License Agreement between HUGO BOSS Trade Mark Management GmbH & Co. KG and MGI Luxury Group S.A. for Watch Products

Summary

This agreement is between HUGO BOSS Trade Mark Management GmbH & Co. KG and MGI Luxury Group S.A. HUGO BOSS grants MGI Luxury Group an exclusive, non-transferable license to use certain HUGO BOSS trademarks for the production, marketing, and sale of watches worldwide. The Licensee must actively market and distribute the products in specified countries and may use subcontractors with HUGO BOSS's oversight. Payments and other terms are specified, and the agreement includes quality control provisions to protect the HUGO BOSS brand.

EX-10.38 4 y07454kexv10w38.txt LICENSE AGREEMENT EXHIBIT 10.38** License Agreement between HUGO BOSS Trade Mark Management GmbH & Co. KG Dieselstrasse 12 D-72555 Metzingen Germany - hereinafter referred to as "HUGO BOSS" - and MGI Luxury Group S.A. 35 Rue de Nideau CH-2501 Bienne Switzerland - hereinafter referred to as "Licensee" - **CONFIDENTIAL PORTIONS OF THIS EXHIBIT HAVE BEEN OMITTED FROM PAGES 3, 5, 6, 10, 11-13, 20, 22-24; APPENDIX 3 (PAGES 7-54 AND PAGE 58); APPENDIX 4 (PAGES 1-14) AND APPENDIX 6 AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION ("SEC") PURSUANT TO RULE 24b-2 OF THE SECURITIES EXCHANGE ACT OF 1934,AS AMENDED ("1934 ACT"). 2 Preface a) HUGO BOSS is entitled to grant licences for the trademarks "BOSS", "HUGO BOSS", "BOSS HUGO BOSS", "HUGO", and "HUGO HUGO BOSS" which are registered or under application for registration for various products in numerous countries around the world. The HUGO BOSS group enjoys an excellent reputation world-wide as an established fashion house, which is based upon the high quality of HUGO BOSS products and the special HUGO BOSS image. b) Licensee is aware that HUGO BOSS grants production and distribution licenses to third parties for the above trademarks. c) Proceeding from the foregoing, the parties wish to enter into a licence agreement on certain watch products and agree as follows: 1. Grant of License 1.1 Subject to the terms of this Agreement, HUGO BOSS hereby grants to the Licensee the exclusive non-transferable license to use the trademarks "HUGO BOSS", "BOSS HUGO BOSS", "HUGO HUGO BOSS", "BOSS", and "HUGO" as set forth in Appendices 1 and 2 to this Agreement, and any other trademarks which at any time during the term of this Agreement are owned by HUGO BOSS for Licensed Products (as hereinafter defined) and contain either or both the words "HUGO" and/or "BOSS" (hereinafter referred to as the "Trademarks"), for the production, marketing, advertising, promotion, sale and distribution of the Licensed Products (as hereinafter defined) in the License Territory (as hereinafter defined) and in connection therewith, and subject to the terms hereof, to use the reputation and the image of HUGO BOSS and the products of HUGO BOSS. Notwithstanding the foregoing, Licensee shall not have any right to use any trademark containing the word BALDESSARINI. In addition, Hugo Boss hereby grants Licensee the non-exclusive right and license to use the tradename HUGO BOSS as a tradename solely in connection with Licensee performing its obligations and exercising its rights under this Agreement. The License includes, besides the exclusive right to use the Trademarks as set forth above, the exclusive right to use the Trademarks in advertising and PR materials, in promotional materials and on the packaging of the Licensed Products, subject to and within the limitations of the other provisions of this Agreement, in particular Art. 10. Trademark use on promotional gifts is only permitted upon obtaining the prior written approval of HUGO BOSS. The 3 License further includes the exclusive right to use the Licensor Designs (as defined in section 6.5 hereof) and the right to use designs of the promotional material, and all associated copyrights, trade dress rights, and other design rights. "HUGO BOSS group" means all subsidiaries linked to HUGO BOSS AG, Dieselstrasse 12, D-72555 Metzingen, in accordance with ss. 18 of the German Stock Corporation Act ("Aktiengesetz"). "Licensed Products" means watches, e.g. wristwatches, pocket watches, alarm watches, in each case bearing the Trademarks on labelling, tags and/or on the products themselves. "License Territory" means all countries of the world "Exclusive" means in this context that during the term of this Agreement, HUGO BOSS will not grant any further licenses for the production, marketing, advertising, promotion, sale and/or distribution in the License Territory of the Licensed Products and moreover will not itself produce and/or distribute any Licensed Products in the License Territory. Notwithstanding the foregoing, HUGO BOSS retains the right to produce and/or distribute Licensed Products bearing the Trademarks to the extent it in good faith deems such use necessary or useful in order to perfect or preserve its rights in the Trademarks and only to the extent that Licensee has refused or failed to provide Hugo Boss with the necessary Licensed Products within a reasonable time after written request made to Licensee by Hugo Boss. All such Licensed Products provided by Licensee to HUGO BOSS shall be under terms of sale that are * consistent with Sec. 8.3 hereof. Moreover, nothing set forth herein shall limit in any way HUGO BOSS' right to manufacture and/or distribute and/or grant licenses for manufacture and/or distribution of products other than Licensed Products, in particular, men's and women's jewellery of precious metals and alternative materials, e.g. rings, bracelets, chains, cufflinks, earrings, key rings. 1.2 It is the intention of the parties that the Licensee exploits the rights granted hereunder throughout the whole of the License Territory to the extent commercially reasonable. Subject to the terms of this Agreement, it shall be considered commercially reasonable for the Licensee to make use of the license and engage in an active course of distribution and marketing activities in those countries within the License Territory where the HUGO BOSS group has an existing marketing and distribution structure for its core products. However, the parties agree that Licensed Products shall be distributed, marketed and sold - at a minimum - in the following countries: (Europe:) United Kingdom, Germany, France, Spain, Italy, Benelux, Switzerland, Austria, * CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT 4 (Asia:) Japan, Hong Kong, South Korea, Taiwan, PR China, Singapore, (Americas:) U.S.A., Canada, Mexico. Licensee shall refrain from any activity which could adversely affect in any way the cooperation of the parties under this Agreement and any third party licensee of HUGO BOSS with respect to production, distribution, sales and promotion campaigns or any other activity using or in connection with the Trademarks. 2. Subcontractors 2.1 The Licensee is entitled to have the Licensed Products manufactured by third parties acting as subcontractors. In any case, manufacturers of the Licensed Product are to be considered as subcontractors according to this regulation. Licensee shall inform HUGO BOSS in a timely manner of new subcontractors at the latest 6 (six month) after production start. 2.2 Licensee warrants to HUGO BOSS that each subcontractor will perform all relevant obligations under this Agreement. 2.3 HUGO BOSS may request for cause, upon written notice to Licensee, at any time that a subcontractor shall discontinue the manufacturing of the License Products. It shall be considered as cause if, based on reasonable grounds which shall be set forth in the written notice delivered to Licensee as provided above, it appears likely that the subcontractor will materially and enduringly imperil the marketing concept of HUGO BOSS e.g. through the production of Licensed Products of inferior quality. The Licensee warrants that its agreements with subcontractors shall provide for immediate termination on the aforementioned grounds. 5 3. HUGO BOSS Team LICENSEE shall at all times maintain a separate team of highly experienced and qualified people solely in charge of the development, the marketing and the overall distribution and sale strategy of the Licensed Products. 