may be applicable to
the operations of the Company contemplated hereby, including, without
limitation, as they relate to the manufacture, distribution, sale or promotion
of Licensed Products, notwithstanding the fact that the Design Partnership may
have approved such item or conduct. The Company shall advise the Design
Partnership to the extent that any Final Prototype does not comply with any such
law, rule, regulation or requirement effective in the Territory.
9.6 This Agreement shall be binding upon and inure to
the benefit of the successors, heirs and permitted assigns of the parties
hereto.
9.7 This Agreement shall be construed in accordance
with and governed by the laws of the State of New York, applicable to contracts
made and to be wholly performed therein without regard to its conflicts of law
rules.
9.8 The parties hereby consent to the jurisdiction of
the United States District Court for the Southern District of New York and of
any of the courts of the Southern District of New York and of any of the courts
of the State of New York located within the Southern District in any action by
the Design Partnership to enforce its rights pursuant to paragraph 6.4 or 9.9
hereof, and agree further that service of process or notice in any such action,
suit or proceeding shall be effective if in writing and delivered as provided in
paragraph 9.1 hereof. Notwithstanding anything to the contrary set forth herein,
neither Polo Ralph Lauren Corporation nor any other general or limited partner
of the Design Partnership shall be liable for any claim based on, arising out
of, or otherwise in respect of, this Agreement, and the Company shall not have
nor claim to have any recourse for any such claim against any general or limited
partner of the Design Partnership. In the event that (i) there is a dispute,
controversy or claim arising out of or relating to this Agreement or the breach,
termination or validity thereof (hereinafter referred to as a 'Controversy'),
and (ii) the parties hereto have not resolved such Controversy within sixty (60)
days (or such other period of time as the parties hereto may at the time
15
agree upon) after either party gives written notice of such Controversy to the
other, then the Controversy in question shall, at the request of either party,
be finally settled by arbitration in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, in the manner set forth in
paragraph 16.7 of the License Agreement.
9.9 In the event of a breach or threatened breach of
this Agreement by the Company, the Design Partnership shall have the right,
without the necessity of proving any actual damages, to obtain temporary
injunctive relief in a court of competent jurisdiction, it being the intention
of the parties that this Agreement be specifically enforced to the maximum
extent permitted by law pending final resolution by arbitration in accordance
with paragraph 9.8 hereof.
9.10 Provisions of this Agreement are severable, and
if any provision shall be held invalid or unenforceable in whole or in part in
any jurisdiction, then such invalidity or unenforceability shall affect only
such provision, or part thereof, in such jurisdiction and shall not in any
manner affect such provision in any other jurisdiction, or any other provision
in this Agreement in any jurisdiction. To the extent legally permissible, an
arrangement which reflects the original intent of the parties shall be
substituted for such invalid or unenforceable provision.
9.11 The paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Any ambiguity in this Agreement
shall not be construed against the party who prepared this Agreement.
9.12 This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed
this Agreement or caused the same to be executed by a duly authorized officer as
of the day and year first above written.
Polo Ralph Lauren Enterprises, L.P.
By: Polo Ralph Lauren Corporation,
General Partner
By: /s/ Michael J. Newman
---------------------------------
Polo Ralph Lauren Japan Co., Ltd.
By: /s/ Hiroshi Kometani
---------------------------------
Hiroshi Kometani
Acknowledged and Agreed:
The Seibu Department Stores, Ltd.
By: /s/ Hiroshi Kometani
------------------------------------
17
Schedule A
EARNED COMPENSATION PERCENTAGE RATE
Except as hereinafter provided with respect to Chaps Licensed
Products, during each year hereof, there shall be two applicable rates of earned
compensation applied against net sales of Licensed Products, depending upon the
volume of net sales achieved. For each year during the term hereof, the Earned
Compensation Percentage Rate shall mean 'Initial Rate' applied to net sales of
Licensed Products up to the 'Trigger Point' (which shall mean a pre-established
volume of the aggregate net sales price of all Licensed Products sold by
Licensee, sales above which shall trigger a lower rate), and the 'Overroyalty
Rate', which shall be applied to all net sales in excess of the 'Trigger Point',
all as hereinafter set forth. The first Trigger Point shall apply to net sales
of all Licensed Products which do not bear the Chaps trademark. The second
Trigger Point shall apply to net sales of all Licensed Products which bear the
Chaps trademark ('Chaps Licensed Products').
YEAR
COMMENCING
MARCH 1ST: INITIAL RATE TRIGGER POINT OVERROYALTY
(IN [***] YEN)
(NON-CHAPS/CHAPS)
1998 [***] [***] [***]
1999 [***] [***] [***]
2000 [***] [***] [***]
2001 [***] [***] [***]
2002 [***] [***] [***]
If renewed:
2003 [***] [***] [***]
2004 [***] [***] [***]
2005 [***] [***] [***]
2006 [***] [***] [***]
2007 [***] [***] [***]
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If renewed:
2008 [***] [***] [***]
2009 [***] [***] [***]
2010 [***] [***] [***]
2011 [***] [***] [***]
2012 [***] [***] [***]
Notwithstanding anything to the contrary contained herein, the
Earned Compensation Percentage Rate with respect to all sales of Chaps Licensed
Products shall be [***] percent [***]. Accordingly, the Company shall account
for and pay earned compensation in respect of net sales of Chaps Licensed
Products in excess of the Chaps Trigger Point set forth above, at the rate of
[***] percent [***].
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Design Services Agreement - Polo Ralph Lauren Enterprises LP and Polo Ralph Lauren Japan Co. Ltd.
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