GBR Limited License Agreement

LICENSE AGREEMENT


This License Agreement (this "Agreement") is made to be effective as of January 7, 2003 (the "Effective Date"), by and between R.G. Barry Corporation, an Ohio corporation having its principal business offices located at 13405 Yarmouth Road, N.W., Pickerington, Ohio 43147, United States of America ("Licensor"), R.G. Barry International, Inc., an Ohio corporation having its principal business offices located at 13405 Yarmouth Road, N.W., Pickerington, Ohio 43147, United States of America ("International"), Barry (G.B.R.) Limited, a business entity organized under the laws of Great Britain having its principal business offices located at Lockhill Factory, 162 High Street, Street, Somerset, England BA160NH ("UK Licensee"), and GBR Limited, a business entity organized under the laws of Great Britain and having its principal business offices located at Lockhill Factory, 162 High Street, Somerset, England BA160NH ("GBR Limited"). GBR Limited shall be a party to this Agreement solely for the purposes of (1) agreeing to the termination of the April 9, 2000 Agreement (as hereinafter defined), as provided in Section 1(a) of this Agreement, and (2) agreeing to execute an Unconditional Guaranty, in the form attached as Exhibit C to this Agreement, for the benefit of Licensor, of certain of the payment obligations of UK Licensee to Licensor, as provided in Section 1(b) of this Agreement. International shall be a party to this Agreement solely for the purpose of agreeing to the assignment and transfer of assets and obligations of International's Paris office, as provided in Section 2(c) of this Agreement.


BACKGROUND


A. Licensor manufactures, markets and sells throughout the world a wide range of branded and privately labeled comfort footwear products.


B. UK Licensee markets and sells comfort footwear under Licensor's brands in the United Kingdom and the Republic of Ireland, and other, private labeled, products in the United Kingdom and elsewhere.


C. During the period commencing as of April 9, 2000 and continuing through the Effective Date, Licensor and UK Licensee have been, along with GBR Limited, parties to that certain Agreement, dated as of April 9, 2000 (the "April 9, 2000 Agreement"), pursuant to which UK Licensee was organized for the purpose of distributing slippers manufactured by Licensor, GBR Limited and others within a territory including the United Kingdom and the Republic of Ireland.


D. Licensor and UK Licensee, along with GBR Limited, desire to terminate the April 9, 2000 Agreement, and Licensor and UK Licensee desire to enter into a new business relationship pursuant to which Licensor will grant licenses to UK Licensee and to Comfort Group (as hereinafter defined) to make, have made, use, import, offer and sell within the Territory (as hereinafter defined) certain products within certain of Licensor's product lines and for Comfort Group to assume the bulk of International's operation located in Paris, France (the "Paris Operation"), all according to the terms and conditions set forth below.


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing and the covenants of the parties contained herein, Licensor and UK Licensee (and GBR Limited, for the limited purposes of Section 1 hereof, and International, for the limited purposes of Section 2(c) hereof), and, once formed and upon its execution of this Agreement, Comfort Group, agree as follows, each intending to be legally bound hereby.


Section 1. TERMINATION OF THE APRIL 9, 2000 AGREEMENT; EXECUTION OF
UNCONDITIONAL GUARANTY.


(a) Licensor, UK Licensee and GBR Limited hereby agree that, as of the Effective Date hereof, the April 9, 2000 Agreement is hereby terminated and, with the two exceptions (i) and (ii) set forth below in this Section 1(a), shall be of no effect:


(i) notwithstanding the termination of the April 9, 2000
Agreement, UK Licensee shall, on or before the date that it
executes this Agreement, pay to Licensor all amounts owed by
UK Licensee to Licensor under the April 9, 2000 Agreement for
products purchased from Licensor, as well as for processing
fees, as provided by Section 6(b) of the April 9, 2000
Agreement, and royalty fees, as provided by Section 5(b) of
the April 9, 2000 Agreement, and such payment obligations
shall survive the termination of the April 9, 2000 Agreement.
(ii) notwithstanding the termination of the April 9, 2000
Agreement, respecting products to be sold by UK Licensee for
the Spring 2003 fashion season, the provisions of Section 4(a)
and of Section 6(b) of the April 9, 2000 Agreement shall be
applicable.


(b) GBR Limited hereby agrees to execute, on the date that it executes this Agreement, an Unconditional Guaranty, in the form attached as Exhibit C to this Agreement, of UK Licensee's obligations to pay to Licensor the Initial License Fee (as hereinafter defined).


Section 2. TRANSITIONAL ITEMS.