4. Payments / Taxes 4.1 The license and marketing fees payable by Licensee to HUGO BOSS are stated in CHF. The payment shall be made to account : * or such other account as HUGO BOSS may from time to time designate to Licensee in writing. Any amounts owing to HUGO BOSS which are past due shall bear interest of the applicable Base Rate of the Deutsche Bundesbank plus eight (8) per cent. 4.2 Direct taxes on the license fees and/or advertising contributions in the Federal Republic of Germany will be assumed by HUGO BOSS; Licensee agrees to pay any turnover tax (VAT) and/or withholding tax on the license fees, Marketing Contribution (as defined in Sec. 10.8) and/or Advertising Fees (as defined in Sec. 10.4) imposed on Licensee under the law of Switzerland, any Swiss Canton or any other taxing authority within Switzerland. An amount equal to the withholding taxes paid by Licensee shall be deducted by Licensee from the License Fees payable under Article 5 and/or from the Marketing Contribution or Advertising Fees payable under Article 10. Licensee shall, in due time, furnish HUGO BOSS with all certificates or other administrative documents issued by the Swiss taxing authority on the withholding taxes paid. 5. License Fees 5.1 As compensation for the rights and opportunities for use provided in this Agreement, Licensee shall pay to HUGO BOSS a license fee in the amount of * of the sum of the Net Sales. Net Sales shall designate the sales of Licensed Products made and invoiced by Licensee or by any entity controlled by, under common control with, or controlling Licensee ("Licensee Affiliate") to an unrelated third party (e.g. customer or distributor) after the deduction of: - Sales or value added taxes; - Customs duties and insurance costs; - Packing and freight charges; * CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24-b2 OF THE 1934 ACT. 6 - Returns that Licensee actually authorizes and receives, not exceeding * total sales of Licensed Products in such year; and - Rebates and other allowances, defined as credits to a customer after delivery that Licensee actually grants in writing to the extent auditable, expressly excluding credits for warranty related or delivery or quality issues, and further excluding any credits included within the Marketing Contribution (as defined in Sec. 10.8) and not exceeding in any year * total sales of Licensed Products in such year, provided that each such item is indicated separately and appears clearly separate from the product price, or, in the case of returns and allowances, is appropriately documented. Subject to Sec. 5.3 and subsequent adjustment for returns and allowances, the due date of the license fees is Licensee's invoicing date to third parties. Notwithstanding anything contained herein to the contrary, Licensee shall not be obliged to pay any License Fees for Net Sales made and invoiced during the calendar year 2005 in connection with Prior Products (as defined in section 17.1). 5.2 Licensee shall have no obligation to pay any minimum license fee for the year 2005. Beginning in calendar year 2006 and through the calendar year 2010, Licensee shall pay to HUGO BOSS a minimum annual license fee each year equal to * Net Sales for such year under the Business Plan (as defined in Sec. 11). (a) Beginning in calendar year 2011, Licensee shall pay HUGO BOSS an annual minimum license fee equal to * Notwithstanding the foregoing, in the event that the entity owning either the * brand acquires fifty percent (50%) or more of the voting rights of Licensee or of any entity controlling Licensee, then the minimum annual license fee each year shall be * Net Sales for such year as set forth in the Business Plan, beginning with the calendar year in which such change of ownership has taken place. 5.3 No later than 30 days after the last day of each calendar quarter (April 30, July 30, October 30 and January 30, respectively, or if such date shall fall on a * CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 7 weekend or holiday, the following business day), Licensee shall submit to Hugo Boss a written statement setting forth the license fee and Advertising Fee (as defined in section 10.4) due for the immediately preceding calendar quarter, giving a count by country of total Licensed Products sold per stock keeping unit ("SKU") and the applicable Net Sales. Licensee shall remit to HUGO BOSS with each such statement the aggregate license fee and Advertising Fee due for the calendar quarter then ended. After the fourth quarter each year, Licensee shall determine the minimum license fee and the minimum Advertising Fee due for such year and, where necessary, the difference between such minimum fees and the license fees and Advertising Fees paid for such year. In the event the payments made were less than the minimums due for any such year, Licensee shall transmit the difference at the latest with the payment of the License fee due for the fourth quarter. In the event the payments made were more than minimums due for any such year, Licensee can deduct the overpaid differences from the license fee and Advertising Fee due in the following quarter. 5.4 The Licensee shall keep complete and accurate records of sales subject to license fees, maintain and preserve the underlying documents for at least five years following the termination of this Agreement and permit a representative or authorised agent of Hugo Boss to examine such records, copy them, and audit the corresponding accounting entries in Licensee's books during the latter's business hours on at least three business days' notice. Notwithstanding the immediate due date and accrual of interest on overdue license fees, Licensee shall bear the costs of the audit, but only if the license fees paid by the Licensee with respect to any audited time period are three or more percent lower than those determined by the audit. Hugo Boss shall ensure that all its representatives examining Licensee's records are aware of and abide by the confidentiality obligations as set forth in Article 14 hereof. 6. Product Development, Product Design 6.1 To ensure the uniformity of quality and image in all products sold by HUGO BOSS and its licensees and bearing HUGO BOSS trademarks, the principal design guidelines and general structure of the collection shall be provided by HUGO BOSS to Licensee for development of the Licensed Products. Licensee agrees to observe and comply with all such guidelines and briefings and acknowledges HUGO BOSS' high quality standards and reputation in high end fashion products. Hugo Boss will notify Licensee in due time when such guidelines will be materially modified. 6.2 Licensee shall provide all its design proposals in the following process: 8 (i) Licensee shall present to HUGO BOSS design drawings. After approval according to this subsection 6.2, (ii) Licensee shall present to HUGO BOSS prototypes. After approval according this subsection 6.2, (iii) Licensee shall present to HUGO BOSS pre-production samples for approval. Licensee warrants that production conforms to the approved pre-production samples. HUGO BOSS shall, with respect to each submission made by Licensee for approval, notify Licensee in writing without undue delay, and in any event within ten (10) business days, as to whether it approves the submission. Unless Hugo Boss disapproves any submission with the specified time period, it will be deemed approved. In the event Hugo Boss disapproves any submission, it will furnish Licensee with the reasons for such disapproval together with notice thereof. 6.3 Following Licensee's receipt of HUGO BOSS' written approval of any prototype, Licensee shall provide HUGO BOSS with samples of the Licensed Products from the first production run using the approved designs for the purpose of obtaining HUGO BOSS' written approval of said samples. Each party shall receive and maintain an approved production run sample of every approved model for purposes of documentation of said approval and quality control of the Licensed Products pursuant to Sec. 7. The costs of creation and supply of the samples shall be borne by Licensee. 6.4 The parties acknowledge and agree that it is essential to the image and reputation of HUGO BOSS to regularly adjust the range of designs of the Licensed Products (like those of HUGO BOSS and its other licensees) to meet new demands and fashion trends. The intervals of the renewal and expansion of product designs will be mutually determined by the parties acting in good faith. 6.5 Licensee agrees that HUGO BOSS shall become and remain the sole owner of any design that it approves hereunder which is not in the public domain and which previously was not used by Licensee on products other than the Licensed Products, including usage of special materials, creation of special colour effects and shapes, to the extent the respective Licensed Products are actually offered for sale in any jurisdiction ("Licensor Designs"). Hugo Boss shall protect all Licensor Designs, where appropriate, in accordance with Sec. 13. of this Agreement. In addition, HUGO BOSS remains the sole owner of any design for the Licensed Products which was developed by HUGO BOSS. Licensee shall remain the owner of designs proposed to HUGO BOSS but not used on any Licensed Products sold to third parties. 6.6 Licensee shall provide HUGO BOSS, on its own costs, with one sample of each launched Licensed Product. 9 7. Quality 7.1 Licensed Products produced by Licensee for sale shall conform to the samples from the first production of such Licensed Products approved by HUGO BOSS pursuant to Section 6.3. Licensee shall adhere to the standards of quality (including, without limitation, materials, design and workmanship) set forth in Appendix 3 (as such standards may be updated and expanded by mutual agreement between the Parties from time to time) and safeguard the quality of Licensed Products by means of quality-control measures approved by HUGO BOSS. In doing so, Licensee acknowledges HUGO BOSS' high quality standards and reputation in high end fashion products. 7.2 All modifications with respect to materials, design and workmanship in a series under production require the prior written approval of HUGO BOSS. 7.3 HUGO BOSS may at any time, upon giving reasonable prior notice, carry out quality and manufacturing control inspections at the premises of Licensee, or wherever the Licensed Products are being manufactured, or it may have such inspections performed by third persons. Licensee agrees to permit such examinations, also with respect to subcontractors, during normal business hours and facilitate said inspections. 7.4 In the event that any Licensed Products produced or in production do not conform to the required specifications, HUGO BOSS shall give notice of such nonconformity to Licensee and, in HUGO BOSS' sole discretion, determine whether the affected Licensed Products may be sold. In the event Licensee shall become aware of any such nonconformity, it shall immediately notify HUGO BOSS thereof prior to the distribution of the affected Licensed Products, so that HUGO BOSS can make appropriate decisions as to conforming such products to the applicable quality standards that shall be binding upon the Licensee. In any case in which either party has notified the other of any such quality problem, no affected Licensed Products shall be distributed until HUGO BOSS has approved and monitored the necessary modifications to said products or otherwise indicated in writing that the products are acceptable. If it is not reasonably practicable to conform the affected Licensed Products to the applicable quality standards, Licensee shall have the right to sell such Licensed Products but only after removing any identifying brand names and only through its outlet stores or through approved clearance channels; alternatively the affected Licensed Products will be destroyed under the supervision of HUGO BOSS and the costs thereof borne by Licensee. 10 8. Distribution 8.1 Licensee shall be responsible for the distribution of the Licensed Products throughout the License Territory. The parties agree that the Licensed Products will be offered, sold and distributed by Licensee directly and/or through Licensee's distributors exclusively through distribution channels: which suit the image of the Trademarks and the marketing policies of HUGO BOSS including the following: - specialised retail dealers; - high-end department stores, provided they are HUGO BOSS clients; - BOSS HUGO BOSS Shops, HUGO HUGO BOSS Shops, and HUGO BOSS stores; - Duty-Free stores; - Licensee's own outlet stores; - After prior written approval by HUGO BOSS, which shall not be unreasonably withheld: Other clearance channels up to * annual Net Sales. In case where said percentage of Net Sales exceeds * , Licensee needs the express and written approval by HUGO BOSS for such distribution on a case-by-case basis, such approval not to be unreasonably withheld. - After prior written approval by HUGO BOSS: catalogues, premium, incentive, and military accounts. Within the framework of the Business Plan and subject to this section 8.1, Licensee shall suggest, and the Parties shall agree on individual distribution channels (importers, retail dealers, "points of sale") for the Licensed Products. 8.2 Licensee shall enter into separate distribution agreements with its distributors. No rights or duties shall be derived for HUGO BOSS from the resulting direct contract relationship between Licensee and its distributors. However, Licensee guarantees that the agreements between Licensee and its distributors will terminate if the agreement between HUGO BOSS and Licensee terminates for any reason whatsoever. Licensee will terminate its contract with any distributor in the event that any such distributor violates a material term of such contract which reasonably is expected to adversely affect the reputation, image, style and marketing strategy of HUGO BOSS (e.g., no diversion of Licensed Products, adherence to advertising protocol, selling only to approved accounts), and such violation has not been remedied within fifteen (15) calendar days. Licensee warrants that such a remedy and termination clause will be provided for in the respective agreements. 8.3 At the request of HUGO BOSS, Licensee will sell the Licensed Products to HUGO BOSS itself, to organisations within HUGO BOSS' distribution network for further distribution to its local customers (e.g. franchising stores, BOSS HUGO *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 11 BOSS Shops in Shops, etc.) or directly to said local customers. Such sales shall be under terms of sale that are * . 8.4 Licensee shall entrust the distribution of the Licensed Products as follows: Nominated sales personnel shall attend mainly to the distribution of the Licensed Products. This personnel will not distribute or be otherwise involved in handling any products competing with the Licensed Products, i.e. with high-end designer brands, without the prior written approval of HUGO BOSS. The distribution system, as well as the countries included within Licensee's key market plan and Licensee's organizational structure with respect to the License Products, are set forth in the Business Plan. Licensee will select its sales personnel in accordance with and inform its sales personnel of the product philosophy of the Licensed Products as communicated by HUGO BOSS. Upon request by HUGO BOSS, Licensee shall cause its employees who are entrusted with the distribution of the Licensed Products to be trained regularly by HUGO BOSS or by persons or companies instructed by HUGO BOSS. Licensee will require each such employee to abide by such product philosophy. 8.5 Licensee acknowledges that to preserve the goodwill associated with the Trademarks, License Products should be sold at prices and terms reflecting the prestigious nature of the Trademarks, and the reputation of the Trademarks as appearing on goods of high quality and reasonable price, it being understood, however, that Hugo Boss is not empowered and may not fix or regulate the prices for which the Licensed Products are to be sold, either at the wholesale or the retail level. 8.6 Licensee shall not materially breach the applicable terms and dates of delivery and shall in a timely and complete manner inform HUGO BOSS of any material problems which arise in connection therewith, particularly delivery delays. 8.7 Licensee shall handle all customer inquiries and complaints relating to the Licensed Products in a manner consistent with the manner in which it handles customer inquiries and complaints relating to watches it sells at comparable prices under other brand names. Licensee shall provide substantially the same service, warranties, repair and replacement rights to wholesale purchasers and consumers of the Licensed Products as it provides to purchasers of such other watches. Licensee shall be solely responsible for all costs associated with the handling of such inquiries and complaints and the provision of such service. The After Sales Service is subject to the quality requirements as stated in Section 7 of this Agreement and may be controlled by HUGO BOSS in accordance with the same conditions. * CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 12 9. Launch Dates The parties shall agree on an annual general launch schedule, and on further seasonal launch schedules based on said annual launch schedule. 10. Marketing, Advertising and Promotional Measures 10.1 With regard to the general HUGO BOSS marketing activities, HUGO BOSS alone is in charge of all activities including all marketing, advertising (e.g. newspapers, magazines, billboards, TV, radio, internet sites) and promotional as well as sport and art sponsoring activities. 10.2 Within the framework of the Business Plan (Sec. 11), marketing, advertising and promotional activities in connection with the Licensed Products shall be agreed upon with the Licensee. The parties shall inform each other regularly about the implementation of this Business Plan. 10.3 With respect to the Licensed Products, subject to section 10.4, HUGO BOSS is in charge of conception and design of all advertising activities (e.g. concepts, layouts and shootings for print and billboard campaigns; concepts, layouts and production for TV or radio spots; concepts, layouts and set ups of internet sites; all media bookings and spending). 