(a) During the period commencing on the Effective Date, and ending upon May 30, 2003 (the "Transition Period"), Licensor shall have the right to sell certain aged inventory of the


Products (as hereinafter defined) within the Territory, and such sales shall not be deemed to be a breach of this Agreement.


(b) Prior to May 1, 2003, UK Licensee shall take action to organize a single-shareholder limited liability company under, and in compliance with, French law in the name of "Comfort Group, S.A.R.L." or "Comfort Group, E.U.R.L." (hereinafter, "Comfort Group"), which limited liability company shall be organized as a wholly-owned subsidiary of UK Licensee. Once UK Licensee has received governmental certification of registration of Comfort Group, UK Licensee shall (i) provide a copy of such certification to Licensor and (ii) cause Comfort Group to execute this Agreement, to become a party to this Agreement and to assume and become responsible for all obligations of Comfort Group specified in this Agreement. On or before May 1, 2003, UK Licensee shall deliver to Licensor written evidence that Comfort Group has become a party to this Agreement. Even prior to the execution of this Agreement by Comfort Group, this Agreement shall constitute a legally enforceable agreement among Licensor, International, UK Licensee and GBR Limited.


In the event that UK Licensee is unable to complete the organization and registration of Comfort Group as provided above, such failure shall not constitute a default by UK Licensee hereunder; provided, however, that UK Licensee shall be obligated to perform all of the obligations of Comfort Group provided hereunder.


(c) After the organization of Comfort Group and on or before June 1, 2003, the parties hereto shall arrange for International to irrevocably assign and transfer to Comfort Group those assets of the Paris Operation, including those certain employment agreements and/or relationships between International and those employees in its Paris office whose names are set forth on Exhibit E attached hereto (the "Transferred Employees"), all customer lists for


International's Paris office, the vehicle leases for International's Paris office and certain office furniture and equipment used in International's Paris office, with such assignment and transfer to be evidenced by appropriate agreements and documents of conveyance and assignment. Each of Exhibit F (Vehicle Lease Agreements To Be Assigned), Exhibit G (Personal Property Assets To Be Conveyed), and Exhibit H (Customer List) attached hereto shall be completed by Licensor and provided to UK Licensee on or before January 31, 2003. The parties hereto hereby acknowledge that none of the assets to be assigned pursuant to this Section 2(c) is a right in intellectual property, including, without limitation, rights in trademarks or product designs. International shall receive as consideration for such transaction involving the transfer to Comfort Group of an ongoing business the One Hundred Thousand Dollars ($100,000.00) payment by UK Licensee referenced in Section 11(a)(i) hereof. Such payment amount was negotiated and agreed upon by Licensor and UK Licensee. Licensor shall defend, indemnify and hold harmless UK Licensee and Comfort Group, and the directors, officers, shareholders, employees and agents of each of them, from all losses and expenses incurred in connection with any legal action or claim arising out of or otherwise connected with International's operation of the Paris Operation prior to the effective date of the assignment transaction described in this Section 2(c).


The parties acknowledge and agree that:


(i) in accordance with EC Directive (European
Directive) 77/187 (known as the Acquired Rights
Directive), as subsequently enacted into French law
by statute or common law or otherwise ("the Relevant
Provisions"), the contracts of employment between
International and each of the Transferred Employees
will transfer to Comfort Group; and


(ii) Licensor shall indemnify and keep Comfort Group
and UK Licensee indemnified against all costs,
claims, losses, liabilities and expenses which
Comfort Group may incur:


(A) arising out of or in connection with any
claim made by a Transferred Employee which
relates to his employment by International
prior to the effective date of assignment;


(B) in relation to anything done or omitted
to be done before the effective date of
assignment by International by way of
consultation with, or the provision of
information to, any persons employed by
International prior to the effective date of
assignment, or any trade union or elected
representatives of any such persons, which
Comfort Group may incur pursuant to the
Relevant Provisions; and


(C) in the event that a person who is not a
Transferred Employee at the effective date
of assignment is held to be or it is held
that he should have been employed by Comfort
Group as a consequence of the Relevant
Provisions. For the avoidance of doubt, this
provision shall include but is not limited
to, Thierry Civetta.


Other than as described in the two immediately preceding sentences, UK Licensee and Comfort Group shall assume all liabilities associated with the employment agreements/relationships and vehicle leases assigned pursuant to the assignment transaction described in this Section 2(c) arising on or after the effective date of such assignment.


Notwithstanding such transfer of certain assets and liabilities of the Paris Operation, International shall deliver all orders for products for the Spring 2003 fashion season from such listed customers which orders were accepted by International prior to the closing of the described assignment transaction, and International shall have the rights to collect all amounts owed to it by such customers for products delivered.