10.4 To contribute to the costs for the above-mentioned activities of HUGO BOSS, Licensee shall pay to HUGO BOSS an amount each year equal to the greater of * target Net Sales for such year set forth in the Business Plan ("Advertising Fee"). Notwithstanding the foregoing, in the event that the entity owning either the * brand acquires fifty percent (50%) or more of the voting rights of Licensee or of any entity controlling Licensee, then the Advertising fee each year shall be * target Net Sales for such year as set forth in the Business Plan. The Advertising Fee shall be paid in accordance with the provisions in Sec. 4 and 5. HUGO BOSS shall use this fee for the costs of production and placement in print and electronic media of advertising for Licensed Products only. HUGO BOSS and Licensee shall, every six (6) months, agree in which countries such media budget shall be spent; provided, however, that for the U.S.A. only, such media budget shall be withheld and spent by Licensee as it shall reasonably determine after approval of HUGO BOSS. While in principle, HUGO BOSS shall endeavour to spend the entire Advertising Fee paid by Licensee in respect of each year, and Licensee shall endeavour to spend the portion thereof withheld for the U.S.A., prior to the end of such year, the parties recognize that this * CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 13 will not always be practical or possible and therefore they agree that any deficiency will be spent in the immediately following year. 10.5 Licensee shall be responsible for conception and design of point-of-sale activities with regard to the Licensed Products, i.e. catalogues for retailers and/or sales representatives, special events, co-operative advertising with the retailer and product displays. However, all advertising materials and promotional activities require the prior written approval of HUGO BOSS. 10.6 Moreover, Licensee shall carry out all point-of-sale activities such as production and distribution of stand-ups, window cards, catalogues and other promotional material, production and distribution of product displays, special events, co-operative advertising with retailers. Licensee shall also be responsible for trade fairs, product placements, media bookings and spending of advertising targeted to retailers. 10.7 Licensee shall be responsible for public relations activities with regard to the Licensed Products, i.e. texts, shootings, placement in end-consumer press and trade press throughout the License Territory. However, all public relations activities require the prior written approval of HUGO BOSS. 10.8 All those activities mentioned in Sec. 10.5, Sec. 10.6 and Sec. 10.7 shall be elaborated in close co-operation with HUGO BOSS or persons/companies appointed by HUGO BOSS (for example PR Agencies in charge for HUGO BOSS) and are subject to the prior approval of HUGO BOSS. Licensee shall bear responsibility for all costs for the activities referred to in Sec. 10.5, Sec. 10.6 and Sec. 10.7. For those activities Licensee shall spend or cause its distributors to spend at least * of the "Net Sales" throughout the term of this agreement ("Marketing Contribution"). The Marketing Contribution may be revised from time to time by mutual consent. Notwithstanding the foregoing, in the event that the entity owning either the * brand acquires fifty percent (50%) or more of the voting rights of Licensee or of any entity controlling Licensee, then the Marketing contribution each year shall be * of target Net Sales for such year as set forth in the Business Plan. 10.9 Costs incurred by Licensee in connection with customer accommodation or after-sales service, customer gifts or invitations, dealers' meetings and training of marketing and sales personnel are not included in the activities stated in clauses 10.6 and 10.7 and shall be borne solely by Licensee. 10.10 Any and all public statements, publications and information given to third parties concerning this Agreement or the relationship between Licensee and HUGO BOSS generally must be previously agreed upon by the parties, except where such statements are required by law or government act. However, the *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 14 parties shall inform each other of such statements required by law or government act. Normal company information of Licensee and HUGO BOSS that does not contain any statements regarding the contents of this Agreement or its relationship with HUGO BOSS is exempted from this provision. 10.11 Licensee is not permitted to use the Trademarks as a part of its firm name or as part of the firm name of a company affiliated or otherwise associated with it. The use of the Trademarks by Licensee on letterhead, forms, business cards, etc. requires the prior written approval of HUGO BOSS. 10.12 The parties will consult at least semi-annually to review the level of actual expenditures for (i) the production and placement of advertising for the Licensed Products in print and electronic media and (ii) the activities set forth in Sections 10.5, 10.6 and 10.7, relative to sales growth, including consideration of whether certain increases in such expenditures are appropriate. If the parties disagree as to whether certain increases are appropriate, a top management meeting of the parties can be called by either party and the parties will use their best efforts to resolve such disagreement. 11. Business Plan 11.1 The parties have agreed upon a Business Plan for the term of this Agreement, as set forth in Appendix 5 (the "Business Plan"). This Business Plan determines: - the sales targets (volume and value), specified by products and regions - the sequence of collection development - the distribution structure and distribution manpower investments - the marketing, advertising and promotional investments - the marketing and design manpower investments - the utilisation of marketing, advertising and promotional investments - the size of collections and suggested retail price points - the launch schedule etc. with regard to the business development of the Licensed Products for the complete term of this Agreement. Licensee shall, once a year, develop a forward rolling action plan covering the pursuant three (3) years, containing among other things, sales, turnover, number of customers per country and other data contained in the Business Plan. HUGO BOSS and Licensee shall agree on the action plan in a joint annual meeting. If the Parties cannot agree on the three-year action plan, a top management meeting of the parties can be called by either party and both parties will use their best efforts to solve the issue. 15 11.2 On request by HUGO BOSS, Licensee shall inform HUGO BOSS in writing of actions taken and confirm compliance with the individual steps of the three-year action plan and the implementation of the planned activities. 12. Information, Co-ordination and Co-operation 12.1 Licensee shall inform HUGO BOSS in a timely manner, if it terminates the collaboration with a distributor. 12.2 HUGO BOSS and the Licensee shall each designate a person at their respective companies to be in charge of the development, design and marketing of the Licensed Products. 12.3 In co-ordination with Licensee, HUGO BOSS has defined all reporting data relevant to HUGO BOSS' quality control of the manufacture, distribution and sale of Licensed Products (Appendix 5) and shall specify the frequency with which such data is to be made available. This data must be electronically processed and made available to HUGO BOSS via data transmission in a complete and timely manner. The Parties shall jointly decide on changes to the reporting data format. 12.4 HUGO BOSS may specify and furnish the data processing interfaces necessary for a smooth exchange of data in accordance with Licensee; provided that, in any event, it shall be sufficient if Licensee furnishes the required reporting data to Hugo Boss via email. 12.5 The parties will endeavour to keep each other fully informed on a timely basis of all issues that reasonably could be expected to have a material impact on the production, marketing, advertising, promotion, sale or distribution of the Licensed Products and Licensee shall furnish HUGO BOSS with such reports in respect thereof as HUGO BOSS may reasonably request from time to time. 12.6 Licensee acknowledges HUGO BOSS's intent to license the Trademarks for jewellery, as provided in Sec. 1.1 and Licensee will reasonably cooperate with any such jewellery licensee. 13. Trademarks, Internet Domains and other Intellectual Property Rights 13.1 During the term of this Agreement, Licensee shall be entitled to use the Trademarks only as provided herein in connection with the Licensed Products, subject to the terms hereof, and for no other purpose. Upon termination of this Agreement for any reason, Licensee shall immediately discontinue all use of the Trademarks, except as otherwise provided herein or as otherwise agreed in writing by HUGO BOSS, and thereafter will not, either directly or indirectly, use any other name, title, expression, design or packaging so nearly 16 resembling the Trademarks as would be likely to lead to any confusion or uncertainty or to deceive the public. 13.2 Licensee agrees that, to the extent such guidelines are not inconsistent with any of the provisions of this Agreement, it will fully comply with any and all guidelines notified to Licensee by HUGO BOSS regarding the utilisation of the Trademarks on or in connection with the distribution and sale of Licensed Products, including, without limitation, any corporate Identity Policies of HUGO BOSS on the use of the Trademarks. 13.3 The Trademarks and the Licensor Designs, whether or not registered by HUGO BOSS, are the sole property of HUGO BOSS. HUGO BOSS warrants that is has the full and exclusive right, power and authority to grant this exclusive license for the Trademarks and the Licensor Designs to Licensee and that neither this Agreement nor the grant of such license conflicts with or will result in a breach of the terms, conditions, provisions, representations, warranties or covenants contained in any other agreement to which Hugo Boss, or any of the Hugo Boss Group Companies, is a party, including, the Previous License Agreements (as defined in section 17.1). Licensee recognises the exclusive rights of HUGO BOSS with respect to the Trademarks and acknowledges that all rights of use of the Trademarks on or in connection with the Licensed Products by Licensee inure solely to the benefit of HUGO BOSS. The parties agree that any and all rights to the Trademarks that may arise from their use by the Licensee shall vest solely in HUGO BOSS. Licensee agrees that it shall take no action that might impair in any way HUGO BOSS' rights with respect to the Trademarks, including, without limitation, registering the Trademarks in its own name, or might damage HUGO BOSS' license relationships with third parties with respect to manufacture, distribution or otherwise. Licensee is aware that all Internet Domains relating to the trademarks are the sole property of HUGO BOSS AG, Dieselstrasse 12, D-72555 Metzingen, Germany, and recognises the exclusive rights of HUGO BOSS AG of such Internet Domains. The parties agree that the provisions of this subsection 13.3. also apply, mutatis mutandis, to said Internet Domains. Licensee is further aware that HUGO BOSS is entitled to use such Internet Domains. 13.3.1 HUGO BOSS shall have the sole responsibility between the parties to maintain the Trademarks and the Licensor Designs, in particular, to pay all pertaining prolongation fees, initiate and conduct opposition proceedings against similar trademark or design applications, in any applicable country of the License Territory. HUGO BOSS shall do so on its own costs. Licensee agrees to provide any and all information to HUGO BOSS which may reasonably be required in such actions, e.g. invoices to prove use of any given Trademark. Licensee shall give immediate notice to HUGO BOSS of any application or registration of a sign, trade name, trademark, or product packaging or product design which 17 comes to Licensee's attention and which appears to violate any of HUGO BOSS' rights with respect to the Trademarks or any packaging or product design. 13.3.2 Subject to this Sec. 13.3.2, HUGO BOSS shall further have the sole right as between the parties to defend the rights to the Trademarks and any other rights of HUGO BOSS in any applicable country of the License Territory against third party infringements of the Trademarks, e.g. counterfeits, use of the Trademarks, HUGO BOSS product or packaging design without authorization of HUGO BOSS, or of brand names or product or packaging design by third parties confusingly similar to the Licensed Products. Licensee agrees to provide any and all information to HUGO BOSS which may reasonably be required in such actions which HUGO BOSS in its sole discretion may initiate. In particular, but without limitation, Licensee shall provide prompt notice to HUGO BOSS of products which come to Licensee's attention and which infringe upon HUGO BOSS' rights, providing the names and addresses of the manufacturer, the supplier or seller, as the case may be, together with bills, receipts and other records, if any. Notwithstanding the foregoing, with respect only to products which are counterfeits of the Licensed Products, the parties will consult to determine appropriate action. If, following such consultation, the parties agree to bring any claim, complaint, proceeding or other action, then HUGO BOSS shall bring the claim, complaint, proceeding or other action in its name and the parties shall equally share all costs and all monetary recoveries, if any, including without limitation, judgments, settlements and any other awards, in connection therewith and the parties will reasonably co-operate in good faith with respect to each such action brought. If, following such consultation, only one party desires to pursue action, then such party shall have the right to pursue such action in its own name at its sole cost and shall be exclusively entitled to any and all damages and other amounts recovered or awarded in connection with any such action and the other party shall reasonably cooperate with the party pursuing such action at the latter's expense; provided however that notwithstanding the foregoing, in no event shall Licensee have the right to pursue any such action without the prior written consent of HUGO BOSS which HUGO BOSS shall not unreasonably withhold. Licensee shall give prompt notice to HUGO BOSS of any use of a sign, trade name, trademark, or product packaging or product design which comes to Licensee's attention and which appears to be an infringement upon or to violate any of HUGO BOSS' rights with respect to the Trademarks or any packaging or product design. Nothing set forth herein shall be construed as requiring HUGO BOSS to prosecute any infringements if in its own discretion it decides not to do so. 13.3.3 HUGO BOSS shall continue to take all reasonable and necessary actions to obtain trademark registrations in those countries of the License Territory, where such registrations for the Trademarks have been applied for but are not yet issued, as identified in Appendices 1 and 2 to this Agreement. In addition,in the event that HUGO BOSS determines that it is necessary to do so, HUGO BOSS shall take all reasonable and necessary actions to obtain additional 18 registrations for the Trademarks in those countries identified in Appendix 1 where such registrations have not yet been applied for. However, HUGO BOSS is not liable for ensuring the successful registration of the Trademarks in these countries. HUGO BOSS shall keep Licensee informed as to the legal status of the Trademarks. HUGO BOSS shall not be liable for ensuring that the Trademarks are utilised in a manner which maintains their protection. Upon request by Licensee, HUGO BOSS shall take all reasonable and necessary actions to obtain trademark registrations of the Trademarks in other countries of the License Territory not named in Appendix 1 to this Agreement, provided that HUGO BOSS, accepts no liability for failure to successfully register such Trademarks in such countries. In the event that trademark registrations for the Trademarks cannot be obtained in a country where, according to this section 13.3.3, Hugo Boss is to seek such registrations, and such country is specifically mentioned in the Business Plan and the failure to obtain any such registrations has a material adverse affect on Licensee's ability to sell Licensed Products in such country, the Business Plan shall be adjusted proportionately to reflect the elimination of such country. 13.3.4 Licensee shall use its best efforts to assist and otherwise co-operate with HUGO BOSS in applying for and maintaining the registration and protection of the Trademarks, such efforts to include without limitation, executing any registered user or other agreement or document as may be appropriate, through the making of necessary declarations, delivery of necessary documents and by providing useful or appropriate information. HUGO BOSS shall reimburse Licensee for its out-of-pocket costs incurred therefore. Licensee shall supply to HUGO BOSS upon its reasonable request copies of invoices and other records of sales for each country where necessary or useful to establish proof of Trademark use in such countries on the Licensed Products. For this purpose, Licensee shall also regularly inform HUGO BOSS of the countries in which deliveries of the Licensed Products are expected in the then current year. 13.3.5 Licensee agrees that it will be listed as "Registered User" of the Trademarks for the Licensed Products to the extent possible and/or required under relevant local law. HUGO BOSS will reimburse Licensee for its costs incurred therefore. 