(d) In the event that either UK Licensee and/or GBR Limited, acting in its sole discretion, purchases from Licensor any products remaining after the Spring 2003 fashion season and warehoused at Licensor's warehouse and distribution facility in Wales (the "Wales Facility"), such purchaser (UK Licensee or GBR Limited) shall purchase such products at a price equal to Licensor's standard costs for such products, in addition to any duties and/or quota fees paid by Licensor respecting such products and any freight expense incurred by Licensor to transport the products to the Wales Facility. The price to be paid by such purchaser shall be F.O.B. Licensor's Wales Facility, and such purchaser shall be responsible for paying all freight expenses to transport such products between Licensor's Wales Facility and UK Licensee's facility. Licensor shall provide thirty (30) days payment terms for the purchases described in this paragraph. "Licensor's standard costs" shall mean Licensor's actual costs reasonably attributable to the manufacture of such products, as determined by Licensor. The re-sale of the products described in this Section 2(d) by UK Licensee, Comfort Group (or GBR Limited) shall be included within the definition of Net Sales for purposes of determining Royalty Fees under Section 11 hereof.


(e) Licensor intends to close the Wales Facility during 2003. Licensor intends to terminate the employment of Licensor's employees at the Wales Facility on or before May 30, 2003. Licensor shall indemnify and hold harmless UK Licensee and GBR Limited, and the


directors, officers, shareholders, employees and agents of each of them, from all losses and expenses incurred in connection with any legal action or claim arising out of or otherwise connected with Licensor's termination of the employment of Licensor's employees at the Wales Facility.


Section 3. DEFINITIONS.
(a) As used herein, "the Territory" shall mean the geographic area included within the following countries: United Kingdom, Republic of Ireland, and France. In addition, "the Territory" shall be deemed to include the rights to sell and export the Products to the customers listed below for delivery to such customers at the customers' facilities located within the associated countries listed below opposite such customers:


Country Customer
------- --------
Belgium Cora
The Netherlands Cora
Luxemburg Cora
Spain Continente
Germany Wal-Mart (Germany)
Greece John Haidopoulos Import-Export.


In the event that UK Licensee desires to propose additional countries for inclusion within the Territory, UK Licensee shall provide to Licensor written notice of such proposed additional country(ies), along with UK Licensee's business plan for such country(ies). Licensor shall, in its sole discretion, determine whether or not it desires to accept UK Licensee's proposal and shall communicate such determination to UK Licensee in writing, and such communication shall become part of this Agreement.


(b) As used herein, the "Products" shall be defined to include the products in Licensor's "Dearfoams" and "Barry Comfort" product lines (the "Product Lines") for the fashion


seasons occurring during the Term hereof. "Products" shall not be deemed to include any products manufactured by Licensor under private labeling agreements with third parties pursuant to which goods manufactured by Licensor are produced under the third party's trademark(s). In the event that Licensor establishes one or more product lines other than the Product Lines and UK Licensee communicates its desire to Licensor to amend the Agreement to add the products in such new product line(s) to those Products licensed hereunder, Licensor shall, in its sole discretion, determine whether or not it desires to agree to such amendment hereof and shall communicate such determination to UK Licensee in writing, and such communication shall become part of this Agreement.


(c) As used herein, the "Licensed Business" shall be defined to mean the business involving the sale of the Products operated by UK Licensee and the business involving the sale of Products by Comfort Group under this Agreement.


(d) As used herein, "Net Sales" shall mean the consolidated total sales of the Products, and the consolidated total sales of any other comfort footwear products (other than the Suede Products, as defined below) sold within the Territory, by UK Licensee and by Comfort Group (at invoiced wholesale prices, less returns and less customer discounts actually applied or taken by the customer) during the applicable time period.


In the event that UK Licensee and/or Comfort Group sell suede footwear products (the "Suede Products") under trademarks not included in the Intellectual Property (as defined in Section 14(a) hereof), such sales shall not be included within the definition of Net Sales.


In the event that UK Licensee and/or Comfort Group sell suede footwear products under any of the trademarks included in the Intellectual Property either within or outside of the Territory, such sales shall be included within the definition of Net Sales.


(e) As used herein, "Licensed Rights" shall mean those proprietary rights comprising Licensor's Intellectual Property necessary to make and sell the Products in the Territory under this Agreement, as listed in Exhibit D attached hereto, including know-how, product designs (whether or not patented or registered), trademarks and service marks (whether or not registered) and including any other proprietary rights which Licensor has or may claim to have in the Products.


Section 4. TERM. The term (the "Term") of this Agreement shall commence upon the Effective Date and, if not earlier terminated pursuant to the provisions of Section 15 hereof and if not renewed pursuant to the provisions of Section 5 hereof, shall expire on May 31, 2008.