13.3.6 Licensee agrees: (a) to use the Trademarks exclusively in the design format indicated by HUGO BOSS, and, to the extent not contrary to any of the provisions hereof, in conformity with the "Corporate Identity Policy" of HUGO BOSS, (b) to designate them with the markings prescribed by HUGO BOSS (such as "(R)" or "Marca registrada," "HUGO BOSS is the registered trademark of HUGO BOSS AG" or the like); provided that no such designation shall be 19 required on the Licensed Products themselves, and (c) to the extent not contrary to any of the provisions hereof, to observe any and all other restrictions and conditions reasonably notified by HUGO BOSS to Licensee, including those which may arise from agreements between HUGO BOSS and any third party. Licensee shall not itself use the Trademarks in connection with sub-brands or accompanying brands of Licensee or otherwise in any way not explicitly permitted by this Agreement or HUGO BOSS. In particular, and without limiting the foregoing, designations such as "BOSS HUGO BOSS by ........." are prohibited. All references to the manufacturer and/or Licensee require the prior written approval of HUGO BOSS. Notwithstanding the foregoing, Licensee shall not be prohibited from using model names for individual collections of Licensed Products or from applying for trademark registrations for such model names, provided that Licensee shall be solely responsible for all costs associated therewith. 13.4 The parties acknowledge and agree that, as provided in section 6.5, HUGO BOSS is the owner of all rights to the Licensor Designs and of the designs of the promotional material. HUGO BOSS grants the Licensee for the duration of this Agreement the right of use of these designs for the purpose of this Agreement in the License Territory. Furthermore, except as otherwise provided in Article 18, the Licensee undertakes to no longer use the above-mentioned designs and promotional material after termination of this Agreement. Notwithstanding and without limiting the foregoing, Licensee shall provide to HUGO BOSS any and all instruments or documents necessary or useful to confirm HUGO BOSS' ownership of such copyright and design rights, including, without limitation, any assignments of rights that HUGO BOSS may reasonably request. 13.4.1 HUGO BOSS shall own all inventions made by Licensee or its employees, whether or not patentable, which are based in whole or in part on Confidential Information from HUGO BOSS as hereinafter defined in Sec. 14. Licensee shall promptly notify HUGO BOSS of the making of each such invention and shall co-operate in securing to HUGO BOSS the benefits of each such invention throughout the world by executing assignments, patent applications and similar documents necessary for HUGO BOSS to perfect rights in the invention; provided that Hugo Boss reimburses Licensee all amounts incurred by Licensee in assigning such rights to Hugo Boss, including, without limitation, any and all amounts Licensee may be required to pay by law to the inventing employee. 13.5 Any and all intellectual property rights in display and sales promotional materials related to the Licensed Products shall be the property of HUGO BOSS. Licensee shall co-operate in securing to HUGO BOSS the benefits of any such rights throughout the world by executing assignments and similar documents necessary for HUGO BOSS to perfect its rights in such matters. 20 13.6 The provisions contained in this Section 13. shall not affect Sec. 18. 14. Confidentiality The Parties agree to use all Confidential Information (as hereinafter defined) of the other party provided to it or obtained by it pursuant to this Agreement only in its capacity as contracting party to this Agreement and as contemplated in this Agreement. "Confidential Information" shall mean any and all technical data, knowledge or information, trade secrets or advice relating to the design development, manufacture, assembly, use, sale, and customer servicing of the Licensed Products and any and all information concerning the business of the other party. Either party acknowledges the other party's sole rights in the Confidential Information. Either party shall ensure that, without the prior written approval of the other party, no Confidential Information shall be used for any purpose other than as set forth herein or copied or disclosed to any third party during the term of this Agreement or after its termination. This confidentiality provision does not apply to information (i) which was or comes into the public domain through no fault of the receiving party, or (ii) which was obtained from a third party legally entitled to use and disclose such information, or (iii) the disclosure of which is required by law, or (iv) which was already in possession of the receiving Party before closing this Agreement and not otherwise subject to any confidentiality obligation as between the parties. Upon termination of this Agreement, either party shall either return to the other party, or at the request of the other party, destroy all Confidential Information in its possession. 15. Other Products 15.1 Licensee will not manufacture or distribute watches under the brand names * ; provided that, nothing contained herein shall prohibit Licensee from acquiring any third party distributing either or both of those watch brands so long as such distribution ceases within twelve (12) months after the date of such acquisition. *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PUSUANT TO RULE 24b-2 OF THE 1934 ACT. 21 16. Liability Issues 16.1 Licensee shall be responsible for any and all defects in the Licensed Products and in no event shall HUGO BOSS be liable for any direct, indirect, special, incidental or consequential damages or any lost revenues or profits or any other damages arising with respect to the Licensed Products, whether based in contract, tort, breach of express or implied warranty, including without limitation, negligence or product liability. 16.2 If either party becomes aware of any law, or other rule, regulation or order having the force of law issued by any duly constituted authority having appropriate jurisdiction, in any country included within the Business Plan that would have the effect of making it impractical to sell or to continue selling Licensed Products in or into such country, the parties shall consult in good faith and attempt to agree on an appropriate adjustment to the Business Plan, including, without limitation, a proportionate reduction in target Net Sales. 16.3 Hugo Boss will indemnify, defend and hold harmless Licensee, each Licensee Affiliate, and their respective officers, directors, agents, employees, shareholders, legal representatives, successors, affiliates and assigns, from and against any and all claims, actions, suits, liabilities, damages and expenses (including reasonable attorneys' fees, costs and expenses) which Licensee or any Licensee Affiliate may incur or be obligated to pay in any action or claim (i) for infringement of any other person's claimed right to use a trademark or other intellectual property right (except claimed rights relating to the designs of the Licensed Products or to any intellectual property used by Licensee and not granted by HUGO BOSS hereunder) in the Territory, including such infringements as may be contained in any advertising placed by Hugo Boss, where such action or claim results from Licensee's proper use of the Trademarks or other rights (except rights related to the Licensor Designs) granted hereunder in the Territory, in accordance with the terms of this Agreement, or (ii) arising out of or in connection with the Previous License Agreements (as defined in section 17.1) or the termination of either or both of the Previous License Agreements, or the distribution, sale, marketing or advertising of the Prior Product (as defined in section 17.1). Licensee will give Hugo Boss timely written notice of any such claim or action, and thereupon Hugo Boss will undertake and conduct the defense of any suit so brought. HUGO BOSS further agrees that the provisions contained in this Section shall survive the termination or expiration of this Agreement. 16.4 Licensee agrees to indemnify, defend and save harmless HUGO BOSS and its officers, directors, agents, employees, shareholders, legal representatives, successors, affiliates and assigns, and each of them, from any and all claims, actions and suits and from and against any and all liabilities, judgements, losses, damages, costs, charges, reasonable attorneys' fees and other expenses of every nature and character incurred in any action between HUGO BOSS and any third party, relating to Licensee's business and/or with respect to the 22 Licensed Products (including, without limitation, any breach by Licensee of this Agreement). Licensee further agrees that the provisions contained in this Section shall survive the termination or expiration of this Agreement. Licensee will maintain at all times during the term of the Agreement and for 5 (five) years thereafter and provide evidence thereof to HUGO BOSS from time to time upon its request, product liability insurance of a kind and in an amount reasonably satisfactory to HUGO BOSS naming HUGO BOSS as beneficiary as its interests shall appear. 17. Transition from preceding agreement on Licensed Products 17.1 Licensee is aware that prior to the date of this Agreement, HUGO BOSS granted a license to use the Trademarks in connection with Licensed Products to Tempus Concept S.A. ("Tempus") and, following the bankruptcy of Tempus to Roventa-Henex S.A. ("Roventa") (the "Previous License Agreements"). Hugo Boss represents and warrants that the Previous License Agreement with Tempus has been properly terminated, and that neither Tempus, nor any party claiming under Tempus, nor any other third party, has any right and, after termination of the Previous License Agreement with Roventa, neither Roventa nor any party claiming under Roventa will have any right, to use the Trademarks in connection with the Licensed Products; except that Roventa has existing inventory of finished watches bearing the Trademarks ("Prior Product") which it has the right to sell. HUGO BOSS will use best efforts to terminate the Previous License Agreement with Roventa on or prior to March 15, 2005. 17.2 Hugo Boss shall purchase all Prior Product from Roventa as soon as practicable . Promptly after purchasing the Prior Product, Hugo Boss shall send Licensee a list describing all such Prior Product, giving quantities and identifying all such Prior Product by model number, and otherwise containing such additional information as Licensee may reasonably request. Licensee shall have the right to examine all such Prior Product upon prior notice to Hugo Boss at a mutually convenient time. Within thirty (30) days after receipt of the above described list, Licensee shall identify which styles and quantities of such products it elects to purchase from HUGO BOSS; provided, that in any event Licensee shall purchase those styles listed on Appendix 6 annexed hereto. Of those styles listed in Appendix 6, Licensee shall purchase at least such of the Prior Product as it reasonably deems necessary for establishing an initial inventory of Licensed Products and for purposes of performing its obligations under this Agreement for calendar year 2005 and in any event up to * based on average monthly sales for the prior two (2) years. Hugo Boss shall sell such Prior Product to Licensee at the price Hugo Boss paid to purchase such products, and, together therewith, shall use best efforts to provide Licensee with a corresponding number of boxes, warranty cards and operating manuals. Hugo Boss shall have the right to sell any Prior Products not purchased by Licensee until, but in no event after, June 30, 2006. All Prior Product remaining in Hugo Boss's possession after June *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PUSUANT TO RULE 24b-2 OF THE 1934 ACT. 23 30, 2006 either will be destroyed (in which event Hugo Boss will furnish to Licensee appropriate evidence of such destruction as Licensee may request) or will be sold by HUGO BOSS through its outlet stores. 17.3 Subject to the other provisions contained herein, the parties shall reasonably co-operate to manage all issues, including, without limitation, all communications issues, arising out of the termination of the Previous License Agreements, with the aim to appropriately and expeditiously dispose of the Prior Product while maintaining and developing the reputation and distribution of the Licensed Products. 18. Contract Term and Termination 18.1 This Agreement enters into force on March 21, 2005, and shall continue in effect until December 31, 2013, unless sooner terminated as herein provided; except that if Licensee pays to HUGO BOSS license fees which are based on Net Sales * for the year 2011, the Agreement will be automatically extended for an additional period of five (5) years through December 31, 2018, unless either party gives notice of non-extension at any time during the period from March 1, 2012, to April 30, 2012. In case Licensee pays to HUGO BOSS license fees based on Net Sales * for the year 2011, not later than 18 months before the final expiration of the Agreement the contracting parties shall enter into negotiations for the extension of the Agreement. 18.2 Either contracting party may terminate the Agreement if for two successive calendar years (beginning after calendar year 2005) only the minimum license fees are paid. In this case the notice period for termination is two months before the end of the half calendar year following the relevant time periods. For the avoidance of doubt, all payment obligations of Licensee under this Agreement shall continue during such half year period. 18.3 Further, the Agreement may be terminated by either party upon a notice period of three months prior to June 30 and December 31 of a particular year where there are material changes in the ownership composition of the other party, i.e. a change of fifty (50) % or more of the voting ownership rights. The right of termination must be exercised within three months after receiving the information about the material change in ownership composition. Notwithstanding the foregoing, Hugo Boss shall not have any such right of termination where the new owner of Licensee is either (i) a financial investor, or (ii) a strategic investor experienced in the design, manufacture, marketing and sale of high end watches or fashion products, However, in the *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 24 event that the entity owning either * brand acquires fifty percent (50%) or more of Licensee or of any entity controlling Licensee, the following shall apply: If the agreed Business Plan will not be met for the calendar year in which such change of ownership of Licensee has taken place, HUGO BOSS can terminate the Agreement with six (6) months notice. Licensee shall not have any such right of termination where the new owner of HUGO BOSS is either (i) a financial investor, or (ii) a strategic investor experienced in the design, manufacture, marketing and sale of high end fashion products. After a warning letter with a period of maximum 6 (six) months for fulfilling its obligations of the Business Plan and any further action plans as referred to in Sec. 11, HUGO BOSS may also terminate the Agreement upon a notice period of three months prior to June 30 and December 31 of a particular year, if Licensee fails to fulfil its above-mentioned obligations. 18.4 The right to terminate for cause remains unaffected. Such cause also exists, (a) if the other contracting party becomes insolvent, (b) if settlement or bankruptcy proceedings are commenced with respect to the estate of the other party, (c) if - insofar as not otherwise indicated in this Agreement - the other party fails to fulfill within 30 (thirty) days a contractual obligation or one undertaken in order to fulfil this Agreement despite prior written notice, or fails to desist from conduct that is in violation of the Agreement within this period, (d) if the other party is in breach of a material obligation hereunder and fails to remedy such breach (if it reasonably can be remedied) within ten (10) days after receipt of notice thereof from the party not in breach, or, (e) without prior written notice, if the other party has repeatedly breached the same obligation hereunder within any twelve (12) month period. (f) if by reason of the other party's behaviour, continued compliance with contractual obligations would be considered intolerable by a reasonable party . 18.5 HUGO BOSS may also terminate the Agreement with a notice period of ten (10) days for cause if Licensee falls more than three months into arrears in paying the license fees. If Licensee considerably damages the reputation of the Trademarks by a negligent act or omission, HUGO BOSS may likewise terminate the Agreement without notice. 18.6 Terminations and notices under this provision must be communicated by registered mail or personal delivery. *CONFIDENTIAL PORTION OF THIS EXHIBIT OMITTED AND FILED SEPARATELY WITH THE SEC PURSUANT TO RULE 24b-2 OF THE 1934 ACT. 25 19. Consequences of Termination of the Agreement 19.1 The termination of this Agreement according to one of the above provisions does not release either party from any of its obligations under this Agreement that arise or come due, as the case may be, after the termination of this Agreement or that by their express terms survive termination. Upon the justified termination for cause as defined in Sec. 18.4 by HUGO BOSS, all outstanding license and Advertising Fees will become immediately due and payable. Further rights of indemnity etc. will not be affected by extraordinary notice of termination, regardless of whether such rights are founded upon the Agreement or in law. The regular or extraordinary notice of termination and termination as such does not in itself give rise to any sort of damages or compensation claims. 