Section 5. RENEWAL. In the event that each of UK Licensee and Comfort Group has been in substantially full compliance with this Agreement throughout the Term of this Agreement and UK Licensee and Comfort Group desire that the Term of this Agreement be renewed for one additional five (5) year renewal term, UK Licensee and Comfort Group shall, on or before February 28, 2007, provide to Licensor a detailed written business plan specifying UK Licensee's and Comfort Group's proposed actions to further develop the Licensed Business during such renewal term and their projections and expectations respecting such further development of the Licensed Business during such renewal term. Additionally, UK Licensee and Comfort Group shall respond promptly to any of Licensor's inquiries respecting such business plan. After reviewing such business plan, Licensor shall have the right, in its sole discretion, to decide whether to grant the renewal of this Agreement for one additional five (5) year renewal term and shall, on or before May 31, 2007, communicate to UK Licensee and Comfort Group in writing its decision respecting the grant of such renewal. The grant of such renewal shall be evidenced by


the execution by the parties of a renewal License Agreement substantially in the form of this Agreement, with the following exceptions:


(a) Sections 1 and 2 of this Agreement in the form set forth
herein will not be included in the renewal License Agreement;


(b) Section 11(a) regarding the Initial License Fee will not be
included in the renewal License Agreement;


(c) The provisions of the renewal License Agreement respecting
Royalty Fees may be different than those provisions set forth
in Sections 11(b), (c) and (d) hereof;


(d) The provisions of the renewal License Agreement regarding
advertising support will be different than those provisions
set forth in Section 12 hereof.


Section 6. GRANT OF LICENSED RIGHTS. Licensor hereby grants (a) to UK Licensee the right and license, during the Term of this Agreement, to use the Licensed Rights to make, have made, use, import, offer and sell the Products solely within the United Kingdom and the Republic of Ireland, and (b) to Comfort Group the right and license, during the Term of this Agreement, to use the Licensed Rights to make, have made, use, import, offer and sell the Products solely within France and to certain customers located within certain other European countries, as set forth in Section 3(a). Subject to the exceptions provided by Section 1(a)(ii) and Section 2(a) hereof and, during the Term of this Agreement as long as each of UK Licensee and Comfort Group is in substantially full compliance with the provisions of this Agreement, Licensor shall not (a) sell the Products for delivery to customers located within the Territory, or (b) grant a license to any third party to use the Licensed Rights to make, have made, use, import, offer and sell the Products within the Territory.


Section 7. LICENSOR'S OBLIGATIONS. During the Term of this Agreement, Licensor shall:


(a) Assist, at no additional cost, UK Licensee and Comfort Group by identifying, and in using, Licensor's manufacturing sources, including assistance in the areas of manufacturing know-how, product procurement, negotiation and quality assurance.


It is acknowledged and agreed by the parties hereto that UK Licensee and Comfort Group shall have the right to contract with the manufacturing facilities/entities of their choosing in order to purchase inventories of products, including the Products. Each of UK Licensee and Comfort Group agrees that, in the event that it decides to use Licensor's agent in Hong Kong to assist it in the procurement and negotiation of the terms related to manufacture of a particular order of products, it shall not separately become involved in communications with any manufacturing sources for procurement or negotiation of such order of products, but shall restrict its communications respecting such order of products solely to Licensor's Hong Kong-based agent. UK Licensee and Comfort Group acknowledge that, the failure of either of them to fully comply with the immediately preceding provision could result in damage to the sourcing relationship(s) with manufacturers of Licensor and Licensor's Hong Kong-based agent.


It is acknowledged by the parties hereto that all agreements with manufacturers of products to be procured for UK Licensee or Comfort Group shall be entered into directly by UK Licensee and/or Comfort Group with such manufacturers and that UK Licensee and Comfort Group, which will be solely responsible for payments under such agreements, will be required to establish letter of credit facilities in connection with such payment arrangements.


(b) Permit UK Licensee and Comfort Group to use Licensor's Intellectual Property (as defined in Section 14(a) and as listed in Exhibit D) in compliance with the provisions of Section 14 hereof.


(c) Permit UK Licensee and Comfort Group to continue to make, have made, use, import, offer and sell all existing Product Lines and any new products added by Licensor to such existing Product Lines.


(d) Assist, at no additional cost, UK Licensee and Comfort Group by consulting with the representatives of same respecting product design and specifications, by assisting with the preparation of product specification packages, and by assisting with the preparation of product and sales samples.


(e) In the event that UK Licensee or Comfort Group desires to purchase Products from Lice ...