19.2 On the date of termination or expiration of this Agreement, except as otherwise provided herein, all rights of the Licensee to use the designations "BOSS" and/or "BOSS HUGO BOSS" and/or any other trademark belonging to HUGO BOSS shall end and the Licensee shall also cease making any reference to HUGO BOSS and/or its Trademarks and any reference to previous activity/co-operation for/with HUGO BOSS as Licensee of HUGO BOSS, and will also be responsible therefore on behalf of its subcontractors. Further, the Licensee shall, no later than as of the date of termination of the Agreement, extinguish all "Registered User" registrations at its own cost or - upon the request and at the cost of HUGO BOSS - transfer them, to the extent legally possible, to third persons designated by HUGO BOSS. 19.3 Notwithstanding anything to the contrary contained in this Agreement, HUGO BOSS has the right to purchase from Licensee, completely or in part, Licensed Products on hand with the Licensee in finished form or still in production, insofar as they have been manufactured according to designs approved by HUGO BOSS pursuant to Section 6.3, at the Licensee's book value evaluated by a third party to be nominated by both parties; if the parties cannot agree on the appropriate person within 30 days, such person shall be appointed by the President of the Industrie- und Handelskammer Stuttgart. To exercise such right, Hugo Boss shall give Licensee written notice of the Licensed Products Hugo Boss intends to purchase no later than thirty (30) days prior to the effective termination date. Licensee shall be permitted to distribute all its remaining Licensed Products not purchased by Hugo Boss for up to twelve months after the termination of the Agreement upon the previously customary conditions and through the previously utilised or similar channels of distribution; provided however that the quantity of Licensed Products Licensee shall be permitted to sell during such twelve month period may not exceed one hundred twenty percent (120%) of the units sold by Licensee in the immediately preceding year, and provided 26 further that any quantity in excess thereof either will be destroyed (in which event Licensee shall furnish to HUGO BOSS appropriate evidence of such destruction as HUGO BOSS may request) or may be sold by Licensee for an additional period not exceeding six (6) months through its outlet stores. After the aforementioned six(6) month period, Licensee shall destroy all remaining inventory and shall furnish HUGO BOSS appropriate evidence of such destruction. The Licensee shall account for these sales and pay the computed license fees to HUGO BOSS no later than within eight months after the termination of the Agreement. 19.4 In addition to its rights under Section 19.3, in case Licensee has still remaining inventory after the twelve month distribution period HUGO BOSS shall also have the right of election: a) to purchase the remaining inventory, completely or in part on terms to be mutually agreed upon, b) or to request the transfer of the remaining inventory to a third party designated by HUGO BOSS on terms to be mutually agreed upon. These sales will not be subject to the payment of license fees. 19.5 In order to enable HUGO BOSS to exercise its right of election of Sec. 19.3 and 19.4, the Licensee shall promptly inform HUGO BOSS as to the existing inventory of Licensed Products, broken down by article number including colour variants. Upon receipt of the information about the inventory, HUGO BOSS shall decide within four weeks the manner in which its right of election will be exercised. 20. Miscellaneous 20.1 Licensee may not assign, delegate to third parties or sublicense rights or duties under this Agreement or assign the Agreement as a whole, without the express prior written consent of HUGO BOSS. This does not apply to an assignment, delegation, or sublicense to any Licensee Affiliate (provided that notwithstanding any such assignment, delegation or sublicense, MGI Luxury Group S.A. shall remain liable for performance of Licensee's obligations hereunder) or to any change in control otherwise permitted under section 18.3. Licensee shall notify HUGO BOSS any such assignment. HUGO BOSS shall not assign any rights or delegate any duties to any party other than an affiliate. 20.2 This Agreement constitutes the entire agreement between the parties and supersedes all prior agreements and understandings, oral or written, between the parties hereto with respect to the subject matter hereof. This Agreement may be modified, amended or supplemented (including this clause) only by the mutual written agreement of the parties hereto. 27 20.3 This Agreement is made and shall be construed in all respects in accordance with the laws of the Federal Republic of Germany, without regard to its conflicts of law principles. The parties irrevocably agree that all disputes related to this Agreement shall be brought exclusively before the courts of Stuttgart, provided, that HUGO BOSS may, but is not obliged to, seek relief in any court located in the place of Licensee's principal place of business. 20.4 In the event any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, unless the unenforceability or invalidity thereof causes a substantial departure from the underlying intent and sense of the remainder of this Agreement, the validity and enforceability of the remaining provisions shall not be affected thereby, except those remaining provisions of which the unenforceable or invalidated provisions comprise an integral part of or from which they are otherwise clearly inseparable. In the event any provision is held unenforceable or invalid, the parties shall use their best efforts to agree upon an enforceable and valid provision which shall be a reasonable substitute for such unenforceable or invalid provision in light of the purpose of this Agreement, and, upon so agreeing, shall incorporate such substitute provision in the Agreement. The same applies if omissions in the Agreement become apparent. The relevant provision, which is unenforceable or missing, is then to be replaced by a valid provision corresponding to the meaning and purpose of this Agreement. 20.5 The instant Agreement is executed in duplicate. Appendices 1 - 6 to this Agreement constitute a part of this Agreement. Appendix 1: Trademarks (Exclusive License)(Sec. 1.1) Appendix 2: Trade name (non-exclusive license) (Sec. 1.1) Appendix 3: Quality directives (Sec. 7) Appendix 4: Business Plan (Sec. 11) Appendix 5: Reporting format (Sec. 12) Appendix 6: Prior Product Styles (Sec.17.2) 20.6 No delay or omission by either of the parties hereto in exercising any right or remedy provided for herein shall constitute a waiver of such right or remedy, nor shall it be construed as a bar to or a waiver of any such right or remedy on any future occasion. No waiver by either party of any provision of this Agreement, or of any breach of default shall be effective unless in writing and signed by the party against whom such waiver is to be enforced. 20.7 Nothing contained herein shall be deemed to place the parties in the relationship of employer-employee, partners, joint venturers, or either as agent of the other. Licensee shall not represent itself as the employee, partner, agent or legal representative of HUGO BOSS for any purpose 28 whatsoever and shall have no right to create or to assume any obligation of any kind, express or implied, for or on behalf of HUGO BOSS; provided, however, that Licensee may describe itself as the exclusive licensee of the Licensed Products in the License Territory. 20.8 Notwithstanding the provisions in Sec. 20.3 above, HUGO BOSS may enforce its rights under Sec. 13 and 14 and Licensee may enforce its rights under Sec. 14, in any court having competent jurisdiction. 20.9 The English language version of this Agreement shall be the definitive version and any issues that may arise in connection with this Agreement or its interpretation shall be resolved by reference only to that version. 20.10 Any notice to be given pursuant to this Agreement shall be written in English and shall be deemed duly given when sent by reputable overnight international courier including FedEx, UPS or DHL to the respective address first set forth above or by facsimile to the respective facsimile number set forth below confirmed by letter as aforesaid, or to such other address and/or facsimile number as a party hereto may designate by like notice. To Licensee: Fax: ( 41 ) 32 329 34 01 Attn: General Manager - Hugo Boss Watches Copy to: Fax: (201) 267 8050 Attn: Brand Manager - Hugo Boss Watches To HUGO BOSS: Fax: (49) 7123 94 2018 Attn: Head of Legal Department Copy to: Fax: (49) 7123 94 2086 Attn: Head of Licensing Department 20.11 The obligations of either party hereunder, except for the obligations of Licensee to pay license fees, Advertising Fees and other amounts to be paid to HUGO BOSS hereunder, shall be excused for a period equal to the time by which such performance is prevented or delayed as a result of strikes, labor disputes, acts of God, or any other causes beyond the reasonable control of the party obligated to perform. 29 Metzingen,......................2004 ......................, ..................2004 HUGO BOSS By: /s/ Wolfgang Merte -------------------------- Name: Wolfgang Merte ------------------------ Title: Managing Director ----------------------- MGI LUXURY GROUP S.A. By: /s/ Kurt Burki ------------------------- Name: Kurt Burki ----------------------- Title: Chairman ---------------------- By: /s/ Rick Cote ------------------------- Name: Rick Cote ----------------------- Title: Director ---------------------- Appendix 1 Registerations and Applications - Exclusive - International Class 14